Democrats on the Senate Finance Committee on Tuesday attempted to shift some blame for the Internal Revenue Service’s alleged targeting of conservative organizations on the Supreme Court’s 2010 Citizens United ruling, which held that the government cannot limit political spending by corporations, unions, and other groups.
Democrats alleged during a hearing on the IRS controversy that the rules governing political activity by 501(c)(4) organizations were unclear and claimed this led to the IRS singling out conservative groups for special scrutiny.
"I really do believe that we need clarity in our tax-exempt status," said Sen. Maria Cantwell (D., Wash.). "And we need that clarity as soon as possible."
Sen. Bill Nelson (D., Fla.) said this was a case of the IRS not doing enough to crack down on political activity by outside organizations.
"Whereas Sen. Hatch has pointed out from his standpoint that this was government run amok, it also seems to me that this was government that was impotent and did not act," Nelson said.
Finance Committee Chairman Max Baucus (D., Mont.) called on the IRS to look into large 501(c)(4) groups that he believed were engaging in electioneering.
"What about Crossroads [GPS]? What about Priorities USA?" he said. "That’s where the abuse seems to be, in terms of dollars. … What have you done about those two organizations? And similar organizations?"
"It doesn’t take a rocket scientist to know what’s going on here," he added. "Did somebody in the IRS think about this and try to do something?"
Baucus also wondered "to what extent" the conservative groups targeted by the IRS were involved in political activities.
"Have you been asking that question?" Baucus asked Treasury Inspector General for Tax Administration J. Russell George.
George said his office had no details to provide at the time.
Sen. Orrin Hatch (R., Utah) objected to the notion that Citizens United led to the targeting, noting that the IRS began singling out conservative groups before the agency saw an increase in non-profit applications.
"You can pick on Crossroads [GPS] all the time, but there were plenty of liberal groups on the other side," Hatch said.
He argued that Democrats calling for a ban on political activity by 501(c)(4) groups have not supported a similar ban on political activity by labor unions.
"[It’s] beyond hypocritical not to call for a ban of 501(c)(5) labor groups political activity as well. But we all know that’s never going to happen here," Hatch said.
Former IRS Commissioner Douglas Shulman and former acting IRS Commissioner Steven Miller also testified during Tuesday’s hearing. It was Miller’s second round before Congress, after his testimony to the House Ways and Means Committee last Friday.
Both Miller and Shulman maintained that they had not lied to or misled the committee by failing to disclose their knowledge of the IRS targeting when asked about it last spring by senators.
"Now Mr. Miller that’s a lie by omission, there’s no question about that in my mind," Hatch said. "Why did you mislead and my fellow senators but, most importantly, the American people by failing to tell us about the subject we were asking about?"
Miller said he had been truthful in his interactions with Congress, and did not believe the actions by IRS officials rose to the level of political targeting.
Miller also took responsibility for planting an associate in a question-and-answer session with IRS official Lois Lerner at an American Bar Association meeting. That associate then asked a question about the scandal in order to get ahead of the inspector general’s report on the politically motivated targeting.
George told Congress that the inspector’s general office is not finished with its reviews and indicated it may be taking a deeper look at whether the targeting was politically motivated.
"Suffice it to say this matter is not over as far as we are concerned," he said.
George told the House Ways and Means Committee last Friday that groups applying for tax-exempt status were flagged for extra scrutiny by IRS officials if their names included words such as "Tea Party" or "patriot," and if their issues included "government spending," "government debt," or "taxes."
IRS leadership has maintained that rogue, lower-level employees at a Cincinnati, Ohio office were responsible for the inappropriate actions.
George said there was no evidence in its initial audit report of political motivation, but that assessment was based exclusively on interviews with IRS officials involved. He said an audit is less thorough than an investigation, and in this case did not include interviews with anyone outside of the IRS.
"Events subsequent to this [initial report] have now caused us to reassess how, and what, we’re going to look at," George said.