Treasury Inspector General for Tax Administration, Status of Actions Taken to Improve the Processing of Tax‑Exempt Applications Involving Political Campaign Intervention:
In a prior audit, TIGTA found that ineffective management resulted in 1) inappropriate criteria being used to identify for review organizations applying for tax-exempt status based on names and policy positions instead of indications of political campaign intervention, 2) substantially delayed processing of certain applications, and 3) unnecessary information requests being issued. Recommendations from the prior audit were made to help ensure that applications for tax-exempt status are processed in a fair, impartial, and timely manner.
The overall objective of this audit was to assess the IRS’s actions in response to TIGTA’s recommendations to improve the identification and processing of applications for tax-exempt status involving political campaign intervention.
The IRS has taken significant actions to eliminate the selection of potential political cases based on names and policy positions, expedite processing of Internal Revenue Code (I.R.C.) Section (§) 501(c)(4) social welfare organization applications, and eliminate unnecessary information requests.
First, the IRS eliminated the use of Be On the Look Out (BOLO) listings, which TIGTA determined had contained inappropriate criteria regarding political advocacy cases. TIGTA conducted interviews with a random sample of employees, who confirmed that BOLOs or similar listings were no longer being used.
Second, the Exempt Organizations function completed processing for 149 of the 160 applications for tax-exempt status that, as of December 2012, had been open for lengthy periods. To expedite processing of I.R.C. § 501(c)(4) social welfare applications, the IRS developed an optional expedited self-certification process. This expedited process is not available to other types of organizations, e.g., labor organizations and business leagues, with similar political campaign intervention limitations.
Third, the IRS has developed preapproved questions and has instituted a quality review process to provide better assurance that unnecessary information requests are not sent to applicants.
The Department of the Treasury is revising draft guidance to address how to measure the “primary activity” of social welfare organizations. Until this guidance is finalized, the IRS does not have a clearly defined test for determining whether an organization’s request for exemption as a social welfare organization should be approved. As a result, for those applicants not choosing the optional expedited process, the IRS continues to use a subjective facts and circumstances process.
Bloomberg, IRS May Be Trying to Stop Tax Exemption of Karl Rove’s Crossroads GPS:
The IRS may be trying to block the tax exemption of one of the largest politically active nonprofit groups, Crossroads Grassroots Policy Strategies, an organization founded by Republican strategist Karl Rove.
The oblique disclosure can be found between the lines of an inspector general’s report released on Thursday, which said that 149 of 160 cases that had been stalled have been resolved. Of the other 11, six are in litigation with the IRS -- which Crossroads isn’t -- and the other five have received proposed denial letters or are appealing.
That suggests that the Internal Revenue Service has sent Crossroads a denial letter. Crossroads is one of the most politically involved nonprofit groups, and its bid for tax exemption is being closely watched by campaign-finance lawyers. ...
Crossroads applied for its tax exemption in September 2010.
Documents previously released by the House Ways and Means Committee showed that the IRS was drafting a denial letter to Crossroads in 2013, just before news broke of the controversy of the agency’s treatment of conservative groups.
Those documents list Crossroads among Tea Party groups that were being held up by the IRS and show that Lerner, the former IRS director of exempt organizations, was directly involved in asking about the group’s application.
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