5 Questions About That Obama IRS Mess

Nancy Cook
National Journal

Not that it needed help, but the Internal Revenue Service officially became the most hated government agency on Monday, as both parties decried the way the IRS had allegedly screened tax-exempt organizations in recent months.

In a news conference Monday morning, President Obama told reporters that he just learned of the IRS’s potential problems on Friday. “If, in fact, IRS personnel engaged in the kind of practices that had been reported on and were intentionally targeting conservative groups, then that's outrageous and there's no place for it,” he said.

“And they have to be held fully accountable, because the IRS as an independent agency requires absolute integrity, and people have to have confidence that they're applying it in a nonpartisan way—applying the laws in a nonpartisan way.”

Meanwhile, both congressional Democrats and Republicans attacked the agency and called for investigations and hearings. Everyone from House Minority Leader Nancy Pelosi, D-Calif., to Senate Finance Committee Chairman Max Baucus, D-Mont., to House Ways and Means Committee Chairman Dave Camp, R-Mich., piled on. The House’s tax-writing committee plans to hold a hearing on Friday morning, with the acting commissioner of the IRS as one of two witnesses. And the Treasury inspector general for tax administration is slated to release a potentially explosive report on tax-exempt organizations and the IRS this week.

At issue is whether the agency intentionally targeted conservative groups associated with words such as "tea party," "patriot," or "debt" as the agency sifted through applications that various organizations had filed for tax-exempt status. Becoming a so-called 501(c)(4) group has benefits because it means the groups do not have to disclose donors. The number of groups filing for this designation grew exponentially during the recent presidential election, thanks to a 2010 Supreme Court decision that allowed for unlimited amount of money from corporations, unions, and associations to flow into campaigns.

While the IRS scandal is wreaking political havoc for the White House, people still do not understand many aspects to this story. Here are a few key questions:

Did the IRS just target Republican-leaning groups?

A report from the Treasury inspector general, slated for release this week, should offer insight into whether the IRS knowingly targeted conservative groups for political reasons.

The American Center for Law and Justice, which represents 27 tea-party groups across the country, says the IRS unfairly targeted conservatives by asking them to submit to onerous levels of questioning while processing their applications for tax-exempt status. 

How high up in the IRS food chain did the decisions go on tax exempt groups?

We don’t know yet. Lois Lerner, the IRS administrator in charge of tax-exempt groups, blamed the IRS's blunder on Friday on some lower-level employees out of the Ohio office, but it’s not clear yet if anyone higher up in the managerial ranks approved the criteria the agents used to sift through the exemption applications. Former IRS Commissioner Douglas Shulman testified in Congress in March 2012 that the agency did not target groups based on their political leanings.

Why would the IRS do this? I thought it was just supposed to worry about the tax code…

The IRS's role in fact spans from collecting taxes to delivering social policy, and now, to evaluating political groups. Most see the IRS as simply the "tax man"—folks who collect money from companies and individuals—but a great deal of federal social policy becomes law by way of the tax code, from giving tax breaks to working families or people with children to encouraging home purchases through breaks such as the mortgage-interest deduction.

The IRS is also indirectly responsible for implementing much of the Affordable Care Act, since taxes will fund the bulk of the president’s health care law.

Now, with the rise in tax-exempt organizations, the agency must figure out this piece of the puzzle, and politics has never been its specialty. The tax code is just one part of the agency’s responsibilities.

So someone from the IRS could get fired over this, right?

There's no one at the top to fire. No kidding. The top commissioner of the IRS—an appointee of President George W. Bush—left the agency in November 2012 once his tenure ended. The president has not yet appointed a new commissioner (there's just an acting one), so there’s no one clear-cut candidate to take the fall.

What will be the fallout in Congress concerning the IRS?

Lots of committees, lots of investigations, lots of press conferences. The House Oversight and Government Reform Committee, under Republican Chairman Issa; House Ways and Means, under GOP Chairman Camp; the Senate Finance Committee, under Democratic Chairman Baucus; and the Senate Permanent Subcommittee on Investigations under Chairman Carl Levin, D-Mich., have all promised to investigate. First out of the gate is the House Ways and Means hearing, set for Friday morning. So IRS officials will have their hands full preparing testimony.