The IRS is in trouble. Everyone is justifiably angry about what they hear and read about the situation. Some want heads to roll (acting IRS Commissioner Steven T. Miller's being the first) and some want people to go to jail. More on that later.
What happened? As we now know, the IRS, in the person of Lois Lerner, director of Exempt Organizations, admitted in Q&A after a speech to the American Bar Association Section on Taxation on May 10 that certain applications for tax free organization status were singled out for extra scrutiny by at least two employees in the Cincinnati office of the IRS. This admission came four days before a U.S. Treasury Inspector General for Tax Administration (TIGTA) report was issued.
The TIGTA report said tea party groups were asked inappropriate questions about their donors, their political affiliations and their positions on political issues. This resulted in delays averaging nearing two years for applications to be processed. The report also states that those at the top knew of this behavior for 18 months.
This was known to the IRS Commissioner as early as 2012 (and maybe June of 2011) and by his temporary replacement, Steven Miller, on May 3, 2012. On July 25, 2012, Miller failed to report to the House Ways and Means Committee that applications were singled out based mainly because they had "tea party" or "patriot" or other such language in their organization name.
The innocent part of this scrutiny is that when the IRS sees an uptick in applications of a new sort, they send them all to the same location so that there is a better chance of them all be dealt with in a consistent way. The bad behavior occurred when fully one-fourth of the 300 applications held for more scrutiny were picked because of certain political language in the title. It was lazy profiling in the view of many.
None of these applications were denied, but they were held up for roughly two years. If none were denied, what was gained by the delay? The ability to collect and funnel campaign contributions was delayed until after the elections.
Some background is needed here. There are 501(c)(3) organizations and there are 501(c)(4) organizations. Churches, private schools, and Habitat for Humanity are examples of the former. The two types are similar, but the latter include a lot of organizations that are supposedly formed "primarily" for social welfare but many of which are really probably formed to circumvent campaign contribution limits. Attempting to influence elections by backing one candidate over another is supposedly cause for loss of tax exempt status, but even some religious organizations are daring the IRS to act by trying to influence its members from the pulpit or website.
The IRS wanted Congress to act to state in a law that contributions to 501(c)(4) organizations are subject to gift tax, but Congress didn't want to hear it. Congressmen, of course, are the primary beneficiaries of those organizations and their campaign contributions, with the President being a close second. Raising money for re-election is a big part of every elected official's life, and anything that closes down the valve of contribution money is clearly not in their best interest.
The severity of the IRS behavior, both the agents directly involved and those at the top who knew of it, made it mandatory for everyone regardless of party to decry and condemn it after it became public knowledge.
The groups being heavily scrutinized complained to their Congressmen, and Congress sent at least eight letters to the IRS asking "what's up with this"; but the IRS response never acknowledged that any groups were being targeted.
Senator John Boehner (R-OH) has said he wants to know who's going to jail for this. Considering the burden of proof, probably nobody. But the potential crimes include civil rights violations, making false statements to authorities, and violating the Hatch Act. This act prohibits federal employees from engaging in some partisan political activities and could be the one offense for which proof might be found.