Senate Republicans Propose Making IRS Independent, Non-Unionized

Last week’s four-part, 5,400-page Senate Finance Committee report blasting mismanagement and politicization at the Internal Revenue Service included several fresh accusations and a proposal for reform.

Its contributions to the ongoing debate range from overlooked congressional testimony from former IRS executive Lois Lerner, to critiques of the National Treasury Employees Union, to a call for separating the IRS from the Treasury Department.

The panel’s Republican majority used its “additional views” section to highlight questionable testimony given to a House Ways and Means subcommittee in 2013, just days before the controversy erupted over political targeting of nonprofits seeking tax-exempt status. In an answer the majority calls an “act of deception and obfuscation,” Lerner responded briefly and vaguely to a question from Rep. Joe Crowley, D-N.Y., who wanted a status report on the IRS’s reported investigation of social welfare nonprofits that may be funding political campaign ads.

“Well, there was a questionnaire that began this discussion and there is also a questionnaire out there, you can look at it on our Web site right now, that is seeking information from section 501(c)(4), (5), and (6) organizations, and a big piece of that questionnaire relates to their political activities,” Lerner said. “So that is our beginning.”

Republicans said her referral to “an obscure questionnaire,” was dishonest because at the time Lerner and IRS top leaders were aware of the inappropriate placement of apparently political organizations on “be on the lookout” lists based on their names, as well as the existence of an investigation of the practice by the Treasury Inspector General for Tax Administration. “That pattern of deception is evident not only in what [Lerner, then- IRS Commissioner Doug Shulman and later acting chief Steven T. Miller] told Congress about the treatment of Tea Party groups, but also in what they failed to tell Congress,” the Republicans wrote.

Democrats expressed mild skepticism toward the charges that IRS officials misled Congress, saying reaching such conclusions would require additional bipartisan investigation.

As part of their ongoing critique of federal union activity, Republicans blamed NTEU for IRS political bias. “It is virtually impossible for the IRS to maintain the reality, much less the appearance, of neutrality and fairness to all taxpayers, when a substantial number of IRS employees are members of the highly partisan and left-leaning National Treasury Employees Union,” they wrote. “At the IRS alone there are approximately 48,972 dues-paying union employees, representing 65 percent of the bargaining unit employees at the IRS. Politically, the NTEU is extremely active and twice endorsed Mr. Obama for president.”

Democrats rebutted this assertion. “Union membership in and of itself does not mean political bias,” they wrote. “The Additional Republican Views establish no factual evidence that any IRS employee, whether they belonged to a union or not, was politically biased in their actions related to the 501(c)(4) applications with political advocacy issues. Moreover, Lerner, as a senior manager, was not eligible for union membership.”

Finally, the Republicans’ offered a concrete proposal saying that a key lesson of the targeting controversy is that that the IRS should be transformed into an independent agency along the lines of the Social Security Administration. “To fully appreciate the politicized environment of the IRS, it is necessary to understand the IRS’ role as a bureau of the Treasury Department – an entity that is closely controlled by the president to implement his economic and financial initiatives,” they wrote. “The IRS commissioner is a political appointee nominated by the president and confirmed by the Senate. However, the IRS Commissioner does not report to the president, as the head of an independent agency would; instead, the IRS Commissioner reports to the Secretary of the Treasury via the Deputy Secretary of the Treasury.”

These relationships are poorly understood by the public, the Republicans continued. “The Treasury Department is supposed to keep an arms-length relationship with the IRS on matters of tax administration, enforcement and ‘process,’ which essentially means that it doesn’t ask the IRS for information about taxpayers,” they wrote. “However, on matters of tax policy and regulations, the Treasury Department works closely with the IRS. This dichotomy is a difficult one to balance and is made even more challenging because the IRS Chief Counsel is actually organizationally housed in the Treasury Department.”

Democrats did not embrace this proposed reform. “The IRS is organized under the Treasury Department because the tax function is a critical element of government and clear lines of authority and management need to be established,” they wrote. “This report demonstrates how important accountability and the power to act quickly are when mismanagement has occurred. Treasury Secretary Jack Lew was able to fire the head of the IRS almost immediately after revelations about the alleged Tea Party targeting were unveiled. A truly independent agency, with a lengthy burdensome process for removing executives, could have continued with its existing management for some period of time.”

The proposal to separate IRS from Treasury drew applause from Paul Streckfus, the editor of a newsletter on tax-exempt organizations who analyzed the Senate Finance Committee report. Regulation of exempt-organizations “needs to be moved out of the IRS into a separate, truly independent agency--the IRS ‘scandal’ supports this case in spades,” Streckfus wrote on Monday. “Problems in EO have tarnished the reputation of the entire IRS. And you can bet your last dollar that there will be future ‘scandals’ involving EO regulation.”

If EO regulation were the job of a separate agency, he wrote, “the damage and condemnation would be limited to that agency. The IRS could go about its business without worrying about the next EO eruption.”

(Image via Mark Van Scyoc / Shutterstock.com)