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The ABCs of the IRS Scandal

May 28, 2013 by

 

 

Last Thursday, Dan Epstein, Cause of Action’s executive director appeared on WDEL’s The Rick Jensen Show to talk about the scandal surrounding  the IRS’s exempt organizations unit and recent discoveries it specifically targeted conservative organizations when applying for the tax-exempt 501(c)(4) status. Rick asked the questions and Dan dished out the answers. Here are some of the highlights:

 

Rick: There are so many people that don’t believe that using the IRS as a weapon is illegal and is a big scandal.  So what? Lots of presidents have done this. It’s not a scandal. Why should we care?

 

Dan: Actually, not a lot of presidents have done this; in fact the Internal revenue code—the whole reason why we were able to get transparency on what Nixon was doing and allegedly Johnson and Kennedy was because there’s a specific provision of the tax code that specifically authorizes the President to get tax information and he has to report that back to Congress. Cause of Action investigated this…we found that in fact even though the President had appeared to have gotten private information of certain entities he did not use the statutory mean s to do that.

 

So why should we care? We should care because:

1)       We want a President, an Administration that follows the law.

2)       It’s not just the issue of political corruption or political targeting; it’s the silencing of free expression.  When you’re a non-profit and an organization that wants to get a tax-exempt status and you apply to the IRS, part of what that IRS application and certification does… it’s the government approving you to engage in certain protected expression.  When you don’t’ approve them and when you actually are engaged in selective politicization in terms of whom you approve, you’re violating the most important  amendment in the United States Constitution, that’s the First Amendment, that’s the freedom of speech, the freedom of expression, the freedom of no government-established religion.  And when you infringe on that, you’re fundamentally infringing on something has been most key to the expression of our basic rights.

 

Rick: The Tea Party…they don’t want to pay taxes.  They should be investigated. The IRS investigating Tea Party is the right thing… the IRS is doing the right thing, right?

 

Dan: It’s actually quite ironic because the Inspector General’s report from the IRS—TIGTA actually showed that in fact if the IRS was really just concerned about groups that are doing political activity then the IRS actually was in fact under-inclusive.  In fact, most of the Tea Party groups that the IRS investigated were actually not doing any political activity and were educational or social in community-outreach organizations.  Yet in fact, there were left-of-center groups that applied for tax-exempt status that were granted it and yet clearly—according to the Inspector General—were engaging in political activity.

 

So if anyone needs to be audited, if anyone need s be investigated, it’s not the majority of the Tea Party groups, it’s the left-of-center groups. And in fact the person is incorrect because the Inspector General, the government official who investigated this stated that as a matter of fact most of these Tea Party groups were not interested in engaging in policy.

 

Rick: Asking some group to answer a few questions is not intimidating. These Tea-Party people they’re just whining and trying to make something out of nothing.  Big deal- you have to answer a few questions. How the heck can that be intimidating or harassment?

 

Dan: There are a number of issues there. It’s not just as if they’re asking a few questions.

 

1)      They’re asking for in many cases, disclosure of donors, disclosure of contributors, and in other cases they’re asking specific questions that relate to how you would answer certain political questions.  So the IRS has no authority to do those types of things. The IRS does not actually have the authority to respectively use the examinations process as an audit process.

2)       It merely wasn’t just a few questions, because in other instances, the IRS actually conducted audits which are a costly enterprise- you have to hire lawyers.  Most organizations have to hire lawyers anyways to apply for an exempt status… it’s not just a question of having to deal with questions, its having to deal with questions that very much take the posture  of an investigation, or as we now know, were actual audits.

 

Rick:  Regarding the disclosure of donors and contributors to these groups we (the public) want to know who’s funding these groups and who’s behind them and behind this. [Shouldn’t the IRS be investigating this?]

 

Dan: When you’re applying for exempt-status as a  501(c)(4) which is basically a social-welfare organization, what the IRS is trying to determine is in fact,  should you be a 501(c)4 or should you be a section 524 – a Political Action Committee (PAC)?  That’s really what the examination process is geared towards.  It has nothing to do with donors.  It has everything to do with what is the evidence that you’re going to be engaging in social welfare activities verses pure politics.

 

Rick: What’s with the IRS sending the names of donors to the media? When you actually send these names illegally to a group like ProPublica they can use the list of these names against them in public.

 

Dan: What the IRS did in disclosing those lists to ProPublica is illegal. Imagine if the IRS was to take any of our tax returns and just give it to a news organization. That is a violation of law.

 

Rick: So the question is…. these phony retirements. You’ve got two people who are going to retire anyway, and Obama is saying, “Okay we fixed it, we’re retiring them early.”  So who goes to jail?

 

Dan:  What we know is that so far, the only things that have happened from the criminal side is that Attorney General Holder has asked the FBI to investigate.  Congress doesn’t have the authority to recommend prosecution.  It looks like the claim is that these were just a few rogue employees.  The likelihood is that the FBI will find no criminal wrongdoing, that’s typically what happens with these types of issues.  It may just be a slap on the wrist.

 

Rick: Is it a problem that Eric Holder is in essence investigating himself, recusing himself and saying, “I may be a whistleblower myself”?  Should we have a special prosecutor?  Who oversees Holder?

 

Dan: I think we need to do one of a few things:

1)      Congress either needs to set up a special committee to investigate the IRS –which it can do and empower through emergency legislation— it can either make it an Article 1 Committee, which is legislative or it can make it an executive branch committee and give it prosecutorial power.  Congress has the authority to do that.

 

2)      What can happen (and this likely not to happen) is that the Attorney General, or if he has a conflict of interest, the Deputy Attorney General could appoint an Independent Counsel or a Special Counsel which would actually have much of the prosecutorial authority as the Attorney General himself.

 

3)      In any of these legal cases that have now been filed, whether the case in Ohio or the case filed in the U.S. District Court for the District of Columbia – in either of these cases, a judge (based off the necessity of fact gathering) can appoint an Independent Prosecutor and assign an Independent Counsel to prosecute these issues.  A federal judge has the opportunity to recognize the importance of independence here.

 

For more information on Cause of Action’s investigation into the IRS click here.

 

Filed Under: Blog Tagged With:

CoA Applauds Hatch-Baucus Letter to IRS

May 21, 2013 by

Cause of Action applauds the joint effort of Ranking Member Hatch and Chairman Baucus of the Senate Finance Committee for seeking the facts from the IRS.

“Targeting applicants for tax-exempt status using political labels threatens to undermine the public’s trust in the IRS,” the letter stated.

Read the full letter here: Hatch-Baucus Letter to IRS

 

 

Filed Under: Press Release Tagged With:

FOIA request to the IRS regarding policies and practices concerning applications for 501(c)(4) status

May 17, 2013 by

FOIA Request

CoA requests access to the following records pertaining to the Internal Revenue Service’s (IRS) Exempt Organization (EO) Division for the time period January 1, 2009 to the present:

 

  1.  Copies of any criteria that the IRS Cincinnati Service Center has used to assess applicants for 501(c)( 4) status;
  2.  Communications from the Treasury Inspector General for Tax Administration (TIGTA) to the EO Division concerning any audit or investigation conducted of the EO Division;
  3. Copies of any Form 990 Schedule B (Schedule of Contributors) released by the IRS to a third party in response to a Freedom of Information Act (FOIA) request, as well as copies of the IRS’s FOIA response letter to that request;
  4. All records, including documents and emails, relating or referring to any disclosure of an exempt organization’s Form 990 Schedule B to any employee, contractor or officer of the Executive Office of the President, excluding any such records disclosed pursuant to 26 U.S.C. § 6103(c) or 26 U.S.C. § 6103(g);
  5. All records, including documents and emails, referring or relating to any request from the President, Vice President, Cabinet official, employee in the Executive Office of the President, or employee in the Executive Office of the Vice President to any officer or employee of the IRS to conduct an audit or other investigation of any particular taxpayer; and a. If any requests are located in response to this item, then all communications between the IRS and TIGTA concerning those requests.

Click Here for the full request

Related work on the IRS:

FOIA Freak-Out: IRS Wrongly Denies FOIA Request, Comes Unglued Over Media Response

Cause of Action letter to the U.S. Attorney Kerry Harvey requesting an investigation of the IRS and their employees in the IRS Cincinnati Service Center in Kentucky for potential violations of the law concerning conspiracy by singling out organizations based on political views stated in their tax-exempt applications.

IRS Is At Risk of Conspiracy

Filed Under: Investigation Tagged With: , ,

FoxNews.com: Dan Epstein: Does the IRS believe that support for Israel is support for terrorism?

May 16, 2013 by

Does the IRS believe that support for Israel is support for terrorism?

By Dan Epstein   Published May 16, 2013   

In the wake of recent scandal arising from the Internal Revenue Service’s (IRS) targeting of social welfare groups for their political beliefs, little has been said about the fact that the IRS also scrutinized several pro-Israel organizations, including Z Street, an organization that applied for 501(c)(3) status.

According to Politico, Z Street was targeted by the IRS because “applications mentioning Israel were getting special attention.”

Another group was asked by the IRS, “Does your organization support the existence of the land of Israel?  Describe your organization’s religious belief system towards the land of Israel.”

The supposed justification for such questions: “the government shouldn’t bestow a benefit on an individual or organization engaged in illegal activity like terrorism.”

It’s not merely problematic that the IRS’ questions are woefully under-inclusive with regards to preventing the funding of terrorism – indeed they simply equate being in support of Israel (Zionism) as terrorism, which is less a statement about concerns against promoting terrorism than a reflection of patent anti-Semitism.

These questions are also overly inclusive to the degree of violating protected expression, hinting that the IRS sought to discriminate against those groups that held certain religious beliefs – whatever the form.  (If there’s any question as to the anti-Semitism here, simply look at Jeffrey Goldberg’s tweet on a recent Al Jazeera article which equates Zionism with anti-Semitism).

But government myopia has lurked behind state-sanctioned discrimination throughout history.

To illustrate, Jon Waddell, manager of the IRS’s Exempt Organizations Determinations Group stated “Israel is one of many Middle Eastern countries that have a ‘higher risk of terrorism’… A referral… is appropriate whenever an application mentions providing resources to organizations in a country with a higher risk of terrorism.” Higher risk compared to whom? Libya? Afghanistan?

The idea that supporting Israel is equitable to supporting terrorism is not only racist, it’s false.

The State Department has designated only four countries to be “State Sponsors of Terrorism” – Cuba, Iran, Sudan, and Syria — and in its most recent report on Mideast terrorism, Israel was identified by the State Department as “a resolute counterterrorism partner in 2011.”

Far from being a country whose support constitutes a higher risk of terrorism, the State Department holds the opposite: “Israel faced terrorist threats from Hamas, the Popular Resistance Committees, and Palestinian Islamic Jihad (PIJ), particularly from Gaza but also from the West Bank, and from Hizballah in Lebanon.”

No citizens of Israel are listed on the FBI’s terrorism watch list, but the majority of those who are listed share one thing in common: being anti-Israel.

The idea that the IRS’s targeting of American pro-Israel groups had any sound basis in public policy is not only inaccurate, but has never been justified by U.S. policy, and hopefully never will be.

To give a sense of why the IRS’s anti-Semitism is also dangerous as a policy matter, consider those groups and funding schemes that the IRS has failed to scrutinize in the name of public policy.

On May 30, 2010, the Freedom Flotilla, led by the pro-Hamas Free Gaza Movement, incited violence and the death of nine people in an attempt to defy Israeli law.

The flotilla was funded by the Free Gaza Movement,  which is a project that the IRS has allowed to receive tax-deductible contributions through an IRS-approved financial sponsor, the American Educational Trust, a 501(c)(4) based in Washington, D.C. Apparently fundraising for enemies of the United States is not the type of red flag that concerns the IRS.

Indeed, as another example, consider that the International Solidarity Movement, which has ties to Hamas and Islamic Jihad, receives tax-deductible contributions through its financial supporter, the A.J. Muste Memorial Institute, an IRS-designated 501(c)(3) charity.

So we have an IRS that willfully prevents the free exercise of American groups that support a country that has been a “resolute counterterrorism partner” of the United States since its inception and yet an IRS that has supported entities which have funded the pro-terrorism Free Gaza Movement and International Solidarity Movement.

If only this was a regrettable moment of anti-Semitism in the country with the world’s oldest Constitution committed to liberal democracy.  But, sadly, it presents a much deeper problem: an administration that has convinced its agencies that violating freedom in contexts that have no rational relationship to the prevention of terrorism, is, indeed, good policy for America.

Dan Epstein, executive director, Cause of Action, a non-profit, nonpartisan government accountability organization.

Filed Under: News Tagged With:

CoA Letter Requesting Investigation of IRS Violations

May 14, 2013 by

Cause of Action letter to the U.S. Attorney Kerry Harvey requesting an investigation of the IRS and their employees in the IRS Cincinnati Service Center in Kentucky for potential violations of the law concerning conspiracy by singling out organizations based on political views stated in their tax-exempt applications.

RFI to USAO ED KY

 

 

Filed Under: Filing, Investigation Tagged With:

FOIA Freak-Out: IRS Wrongly Denies FOIA Request, Comes Unglued Over Media Response

May 13, 2013 by

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(Photo via Politico and BGA Think Tank)

A little-known provision of the Internal Revenue Code, IRC § 6103(g), allows the President of the United States to request the tax returns of any individual or business he wishes.  Concerned that the President may be asking for tax returns in order to retaliate against opponents of his administration, in March 2012 Cause of Action submitted a FOIA request to the Internal Revenue Service (IRS) seeking records of any presidential requests for these returns.  The IRS denied our request in May, citing a provision that prohibits the release of private tax return information.  Since Cause of Action asked only for any presidential requests for returns, not the returns themselves, we appealed the IRS’s decision.  When the IRS denied our appeal as well, we sued for the documents’ release while also submitting an additional FOIA request seeking communications concerning our original request.

After months of back-and-forth between Cause of Action and the IRS, in October 2012 we were stunned to learn that the documents we’d been requesting since March had never even existed!  According to the IRS Office of Disclosure, since the law’s inception in 1976 no president had ever requested tax returns through § 6103(g).  Why it took the IRS seven months to disclose this important bit of information, plus a bona fide freak-out by IRS Counsel and Disclosure staff, is revealed in the following documents [Large file warning] received by Cause of Action in March 2013.

Take a look at these excerpts from an e-mail between Tax Law/ FOIA Specialists Valerie Barta and Janice Rudolph, dated May 21, 2012:

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Ms. Rudolph agreed, concluding that Cause of Action was not privy to information regarding presidential requests for tax returns.  Note that these specialists appeared to operate under the assumption that the records did, in fact, exist.

Cause of Action eventually filed suit on October 2, prompting immediate finger-pointing in the IRS’ FOIA division:

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Ms. Barta’s response is telling:

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Way to throw a colleague under the bus, Val.  Ms. Barta and Ms. Rudolph both seemingly failed to inform management why they denied Cause of Action’s request or to convey the seriousness with which we threatened to take legal action.  In fact, it appears that the two neglected to conduct a due diligence review of potentially responsive documents, instead relying on poor legal reasoning to prop up their contention that the documents would be exempt from disclosure.  After we filed suit, IRS analyst David Nimmo returned to the issue and made a surprising discovery.

An excerpted e-mail from the afternoon of October 2:

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Forgive us for feeling a little miffed that the IRS didn’t research this issue with Counsel before denying both our request and appeal.  And since it took Mr. Nimmo a matter of hours to ascertain that no records existed, what exactly prevented Ms. Barta and Ms. Rudolph from conducting that most basic of searches five months previously?

Counsel’s research soon yielded an answer to whether the denial was done in error.

Senior Technician Reviewer Don Squires on October 3:

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Counsel A.M. Gulas:

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And Chief of Disclosure Gary Prutsman:

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With it now established that the IRS had erred in denying our request, one would expect the agency to confess its mistake and quickly contact us to remedy the situation.  But with journalists now asking questions, the IRS was hesitant to admit it had acted wrongly.  In fact, all the press attention caused a bit of an office-wide freak-out.

Disclosure Chief John Davis responding to our press release and the resulting media inquiries on October 3:

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Counsel A.M. Gulas after the Washington Examiner published a piece on October 4:

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As the flames climbed higher, IRS firefighters worked to douse the blaze before it consumed their agency’s reputation:

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Counsel Sarah Tate came up with a creative way to spin their original denial:

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If that explanation sounds largely incomprehensible, that’s because it is.  By this point the IRS was grasping for any justification that would allow them to avoid responsibility for their error.  In the process, they wasted a tremendous amount of employee time and taxpayer dollars defending themselves in a pointless battle they could have easily avoided some months previously.

As we often do, Cause of Action alerted media when we filed our lawsuit against the IRS for refusing to disclose presidential requests for tax returns.  After Politico and the Washington Examiner ran stories, media began questioning the IRS for a response.  Although Cause of Action had been in contact with the IRS regarding our FOIA request and appeal for months, they only revealed that no documents existed to the Washington Examiner and the Washington Free Beacon.  IRS officials apparently do not respect the FOIA process or even the judicial system, but instead will cave to media scrutiny.

After finally receiving written confirmation in late November that no responsive documents existed, Cause of Action dismissed the lawsuit on December 5; by that time, however, the damage had already been done.  Because two FOIA analysts failed to undertake a simple search and instead relied on their own inadequate legal analysis, Cause of Action and the IRS were both forced to spend time and money on needless litigation.  Even after it became clear no records existed, the IRS continued to obsessively protect its reputation rather than admit its error and move forward.  Unfortunately, it appears that one must sue to ensure that IRS analysts conduct searches with the diligence and oversight that FOIA demands.

 

Filed Under: Blog Tagged With: ,

Cause of Action: IRS Is At Risk of Conspiracy

May 10, 2013 by

FOR IMMEDIATE RELEASE                                                                                                 

May 10, 2013

 

Cause of Action: IRS Is At Risk of Conspiracy

WASHINGTON – Cause of Action (CoA), a government accountability organization, today called for transparency and accountability in light of reports that IRS official Lois Lerner admitted that the “Internal Revenue Service inappropriately flagged conservative political groups for additional reviews during the 2012 election to see if they were violating their tax-exempt status,” according to the Associated Press.

Executive Director of Cause of Action, Dan Epstein responded:

“Cause of Action has spent over a year investigating how the IRS monitors tax-exempt groups and what type of access the President has to individuals’ and businesses’ tax return information. As a new 501 (c)(3)  organization, we know firsthand that this IRS office in Cincinnati processes a high volume of, if not all, tax-exempt applications, and therefore this is not a low-level office in terms of accountability in regard to tax-exempt applications. In light of the alleged confessions by the IRS employees of singling out different non-profit groups for review on the basis of political beliefs, the IRS is at risk of being guilty of conspiracy. The IRS has admitted that some undisclosed number of its employees conspired to target taxpayers based solely on their political views, and then subjected them to differential standards of review, all apparently to injure, oppress, threaten or intimidate their members.

We call on Congress, the Department of Justice, and the U.S. Attorney’s Office for the Southern District of Ohio to take seriously these claims of what can at the least be called misconduct and at the worst constitutes a violation of law by taxpayer-funded government employees.

The politicization of federal agencies must not be allowed to stand, the full matter of facts must come to light, and the leadership of the IRS must answer for this incredulous behavior that has betrayed the trust of the American people.”

To see more information on Cause of Action’s work investigating the IRS, click here.

 

Filed Under: Press Release Tagged With: