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August 20, 2013
Conservative Groups Still May Be Getting Secondary Screening
by Fred Stokeld and David van den Berg

Full Text Published by Tax Analysts®

This document originally appeared in the August 19, 2013 edition of Tax Notes.

By Fred Stokeld -- and
David van den Berg --

Three months after an uproar erupted regarding the IRS's mishandling of conservative organizations' exemption applications, the agency still appears to be subjecting Tea Party groups to extra scrutiny, according to House Ways and Means Committee majority staff.

Ways and Means staff members who are investigating the IRS's treatment of conservative groups interviewed an agent from the Cincinnati determinations unit on August 1. According to portions of a transcript reviewed by Tax Analysts, the agent was asked how the IRS is handling applications from organizations that might take part in political advocacy. The agent responded that because the IRS has stopped using its "be on the lookout" (BOLO) list designed to single out applications for further review, he would discuss such a case with his manager, adding, "We really don't have any direction, or we haven't had any for the last month and a half."

In response to a follow-up question, the agent said if he were assigned a Tea Party case with no evidence of political activity, he still would send it to secondary screening "based on my current manager's direction."

A Ways and Means staffer familiar with the investigation told Tax Analysts that the agent's remarks suggest that IRS screeners in Cincinnati have no direction since the BOLO list was discontinued and that it appears Tea Party groups are still receiving extra scrutiny. The staff member said that there are legitimate reasons for a BOLO list -- screening out terrorist or criminal organizations, for example -- provided that inappropriate criteria based on organizations' ideological leanings are not used. The IRS decision in June to suspend the BOLO list instead of removing the inappropriate criteria will not necessarily fix the problem, the staffer said.

House Ways and Means Committee Chair Dave Camp, R-Mich., appearing August 9 on Fox's Your World, asserted that the IRS is still targeting Tea Party groups despite ending the use of the BOLO list. "This is the first that we've heard they were continuing to send cases for extra scrutiny just because they had Tea Party in the name," Camp said. "That's what started this whole thing off. That's what's wrong. Americans shouldn't be harassed because of how they express their political views."

In a statement, the IRS said it has taken decisive action to eliminate the use of inappropriate political labels in the screening of applications for section 501(c)(4) status and that it has eliminated the use of BOLO lists. IRS policy is now clear that screening is based on activity, not words in a name, the statement said, noting that new steps and current policies were outlined in an IRS report released June 24 that says political campaign intervention will be reviewed without regard to specific labels. (Prior coverage: Tax Notes, July 1, 2013, p. 28.)

"The IRS will not tolerate any deviation from this," the statement said. The IRS said that it looks forward to seeing the full transcript to gain a more complete understanding of the interview's context.

Ways and Means ranking minority member Sander M. Levin, D-Mich., later released additional portions from the interview and accused Republicans of selectively releasing excerpts. In the excerpt Levin released, the IRS agent said he brings cases to his manager to ensure compliance with the new determinations standards. "I want to make sure I do the right thing when I am looking at a case. I would want to make sure that it is handled according to EO Determinations policy," the agent said.

"House Republicans are at it again trying to twist the facts to fit their political narrative," Levin said. "This particular screener is not singling out applications but rather sending all potential political advocacy cases for secondary screening out of an abundance of caution. The Republicans should stop trying to distort facts to gain a political advantage and instead focus on fixing the 501(c)(4) guidance problem."

Practitioner Reaction

Responding to an earlier report in The Washington Examiner and the partial transcript posted with it, two practitioners and a professor told Tax Analysts that further information was needed.

Ellen P. Aprill, a professor at Loyola Law School in Los Angeles, said it was unclear from the interview whether the IRS was singling out just conservative groups.

James K. Hasson Jr. of Sutherland Asbill & Brennan LLP said the IRS agent's comments show that the IRS determinations unit remains in a state of uncertainty. "The IRS website very clearly has the agency's workplan spelled out, and it has a target date of January 31, 2014, for the completion of the development of new policies and procedures to follow in dealing with applications from organizations claiming section 501(c)(4) status," Hasson said.

Based on the agent's statements, Hasson said, the Ways and Means Committee staff member asking the question didn't do enough to make it clear what that uncertainty is and why it remains.

Regarding the IRS's current determinations practice as described by the IRS agent, Hasson said, "It may make perfectly good sense for certain cases to be reviewed by more senior or experienced IRS personnel than the individual being interrogated." He added, "Of course, that review should be based on factual information concerning the applicant organization's intended activities, not its name or political orientation."

Elizabeth J. Kingsley of Harmon, Curran, Spielberg + Eisenberg LLP said that at times the testimony seemed to indicate organizations were being flagged for further screening just for having the term "Tea Party" in their names, even absent any indications of political activity. That's unlikely if the IRS has stopped using BOLO lists, she said.

"At other times, it seems to be saying that applications that look like Tea Party cases, that is, those with indications of political activity, are being subjected to further screening," Kingsley said. "That would not be inappropriate in and of itself. The need for clear rules on what is considered political and how much an organization can engage in is only getting more urgent."

Meg Shreve contributed to this article.

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