Stretching the law to hide political donors

IRS problem started with vague tax exemption rules

IRS was ill-equipped to handle the deluge of tax-exempt applications from 'social welfare' organizations and to police their political activities, experts say.

By Matea Gold, Washington Bureau
4:44 PM PDT, May 16, 2013

WASHINGTON — In spring 2010, agents in the Cincinnati office of the Internal Revenue Service, which handles applications for tax-exempt status, faced a surge of filings by new advocacy groups, with little guidance on how to treat them.

Their decision to deal with the problem by singling out tea party and other conservative groups for extra scrutiny has now triggered a criminal inquiry, congressional investigations, the departure of two top IRS officials and the naming of a new acting commissioner Thursday.

For former IRS staff and tax experts, the case confirms what they view as one of the agency's long-standing weaknesses: its inability to cope with the growing number of tax-exempt advocacy groups that appear to stretch the law to engage in politics.

With the IRS now under fire for its practices, campaign finance lawyers anticipate that the agency will shy away even more from regulating such organizations.

(More here.)