Defenders of the IRS’s harassment of Tea Party groups and other conservative and free-market 501(c)(4) groups continue to defend what the IRS did based on ridiculous, patently false assertions about the law and the facts surrounding the IRS’s scrutiny of those groups. A classic example is today’s letter in the Washington Post by Kathleen P. Hunter of Washington. She misstates the entire focus of the IRS’s scrutiny of conservative groups. That scrutiny mostly involved 501(c)(4) groups, which are allowed to be political (under IRS rules, they can lobby all day long, and even get involved in elections as long as that is not most of what they do), rather than 501(c)(3) groups, which can’t meddle in elections at all because people can claim a tax deduction for contributions to 501(c)(3)’s (501(c)(3)’s are allowed to engage in some lobbying, though). She also claims that 501(c)(3) groups are “social welfare groups,” when anyone can read the statute in question and see that “social welfare groups” are a type of 501(c)(4) group, not a 501(c)(3) group. She nonsensically implies that they have to be a welfare-rights group or minority-interest group, even though the statute expressly describes such groups to include “civic leagues or organizations not organized for profit.”
In “Impeaching John Koskinen Isn’t the Answer,” she writes:
Lois Lerner was not “suppressing political advocacy” of conservative groups. As exempt-organizations director, her job was to administer tax law determining whether applicants met requirements for 501(c)3 status; people who contribute to them can claim a deduction on their income tax returns. Social-welfare groups and organizations that advocate the welfare of specific groups — e.g., accommodations for the disabled — are eligible for 501(c)3 status. “Political advocacy” groups are not.
Using the word “scandal” to describe administration of tax law in this instance is indicative of flawed comprehension of the law; the result is a complete misrepresentation. If George F. Will wishes to contribute to the campaigns of candidates he finds worthy, he is free to do so, but he can’t shelter the sums he gives from income tax.
This is just an ignorant (or dishonest) misrepresentation on Kathleen Hunter’s part, as court rulings against the IRS prove.
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As the U.S. Court of Appeals for the Sixth Circuit emphasized in ruling against the IRS in a lawsuit over its targeting of Tea Party groups (NorCal Tea Party Patriots v. IRS (2015)), the non-profits targeted by the IRS included 501(c)(4) groups, which are allowed to be political:
Tax-exempt 501(c)(4) groups may not collect tax-deductible donations, but they may engage in relatively unfettered political advocacy, including election advocacy. 501(c)(4) groups range from national organizations—including the American Civil Liberties Union, the National Rifle Association, and the Sierra Club—to local neighborhood associations.
Among the most serious allegations a federal court can address are that an executive agency has targeted citizens for mistreatment based on their political views. No citizen—Republican or Democrat, socialist or libertarian —should be targeted or even have to fear being targeted on those grounds. Yet those are the grounds on which the plaintiffs allege they were mistreated by the IRS here. The allegations are substantial: most are drawn from findings made by the Treasury Department’s own Inspector General for Tax Administration. Those findings include that the IRS used political criteria to round up applications for tax-exempt status filed by so called tea-party groups; that the IRS often took four times as long to process tea-party applications as other applications; and that the IRS served tea-party applicants with crushing demands for what the Inspector General called “unnecessary information.”
Instead of processing these applications in the normal course of IRS business, as would have been the case with other taxpayers, the IRS selected out these applicants [True the Vote, Inc. and Linchpins of Liberty] for more rigorous review on the basis of their names, which were in each instance indicative of a conservative or anti-Administration orientation[…. This] was admitted by the Department of Treasury in the 2013 report of the Treasury Inspector General for Tax Administration (TIGTA).
As I explained earlier,
nonprofits are not forbidden to be “political,” and of those that are “political,” the vast majority are liberal. Yet, according to NPR, the list of targeted groups was “top-heavy with conservative groups”: “282 conservative groups were on the IRS list, about two-thirds of the total number of groups that got additional scrutiny.”
Moreover, [fear] about “subsidizing political groups” [was] no basis [for the IRS’s scrutiny], because the targeting scandal involved 501(c)(4) groups, not 501(c)(3) groups. Contributions to 501(c)(4) groups are not tax-deductible, and in exchange for this loss of a valuable tax benefit, they are permitted to be quite political, although IRS rules say they cannot be predominantly engaged in elections (as opposed to activities like lobbying).
By contrast, donations to 501(c)(3) groups are tax-deductible, and in exchange, they cannot endorse political candidates at all, and are sharply limited in the amount of lobbying they do. But nothing stops a 501(c)(4) like a Tea Party group from lobbying all day long for legislation it believes to be in the public interest. That is perfectly legal under both the tax laws and the IRS regulations, and the IRS thus had no basis for holding up their applications for 501(c)(4) status. As a lawyer notes in a comment at this link, …“There is no such subsidy to 501(c)(4) groups, because they — unlike 501(c)(3)’s — can’t receive tax-deductible contributions, as the Supreme Court made clear in Regan v. Taxation with Representation (1983).”
