IRS Scandal - Blame It All On Lois Lerner And Move On?

This post was originally published on Forbes Aug 6, 2015

According to statements by Senators Hatch and Wyden the Senate Finance Committee report on the IRS  scandal (now on Day 818 by TaxProf count) with the snappy title - The Internal Revenue Service's Processing of 501(c)(3) And 501(c)(4) Application For Tax-Exempt Status Submitted By "Political Advocacy" Organizations From 2010-2013 - absolutely proves that there was political targeting and that there was not political targeting - depending on how you look at it. (Links to various documents can be found here but you have to poke around a bit.)

The Search For The Smoking Gun

Republicans have been hoping that there would be a smoking gun in all those interviews and documents.  I mean wouldn't it be great if there were a taped conversation in which President Obama ordered the IRS to harass the Tea Party. Senator Wyden indicates that nothing anywhere near to that has turned up.  Senator Hatch, on the other hand, thinks the smoking gun has been hiding in plain sight.

Regardless of whether an explicit directive was given, the President gave the order to target conservative groups at every opportunity – the State of the Union, in press conferences, and in TV interviews. He didn’t send a “smoking gun” email because he did not need to – he gave the order for all to hear. And his political allies at the IRS followed those orders

Senator Wyden in his statement points out the inconvenient facts that the IRS Commissioner at the time had been appointed by President Bush and that Lois Lerner had been promoted to head the Exempt Organization group by a Bush appointed IRS Commissioner. Go figure. So I guess the TaxProf can keep the count going.

There are three major reports and summary material.  In the main report we get what the Democrats and Republicans agree on.  The other two reports tell us what they agreed to disagree on.

 Does This Sound Familiar?

There is significant agreement that there were serious management issues at the IRS.  It strikes me that the problems are common to large organizations.

 Factors further contributing to the dysfunctional “culture” of the EO Division included the office structure of the Determinations Unit thatplaced managers in offices located in geographic locales far from the employees they supervised, and employees and managers who frequently teleworked, in some cases up to four days a week. The confluence of remote management and a dispersed workforce undoubtedly impaired coordination and communication within the Determinations Unit. Moreover, acrimony typified the relationship between various organizations within the EO Division and served to further embitter the workplace “culture.Management’s efforts proved fruitless, and as a consequence, the IRS performed no examinations of 501(c)(4) organizations related to political campaign intervention from 2010 until 2014.

And then there was this:

 Some managers within the EO Division were not trained in the substantive tax areas that they managed, including one who did not complete any technical training during the 10 years that she served in a managerial EO position..

And

Lerner, in particular, demonstrated a lack of understanding about how EO Determinations employees performed their day-to-day jobs, which hampered her ability to effectively manage EO.

Here is the part that reminded me, more than anything else of my brief stint at the end of an undistinguished career when I was working for a not quite Big 4 firm.

EO Management tolerated and even fostered a culture that was not conducive to efficient and effective operations. Lacking a sense of customer service, EO Management operated without regard to the effect of its actions on applicant organizations. Remote management and telework in EO Determinations may have impeded communications and coordination between its employees. 

Further, a pervasive atmosphere of antipathy existed between the Cincinnati and Washington D.C. offices of EO, fueled largely by the words and actions of Lois Lerner. Lastly,the culture within EO permitted a manager with no technical training in the subject matter area over which she exerted supervisory authority to remain in her job for nearly a decade. 

Another symptom of the problematic culture within the EO Division is the clear divide that existed between EO senior executive level Management in Washington, D.C. and the mid-level managers and line employees in EO Determinations. Cindy Thomas explained her views of Lois Lerner as follows: 

… I don’t think that she valued what employees were doing … she didn’t really listen to what others had to say. She would cut you off and didn’t allow people to express what was going on … it was like it didn’t matter if other people had questions, so to speak. So I don’t think she was a very good leader.

Recommendations

There were some really interesting recommendations. The Republicans think that the IRS should be taken out from under the Treasury Department to further insulate it from political intervention.  They also think that IRS employees should not be able to belong to a union.  The joint report had several recommendations, but I think the one that really stands out is this one.

Evaluate whether current organizational structures and workplace locations are inhibiting performance. Make appropriate adjustments to improve communication between employees and their managers.

Hopefully they will be listening to Frank Wolpe, who traces a lot of the IRS problems to faulty organization.

The dispute over whether the holdup of Tea Party applications was deliberate political targeting or a massive screwup will never be resolved.  Conservatives have invested too much intellectual capital into the persecution narrative.  The country does, however, need effective tax administration and the agency that does it will never be really popular.  Maybe the IRS can just put up big signs that say "Lois doesn't work here anymore" and then we can move on.