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There has been a lot of talk in the news recently about the IRS targeting various applications for tax-exempt organizations and scrutinizing their application more closely. These applications typically have the words "tea-party" or "patriot" in the name or description. It is my understanding these tax-exempt applications are sent to a group of specialists to be assessed for flaws and inaccuracies. Many republicans have stated that this is wrong, disrespectful, and possibly illegal (?).

My question is: why would it be wrong for the IRS to target certain groups with extra scrutiny with regards to tax collection?

Please note that I am not particularly concerned with the political affiliation of these groups. Furthermore, I believe this question can be broadened: Would it also be inappropriate to scrutinize other groups such as hedge-fund manager, large corporations, or any group/person with a lot of money?

  • I think the answer is going to have to come entirely down to intent. – user1530 May 14 '13 at 18:59
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    I might add that the current situation being discussed in DC is not just more close scrutinization. We are talking about harassment and intimidation. Many requests seemed to have nothing to do with taxes but were instead more related to executing a witchhunt. Most of these groups are very small, with little money and can't afford a lawyer. Rather than deal with the IRS many either folded up or at least rescinded their applications because they were afraid to deal with the IRS. Which in essence was using the government to silence political opponents. – Dunk May 14 '13 at 21:43
  • Again, though, the intent would have to be to target a particular political affiliation. I'm not sure that's the case at this time (Though may turn out to be the case). – user1530 May 14 '13 at 22:09
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    It's even worse that Dunk said. IRS (1) Requested - illegally - their membership details and (2) leaked their private details to a liberal organization – user4012 May 14 '13 at 23:10
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    +1 - it's a surprisingly deep question, with a very obvious off the cuff intuitive answer but a good answer to which requires understanding of US legal and political basis. – user4012 May 20 '13 at 18:39
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Would it also be inappropriate to scrutinize other groups such as hedge-fund manager, large corporations, or any group/person with a lot of money?

Scrutiny in IRS audits is supposed to be based on suspicion that a person or organization is cheating on their taxes (e.g., by under-reporting income or over-reporting deductions).

Rich people do get audited more than poor people. As the above-liked article states, those who report at least $1 million in income are 12 times more likely to get audited than average. This can be rationalized by them tending to have more complex tax situations (more investment income, more likely to itemize deductions).

Non-profit “social welfare” organizations have restrictions on political activity, and the IRS does have a duty to enforce those restrictions. The problem, as the IRS has confessed, is that the audits were targeted towards one political viewpoint. In a presidential election year.

Quite naturally, the Republicans see this as an attempt to influence the election by intimidating Obama's political opponents.

There's precedent for this. Many people have compared these politically-biased audits to President Nixon's Enemies List, which had the intent to “use the available federal machinery to screw our political enemies.” It was one of the scandals mentioned in the articles of impeachment against Nixon. (He resigned before the impeachment vote took place.)

So far, however, no evidence has emerged that Obama or the White House staff directed the IRS to engage in illegal activities.

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    "no evidence has emerged that Obama or the White House staff directed the IRS to engage in illegal activities" - there is clear evidence that Democratic members of Senate DID it (publically); and there is some evidence that Obama white house likely knew about it happening WHILE it was happening. – user4012 Jun 7 '13 at 16:16
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    @DVK knowing about something that happened (and since fixed, apparently) and initiating it is still different. It is one thing to incite IRS to do political audits - of which we right now have no idea that Obama or somebody near him did, and another thing, when reported that there was this scandalous behavior, not tell anybody and telling them quietly to stop doing this (which they eventually did, as it appears). The latter is despicable, but quite common for a politician, the former raises to the level of impeachable offense. – StasM Jun 13 '13 at 4:28
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Government organizations like the IRS are meant to enforce the laws. Officers of the IRS generally aren't supposed to be a higher class of citizen, who can make decisions for other people on a whim.

If you allow administrators of an organization like the IRS to give extra scrutiny to organizations based on political affiliation, then that creates a channel in which they can bully and suppress political opponents, and they gain an undue amount of personal political power.

It's not necessarily a problem to give extra scrutiny for tax-exempt status to say... larger organizations who pull in a lot of money, or organizations that sell a product, so long as those criteria are justified, established ahead of time, and are enforced consistently.

  • One detail that is important, however, is that these groups being investigated were applying for tax-exempt status as 'social welfare' focused organizations. When said entities then used political-party names (such as 'tea party') it was likely going to raise a few flags. In otherwords, they may very well have been investigated due to political affiliation because to be tax-exempt, they weren't supposed to have political affiliations as their primary focus. – user1530 May 15 '13 at 3:53
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    @DA:It is already a fact that the IRS specifically targeted conservative groups. Even IRS leadership admits this to be the case. Whether this alone is illegal is another matter but is certainly politically damaging. However, it also seems that the IRS broke a number of laws by releasing private tax documents to liberal political organizations, including donor/member names. – Dunk May 15 '13 at 11:53
  • @dunk yes, if they were targeted at the exclusion of other party affiliated groups, definitely a bad thing. – user1530 May 15 '13 at 15:29
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Why would it be wrong for the IRS to target certain groups with extra scrutiny with regards to tax collection?

Well, that isn't the issue with what the IRS was doing (more on this later), but to answer that question. It stems from the Supreme Courts current interpretation of the 5th and 14th Amendment

No person shall be [...] nor be deprived of life, liberty, or property, without due process of law; [...]

No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

Ignoring for a moment the original intent of these amendments, SCOTUS decided since Bolling v. Sharpe that the "equal protection clause" applies to federal law as well as state law.

The "equal protection of the laws" is a more explicit safeguard of prohibited unfairness than "due process of law," and, therefore, we do not imply that the two are always interchangeable phrases. But, as this Court has recognized, discrimination may be so unjustifiable as to be violative of due process.

In general, legal discrimination has to pass a minimum level of scrutiny.

Usually the Court finds a State classification Constitutional as long as it has a "rational basis" to a "legitimate state purpose". The U.S. Supreme Court, however, established a firmer sense of analysis to certain cases.

The guidelines that the IRS were using to delay 501(c)(3) and 501(c)(4) do not meet that minimum level, they are not a rational basis for additional scrutiny, not do they serve a legitimate state purpose. This is evident from the Inspector Generals report, and the IRS's own regulations for 501(c) tax exempt status.

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