Diary

Applying "Disparate Impact" Theory to the IRS Abuses

The idea of “disparate impact” is a cancer that has taken root in the business world. If we do not focus on substantially curbing or ending it, it will continue to grow, extorting huge sums from innocent companies, creating an enormous economic burden on society, and allowing the tort bar to run amok.

There are many areas in business where charges of “discrimination”, often regarding race, could and are being made every day. Employment and mortgage origination are two of the most prevalent. The law requires – as it should -that for a company to be guilty of such discrimination, there must be an intent to discriminate.

But government agencies have found a way to overrule that requirement by developing the idea of “disparate impact”. Disparate impact is the concept which allows if a protected class of citizens has a statistically lesser representation with respect to a business (hiring, mortgages origination, etc) it may be implied that the business has intentionally discriminated — because there is an adverse impact as a result. This is clearly irrational, since there may be many economic, societal, and local reasons for the particular statistical representation. Unfortunately, disparate impact puts the burden to show lack of discrimination on the employer, meaning he is guilty until proven innocent. In fact, in order for an employer to defend himself against such a charge, he would have to show that the “offending rule or practice” was a “business necessity”.

Though I find this concept outrageous, the federal and state governments and their agencies seem to love it lately. I therefore believe that they should be equally adamant in applying the concept of disparate impact in the public sector.

The IRS scandal has shown the clear practice of targeting conservative groups applying for 501c4 status (despite the subsequent cover up). By applying disparate impact theory to this situation, the charge of intentional discrimination would most certainly apply because there is no “business necessity” in the policy the IRS employed.

The Obama administration, having complete control and responsibility for the Department of the Treasury and its Internal Revenue Service is therefore guilty of such intentional discrimination. In particular, President Obama’s specific response, that there has been no evidence that anyone directed anyone to intentionally target conservatives, does not insulate him from being actually guilty.

The current administration has been keen on applying disparate impact theory to a number of private companies, and appears intent on ramping up the practice. For example, Obama’s labor secretary pick, Thomas Perez, has been particularly lucrative in this regard. Last summer, National Review Online (NRO) covered some of Perez’s cases in recent years, noting that Perez “has applied that theory vigorously to force large settlements from financial companies even in cases where there was no evidence of actual racial discrimination”. In other words, employers can be sought after for violating the law whether or not they intended to do wrong.

The White House in general, and Perez in particular, like disparate impact theory because it, as NRO noted, it “sets a very low bar for proving discrimination. Under it, prosecutors need not prove intent, merely that minorities have suffered a disparate impact from some action”. And this is a person Obama added to his Presidential Cabinet.

If disparate impact can be applied to the private sector, it should also — in the spirit of fairness and equality, of course — be applied to the IRS. Particular groups were adversely singled out and subject to excessive, burdensome, and overreaching scrutiny; of this we are certain. The targeting of conservatives was a concerted effort to slow down or dissuade the creation of their tax-exempt groups. Even if we no longer have tangible evidence of a White House link because of lost, missing, or destroyed emails and Blackberrys, it doesn’t really matter anyway under disparate impact theory. Intent needs not to be proved in court; merely the act of discrimination is enough.

Based on the White House’s unmitigated belief of their ability to use disparate impact against companies for questionable practices, the rule should be applied to the IRS for its questionable practices as well. Since the IRS falls directly under the purview of the Executive Branch, why is the President of the United States therefore not directly responsible and culpable for the IRS abuse?