May 13, 2013

IRS singled out groups critical of government

Staffers in the Cincinnati field office made high-level decisions on how to evaluate nonprofit groups.

By JULIET EILPERIN The Washington Post

WASHINGTON - Over the past two years, Internal Revenue Service officials singled out for scrutiny not only groups with "tea party" or "patriot" in their name 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, who is now a member of the law 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 of groups, 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," Collins 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 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 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."

"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," Issa said.

The appendix of the inspector general's report -- which was requested by the 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 ever 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" did not consist of targeting electoral candidates.

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

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.

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 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 inspector general's 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.)"

Toby Marie Walker, president of the Waco Tea Party, said the IRS subjected her group to a series of unreasonable requests after they applied for tax-exempt status in June 2010. The requests came in early 2012, after they were 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. The IRS also asked for transcripts of any radio interviews its officials had done and hard copies of any news article 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 their events, since they hosted informal gatherings such as "rant contests" where anyone could come and express their views.

 

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