On June 30, 2014, the National Taxpayer Advocate supplemented the required Fiscal Year 2014 Objectives Report to Congress (outlining work for the upcoming fiscal year) with National Taxpayer Advocate Special Report to Congress: Political Activity and the Rights of Applicants for Tax-Exempt Status. The highlighted quote from Nina Olson on the homepage of the report says: “Today, the IRS is an institution in crisis. In my view, however, the real crisis is not the one generating headlines. The real crisis facing the IRS – and therefore taxpayers – is a radically transformed mission coupled with inadequate funding to accomplish that mission. As a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done.”
While certain members of Congress continue to waste taxpayer dollars (funny that those that rage about taxes so much could waste so much with this “investigation” – in February the number reported was $14 million… and that just on the IRS side and not including congressional/other governmental time) on their witch hunt, the real scandal is that we have not moved on. The IRS made mistakes. Underfunding is a significant driver behind the mistakes. For those that want to fully understand the other side of the story being put out there by Republicans in Congress – I suggest you read the report (and take into consideration that it is the Taxpayer Advocate’s job to critique the IRS with the taxpayers’ best interest in mind). It describes the issues and the Taxpayer Advocate’s analysis of the problems in a simple and straightforward manner, as well as echoing solutions previously given and providing new ones.
A summary of highlights I think are important:
1. The law used to determine when a §501(c)(4) organization violates the limits on political campaign activity is unclear and needs to be clarified. As the report points out, this is not surprising in part because the influx of §501(c)(4) organizations conducting political activities is fairly recent.
2. Unlike potential §501(c)(3) organizations, potential §501(c)(4) organizations do not have judicial recourse until their application has been ruled upon. Again, this is not that surprising because §501(c)(4) organizations do not have to apply for tax-exempt status – and §501(c)(3) organizations do.
3. Form 1024 (the form used by organizations applying for tax-exempt status under sections other than §501(c)(3)) has not been revised recently and does not really ask questions that ensure that the IRS gets the information it needs about political activity. The Form could/should include questions that would ask for more information that would clarify the types and level of political activity an organization planned to conduct.
4. Funding is a significant problem. Technology issues continue to prevent the IRS from adequately tracking and processing applications, requests for assistance from other Units, etc.
Issues in the full report not related to the Tea Party scandal –
1. There are problems with procedures associated with automatic revocation of tax exempt status and the problems with understaffing at the IRS are making the issue worse.
2. Insufficient funding by Congress has limited the training of IRS employees and results in IRS employees being unable to properly handle issues when they arise.
Note that both of those issues ultimately come down to funding. Nobody is well-served by continuing to cut IRS funding and doing so will only result in more mistreatment of taxpayer issues that could have been avoided.
The National Taxpayer Advocate’s report echo’s what we have heard (other than from certain Congressional sources) prior – which is that difficult law and poor management resulted in “inappropriate criteria” being used. Neither the Taxpayer Advocate nor TIGTA identified partisan bias in the acts. We have spent tens of millions of dollars in taxpayer dollars on this…stop the madness!