The IRS targeting of conservative groups for special scrutiny when they sought non-profit status is of course primarily a political scandal, but it's a tax-code scandal, too — and contrary to what you may have heard, it's not entirely resolved.
It's a tax-code scandal because once again Americans have learned that even the people who do nothing all day, every day but think about our complicated tax laws don't always understand them. The Inspector General's report last week on the IRS is quite blunt about this failing. "We also believe that Determinations Unit specialists lacked knowledge of what activities are allowed by ... tax-exempt organizations," the report says.
In other words, the very "specialists" tasked with enforcing the laws for groups seeking tax-exempt 501(c)(4) status were confused about what was and wasn't allowed. They didn't target conservative groups out of confusion — that was deliberate — but some of their out-of-line inquiries apparently stemmed from outright ignorance.
And yet ordinary Americans with day jobs are supposed to comply with every twist of the tax code without stumbling into trouble. Really?
As for the scandal not being resolved, that too is straight from the IG report. "Nine recommendations were made to correct concerns we raised in the report, and corrective actions have not been fully implemented," the inspector general states. "Further, as our report notes, a substantial number of applications have been under review, some for more than three years and through two election cycles, and remain open."
Given such staggering foot-dragging, it might be too much to expect that the IRS thoroughly retool the way it handles 501(c)(4) applications by the next election. Yet it's important that its new acting director, Daniel Werfel, demand that this be the goal. Although government shouldn't assume that certain types of groups seeking tax-exempt status are trying to skirt the prohibition against electioneering, it shouldn't simply take them at their word, either.
Abuse of tax-exempt status by patently political groups was rampant in the 2012 election, on both the right and left. The IRS should push back against similar abuses in 2014, but not by targeting small fry on only one-half of the political spectrum.
It's the big political operators who have given the system a bad name. They're the ones turning a tax-exempt status meant to "promote social welfare" into a vehicle with no other purpose than to hide the identity of donors while aiding national and state political campaigns.
The IRS needs to more precisely define how much political activity is allowed by 501(c)(4)s and how it will be defined. It needs to better train its employees. And then it needs to enforce the law — impartially.