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Tax-exempt organizations and the IRS: political fallout continues

Regardless of political persuasion, the collection of taxes by the government is supposed to be done in an even-handed way. It is not supposed to favor some political groups over others. Otherwise taxes become an exercise in oppression.

This is why allegations that the IRS may have played politics with tax collection are particularly troubling. In this post, we will discuss the latest development in the scandal that broke a year ago over whether the IRS used inappropriate criteria to determine which organizations qualify to be exempt from taxes.

The latest development is that the House of Representatives has voted to hold an IRS official in contempt of Congress. The official involved is Lois Lerner, the woman who headed the IRS division that was responsible for determining which organizations meet the criteria for tax-exempt status.

The vote in the Republican-controlled House was essentially along party lines. Many Republicans claim the IRS inappropriately targeted Tea Party and other conservative groups for heightened scrutiny of applications for tax-exempt status.

Ms. Lerner's attorney counters that she had every right to invoke her Fifth Amendment privilege against self-incrimination when she appeared before Congress last year.

Moreover, liberal groups may have been targeted along with conservative ones. Last year, the Treasury Inspector General for Tax Administration (TIGTA) found that IRS employees who were sorting through applications for tax-exempt status also used the word "progressive" to target certain groups for additional scrutiny.

Why would the IRS do this, when it is supposed to be nonpartisan?

Well, it is entirely possible that an underfunded IRS - whose sagging budget fortunes we have followed closely in this blog - may have used political code words in a misguided attempt to simplify its daunting workload. Instead of reviewing each application closely on its own merits, the agency may have been looking for quick-and-dirty shortcuts that enabled it to focus its limited resources on the applications most likely to be questionable.

In this sense, the dustup over tax-exempt organizations could be seen as another episode in the ongoing saga of the IRS's sagging budget fortunes and declining ability to provide good customer service.

As we noted in our May 9 post on tax audits, that decline has already compromised the IRS's ability to collect taxes as efficiently as it once did.

Source: CNN, "GOP-led House votes to hold former IRS official in contempt," Lisa Desjardins, May 8, 2014

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