The Internal Revenue Service's internal watchdog says "unstable and chronic underfunding" of the agency is "the major problem facing the IRS today."
In its congressionally mandated 2013 annual report, released Thursday, National Taxpayer Advocate Nina Olson offers details on the 25 "most serious" problems — the law requires her to identify at least 20 — and funding issues are seen as a gateway to broader problems, including the scandal involving targeting of politically conservative groups.
The targeting of Tea Party and other groups at odds with the Obama administration policy is addressed in a technical sense in the report's 15th problem, which details the IRS' erroneous revocation of exempt status for tax-exempt organizations.
However, in its very first plank, the taxpayer advocate's report deals with the issue in calling on its parent agency to adopt a taxpayer bill of rights whose existence might forestall the kind of tampering that embroiled the agency and led to the early retirement or resignation of Exempt Organizations director Lois Lerner and two other senior officials.
In a footnote to the bill of rights portion of the report — many of the report's sections are hundreds of pages, and its executive summary alone weighs in at 76 pages — Olson cites a previous analysis from her office arguing that the IRS' political targeting violated eight out of 10 items in her bill of rights.
"Had there been a published taxpayer bill of rights, organizations applying for tax-exempt status, IRS employees processing their applications, IRS executives overseeing the program and congressional offices receiving complaints likely would have flagged the inconsistencies between the applicants' rights and the IRS' actions more quickly," the report says. "There is no guarantee that would have happened, of course, but the existence and broad awareness of a taxpayer bill of rights would have substantially increased the odds that the problems would have surfaced and been addressed sooner."
For example, item No. 4 of her proposed bill of rights is "the right to challenge the IRS' position and be heard," which includes receipt of a written response from the agency if it rejects a challenge; and item No. 5 is "the right to appeal an IRS decision in an independent forum," which again includes a written response if an appeal fails and the right to further court challenges.
The Office of the Taxpayer Advocate, with some 2,000 employees, doesn't seem to address its own role or absence thereof in the political targeting crisis. In May, in the heat of the scandal, former Democratic Sen. Bob Kerrey, an author of 1990s legislation revamping the IRS, criticized Olson's office for failing to pay attention to complaints from conservative groups having difficulty with their tax-exempt status:
