Select Page

IRS Finally Issues Tea Party Status: DENIED

As we’ve been following this story regarding the IRS for years, here’s the latest update from the Washington Times:

Nearly seven years after it applied to the IRS for nonprofit status, the Albuquerque Tea Party has finally been given a decision: Denied.

The tax agency, under orders from a federal judge, is belatedly tackling the remaining tea party cases that it delayed for years, and so far the tea party isn’t doing well. Only one of the three groups in the case was approved, and the other two, including Albuquerque, got notices of proposed denials last week.

The applicants will have a chance to appeal, but the denials aren’t sitting well with the groups, whose attorney said it’s more evidence that the IRS continues to single out the tea party for abuse.

“It is clear that we still have an IRS that is corrupt and incapable of self-correction,” said Jay Sekulow, chief counsel at the American Center for Law and Justice, which represented a number of tea party groups in a case against the tax agency.

The one group that was approved was Unite in Action, a Michigan-based organization that first applied for tax-exempt status more than six years ago. The Albuquerque Tea Party and Tri Cities Tea Party from Washington state were notified of proposed denials.

“It is clear that we still have an IRS that is corrupt and incapable of self-correction,” said Jay Sekulow, chief counsel at the American Center for Law and Justice, which represented a number of tea party groups in a case against the tax agency.

Still to come is a decision on Texas Patriots Tea Party, a group that is part of a separate class-action lawsuit out of Ohio. A judge in that case ruled late last month that the IRS was likely violating the group’s First Amendment rights by delaying its application and ordered the tax agency to process and decide on the application.

The IRS, which declined to comment on the new decisions, admitted in court that it did subject the tea party groups to intrusive scrutiny, singling them out because of their political viewpoints and forcing them to go through hurdles that other groups didn’t face.

IRS officials over the summer promised both the courts and Congress that the agency would begin to process all outstanding applications after years of delay that it blamed on a “litigation hold” policy.

Under that policy, the IRS said once a group sued, the agency stopped work on its application. Federal courts held that policy was both ill-advised and not a hard-and-fast rule and ordered the agency to get back to work.

In a notice filed last week, the IRS said it has now met its first deadline.

“As of November 8, 2016, the Internal Revenue Service has issued determinations with respect to each of the Plaintiffs whose applications for tax exempt status had been pending,” the agency said.

Mr. Sekulow said the groups never should have faced the delays, adding that they showed “continuing problems inside the IRS.”

In a court filing this weekend Mr. Sekulow asked a federal judge in the District of Columbia to officially declare that the IRS violated groups’ First Amendment rights.

The groups also said they are worried that the IRS decision-making in applications that were denied might have been skewed by the entire history of the targeting.

The Albuquerque Tea Party first applied on Dec. 29, 2009. Four months later, it got a two-page, 10-question reply from the IRS, beginning years of back and forth. It has faced a series of follow-up questions, the years long delay in court and an offer to be approved — if the group would agree to limit its political advocacy to 40 percent of its activities.

3 Years Later, IRS Reveals List of Targets

As a tax practitioner, I have been following the IRS scandal since the beginning. Here’s the latest update — the list of IRS target have been released, 3 years later. From the Washington Times:

More than three years after it admitted to targeting tea party groups for intrusive scrutiny, the IRS has finally released a near-complete list of the organizations it snagged in a political dragnet.

The tax agency filed the list last month as part of a court case after a series of federal judges, fed up with what they said was the agency’s stonewalling, ordered it to get a move on. The case is a class-action lawsuit, so the list of names is critical to knowing the scope of those who would have a claim against the IRS.

But even as it answers some questions, the list raises others, including exactly when the targeting stopped, and how broadly the tax agency drew its net when it went after nonprofits for unusual scrutiny.

The government released names of 426 organizations. Another 40 were not released as part of the list because they had already opted out of being part of the class-action suit.

That total is much higher than the 298 groups the IRS‘ inspector general identified back in May 2013, when investigators first revealed the agency had been subjecting applications to long — potentially illegal — delays, and forcing them to answer intrusive questions about their activities. Tea party and conservative groups said they was the target of unusually heavy investigations and longer delays,

Edward D. Greim, the lawyer who’s pursuing the case on behalf of NorCal Tea Party Patriots and other members of the class, said the list also could have ballooned toward the end of the targeting as the IRS, once it knew it was being investigated, snagged more liberal groups in its operations to try to soften perceptions of political bias.

“As we have identified in our filings in this case, important questions still exist regarding changes to the IRS‘ case listings that occurred after theIRS learned that the [inspector general] and congressional investigations had begun,” he said. “Based on these changes, which to date remain unexplained, a very real possibility — if not probability — exists that theIRS modified its targeting in light of the investigations, packing its own internal lists of targeted groups to support its preferred narrative, including by adding ideologically diverse groups.”

He said if that did happen, it would have “tainted” the list the IRS has now released.

The IRS declined to comment, saying its filing spoke for itself.

A series of investigations found the IRS did ask intrusive questions and did delay applications for years, in violation of policy. But so far no investigation has found any order from the White House to conduct the targeting.

‘Tea’ and ‘patriot’ groups

Sixty of the groups on the list released last month have the word “tea” in their name, 33 have “patriot,” eight refer to the Constitution, and 13 have “912” in their name — which is the monicker of a movement started by conservatives. Another 26 group names refer to “liberty,” though that list does include some groups that are not discernibly conservative in orientation.

Among the groups that appear to trend liberal are three with the word “occupy” in their name.

And then there are some surprising names, including three state or local chapters of the League of Women Voters — a group with a long history of nonprofit work.

Some of the most active and prominent tea party groups snared in the targeting aren’t on the class-action list. At least some of them opted not to be part of the joint legal action to preserve their own lawsuits.

Congressional Republicans say IRS Commissioner John Koskinen, who was brought in by President Obama to clean up the agency after the targeting scandal, has failed — and even misled Congress during the investigation. Some Republicans are even pursuing impeachment against Mr. Koskinen, accusing him of defying a subpoena for former senior IRSexecutive Lois G. Lerner’s emails by allowing computer backup tapes to be destroyed.

Even outside of impeachment, the House GOP has proposed a new round of budget cuts for the IRS, aimed at trying to deliver a message that Mr. Koskinen’s tenure has been unacceptable.

And the tax agency is still defending itself in a series of court cases. In addition to the NorCal class action case, the federal appeals court in Washington, D.C., is currently considering an appeal by tea party groups who argue the targeting is still going on.

“One thing remains clear: Continued litigation is the only way to force theIRS‘ hand in order to expose its targeting scheme that was coordinated with the help of the DOJ and other federal agencies so that we can obtain justice for those patriotic Americans who were unconstitutionally targeted by their own government,” said Jay Sekulow, chief counsel at the American Center for Law and Justice, which is representing some of the plaintiffs in the appeals case.

In yet another case, the conservative group Cause of Action has been pursuing the IRS to turn over documents the group believed would show White House officials requesting secret taxpayer information on conservatives.

But in a filing Friday, the IRS said it has conducted a final search and can’t find any evidence that the White House either asked for or received protected information.

The IRS Scandal Continues: Judge Orders Release Of Target List

We’re coming up on three years since the IRS scandal broke in May 2013. Most Americans have certainly forgotten about it, especially since the former head, Lois Lerner, went wholly unpunished. But some targeted groups have not forgotten about it, and continue to fight for transparency with the entire affair.

Earlier this week, a federal appeals court “ordered the IRS to quickly turn over the full list of groups it targeted so that a class-action lawsuit, filed by the NorCal Tea Party Patriots, can proceed. The judges also accused the Justice Department lawyers, who are representing the IRS in the case, of acting in bad faith — compounding the initial targeting — by fighting the disclosure.”

The IRS, of course, claimed that no targeting happened — that it was merely an issue of poorly trained employees. Of course, we all know better. A vast majority of the targets were conservative or tea-party groups, there were secret buzz words to identify them, and some of the groups still have not attained 501c3 status after 5 years!

According to the Washington Times, Tea Party groups have been trying for years to get a full list of nonprofit groups that were targeted by the IRS, but the IRS had refused, saying that even the names of those who applied or were approved are considered secret taxpayer information. The IRS said section 6103 of the tax code prevented it from releasing that information.

Judge Kethledge, however, said that turned the law on its head. ‘Section 6103 was enacted to protect taxpayers from the IRS, not the IRS from taxpayers,’ he wrote.”

This particular ruling certified the NorCal case as a class-action lawsuit. Others who were targeted may be permitted to join the case, but until that list is revealed, it is unknown who exactly among the 200 or so groups involved were actually targeted.

Now, “the case moves to the discovery stage, where the tea party groups’ lawyers will ask for all of the agency’s documents related to the targeting and will depose IRS employees about their actions.”

As a CPA intimately involved with the IRS for many years, I have been following this case since the beginning and have continued to report on updates. The actions of the IRS were particularly egregious and overreaching, and no one was appropriately punished for it. It’s good that some of the groups remain dedicated to getting more answers that what has been divulged by the Department of Justice to date.

The IRS Admits to Erasing Another Important Hard Drive

The IRS is involved in another “erased hard drive” event — and it’s not a part of the IRS scandal of 2013. It is apparent that there is a pattern of destruction at the agency.

This time, the hard drive that was erased belonged to “Samuel Maruca, former director of transfer pricing operations at the IRS Large Business and International Division.” Maruca was also a top level employee at the IRS, and was also involved in a controversy; this time, the scrutiny involved the IRS’s decision to hire an inexperienced yet elite law firm to handle tax data.

In this particular incident, “although there was a court preservation order on all documents related to the IRS hiring of the outside firm, the hard drive was erased anyway. The order was borne of a Freedom of Information Act (FOIA) request submitted by Microsoft.

Even though the white shoe law firm has zero experience handling sensitive tax data, taxpayers have been footing bills of over $1,000 per hour for its services.”

And more:

“Despite its complete inexperience handling audits or taxpayer data, Quinn Emanuel was hired under an initial $2.2 million contract.

This unusual decision prompted a probe by Finance Committee Chairman Orrin Hatch (R-Utah), based on concerns that the decision to hire outside contractors was expensive and entirely unnecessary.

As Sen. Hatch pointed out in his letter to the IRS, the agency already has access to around 40,000 employees responsible for enforcement. The IRS can also turn to the office of Chief Counsel or a Department of Justice attorney, both of which have the expertise to conduct this kind of work, without risking sensitive information.

The fact that another important hard drive is permanently gone can only lead to two conclusions: 1) that the IRS is still thoroughly incompetent or 2) the IRS is exceedingly corrupt. Neither of these are good for the taxpayer. The only immediately remedy should be to remove IRS Commissioner John Koskinen.

No DOJ Charges for IRS Officials in Scandal


The cynic in me was wholly unsurprised when the Associated Press reported the Department of Justice (DoJ) concluded that no formal charges would be filed against any of the IRS officials embroiled in the IRS scandal of 2013. In a letter to Congress, the DoJ announced that they found “no evidence that any IRS official acted based on political, discriminatory, corrupt or other inappropriate motives that would support a criminal prosecution.”

Never mind the fact that computer hard drives and emails disappeared, secret email accounts were maintained, interoffice messaging systems were used to avoid written records, only one conservative group received approval under Lerner in three years, and some groups remain unapproved after 5 years — all while Obama’s brother received retroactive tax-exempt approval in less than 30 days.

According to the DoJ letter, such actions were merely, “mismanagement, poor judgment and institutional inertia.” That is utter nonsense.

Stephen Dinan at the Washington Times did a decent round up of the news and reactions to the decision.

The IRS did mishandle tea party and conservative groups’ nonprofit applications, but their behavior didn’t break any laws, the Justice Department said in a letter to Congress Friday that cleared the tax agency and former senior executive Lois G. Lerner of any crimes.

“Ineffective management is not a crime,” Assistant Attorney General Peter J. Kadzik said in a letter to the House Ways and Means Committee. “The Department of Justice’s exhaustive probe revealed no evidence that would support a criminal prosecution. What occurred is disquieting and may necessitate corrective action — but it does not warrant criminal prosecution.”

The decision comes more than two years after the IRS’s internal watchdog reported that auditors singled out tea party groups’ applications for special scrutiny and delayed those applications beyond reasonable timelines, preventing the groups from being able to say they were officially recognized nonprofits.

The agency initially admitted its bad behavior, and President Obama vowed an investigation — but he later said, in the middle of the probe, that there was no evidence of corruption.

Some Republicans have questioned the validity of the probe from the beginning, after learning that one of the Justice Department lawyers assigned to the investigation was a contributor to Mr. Obama’s political campaigns.

In its letter Friday the Justice Department specifically cleared Ms. Lerner, a senior executive in charge of approving the groups’ applications, who had authored a number of emails that suggested a bias against the tea party movement.

Investigators said none of the witnesses they interviewed believed Ms. Lerner acted out of political motives, and said that Ms. Lerner seemed to try to correct the inappropriate scrutiny once she “recognized that it was wrong.”

“In fact, Ms. Lerner was the first IRS official to recognize the magnitude of the problem and to take concerted steps to fix it,” Mr. Kadzik wrote.

Congressional Democrats said the decision confirmed what they’d figured out years ago — that there was no underhanded political dealing at the agency.

“Over the past five years, Republicans in the House of Representatives have squandered literally tens of millions of dollars going down all kinds of investigative rabbit holes — IRS, Planned Parenthood, Benghazi — with absolutely no evidence of illegal activity,” said Rep. Elijah E. Cummings of Maryland, the top Democrat on the Benghazi investigation and ranking member of the House Oversight Committee.

The House Ways and Means Committee conducted its own investigation into the IRS’s tea party targeting, as did the Senate Finance Committee. The House panel was the one that voted to refer Ms. Lerner’s behavior to the Justice Department for criminal investigation.

Rep. Paul Ryan, the chairman of the Ways and Means Committee, called the Friday letter “deeply disappointing,” but said it wasn’t a surprise given the bent of the Obama administration.

He said his committee’s probe did find “serious and unprecedented actions” by Ms. Lerner that deprived tea party groups of their rights.

“The American people deserve better than this. Despite the DOJ closing its investigation, the Ways and Means Committee will continue to find answers and hold the IRS accountable for its actions,” he said.

Ms. Lerner’s lawyers, in a statement, said they were “gratified but not surprised” by the announcement.

“Anyone who takes a serious and impartial look at the facts would reach the same conclusion as the Justice Department,” they said, adding that she cooperated with the investigators and answered their questions.

That stands in contrast to her interaction with Congress, where she refused to answer questions, invoking her Fifth Amendment right to remain silent — but only after she delivered a statement declaring her innocence.

The House Oversight Committee concluded that she was not, in fact, able to invoke the Fifth Amendment at that point, and when she refused to answer questions, the House voted to hold her in contempt of Congress.

The Justice Department declined to pursue that case, too, arguing that her claim of Fifth Amendment rights was likely to succeed.

Groups that faced targeting by the IRS were infuriated by Friday’s decision.

“To say there is no evidence of discrimination makes a mockery of all we witnessed in the last two years,” said Catherine Engelbrecht, founder of True the Vote, which had its application for nonprofit status delayed as it and another group she was involved in faced scrutiny by everyone from the FBI to federal occupational health authorities.