The U.S. Internal Revenue Service (IRS) has been accused of applying excessive scrutiny to certain applications for tax exemption under Section 501(c)(4) of the Internal Revenue Code. The heightened review was allegedly received by groups with names that include references to “Tea Party” or some less common other ‘conservative’ terms.
A Tuesday, May 21st, Huffington Post article revealed that “[a]n IRS official who asked to talk without being identified said … that the terms that IRS officials used were partisan terms, but that the motivation for the behavior was not driven by partisanship.” The acting IRS Commissioner, Steven Miller, asserted in recent Congressional testimony that the agency’s actions were “foolish mistakes made in trying to be more efficient.” Miller attributed some of the problem to a $1 billion cut in the IRS budget at a time when the agency’s exempt organization division must process roughly 70,000 applications every year.
According to Lois Lerner, the Head of the IRS tax exempt organizations division, the “be on the lookout” (or “BOLO”) list criteria was changed in January 2012 to include various conservative and progressive terms including “political action type organizations involved in limiting/expanding government, educating on the Constitution and Bill of Rights, social economic reform/movement.” IRS officials have asserted that the record indicates an overloaded government staff that was searching for efficient ‘short cuts.’
Section 503(c)(4) of the Internal Revenue Code allows an organization to be tax-exempt if it is not “organized for profit” and it is “operated exclusively to promote social welfare.” The IRS.gov website provides that “a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity.” Yet, the website also instructs that “[t]he promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”
Many observers to the recent so-called scandal, have asserted that the lack of clarity in the tax laws contributed to treatment concerns. It is unclear what level of political activity should be considered to exceed the permissible limits and whether endorsement of particular candidates should be permitted at all.
Yet, the end result of an IRS review, and whether tax exemption should be granted or not, is not the subject of this article. In the question of whether extra scrutiny of an application is merited, the issue is whether the IRS has a sufficient and justifiable reason for concern about that application to merit a ‘deeper look.’
Certainly, an objective observer without political bias might conclude that a group with “Tea Party” in its name will be likely to get involved in politics to some degree. A randomly selected site, teaparty911.com, provides a list of “Tea Party Endorsed Candidates” updated through May 15, 2013.
In an August 30, 2012 Facebook post, First Coast Tea Party, a group that was granted 501(c)(4) status in 2011, advertised a rally for the Romney-Ryan Republican presidential ticket. The advertisement stated that its members should “bring your chairs and your signs, make sure they know that the First Coast Tea Party is and has been helping their campaign.” In a later Facebook post, the group encouraged its members to “get to the Republican Headquarters and offer and then do some work” because “we cannot lose Florida to Obama.”
Kentucky Tea Party, a group granted 501(c)(4) status in 2009, published a list of “officially tea party endorsed candidates for the 2011 Kentucky primary” and “The Rationale for Romney-Ryan.” Katy Tea Party Patriots, which filed for 501(c)(4) status in 2009, ran an “Oust Obama 2012” campaign. Various other tax-exempt organizations, including Tiftarea Tea Party Patriots, Inc. and Central Valley Tea Party Inc., have also been involved in political campaigning and have made numerous political endorsements.
Dictionary.com defines “Tea Party” as “a conservative political movement …” In fact, there is one word that is associated with the most “political” of all organizations. Both the “Democratic Party” and the “Republican Party” have in common the use of the word “party.” Of course, they also share that word with the Tea Party and the intended implications are apparent. There have been many identified “Tea Party candidates” that have run in recent elections.
Any IRS favoritism for one political party or persuasion would be unacceptable. However, that is an entirely separate issue from the question whether heightened scrutiny was merited for those that did receive it.
In an era when political organizations wield excessive power and the U.S. Supreme Court case, Citizens United, granted them even greater power, the possible long-term effects of the alleged IRS scandal are troubling. Rather than beginning to give “Tea Party” applications a ‘free pass,’ the scrutiny should continue but we should ensure that it is applied equally and without political bias.