Go to Top

An IRS Scapegoat Retires

There is nothing admirable about scapegoating, but some scapegoats are definitely better than others. The IRS had one of the best in the business until Lois Lerner retired last week.

Lerner, you will recall, is the attorney who headed the IRS branch that determines whether organizations qualify for tax-exempt status. After a series of denials by the agency that it was stonewalling groups aligned with conservative causes, Lerner disclosed in May that it had been doing exactly that.

As if the conduct by her department was not bad enough, Lerner made her admission in about the sleaziest way imaginable, in response to a question she herself had planted with an audience member at a law conference. (The attorney who questioned Lerner, Celia Roady, at first denied that it was a plant but later confessed.) I can only wonder which course, at which law school, teaches that the best way to admit a lie is through another deception.

But Lerner was not finished impressing us with her duplicity. She may have had responsibility for the tax-exempt determination unit, but by her account, she was not responsible, nor was anyone else at the IRS or its parent Treasury Department headquarters in Washington, D.C. She blamed lower-level workers at the Cincinnati field office. Some bosses have your back; others use it to practice their carving skills.

Just a couple of weeks after this inspiring performance, Lerner gave an encore with an appearance before a House committee in which she declared herself innocent and then declined to answer questions, invoking her Fifth Amendment right to avoid self-incrimination.

“I have not done anything wrong,” Lerner told that House oversight panel. “I have not broken any laws, I have not violated any IRS rules or regulations, and I have not provided false information to this or any other congressional committee.”

But, as The Washington Post’s Fact Checker columnist Glenn Kessler reported, just two days before the law conference Lerner appeared before a House committee where she acknowledged the IRS’ mistreatment of conservative groups, and evaded a question from Rep. Joseph Crowley on that very point. Crowley soon called for Lerner to resign, saying she had lied to him.

Lerner did not resign. She was put on paid leave instead, pending an agency probe into her conduct. That probe reportedly called for her dismissal, but she opted to retire before any action was taken. Retirement protected Lerner’s government pension.

The Obama administration and its Democratic allies in Congress have insisted that there was no direction from the White House in the targeting of conservative groups, and that liberal-oriented groups were subject to similar scrutiny. The part about the lack of a connection - or at least the lack of direct connection - to the White House is plausible, because it would have been important to maintain deniability. Most likely, nobody told the IRS to target conservative groups for special scrutiny because nobody needed to tell it. Lerner and other agency officials were already deeply concerned that the Supreme Court’s Citizens United ruling would open the floodgates for these groups to take overtly political stands, as indicated in emails that were released after the scandal broke.

Yet the original claim that rogue employees in Cincinnati were responsible for targeting conservatives - even though they allegedly had no political motive - never made sense viewed in the context of other IRS initiatives against the same group. I had been writing about this IRS targeting for 14 months before Lerner appeared in front of that bar association group.

Likewise, the contention by allies of the administration that Lerner herself was the problem does not hold water. Even as Lerner admitted that targeting conservative groups was wrong, some such groups that sought tax-exempt status as early as 2010 or 2011 were still waiting for their applications to be decided, according to The Wall Street Journal. By that point, the IRS inspector general’s office had completed its report on the matter and top Treasury officials had been briefed on the findings.

Rep. Sander Levin, D-Mich., is eager to make Lerner the focus of the story, and to spin the narrative away from any indication that the IRS targeted conservative groups specifically.

Lerner is being held responsible for “gross mismanagement” but not for political bias, according to Levin, who is the ranking Democrat on the House Ways and Means Committee. “The IRS Internal Review Board found no evidence of political bias in her neglect of duties,” Levin said in a statement. That’s convenient.

Scapegoats are all about convenience, and Lerner excelled at being a scapegoat. She wasn’t a low-level flunky; she was a high-level manager who supervised 900 employees, a trained lawyer, and - as the world has come to know - a weaseling dissembler. You couldn’t get a better bad guy if you called Central Casting.

Lerner really isn’t the story, though. The law that puts the IRS in the business of evaluating the purpose of not-for-profit groups, and the degree to which those groups can engage in political speech activity, is part of the story; the way in which the IRS goes about this mission is the rest of the tale. Lerner is only one character in that narrative.

Businesses that are organized to earn profits should be taxed on those profits. Associations that do not generate profit, and that do not permit any accumulated funds to “inure” (that’s the legalese used in the tax code) to the benefit of a private party, ought to be defined as tax-exempt, period. Individuals must still pay tax on their income from such groups. Donors are not allowed to deduct contributions (except to qualified charities, a practice which is not at issue in the recent IRS cases).

Bright-line rules like these would protect Americans’ First Amendment rights to free speech and free association without putting the IRS in the untenable position of evaluating organizations’ purposes and motivations. Speech is speech, as the Supreme Court decided in Citizens United. We run into problems when we try to restrict it.

Lois Lerner wasn’t the story. She was just the scapegoat, albeit a very, very good one.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book Looking Ahead: Life, Family, Wealth and Business After 55.

The views expressed in this post are solely those of the author. We welcome additional perspectives in our comments section as long as they are on topic, civil in tone and signed with the writer's full name. All comments will be reviewed by our moderator prior to publication.

, , , ,