Exclusively means 49 percent

The acting commissioner of the Internal Revenue Service, Steven Miller, has been forced to resign days after the IRS apologized to tea party and other right-wing groups for putting extra scrutiny on their bids to become tax-exempt organizations. While the IRS targeting of tea party groups has made headlines for days, far less attention has been paid to the roots of the crisis. After the 2010 landmark Supreme Court decision Citizens United, there was a spike in new political organizations seeking tax-exempt status under tax code Section 501(c)(4). The court ruled these groups could raise unlimited corporate money without disclosing donor information. Several groups have claimed to be social welfare organizations while spending tens of millions of dollars on political operations. We speak to David Cay Johnston, a Pulitzer Prize-winning journalist who writes about taxes issues. “One of the questions that needs to be examined in the real scandal here is: How did MoveOn, how did Karl Rove’s Crossroads GPS, how did Bill Burton’s progressive Democratic group get approved as exclusively social welfare organizations?” Johnston says. “There are a bunch of folks out there arguing that, well, ‘primarily,’ that phrase that pops up in IRS regulations, can mean 49.9 percent of your activity. I’m sorry, is there an adult in America who’s been in a romantic relationship who thinks that ‘exclusively’ is 49 percent of the time?”

David Cay Johnston talking:

Miller didn’t resign; he was fired. The president said that Jack Lew, the treasury secretary, asked for his resignation. What’s a little strange about this is that Miller had nothing to do with this, as best we know. He’s the acting commissioner. The misconduct—and it’s absolutely misconduct; it’s no different than stopping young men on the street based on the color of their skin, as we know is going on a lot in New York City—took place under the watch of Douglas Shulman, who was an appointee of President George W. Bush, which shows how complicated this story is.

The person still working at the IRS who has not been fired and has not resigned is Lois Lerner. She was the person in charge of exempt organizations—that is, organizations that don’t pay taxes. And she misled reporters, to be polite, last Friday. It’s not the first time reporters have found her to make false statements to them. And Congress, members of Congress say that she lied to them. I do not understand why she is still on the taxpayers’ payroll.

The Internal Revenue Service has been given all of these duties that are beyond collecting taxes, and they have enormously added to their burdens. So, in the last 10 years, the budget of the IRS, adjusted for the size of the population and inflation, has come down 17 percent, while the duties it’s been given have gone like this. Now, if you’re a wage earner and—or pensioner, you have your taxes taken out of your money before you collect it. You’re not being affected by these budget cuts. But people trying to get a tax-exempt status, there aren’t enough people to process the complaint—to process the permit requests. People are not being audited at the level they should, who are very wealthy and who self-report. There is no independent verification of their income. And we know that self-reported income, roughly a third of it, tends not to be reported overall—some people are scrupulous; some people are the exact opposite—and that verified income, like wages, 99.9 percent of that gets reported to the government. So, the IRS is being asked to do things it doesn’t have the budget to do. Its workers have not had pay raises in three years. IRS employees are held to a higher standard than anybody else in the government in terms of their conduct. And they simply cannot do all the things that Congress is asking of them.

it’s very hard to imagine that there’s a criminal case here. The IRS agents in Cincinnati, the examiners in what’s called the determination unit, were presented with an irresolvable conflict. The law for what are called 501(c)(4) organizations, which dates to 1913, says that they are exclusively to be engaged in social welfare. But an IRS regulation that’s been around since 1959 invokes the word “primarily.” And groups like MoveOn, which is a 501(c)(4), although it does not appear to be, in the classic meaning, a social betterment group—they’re not out promoting more wildflowers in the parks and Little League and Girl Scouts and things like that—they are a 501(c)(4). Karl Rove’s organization spent, based on its tax filings, less than one-tenth of 1 percent of its 2011 revenue on social welfare.

So it’s hard to—the IRS agents have this problem of: What do I do with these organizations? They picked 300 of them for close scrutiny. Seventy-five of them said “tea party” or “patriot” or Glenn Beck’s 9/11, things like that, and they selected them. They shouldn’t have done it on that basis. But the applications those groups made, because some of them have made public their responses so we know what their applications said, those applications were drafted in a way that basically said, “I’m really not a social welfare organization.” So of course they came under scrutiny. They just shouldn’t have been picked the way they were. Can’t see a criminal case in that.

there was no group that was actually denied its 501(c)(4) status.

you don’t have to get a permit from the IRS. You do not need a determination. The law allows—it’s right on the IRS website—that you can simply self-declare that you are a 501(c)(4) organization. So no organization was prevented from participating in political activity because of the actions of this unit. All that happened is, they didn’t have a letter certifying that there was no question that they were a 501(c)(4) organization. And that’s a very important distinction that’s being lost here and I have not seen in any of the news reports.

Don Alexander, who was Richard Nixon’s IRS commissioner, said emphatically to many people on many occasions that nothing went on, that he was aware of, at the IRS. Now, maybe there were things that went on beneath him he didn’t know about. In fact, he only briefly met Nixon once, shook hands with him, and Nixon went, “Oh, yeah. You’re the tax guy.” FDR ordered up reports. He wanted to know information. But there’s no indication that anybody was audited.

And, you know, the issue here is the IRS is an independent agency. The president technically didn’t fire Steve Miller. The secretary of the treasury did. And if you listen to the president’s statement, that’s what he says. There is no indication that this was anything but an internal IRS operation. The TIGTA report, the Treasury inspector general’s report, is quite clear that everybody they talked to said this was entirely within the IRS. And barring any new evidence, I don’t see any reason to question that. TIGTA has certainly a sterling reputation for the work that it does. I read all of their audits.

Citizens United is this case that essentially says that artificial persons—corporations, labor unions, nonprofit organizations—have political rights. The Founding Fathers would be astonished at that. And remember, we have a Supreme Court with these, quote-unquote, “originalists” on it. You know how many corporations there were in the United States at the time of the Revolution in 1776? Six. Six. And we would describe every one of those today as either a public utility or a charity. They were not profit-making corporations. Justice Rehnquist, Chief Justice Rehnquist, an authentic serious conservative, said in more than one opinion that you shouldn’t be granting political rights to corporations; they are not natural persons. So, this is a—this decision, Citizens United, is our Plessy case. That’s the case that approved “separate but equal.” And we’re going to have to live with it, but it has created terrible problems now.

And one of the questions that needs to be examined in the real scandal here is: How did MoveOn, how did Karl Rove’s GPS, how did the Bill Burton’s progressive Democratic group get approved as exclusively social welfare organizations? There are a bunch of folks out there arguing that, well, “primarily”—that phrase that pops up in the IRS regulations—can mean 49.9 percent of your activity. I’m sorry, is there an adult in America who’s been in a romantic relationship who thinks that “exclusively” is 49 percent of the time?

Justice Department’s seizure of the telephone records from AP editors and reporters.

one of the important things to keep in mind about this, Amy, is that AP found out about this information, told the government what it had, and as responsible news organizations do, when the government said, “Please, we’re in the middle of an investigation. Hold off,” they held their story. Then the White House notified them that the next day it was going to go public about this, basically extending to AP the courtesy, because they had behaved well, of letting them break the story that they had held.

Now, the outrage you’re hearing from some members of Congress that this is something terrible the AP has done—and there are members of Congress saying that—is beyond belief, particularly for people who claim to be concerned about the Constitution, which, after all, includes a First Amendment to protect our religious, free speech, petition, assembly and press rights.

In this case, I don’t think that the attorney general is correct. I don’t think the exceptions apply here. There were no exigent circumstances. This was looking at something after the fact. And, you know, according to the FBI, they did 550 interviews, and they don’t know who the leaker is. That’s officially what they’re looking for: who spoke to the AP. If they don’t know, it suggests that in fact this may well be a story that came through some odd factor. I mean, the world is full of news stories that come about not because somebody issued a press release.

But this is a very troubling sign. The 4,200 members of Investigative Reporters and Editors, that I’m privileged to be the board president for, I’m sure will discuss this next month at our annual meeting in San Antonio, and we are taking steps to try and find out how far this reached and what the government is going to be doing in the future.

But the Obama administration has been very, very troubling about all of these issues. Remember that President Obama in 2008 campaigned on a transparency and openness in government. I wrote a piece—I think I’m the first national journalist who wrote a highly critical piece of President Obama, nine days after he took office, about the simple matter of calling the White House press office. And I’ve been calling White House press offices back to Nixon. And I just asked the first person who answered the phone, you know, “What’s your name?” And immediately it was: “What do you want that for?” And I literally had people hang up. They wouldn’t say who they were. I mean, you don’t know if you’re talking to a secretary, an intern or a press secretary, or somebody who walked by and picked up a telephone.

And since then, I and many other journalists have observed that this administration, despite its public rhetoric, has repeatedly and continually been very difficult to deal with. I rate them worse than the Bush administration. And every single story that I wrote at The New York Times, with one exception, had Bush people on the record by name, rank and serial number. So, this is a very troubling aspect of this administration. It is hostile to the news media. It seems to have an attitude that if they don’t like the question, they don’t have to answer it. And it makes it very difficult and cumbersome to get responses from there. They’re be having much more like a corporation than like the people’s government.

the idea here is that reporters should be exempted from having to both identify sources that they have to the government as well as from the kind of surveillance that went on with the AP after the fact. I don’t think there’s any chance we’re going to get a surveillance law passed by this Congress, by the way; I think it’s absolutely zero.

But historically, governments—the American administrations have treated the press, certainly in the modern era, the last hundred years, with some deference about these matters; and at the same time, they have sometimes been very tough. Let’s remember that Bill Keller, the editor of The New York Times, was summoned to the White House office and literally threatened with the death penalty over investigative work The New York Times has done. At the same time, President Kennedy said the biggest thing he regretted, or one of the biggest things he regretted, was that he had gotten The New York Times to hold off on a story that it was going to run dealing with the Bay of Pigs.

Many of the things we need to know come from leakers and what the press reports the government doesn’t want to know. The government leaks every day anything it wants out. It’s what administrations don’t want to get out that we need to focus on. And if we want to be a free people, we need to have a robust press, and we need to have a press that’s aggressive, that doesn’t let officials work from press releases and canned statements, and doesn’t let them get away with not answering questions. We need to have a much more aggressive press corps, the kind of press corps that we had in the past, but certainly, I don’t think, have now.

this is a massive fishing expedition, and I don’t mean with a—with a line. This was a huge seine they put out trying to draw in everything—home records of reporters. Now, they didn’t record the calls; they just got records of calls, looking for whoever was leaking. But that’s the exact problem: It’s not that the AP reporters are intimidated; it’s that sources won’t come to people, and the government can operate as a power unto itself. We created our government, in this, the Second American Republic, to serve the people. We begin our Constitution with those words: “We the people.” And we need to make sure that the government never, ever, ever is run by people who think it is a power unto itself.

Now, that doesn’t mean that the government has to be powerless and that there aren’t exigent circumstances. You know, if the government thinks that someone is about to expose something that will cause real physical harm, I would be right up front saying, “OK, make them delay, if need be, for public safety.” But this has got to be very carefully looked at and watched at on a case-by-case basis, what the lawyers call facts and circumstances.

I think, though, that you’re seeing this administration trying to respond to all the criticisms it’s getting. Remember, 10 days after the president took office, the Republicans on Capitol had a meeting, and they said that—came out of it, and there have been accounts written of this, that their purpose was going to make sure this president didn’t succeed. You’re now seeing the president apparently recognize that he is under this tremendous pressure by people who don’t care about the welfare of the government as much as they do—in the people, as much as they do destroying him. So, you’re seeing some shifts in position. They’re good shifts. I’m glad we’re having them. But I don’t—cannot imagine that this Congress, particularly the House, is going to pass legislation to protect the news media, even though the news media is a broad range of groups, from the far right to far left, to absolutely straight news in the middle. The hostility to news by members of Congress, on both sides, but particularly right-wing Republicans—it’s just not going to happen.

– source democracynow.org

David Cay Johnston, a Pulitzer Prize-winning journalist who writes about taxes issues and is president of Investigative Reporters and Editors. He is a former New York Times reporter and author of several books, including, most recently, The Fine Print: How Big Companies Use “Plain English” to Rob You Blind. His latest article is titled “The Other IRS Scandal.” It appears on the Columbia Journalism Review website.