Q. What is the main scandal?
Tax-exempt 501(c)4s, organized to promote “social welfare,” spent $254,279,733 to influence the 2012 election, despite an IRS regulation that “The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”
Q. Was it OK for IRS to search for the words “patriot” and “tea party” in 501(c)4 applications?
Absolutely not. The IRS and all federal agencies must be extremely careful about bias and even the appearance of bias. The predictable consequence was a political firestorm that will weaken regulation. The IRS staff also used a bad methodology because they missed the American Action Network, which spent $30.6 million on elections, and the American Crossroads GPS which spent $71 million. Both had 501(c)4 status. And they missed liberal groups which have also abused the 501(c)4 loophole.
Q. Are the Republicans going after the IRS to protect undisclosed private money in elections?
I don’t know. Norm Ornstein says they are. I would guess it’s a mix of motives–sincere anger and fear of the government, partisan advantage (because the Tea Party can be made to look like victims and Obama can be associated with Nixon), and a preemptive strike against campaign finance reform.
Q. Were any groups victimized?
Not really. They were free to operate while their applications were pending. They were even allowed to wait until after the election to file with the IRS. They may have been worried that their applications would ultimately be denied. If that was a worry, they could have registered instead as tax-exempt Section 527 organizations. But then they would have had to disclose their donors.
Q. Why didn’t House Republicans publicize the problem in March 2012?
Marc Tracy raised this question. I think I can answer it. The story had to break in the media in a way that put the “Tea Party” search term at the center. If the House GOP had raised the issue, especially during an election, the press would have treated it as a campaign finance story. Reporters would have asked questions about whether the 501(c)4 applications really had merit–what were these groups doing in the election? I don’t know whether House Republicans intentionally waited, but they certainly have more reason to emphasize the story now than a year ago.
Q. What will happen?
It will drag for many months. Public opinion will be polarized, and very few minds will be changed. There will be scattered stories that tie political officials to the IRS, and other scattered stories that reveal genuine abuses by Tea Party 501(c)4s. Different people will read the two kinds of articles. General trust in government may erode by a couple of points. Any legislation that emerges will be harmful–loosening the disclosure rules. But House legislation will die in the Senate.