A group of 63 Republican members in the House have written a letter to Internal Revenue Service Commissioner Doug Shulman urging him to stop the agency from requesting extensive information from Tea Party groups and other conservative organizations applying for tax-exempt status under Section 501(c)4 of the Tax Code.
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They noted that in recent months, certain conservative organizations, including the Waco Tea Party, have received extensive questionnaires from the IRS regarding their nonprofit status (see IRS Probe of Tax-Exempt Political Groups Questioned and Senate Republicans Ask IRS to Hasten Approval of Tax-Exempt Political Groups). Rep. Bill Flores, R-Texas, along with 62 other GOP members of Congress, sent a letter to Shulman on Tuesday, asking how the IRS’s informational requests are consistent with precedent and supported by law.
“The IRS is supposed to enforce our tax laws with integrity and fairness,” Flores said in a statement. “Yet, when certain groups are targeted for further scrutiny based on ideology, you begin to lose confidence in and question the integrity of the IRS. Americans deserve and demand transparency from government agencies, as well as compliance with current law. Today, we are asking for the IRS to explain the reasoning behind the egregious treatment of these organizations who, in good faith with our laws, have applied for 501(c) tax-exempt status.”
Flores said the congressional delegation that has signed onto the letter is concerned about the excessively long IRS review times (some as long as two years from the initial applications), ambiguous questions, overly broad requests, and unreasonably short response deadlines. For example, some of the requests made by the IRS include providing records of every oral statement ever provided by any member of the organization and vague probes into associations with private citizens.
“The IRS seems to be enacting a highly political agenda by sending out these vague and burdensome requests,” said Flores. “What is particularly troubling about these probes is that they seem to only target conservative civic organizations. The requests include intrusive questioning, which can infringe on the groups’ rights to freedom of association and speech. I am also concerned that these requests are intended to suppress these rights ahead of the upcoming 2012 elections.”
Shulman has come under increasing pressure over the information requests, with Democrats urging the IRS to deny tax-exempt status to political groups and Republicans pressing the IRS to end the inquiries. During testimony at a congressional hearing last month, Shulman was asked about the requests for information. He defended the agency’s work, noting that the groups are not required to ask for tax-exempt status before filing their returns (see IRS Says Tea Party Groups Aren’t Targets).
“For 501(c)4 organizations, which are what has been in the press, organizations do not need to apply for tax exemption,” Shulman pointed out. “Organizations can actually hold themselves out as 501(c)4 organizations and then file a [Form] 990 with us. The organizations that have been in the press are all ones that are in the application process, so first of all I think it’s very important to emphasize that all of these organizations came in voluntarily. They did not need to engage the IRS in a back and forth. They could have held themselves out, filed a 990, and if we had seen an issue, we would have engaged, but otherwise, we wouldn’t.”
Nevertheless, the groups still want the reassurance of being granted tax-exempt status by the IRS in case that status is later challenged.
“It has come to our attention that numerous nonprofit civic organizations across the country have experienced extensive delays and received excessively burdensome information requests in connection with their applications for tax-exempt status under 26 U.S.C. Section 501(c),” said the letter from the lawmakers. “These requests have included demands for complete records of every oral statement ever provided by any member of the organization, vague probes into tangential associations with private citizens and excessively long questionnaires, all to be returned within unreasonably short time periods. These demands go well beyond good-faith due diligence and appear designed to be logistically and financially impossible to comply with.”
The lawmakers noted that tax-exempt status exists to ensure that taxation does not hinder citizens’ engagement in social welfare and civic activities. Section 501(c)(4)(A) exempts “[c]ivic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare…the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.”
They pointed out that the IRS has affirmed that an organization “may carry on lawful political activities and remain exempt as long as it is primarily engaged in activities that promote social welfare,” under Rev. Rule 81-95, 1981-1 C.B. 332.
“These recent inquiries appear to constitute disparate treatment for no apparent reason other than the political persuasion of applicants,” said the letter. “Such practices chill these groups’ Constitutionally-guaranteed rights to civic participation, freedom of association and free speech and are better left to despotic regimes than a revenue-collection agency in a free country.”
They said the organizations should only need to file the traditional forms. “It does not appear that the missions and activities of these organizations require information beyond the scope of Form 1024 and Schedule B, which we understand to have been traditionally required,” said the letter. “We request that you provide a response demonstrating how these recent requests by the IRS are consistent with precedent and supported by law. We further request that the IRS refrain from any additional unwarranted and excessive information demands and other dilatory tactics.”
Last week, Rep. Tom McClintock, R-Calif., one of the signers of the letter, took to the House floor to complain about the IRS’s treatment of the groups and compared them to the harassment of the NAACP during the Civil Rights movement.
“In order to be recognized as nonprofit groups, these organizations must register with the IRS—a purely ministerial function that has, in the past, been applied evenly and without regard to their political views. At least until now,” said McClintock. “It seems that Tea Party groups are now being treated very differently than their counterparts on the political left. For the last two years, many have been stone-walled by the IRS when they have sought to register as nonprofits and most recently, they have been barraged with increasingly aggressive and threatening demands vastly outside the legal authority of the IRS. Indeed, the only conceivable purpose of some of these demands could be to intimidate and harass.”
McClintock noted that a Tea Party group in his district had submitted articles of incorporation as a nonprofit to the state of California, and received approval within a month. The group then tried to register as a nonprofit with the IRS. “Despite repeated and numerous inquiries, the IRS stonewalled this group for a year and a half, at which time it demanded thousands of pages of documentation—and gave the group less than three weeks to produce it,” said McClintock. “The IRS demanded the names of every participant at every meeting held over the last two years, transcripts of every speech given at those meetings, what positions they had taken on issues, the names of their volunteers and donors, and copies of communications they had with elected officials and on and on. Perhaps most chilling of all, the organizer of this particular group soon found herself the object of a personal income tax audit by the IRS.”
He noted that the donations to the groups are not tax-deductible and argued there is no legitimate purpose for asking the names of the groups’ donors and volunteers “unless the intention is to harass and intimidate.”