MSNBC "Hardball with Chris Matthews" - Transcript: The IRS Scandal

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MATTHEWS: Anyway, welcome back to HARDBALL.

That was Republican Darrell Issa, of course, head of the House Oversight Committee. As you saw there, Issa has repeatedly tried to link -- tried to link the IRS` targeting of conservative groups to the White House. And he`s failed to do it every single time.

But, to this point, his witch-hunt has found no witches, not in the White House, of course. In fact, the entire narrative of this so-called scandal, this reputed scandal, has gotten pretty hard to follow. In fact, is it a scandal?

Well, yesterday, House Democrats released new evidence that the IRS was also targeting liberal groups in addition to flagging groups with names like progressive. They also flagged applicants using terms like emerge and of course ACORN, a group on the left, which were associated with liberal causes. Issa`s camp have dismissed those reports, of course, which could be evidence that he`s using the issue to score political points instead of actually trying to solve whatever problems there are at the IRS.

U.S. Congressman Chris Van Hollen, who is my congressman, my wife`s congressman, is on the issue today. He announced he`s filing a lawsuit against the IRS which would attempt to the clarify the murky tax law which actually led to this brouhaha in the first place. Van Hollen is arguing the law, as it was originally written, says that tax-exempt groups must be exclusively involved in social warfare, in other words, no politics.

Translation: If you want to be a tax-exempt 501(c)(4) organization, you can`t do anything political. Problem solved.

U.S. Congressman Van Hollen is a Democrat from member. He`s the ranking member on the Budget Committee and he joins us right now.

Congressman, thank you so much for joining me.

REP. CHRIS VAN HOLLEN (D), MARYLAND: Good to be with you.

MATTHEWS: I got you this morning. I watching you on Chuck`s show, on "POLITICAL RUNDOWN." And I thought that was the answer, just stop giving any of these tax bennies to people if they`re involved in politics.

Treat them like 501(c)(3)s. You can`t do it.

VAN HOLLEN: Well, and the law has been very clear.

Look, Darrell Issa is operating in a totally fact-free zone. What we know now is the IRS was looking at political groups both on the right and the left. Now, why is the IRS trying to determine if you as an organization are involved mostly in social welfare activities or political activities?

Because they have a regulation that says that if your primary purpose is social welfare, then you could also do some politics. But that regulation, as you just said, is totally inconsistent with the way the law itself is written.

MATTHEWS: Yes.

VAN HOLLEN: The law is clear. If you want to be involved as a 501(c)(4), you`re exclusively involved in social welfare activities, no politics.

Now, why has this become to matter -- this is an old regulation. It`s come to matter more since the Citizens United case, Supreme Court case, because what they said was that corporations, including nonprofits, could all of a sudden dump millions of dollars into campaigns. So if they allowed some of this political activity, they could dump millions of dollars.

MATTHEWS: Why don`t they keep it simple? One of the nice things about having my job, Congressman -- and you may resent it -- some people do -- I can`t give a political contribution of five bucks. I can`t give a nickel.

And because I can`t, it keeps it simple. People call me and say, can you help? I say, no, you can`t. I can`t even attend. I don`t want people thinking I have given money. I think tax laws should be written that way.

VAN HOLLEN: Yes.

And you know what? The law itself was. The law says -- if you look up your statute, the law stays it you want to be a 501(c)(4) organization, you can only, only, exclusively engage in social welfare activities.

Somehow, when the regulators back in 1959 wrote the regulations, they totally murdered the plain meaning of the law. And they said exclusive doesn`t mean exclusive. It means primary.

MATTHEWS: OK. Let`s get to the --

VAN HOLLEN: That`s the root of the problem.

MATTHEWS: OK. Let`s get to the moral issue.

VAN HOLLEN: Yes.

MATTHEWS: People that drive a truck or work hard for a living --

VAN HOLLEN: Yes.

MATTHEWS: -- work with their hands, they have got to pay taxes.

VAN HOLLEN: That`s right.

MATTHEWS: So, why should a group that is out there playing politics not pay taxes?

It seems to me, if you have got a political agenda, pay for it, damn it. Don`t ask the government to pay for it.

VAN HOLLEN: Well --

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MATTHEWS: And that gets to the question of the way we always -- you can give all the money you want, if you`re wealthy, to a politician, but you can`t get any tax break for it.

VAN HOLLEN: That`s right.

MATTHEWS: There`s a principle involved.

VAN HOLLEN: That`s right.

MATTHEWS: The government doesn`t subsidize elections.

Now, why did we get into -- why did it creep into the woodwork here that some organizations, whatever they were called, the Tea Party Express -- I don`t know -- I don`t want to get into the names -- but what organizations got the idea, you know what, we got an opening here, we got a loophole here, and we can start doing politics, promoting issues, promoting candidates, and not pay taxes?

VAN HOLLEN: Well, I mean, the regulation, this loophole left the door open to groups whether you`re on the right or the left to do actually that. And the reason they use this one, Chris, is because you can do it secretly without telling the public who is funding the campaign.

Now, if you want to engage in politics, you can spend as much money as you
want. File under Section 527. That`s also tax-exempt. That organization
--
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MATTHEWS: Could the president do this? I hate to sound like a real lefty here, but sometimes the real lefties are right. Is this something the president could do by executive order? Just call the IRS and stop giving tax-exempt status to anybody playing politics.

VAN HOLLEN: Well --

MATTHEWS: That`s what the law says. I want to enforce.

VAN HOLLEN: Certainly, the IRS --

MATTHEWS: Why can`t the attorney general do this?

VAN HOLLEN: Well, the IRS could certainly, on its own initiative, take review the regulations and say, we want to conform the regulation. In fact, we petition the IRS, a group -- some groups did two years ago to do exactly that. They haven`t done it yet, which is why you need a lawsuit.

Just conform with the law.

MATTHEWS: Thank you very much, U.S. Congressman Chris Van Hollen.

VAN HOLLEN: Thanks, Chris.

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