Tuesday, May 14, 2013
Targeting Conservative (c)(4)'s and the Next IRS Watergate Scandal: Service Workers between a rock and a hard place.
The good thing about blogs is that you can always add some "op-ed." Let me just add a little op-ed to Elaine's helpful post below.
A long time ago, a federal district court judge imposed sanctions on the Nixon Watergate imploding Whitehouse for what it viewed as improper political interference in process by which applications for exemptions were reviewed:
A looming issue in this case has been whether political interference or intrusion has played a role in the Internal Revenue Service's consideration of the Plaintiff's exemption application. Should this specter prove to have substance, the complexion of this case changes. A showing of political influence renders the Service's ruling null and void. It is outside the law.
The Court is concerned not only with direct political intervention, but also with the creation of a political atmosphere generated by the White House in the Internal Revenue Service which may have affected the objectivity of those participating in the ruling in the Plaintiff's case. The inference of political intervention has been unmistakenly raised: (1) by the handwritten memo in the Plaintiff's file indicating "perhaps White House pressure"; (2) by John Dean's testimony before the Ervin Committee; (3) by the memoranda Mr. Dean submitted to the Ervin Committee; (4) by the testimony of Patrick J. Buchanan, White House Staff Member, before the same committee (September 27, 1973);(5) by the Deposition of Roy Kinsey, Assistant to Mr. Dean, (July 30, 1973, at 10-18); and (6) by the four documents submitted for in camera inspection. These indicia of political intervention, combined with the unusual and protracted processing of the Plaintiff's application, have triggered a warning signal requiring the Court to fully investigate the issue. Through its Discovery Orders, the Court has endeavored to obtain all the information necessary to make an informed evaluation of the issue. However, the time has come for the Court to make that evaluation, and the Court is without the requested materials to do so.
The Defendants have failed to comply with the Court's Order of July 6. Within the scope of the Order were all White House files plus the Treasury and the IRS files regarding tax-exempt organizations since Jan. 20, 1969, and certain tape recordings now before Judge Sirica.
Neither of the two searches of the White House files met the scope of the Order. The first was limited solely to materials in the White House files which mentioned the Plaintiff. In addition, Mr. Kehrli's affidavit regarding the first search of "all White House 872*872 files" was misleading. As his deposition indicates, he did not in fact search all of the White House files. He did not search the impounded files of Messrs. Colson, Ehrlichman, Haldeman, Dean or Caulfield.
The second time, the Defendants limited the search to documents, memoranda or writings in the White House central and special files which either related to or mentioned the Plaintiff or related to "White House interest in the tax-exempt status of left-wing activist organizations." Mr. Buzhardt's affidavit indicated that he conducted a complete search of the files which produced four documents which he submitted for in camera inspection. Mr. Buzhardt's complete search, however, failed to produce the documents, memoranda, and writings relating to this issue which were specifically referred to by Mr. Dean and Mr. Buchanan in their Ervin Committee testimony and by Mr. Kinsey in his deposition.
Center on Corporate Responsbility, Inc. v. Shultz, 368 F. Supp. 863 (1973). What's old is new again. Readers are no doubt well aware, by now, of the bruhaha over the controversy sorrounding the Service's admitted over-scrutinization of conservative 501(c)(4)'S. As Center for Corporate Responsibitility indicates, these matters are not simply political fodder but can have impact on an organization's entitlement to exempt status. It appears that heads will eventually roll for all of this, I' m sorry to say.
I think the IRS workers and their leaders in The Service were caught in a trap not of their own making. Ever since Citizens United, its been no secret that most (c)(4)'s are hardly organized for "social welfare" as that term is apparently intended in the regulations -- i.e., something other than political action. On the one hand, the IRS has been faulted for not doing enough to make sure (c)(4)'s are not simply political action committees in disguise, but on the other they are faulted for looking more closely at (c)(4)'s that appear to have an exclusively political purpose. And while it is certainly wrong to target just one side of the political spectrum, I am not sure that is what happened. The press is on a virtual feeding frenzy but there is evidence that the Service simply looked for "political buzz words" in the title of the 'social welfare" organizations before deciding to give enhanced scrutiny to certain groups. The fault lies in the disparate impact -- more conservative groups ended up being subjected to enhanced scrutiny than did liberal groups, if that is what happened. Even the WSJ, hardly left leaning, admits that the Service personnel were looking for "political" labels, not just "conservative" labels in deciding whether to scrutinize applications from (c)(4)'s. If that be the case, then the only fault lies in whether the result was that conservative leaning groups were more often or more likely subjected to enheanced scrutiny because the Service looked for catch phrases more often used by conservative groups in identifying which (c)(4) applications to pull. In other words, the Service might be faulted only for having a limited vocabulary, not necessarily a political bias. Hopefully the soon to be released Inspector General report will enlighten us all. In the meantime, let's not get the lynch mob all riled up just yet.