Is the IRS the government’s most scandal-prone agency?

Answers to your questions about the news.
May 14 2013 3:37 PM

Taxing One’s Enemies

A brief history of scandals at the IRS.

US President Richard Nixon sits in the Oval Office of the White House During Watergate scandal February 2, 1974 in Washington DC.
Richard Nixon pressured the IRS into forming a commission to investigate his enemies. How does the current IRS scandal compare?

Photo by David Hume Kennerly/Getty Images

Multiple branches of the Internal Revenue Service, including offices in Cincinnati, Washington, D.C., and El Monte and Laguna Niguel, Calif., targeted conservative political groups for special scrutiny, according to a report Monday in the Washington Post. Is the IRS crooked?

Not anymore. During the 1920s, the treasury secretary was accused of using the Bureau of Internal Revenue to harass a sitting senator. And this week’s Tea Party flap is nothing compared with the full-blown corruption that enveloped the Bureau of Internal Revenue in the 1950s. Officials in San Francisco were in bed with organized criminals, bribes were expected as a matter of course, and the head tax collector in St. Louis, a practicing attorney, represented a client in a tax matter against the bureau while still holding office. More than 200 officials were removed from office or indicted, or preemptively resigned. A congressional reorganization cured the most obvious ills, but there were still indications in the 1960s and ‘70s that political influence could be brought to bear on the workings of the IRS. Richard Nixon pressured the agency into forming a commission—the “Special Services Staff”—to investigate his enemies. Even in that case, however, bias was difficult to prove. A congressional committee found that the IRS bowed to White House pressure in forming the SSS, but there was scant evidence that any individual investigation or prosecution was politically motivated.

The current controversy over the agency targeting conservative groups can be considered IRS scandal version 3.0. Patronage and old-school corruption are out, as is overt pressure from the White House or members of Congress. These days, most IRS controversies either involve bias on the part of low-level employees or arise from statistical analyses that suggest favoritism without any hard evidence. In 2001, for example, researchers uncovered statistical evidence that voters in important electoral districts experience disproportionately few tax audits in election years.

Whether or not there is actual malfeasance inside the Internal Revenue Service, the agency cannot avoid accusations—the IRS’s remit puts it in an awfully vulnerable position. The agency is required to draw difficult distinctions between charitable and political groups, and it lacks the funding to thoroughly investigate every violation. Those who are investigated or prosecuted inevitably claim bias. Since the agency isn’t allowed to reveal information about taxpayers, it is essentially defenseless against those accusations. (Of course, the inability to release information can also act as a shield when malfeasance has occurred.)

Accusations of bias have flown during both Republican and Democratic administrations. Four days before the 1992 election, for example, Branch Ministries of Binghamton, N.Y. took out full-page advertisements in major newspapers stating that “Bill Clinton is promoting policies that are in rebellion to God’s laws.” The ads were a brazen violation of tax law, which requires 501(c)(3) organizations such as churches to stay out of election politics. Nevertheless, when the IRS moved to revoke the group’s tax status, the church accused the agency of bowing to pressure from the Clinton administration.

During the 2004 presidential campaign, a minister unleashed a diatribe from the pulpit of All Saints Church in Pasadena, Calif., against George W. Bush’s decision to invade Iraq. After the election, the IRS opened an investigation of the 501(c)(3) church. Although All Saints Church ultimately kept its tax-exempt status, leaders claimed the legal defense cost more than $200,000 and openly wondered whether political influence triggered the investigation.

Got a question about today’s news? Ask the Explainer.

Explainer thanks Steven Bank of the UCLA School of Law, Charlotte Crane of Northwestern University School of Law, Carolyn Jones of the University of Iowa College of Law, and Joseph J. Thorndike of Tax Analysts.

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