501(c)(4) Facts And Figures And Lack Thereof

May 17, 2013

As talk of impeachment fills the airwaves by Republican talking heads and tea baggers concerning the perceived abuse of power by the Internal Revenue Service involving conservative non-profit political organizations being unfairly investigated during the 501(c)(4) application process, one very important issue always seems to be missing from the argument; that being facts and figures.

To understand the scope of the alleged abuse by the IRS’ investigation into the application for tax exempt status, let’s see the statistics over the past ten years, five years for both Presidents Barack Obama and George W. Bush, regarding the total number of applications, the number of applications applied for by political party and the number of applications that were scrutinized to determine if the organization met the requirements of this code section.  What statistics I would like to see would be, by year are:

1.  The total number of 501(c)(4) applications submitted to the IRS,
2.  The total number of 501(c)(4) applications submitted to the IRS by conservative political  groups,
3.  The total number of 501(c)(4) applications submitted to the IRS by democratic political groups,
4.  The percentage of 501(c)(4) applications submitted to the IRS by conservative political groups to the total submitted to the IRS,
5.  The percentage of 501(c)(4) applications submitted to the IRS by democratic political groups to the total submitted to the IRS,
6.  The total number of 501(c)(4) applications submitted to the IRS by conservative political   groups that were scrutinized by the IRS,
7.  The total number of 501(c)(4) applications submitted to the IRS by democratic political groups that ere scrutinized by the IRS,
8.  The percentage of 501(c)(4) securitized applications to the total number submitted to the IRS by conservative political groups to the total submitted to the IRS,
9.  The percentage of 501(c)(4) securitized applications to the total number submitted to the IRS by democratic political groups to the total submitted to the IRS.

As a former audit supervisor with the Auditor of State of Ohio, I learned the importance of statistics.  When conducting an audit of any political entity, no matter the size, audits were always based on materiality and percentages.  For example, if one particular type of expenditure were material to the total dollar amount spent, we would audit it.  However, we would never look at every expenditure.  If an entity had a thousand different expenditures in the general fund, we would audit somewhere between fifty and a hundred of them, and then base our conclusion on percentages.

As an example of how selected number can be very misleading, let’s assume that 100 total 501(c)(4) applications were submitted to the IRS for approval for tax exempt status.  For this example, I will assume there are many more conservative political organizations applying than democratic ones just based on the sheer numbers you see on television ever since Barack Obama was elected president.  So for this example, let’s assume that 90 applications were by conservative groups versus 10 by democrats.  Let’s also assume that of these applications, 9 by conservative groups were scrutinized by the IRS to determine whether they are eligible for tax-free status and only 1 by democrats.  Tea baggers every where would be in an uproar because many more conservative applications were scrutinized as were democratic applications.  However, studying the statistics, one would find the same percentage number were examined.  Below are the numbers and results I used in this example corresponding to my list above;

1.    100 total applications,
2.    90 conservative applications,
3.    10 democratic applications,
4.    90% of total applications were conservative,
5.    10% of total applications were democratic,
6.    9 conservative applications scrutinized,
7.    1 democratic application scrutinized,
8.    10% of conservative applications were scrutinized,
9.    10% of democratic applications were scrutinized.

Reportedly, of the 298 total applications flagged for review between the years 2010 and 2012, 72 had “tea party” in their title, 13 had “patriots” and 11 had “9/12.”  This last designation refers to conservative radio and television blowhard Glenn Beck’s organization, 9/12 Project, in which the goal is to, according to Beck “to bring us all back to the place we were in on September 12, 2001,” when we were not Republicans or Democrats, but Americans.  However, as I showed in my example, numbers can be manipulated and appear to reflect a hypothesis that is not consistent to the overall picture.  If many more applications are submitted by conservative groups, it makes sense that many more applications by them would be scrutinized by the IRS.  Lois Lerner, the director of the IRS division whose responsibility it is to review these tax exempt applications, has been quoted as saying there was no political intent involved when evaluating an application and that these code words were only used as a tool when sorting through the massive upsurge in the number of 501(c)(4) applications in recent years.

The real tragedy concerning these 501(c)(4) organizations is that this code that was established nearly one hundred years ago to give charitable groups providing social welfare to the needy tax exempt status.  The IRS determined social welfare to mean “promoting in some way the common good and general welfare of the people of the community, i.e….bring about civic betterment and social improvements.”  In order to quality, the operations of these organizations were exclusively the promotion of social welfare.  In 1959, the wording on this code was drastically changed so that exclusively was changed to primarily providing social welfare.  Does anyone really believe all these political groups are providing social welfare?

Over the past several elections, spending by these groups have surpassed that of the so-called Super PACs.  Applications for 501(c)(4) status have increased from a mere sprinkle to a monsoon over the past five years, once the Supreme Court, in its ruling “Citizens United,” in which the court ruled that money is free speech, opening the way for citizens and corporations to spend as much money as they wish to influence, or buy an election.  Money is not free speech, money is a very powerful, even overwhelming influence.  This ruling drove the final nail in the coffin of American democracy.  To make matters worse, donors to these organizations remain confidential.

America is now officially a plutocracy, governed by the wealthy elite!

Steven H. Spring

4 thoughts on “501(c)(4) Facts And Figures And Lack Thereof

    • Jim, thanks for taking the time to read and reply to my post. As far as I am aware, no one has done the research to come up with the percentages I addressed. However, as more information comes to light, this scandal just might turn out to be nothing more than partisan political witch hunting.

  1. I would like to see those stats also. But even if 90% were conservative and 90% audited were conservative that doesn’t make it right. If they know that republicans are raising more money than dems through these groups and that is why they get audited than that is just as bad. http://thedebateplace.weebly.com/irs-scandal/1. Why is Lois Lerner pleading the 5th. She must believe something she might say might incriminate her. Keep in mind the biggest problems wasn’t rejections but delays. and look at the evidence in the link.

    • Dave, thanks for reading my blog. However, I must disagree with your conclusion regarding your example. If 90% of PACs applying for tax exempt status are Republican, then it makes sense that 90% of those audited should be Republican. Democratic PACs were audited as well. As for Lois Lerner taking the fifth, I would like to hear what she has to say, but pleading the fifth doesn’t necessary mean a person is guilty. I lost my job and career by speaking the truth to power, when I should have kept my mouth shut. If I had done so, I would have been retired by now with great benefits.

      The biggest travesty concerning this ordeal is why all these political organizations receive tax exempt status in the first place.

      Steven

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