TNR examines how a weak IRS has allowed scammy right-wing non-profits to proliferate and thrive

Progressives around the country were shocked to find out that the Family Research Council, the ultra-right-wing political organization (and SPLC-designated hate group] that has been advocating for extremist laws on the state and federal level level since James Dobson started it in DC in 1983, had managed in 2020 to have itself declared a church in the eyes of the federal government.

This puts the plainly political organization, which has been advocating for and against electoral candidates since its inception — along with its $12 million (or more) annual revenues — out of reach of the IRS. It also means the organization no longer has to file even the minimal amount of documentation about leadership and revenues/spending that non-profits are required to provide.

One of the reasons this obviously crazy proposition slipped through the cracks is that the American right-wing has been slowly decimating the IRS. But the right-wing money machine has also, with help from Democrats like President Bill Clinton, managed to gut the IRS’s ability to monitor non-profits except in the most cursory ways.

Writer Jasper Craven at The New Republic has details in an article titled, “There’s Never Been a Better Time to Be a Scammy Nonprofit.”

Despite budgetary challenges, the IRS had shown itself to be a capable regulator. In the 1970s, agents righteously investigated private tax-exempt Southern schools that had imposed de facto segregation. Many other shady actors were caught through audits and random application reviews. Through this work emerged institutional knowledge and legal theories that helped clarify vague statutes.

When Marcus Owens ran the EO [Exempt Organizations] division from 1990 to 2000, he had a fleet of about 120 lawyers and certified accountants. In addition to their core oversight work, employees fanned out to field offices to train other IRS officials on the ins and outs of nonprofit regulation. They also released continuing education materials every year that featured evolving guidance.

These efforts were kneecapped through the IRS Restructuring and Reform Act of 1998, a bipartisan law that reined in the department’s powers. It passed following a series of overheated congressional hearings in which members of the public essentially complained about the IRS enforcing the law. Nevertheless, President Bill Clinton expressed outrage and promised change. His resulting package increased the burden of proof needed to punish rule-breakers and weakened agency operations. As part of this work, EO lawyers with nonprofit expertise were shuffled elsewhere. The IRS’s overall staffing levels decreased significantly over the next few years. Beginning in 2005, the EO training materials were no longer updated.

In 2012, Republican lawmakers accused the EO office of being a corrupt body of lefty rogues targeting Tea Party groups in its “Be on the Lookout” list. In truth, these were triage tools meant to ensure that the flood of politically influenced nonprofits that emerged in the wake of the Supreme Court’s decision in Citizens United maintained rules against participating in political campaigns. The office was flagging groups all over the spectrum, and its enhanced reviews rarely led to denials.

Still, the IRS is an easy enemy, and once again became Congress’s cat toy. This led to a purge of leaders, a host of morale issues, and less regulation. Among other things, the IRS sought to shrink its massive backlog of applications by creating an “EZ” form for small groups that required no supporting documentation. Lawmakers further restricted the EO mission by prohibiting officials from spending federal funds to regulate potentially improper political activity. By the time the multipronged, multiyear inquiry was exhausted in 2016, the EO’s $102 million budget had been slashed by $20 million, and the office had lost hundreds of employees.

President Biden and the Democrats are aiming to reverse this long trend of gutting the IRS because they know that a weak, under-funded IRS only serves to make billionaires and their shadowy networks of right-wing non-profits stronger.

With an under-funded, under-staffed IRS, the Republicans can call anything a non-profit — or even a church.

This is why the GOP and its web of extremist non-profits have reacted with horror to the re-funding of the IRS. They say they oppose reinvigorating the IRS through the Inflation Reduction Act because the IRS will go after middle-income Americans, when that is plainly a talking point that should be called what it is: an outright lie.

Yet another reason to vote blue in November.

You can read the rest of the TNR article here.

The Family Research Council’s DC headquarters, designated for IRS purposes as a church since 2020. Democrats in Congress are investigating how this happened, although those investigations will end if the GOP regains control of Congress in the midterm elections.