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Disparate Impact Theory and the IRS

The idea of “disparate impact” is a poisonous cancer that has taken root as an important concept in the business world. If we do not end it soon, 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 concept of “disparate impact”.  Disparate impact is the concept that allows for a showing that if a protected class of citizens has a statistically lesser representation with respect to a business (hiring, mortgages originated, etc.) it may be implied that the business has intentionally discriminated.  This is clearly irrational, since there may be many economic, societal, and local reasons for the statistic. But disparate impact puts the burden to show lack of discrimination on the employer – 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. I therefore believe that they should be equally adamant  in applying the concept in the public sector.

The IRS scandal has shown the clear practice of targeting conservative groups applying for 501c4 status. Under disparate impact theory, the charge of intentional discrimination would apply because there is no “business necessity” in the clearly statistically significant discrimination policy the IRS has employed. The Obama administration, having complete control and responsibility for the Department of the Treasury and its Internal Revenue Service.is therefore guilty of 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 nominee, Thomas Perez, has been particularly lucrative in this regard. In June, National Review Online (NRO) covered some of Perez’s more recent cases, 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 notes, 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 intends to add 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. Numbers have been abused, and particular groups have been 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 the White House did not give a direct order (which remains to be seen), 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?

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