The Intimidation Game (18 page)

Mitchell spotted the scam immediately. “It was just a new way to screw the same groups they'd been screwing,” she says. “And all under the guise of being ‘helpful' and ‘solving the problem.' It was so blatant, so in-your-face.”

Unfortunately, few in the movement saw what Mitchell so quickly did. Her phone started ringing, clients wondering if this “fast track” deal was their ticket to legitimacy. Mitchell cautioned that the IRS had purposely chosen not to define anywhere how it would calculate “volunteer” time. “If Mitchell volunteers, and a high school student volunteers, does our time count equally? Or do you factor in my hourly lawyer rate? Who is a volunteer? What kind of services count? It was vague on purpose, so that they could define you down to zero politics, with the right criteria,” was how Mitchell explained it to callers.

Some groups took the deal, not knowing any better. Some took it because they didn't do politics anyway and just wanted out of IRS purgatory. But many, groups like Jenny Beth Martin's, outright refused to be assaulted twice. It wasn't right, Martin told me in 2014, that “every other 501(c)(4) [including liberal groups] would get to live under a different standard than those of us who had been targeted and had been waiting for a determination for years.” She let the deadline for using “fast track” pass.

Her reward: Later that summer, Tea Party Patriots received another round of interrogatives from the IRS, with demands for information Martin had already supplied, as well as new details—such as her fund-raising letters from 2012. She wasn't alone. It is a little-known fact that many groups that declined fast track continued to get hit with IRS question letters, long after the agency targeting had been exposed, and well after Werfel was supposedly “fixing” the problem.

The fast-track idea meanwhile didn't spring out of nowhere. The nation would find that out later in the year, in a bit of news dumped in the quiet of the Thanksgiving Day weekend. (The Obama administration has always made a specialty of slipping out controversial news at times when it hopes nobody is watching.) By that November 2013 day, Democrats were already hip deep into their argument that the IRS mess was nothing more than an unfortunate mistake, brought about by confusion over a complicated law. That groundwork laid, the IRS and Treasury on November 29 announced a new regulation for (c)(4)s.

It wasn't so much a regulation as the full expression of everything Democrats had been hoping to do since Van Hollen and Schumer first dreamed up the DISCLOSE Act. It essentially barred social-welfare groups from participating in any politics. The regulation prohibited candidate-related election activity—banning even the names of active politicians or political parties on an organization's website. It prohibited the use of words such as “oppose,” “support,” “vote,” “defeat,” and “reject.” It prohibited voter registration drives and voter guides. It prohibited hosting candidates at events, even nonpartisan ones. It restricted the leaders of social welfare groups from talking about judicial nominations. It declared political activity as contrary to the promotion of social welfare. (Apparently a well-faring state is one in which nobody talks about politics, and that receives all its political information from the government.) It formalized the use of volunteer hours in calculating political activity. And, of course, it applied all this only to (c)(4) groups. Labor unions were exempt. They would still be able to support Democrats politically to the full extent of biased IRS law.

The particular insult was that Werfel presented the new regulations as the
fix
to the IRS targeting. The prior regulation had been unclear and had confused IRS agents, went his argument; the new regulations would provide clarity. The administration went so far as to claim that it was resolving problems identified in TIGTA's report. It was a brilliant strategy: Use the unsanctioned silencing of the IRS as an excuse to create a system of sanctioned silencing. Obama meanwhile rushed out the rule in November 2013 to ensure that conservative groups would be out of action prior to the 2014 midterms.

Only TIGTA hadn't recommended that the answer to the IRS's stifling of speech of those opposed to Obama should be a rule that would stifle the speech of those opposed to Obama. And the IRS hadn't just started working on those rules after Lerner spilled the beans. As congressional investigators kept digging, they found that IRS and Treasury officials, spearheaded by Lerner, had first started this legal shutdown strategy in 2011. That strategy was far enough along that by 2012, Treasury tax official Ruth Madrigal was asking an IRS lawyer about the agency's “off-plan” work on a (c)(4) regulation. “Off-plan” means the IRS hid the effort, not publishing it on the public schedule of upcoming rules and actions. Around the same time, IRS chief counsel (and Obama appointee) Wilkins met with the staff of Democratic senators to talk about the regulations. By 2013, IRS officials considered such a rule change the agency's top priority.

In short, the Obama administration had been planning this for ages, and one question is whether Lerner wasn't sitting on those (c)(4) applications as a way of keeping them quiet until the administration could get the rule in place. Whatever the motivation, Werfel's claim that the regulation was in response to IRS misbehavior goes down as one of the bigger lies in the IRS affair.

That planning was why Werfel had been able to roll out his fast-track proposal so quickly. The agency already had in place the outline of counting “volunteer” hours and caps. Mitchell goes so far as to note from documents produced in a FOIA case that the IRS had been preparing to issue the rules on Labor Day weekend 2013, only it got derailed by the Lerner confession. “We have a FOIA lawsuit, which is another way of saying I now have binder upon binder of pieces of paper that the IRS has blacked out before it sent them to me. But the one thing I have been able to ascertain is that those regulations were already set to roll in the early fall,” she says.

The proposed rule caused another Washington explosion. Only this time it wasn't just conservatives howling. Obama wanted conservative (c)(4)s shut down; he accepted that the collateral damage would be liberal (c)(4)s, which would also be restricted in their activity. The administration soothed itself with the knowledge that a turbocharged labor movement would still be on its side.

The liberal nonprofit community didn't take it quite so well. Comments poured into the IRS, mounting by the minute. Everyone hated the regulation. Conservative groups like Americans for Prosperity and Crossroads and Tea Party Patriots and True the Vote and the Heritage Foundation hated it. Hobby and special interest groups like the American Motorcyclist Association and the Home School Legal Defense Association hated it. Trade groups like the National Association of Manufacturers and the Solar Energy Industries Association hated it. Liberal groups like the Sierra Club and the NAACP and the Alliance for Justice hated it.

The American Civil Liberties Union slammed the proposal in a twenty-six-page comment, saying it “threatens to discourage or sterilize an enormous amount of political discourse in America.” It astutely noted that the rules opened the door to even more of the sort of political targeting that had caused the scandal. The NAACP pointed out in its comment that most of its work fighting racial discrimination “would be illegal under the proposed regulation.” Even the mighty Service Employees International Union wrote in to oppose the rule. It had been spared this round of regulating, but it worried that the speech restrictions might have a snowball effect that would ultimately roll up organized labor.

Brad Smith's group, the Center for Competitive Politics, quickly pointed out that the rule was in fact a twofer for the left. It largely barred conservative social-welfare groups from engaging in political speech. Those groups that wanted to continue actively doing so would have to register as 527 organizations with the Federal Election Commission. Which would require them to…disclose their donors. Which would then tee those donors up for retribution. Game, set, and match. As the center's Allen Dickerson testified in front of Congress, “The reason 501(c)(4)s do not disclose their donors is because Congress said so. When the Internal Revenue Code was passed, it created criminal penalties for the unauthorized disclosure of the donors to these organizations. And the reason for that is that it has always been understood that 501(c)(4)s are the beating heart of civil society. These are the organizations, like the NRA and the Sierra Club, which go out there and take unpopular positions and move the national debate and make this a vibrant and functioning democracy. Requiring unpopular organizations to give up their donor list to public scrutiny is not only contrary to Congress's intention in the Internal Revenue Code, it is contrary to constitutional law.”

The commentators might as well have been beating their heads against a wall. The White House had dropped this rule in the dead of night, acting like it was just one more little regulation, just a small effort to provide a bit of “clarity” to IRS rules. In fact the (c)(4) regulation had become the greatest priority of the Obama administration. This became clear in December, as Congress and the White House brawled over an omnibus bill to continue funding the government. The fight was high-stakes; if funding legislation wasn't passed by Congress and signed by Obama before year's end, the government would shut down.

The administration had a long wish list of dollar priorities: more money for the International Monetary Fund, money for the president's newly proposed pre-kindergarten program, more funding for Obamacare. Republicans later told me that House Appropriations chairman Hal Rogers wanted only two things in return: protection for groups that morally opposed Obamacare's contraception coverage requirements, and language that would put a hold on the IRS rule.

Democrats wouldn't budge on the IRS. They were willing to throw over everything else the president wanted, so long as they kept the IRS crackdown on conservative speech. “They were willing to shut down the entire government for this,” says Fitton. “The entire government. That tells you how important it was to the left.” Faced with a shutdown scenario, and worried about getting blamed for it, the GOP retreated, and the rule continued.

By the end of the IRS's public comment period for the rule, in February 2014, the agency was nonetheless sitting on 150,000 public statements. “I'm told if you take all the comments on all the Treasury and IRS regulations for the last seven years, double that number, you are close to the number of comments we have on this single regulation,” Koskinen later admitted. An analysis by the Center for Competitive Politics found that 87 percent of the comments opposed the rule outright, and 94 percent opposed it in whole or part.

And yet Koskinen became the rule's biggest advocate, sullenly refusing to budge in the face of overwhelming opposition. Jordan found himself so frustrated that at one meeting with the commissioner he says he spat out, “What was this, like a quid pro quo? We'll nominate you if you continue the rule, no matter what?”

The only reason the rule isn't in effect today is that the White House miscalculated. Liberals had convinced themselves the IRS was a linchpin to retaining the Senate in the 2014 midterms. As
The Hill
reported in February, “Senate Democrats facing tough elections this year want the Internal Revenue Service to play a more aggressive role in regulating outside groups expected to spend millions of dollars on their races.” But the White House hadn't counted on much of its base—groups that would be crucial to supporting its candidates in November—revolting over its rule.

The White House was worried the rule would backfire. Koskinen got new marching orders, and in April 2014 he announced that the agency was pulling the rule, for now, and updating it based on comments. He suggested it wouldn't be reissued before the end of the year. Conservatives were nonetheless worried enough about it that the Republican Congress in December 2015 inserted a ban on the rule into the year-end spending bill.

Three years on from the public outing of its abuse, the IRS continues to operate as it did on May 10, 2013—the day of Lerner's admission. Little has changed. The agency is just as dysfunctional; the administration is just as determined to use it to target its political opponents. Nobody has been held accountable.

The House Ways and Means Committee in April 2014 sent a letter to the Justice Department outlining its case for why Lerner should face criminal prosecution. It provided documents showing at least three different ways in which Lerner criminally violated statutes. One, she helped to target only conservative organizations, thereby robbing them of equal protection and due process. Two, she may have impeded TIGTA's investigation by giving misleading statements. Three, she risked exposing (and may have exposed) confidential taxpayer information by using her personal e-mail address to conduct official business. The Justice Department never responded. In October 2015, it closed its IRS investigation, with no charges.

The House on May 7, 2014, in a bipartisan vote, found Lerner in contempt of Congress, for offering testimony (by reading out her statement) yet still refusing to answer questions. The citation went to U.S. Attorney for the District of Columbia Ronald Machen, an Obama appointee. The contempt statute in question explains that the U.S. attorney's only “duty” “shall be” to “bring the matter before the grand jury for its action.” Machen instead sat on the citation for eleven months. On March 31—the day before he retired from his post—he informed Speaker John Boehner that he'd unilaterally decided not to investigate Lerner. So much for accountability.

The House also on May 7, 2014, passed a bipartisan resolution calling on the Justice Department to appoint a special prosecutor to look into the IRS scandal. Some twenty-six Democrats joined Republicans to demand that Attorney General Eric Holder do something to restore credibility to the agency. Fitton points out that the textbook argument for a special prosecutor is any situation in which Justice has a conflict of interest in an investigation—say, if it had been working with the IRS to go after nonprofits. That call for a special prosecutor has never been answered.