No criminal charges.
That’s the final word from the Department of Justice with respect to its lengthy investigation into whether the Internal Revenue Service (IRS) improperly targeted the Tea Party and related organizations applying for tax-exempt status. The Department of Justice advised Congress today that it is closing its investigation and confirmed that they will not recommend criminal charges be filed against former Director of Exempt Organizations, Lois Lerner, or any other IRS official.
The investigation found, as many suspected, “substantial evidence of mismanagement, poor judgment and institutional inertia leading to the belief by many tax-exempt applicants that the IRS targeted them based on their political viewpoints” inside IRS. “But poor management is not a crime,” Assistant Attorney General Peter Kadzik wrote in the letter.
Kadzik went on to say:
We found no evidence that any IRS official acted based on political, discriminatory, corrupt, or other inappropriate motives that would support a criminal prosecution. We also found no evidence that any official involved in the handling of tax-exempt applications or IRS leadership attempted to obstruct justice. Based on the evidence developed in this investigation and the recommendation of experienced career prosecutors and supervising attorneys at the department, we are closing our investigation and will not seek any criminal charges.
Despite the headlines, most tax professionals who have followed this case didn’t expect a much different answer. I wrote something similar last year after the Federal Bureau of Investigation (FBI) announced that it did not expect to file charges in the scandal:
There are a lot of words that could be used to describe the tenor of what happened. Incompetent. Flawed. Lazy. Confused. Mismanaged. I’ve heard quite a few – and chances are you’ve uttered a few of those yourself.
But the behavior didn’t rise to the level of what would be considered criminal. That’s the finding – to date – of the investigation.
That was in 2014. Nearly a year and a half – and hearing after hearing, headline after headline and millions of dollars – later, that didn’t change.
It’s clear that the IRS didn’t handle the situation well. They bungled the process from start to finish. When the Supreme Court decision came down for Citizens United v. Federal Election Commission, the IRS had to know that they would see a spike in the number of nonprofit organizations applying for tax-exempt status under section 501(c)(4) of the Tax Code increased dramatically. And that’s exactly what happened. But IRS wasn’t prepared.
In 2010, IRS employees in Cincinnati created a workaround to “assist” with their review of organizations applying for section 501(c)(3) or section 501(c)(4) tax-exempt status. That turned into a formal BOLO (Be on the Lookout) listing which included words used to flag an application for further scrutiny. Words on those BOLO lists included names like Patriots as well as specific policy positions such as government spending, taxes, and government debt. Organizations with flagged applications were often sent additional information request letters.
As complaints about the delays rolled in, Rep. Darrell Issa (R-CA) requested a Treasury Inspector General for Tax Administration (TIGTA) inquiry into the matter. The matter wouldn’t become a full-fledged scandal, however, until, during a 2013 American Bar Association meeting, Lerner admitted that organizations were targeted because of their titles or beliefs, calling it “absolutely incorrect, insensitive, and inappropriate.”
A flurry of activity followed. Attorney General Eric Holder announced an FBI investigation. Congress ordered a number of hearings which took a dramatic turn when Lerner refused to testify in front of the House Committee on Oversight and Government Reform, pleading the Fifth Amendment. Lerner was eventually found in Contempt of Congress (the Department of Justice refused to press criminal charges finding that her behavior was not criminal).
And then there were all of those missing emails. They were, some in Congress believed, a smoking gun. Only they weren’t. As tens of thousands of emails trickled in – raising valid concerns over the way that IRS handled its internal communications – no new substantive issues were raised.
It wasn’t pretty for IRS. We learned a lot about the way that IRS was – and wasn’t – functioning. There was significant turnover: three Commissioners served in some capacity before Commissioner Koskinen was appointed in 2014. It was clear that Koskinen, a former clean-up guy for Freddie Mac, was at IRS to make some changes.
I expect that there will be ongoing chatter on the Hill about what the results of these investigations should mean for the IRS moving forward. And that’s a good thing. We should learn from this. But with the word that the investigation is officially closed, it may be also time to move on.
For a timeline of the IRS scandal, with links to previous stories, click here.
