Paul L. Caron

Thursday, May 7, 2015

The IRS Scandal, Day 728

IRS Logo 2Wall Street Journal editorial, The IRS Goes to Court:

The agency suggests it can discriminate for 270 days. Judges gasp.

It isn’t every day that judges on the D.C. Circuit Court of Appeals declare themselves “shocked.” But that happened on Monday when an animated three-judge panel eviscerated the IRS and Justice Department during oral argument in a case alleging the agency delayed the tax-exempt application of a pro-Israel group due to its policy views.

In December 2009, Pennsylvania-based Z Street applied for 501(c)(3) status to pursue its pro-Israel educational mission. In July 2010, when the group called to check on what was taking so long, an IRS agent said that auditors had been instructed to give special attention to groups connected with Israel, and that they had sent some of those applications to a special IRS unit for additional review.

Z Street sued the IRS for viewpoint discrimination (Z Street v. Koskinen), and in May 2014 a federal district judge rejected the IRS’s motion to dismiss. The IRS appealed, a maneuver that halted discovery that could prove to be highly embarrassing. Justice says Z Street’s case should be dismissed because the Anti-Injunction Act bars litigation about “the assessment or collection of tax.” Problem is, Z Street isn’t suing for its tax-exempt status. It’s suing on grounds that the IRS can’t discriminate based on point of view.

The three judges—Chief Judge Merrick Garland,David Tatel and David Sentelle—were incredulous. You say they want a tax exemption, but that’s not the complaint, Judge Sentelle admonished government lawyer Teresa McLaughlin: “They are not in court seeking to restrain the assessment or collection of a tax, they are in court seeking a constitutionally fair process.”

The suit should also be foreclosed, the government argued, because under Section 7428(b)(2) of the Internal Revenue Code groups may sue to obtain their tax-exempt status if no action has been taken for 270 days, and that should be an alternative to Z Street’s approach.

“You don’t really mean that, right? Because the next couple words would be the IRS is free to discriminate on the basis of viewpoint, religion, race [for 270 days]. You don’t actually think that?” Judge Garland said. “Imagine the IRS announces today a policy that says as follows: No application by a Jewish group or an African-American group will be considered until one day short of the period under the statute . . . Is it your view that that cannot be challenged?”

The judges also asked why the government had buried the key precedent in a footnote in its brief. In Direct Marketing Association v. Brohl, the Supreme Court decided that the language of the Anti-Injunction Act did not preclude cases like Z Street’s. In a previous case before the D.C. Circuit, Judge Garland noted, the court also “rejected” the exact arguments the government was making, “so in a way we have already decided every issue before us today, against you.” ...

The Beltway media may be bored, but the IRS scandal is a long way from over.

IRS News, IRS Scandal, Tax | Permalink


Does Rule 11 apply against government agencies? It sounds as if the IRS has no plausible legal basis, and didn't make the argument that existing precedent should be changed.
Also: Is it legitimate use of discretion for a trial judge to say, "I am not going to let you make an interlocutory appeal because you have a track record of making frivolous appeals and using delaying tactics? In this case, I guess the trial judge had to permit the interlocutory appeal (I could be wrong), so maybe per se it's not sanctionable, but it does seem the trial judge should have denied the motion.

Posted by: Eric Rasmusen | May 8, 2015 7:39:38 AM

Skip, they aren't even disinterested. They are actively covering for Obama's use of the IRS as a weapon against his political enemies. Nixon is kicking his coffin in jealousy...

Posted by: Andrew Russell | May 7, 2015 10:04:23 AM

Democrat groups only have to turn in an application and get rubber stamped. Non-Democrat groups are expected to go through several rounds of illegal questions, wait years for no reason other than not being Democrat, and according to the Obama administration, sue the government. Those are a lot of hoops to jump through, at great expense in time and money, just for the Obama administration to do its job.

Also, the article states IRS agents were ordered to do this, by who?

Posted by: wodun | May 7, 2015 9:32:01 AM

Anybody think the IRS care what a bunch of courts have ruled? They certainly dont care about their obligations to congress.

Posted by: MB | May 7, 2015 9:02:56 AM

The media aren't bored, they're disinterested.

Posted by: Skip | May 7, 2015 8:21:04 AM