May 15 2013 09:56 AM

Congress must fix 501(c)(4) loophole, and Obama must reel in Holder-also, the grand jury and sheriff get it wrong

Eric Holder

It hasn't been a good week for President Barack Obama. First it was the hair-on-fire inquiry over the Benghazi talking points; now two more major stories are giving Obama headaches: the Internal Revenue Service's selective targeting of Tea Party-type organizations and the Justice Department's secret seizure of Associated Press phone records.

Late last week, a draft report from the U.S. Inspector General was leaked, revealing that the Cincinnati IRS office had used the terms "tea party" and "patriot" in a search for 501(c)(4) nonprofit organizations that were abusing their tax-exempt status by being too active in election campaigns. CNN reported Tuesday that other IRS offices were doing the same thing. Folks from all political stripes are rightly furious over uneven enforcement of tax rules. We'll know more about what went on when the final Inspector General report is released and after the Justice Department does its own investigation.

It's a given that ideology shouldn't factor in to enforcement, but the thing that Americans should be far more concerned about is why the IRS was looking for scofflaws in the first place. The tax code's 501(c)(4) section regulates nonprofits that are "social welfare" groups—do-gooder organizations that help people and communities. Not only don't they have to pay taxes; they also don't have to disclose names of people who give them money.

The problem is, rulings and language interpretations—both inside and outside of the IRS—have muddied the water in terms of how involved in elections this type of nonprofit can get, and since the Citizens United case threw open the floodgates on election spending, the number of 501(c)(4) corporations has doubled. People who want to influence elections, but do so without revealing who's providing the money, found an easy way to exploit the system. It's easy because, despite complaints from good-government groups, the IRS hasn't lifted a finger to investigate the huge-money groups, both liberal and conservative. That's what's galling about the recent revelation. The IRS has been harassing little groups that haven't made a dent in elections while ignoring the worst offenders that are truly threatening democracy.

There's worry that the IRS will assume a fetal position in the aftermath of this scandal. That's why Congress must pass a law that amends the language in the tax code that closes the loophole.

While the IRS story points to a threat to democracy, the Associated Press brouhaha is a threat to democracy. We'll join the chorus of condemnation aimed at Obama's Justice Department for its broad seizure last April and May of home, work and cell phone records for an AP editor, a handful of reporters and general office lines. It's presumed that the information grab was part of a 2012 probe to find the government source for an AP story about how the CIA thwarted a plot in Yemen to detonate a bomb aboard a plane bound for the U.S.

This kind of thing can't be allowed to happen. Democracy needs whistleblowers. Whistleblowers need to believe that reporters will protect them from retribution. Reporters can't protect them if the government is secretly snatching information from news organizations. News agencies must be able to put up a fight, but they can't if they don't even know they're under siege by the government. Whether a judge or grand jury approved the seizure beforehand hasn't been made public.

The White House is distancing itself from the Justice Department's assault on the AP, saying it had no knowledge of it until the story broke on Monday. That won't cut it. Obama must come out and say that U.S. Attorney General Eric Holder overreached and ensure this doesn't happen again.

Grand Jury flub

Given how much reporting CityBeat's done recently on deaths of jail inmates, we were perplexed Monday when the San Diego County Grand Jury released a study that underreported the number of inmates who died in county jails between July 2011 and August 2012. The Grand Jury said there were four deaths; the accurate number is 11. Read details in our Last Blog on Earth. The Grand Jury has acknowledged the error and vowed to correct it, blaming the Sheriff's Department for providing wrong information. The error shows that Grand Jury reports should be taken with a grain of salt and bolsters our ongoing critique of the Sheriff's Department.

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