IRS + 501(c)(4) = SOS?

"So I guess my bottom line here is that we at the IRS should apologize for that, it was not intentional, and as soon as we found out what was going on, we took steps to make it better and I don't expect that to reoccur."

So stated director of the IRS Exempt Organizations division Lois Lerner May 10, 2013, as she explained to a meeting of the American Bar Association that her employees had singled out for extended examination scores of applicants for 501(c)(4) status that "used names like Tea Party or Patriots and they selected cases simply because the applications had those names in the title." That "was wrong, that was absolutely incorrect, insensitive, and inappropriate," she concluded.

If Lerner had hoped that her admission would enable the IRS to "get out in front" of negative publicity, she must have been disappointed, because within days, and after a very critical review of IRS practices by its own Inspector General, the IRS was embroiled in a controversy that has yet to subside.

Was this merely a case of bureaucratic bungling, as Lerner suggested? Or was the IRS deliberately targeting groups known to be unfriendly to the Obama Administration, as others have argued? Does this episode point to larger, institutional deficiencies that require substantial revisions in the way we understand the 501(c)(4) designation, and the limits on political activity in which such organizations may engage?

These and other questions were publicly addressed at Hudson on September 18th, 2013 by a panel of leading legal practitioners, including John Pomeranz, a key participant in Public Citizen's Bright Lines Project; Cleta Mitchell, who has filed a lawsuit in federal court challenging the IRS actions; and Marcus Owens, former director of the IRS Exempt Organizations Division. Hudson Institute's William Schambra moderated the discussion.

Required Reading

The Bright Lines Project, Defining Nonprofit Political Activity and Clarifying IRS Rules on Political Intervention

James Freeman, Cleta Mitchell: How to Investigate the IRS The Wall Street Journal, June 7, 2013.

Cleta Mitchell, IRS Targeting of Conservative Groups: A History, Overview and Status Report May 20, 2013.

Marcus Owens, Charity Oversight: An Alternative Approach Presented at the Columbia Law School National State Attorneys General Program on Charity Regulation, February 2, 2013.