IRS scandals threaten funding for Obamacare

WASHINGTON (AP) -- Mounting scandals at the Internal Revenue Service are jeopardizing critical funding for the agency as it gears up to play a big role in President Barack Obama's health care law.

Obama sought a significant budget increase for the IRS for next year, when the agency will start doling out subsidies to help people buy health insurance on state-based exchanges. Congressional Republicans, however, see management problems at the IRS as an opportunity to limit the agency's funding just as it is trying to put in place the massive new law.

Republicans have been fighting the health care law ever since Democrats enacted it in 2010 without a single GOP vote. Unable to repeal the law, some Republicans hope to starve it by refusing to fund its implementation.

The IRS scandals are giving them a timely excuse.

"I think it's safe to say they're not going to get the kind of increase they're asking for," said Rep. Ander Crenshaw, R-Fla., chairman of the House appropriations subcommittee that funds the IRS.

"The question is, based on their bad behavior, are they going to end up with less money?" Crenshaw said.

Last month, the IRS was rocked by revelations that agents had targeted tea party and other conservative groups for extra scrutiny when the groups applied for tax-exempt status during the 2010 and 2012 elections. A few weeks later, an inspector general's report said that the agency had spent lavishly on employee conferences during the same time period.

From 2010 through 2012, the IRS spent nearly $50 million on employee conferences. In 2010, the agency used money that had been budgeted to hire enforcement agents to instead help pay for one conference that cost $4.1 million, according to the watchdog's report.

Three congressional committees and the Justice Department are investigating the targeting of conservative groups, and much of the top leadership at the IRS has been replaced.

Obama appointed a new acting IRS commissioner, Danny Werfel, a former White House budget official. Werfel is conducting an internal review of the agency and is expected to issue recommendations for changes by the end of June.

All this is happening as the agency works to implement the health law that includes some of the most sweeping changes to the tax code in a generation.

"The IRS needs to repair the plane while it's in flight right now," said Paul Cherecwich, chairman of the IRS Oversight Board, an independent board within the agency. "Should the current budget environment continue, the IRS will have to continue to have to do more with less while rebuilding taxpayer trust. It has no choice, and it won't be easy."

More...