[Congressional Record (Bound Edition), Volume 159 (2013), Part 5]
[Senate]
[Pages 6889-6890]
[From the U.S. Government Publishing Office, www.gpo.gov]




                                THE IRS

  Mr. WHITEHOUSE. Madam President, I am here to speak today because 
Washington, DC, and the rightwing outrage machine are all abuzz about 
the scandal that the IRS appears to have targeted organizations for 
inquiry based on tea party affiliation. Obviously, that is wrong, but 
let's not forget that is not the only IRS scandal--that is not the only 
scandal in town. There are two IRS scandals. The other is the IRS 
allowing big, shadowy forces to meddle in elections anonymously through 
front groups that file false statements with the IRS.
  Let's go through this. Let's begin with the principle that it is 
pretty clear that Americans have a strong democratic interest in 
knowing who is trying to influence their vote in elections. That is 
kind of democracy 101.
  Even the Supreme Court, which can hardly agree 8 to 1 on what time it 
is, agreed 8 to 1 that knowing who is trying to influence our votes is 
really important. Here is what they said: ``Effective disclosure'' 
would ``provide shareholders and citizens with the information needed 
to hold corporations and elected officials accountable for their 
positions and supporters.'' That is very much a part of the democratic 
process.
  Some folks don't want us to know who they are when they meddle in our 
politics, such as big companies taking positions that would annoy their 
shareholders or their customers and secretive billionaires who want 
influence without accountability. They want to pull the strings behind 
the scenes. It also includes polluters, Wall Street, Big Oil, and other 
folks the public is fed up with. They all have lots of reasons for 
wanting to stay secret.
  The law in America requires lots of disclosure, and the Supreme Court 
has emphasized the importance of lots of disclosure.
  What is a company or a billionaire trying to hide their influence-
seeking going to do? How does the secret money get in? Well, it is 
easy. They create a front organization, usually with a phony-baloney 
happy name, and hide behind that--except it is not quite that easy. 
There are not that many types of organizations that can hide their 
donors that way. The most commonly used is called a 501(c)(4), which is 
a tax-exempt, nonprofit form of corporation that is regulated by--guess 
who--the IRS.
  There is one big problem for people wanting that secret influence in 
politics; that is, that kind of organization, the 501(c)(4), needs to 
be set up under the law ``for the promotion of social welfare''--
indeed, the law says ``exclusively'' for the promotion of social 
welfare. According to the IRS's own regulations, ``The promotion of 
social welfare does not include direct or indirect participation or 
intervention in political campaigns on behalf of or in opposition to 
any candidate for public office.'' So that is a problem.
  Well, the first kind of miniscandal is that the IRS has decided that 
an organization is organized exclusively for the promotion of social 
welfare if it is primarily engaged in social welfare activities. By 
``primarily,'' they mean 51 percent, so the other 49 percent can be 
purely political. So ``does not include direct or indirect 
participation in political activity'' has been turned into ``actually 
does include but up to 49 percent,'' which is nonsensical. As I said, 
that is a miniscandal of its own.
  Let's go on. The IRS allowing a bunch of political operatives to form 
nonprofit groups that don't disclose their donors and then collect 
millions of dollars and spend them on elections in contravention of a 
clear statute and seemingly in violation of their own rules also 
requires that they usually make some false statements. That is where 
the scandal really worsens.
  There is a form called the 1024 form that is the application form for 
501(c)(4) status. If we go to that form, we will see question 15. 
Question 15 asks:

       Has the organization spent or does it plan to spend any 
     money attempting to influence the selection, nomination, 
     election or appointment of any person to any Federal, state, 
     or local public office or to an office in a political 
     organization?

  That is the question on the form, and it has to be answered under 
oath.
  A considerable number of groups appear to have lied on their 
applications for nonprofit status as well as on their returns, and they 
have lied with absolutely no consequences.
  There is a Pulitzer Prize-winning, nonpartisan investigative group 
called ProPublica. ProPublica has investigated these 501(c)(4) filings. 
As part of their investigation, they looked at 104 different 
organizations that had reported to the Federal Election Commission or 
to the State equivalent Federal elective bodies--104 organizations that 
reported electioneering activity, that they were involved in trying to 
elect candidates. In those filings to the Federal and State election 
boards, they said: Here is what we spent on influencing those 
elections.
  ProPublica cross-checked those 104 that had filed statements saying 
how much they had spent to influence elections and 32 of them--32 of 
them--told the IRS they spent no money to influence elections, either 
directly or indirectly. Both statements cannot be true. An organization 
cannot tell one Federal agency how much they spent to influence 
elections and tell another Federal agency they spent no money to 
influence elections and have both statements be true.
  Then we look at these organizations' behavior and the false 
statements look even worse. One organization said it would spend 50 
percent of its effort on a Web site and 30 percent on conferences. The 
investigation showed its Web site consisted of one photograph and one 
paragraph; no sign of any conference. The same group declared it would 
take contributions ``from individuals only'' and then took $2 million 
from PhRMA, the pharmaceutical lobby.
  Another declared to the IRS it had spent $5 million on political 
activities, but it told the Federal Election Commission it had spent 
$19 million on political advertisements.
  Another pledged its political spending would be ``limited in amount 
and will not constitute the organization's primary purpose.'' Then that 
organization went out and spent $70 million on ads and robocalls in one 
election season. It is almost funny it is so bad.
  But there is nothing funny about making a material false statement to 
a Federal agency. That is not just bad behavior, it is a crime. It is a 
statutory offense under 18 U.S. Code section 1001. The Department of 
Justice indicts and prosecutes violations of this statute all the time, 
but they never do for this. Never. Why? It appears there is a bad 
agreement between the Department of Justice and the Internal Revenue 
Service that the Department of Justice will not prosecute false 
statements if they are made on this form unless the case has been 
referred to them by the IRS.
  So that is really scandal two right there. No matter how flagrant the 
false statement, no matter how great the discrepancy between the 
statements filed with the IRS under oath and the statements also filed 
with the Federal and State election agencies, no matter how baldly the 
organization in practice contradicts how it answered IRS questions 
about political activity, the IRS never makes a referral to the 
Department of Justice. Thirty-two flagrantly false statements and, as 
far as anyone

[[Page 6890]]

knows, not one referral to the Department of Justice as a false 
statement. It is a mockery of the law and it is a mockery of the truth.
  There is an easy solution. The Department of Justice prosecutes these 
false statements in lots of other instances. Prosecute these. Juries 
are good at sorting out what is a lie and what is not.
  Investigations, interviews, statements, and subpoenas can look behind 
what appears to be a false statement, and prosecutors can get a full 
sense of the case, in a grand jury, before any charges are finalized. 
But they can't if they don't even look.
  Right now, multiple organizations lie with impunity and in large 
numbers. It is indeed a scandal that the IRS will not even make a 
referral. Frankly, it is no great credit to the Department of Justice 
that the Department will not act on its own with all of this so public 
and so plain. Hiding behind their agreement with the IRS, on these 
facts, is not that great Department's finest hour.
  So it is very wrong. It is very wrong that the IRS required 
additional information from a number of organizations--mostly small 
organizations--based on a screen that incorporates those organizations' 
tea party orientation. But it is also very wrong that the IRS goes AWOL 
when wealthy and powerful forces want to break the law in order to hide 
their wrongful efforts at secret political influence. Picking on the 
little guy is a pretty lousy thing to do; rolling over for the powerful 
and letting them file false statements is pretty lousy too. Two 
scandals. Let's not let one drown out the other.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Florida.
  Mr. RUBIO. Are we in morning business?
  The PRESIDING OFFICER. Yes, we are.
  Mr. RUBIO. I don't anticipate using it all, but I ask unanimous 
consent to be recognized for up to 15 minutes.
  The PRESIDING OFFICER. Without objection.

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