Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

IRS Scandal Tied to Change That Created Tax Loophole

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

IRS Scandal Tied to Change That Created Tax Loophole

Article excerpt

WASHINGTON -- The Internal Revenue Service is under fire for giving extra scrutiny to conservative organizations that asked for tax-exempt status. But the scandal begs a broader question: Why are political organizations getting this government subsidy anyway?

On Thursday, amid the uproar, President Barack Obama appointed Danny Werfel, controller of the White House budget office, as acting commissioner of the Internal Revenue Service.

Mr. Werfel on Wednesday will replace Steven Miller, who was forced to resign Wednesday following disclosure of the agency's selective scrutiny of small-government groups seeking tax-exempt status, although he is still scheduled to testify today at a congressional hearing.

"As we work to get to the bottom of what happened and restore confidence in the IRS, Danny has the experience and management ability necessary to lead the agency at this important time," Mr. Obama said in a statement.

Mr. Werfel, 42, will serve until the fiscal year ends Sept. 30, the White House said. The acting IRS commissioner position doesn't require Senate confirmation.

Mr. Obama hasn't nominated a permanent commission since the term of Douglas Shulman, a George W. Bush appointee, ended in November.

The IRS also announced Thursday that Joseph Grant, who oversees tax-exempt organizations and government entities, will retire June 3.

Looking more closely at the controversy, the tax code section sought by the Tea Party groups was established to benefit groups that promote social welfare, generally nonprofit operations. Examples on the IRS website involve community service and groups that provide a certain local benefit.

Somewhere along the line, apparently in 1959, the IRS modified its regulations regarding the statute establishing this longstanding classification, creating a loophole exploited by groups seeking to elect Democrats, Republicans and most recently Tea Party candidates and like-minded groups.

Search the membership of state associations of nonprofit organizations and you'll have to work to find any that are political in nature. The California Association of Nonprofits in San Francisco lists online more than 1,400 members, yet none have patriot, Tea Party, progressive or similarly political names. …

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