What Congress should ask IRS, but probably won’t

The House of Representatives Ways and Means Committee on Friday will hold the first of three hearings on the Internal Revenue Service "Tea Party" targeting scandal.

Tax experts hope the hearings go beyond finger-pointing and get to the heart of the IRS's long-standing problems. If they can get past the fist-pounding stage, here are some questions lawmakers should ask:

Why do IRS reviews take so long?

According to the IRS website, the tax exempt organizations sections is assigning agents to review applications filed more than a year ago. Long delays for 501(c)4 applicants were highlighted in a Treasury Inspector General for Tax Administration (TIGTA) report that detailed the scandal.

Such delays are relatively new, said a former IRS exempt organizations executive. Reducing delays is crucial, he said.

How can oversight from Washington be improved?

Poor leadership was a big factor in the scandal, TIGTA said. In the IRS' tax exempt section, leadership and legal counsel are located in Washington, while the Cincinnati office reviews applications. Some decisions made in Cincinnati would have been better made in Washington, former IRS staff said.

Why is the IRS not complying with all of the Inspector General's recommendations?

The TIGTA report published Tuesday said the IRS is taking the unusual step of not complying with two TIGTA recommendations. Tax experts said that raises red flags.

What expertise does the IRS have in sorting data?

With 70,000 annual filings to review and a staff of just 200, the IRS non-profit arm has to find a way to sort through applications that is fair and non-partisan. One former IRS executive said working with experts in constructing random samples of large data sets would help.

Should the IRS be doing this at all?

The duties of the IRS have expanded over time. The number of organizations applying for 501(c)(4) status has doubled since 2010, while the IRS' budget has shrunk. The IRS may need to shed its non-profit duties, one lawyer proposed.

How can it be ensured that the IRS doesn't just give up on monitoring these entities, post-scandal?

If Congress does not want to end up subsidizing political action with tax breaks, it will have to make sure a chill does not descend on the IRS. Past initiatives to examine politicking by traditional charities found evidence of a growing problem, but were politically touchy, and faded eventually.

© Copyright 2013 Thomson Reuters. 

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