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IRS Is Gearing Up To Take On 501c4s Again

During Congressional testimony on Tuesday, John Koskinen defended his tenure as Commissioner of the IRS against stirrings of impeachment among some elected officials. Koskinen maintained that there has been an ample turnover of personnel, as well as disciplinary reviews within the IRS, so that the IRS has been positively rehabilitated since the scandal erupted in 2013.

While the accusation of charges against Koskinen — accused of “misleading the public and destroying documents that were being sought under a congressional subpoena” — was newsworthy, another portion of his testimony was just as important, but went largely unreported by the the media: the future role of 501c4s.

Koskinen framed part of the reason for the IRS targeting scandal on confusing rules, “leaving the nonprofit groups and IRS auditors uncertain about what activity was allowed.” However, this assertion is utterly nonsensical, as the rules that govern 501c4 activity have been in place since 1959. So why the sudden interest in the last couple of years to create (or “clarify”) rules that limit activities by nonprofit organizations? Because of the 2016 election.

Don’t forget — the IRS tried to do a major rewrite in 2014 ahead of midterm elections, but received an unprecedented amount of comments during the IRS rulemaking comment period. If you added together all of the comments on all Treasury and IRS draft proposals from the seven prior years and doubled that you came close to the number of responses received, which was more than 150,000. In light of the overwhelming response on the proposed changes, the IRS decided to delay any rules changes.

So here we are on the threshold of another major election cycle, and we have the IRS announcing it will be stirring the pot. The Washington Times reported that Koskinen hopes, “that we’d be able to provide these proposed new rules early enough next year so that they could — the work on them can be completed well in advance of the election so there wouldn’t be any confusion.” And more: “But I would stress that the work that we’re doing now is focused on clarifying — not changing — but clarifying the rules under which organizations operate.”

Yet this is onerous and unnecessary. These are your social welfare organizations, for which advocacy for “the common good and general welfare” is their primary purpose. They differ from 501c3, which are your charitable organizations; 501c5s, your labor unions; and 501c6s, your trade organizations. The one thing all of these organizations do have in common is that they are all tax-exempt organizations.

501c4s are not tax-deductible precisely because they are not political organizations. They serve to educate by being issue-based. This is protected under free speech; so long as the 501c4 sticks to an issue and not advocate for a particular candidate, it is not considered political speech and therefore it cannot be curbed. They can talk about policies and positions, not people.

These social welfare groups can therefore participate in the political arena as long as they maintain education as their primary purpose. Some examples of 501c4s would be the National Rifle Association (NRA), American Association of Retired Persons (AARP), Americans for Tax Reform (ATR), and the Sierra Club. 501c4s themselves have been around for nearly 100 years, and the regulations that currently govern them have been in place since 1959.

And yet the IRS has been increasingly adamant about clarifying the rules for social welfare organizations that have been in place for more than 50 years. And why only the social welfare organizations — not the unions or trade organizations?

It is well known that on issue-based advocacy, the Republicans have made much better use of 501c4s than the Democrats. So of course, the Democrats want to find a way to disrupt this. Dozens of articles in recent years have documented how this conservative group and that conservative group spent money on political ads, more than the liberal groups — as if that is somehow unfair. It’s perfectly fair and perfectly legal, except when the Democrats are on the losing/receiving end.

This situation is reminiscent of the repeated attempts to implement the “Fairness Doctrine” for talk radio, pushing to give conservative and liberal talk radio shows “equal air time” — because the conservatives dominate that market as well.

The IRS tried reforming 501c4s in 2014 because they knew the Democrats were vulnerable. It didn’t get done then, and 2014 was a disaster year for Democrats. What better way to stifle the ability for conservatives to message than by attacking the methodology? The Democrats, in cahoots with the Obama Administration, are working in tandem with the IRS to change to the way social welfare organizations function by introducing very specific and onerous rule “clarifications”.

By trying to redefine some activities as “political” instead of advocacy, they would be opened to being limited or even banned — activities which serve to provide education for the common good, as they always have.

Critics of the way 501c4s operate, which allow their donors to remain protected, suggest that the 501c4s are somehow gaming the system — using phrases like “secret donors” and “secret activity” to inflame the public against 501c4s. But this is patently untrue.

Political donors are required to be disclosed under campaign finance, but since 501c4s are specifically not political organizations, the donor names do not need to be made public. Their anonymity is protected under the Right of Free Association. Those who are on the receiving end of 501c4 activities to educate the populace during the election cycle, however, are now pushing for this to change in order to reveal citizens identities.

Therefore turning a simple and known definition of a 501c4 into a new and incomprehensible one, has the effect of stifling speech. Even the mere presence of such a proposal will have detrimental affect. Why? The possibility of new regulations becoming permanent rules will have 501c4s worried about potential infractions — especially as we are recovering from the 2013 IRS targeting scandal, especially since the IRS has been known to issue rules that are effective immediately, and even retroactively.

The most egregious part is that we probably won’t have the ability to comment on proposed changes this time around. According to the IRS bulletin (last revised April 2015), the IRS states, “Given the diversity of views expressed and the volume of substantive input, we have concluded that it would be more efficient and useful to hold a public hearing after we publish the revised proposed regulation. Treasury and the IRS remain committed to providing updated standards for tax-exemption that are fair, clear, and easier to administer.”

In other words, they don’t want to hear feedback this time around. What good is a “public hearing?” It’s not, of course, at least for the public. But from the vantage point of the 2016 presidential elections, the effect of curbing or scaring the activity of 501c4s during the upcoming election cycle is beneficial. What organization would risk the potential for increased scrutiny and possible violation from the IRS, knowing that the IRS has been operating in an unjust and partisan matter? They wouldn’t. So the 501c4s would have to be more careful for at least the time being, which plays right into the timing of the important 2016 election cycle activity.

The IRS continues to act in an incompetent manner. That they are targeting 501c4s, and not c5s and c6s, show that there is an inherent bias internally within the IRS. No one can look at the situation and not think that this isn’t being done to have an affect on our political cycles. This is not how the IRS is supposed to function in our country.

More Calls For Koskinen’s Dismissal

Ron DeSantis (R., Fla.) chairman of the House Oversight and Government Reform Subcommittee on National Security and Jim Jordan (R., Ohio), chairman of the Subcommittee on Health Care, Benefits, and Administrative Rules, also recently called on President Obama to remove John Koskinen from the head of the IRS. Alternatively, they propose Congressional impeachment if Obama does not due his due diligence and remove Koskinen himself.

DeSantis and Jordan made their case in the pages of the Wall Street Journal and is reprinted below in its entirety, as it provided a thorough summation of Koskinen’s incompetence:

“Internal Revenue Service Commissioner John Koskinen needs to go.

When it was revealed in 2013 that the IRS had targeted conservative groups for exercising their First Amendment rights, President Obama correctly called the policy “inexcusable” and pledged accountability. He even fired the then-acting IRS commissioner because he said it was necessary to have “new leadership that can help restore confidence going forward.”

Unfortunately, Commissioner Koskinen, who took over in the wake of the IRS targeting scandal, has failed the American people by frustrating Congress’s attempts to ascertain the truth. A taxpayer would never get away with treating an IRS audit the way that IRS officials have treated the congressional investigation. Civil officers like Mr. Koskinen have historically been held to a higher standard than private citizens because they have fiduciary obligations to the public. The IRS and Mr. Koskinen have breached these basic fiduciary duties:

• Destruction of evidence. Lois Lerner, at the time the director of the IRS’s exempt-organizations unit, invoked the Fifth Amendment on May 22, 2013, when appearing before Congress; her refusal to testify put a premium on obtaining and reviewing her email communications. On the same day the IRS’s chief technology officer issued a preservation order that instructed IRS employees “not to destroy/wipe/reuse any of the existing backup tapes for email, or archiving of other information from IRS personal computers.”

Several weeks later, on Aug. 2, the House Oversight Committee issued its first subpoena for IRS documents, including all of Ms. Lerner’s emails. On Feb. 2, 2014, Kate Duval, the IRS commissioner’s counsel, identified a gap in the Lerner emails that were being collected. Days later, Ms. Duval learned that the gap had been caused in 2011 when the hard drive of Ms. Lerner’s computer crashed.

Despite all this—an internal IRS preservation order, a congressional subpoena, and knowledge about Ms. Lerner’s hard-drive and email problems—the Treasury inspector general for tax administration discovered that the agency on March 4, 2014, erased 422 backup tapes containing as many as 24,000 emails. (Congress learned of the discovery only last month.)

Ms. Duval has since left the IRS and now works at the State Department, where she is responsible for vetting Hillary Clinton’s emails sought by congressional investigations of the Benghazi attacks.

• Failure to inform Congress. Mr. Koskinen was made aware of the problems associated with Ms. Lerner’s emails the same month Ms. Duval discovered the gap. Yet the IRS withheld the information from Congress for four months, until June 13, 2014, when the agency used a Friday news dump to admit—on page seven of the third attachment to a letter sent to the Senate Finance Committee—that it had lost many of Ms. Lerner’s emails.

During that four-month delay, Mr. Koskinen testified before Congress under oath four times. On March 26, 2014, he appeared before the Oversight Committee and pledged that the IRS would produce all of Ms. Lerner’s emails, not mentioning that the IRS already knew of the problems with her emails and hard drive. Mr. Koskinen deliberately kept Congress in the dark. Based on testimony received by the committee, we now know that the IRS appears to have spent the four months working with the Obama administration to fine-tune talking points to mitigate the fallout.

• False testimony before Congress. Mr. Koskinen made statements to Congress that were categorically false. Of the more than 1,000 computer backup tapes discovered by the IRS inspector general, approximately 700 hadn’t been erased and contained relevant information. But Mr. Koskinen testified he had “confirmed” that all of the tapes were unrecoverable.

He also said: “We’ve gone to great lengths, spent a significant amount of money trying to make sure that there is no email that is required that has not been produced.” In reality, the inspector general found that Mr. Koskinen’s team failed to search several potential sources for Ms. Lerner’s emails, including the email server, her BlackBerry and the Martinsburg, W.Va., storage facility that housed the backup tapes.

The 700 intact backup tapes the inspector general recovered were found within 15 days of the IRS’s informing Congress that they were not recoverable. Employees from the inspector general’s office simply drove to Martinsburg and asked for the tapes. It turns out that the IRS had never even asked whether the tapes existed.

Three weeks after the 422 other backup tapes were destroyed by the IRS, Mr. Koskinen told the committee that he would produce “all” Lerner documents. This statement was clearly false—you can’t give Congress “all” of the material if you know that you have already destroyed some of it.

• Failure to correct the record. After his false statements to Congress under oath, Mr. Koskinen refused to amend them when given the opportunity at a public hearing earlier this year. If a lawyer makes a false statement to a court, he has a duty to correct it. Civil officers like Commissioner Koskinen have a duty to the American people to revise their testimony when it contains inaccuracies.

• Failure to reform the IRS to protect First Amendment rights. Mr. Koskinen hasn’t acted on the president’s May 2013 promise to “put in place new safeguards to make sure this kind of behavior cannot happen again.” A Government Accountability Office report released last week found that the IRS continues to lack the controls necessary to prevent unfair treatment of nonprofit groups on the basis of an “organization’s religious, educational, political, or other views.” In other words, the targeting of conservative groups may very well continue.

If the president doesn’t remove Mr. Koskinen from his post, then Congress should remove him through impeachment. The impeachment power is a political check that, as Alexander Hamilton wrote in Federalist No. 65 in 1788, protects the public against “the abuse or violation of some public trust.”

Supreme Court Justice Joseph Story echoed Hamilton in 1833 when he distinguished impeachable offenses from criminal offenses, noting that they “are aptly termed political offenses, growing out of personal misconduct or gross neglect, or usurpation, or habitual disregard for the public interests . . . They must be examined upon very broad and comprehensive principles of public policy and duty.”

John Koskinen has violated the public trust, breached his fiduciary obligations and demonstrated his unfitness to serve. Mr. President, it’s time for Commissioner Koskinen to go. If you don’t act, we will.”

Koskinen Should be Fired

Last month, Rep. Jason Chaffetz (R. Utah) wrote a letter regarding John Koskinen, the commissioner of the IRS, asking President Obama to remove him from his post. As the IRS is a part of the Department of the Treasury, it falls under the authority of Executive Branch.

Chaffetz rightly calls out Koskinen for “obstruction” with regard to the various congressional investigations, which have revealed bungled IRS responses to repeated inquiries. At the time of his letter in late July, it had recently been revealed that IRS workers destroyed Lerner’s backup tapes from 2010-2011, losing 24,000 emails in the processes.

Chaffetz has it right. Even now, a month after calling on Obama to dismiss Koskinen, there have been even more revelations of IRS misconduct. This include that fact that 10 groups have still yet to be approved for tax-exempt status — with some waiting as long as 5 years — due to a “backlog of cases”. Even more egregiously, the IRS only revealed last week during court proceedings that Lois Lerner used a second, private email account with the alias “Toby Miles” to conduct IRS business (on top of her IRS email and another private email account). The fact that after years into the investigations, only last week this information was disclosed to the public shows an unrepentant IRS.

If Obama is unwilling to actually dismiss Koskinen from his deplorable actions, it shows he lacks the fortitude to fix the critical problems at the IRS. In fact, it proves that he really is the root of the problem.

IRS Complains About Budget Cuts, But It Cut Its Own Customer Service Budget

Earlier this year, John Koskinen, the IRS Commissioner, complained about the IRS budget given to him by Congress. It was reduced by nearly $350 million for this fiscal year. Commissioner Koskinen claimed the “agency’s $10.9 billion budget is its lowest since 2008. When adjusted for inflation, the budget hasn’t been this low since 1998.”

Due to budget cuts, the IRS warned that customer service would be reduced. The Taxpayer Advocate, (the IRS watchdog of sorts) recently gave her semi-annual report to Congress and discussed this issue at length. Among her findings were 1) if you call, it is likely that only half of the estimated 100 million people will ever reach an IRS agent on the other end; 2) hold times will exceed 30 minutes or more; and 3) the IRS is mandated to provide callers with the option to speak to a live person on its helplines, but would not even clarify to the Taxpayer Advocate which lines are designated helplines when calling in.

Now it seems that the dire, reduced customer service has already been happening for the past year and was orchestrated by the IRS itself. A new House Ways and Means report shows that, “while congressional funding for the IRS remained flat from 2014 to 2015, the IRS diverted $134 million away from customer service to other activities. In addition to the $11 billion appropriated by Congress, the IRS takes in more than $400 million in user fees and may allocate that money as it sees fit. In 2014, the IRS allocated $183 million in user fees to its customer service budget, but allocated just $49 million in 2015–a 76 percent cut.” How much more will they cut for FY2016? How much worse will customer service get?

Just as Obama dared to close national parks and monuments and cut off treatment for cancer kids during the government shutdown, in order to inflict pain on ordinary citizens, the IRS decided follow the same tactic and abrogate its basic responsibility to help taxpayers with compliance. Reducing the ability to provide customer service is particularly shameless.

For all the complaints about lack of budget funds, the Weekly Standard made note of a particular irony: “The IRS’s total annual $11 billion budget is dwarfed by the amount of improper tax payments it makes each year. According to the report, the IRS paid out $17.7 billion in improper Earned Income Tax Credit payments (which are supposed to help poor and low-income individuals) and an additional $6 to $7 billion in improper child tax credit payments.”

That’s double the amount of the entire IRS budget paid out to taxpayers incorrectly. Perhaps if the same amount of diligence the IRS took when targeting conservatives was paid to processing tax returns properly, there wouldn’t be such whining from the IRS Commissioner. And maybe some more phone calls would be answered.

More Abject Failure From Koskinen’s IRS


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John Koskinen has failed the IRS and the American people. Should he resign?

IRS Commissioner John Koskinen testified last week about the missing emails lost forever due to computer failures. When questioned about any more crashes or computer issues recently, Koskinen told the House Oversight and Government Reform subcommittee that “Hard drive crashes continue as we speak.”

Can someone please buy the IRS reliable computers and a backup system?

Don’t forget, the IRS canceled the back-up contract service that they had for six years, shortly after Lois Lerner’s original hard drive went missing. Koskinen was forthcoming during the hearing that no backup system currently exists: “There is no system outside the IRS, government or otherwise, that the IRS uses to back up or store emails,”.

On the other hand, there was also no mention if the IRS is complying with the law that states it must keep copies of all data; it apparently hadn’t been routine practice during the time of the IRS scandal actions, so there are no assurances that it is being followed now. That is a travesty.

Koskinen also admitted that “if the agency destroyed records then ‘that was an act not consistent with the law’ but said, ‘There’s no evidence that there were records destroyed.'”.

Notice he didn’t state that “The IRS didn’t destroy records” because then it would logically follow by his own admission that the IRS would have engaged in an act “not consistent with the law”. However, Koskinen chose his words carefully when he stated “there’s no evidence that there were records destroyed” — of course there is no evidence, because it is all missing. He further reiterated this position of “non-destruction”, when he stated, “I never said they disappeared, I said they were recycled.” Because “recycling” equipment and information that is irretrievable isn’t “destruction”.

Lastly, “Koskinen also admitted that IRS employees routinely use personal email accounts to conduct agency business but maintained that ‘they do it inadvertently.'” But how can someone do something “routinely” but also “inadvertently”? Of course, it makes no sense. Don’t forget, the email game is the same practice seen with the former EPA chief Lisa Jackson last year; the IG report found that the personal email use for agency business was indeed rampant among EPA employees. Since the IRS clearly engages in the practice as well, one can only conclude that this probably not “inadvertent” from an agency of the “most transparent administration ever.”

John Koskinen was confirmed by the Senate to head the IRS on December 20, 2013. In the nine months that have followed, he has done virtually nothing to restore the trust of the agency to the American people. As the testimony above freely evidences, Koskinen is aware of many issues and irregularities — such as no backup system and use of personal emails — and yet he has yet to crack down on practices or implement stringent rules among his employees. His leadership has been derelict; his attitude abysmal. American deserves better.