They participated in an array of political activities that could warrant closer IRS review.
When CVFC, a conservative veterans’ group in California, applied for tax-exempt status with the Internal Revenue Service, its biggest expenditure that year was several thousand dollars in radio ads backing a GOP candidate for Congress.
The Wetumpka Tea Party, from Alabama, sponsored training for a get-out-the-vote initiative dedicated to the “defeat of President Barack Obama” while the IRS was weighing its application.
And the head of the Ohio Liberty Coalition, whose application languished with the IRS for more than two years, sent out e-mails to members about Mitt Romney campaign events and organized members to distribute Romney’s presidential campaign literature.
Representatives of these organizations have cried foul in recent weeks about their treatment by the IRS, saying they were among dozens of conservative groups unfairly targeted by the agency, harassed with inappropriate questionnaires and put off for months or years as the agency delayed decisions on their applications.
But a close examination of these groups and others reveals an array of election activities that tax experts and former IRS officials said would provide a legitimate basis for flagging them for closer review.
“Money is not the only thing that matters,” said Donald B. Tobin, a former attorney with the Justice Department’s tax division who is a law professor at Ohio State University. “While some of the IRS questions may have been overbroad, you can look at some of these groups and understand why these questions were being asked.”
The stakes are high for both the IRS and lawmakers in Congress, whose election fortunes next year will hinge in no small part on a flood of political spending by such advocacy groups. They are often favored by strategists and donors not for the tax benefits — they typically do not have significant income subject to tax — but because they do not have to reveal their donors, allowing them to pour hundreds of millions of dollars into elections without disclosing where the money came from.
The IRS is already separately reviewing roughly 300 tax-exempt groups that may have engaged in improper campaign activity in past years, according to agency planning documents. Some election lawyers said they believed a wave of lawsuits against the IRS and intensifying congressional criticism of its handling of applications were intended in part to derail those audits, giving political nonprofit organizations a freer hand during the 2014 campaign.
After the tax agency was denounced in recent weeks by Obama, lawmakers and critics for what they described as improper scrutiny of at least 100 groups seeking IRS recognition, the New York Times examined more than a dozen of the organizations, most of them organized as 501(c)(4) “social welfare” groups under the tax code, or in some cases as 501(c)(3) charities. None ran major election advertising campaigns, according to the Campaign Media Analysis Group, the main activity of a small number of big-spending tax-exempt groups that emerged as major players in the 2010 and 2012 elections.
But some organized volunteers, distributed pamphlets and held rallies leading up to the 2010 elections or the 2012 presidential election, as conservatives fought to turn out Obama.
Inspector general’s report
A report issued this month by the Treasury Department’s inspector general, J. Russell George, found that inappropriate criteria, including groups’ policy positions, were used to flag some cases and that specialists in the IRS office in Cincinnati, which reviews all tax-exemption requests, sometimes asked questions that were irrelevant to the application process.
And agency officials have acknowledged that specialists inappropriately used keywords like “Tea Party” and “Patriots” in searching through applications.
But some former IRS officials disputed several of George’s conclusions, including his assertion that it was inappropriate to ask groups about their donors, or whether their leaders had plans to run for public office. While unusual, the former officials said, such questions are not prohibited if relevant to an application under consideration.
“The IG was as careless with terminology as the Cincinnati office was,” said Marcus S. Owens, who headed the IRS’ exempt organizations division until 2000. “Half of those questions have been found to be germane in court decisions.”
IRS agents are obligated to determine whether a 501(c)(4) group is primarily promoting “social welfare.” While such groups are permitted some election involvement, it cannot be an organization’s primary activity. That judgment does not hinge strictly on the proportion of funds a group spends on campaign ads, but on an amorphous mix of facts and circumstances.
“If you have a thousand volunteer hours and only spend a dollar, but those volunteers are to help a particular candidate, that’s a problem,” Tobin said.