IRS targeted groups critical of government, documents from agency probe show

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IRS targeted groups critical of government, documents from agency probe show

 

Susan Walsh/AP - The exterior of the Internal Revenue Service building in Washington March 22, 201

 

By Juliet Eilperin, Published: May 12

At various points over the past two years, Internal Revenue Service officials singled out for scrutiny not only groups with “tea party” or “patriot” in their names but also nonprofit groups that criticized the government and sought to educate Americans about the U.S. Constitution, according to documents in an audit conducted by the agency’s inspector general.

The documents, obtained by The Washington Post from a congressional aide with knowledge of the findings, show that the IRS field office in charge of evaluating applications for tax-exempt status decided to focus on groups making statements that “criticize how the country is being run” and those that were involved in educating Americans “on the Constitution and Bill of Rights.”

The staffers in the Cincinnati field office were making high-level decisions on how to evaluate the groups because a decade ago the IRS assigned all applications to that unit. The IRS also eliminated an automatic after-the-fact review process Washington used to conduct such determinations.

Marcus Owens, who oversaw tax-exempt groups at the IRS between 1990 and 1999, said that delegation “carries with it a risk” because the Cincinnati office “isn’t as plugged into what’s [politically] sensitive as Washington.”

Owens, now with the firm Caplin & Drysdale, said that before the agency’s most recent reorganization, it had a series of “tripwires in place” that could catch unfair targeting, including the fact that the IRS identified its criteria for special scrutiny in a public manual.

“There’s no longer that safety valve, and as a result, the IRS has been rolling the dice ever since,” said Owens, who worked at the agency for nearly a quarter-century and now represents some organizations seeking tax-exempt status.
The IRS came under withering attack from GOP lawmakers Sunday. Sen. Susan Collins of Maine, a moderate Republican, described the practice as “absolutely chilling” and called on President Obama to condemn the effort.

“This is truly outrageous,” she said on CNN’s “State of the Union,” adding that even though White House spokesman Jay Carney has said the matter deserves an investigation, “the president needs to make crystal clear that this is totally unacceptable in America.”

In March 2012, then-IRS Commissioner Douglas H. Shulman, who was appointed by President George W. Bush, told Congress that the agency was not targeting conservative groups. On Sunday, the agency declined to answer questions about whether senior officials asked IRS exempt organizations division chief Lois G. Lerner and her staff in Cincinnati about this heightened scrutiny before testifying it did not take place.

“There has to be accountability for the people who did it,” House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) said on NBC’s “Meet the Press,” adding: “And, quite frankly, up until a few days ago, there’s got to be accountability for people who were telling lies about it being done.”

The appendix of the inspector general’s report — which was requested by the House Oversight and Government Reform Committee and has yet to be publicly released — chronicles the extent to which the IRS’s exempt organizations division kept redefining what sort of “social welfare” groups it should single out for extra attention since the 2010 Supreme Court ruling Citizens United v. Federal Election Commission. That decision allowed corporations and labor unions to raise and spend unlimited sums on elections as well as register for tax-exempt status under Section 501(c)(4) of the tax code, as long as their “primary purpose” was not targeting electoral candidates.

The number of political groups applying for tax-exempt status more than doubled in the wake of the Citizens United ruling, forcing agency officials to make a slew of determinations despite uncertainty about the category’s ambiguous definition.

Of the 298 groups selected for special scrutiny, according to the congressional aide, 72 had “tea party” in their title, 13 had “patriot” and 11 had “9/12.” Lerner, who apologized Friday for the targeting of such groups, described it as a misguided effort to deal with a flood of applications for tax-exempt status. She did not release the names of the groups.

On June 29, 2011, according to the documents, IRS staffers held a briefing with Lerner in which they described giving special attention to instances where “statements in the case file criticize how the country is being run.” She raised an objection, and the agency adopted a more general set of standards. Lerner, who is a Democrat, is not a political appointee.

But six months later, the IRS applied a new political test to social welfare groups, the document says. On Jan. 15, 2012, the agency decided to look at “political action type organizations involved in limiting/expanding Government, educating on the Constitution and Bill of Rights, social economic reform movement,” according to the appendix in the IG’s report.

The agency did not appear to adopt a more neutral test for 501(c)(4) groups until May 17, 2012, according to the timeline in the report. At that point, the IRS again updated its criteria to focus on “organizations with indicators of significant amounts of political campaign intervention (raising questions as to exempt purpose and/or excess private benefit.)”

Campaign reform groups have been pressing the IRS for several years to conduct greater oversight of nonprofits formed in the wake of the Citizens United case, given that many have become heavily involved in elections. “But this isn’t the type of enforcement we want,” said Paul Ryan, a senior counsel at the Campaign Legal Center. “We want nonpartisan, non-biased enforcement.”

Loyola Law School professor Ellen Aprill, who specializes in tax law, said any groups that have applied for tax-exempt status has “opened themselves up to scrutiny” by the IRS. “It’s part of their job to look for organizations that may be more likely to have too much campaign intervention,” she said. “But it is important to try to make these criteria as politically neutral as possible.”

Aprill said one of the problems is the agency’s top officials have not provided clear enough guidelines on what constitutes too much political activity for a social welfare group because it’s been “a hot potato,” and that now with this new controversy, “it’s going to make it even more difficult to do so.”

Toby Marie Walker, president of the Waco Tea Party, said the IRS subjected her group to a series of unreasonable requests after it applied for tax-exempt status in June 2010. The requests came in early 2012, Walker said, after being initially informed by an official in the Cincinnati field office that he was “sitting on a stack of tea party applications and they were awaiting word from higher-ups as to how to process them.”

The agency asked the group’s treasurer to supply information on its “close relationship” with current candidates and elected officials as well as future candidates, along with detailed information about its contributors and members. It also asked for transcripts of any radio interviews its officials had done and hard copies of any news articles mentioning them.

“That would take me years to do,” Walker said, noting that in some cases, Chinese media outlets referred to her organization. “Am I responsible for every news article across the globe?”

The group had even more difficulty providing transcripts and details of speakers at its events, since they hosted informal gatherings such as “rant contests” where anyone could come and express their views.

While the IRS awarded the Waco Tea Party tax-exempt status about six weeks ago, Walker said the group was now considering suing the agency since the process not only consumed time and effort but prompted the group to scale back its 2012 get-out-the-vote operation. “We were afraid to do it and get in trouble,” she said.

Sal Russo, chief strategist for the Tea Party Express, said that even though the agency’s actions intimidated tea party adherents, he gives the IRS “credit for standing up and admitting” it targeted them. And while only two of the agency’s officials — the commissioner and the chief counsel — are political appointees, Russo said the administration needs to conduct better oversight.

“The culture is set at the top,” Russo said. “Obviously you can’t control what every employee does. But you have to set a standard, particularly with the IRS, to be squeaky clean.”


Josh Hicks and Julie Tate contributed to this report.

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