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Who's to blame for murky regulation in IRS scandal: Agency or lawmakers? (+video)

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But figuring out just what counts as political activity and what’s an educational offering tied to social welfare is often in the eye of the regulator rather than a definitive science.

Because the IRS, along with the Treasury Department, handles the regulations that spring from the tax code, “the IRS should be able to fix it on their own,” says Annette Nellen, a professor of accounting at San Jose State University. “The language in the statute does say ‘exclusively.’ ”

Members of Congress look at the original law and say, like Sen. Ben Cardin (D) of Maryland, “I don’t know what else we can do.”

“When you say ‘exclusively’ … What stronger word do you want us to use?” Senator Cardin says.

Citizens for Responsibility and Ethics in Washington (CREW), a government watchdog group, is even suing the IRS, asking a court to require the organization to reconcile the differences between what the law says and what the IRS does.

Why didn’t the agency take on the issue previously? IRS officials argued that the agency was caught flat-footed with a wave of applications for 501(c)(4) status, which doubled between 2011 and 2012 in the aftermath of the Citizens United Supreme Court decision that allowed corporations and labor unions to participate more aggressively in the political process.

And the bureaucracy is notoriously hesitant to take on such large political issues on its own, says Melanie Sloan, CREW’s executive director.

“They’re afraid to take a position,” Ms. Sloan says. “All that happens is they get beat up no matter what they do.”

Case in point: In 2010, Democrats led by Sen. Max Baucus of Montana asked the IRS to look into such groups because of concerns groups fully committed to politics were hiding behind the social welfare exemption to shield their donors from public scrutiny.

The problem? The IRS wasn't doing enough, allowing too many groups to get the status. 

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