The IRS apologized Friday for what it acknowledged was “inappropriate” targeting of conservative political groups in the process for applying for tax-exempt status. Details of the scandal emerged from excerpts of an investigative report from the Treasury Inspector General for Tax Administration (TIGTA).
Targeting Tea Party Groups
According to TIGTA, IRS agents and attorneys developed a screening process that initially identified key words in the names of groups – including ‘Tea Party, ‘Patriot‘ and ‘9/12‘ that were being used to choose applications for greater scrutiny.
“Issues” criteria were eventually developed and also used. IRS agents scrutinized references to “Government spending, Government debt, or taxes; Education of the public via advocacy/lobbying to ‘make America a better place to live;’ and Statements in the case file (that) criticize how the country is being run.”
By July 2011, the IRS was no longer targeting just groups with certain key words in their names. Rather, the screening criteria had changed to “organizations involved with political, lobbying, or advocacy.”
But then it changed again in January 2012 to cover “political action type organizations involved in limiting/expanding government, educating on the constitution and bill of rights, social economic reform/movement,” according to the findings contained in in the watchdog report.
Tied Up in Red Tape
One of the targeted groups, the Waco Tea Party, waited over two years after it filed its application for tax exemption before receiving a response from the IRS. Then, the IRS issued them a 20 page question form requesting, among other things, that the group provide copies of blog posts, articles, and other media distributed to members. That included copies of tweets, Facebook posts, and other social networking platforms. The Waco Tea Party was exasperated not only at the delay, but also at the prospect of gathering the material for review. Perhaps most shocking, was the IRS request for the identity of donors. The Waco Tea Party felt obligated to inform its donors of the disclosure, and donors panicked at the notion of being identified and targeted themselves. The organization considered dropping its application, as several other nonprofits did in light of the overwhelming scrutiny.
Nonprofits’ Need for Legal Representation
It is important to note that the IRS has a statutory obligation to assess whether an organization applying for tax exemption is charitable and organized for the benefit of the general welfare, or whether the organization is primarily political. Political organizations can’t claim the tax exemption status afforded charitable nonprofits. These distinctions are subtle but significant.
Attorneys specializing in nonprofit law and tax are trained to know the voluminous rules, regulations and private rulings of the IRS and the “ins and outs” of obtaining tax-exempt status. Experienced attorneys in nonprofit law understand controversial facts and circumstances that may result in greater scrutiny from the IRS and can advise their clients accordingly. Furthermore, attorneys who have experience dealing with IRS agents in the Cincinnati office can personally advocate for their clients throughout the application process, and in some cases, help accelerate the determination of tax exempt status.
If your nonprofit organization is contemplating applying to the IRS for tax-exempt status, consider contacting an attorney who specializes in nonprofit law and has successfully worked with the IRS on tax exemption cases.
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The Cullinane Law Group works exclusively with the nonprofit tax-exempt sector: new nonprofits, foundations, religious groups, and social enterprises throughout the United States who seek to create positive change. We have represented clients before the IRS in obtaining nonprofit’s tax exemption. Contact us today to learn how we can help your organization.