Sunday, October 26, 2014

IRS Court Victory Over Teaparty Still Leave Open Questions of Enforcement

    The IRS secured a victory over the Tea Party in a ruling by the United States District Court for the District of Colombia in Linchpins of Liberty v. United States and True the Vote, Inc. v. IRS. The District Court found that the cases were now moot after the IRS ultimately approved the parties’ application for tax-exempt status.

    The case began after a highly controversial scandal after the IRS delayed a number of applications for tax-exempt status as a 50(c)(3) or 501(c)(4). The IRS delayed applications based on, among other things, the applicants’ name. For example, the IRS flagged applications containing words such as ‘patriot,’ ‘freedom,’ and ‘liberty’ and gave them further review. The IRS’ rationale was that an influx of applications for 501(c)(3) and 501(c)(4) status, along with the dubious nature of many of the applicants’ dealings, caused significant backlogs. The result was a significant delay in processing applications.

    Instead of litigating the case, the IRS ultimately granted tax-exempt status to most of the parties involved rendering the lawsuit moot. While this may be the end for now, this raises serious questions for the IRS going forward. What, if anything, may the IRS do to review the merits of 501(c)(3) and 501(c)(4) applications—especially those that appear suspect?     


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