Former IRS Director: IRS Scandal Due to Budget Restrictions

Ali Meyer | July 9, 2014 | 1:57pm EDT
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FILE - This March 22, 2013, file photo, shows exterior of the Internal Revenue Service building in Washington. (AP Photo/Susan Walsh, File)

( - A former IRS director said Tuesday that IRS mismanagement was due to budget restrictions and a backlog of applications, claiming it had nothing to do with tax-exempt organizations.

“This issue with the IRS performance has been building for a long time, and critical decisions were made actually back in 2003. Training was cut back dramatically in 2003 because of budget restrictions,” said Marcus Owens, former director for the Exempt Organizations Division of the IRS for 10 years, during a panel discussion hosted by Citizens for Responsibility and Ethics in Washington (CREW) at the Capitol.

“The backlog of applications was growing enormous – had nothing to do with [501c(4)s], it had a lot to do with apparently the procedures that had been put in place after 2003 that simply weren’t working,” Owens said.

At the event panel titled, “Critical Issues in Dark Money,” the moderator, Eliza Newlin Carney, a senior writer for Roll Call, questioned the panelists about the IRS scandal.

“We’ve not talked about the Internal Revenue Service. Obviously, their self-admitted mismanagement in this area has triggered strong reactions on Capitol Hill and a fairly aggressive investigation. I want to know how much of this outrage you feel is justified. Where did the agency legitimately go astray, and what do you think of the proposed IRS regulations in this arena?” Carney said.

Owens’ statement was echoed by another panelist, Norman Orstein, contributing editor and columnist for National Journal and The Atlantic. “There is a real scandal here,” Ornstein said. “And the scandal is the attacks on the IRS as an agency, the draining of the budget, the attempts to punish the people who work there – the agency has been overwhelmed. And there have been serious failures in management, but this is part of a broader attack by people who don’t want any government.”

Not only did the panelists overwhelmingly defend the IRS agency, but they claimed that the often quoted analogy, which compares the targeting of conservative groups to the harassment of civil rights organizations, a “stretch.”

“I think the analogy to civil rights organizations and the harassment that they faced is an enormous stretch, and I’m not alone in that,” Ornstein said. “Why should we care about this? And I think there are two reasons really. One is that dark money, the failure to disclose, could tilt elections and leave voters in the dark.

“If you get a massive sum of money coming in that attacks a candidate from Americans for a Better America, and you don’t know there’s a coal company behind it because they don’t like the position of the candidate, you don’t really have enough opportunity to assess the meaning, impact and context of those attacks,” Ornstein added.

“That’s one thing, it’s overshadowed by the second, which is the corruption that flourishes when you don’t know who is giving the money and when the members certainly do know,” Ornstein said.

While panelists weren’t in support of organizations being awarded “dark money,” some did advocate that government should get something in return for giving out tax-exempt statuses to organizations.

“You talked about tax exemption as a form of government subsidy, and I wondered if you could sort of elaborate on that a little bit, in other words, if the government is giving these groups tax exemption does it have the right to then ask for something in return?” Carney asked.

“Yes, I very much believe that, if the government is providing some sort of subsidy or benefit that it has the right to ask for something in return, it’s not an uncommon thing that goes on in a variety of areas of the law and not just the tax exempt world, said Adam Rappaport, senior counsel for CREW, the host of the event. “And I think as a moral or ethical view of things when somebody is providing you with some sort of benefit, then it makes sense that that they might be able to condition that benefit in some way, so I think that makes perfect sense.”

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