By John F. Di Leo -
Reflecting on the real-life impact of the IRS "Questionnaire-Gate" scandals…
“Congratulations, Restauranteur!”
You’ve just signed a lease on a great property. It’s a beautiful restaurant, just the right size, with a modern kitchen, and a terrific location with plenty of parking. You start decorating – painting, ordering window treatments, maybe updating the floor a bit, bringing in a custom bar that you found at an auction, re-upholstering the chairs, no, every other chair, to make it distinctive. You’re making it your own.
You’ve had the menu in mind for a while, so you start outfitting the kitchen to meet your needs – removing the deep fryer, adding more ovens or ranges, whatever fits your chosen cuisine. You start hiring, signing contracts for perishables and meats and alcohol and sodapop. You get your local business license, the approval of the health department, and now only one barrier remains:
Your liquor license hasn’t come in yet.
What do you do? You could open up without the liquor license in hand… there are fast food restaurants that don’t serve alcohol, and carry-out pizza and Szechuan places too… But yours isn’t that kind of restaurant. You don’t think it makes sense to open without being able to serve wine, beer, and cocktails. So you wait for the license.
Another week goes by, then two, then three. You can’t open without a liquor license. You’ve paid for the redecorating, you’ve hired some of your staff, you’ve placed advertising in the local newspapers, bought space in all the coupon books. Nothing’s coming in yet though; you’re not open. An unexpected additional month’s rent and utilities and salary are gone, while you twiddle your thumbs. And wait.
Finally, a month after the health department and the business license were already in the window, the liquor license comes in, maybe with an apology for the delay. Well, that helps. A little. But at least you can finally open, and you do.
All you’ve lost was a month, but you’ll never know how many potential customers you missed that month, how many people drove by every day, thinking “maybe I’ll try that place when it opens…” and then gave up on it, or forgot about it, so they never gave it a chance when they finally could. Maybe another dozen potential regulars were lost? Maybe another few potential banquets or office parties, the kinds of things that bring in key revenue and even more key new customers to a restaurant? You’ll never know.
Maybe you’ll make it, maybe you won’t. You still have a chance, but the restaurant business is the toughest there is, even when everything goes well. Being delayed by a late liquor license could be the death knell for your enterprise, even before you’ve opened.
The Business of the Nonprofit
Now that we have our local for-profit restaurant in mind, let’s consider what the same scenario means to a nonprofit organization, shall we?
People tend to think of a nonprofit as being entirely outside the business world, but it isn’t. Many of the same market pressures still apply; the laws of supply and demand are still present. You have competition in your space, just as the restauranteur has competition in his.
When starting up a nonprofit, such as a church or charity or educational group, you are in competition with other churches, other charities, other educational organizations. That doesn’t mean you wish them ill, but you know that you have to do as good a job as you can, both at your stated activity and in your fundraising effort, in order to gain supporters.
So you file for your tax-exempt status, and you wait until you get it. Your normally don’t start the big stuff until you have that letter from the IRS.
Can you legally raise money without being tax-exempt? Sure. Candidates raise money that way… but it’s difficult. While political candidate committees cannot offer tax-exempt benefits for their fundraising, most other nonprofit groups can, and are expected to. The number of potential donors and activists you lose by not being tax-exempt is immense.
If you can’t offer tax-exempt status, overtaxed donors will likely look at others to donate to. Perhaps others in your own space, perhaps even others in another space entirely. Many generous people set a figure for themselves, and commit to donating five or ten or more percent of their income every month to some mix of their church or synagogue, various charities, and educational organizations.
One might choose, for example, to donate 5% to his church, and the other 5% to a combination of worthy cancer research organizations, overseas missions, veteran support funds, and political groups. If one doesn’t get a fundraising letter from any veterans groups one month, no problem – write another check to a mission, and see what solicitations come in next month.
For any organization that survives on donations, getting into that rotation, as early as possible, is critical.
The Business of Fundraising
Nonprofit fundraising is a complex specialty, dependent upon many disparate talents:
Purpose – It all begins, of course, with the purpose of the organization. Different charities or educational groups have different modus operandi, of course, and setting out a path is step one. Will the group be lobbying politicians? Performing research and development? Giving food to the poor? Operating a foreign mission? Educating the public? The group makes its choice and then enters that arena, with automatic competition from hundreds of others in the same space… remembering that many of these purposes may have a very defined time window – the next winter, the next school year, the next flu season, the next election.
Method – The group then must determine how to do it. If an educational group, will it hold rallies at Daley Plaza? Operate and fund a speakers’ bureau? Publish educational materials to distribute to schools? Publish a newsletter or magazine? All these have costs; a business plan is needed to succeed, just as in the for-profit sphere. And again, each has a defined time window.
Target Audiences – Now you identify your markets… from whom will you draw your activists, your writers or researchers, your event planners and volunteers? From whom will you draw your donors – and how will you reach out to them, with mailings, personal appeals, fundraising banquets, promotions?
You can’t do much in this world without money. The organizers of a new charity may be happy to self-finance, to the extent that they can, but unless you’re one of the famous philanthropists yourself, you will need to reach out for donations before doing anything big.
So you file your application with the IRS for tax-exempt status, which has always been relatively automatic in the past, and you start writing your materials and recruiting volunteers, maybe scouting out space for an office, making connections in the community, so you can get started as soon as that tax-exempt letter shows up.
If a nonprofit sells banquet tickets, there’s an IRS rule that you declare the cost of the dinner so that the ticket buyer knows what portion of the ticket is tax deductible. If a nonprofit does mass mailings, there are often different tax rates on the printing, and different postage rates for the mailing, depending on the type of organization it is. Practically everything that’s printed needs a disclaimer, and that disclaimer will differ depending on whether the organization is tax-exempt or not.
So the nonprofit waits. Researches, sure. Makes some calls, sure. But doesn’t start up in force, with fundraising or room rental or genuine activism, until it receives that critical letter from the IRS. A few weeks of such waiting are expected; it takes that long to draft the fundraising materials and educational publications anyway. But beyond a few weeks, such a delay may prove destructive, even fatal, to this startup organization.
The Jackboot of a Politicized Government
While there had been rumors and suspicious from the very beginning of the administration, the proof began finally to flow in early 2013, as IRS personnel admitted publicly that a highly confidential internal audit had proven that the IRS had been targeting conservative and religious groups for harassment from virtually the day the ink was dry on the first “Obama Stimulus” and the Tea Party movement erupted in early 2009.
The mainstream press, long a reflexive defender of this administration – burying the stories they wanted buried, putting the best possible spin on those that they had to cover – finally began to acknowledge the truth: that the massive civil service of the federal government under this 44th president is being used for political purposes. For example:
- The Secretary of Homeland Security has ordered the immigration bureaucracy to allow illegal aliens to remain here, undeported, so they can more easily illegally participate in elections.
- The Attorney General himself signed orders to illegally spy on members of the news media, including even the parents of at least one Jewish television reporter.
- The Secretary of Health and Human Services, which now has the power to regulate virtually all private sector people and organizations because of Obamacare, has been revealed to have been illegally shaking down companies and organizations for donations to a pet political fund of hers.
- The Secretary of Transportation designed an alleged economic stimulus program – Cash for Clunkers – that was specifically designed to use federal dollars to destroy American vehicles and convert American car buyers into customers of imported cars (it succeeded in this pernicious goal, as over half the car purchases utilizing these taxpayer rebates were for Japanese and South Korean cars to replace GM , Chrysler and Ford vehicles).
And now, in addition to these and many more such criminal enterprises, we learn of how severely the IRS has systematically attacked political and religious groups since this president’s rise to power. Under IRS boss Doug Shulman – a Clinton appointee foolishly retained by the George W. Bush administration – the IRS has been hounding conservative and religious groups applying for tax-exempt status, holding up their applications for months or years, using the department handling tax-exempt organization requests as a barrier to entry, retarding the development of such organizations in the polity while speeding liberal groups through in a tax-exempt “application fast lane.”
It is now known that – throughout the 2010 and 2012 election cycles – the IRS has been engaging in a conscious, willful act of abuse of power – harassing, needling, delaying the applications of any group including certain code words such as “tea party,” “Constitution,” and “conservative;” it has now been proven that the organizations slated for such harassment include all sorts of conservative and religious groups, even missionary and charitable operations, if the IRS could imagine any kind of link, however tenuous, with the American Right – even to the extent of recognizing a single donor or author from among the group’s boards of directors.
Harassment by the IRS, Notarized and in Triplicate
The IRS’ harassment appears, on its face, to be a delaying tactic, an ultimately harmless abuse of power that makes people work a little harder, fill out some more forms, waste a little more time. But this assumption is deceptive, and neglects the very real result of such a time element to the process.
As we have seen from our restaurant example, government delays in licensing can make the difference in any startup, both for-profit and nonprofit alike. Delaying a group’s nonprofit status postpones its fundraising, forces delays in organization and activity, chews up money as costs mount before compensatory funds can be raised, and likely causes it to miss its intended target launch.
Organizations intending to help the schools might lose a whole school year if they’re not ready by the day that the schools set their year’s schedules. Groups intending to raise funds to buy winter clothes lose a whole year if they can’t get going until winter is over. Groups hoping to help educate the public before an election are utterly defeated if they can’t get going until Election Day is upon them, or has even passed them by.
It is now clear that the IRS tax-exempt unit under Lois Lerner was the key enforcer of an administration plot to suppress both activism and conservative voter turnout, from the beginning of this administration. They chose their people well; Lois Lerner has a long record of politicizing her federal job and harassing conservative candidates. She managed the obstruction machine within the department, while IRS boss Shulman visited the White House at least 157 times (that’s just the visits that the Daily Caller reporters could find in the official White House log; there could obviously have been even more meetings elsewhere or unrecorded) to discuss policy and strategy. As a frame of reference, the IRS chief’s 157 visits totaled more than twice as many times as any cabinet member visited the White House in Obama’s first term.
We will never know how many organizations never got off the ground because of this tax-exempt harassment tactic – how many were just slowed long enough to miss an election cycle, how many were rendered less effective as a result, how many lost key donors or volunteers, out of fear or exhaustion or cost.
In the private sector, there’s a magic moment when two people are available who would work together well if they got started together, or a store that can make the most of a location or trend while that trend is hot, or an invention that can become popular because its announcement coincides with some news event.
It’s the same in the nonprofit world. Today’s news cycle, or two talented people available at the same time, or a scandal or newly debated legislation, all might be the perfect time for a certain group to take off… for the government to intentionally hold them back so they miss this propitious moment is simply tyrannical.
The USA has long had a Hatch Act in place, to restrain political appointees in the executive branch from forcing the civil servants under their control to abuse their offices for political purposes. They are banned from fundraising among the public sector employment pool; they are barred from doing political activity on government time or at government desks, essentially forbidden from allowing personal politics to affect the way they do their jobs as regulators.
The IRS scandal – Nonprofit-gate, IRS-gate, Questionnaire-gate, the final name for this colossal abuse of power is yet to be settled – has proven that every fear of the American Right was absolutely well-founded.
When the modern American Left gains political power, they are either unwilling or incapable of drawing that fundamental moral and practical line between their public duty and their private desires.
Rather than fairly fulfilling the public trust of their civil service jobs, leftists either initiate illegal orders – or happily carry out the illegal orders of their political superiors – to apply political tests to the people and entities that they regulate, and then allow that test to color the government service they provide.
This scandal makes three things crystal clear:
- First, that many in this administration need to be prosecuted and jailed, probably at both political and civil levels, both as punishment for their undemocratic abuses of power and as a lesson to future administrations.
- Second, that there are simply too many such scandals to be a mesh of unfortunate coincidences; the abuse of power comes from the top. This is a corrupt administration, and any but the most spineless of Congresses would have initiated impeachment proceedings long before now.
- And Third, that government has simply grown too big, and agglomerated too much power, to ever be the honest source of governance that our Founding Fathers intended for us. We must shrink the government back to its constitutional bounds. Any organization so large that it can regulate the private sector, any organization so powerful that it can fund every housing purchase and every college tuition loan, any organization so insulated from the criminal justice system that it can be riddled with criminals and proceed in tyranny for years without fear of prosecution, is simply too big and powerful to be tolerated by a nation that still calls itself free. Such power is evil and un-American, whether in the hands of Democrats or Republicans, whether in the hands of the big cities or the small towns.
The only honest government is a small government. This scandal serves as yet another critical reminder that the American political goal, today and for the future, must be to return to the days of Constitutional “small government.” Only then can we again appreciate and enjoy the limitless potential of limited government as our Founding Fathers so brilliantly and generously intended us to do.
Copyright 2013 John F. Di Leo
John F. Di Leo is a Chicago-based Customs broker and trade compliance trainer. In this “day job,” he has never found a problem limiting his own political comments to a joke or two within the span of a four-hour seminar, and he would never dream of abusing his position with a captive audience to unduly make his work political… he just wishes the current administration shared the same ethical commitment.
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