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During its past four fiscal years, the Internal Revenue Service has formally denied the applications of just 60 organizations seeking recognition under Section 501(c)(4) of the U.S. tax code as “social welfare” groups.

In the same period, the agency processed 8,214 applications and approved 6,837 of them — about 83 percent, according to a Center for Public Integrity analysis of IRS data.

Sometimes applications were neither approved nor denied, meaning groups could still be awaiting recognition of tax-exempt status or still be providing the IRS with additional information. They may also have withdrawn their applications.

The IRS's approval processes have come under fire following an inspector general report that found IRS employees used “inappropriate criteria” to discern which organizations’ applications warranted additional scrutiny.

The IRS’s 2012 fiscal year, which covered the period between Oct. 1, 2011, and Sept. 30, 2012, saw a surge of new applications under Section 501(c)(4). During that period, 2,774 groups sought recognition as “social welfare” nonprofits, as the Center for Public Integrity has previously reported.

That represented an increase of more than 56 percent from fiscal year 2011 — and an increase of nearly 86 percent from fiscal year 2008.

The IRS processed 23,722 applications for 501(c)(4) nonprofit status between fiscal years 2001 and 2012, records indicate.

The agency approved roughly 77 percent of those, while rejecting less than three-tenths of one percent: 66 denials versus 18,214 approvals, albeit in fiscal year 2008 the IRS did not report how many groups it denied “to avoid disclosure of specific taxpayer data.”

Before the House Ways and Means Committee on Friday, Steven Miller, who served as the agency’s commissioner until he resigned last week, testified that IRS did not have “sufficient personnel” to process all of the applications its tax-exempt unit has received.

Both the Senate Finance Committee and the House Oversight and Government Reform Committee are planning hearings on the topic this week.

 

 

I was not among those who believed the Supreme Court’s Citizens United decision would open the floodgates of corporate money to influence elections and public policy. While the decision enables corporations to call for the election or defeat of federal candidates, those expenditures have to be reported and few corporations will take the risk of losing customers by getting involved in politics so publicly.

The reality is, the floodgates have been open for years, and the attention focused on Citizens United has actually been helpful to corporations, because it has diverted the public’s attention away from the deceptive yet perfectly legal ways corporations are able to deploy enormous sums of money to advance their political agendas.

The mainstream media, meanwhile, seems to willfully ignore what corporations and other moneyed interests do to get what they want in Washington. That was certainly the case last week after National Journal reporter Chris Frates disclosed how America’s Health Insurance Plans, the insurance industry biggest PR and lobbying group, funneled hundreds of thousands of dollars to a longtime ally with a better reputation to pay for an industry-serving communications campaign. The only media outlets I could find that picked up the story were The Huffington Post, Bloomberg Businessweek and ABC News online.

As Frates’ investigation uncovered, AHIP in 2011 gave the National Federation of Independent Business $850,000 to finance an effort to persuade Congress to repeal a provision of Obamacare that will actually help many uninsured people afford coverage. NFIB is a nonprofit that calls itself the voice of small business but which I know from my days in the insurance industry has often been a voice for my former bosses.

Insurers are delighted that Obamacare will require most Americans to buy coverage from them beginning January 1. That was one of their health care reform goals, along with making sure reform did not include the creation of a public option to compete with private companies. And insurers love the fact that the federal government will be sending them billions of dollars every year to help subsidize the coverage of low-income Americans who would otherwise be unable to afford their premiums.

Knowing that insurers would be getting a windfall in new revenue from all of that, drafters of the Affordable Care Act included a provision that would impose a tax on some policies insurers sell to help finance the expanded coverage that insurers will benefit from. Sounds reasonable, right?

Well, not if you are the CEO of a health insurance company who cares more about meeting Wall Street’s profit expectation than the health care needs of Americans.

But even health insurance executives know they’re not viewed as positively as small business owners. If AHIP spent that $850,000 in a way that could easily be traced to the insurance industry, the campaign to get the tax repealed would be considered — rightly — as self-serving. So AHIP needed a trusted partner with a better reputation to try to get the job done, and the NFIB was more than willing to sign on and take the money.

Exactly how the NFIB spent insurers’ money will likely never be known, but there is a good chance most of it went to set up and finance the operations of an outfit called the Stop the HIT Coalition. (HIT stands for Health Insurance Tax.) That’s the group that is fronting for the industry to get the tax repealed.

The NFIB, one of the organzations that challenged the constitutionality of the Affordable Care Act, undoubtedly was willing to partner with AHIP because insurers say they will pass the tax along to their small business customers instead of absorbing it as a cost of doing business or as goodwill from getting the additional business guaranteed by Obamacare. Rather than push back against the insurers, the NFIB clearly saw this as a new reason to attack and weaken the law.

Frates discovered this back channeling of money by looking at tax returns filed by both AHIP and the NFIB. It turns out the $850,000 from AHIP was the second largest contribution the NFIB received in 2011. To put that into context, the NFIB offers small business memberships for $180, so AHIP’s money (which comes from premiums insurers charge their customers), was equivalent to 4,722 small business memberships.

Other than the reporters at the Center for Public Integrity, Frates — who last year broke the story that AHIP funneled more than $100 million to the U.S. Chamber of Commerce in 2009 and 2010 to pay for an anti-reform advertising campaign — is one of the few Washington reporters investigating how corporations and trade associations hide the money they spend to influence Congress. As a result of this lack of media interest, Americans remain in the dark about how big special interests are able to control what happens in the nation’s capital. And Citizens United has nothing to do with it.

Trevor Potter — a Republican lawyer and president of the Campaign Legal Center, which advocates for stronger campaign finance regulations — says that the Internal Revenue Service is right to be on the lookout for organizations with a “significant amount of political activity.”

“What they are trying to do is identify groups that intend to be politically active, which is the appropriate thing for them to do,” he told the Center for Public Integrity, adding an important caveat.

“It seems to me, personally, that using the name is a pretty weak indicia,” he continued.

There are about 90,000 organizations recognized by the IRS as "social welfare" nonprofits under Section 501(c)(4) of the U.S. tax code.

Most don't have politically charged names, but scores do.  

For instance, there are 20 social welfare nonprofits with the word "Democrat" in their name, according to a Center for Public Integrity review of IRS data. Meanwhile, 18 social welfare nonprofits include the word "Republican" in theirs.

Twenty-one organizations use the word "conservative," while 31 use the word "progressive."

Sixty-nine social welfare nonprofits include the word "campaign" in their names. Just three use the word "politics."

Words such as "America" and "veterans" are far more commonly used by 501(c)(4) organizations, as our word cloud illustrates.

According to a recently released inspector general report, the buzzwords “tea party,” “patriot” and “9/12” were used by IRS employees to flag potentially political cases.

Only two social welfare nonprofits with any of those buzzwords in their names reported any political spending to the Federal Election Commission, as the Center for Public Integrity today reported. One was Republican-aligned and one was Democratic-aligned.

Methodological note: This graphic was constructed based on a Center for Public Integrity analysis of organizations listed in the IRS business master file that were recognized in 2012, omitting some common, generic words such as "association," "club" and "inc."

 

 

Amid withering accusations the Internal Revenue Service targeted tea party and other conservative groups with enhanced scrutiny, the agency faces another problem: it’s drowning in paperwork.

The IRS’ Exempt Organizations Division, which finds itself at the scandal’s epicenter, processed significantly more tax exemption applications in fiscal year 2012 by so-called 501(c)(4) “social welfare” organizations  — 2,774 — than it has since at least the late 1990s, according to an analysis of IRS records by the Center for Public Integrity.

Compare that to 1,777 applications in 2011 and 1,741 in 2010, federal records show. Not since 2002, when officials processed 2,402 applications, have so many been received.

Meanwhile, Exempt Organizations Division staffing slid from 910 employees during fiscal year 2009 to 876 during fiscal year 2012, agency personnel documents indicate.

In 2010, IRS officials projected exempt division staffing at 942 employees. But IRS officials cut the number to 900 after the agency began slashing its budget in response to fiscal woes affecting most corners of the federal government.

The agency said this weekend that a heavy workload prompted bureaucrats to “centralize” the “influx of advocacy applications” and, in the name of efficiency, scrutinize groups that contained more common phrases such as “tea party” in them.

“That was wrong, that was absolutely incorrect, insensitive and inappropriate — that’s not how we go about selecting cases for further review,” Lois Lerner, IRS exempt organizations director, said Friday. “We don’t select for review because they have a particular name.”

Lerner, who denied the targeting was politically motivated, added that about 75 groups with words such as “tea party” or “patriot” received extra scrutiny but none had its tax-exempt status revoked.

The IRS could not be reached for comment Monday.

(Also read: IRS employees back Obama, Democrats)

For Washington, D.C.,-based attorney Dan Backer, who represents two tea party-affiliated organizations, blaming such actions on staffing cuts and increased workload is a “lame excuse” that the IRS should stop using.

“They could have hired new employees, they could have reallocated employees, they could have done a lot of things, the not doing of which doesn't suddenly make it OK for them to engage in viewpoint discrimination,” said Backer, who said he is considering suing the IRS. “At worst, their staffing woes maybe justifies a growing backlog, not discriminating against those whose viewpoints they disagree with.”

IRS records show that applications of the most common nonprofit organizations — 501(c)(3) educational nonprofits, private foundations, charities and the like — have dropped this decade after reaching a high of more than 85,000 in fiscal 2007. Generally, this type of nonprofit entity must remain apolitical.

As for 501(c)(4) nonprofit organizations, such as the tea party groups in question, they may engage in politics so long as it isn’t their primary purpose.

During the 2012 election cycle, however, numerous 501(c)(4) organizations — most of them conservative, a few left-leaning and all endowed with new spending powers thanks to the Supreme Court’s 2010 Citizens United v. Federal Election Commission decision — together spent tens of millions of dollars overtly advocating for or against political candidates.

And unlike super PACs, which may also raise and spend unlimited amounts of money, they’re not required to reveal their donors

Democrats primarily cried foul, accusing groups such as the Karl Rove-backed Crossroads GPS and Koch brothers-supported Americans for Prosperity of violating their tax-exempt status.

But the IRS has taken no definitive action against these or other nonprofit groups, and several campaign finance reform advocates have opined that this latest incident will further stymie their effort to convince the IRS to crack down on nonprofit groups they consider overridingly political.

As for tea party-named nonprofit groups, for all the attention now on them, they generally played bit roles during the 2012 election.

Of the more than 40 organizations that identified themselves as tea party-related in IRS documents, just one — the National Tea Party Group of California — reported assets of more than $100,000 in its most recent publicly available financial filing.

For now, Republicans and Democrats in Congress have called on the Obama administration to investigate the matter, and Obama himself described the IRS’ conduct as “outrageous.”

The Treasury Inspector General for Tax Administration is expected to release a full report on the matter later this week, and officials in the House and Senate are promising hearings.

Karen Gries, an appointee to the IRS Advisory Committee on Tax Exempt and Government Entities, says she expects her committee will discuss the matter when it meets later this year.

In the meantime, Gries praised the overall performance of Lerner, the exempt organizations director, while expressing concern about her department’s ability to do its job.

“They are asked to do more with less resources,” said Gries, a principal at with accounting firm CliftonLarsonAllen LLP. “The EO group operates very lean.”

Last Saturday I had the honor of teaching at a public writing conference at The Washington Post.  After I finished my part of the program, I spent the day listening carefully to four of the Post’s most accomplished writers … Read more

What kind of response do we want readers to have? When you build an informative and elegant visualization, how are you hoping they’ll react?

These are questions that Amanda Cox of The New York Times’ graphics desk asks herself on a regular basis. In a recent analysis of their popularity on social media, Cox tried to locate what makes a graphic popular.

1. “development.really.hard”
2. “big.breaking.news.big.breaking.news.adjacent”
3. “useful”
4. “explicitly.emotional…atmospheric”
5. “surprise.reveal”
6. “comprehensive”

Unsurprisingly “difficult” topics — mostly related to war, violence, climate change, and other highly complex issues — performed least well, but “takeaway” pieces with an obvious message also performed poorly as a class. In contrast, visualizations that requires extensive technical resources tended to perform particularly well, as did features Cox classed as emotional and useful — and, of course, those closely tied to breaking news.

In the wrap-up of her analysis, Cox considered the problem of indicating importance to the paper’s readership across platforms: “How do you signal that something is important? You do that by using the resource that is scarce.” In print, the Times can use scarcity to indicate importance by giving an important graphic a desirable spot on a “good page.” On the web, the equivalent scarce resource isn’t placement, but the allocation of valuable internal tech/development hours.

Lately, the news around BuzzFeed is all about how serious they are. They’re getting into longform. They’re fixing breaking news. They’re hiring big names from The New York Times.

But that doesn’t mean the good people of BuzzFeed have forgotten where they came from — what community editor (and animals editor!) Jack Shepherd calls the site’s “bread and butter.”

The department devoted to creating this “old school” content is known as BuzzTeam. Their focus is anything shareable — lists, animals, nostalgia. The kind of content that BuzzFeed’s loyal readers have become hyper-familiar with. Many, in fact, have consumed so many such BuzzFeed posts that they’ve become adept at mimicking both their tone and their viral success.

Earlier this month, BuzzFeed’s editors took a step toward giving those faithful followers a little more of the spotlight they crave. Shepherd, along with a staff of four, now run BuzzFeed Community, a content-producing vertical of its very own, complete with featured posts by community members and a leaderboard with the latest on who’s posts are getting the most traffic, likes, comments, and badges. It’s a competitive place, and anyone can join and enter the fray.

Success generally comes to those who enjoy making post after post, learning the audience and predicting what they will like. Shepherd says active, productive, and successful communtiy members are the kind of people who are Internet-obsessed. “They’re aware of how long a particular image has been around, what its currency is, whether it will come back or whether it’s old,” he said, laughing. “They’ll always let us know. “

This community has existed since the early days of BuzzFeed. The site’s community moderator, Cates Holderness, was boarding and grooming dogs at a kennel in North Carolina when she first discovered the site. “After a long day at work, posting on BuzzFeed was both a creative outlet for me as well as a way to relax and have fun. I got great feedback from the other users, who were very supportive and encouraging.”

#FF —> @buzzfeeders, where the best of the @buzzfeed Community will be featured!

— Cates Holderness (@catesish) May 8, 2013

@catesish @buzzfeeders @buzzfeed You mean like @tonydac??? :D buzzfeed.com/tonydac/9-ways…

— Leslie Stewart (@darlingstewie) May 8, 2013

@darlingstewie@tonydac Yep! Exactly like that!

— BuzzFeed Community (@BuzzFeeders) May 8, 2013

@buzzfeeders @tonydac Tony is just so smart and funny. He was the first friend I had on Twitter and he is just an all around NICE GUY

— Leslie Stewart (@darlingstewie) May 8, 2013

#ff @darlingstewie thanks for being awesome! You’re so supportive and helpful! Internet!

— tonydac (@tonydac) May 8, 2013

@tonydac INTERNETTTT

— Leslie Stewart (@darlingstewie) May 8, 2013

Holderness got so good at making posts — and scoring badges from staffers — that she ended up talking with Shepherd about a job, and was eventually hired to manage and interact with the site’s growing commenter base. She says the Community staff spends a lot of time engaging with users, encouraging them to make more posts and awarding them various badges. But her greatest power is the ability to promote posts, placing them on the featured Community page, or suggesting them to the editors of other verticals. Holderness says the Community team reads every single post that’s made.

Now, partially in hopes of finding others like her, Shepherd has opened that community up. The CMS for community members was originally built to allow potential hires to make sample posts, he says. But what the new vertical offers, in addition to centralized Featured Posts and a way to view the Community contributions all at once, is a leaderboard. (At the moment, WhittyGolden is edging out swelldesigner for the top spot, powered by posts like “Ten American Idol Judges Whose Opinion You’d Actually Respect” and “Why It Would Have Totally Rocked To Be A Huxtable.”)

“Now they have a community board that also lets you see how you rank against other community members,” says Community member Alexa Westerfield, “so that brings out my competitive spirit.” That sense of competition is key, because along with the new vertical, BuzzFeed community members now also have a new currency for measuring how well they’re doing: Cat Power. (Not that Cat Power.)

“I know that on Reddit, people get really obsessed with how much karma they have. That totally works for them, but I don’t think that’s our model in any way,” says Shepherd. “Cat Power, actually, it’s kind of silly, but it actually correlates directly with an actual thing. The higher your Cat Power is, the more posts you can suggest to our community editors for consideration.”

Community users can create as many posts as they want, but they can only promote a few. The better their posts are, the more Cat Power they get, the more access to editors they have, which in turn means more promotion, audience, and views. Building a relationship with the editors can be lucrative — Shepherd says there’s an active freelancing network to pay users, and lately BuzzFeed fellowships have been given to frequent posters. Shepherd calls the new vertical “small scaffolding to help people naturally” ascend the steps of the hiring process — and he says the Community editing team will expand within the year.

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Hundreds of applications for the @buzzfeeduk writer job. Best way to stand out from the pack: sign up + start posting buzzfeed.com/community

— Luke Lewis (@lukelewis) May 16, 2013

Those jobs are major incentives for BuzzFeed Community members. A cursory examination of frequent posters finds the vast majority seem to be journalism students, budding comedians, or both. Frequent users said that creating posts for BuzzFeed offers built in access to an audience of a size it would be impossible to reach otherwise. “I had a blog for five years that literally nobody read,” says Shepherd.

Writes Travis Greenwood, a top ranked Community member currently in marketing: “My community posts have been linked by National Geographic, Time, Huffington Post, Jezebel, Babble (a Disney property), ET.com, Complex, Fark, Mental Floss, Team Coco, IFC, Glamour, and dozens of other prominent sites (in other words, big, established editorial brands that probably wouldn’t give me the time of day otherwise). On a basic level, BuzzFeed is a marketplace of ideas and I want to compete in this arena. Pushing something onto the homepage is like jumping onto the diamond with the Red Sox (I’m from Boston).”

Of course, media companies hiring popular commenters as writers is nothing new. “We have a long tradition of hiring people who love the site and organically discover how to make really great BuzzFeed posts,” says Shepherd. And as Matthew Ingram wrote a few weeks ago, it’s happened at The Atlantic, Wired, and Gawker — and Gawker’s new Kinja platform seems expressly built for the purpose of surfacing talent.

Community members are also using BuzzFeed as an opportunity to learn about audience desires. They get access to a BuzzFeed dashboard that tracks tweets, links, and views, and, through editors, can have their success tracked by BuzzFeed’s algorithm.

“People love to see posts that reflect them or impact them. That’s just a rule of journalism,” wrote Austin Carroll. “As a journalism student, I do hope to get hired by BuzzFeed (currently that is in the talks of happening soon). However, I am mostly a narrative televison writer and therefore this experience has given me valuable insight into what people relate to, what they find funny, and what they want to talk about and share.”

So while they may be creating heavily branded and highly popular content for free, it’s not as though BuzzFeed’s Community users walk away empty handed. But what is BuzzFeed hoping to will come of the project?

“I would love to see a large core of users genuinely competing with the editors. It’s always the case with big sites, and it’s true for us as well, that the percentage of registered users versus the percentage of people who are dedicated and active — the latter is very small,” says Shepherd. “I would consider this to be a success if we got really good at focusing on that percentage and growing that and giving them the attention they wanted and mkaing it a good experience. Getting it to a point where they could kind of compete with the editors.”

I asked Shepherd whether they’re concerned about users repackaging staffer ideas, or vice versa. On Twitter, some voiced even more serious concerns.

Starting a pool: How long before BuzzFeed gets sued for something someone posts in its Community section?

— Nicholas Jackson (@nbj914) May 15, 2013

But Shepherd said, while Community wasn’t built to help editors pad the other verticals, if users end up making content that’s more popular than what staffers make, that’s all right. “Maybe from there,” he says, “there will be entirely new post types that we never thought of that really work because they’re being crowdsourced or being collaborative.”

Photo by Roger H. Goun used under a Creative Commons license.