Return of a politicized IRS? Democrats' push to expand tax agency raises concerns

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House Democrats are pushing for expanding the IRS with $5.2 billion dedicated to “enforcement activities,” prompting concern from conservatives who recall the tax-collecting agency’s politicized targeting during the Obama administration.

Investigations by an inspector general and subsequent congressional oversight determined the agency’s exempt organization’s unit unfairly targeted tea party and conservative groups.

“You’ll see tremendous politicization of the IRS during a Biden administration,” Grover Norquist, president of Americans for Tax Reform, told Fox News. “There will be an effort to bulk up and harass, first, small businesses, then they will go after political groups. ... Democrats weren’t looking to throw the money into the IRS when Trump was president. But they want to do it now.”

The Biden transition team didn’t immediately respond to an inquiry for this story. But the campaign seemed to be on board with a more aggressive IRS, as Jared Bernstein, who President-elect Joe Biden tapped to serve as a member of the Council on Economic Advisers, said during the presidential campaign in October that Biden would seek “significant increases in IRS enforcement and auditing, particularly for those with complex business structures.”

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Boosting money for enforcement would be a matter of “tax fairness,” according to a Nov. 25 letter to House and Senate leaders signed by 25 House Democrats. The letter asks for $12.1 billion for the IRS that includes $5.2 billion for “enforcement activities that are critical to ensuring compliance.”

“The strength of IRS enforcement activities must be a priority for Congress, especially considering the additional measures Congress enacted under the CARES Act to lessen the financial burden of the COVID-19 pandemic,” says the letter, led by Reps. Judy Chu, D-Calif., and Bill Pascrell, D-N.J. It later adds, “Specifically, increasing the examinations and collections budget by $20 billion over 10 years increases revenues by $61 billion, and if it is increased by $40 billion over 10 years it would increase revenues by $103 billion.”

The Democratically controlled House approved the $12.1 billion in a funding bill, but the House Democrats want to ensure Congress retains it for the final 2021 Financial Services and General Government appropriations bill.

The conduct of IRS officials during a Biden administration is a bigger concern than any budget appropriations, said Jenny Beth Martin, honorary chairwoman of Tea Party Patriots Action.

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“At the IRS, the question is not will they get more money for enforcement, but will they return under a Biden administration to acting as they did under the Obama-Biden administration?” Martin said. “Will they suspend the First Amendment for their political foes, as they did before? That does not require a change in the size of their bank account. That is simply a function of attitude, and whether or not they are going to treat the public they serve with dignity, respect and consideration for their constitutional rights.”

The IRS scandal first came to light in May 2013, when the Office of Treasury Inspector General for Tax Administration released a report asserting: “The IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax exempt status based upon their policy positions instead of indications of potential political campaign intervention.”

This essentially “smothered” a movement since incorporation as a tax-exempt entity is key to raising money to expand, Norquist said.

“What the Obama administration was able to do is kill that movement using the IRS,” he said.

In August 2015, the Senate Finance Committee released a scathing report pointing to Lois Lerner, who was the IRS director of the IRS' Exempt Organizations Unit during the period from 2010 to 2013 when the abuse occurred.

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“We found evidence that Lerner’s personal political views directly resulted in disparate treatment for applicants affiliated with Tea Party and other conservative causes,” the report stated. “Lerner orchestrated a process that subjected these applicants to multiple levels of review by numerous components within the IRS, thereby ensuring that they would suffer long delays and be required to answer burdensome and unnecessary questions. Lerner showed little concern for conservative applicants, even when members of Congress inquired on their behalf, allowing them to languish in the IRS bureaucracy for as long as two years with little or no action. The IRS began to resolve these applications only after some of the problems became public in 2012. By that time, the damage had been done.”

Lerner refused to answer questions before the House Oversight and Government Reform Committee in 2013, invoking the 5th Amendment right against self-incrimination. She nevertheless claimed innocence in a prepared statement she read to the House panel.

Although the Obama Justice Department determined there was no criminal conduct, Republicans in 2015 mistrusted the DOJ lawyer placed in charge of the probe, Barbara Bosserman, because she was a donor to President Barack Obama's campaigns.

In October 2017, the IRS issued a “sincere apology” and stated its treatment of the tea party groups “was wrong,” as part of a Trump administration settlement with more than 400 tea party and conservative groups. The federal government made a separate $3.5 million settlement in April 2018 with several tea party groups.

The settlements won’t likely mean anything as far as deterring future bad behavior from the IRS, said Martin of Tea Party Patriots Action.

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“It’s not like it was Lois Lerner who paid that bill,” Martin said. “It didn’t even come out of their [the IRS] budget.”