IRS Delays for Conservative Groups Greater Than Reported Initially

New details were released this week on the IRS programs involved in requiring conservative groups to undergo additional levels of scrutiny to obtain tax-exempt status, which made it clear the extent of the treatment was far more extreme than first reported.

A report from the Treasury Inspector General for Tax Administration found that the IRS began to single out conservative organizations at least as early as 2010 when the first formal list of keywords related to conservative organizations was distributed within the IRS in August.

The IRS was able to carry out the unfair treatment because of a lack of oversight by management and clear definitions of criteria for selecting organizations subject to audit.  The additional levels of scrutiny led to more than 80 percent of the conservative organizations having to wait for more than a year to find out if they were approved for tax-exempt status.  Some organizations were under review for as long as three years.

The organizations subject to the year-plus delay included the Tea Party.

The Treasury Inspector General’s report noted that “as of December 17, 2012, many organizations had not received an approval or denial letter for more than two years after they submitted their applications.  Some cases have been open during two election cycles (2010 and 2012).”

The timing of the delays across election cycles is especially incriminating as it appears that those responsible for the criteria were seeking to prevent the conservative organizations from effectively supporting conservative candidates in the elections.

The report continued, noting “in addition [that] some organizations withdrew their applications and others may not have begun conducting planned charitable or social welfare work.  The delays may have also prevented some organizations from receiving certain benefits of the tax-exempt status.”

On Tuesday, Attorney General Eric Holder announced that the Justice Department will be conducting a thorough investigation of the IRS’ unfair treatment of conservative organizations.

Details in the Treasury Inspector General’s report included other details about the mis-managed criteria, specifically points that allowed the IRS to request information about donors to conservative organizations.  Until the IRS first revealed this practice on Friday, it had been believed that requesting donor information from an organization applying for tax-exempt status was illegal.

The fact that conservative organizations had to provide donor information to the IRS likely impacted fundraising for those organizations, as potential donors chose to avoid having their charitable contributions subject to the increased level of scrutiny aimed at such organizations.

The IRS claimed initially that the delays and targeting of conservative organizations was limited to the Cincinnati office.  However, additional documentation released with the Treasury Inspect General’s report indicated the effort was broader in nature.

Representatives from both parties have denounced the practice, referring to it as a “state of purgatory” for conservative organization who were within their right to apply for and obtain tax-exempt status.

“We still do not know why the targeting began, how extensive it was, who initiated it and who knew about it. The IRS must be held accountable to the American people, which requires a full investigation of the circumstances surrounding the facts established in this audit,” noted Representative Jim Jordan of Ohio.

by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.