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Q. What is the Internal Revenue Service accused of doing?
A. Lois Lerner, the head of the IRS office tasked with reviewing applications for tax-exempt status, acknowledged last week that the agency had given a greater degree of scrutiny to the tea party-movement and other nonprofit conservative groups than to others in the months leading up to the November 2012 elections. She said this in advance of a U.S. Treasury Department inspector general's report released on Tuesday.
Q. Why the political firestorm?
A. The IRS is an independent agency feared for its sometimes-intimidating mandate and has a past history of being used to harass political opponents. The agency is to act in nonpartisan ways. In addition, tea party groups take the position that the federal government is too involved in daily life, so the added scrutiny tends to confirm their perceptions. There does not appear to evidence that liberal groups drew the same level of scrutiny. President Barack Obama has called the findings of the inspector general's report of the overreach "intolerable and inexcusable."
Q. Why is the Cincinnati office involved?
A. The Internal Revenue Service's Determinations Unit is based in the Cincinnati office at 550 Main St. The Determinations Unit is at the center of the investigation because the Inspector General's Audit found that workers here used the words "Tea Party" "Patriots" and 9/12" to flag applications for tax-exempt status and delayed their processing.
Q. Was a crime committed?
The U.S. Department of Justice has launched an investigation to see if any crimes were committed and likely will focus on potential civil rights violations or those related to the Hatch Act, which restricts political activities of government workers.
U.S. Rep. John Boehner on Thursday also pointed to Section 7214 of Title 26 of the Internal Revenue Service Code that states: "Any officer or employee of the United States acting in connection with any revenue law of the United States who is guilty of extortion or willful oppression under the color of law shall be dismissed from office and if convicted be fined up to 10,000 dollars and spend five years in jail'.
Ohio law, section 2921.45, also makes it illegal for a civil servant to interfere with the civil rights of others. It is a first-degree misdemeanor.
Q. What is the 501(c)(4) provision in the tax code?
A. Section 501(c) of the United States Internal Revenue Code provides that 28 types of nonprofit organizations are exempt from paying some federal income taxes. Subsection (4) applies to two types of groups: Social-welfare organizations: Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare; and local associations of employees, the membership of which is limited to the employees of designated person(s) in a particular municipality, and the net earnings of which are devoted exclusively for the promotion of social welfare.
Q. Why does the IRS examine the claims of organizations seeking a tax-exempt status?
A. The short answer is to prevent fraud. Congress wants to prevent commercial interests from manipulating partisan politics through contributions to 501(c)(4) groups that should be subject to income taxes because they don't promote the general welfare but rather advance a partisan cause.
Q. What do these groups have to do with elections and politics?
A. The IRS says that 501(c)(4) groups "must operate exclusively to promote social welfare." But they are allowed to spend money on elections and lobbying as long as the primary activity of the group is promoting social welfare. So they can spend 51 percent of their time and money promoting social welfare and 49 percent on promoting candidates and issues. The test of whether an organization qualifies for the exemption is based on whether its educational activities are conducted in a nonpartisan manner, even when its dominant philosophy on issues is consistent with a political party with which it cannot be affiliated.
Q. What are some examples of 501(c)(4) groups, and what they are doing?
A. The Sunlight Foundation, a Washington good-government group that monitors the influence of outside money on public policy, noted Wednesday that Obama spun off his campaign organization, Obama for America, into a 501(c)(4) group called Organizing for America, which recently ran a media campaign to influence 13 members of Congress to support stronger background checks for gun purchases. Last year, the IRS denied 501(c)(4) status for the San Francisco-based and Democratic Party-leaning Emerge America for being too involved in partisan interests. Crossroads GPS, a 501(c)(4) founded by former George W. Bush political strategist Karl C. Rove and others, has had its tax-exempt status questioned by some Democrats and transparency advocates.
Q. What are the political implications of the current IRS inquiry and its fallout?
A. The biggest political casualty could be the Obama
administration, which came into office promising greater transparency in government. That promise is now being severely undercut not only by the IRS scandal but also by allegations the administration tried to cover up a terrorist attack on a U.S. mission in Benghazi, Libya, last fall and by the Justice Department's admission that it secretly obtained the phone records of reporters and editors for the Associated Press.
Q. Who was in charge of the IRS at the time the increased focus was being given to Tea Party and other conservative groups?
A. Douglas H. Shulman, a lawyer and native of Ohio, was nominated in 2008 by then-President George W. Bush and served as IRS commissioner through last year's November elections. The Treasury Department inspector general's report makes clear that the agency's general counsel was aware of the targeting since at least August 2011. The agency's acting commissioner, Steven T. Miller, was aware of the scrutiny since March of last year. Miller resigned and on Thursday Obama appointed Daniel Werfel as acting IRS chief effective May 22. He is currently controller of the Office of Management and Budget.
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