[EL] IRS probe ignored most influential groups

[John Pomeranz]

I wonder how the reporters for this AP article are so certain that "big-budget organizations on the left and right that were most influential in the elections" ...  "have escaped investigations into whether they have crossed the blurry line under the law between what constitutes a tax-exempt 'social welfare' organization that is free from donor reporting requirements and a political committee subject to taxes and disclosures"

IRS examinations (aka audits) of tax-exempt organizations only become known to the public when (i) the IRS revokes the tax-exempt status of the organization (a process than can take months or years from the beginning of the examination) or (ii) when the organization chooses to make the examination public (something that most organizations are reluctant to do, usually to avoid frightening away donors and avoiding press scrutiny).   The IRS is prohibited by law from commenting publicly on current examinations of particular groups.

It is entirely possible that Crossroad GPS, Americans for Prosperity, Priorities USA, and the rest are even now in a struggle with the IRS seeking to avoid revocation of their 501(c)(4) status.  We just don't know (and may never know, if the organizations prevail).

It's also possible that these organizations are not currently under examination by the IRS.  The vagueness in the rules (that "blurry" or "fuzzy" line that the AP article mentions) was the underlying reason for the failures of the IRS in the agency's review of the tax-exemption applications of conservative groups, and it might also have tied the hands of the IRS as it tries to determine whether these groups are or are not operating in compliance with the limits on 501(c)(4) social welfare organizations.  It's not just the vagueness of the "primary purpose" standard mentioned in the article, but also the uncertainty about what does or does not count as political campaign intervention.

Before the IRS can fix what went wrong in reviewing applications from newly formed organizations and before the IRS can effectively enforce the law governing existing organizations, the agency (or Congress) needs to come up with clear, bright-line rules that provide adequate guidance both to IRS staff and the tax-exempt organizations themselves.  The TIGTA report echoes this need for clear guidance, and the President had given his full-throated support for the TIGTA recommendations.  We'll now see whether, in addition to expressing regrets and indignation about the shoddy treatment of conservative groups by the IRS, the agency, the Administration, and Congress can take steps to prevent such fiascos in the future.


John Pomeranz
Harmon, Curran, Spielberg & Eisenberg, LLP
1726 M Street, NW, Suite 600
Washington, DC  20036
office: 202.328.3500
mobile: 703.597.7663
fax: 202.328.6918
e: jpomeranz at harmoncurran.com

"IRS probe ignored most influential groups"<http://electionlawblog.org/?p=50675>
Posted on May 20, 2013 7:11 am<http://electionlawblog.org/?p=50675> by Rick Hasen<http://electionlawblog.org/?author=3>

AP<http://hosted.ap.org/dynamic/stories/U/US_IRS_OUTSIDE_GROUPS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT>: "There's an irony in the Internal Revenue Service's crackdown on conservative groups. The nation's tax agency has admitted to inappropriately scrutinizing smaller tea party organizations that applied for tax-exempt status, and senior Treasury Department officials were notified in the midst of the 2012 presidential election season that an internal investigation was underway. But the IRS largely maintained a hands-off policy with the much larger, big-budget organizations on the left and right that were most influential in the elections and are organized under a section of the tax code that allows them to hide their donors."
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