Senate Finance Committee Chairman Max Baucus (D-Mont.) expressed his outrage over the IRS process in a hearing on the IRS targeting scandal, but not about the right issue.
The perspective of any rational person would be that the IRS broke the public's trust by targeting conservative groups and that's the problem here.
The Democrats on the committee seemed to think otherwise. To them, the idea that conservative groups could have gotten tax exemption in the first place is outrageous, and they're putting all their focus on reforming the rules on qualifying for 501(c)(4) tax exemption, which allows groups that primarily are used for social welfare purposes to pursue political acitivities and remain tax-exempt.
Baucus's opening statement began on the issue of the targeting, but quickly moved to the focus on 501(c)(4) groups. "Today, there are countless political organizations at both ends of the spectrum masquerading as 'social welfare' groups in order to skirt the tax code," he said. "These groups seek 501(c)(4) tax-exempt status. Why? Because it allows them to engage in political activity while keeping the identities of their donors secret."
Several other Democratic senators, including Sen. Bill Nelson (D-Fla.) and Sen. Ron Wyden (D-Ore.), follow his lead.
"How can you all in the IRS allow these tax breaks essentially funded by taxpayers?" Nelson asked.
Wyden's thoughts weren't much different. He favored 527s, which are political groups that have to disclose their donors, over 501(c)(4)s, which do not. "Organizations that ought to be 527s are applying for (c)(4) status. There is an incentive for people to choose their tax status based on if they want to declare their donors," he said.
"You all don't seem to have done anything about it and I want to know why not," he demanded to former IRS chief Douglas Shulman and acting IRS chief Steve Miller. Wyden's outrage was apparent, but it was directed a the wrong issue.
I don't want to go into the details on the various types of designations for groups, because it really doesn't matter. The real questions of this hearing and of this scandal in general is what the IRS did in targeting conservative groups and why it was absolutely wrong.
Once all of this is resolved, politicians can debate 501(c)(4) status all they want. Democrats hate the Supreme Court's decision in Citizens United, and this is just another way for them to reinforce that view. Debating that is fine, but let's at least get to the bottom of this issue and hold the right people responsible first.
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