A Conservative Law Professor Points the Way Out of the IRS Scandal-That-Never-Was

Last year at this time, there was a political and media frenzy surrounding the disclosure that the Internal Revenue Service had apparently singled out certain right-wing groups for some sort of extra scrutiny in their applications for tax-exempt status. Visions of Watergate and enemies lists danced in the heads of Republican politicians, who imagined that they could pillory the Obama Administration for supposedly having used the Tax Man to punish its political enemies.

That lurid story, however, was not even backed up by the facts that were initially reported, and it became clear very quickly that something else entirely had happened. Nobody’s tax returns had been audited, either at the behest of the Administration or otherwise. What happened, we knew then (and still know today), is that a bad provision of the tax law was applied badly by some lower-level IRS employees.

What was the tax provision at issue? It is possible for a group to qualify as a nonprofit “social welfare organization” under Section 501(c)(4) of the tax code, so long as the group devotes less than half of its revenues to political activities. Faced with the responsibility of reviewing the activities of thousands of such groups each year, the IRS on an ongoing basis needs to figure out which groups are more likely than others to be purely political groups who are fraudulently trying to claim status as nonpolitical nonprofits.

An inspector general’s report found that, from 2010 through 2012, the IRS employees who were trying to sort through the piles of forms had used various politically loaded search terms, including “tea party,” to flag groups that were more likely to be ineligible for tax-exempt status. Although it is quite reasonable to assume that a group with “tea party” in its name is probably engaged in political activities, everyone agrees that it is wrong to use search terms that would surely turn up more conservative groups than liberal groups, or vice versa.

We later found out that the same IRS unit had also used terms like “occupy” and “progressive” in its searches, but the initial reports made it look as if the IRS were pursuing a political agenda. Because the IRS is part of the Treasury Department, and Treasury reports to the President, right-wing activists and politicians smelled an Obama-sized rat. Surely, they thought, there had to be orders from on high to punish the President’s enemies.

The problem was that the evidence simply did not go any further than the basic facts that the IRS had used certain search terms, and that mid-level professionals at the agency found out about the problem and stopped it. Here on Verdict, John Dean (who has some familiarity with Watergate, to say the least) declared the scandal “all smoke and no fire.” Within a month, all but the shouting seemed to be over, with Republicans having failed to connect the low-level misfeasance to anything with political salience. As a result, on Dorf on Law last June, I could confidently write: “The IRS Non-Scandal Scandal Collapses on Itself.”

As the months rolled by, however, some House Republicans refused to let go of their conspiracy theories. They held multiple hearings, and they engaged in open-ended document searches in an attempt to turn up something that they could use to back up their claims that this was a political hit job by the White House. They never found anything that amounted to a scandal, and they never could even explain why a White House that was intent on using the IRS to harm its political enemies would use this pathetically ineffective strategy.

Nevertheless, key House Republicans have refused to let go of this idée fixe. Finally, Fox News’s Chris Wallace chastised one of those House Republicans during an appearance on Wallace’s show last month. Wallace pointed out that the Republicans, after a year of finding nothing to link the scandal to the White House, were now reduced to complaining that Lois Lerner, the mid-level former IRS lawyer who initially revealed the misfeasance, was refusing to talk. “I mean, let’s face it,” Mr. Wallace said, “nobody really cares what Lois Lerner did, the question is did she get it from higher ups or just the decision by a mid level bureaucrat in the IRS?”

The Unusual Role Played By a Law Professor and His Blog

One would think that the lack of any new evidence, after a year of herculean efforts by conservative activists and elected Republicans, would cause all but the most committed scandal mongers to move on. Some activists, however, pointed for support to the TaxProf Blog, an “aggregator” website that provides links to tax-related news items (and items relevant to law professors at large), providing those links generally without comment, and thus without political spin or commentary.

In the initial rush of news last March about the possible scandal, TaxProf’s founder and administrator, tax law professor Paul Caron, started to gather links to all items related to this story under a daily post titled, “The IRS Scandal, Day __,” with a counter of the number of days since the original story broke into the news.

After a few weeks, when it had become clear that the story was not turning into the blockbuster that Republicans had imagined, the daily IRS Scandal coverage on TaxProf fell into a standard pattern: links to a dozen or so blog posts and op-eds by conservatives who were trying to keep the story alive, and a handful of links to stories by other people saying, in essence, “Wait, the Republicans have still not given up on that IRS thing?”

It would have been completely plausible for TaxProf to drop the daily “IRS Scandal” coverage last June, or to continue to aggregate the links each day under a less inflammatory label, such as “Today’s coverage of IRS investigations.” Instead, TaxProf stuck with the “scandal” title, perhaps in the belief that to discontinue calling it a scandal would be seen as a partisan act. Of course, the original label itself was obviously partisan.

In any event, conservatives regularly pointed to TaxProf to make the claim that even that nonpartisan source was still calling it a scandal.

The Tax Professor Puts It All On the Line For Conservatives

Professor Caron, by virtue of his blog, is widely known among tax professors and practitioners. He has, over the years, tried very hard to keep TaxProf ideology-free, and the blog has been an important source of information, providing links to new scholarship in tax law, and so on. Although Professor Caron had over time made it reasonably clear that he leaned conservative, he had never been openly ideological or partisan.

This past week, that all changed. In the aftermath of a slew of commentary concluding that there was no IRS scandal, such as my Dorf on Law post last Friday, “A Year Later, Still No Scandal at the IRS, But Plenty of Wasted Time and Effort (and Money),” Professor Caron penned an op-ed this past weekend in The USA Today: “The Media Ignore IRS Scandal.”

One cannot overstate the significance of this decision by Professor Caron. He took all of his considerable personal and professional reputational capital, and he put it behind the claim that there is “nothing less than a scandal” behind the “targeting” of right-wing groups. In writing this op-ed, he thus negated any neutral explanation for his decision to continue the daily scandal counter on his blog, seriously compromising the hard-won reputation for political neutrality that he and his blog had enjoyed to date.

Much more importantly, however, Professor Caron is the only person of any repute who has attempted to make the actual case for “scandal.” Writing his op-ed in a prosecutorial tone, he lays out facts and a timeline that make what he clearly believes is the strongest possible case for the conservative view about the IRS’s actions adding up to a full-on scandal. He also, however, deliberately uses language that unmistakably says to conservatives, “I’m one of you,” such as his broad claim that the mainstream media is not “curious” enough about the supposed scandal. People who believe in a liberal media conspiracy will sit up and listen.

What Professor Caron has done is to allow both conservatives and liberals to assess the actual case. As a result, we know that, based on the available facts, even a motivated prosecutor cannot make a convincing case that the Obama Administration did something scandalous. Below, I will consider his various factual claims and arguments. (I am leaving out the purely speculative assertions, such as his initial claim in the op-ed that a joke by President Obama at a commencement in 2009 somehow signaled “open season on the president’s political opponents.” Again, I view these as simply a matter of asserting his conservative bona fides.)

The first claim of any substance is that, after the low-level IRS team put in place the politicized search terms in 2010, “the IRS slow-walked the applications of many such groups, limiting their ability to participate in the 2010 and 2012 political campaigns.” This is the closest thing that we have ever heard to a “damages” claim, that is, something that says that some harm was actually done by the IRS’s actions.

But it is an odd claim, because it covers the 2010 elections, when Tea Party groups led the charge for the “shellacking” that Democrats suffered, an historic landslide loss that turned the House decisively Republican, saw Democrats lose six Senate seats, and had statehouses across the country turning bright red. Is the claim that the damage done by the IRS never really showed up until 2012, even though groups like Karl Rove’s Crossroads GPS and other groups operated as 501(c)(4)’s, while some small local groups were “slow-walked”? There certainly was plenty of evidence of grassroots activism on the right in both 2010 and 2012. I suppose they could have done more, if the IRS had simply rubber-stamped all conservative groups’ applications, but the damages claim looks, at best, underdeveloped.

Even so, something can be a scandal even if there were no electoral consequences, one way or the other. What is the strongest argument that the President or his people knowingly used the IRS for nefarious purposes? “In March 2012, the IRS commissioner testified before a House committee that there was ‘absolutely no targeting’ by the IRS of political organizations opposed to the president.” So, the Republican-appointed former commissioner said something that turned out not to be true. There is, however, simply no proof that he knew about any targeting, and certainly nothing to suggest that he ordered it, or that he coordinated anything with the White House.

Other than a swift recitation of some additional widely known facts, the op-ed then seems to want to make it appear that Ms Lerner, the former IRS official who initially apologized for the IRS’s errors, is somehow a suspicious character. In particular, we learn that “she received a $42,000 bonus” the month after her public statements. Again, however, there is no indication that the bonus has been tied to anything or anyone in the White House, and indeed, such performance-related bonuses are the kinds of things that (especially in the bureaucratized world of the federal government) are usually in the works for months. The bare fact of the bonus tells us nothing.

Similarly, the op-ed strings together various supposedly suspicious clues have been “revealed,” such as the fact that a Justice Department attorney tasked with investigating the affair had given money to the President’s campaigns, followed by the claim that some conservative groups had complained about not having been interviewed before that internal investigation was closed.

To be fair, these facts could be made to look truly suspicious, calling for further inquiries. But if, by now, it has not been possible to pursue these questions, allowing conservatives to point to additional facts rather than relying on crude innuendo, then there really is no case to be made. Even if the Justice investigation had been “fixed,” certainly House Republicans have been actively engaged in their own investigations. They keep coming up dry.

At this point, therefore, the most Professor Caron has shown is that this is something that could have been a scandal. And if some genuinely new and shocking facts were to come to light, then of course this would become a true scandal. But what we most definitely do not have right now is a scandal.

When the President said, during an interview with Bill O’Reilly on Fox News, that there was “not even a smidgen of corruption” in the IRS’s actions, he was stating the facts as they are now known to the world. Admittedly, those facts do not fit the storyline that conservatives have dearly wanted to believe, but sometimes partisans do not get the scandals they hope for. Democrats, for example, were briefly excited in 2008 by the possibility of an infidelity-related scandal involving Republican presidential nominee John McCain. Nothing came of it, and Democrats moved on, some of them possibly with some disappointment. Republicans should now do the same.

As the title to this column indicates, however, the point here is not merely that the case that Professor Caron offered in his op-ed adds up to nothing. Even though the case that he lays out fails on the merits, he has done conservatives an enormous favor. He ends his essay by calling on Republicans to give Ms Lerner immunity, to allow her to tell what she knows, and “let the chips fall where they may.” This is exactly what many others have argued, but the reluctance of the House Republicans to follow this advice has strongly suggested that they fear that Lerner has nothing to say.

In any case, Professor Caron’s selflessness should not be underestimated. He boiled down the affirmative case against the Obama Administration to its essentials, revealing that there is no substance to that case, based on the facts as they are known more than a year later. The only hope for conservatives is that some unknown facts will emerge, gladdening right-wing hearts everywhere. Professor Caron used every political signal in the book, and permanently compromised his public reputation, to implore conservatives to prove what he suspects is surely true, but which only suppositions currently support. One must hope that his compatriots honor his sacrifice and listen to him.