The Internal Revenue Service is preparing to settle claims for $3.5 million with Tea Party groups whose applications for tax-exempt status were delayed by the IRS’s Exempt Organizations unit.

In 2013, the director of the Exempt Organizations unit, Lois Lerner, admitted the group had been setting aside applications from political organizations and subjecting them to extra scrutiny. The unit had been using so-called “BOLO lists,” short for “be on the lookout,” by using terms such as “Tea Party” and “Patriot” to examine applications from a flood of conservative political groups applying for 501(c)4 status ahead of the 2012 elections.

Lerner admitted to the practice shortly before the release of a report by the Treasury Inspector General for Tax Administration. Further revelations indicated the IRS had also been subjecting some liberal groups to such scrutiny by using terms such as “Occupy” and “Progressive.” The revelations led to the ouster of Lerner and several other top IRS officials. Amid protests over the so-called "Tea Party targeting scandal," the IRS was forced to abandon the regulations it had been preparing for how to treat 501(c)4 applications and to offer a streamlined way for groups to self-certify themselves as tax exempt without waiting for IRS approval.

With the advent of the Trump administration last year, the IRS has moved to settle the lawsuits brought by Tea Party groups against the IRS. Last Friday, Graves Garrett, a Kansas City law firm representing one of the groups suing the IRS, NorCal Tea Party Patriots, sent out a notice about a proposed $3.5 million settlement for all members of the class-action suit.

A hearing has been set for July 10 on the proposed settlement in a federal court in Ohio to determine some of the parameters. More details are available at www.NorCalTeaPartyvIRS.com.


IRS headquarters in Washington, D.C.
IRS headquarters in Washington, D.C. Andrew Harrer/Bloomberg

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Michael Cohn

Michael Cohn

Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985.