Welcome to the Club, Tea Party: A Brief History of IRS Scandals

Welcome to the Club, Tea Party: A Brief History of IRS Scandals
See Gallery
Welcome to the Club, Tea Party: A Brief History of IRS Scandals

In 1924, Treasury Secretary Andrew Mellon, one of the country's wealthiest men, was feuding with Sen. James Couzens (R-Mich.), said to be the richest member of Congress. Couzens wound up being sued by the Bureau of Internal Revenue, precursor to the IRS, over a tax bill of between $10 million and $11 million on a sale of Ford Motor Co. (F) stock -- an amount approximately equivalent to $140 million today. The result was a power struggle between Congress and the administration of Calvin Coolidge, which led to the creation of the U.S. Joint Committee on Taxation. The Washington Post dubbed the affair "the greatest tax suit in the history of the world."

Photo: President Calvin Coolidge (Left) and Sen. James Couzens (right in glasses).

Under the Kennedy administration, the IRS targeted right-wing political groups for audits; the stated purpose was to determine whether such groups were abusing their tax-exempt status, but the bias of the effort was obvious, despite superficial attempts to disguise it. "By the end of 1964 the Ideological Organizations Project had led to recommendation of the revocation of exempt status for 15 groups (14 of them right-wing)," reports John A. Andrew in The Other Side of the Sixties. "The IRS eventually approved four of the recommendations for continued action (3 right-wing groups), rejecting the rest or sending them back for further study." The project remained secret from the public until the Church Committee hearings in the mid-1970s.
I hope you're sitting down, because it turns out that the power of the IRS was abused under President Richard Nixon. In a reverse of the Ideological Organizations Project, a White House aide named Tom Charles Huston -- who had been president of Young Americans for Freedom, one of the groups on the Kennedy administration's radar -- suggested investigating left-wing groups with tax-exempt status, and Dick could dig it. Huston also proposed using electronic surveillance and burglary against left-wing "radicals" and antiwar types, so he was Nixon's kind of guy. (Amazingly, J. Edgar Hoover objected to Huston's proposals.) Nixon pressed for the creation of something called the Special Services Staff, the purpose of which was to use the IRS against his "enemies." Unlawful applications of IRS power were part of the articles of impeachment drafted against our uncrookiest president by the House of Representatives.

Worse than Watergate, but significantly less well-known, is a 15-year FBI program directed against domestic political groups deemed "subversive." It was called COINTELPRO, and the IRS was one of its tools of attack. Members of the New Left, black activists, antiwar figures and other dissidents were targeted for audits, and the IRS handed over 200 tax returns for investigatory purposes in a manner deemed illegal in 1968.

Photo: Fred Hampton, national spokesman for the Black Panther Party, who was killed by members of the Chicago Police Department, as part of a COINTELPRO operation.

In a 2001 paper titled "The Political Economy of the IRS," researchers reported that data for 33 IRS districts from 1992 to 1997 showed significantly lower audit rates in electorally important districts, as well as those represented by members of important congressional committees. "These findings suggest that the IRS is not a rogue government agency, but rather is an effective bureaucratic agent of its political sponsors," the authors note drily. "'Reforming' the IRS by subjecting it to an independent oversight board appointed by the president would therefore seem to be redundant."
After a guest preacher denounced George W. Bush's Iraq policy in a 2004 sermon delivered at All Saints Church in Pasadena, Calif., the IRS began an inquiry into the congregation's tax-exempt status the following year. The church hired Marcus Owens, a former head of the IRS tax-exempt section, to represent it. Owens said the IRS's contention that the church had implicitly intervened in the election "seems ludicrous." The church was eventually able to keep its 501(c)3 status. "I'm very interested to know whether the IRS is taking a look only at churches that are critical of the war in Iraq, or also at the churches that are supportive of the war and the president," the rector told The Washington Post. IRS Commissioner Mark W. Everson (pictured above) said, "There is absolutely no place for any politics in our consideration of these things."