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

Wednesday, May 23, 2012

It's Time to Investigate the IRS

IRS Logo 2Following up on my prior posts (links below):  Fox News: It's Time to Investigate the IRS:

Richard Nixon ordered the IRS to conduct tax audits of those on his infamous “Enemies List.” Now, a spate of investigations and leaks coming out of President Obama’s IRS raises concerns that this administration may also be using the power of the nation’s most feared agency to silence its political opponents.

Today, more than six dozen grassroots citizens groups seeking to gain 501(c)(4) -- and in some cases 501(c)(3) -- tax status today find themselves facing unexpectedly invasive investigations and onerous procedural hurdles. All these groups have received non-profit recognition at the state level. Yet their requests for IRS recognition have been left in bureaucratic limbo for months -- in some cases, for more than two years. ...

In a separate instance of bureaucratic malfeasance, it appears that some within today’s IRS are even willing to break federal law to publicly disclose the private donor information of conservative non-profits.

Somehow, the Human Rights Campaign (HRC), a gay advocacy group, got its hands on Schedule B of the tax return filed by the National Organization for Marriage (NOM) -- a conservative values organization that has sparred with the administration and liberal groups over homosexual marriage. The HRC -- soon followed by scores of left-leaning publications, magazines, and blogs like the Huffington Post and Mother Jones -- published the confidential document that revealed the names, contact information, and donation amounts of anyone who had given over $5,000 to NOM.

NOM has called for immediate investigations by the Justice Department and the Treasury Department’s Inspector General to determine how HRC gained possession of this document. ...

The IG and the DOJ need to undertake their investigations with utmost seriousness, swiftness and impartiality. And they should bring criminal indictments against anyone inside or outside of the IRS found to be responsible for these abuses of federal tax power. This kind of behavior is simply unacceptable, for it threatens the liberty and freedom of Americans who want to participate in the political process.

Prior TaxProf Blog coverage:

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what a bunch of garbage. the irs should be much more involved in monitoring these supposed charitable or issue oriented tax exempts. many of them are breaking the law, like karl roves attack ads on obama coming from his "issue oriented" organization.

and before you accuse the obama administration of leaking donor information you really ought to look at how the hrc got their information. you have no idea, yet you infer it is the administration. you're not in any sense a journalist. just a big-mouth right-wing blogger under the disguise of a tax analyst.

Posted by: cowboyHoward | May 23, 2012 7:54:09 AM

"All these groups have received non-profit recognition at the state level." So...they incorporated under the non-profit rather than for-profit statute of their states. What exactly does that establish? That's just the first step in applying for federal tax exempt status and involves no state level review, other than that the correct filing fee was paid. What am I missing about the significance of this fact?

Posted by: Confused | May 23, 2012 9:03:38 AM

I'm pretty sure the contents of 990s filed by tax-exempt entities are supposed to be publicly available. In fact, the availability of the financials for public inspection is one of the interrogatories on the new 990. These reports are often available for viewing on websites like One of the conditions of receiving tax exempt status is existing for the the benefit of the public at large, and not being anyone's personal or private entity. That means public access to your activities.

So, if I understand your post, entities that exist for the public benefit are upset that the public is able to keep an eye on them, even though this is something that should have been clear to them when they decide to form a tax-exempt organization. Can you clarify how this is even a problem, or how the IRS might have done something untoward?

Posted by: DantheCPA | May 23, 2012 9:24:23 AM

This suggests to me that the confidentiality of tax returns is illusory. Suppose the head of the IRS decides he wants to make my tax return public. He can just order that it be sent anonymously to someone in the press, who can then publish it without fear of prosecution (is that the Pentagon Paper case?).
The IRS ought to have a policy that whenever someone looks at a tax return, the computer system will log their ID. Any idea whether they do? Actually, maybe they have this automatically and neither the leakers nor the Inspector General realizes that.

Posted by: Eric Rasmusen | May 23, 2012 10:56:05 AM

HRC is alleging that a government official broke the law in disclosing confidential information included in the HRC's tax return. Since that information is now in the public domain, and the publishers have implied that it came from IRS "sources" the evidence strongly suggests that a criminal violation took place. See IRC 6103.

If you don't have a problem with this, perhaps the IRS should disclose the details of your tax filings, and that of organizations you support. The headmasters the IRS could be a different slate in as little as 8 months. Politics works both ways.

Posted by: Think38 | May 23, 2012 12:29:04 PM

Disclosing which advocacy groups someone donates their money to is quite different from disclosing how much money they earn. The analogy is inapposite.

People need to understand who think tanks and other advocacy groups get their money from, so they can appropriately investigate and scrutinize the self-serving claims those groups make.

If a so called non-profit is pushing an agenda which increases the profitability or incomes of its donors, is it really a non-profit?

Should it really be entitled to special tax treatment?

Should it really be entitled to confidentiality?

How about a little more disclosure of who is trying to manipulate public opinion and how they are trying to do it.

Posted by: Anon | May 23, 2012 5:58:37 PM