TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, March 9, 2012

IRS May Out Donors to Tea Party, Other 501(c)(4) Groups

The Huffington Post, IRS May Make Political Groups Pay Dearly for Keeping Donors Secret -- And Out Them, by Dan Froomkin:

For years, the IRS has done little or nothing to check the rise of overtly political groups that claim a special tax-exempt status in order to funnel secret money into election-related advertising.

But in a sign that the agency may be waking from its slumber, the IRS has sent detailed questionnaires to several Tea Party organizations -- and possibly other political groups -- to determine if they truly qualify for the 501(c)(4) designation intended for groups whose exclusive purpose is to promote social welfare.

Should any group currently calling itself a 501(c)(4) have its designation denied or revoked, tax experts said the consequences could be severe, including fines of 35% or more of the money they raised in secret.

And the groups might have to make donors' names public....

Reform groups have been pressuring the IRS to enforce its rules for months. In February, a group of Democratic senators sent a letter to the IRS, which stated: "It is contrary to the letter and spirit of the statute for political organizations formed primarily to advocate for a political candidate or to run attack ads against other candidates to take advantage of section 501(c)(4)." ...

Meanwhile, a conservative legal organization representing several Tea Party groups assailed what it says "appears to be a coordinated attempt by the IRS to intimidate and silence these organizations in this election year."

The Tea Party groups released IRS questionnaires that requested detailed information, including lists of people invited to speak at events, their credentials, and hard copies of all handouts.

"The problem here is the IRS has gone beyond legitimate inquiries and is demanding that these organizations answer questions that actually violate the First Amendment rights of our clients," Jay Sekulow, chief counsel of the evangelical interest group American Center for Law and Justice, said in a statement.

But Donald Tobin, a law professor at the Moritz College of Law at Ohio State University, said the information requested by the IRS is perfectly normal and appropriate. "The idea is to get the proper information from the organization so you can make the proper decision," he said.

An IRS spokesman declined to comment on specific cases, but said in a statement on Thursday that "when determining whether an organization is eligible for tax-exempt status, including 501(c)(4) social welfare organizations, all the facts and circumstances of that specific organization must be considered."

(Hat Tip: Francine Lipman, Ann Murphy.)

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