Political Bias at the IRS Likely Deep-Seated

The IRS has been taking flak for its treatment of right-leaning groups seeking recognition as tax-exempt “social welfare” organizations under clause 501(c)(4) of the Internal Revenue Code. As it happens, I have some personal experience with IRS scrutiny of 501(c)(4) applications. I was on the Board of the Free State Project (FSP) when the FSP applied for 501(c)(4) status in 2007-8. Our application was denied. We appealed, and the appeal was denied.

The reasoning the IRS gave us is that the FSP was simply a political action group trying to benefit the Libertarian Party. Nothing could be further from the truth. The FSP has never run or endorsed candidates or given money to any candidates. The FSP has never endorsed specific legislation or lobbied any elected or appointed official. More importantly, the FSP has never had any ties, formal or informal, with the Libertarian Party. Plenty of FSP participants reject electoral politics altogether. To my knowledge, the FSP has never received even a single donation from any foundation, government, party, or any other corporate entity whatsoever.

The FSP clearly qualifies as a social welfare organization, if not a public-benefit, charitable organization (“501(c)(3)”), according to the IRS’s own rules. The point of the FSP is to promote New Hampshire as a destination to people who are philosophically classical-liberal or libertarian. That’s it. The FSP spends money on advertising and promotion, maintaining a website, and holding two annual educational-social events in New Hampshire. The FSP believes that is an organization operated for the public benefit, especially with the educational programs held at its events. However, even if the IRS does not buy that interpretation, it is clearly an organization intended for the social and educational benefit of philosophic libertarians. It is clearly not a political action organization. Indeed, had the FSP applied for section 527 recognition, it probably would have been denied, leading to the absurd likelihood that the IRS would have considered the FSP a nonprofit fitting into no nonprofit category.

Since then, the FSP has operated just fine as a generic nonprofit corporation with no IRS tax status; since the organization’s expenditures always exceed its merchandise sales, it does not have any tax liability. However, 501(c)(4) status would have been a useful designation and signal to donors of the organization’s credibility.

Conservatives would like to find Obama’s fingerprints on the current IRS scandal, but they are unlikely to do so. Career bureaucrats at the federal agency that collects taxes from Americans are unlikely to be friendly to American antitax groups. The IRS’s hostility to antitax groups will manifest itself in a variety of ways, but that hostility is apparently nothing new or even particularly surprising. That doesn’t mean it isn’t wrong, of course.

6 thoughts on “Political Bias at the IRS Likely Deep-Seated

  1. I prefer to think this as tyranny by committee. Whether Benghazi, the IRS scandal, the DOJ actions re the AP, and Sebelius soliciting donations from the industry she regulates, just to list recent examples, there is no real reason to point the finger at a single tyrant. And I suspect many if not all of the folks involved have convinced themselves that they are doing the right thing for the country, even if illegal.

    It is fair to criticize Obama as out of touch and, as Dana Milbank says today not participating in his presidency, which proves he is not the tyrant. The tyrant is the vast army of amorphous and anonymous government functionaries and puts the lie to the President’s recent assertions about government to the OSU graduates. The bigger it becomes, with the lengthening of its reach, the less efficient and more tyrannical our government becomes.

  2. As a longtime federal government employee, I can assure you that bias exists in all federal agencies. No one would necessarily have to tell the people who work there how to advance the interests of Democrats/liberals and how to hinder the interests of Republicans/conservatives. It’s in the blood.

    In 1992, when Clinton was elected, the administrative officer of the federal agency legal department I worked in organized a celebration in the office on the clock. Many who did not vote for clinton hid in their offices but many felt pressure to attend.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s