Reining In the IRS

by Eliana Johnson
The House GOP unveils its plan.

A comprehensive tax-reform plan House Republicans will unveil this morning takes dead aim at what Republicans perceive to be the IRS’s persistent abuse of its authority. According to Republican aides familiar with the plan, it will curb the power of the nation’s tax-collecting agency, something Republicans have attempted to do since the agency admitted to improperly singling out conservative non-profit groups last May.

The legislation, authored by Ways and Means Committee chairman Dave Camp (R., Mich.), introduces reforms that directly address the circumstances that led to last year’s scandal. The specter of Lois Lerner looms large in the minds of many Republicans, and the plan mandates the termination of any IRS employee found to have taken official action for political purposes. The 1988 bill that restructured and reformed the IRS spells out ten actions for which the IRS commissioner must terminate an agency employee after an “administrative or judicial determination” that the employee has committed the prohibited action — among them, providing a false statement under oath on a matter involving a taxpayer and violating the rights of a taxpayer. Today’s bill would add the commission of politically motivated acts to the list.

The plan would also require the IRS to modify its interpretation of a critical provision of the Internal Revenue Code that has been used to protect the privacy of those accused of leaking confidential taxpayer records and to deny information to the victims of IRS abuse.

Under the proposed reforms, the provision, Internal Revenue Code section 6103, would require the government to disclose to victims both the status of an investigation as well as its result, including the identity of the perpetrator.

As currently interpreted, section 6103 prohibits congressional committees or inspectors general from identifying a government employee who has leaked confidential taxpayer information. It even prohibits inspectors general from confirming or denying whether they have conducted an investigation. Disclosing tax returns to the public is a felony, but the results of investigations conducted by congressional committees or inspectors general are considered the confidential tax information of the perpetrator and so, in an ironic twist, perpetrators are currently protected by the very law they violated.

As Republicans, including Camp, have investigated the IRS targeting scandal, they have run head first into the restrictive nature of the 6103 provisions. “The law, intended to protect taxpayers, is being used as a shield for those who perpetrate this wrongdoing,” Camp told National Review Online in October.

The National Organization for Marriage, a conservative organization that had its donor list leaked by the IRS, has filed suit against the agency after it was unable to get answers from the government. Camp’s Ways and Means Committee, which investigated the leak, was prohibited from releasing the findings of its investigation, which concluded in October. In court, according to NOM’s attorneys, the IRS has admitted to disclosing the document but maintains that the disclosure was “inadvertent.” The case is in discovery phase and a trial is expected in April or May.

Camp and his Republican colleagues are also tackling the IRS’s proposed regulations for social-welfare groups, which have rankled groups on both the left and the right. The plan proposes to delay the rules, which would curb the political activity of 501(c)(4) groups, for one year. Camp has proposed a bill in the House that does just that, and Senate Republicans have done the same, but the bills have yet to come up for a vote.

501(c)(4) groups must promote social welfare and, by law, can’t “primarily” engage in political activity. The rules proposed by the agency in November, which have garnered over 70,000 (mostly critical) public comments, would classify such activities as voter-registration drives and the production of voter guides as political activity that does not count toward an organization’s primary purpose, essentially limiting the amount of political activity groups can engage in. Camp has charged that the rules were “reverse engineered” by the IRS in an attempt to codify the targeting of tea-party groups that it was previously performing behind the scenes.

The proposed rules have ignited a firestorm on the right, and, on the left, groups including the American Civil Liberties Union and the Service Employees International Union have spoken out against them. even as Democratic senators urge the agency to codify them in advance of the midterm elections.

The forthcoming legislation would also introduce an additional layer of oversight onto the IRS, directing the Government Accountability Office to review each of the agency’s operating divisions in order to determine that they are properly screening cases. The GAO would conduct follow-up reviews every four years.

— Eliana Johnson is media editor of National Review Online.

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