The Internal Revenue Service is facing renewed pressure over its reluctance to grant tax-exempt status to political fundraising and advocacy organizations, particularly Tea Party-affiliated groups.

Charles Boustany

Several of the groups claim that the IRS has been asking them for detailed information on their contributors and operations before granting them tax-exempt status as a 501(c)3 or 501(c)4 organization, and they are receiving support from some Republican lawmakers who are crying foul.

On Thursday, House Ways and Means Subcommittee on Oversight Chairman Charles Boustany, R-La., sent a letter to Internal Revenue Service Commissioner Doug Shulman requesting that he provide a complete response to a previous request last October on general information on the tax-exempt sector, IRS audits and compliance activities related to tax-exempt organizations.

Boustany's letter also asks for additional information following reports that the IRS was questioning certain tax-exempt applicants, including grassroots political entities such as local Tea Party groups, about their operations and donors.

In the letter, Boustany requested the following information by no later than March 15, 2012:

1. How many new tax-exempt organizations has the IRS recognized each year since 2008?

2. How many new applications for 501(c)(3) and (c)(4) tax-exempt status have been received by the IRS since 2008? Provide a breakdown by year and type of organization.

3. What is the IRS process for reviewing each tax-exempt status application? Is this process the same for entities applying for section 501(c)(3) and (c)(4) tax-exempt status? Please describe the process for both section 501(c)(3) and (c)(4) applications in detail. 

4. Shulman’s preliminary response to Boustany’s Oct. 6, 2011, letter stated, “If the application is substantially complete, the IRS may retain the application and request additional information as needed.” How does the IRS determine that an application for tax-exempt status is “substantially complete?” Please provide guidelines or any other materials used in this process. 

5. Does the IRS have standard procedures or forms it uses to “request additional information as needed” from applicants seeking tax-exempt status? Please provide any forms and related materials used. 

6.Does the IRS select applications for “follow-up” on an automated basis or is there an office or individual responsible for selecting incomplete applications? Please explain and provide details on any automated system used for these purposes. If decisions are made on an individual basis, please provide the guidelines and any related materials used. 

7. How many tax-exempt applications since 2008 have been selected for “follow-up”? How many entities selected for follow-up were granted tax-exempt status?

The IRS has also come under pressure from Democratic lawmakers and advocacy groups to resist granting tax-exempt status to political groups. Groups with tax-exempt 501(c)3 and 501(c)4 status are not permitted under law to be primarily devoted to political advocacy, particularly on behalf of specific candidates. But in both the 2010 and current election cycles, several of the so-called “Super PACs” that have been set up in the wake of the Supreme Court’s Citizens United decision are reportedly using affiliated 501(c)4 groups to help with their fundraising.