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August 7, 2013
Don't Rush to Judgment on IRS-FEC E-Mails, Practitioners Say
by Fred Stokeld and David van den Berg

Full Text Published by Tax Analysts®

Practitioners and law professors on August 6 said it's important not to jump to conclusions over e-mails between the Federal Election Commission and the former director of the IRS's exempt organizations function that some lawmakers say may reveal the two agencies' collusion in targeting conservative political groups.

The practitioners and professors spoke to Tax Analysts about a report on CNN's website that said Donald McGahn, vice chair of the FEC, had seen numerous undisclosed e-mails between FEC employees and Lois Lerner, former director of exempt organizations in the IRS Tax-Exempt and Government Entities Division, who is now on administrative leave. McGahn told CNN that an FEC investigator contacted Lerner to discuss the American Future Fund (AFF), a conservative political advocacy organization.

McGahn added that FEC commissioners had not given their employees permission to contact the IRS in this case, which usually is required, and that the e-mails he has seen do not say whether the FEC was asking only for publicly available information, as some have speculated. Asking for private data probably would violate federal law, according to CNN.

On July 30 House Ways and Means Committee Chair Dave Camp, R-Mich., and Ways and Means Oversight Subcommittee Chair Charles W. Boustany Jr., R-La., sent a letter to IRS Principal Deputy Commissioner Daniel Werfel asking whether the agency improperly disclosed confidential taxpayer data to the FEC.

Appearing August 5 on Fox News's Your World With Neil Cavuto, AFF founder Nick Ryan said the e-mails indicate "there's at least one rogue actor at the IRS that's behaved in a quite possibly illegal way." He claimed that Lerner and FEC lawyers discussed his organization's tax information before it was publicly available.

But practitioners and law professors urged caution. Although the e-mails merit investigation, "we should not jump to conclusions of improper targeting until all the facts are known," said Richard L. Hasen of the School of Law at the University of California, Irvine.

James P. Joseph of Arnold & Porter LLP had a similar reaction. "There are many legitimate or at least innocuous reasons for the FEC and the IRS to be sharing information about politically active nonprofits. The two agencies share regulatory oversight authority," he said.

Ofer Lion of Hunton & Williams LLP said it makes sense for the IRS and FEC to talk to each other when dealing with politically active tax-exempt organizations and applicants. "Most of this probably falls within the FEC's field of expertise anyway, so it makes sense that they would collaborate," he said. He added that it would be disastrous if the two agencies went after organizations for political reasons but that he sees no evidence yet that they have done that.

John Pomeranz of Harmon, Curran, Spielberg + Eisenberg LLP said it's possible an FEC staffer contacted Lerner to find out if a particular group had tax-exempt status, which is public information. If Lerner provided an answer, that would be fine, he said.

"It would be great if everybody went through official channels to get information like that, but I think there are a lot of people who rely on contacts inside the IRS to get a quick answer when it takes too long to get an answer the other way," Pomeranz said.

Gregory L. Colvin of Adler and Colvin said he is not surprised the IRS and FEC contacted each other regarding the AFF and other organizations that spend money on broadcast advertising featuring candidates for federal office. He said that for years the two agencies have been criticized for not coordinating their enforcement of tax and election laws, which "overlap in some respects and leave gaps in others."

Frances R. Hill of the University of Miami School of Law said the IRS and FEC should consider developing systematic methods of talking to each other and sharing information in ways that do not lead to concerns that they are improperly disclosing taxpayer information. "These agencies are going to have to continue to administer [the laws governing] these groups, and maybe they should find a way to do it efficiently," she said.

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