With IRS defanged, politics can run rampant

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Story highlights

  • Gloria Borger: After IRS scandal, it's open season for political nonprofits
  • She says the agency was wrong to target conservative groups
  • Still, the IRS is needed to keep political groups from posing as nonprofits, she says
  • Borger: IRS focused on small fry, left big organizations free to spend on politics

One of the most perverse results of the IRS's lame, overzealous -- and possibly criminal -- behavior in looking into the tax-exempt applications of assorted advocacy groups is this: They're a lot safer from scrutiny today than they were yesterday.

After this IRS mess, who in government is going to be in a rush to take on -- or try to regulate -- the groups they should actually be looking at as political operations, overt or covert? Um, not many.

Here's the real deal: It's an open secret in Washington that some of these groups, which spent huge amounts of money during presidential campaigns, are politically aligned. Whatever their "labels," as the IRS might call them, they have been tax-exempt because they claim to be dealing with issues rather than elections. That is, policy, not political candidates. But in the heat of a general election, when policy is politics, how can anyone tell the difference?

Priorities USA is a Democratic brand; Karl Rove's Crossroads GPS isn't likely to do anything other than help the GOP. To gain their tax-exempt status, they're supposed to promote the "social welfare." What, exactly, does that mean?

Gloria Borger

It's a complicated question that has become infinitely more complex in the wake of the Supreme Court's Citizens United decision, which allowed corporations to start donating directly to activist groups. Suddenly, the potential of getting some dibs on their considerable money grew larger. The groups designated as 501(c)(4) became the perfect pots to hold the dough, and they swelled, literally and figuratively. And the IRS didn't do much about it.

It might have been a better idea, rather than embarking on what seems like a potentially criminal political fishing expedition, to actually take a look at the huge amounts of money being spent out in the open during the last campaign.

Why wasn't the IRS "scrutinizing the big fish," asks Paul Ryan, the chief lawyer for the Campaign Legal Center, a watchdog group that has pushed (unsuccessfully) for the IRS to investigate these groups. "The IRS needs to be focused on the big fish and not on the little Mom and Pop tea party groups, and certainly not based on their political ideology."

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Ah, but that's exactly what happened -- and, as a result, these groups that, according to some estimates, collectively spent over $250 million on candidates during the last election are still tax-exempt. Can it be that the IRS investigators were so silly, clueless and unaware of their appropriate role? Alas, yes.

But the legal eagles reading and interpreting the IRS laws are obviously a lot smarter. In its description of the 501(c)(4) category, the IRS lays it out pretty plainly. "Examples" of organizations under this statute that would be considered tax-exempt, it says, are "civic associations and volunteer fire companies." Hmmm. Not exactly political in any way, shape or form. What's more, the IRS also makes it clear that, in order to qualify, the burden is to prove that "your organization is organized exclusively (italics mine) to promote social welfare."

But according to Ryan, the gremlins (i.e. the lawyers) have managed to figure out a way to get around this. The new "perceived line," he explains, is that all these groups need to do is spend less than half of their money on politics. He calls it the "tax lawyer community interpretation." Huh? Is that how we're running the government?

So if these groups spend less than half of their money on politically related activism, the dough they collect from big corporations and donors can be used for campaign activities, all without disclosure of where the money came from.

This has not escaped the notice of Congress, especially Democrats who have been outgunned by Republican-leaning groups.

"We urge you to protect legitimate section 501(c)(4) entities by preventing non-conforming organizations that are focused on federal election activities from abusing the tax code," seven Democratic U.S. senators wrote then-IRS Commissioner Douglas Shulman last year.

What makes sense is for the IRS to make sure that its laws are followed. Citizens can at least expect that their government might know the difference between quashing political dissent and legitimate inquiry. Fishing expeditions on political-sounding names is just stupid, if not venal.

And now, the obvious -- and perverse -- consequence of the IRS bungling: It has just made the world safer for tax lawyers. Your taxpayer dollars at work.

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