Evaluate tax-exempt groups based on behavior rather than speculation, and compensate them for compliance costs.
Almost everyone agrees that the IRS behaved badly when it singled out conservative activist groups for extra scrutiny. As Ezra Klein put it, "because the Internal Revenue Service holds so much private data, and because it can make people's lives absolutely miserable, it is of paramount importance in our political system that it both is, and is perceived as, an apolitical entity." But Klein also believes that the IRS ought to be scrutinizing all 501(c)4 groups more closely. Kevin Drum agrees. "What's really unfortunate about all this is that it will probably put an end to any scrutiny of 501(c)4 groups, and that's a shame," he writes. "The IRS should be scrutinizing them."
So how can the IRS fulfill its duty to police groups wrongfully claiming tax exempt status without getting abusive?
John Podhoretz suggests the timing of the enforcement matters.
"Didn't the IRS need to ensure that groups applying for non-profit status would conduct themselves properly once they had received it?" he asks. "The answer, actually, is no, not really. The IRS's enforcement power has to do with misconduct following the granting of tax-exempt status. It should not presume lack of good faith on the part of those applying for the status. What it can do to them, fairly and legally, is revoke the status based on the organization's behavior after the exemption is granted--thus effectively crippling and destroying it."
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