I.R.S. Scrutiny Went Beyond the Political
Kitra Cahana for The New York Times
Jesse von Doom and Maggie Vale of CASH Music, whose application for charitable status was rejected by the I.R.S.
By JONATHAN WEISMAN
Published: July 4, 2013 218 Comments
In 2012 alone, the agency received 73,319, of which about 22,000 were not approved in the initial review process. The inspector general looked at 296 applications flagged as potentially being from political groups. That means most of the applications pulled aside for further scrutiny in those years had nothing to do with politics, conservative or liberal, just as most of the red flags thrown up by the I.R.S.’s lookout lists were not overtly political.
Chi Eta Phi Sorority, a mainly African-American nurses’ society that advertises its mission as “social change,” applied for 501(c)(3) charitable status on June 24, 2011, days before the I.R.S. tightened its scrutiny of tax exemption applications. The organization fell under a “group rulings” flag in one of the lookout lists. Two years and 73 questions later, Chi Eta Phi is still waiting for the I.R.S.’s Cincinnati office, which handles the tax exemption applications, to respond.
I.R.S. Scrutiny Went Beyond the Political
Kitra Cahana for The New York Times
By JONATHAN WEISMAN Published: July 4, 2013 218 Comments
I.R.S. Scrutiny Went Beyond the Political
Jesse von Doom and Maggie Vale of CASH Music, whose application for charitable status was rejected by the I.R.S.
WASHINGTON — In 2010, a tiny Palestinian-rights group called Minnesota Break the Bonds applied to the Internal Revenue Servicefor tax-exempt status. Two years and a lot of prodding later, the I.R.S. sent the group’s leaders a series of questions and requests almost identical to the ones it was sending to Tea Party groups at the time.
Tim Gruber for The New York Times
Sylvia Schwarz, a leader of a small Palestinian-rights group, said she was used to scrutiny like that meted out by the I.R.S.
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What are “the qualifications and experience” of Break the Bonds instructors? Does the group “present a sufficiently full and fair explanation of the relevant facts” about the West Bank and Gaza? Provide copies of pamphlets, brochures or other literature distributed at group events? Reveal all fees collected and “any voluntary contributions” made at group functions? Provide a template of petitions, postcards and any other material used to influence legislation, and a detailed accounting of the time and money spent to influence state legislators?
The controversy that erupted in May has focused on an ideological question: Were conservative groups singled out for special treatment based on their politics, or did the I.R.S. equally target liberal groups? But a closer look at the I.R.S. operation suggests that the problem was less about ideology and more about how a process instructing reviewers to “be on the lookout” for selected terms was applied to any group that mentioned certain words in its application.
Organizations approached by The New York Times based on specific “lookout list” warnings, like advocates for people in “occupied territories” and “open source software developers,” told similar stories of long waits, intrusive inquiries and bureaucratic hassles that pointed to no particular bias but rather to a process that became too rigid and too broad. The lists often did point to legitimate issues: partisan political campaign organizations seeking tax-exempt status, or commercial businesses hoping to cloak themselves as nonprofit groups. But even I.R.S. officials say lookout list warnings were often pursued in a ham-handed or overly rigid way.
Last month, the acting I.R.S. commissioner, Daniel I. Werfel, formally ordered an end to such lists after discovering that they were still in use after the controversy flared up.
Sylvia Schwarz, a co-director of the Break the Bonds group, shrugged at the treatment meted out by the I.R.S. She was used to rough scrutiny in a country that tilts against the Palestinians, she said. But the same questions, asked of conservative organizations, led to the dismissals of top I.R.S. officials, prompting criminal and Congressional investigations, scarring the reputation of the nation’s tax collection agency and eliciting charges that the White House had used the agency to pursue its political opponents.
Two months of investigation by Congress and the I.R.S. has produced new documents that have clouded much of the controversy’s narrative. In the more complicated picture now emerging, many organizations other than conservative groups were singled out: “progressive” organizations, medical marijuana purveyors, organizations formed to carry out President Obama’s health care law, and open source software developers who create software tools for computer code writers and distribute them free of charge.
“As soon as you say the words ‘open source,’ like other organizations that use ‘Tea Party’ or ‘Occupy,’ it gets you red-flagged,” said Luis Villa, a lawyer and a member of the board of directors of the Open Source Initiative. The I.R.S. feared that such groups were really moneymaking enterprises.
According to the Treasury inspector general for tax administration, the I.R.S. received 199,689 applications for tax-exempt status between 2010 and 2012. In 2012 alone, the agency received 73,319, of which about 22,000 were not approved in the initial review process. The inspector general looked at 296 applications flagged as potentially being from political groups. That means most of the applications pulled aside for further scrutiny in those years had nothing to do with politics, conservative or liberal, just as most of the red flags thrown up by the I.R.S.’s lookout lists were not overtly political.
Chi Eta Phi Sorority, a mainly African-American nurses’ society that advertises its mission as “social change,” applied for 501(c)(3) charitable status on June 24, 2011, days before the I.R.S. tightened its scrutiny of tax exemption applications. The organization fell under a “group rulings” flag in one of the lookout lists. Two years and 73 questions later, Chi Eta Phi is still waiting for the I.R.S.’s Cincinnati office, which handles the tax exemption applications, to respond.
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