Monday, July 9, 2012

Should We Trust the IRS to Do What Is Right in the EO Area

by Paul Streckfus, Editor, EO Tax Journal

Is recent criticism of the IRS’s EO function just politics as usual? After all, criticizing the IRS always wins a member of Congress huzzahs back in his or her district. Nevertheless, the series of letters written to the IRS this year about its EO function, from both Democrats and Republicans, intimate a lack of trust in the IRS to do the right thing in its regulation of tax-exempt organizations.

As someone who has followed the EO function for forty years, first as a tax law specialist in the IRS’s EO Division in the seventies and now as a journalist exclusively covering EO tax matters, I’d like to be able to say the folks at the IRS are to be trusted to do the right thing without favoring one political party over the other or without favoring certain powerful groups.

My problem is that I do not know what is really going on at the IRS and Treasury in regard to tax-exempt organizations. Lois Lerner, the current director of the EO Division and the IRS’s most frequent public speaker on EO matters, remains an enigma, at least to me. While Lois is always touting the “transparency” of the EO function, the reality is that we in the press -- and hence the public -- get mostly propaganda in the form of superficial, wistful workplans and canned speeches.

What we in the press do not get is access to Lois or to any of her subordinates. Theoretically, we do have access through the Media Relations office of the IRS. In reality, this office’s mission is to keep the press at bay, usually by ignoring press calls or taking so long to respond that stories have long since gone to press. (True story: I’ve had a request to interview Lois pending for over five years, which must set some kind of record.)

Over the years I have suggested that the EO function have periodic press conferences where the members of the EO tax press (there are only a few of us!) could come to the IRS and ask Lois and members of her staff questions. I believe that the reason such a request has never been responded to is because Lois -- and her predecessor and mentor, Steve Miller -- would find such encounters terrifying. Imagine having to answer hard questions from us obnoxious press people! Yet, no matter how you feel about the press, we represent the public, the folks who pay Lois’ salary and to whom she and her fellow EO managers should be accountable and transparent.

Meanwhile, certain groups have easy access to Lois and the IRS. Should I begrudge Independent Sector its access? The Council on Foundations? The EO Committee of the ABA’s Tax Section? Members of the ABA’s EO Committee get to spend a day with the IRS and Treasury each year before their May meeting. In addition, Lois usually picks at least one member of the EO Committee to serve on her EO Advisory Subcommittee.

I think most people of whatever political persuasion are not blind to the fact that the EO function at the IRS has a double standard when it comes to access to its staff. Groups perceived as friendly get the royal carpet treatment. Those of us who are perceived as troublesome are left standing at the door or required to sit in the back of the bus.

I believe this obvious double standard is one of the reasons there is a lack of trust in the IRS to do the right thing in its regulation of tax-exempt organizations. As a former IRS employee and as someone who supports the work of the IRS, I’d like to be in a position to defend the EO function from attacks on its integrity, but even I -- who, as I said, have been involved in the EO area for 40 years -- have no idea what is going on at the IRS.

In addition to the EO Division, the other function at the IRS that is involved in EO matters is the Office of Chief Counsel. When it comes to lack of transparency, the Office of Chief Counsel is even worse than the EO Division, in that it routinely ignores the disclosure laws.

As an example, last year I requested information on EO cases in litigation, which is public information, under the Freedom of Information Act. Not surprisingly, the request was denied. I then asked a new federal agency, the Office of Government Information Services, which has been set up to mediate FOIA disputes, to intervene. That office asked me if I would accept the information I requested in whatever manner or format that was convenient for the Office of Chief Counsel. I said sure, something is better than nothing. Again, not surprisingly, the IRS told the federal government’s mediators that they would not respond in any fashion.

The reality is that the IRS has become a law unto itself. The agency constantly uses section 6103 of the Internal Revenue Code, which protects only individual taxpayer information, to shield all its operations from public scrutiny. The result is that no one knows what really goes on at the IRS, but I do know, at least in the EO function, some favored folks are getting access while the rest of us are ignored.

How can anyone, even those who are getting preferential access, have confidence in an agency that operates this way? Is the Obama Administration, through the Treasury Department, manipulating the IRS to rule favorably in the case of exempt organizations supporting Democratic causes and to rule adversely in the case of EOs supporting Republican causes? I certainly don’t know, but I am becoming increasingly suspicious, in view of their deliberate efforts to keep the press away while favoring certain groups. 

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics,, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)
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