The Wetumpka Tea Party and Defining “Potential Political Cases”
When does politics become the "primary activity" of a 501(c)4?
This article is part of a series exploring aspects of the IRS Exempt Organizations political bias investigation. The first article, looking at 501(c)3, 501(c)4, and 527 regulations can be found here. The second, a deep dive into the TIGTA audit, can be found here.
The TIGTA audit of the IRS revealed that long delays in the approval of some 501(c)3 and 501(c)4 applications were caused, in part, by a lack of guidelines for determining what constitutes permissible and impermissible levels of political activity. The question of political activity is an especially sticky topic for 501(c)4 organizations, as they are allowed to engage in some direct political work, provided that such work does not constitute the “primary activity” of the organization.
One of the groups whose 501(c)4 application has been held up in specialist review is Alabama’s Wetumpka Tea Party. Examining their activities, as described in a recent New York Times article and on the group’s website, provides some insight into the difficulties that IRS specialists face in determining whether an organization is a social welfare or political group.
The Wetumpka Tea Party considers itself a 501(c)4 organization and the group acknowledges that it engages in “some” political activity. While 501(c)4 groups are not specifically required to apply to the IRS, the Wetumpka Tea Party chose to apply for official recognition. In accordance with the rules governing 501(c)4’s, the Wetumpka Tea Party has continued to function as a 501(c)4 while awaiting official confirmation.
In the NYT Article, Nicholas Congessore and Michael Luo discussed one specific activity the Wetumpka Tea Party’s engaged in during 2012:
In Alabama, the Wetumpka Tea Party organized a day of training for its members and other Tea Party activists across the region in the run-up to the 2012 election. The training was held under the auspices of the Adopt-a-State program, a nationwide effort that encouraged Tea Party groups in safely red or blue states to support Tea Party groups in battleground states working to get out the vote [GoTV] for Republicans.
Adopt-a-State was a key component of Code Red USA, a get-out-the-vote initiative organized by a conservative political action committee. The goal of Code Red USA was made clear in one of its fund-raising videos, which told supporters: “On Nov. 6, 2012, Code Red USA authorizes the defeat of President Barack Obama.”
Becky Gerritson, Wetumpka’s president, said in an e-mailed statement that her group engaged “mostly in education on all sorts of topics” and that the day of training was just one of a variety of events that it held for “educational purposes.”
Determining whether or not hosting this sort of GoTV training constitutes a “educational” or a “political” activity is a prime example of the issues IRS specialists have sort through as part of the 501(c)3/4 review process.
TIGTA’s IRS audit touches on GoTV efforts as part of the following footnote on what constitutes “political advocacy”:
9. An organization engages in general advocacy when it attempts to 1) influence public opinion on issues germane to the organization’s tax-exempt purposes, 2) influence nonlegislative governing bodies (e.g., the executive branch or regulatory agencies), or 3) encourage voter participation through “get out the vote” drives, voter guides, and candidate debates in a nonpartisan, neutral manner. General advocacy basically includes all types of advocacy other than political campaign intervention and lobbying. (TIGTA Audit, Footnote 9, Page 2/PDF p8 – emphasis mine)
The Adopt-A-State program, created by the conservative Madison Project, was clearly a partisan GoTV effort. Thus, the activity does not fall under “general advocacy” as described in the audit. This means, for example, that a 501(c)3 could not directly participate in Adopt-A-State without potentially losing its status.
But is “hosting”–the term that the Wetumpka Tea Party uses to describe its role–a seminar for “educational purposes” the same as encouraging participation? I have a hard time seeing how one can separate organizing the forum, promoting the event, and providing the space, from encouraging participation. If someone can make a counter argument, I look forward to reading it.
If the Wetumpka Tea Party had applied for 501(c)3 status, this sort of activity should have led to a denial. However, once we start to discuss a 501(c)4, things get a bit more confusing. As previously noted, 501(c)4’s are able to engage, in a limited basis, in political work. But, if that’s the case, then why does Gerrritson try to frame her group’s work with Code Red USA, as educational versus political?
Her use of “educational” may go back to the fact that political activities cannot become the primary function of a 501(c)4 organization. The challenge for reviewers is interpreting what is meant by the term “primary.” The TIGTA audit notes “Treasury Regulations state that I.R.C. § 501(c)(4) organizations should have social welfare as their ‘primary activity’; however, the regulations do not define how to measure whether social welfare is an organization’s ‘primary activity.'” (14 / PDF p20 – emphasis mine)
In lieu of a fixed definition from the IRS, many, including Gerritson, have taken to using basic math to define “primary” — i.e. something that takes up more than 50% of an organizations activities (see Gerritson’s current letter to supporters on the Wetumpka Tea Party’s home page).
So while a 501(c)4 can participate in a partisan GoTV, doing so counts towards the total number of “political activities” they can engage in. And if there are too many tallies on that “political” side of the equation, the group’s 501(c)4 status can be revoked. For example, The New York Times article details how this happened to a liberal group:
Emerge America, which trained women to run for office, was granted 501(c)(4) recognition in 2006, but its status was revoked in 2012. Training people how to run for office is not in itself partisan activity, but the I.R.S. determined that the group trained only Democratic women and was operated to benefit one party.
Even accepting the 50% definition of “primary,” the question remains, how does one judge what constitutes 50% of an organization’s activities?
Getting back to the Wetumpka Tea Party’s participation in the Adopt-A-State GoTV vote effort, a review of their Event History page shows that organization also co-hosted Code Red USA’s four day Get-Out-the-Vote trip to Jacksonville, FL (from November 2nd to the 6th). On the one hand, this was just one activity out of the more than fourteen that the group participated in during 2012. On the other hand, the sheer amount of time spent planning and on-the-ground– especially when combined with the extended Adopt-A-State training session–makes this one of their major activities for that year. Weighing these sorts of facts is exactly the sort of work reviewers should be doing.
When one looks across the Wetumpka Tea Party site, one begins to see a number of different activities that could potentially indicate more “checks” in the political activities column. The critical word here is “potentially.” As a reminder, the function of the initial EO review is to identify organizations that are potentially involved in a significant amount of political activity. These organizations were passed to specialist review in order to receive a ruling as to whether those political activities, in total, were the primary function of the group.
There’s one activity of the Wetumpka Tea Party that is especially worthy of note as it points to the dual nature of Tea Party groups, and it also helps understand why certain questions get asked in the extended review process. One of the opportunities that the website lists for volunteers is as follows:
Prayer Team: As we work to educate and inform Americans about the issues affecting our Freedom and Liberty and to elect local, state and national candidates that believe in Limited Government and who will protect our personal and religious freedoms we appreciate your continual prayer support. [Emphasis mine]
Ironically, this is the only portion of the current website that explicitly states that the organization has an explicit political goal in addition to its educational goals. For a reviewer, this type of passage immediately should immediately present a red flag–especially if this political goal isn’t discussed anywhere else on the site. Again, the result should not be outright denial, but this is exactly the type of statement that correctly triggers requests for clarification and additional information.
And on the topic of additional information, Doug previously wrote about IRS requests that included questions like:
[E]xplain how all of your activities, including the prayer meetings held outside of Planned Parenthood, are considered educational as defined under 501(c)(3). […] Please explain in detail the activities at these prayer meetings. Also, please provide the percentage of time your organizations spends on prayer groups as compared with the other activities of the organization.
While I’ve already addressed why this question could be appropriate, the Wetumpka Tea Party site provides further support for this sort of inquiry. To the degree that prayer team requests contain appeals for specific individuals to win or lose elections, they cross over into political activities.
My goal here is not to argue whether or not the Wetumpka Tea Party should be awarded 501(c)4 status. Rather, it’s to examine if someone could look at the group’s materials and reasonably come to the conclusion that there is enough evidence to warrant a specialist investigation on the grounds of “potential political interventions.” My goal is to then consider what factors would slow down such an investigation.
In all of my articles on the EO Investigation, I keep returning to the point that no one can reliably articulate what are appropriate functions for a 501(c)4. The more that one looks at the activity of 501(c)4 applicants, like the Wetumpka Tea Party, the more one finds hybrid activities that are at once political and educational, political and religious. The issue becomes how best to disentangle these functions to decided to overall purpose of the organization. And, let us not forget, that the organization charged with making these decision is primarily focused on financial issues, not political ones.
The origins and extent of the political bias within the IRS need to be investigated. However, I cannot help but think that the country, not to mention the political process, would be better served if equal amounts of time and attention were spent questioning the 501(c)4 form as it currently exists, better articulating what constitutes “primary” activities, and asking if IRS is even the right institution to be ruling on political activities in the first place.
One request to commenters — I am sure there is a lot in here to take issue with. And as always I’ll try to respond to every question. However, I will NOT reply to any critique that uses the “Why did the IRS target this Tea Party Group, when X Liberal group was doing the same (or worse) stuff.” This type of “why does only happen to my side” argument, akin to “Why do libs keep complaining about GWB when he’s been out of office for 5 years, instead of talking about what Obama’s doing now,” fails to address the substantive points I’ve raised above.
Plus, I’m of the opinion that any group engaging in similar activities, regardless of political persuasion, deserves to receive the same level of scrutiny.
Obviously we do need to get clinical about that, but I do find it funny that a Tea Party group would deny that their “primary activity” is political. It’s almost like we’re supposed to pretend to be stupid so they can get a little extra money.
We all know what TEA stands for! So why is Gods name is there so much fuss over them being checked out by the IRS? They were all about politics and their interest had nothing to do with social anything!! All this ballyhoo over all those purely political right wing groups is getting on my nerves! Enough of the nonsense!
It’s really hard to imagine that anyone seriously believes that Wetumpka Tea Party is a social welfare organization, as opposed to a political organization.
Yes, the lines on a lot of these activities are way too fuzzy and poorly defined, but this is a pretty straightforward case even with the fuzzy lines.
I think it’s really too much to expect the IRS to be splitting these hairs. They are an agency that’s supposed to collect taxes, not make very subjective judgments about what constitutes political activity and what is educational. More importantly, there is no way for an average citizen or small organization to know which way the IRS would split the hair in their particular case absent some very clear guidelines. So organizations would , essentially, roll the dice and hope the IRS determines their “educational” activity is no sufficiently political to cross the vague yet wide red line. The big organizations like American Crossroads can hire experts to guide them and it seems like they all sailed through with no problems. So this is yet another case where government regulations favor the big, rich and powerful while the little fish get the shaft.
A very good piece Matt, and it exceeds my expectations that political groups just thought they could skate as 501(c)4’s.
Given that groups can self-classify and skate below the radar, we really need to move the bar. This is broken.
@Andy:
The IRS seems to have few problems with 501(c)3’s. On the other hand 501(c)4’s seem to have enough built-in confusion to make careers for lawyers and fixers.
I am a fan of simple rules which resolve without reviewing the notes for every meeting. The 4’sother are not such simple rules.
However, I will NOT reply to any critique that uses the “Why did the IRS target this Tea Party Group, when X Liberal group was doing the same (or worse) stuff.” This type of “why does only happen to my side” argument, akin to “Why do libs keep complaining about GWB when he’s been out of office for 5 years, instead of talking about what Obama’s doing now,” fails to address the substantive points I’ve raised above.
Plus, I’m of the opinion that any group engaging in similar activities, regardless of political persuasion, deserves to receive the same level of scrutiny.
Pardon me, but the crux of the Tea Parties’ complaints is that they were singled out for discriminatory treatment based on their political beliefs. The only way to prove or disprove that is to compare and contrast how their applications were treated vs. how similar groups of differing political bent were treated.
The argument that “no laws were broken” doesn’t cover the “selective enforcement” argument. If the full force of the law is brought down on one group — if one side is held to the strictest letter of the law — while other groups on the other sides are allowed to abide by a much laxer standard, that in and of itself is unfair — and often also illegal.
As you yourself say — “Plus, I’m of the opinion that any group engaging in similar activities, regardless of political persuasion, deserves to receive the same level of scrutiny.” That is exactly what is being complained about. The groups were not subjected to the same level of scrutiny. One can argue that the other groups should have gotten the Tea Party treatment, or that the Tea Party should have been held to the same lesser standard as other groups, but you’re absolutely right — there must be one standard, equally enforced.
And, as admitted by the IRS itself, it wasn’t.
@Jenos Idanian:
No they weren’t. They were singled out because they were formed to do political work. Even you can’t deny that. I take that last part back, you can and often do deny the bleedingly obvious.
@Jenos Idanian:
A political group had a name that screamed political work, and the charge is that the IRS should not have responded to that red flag.
It boils down to bad legislating and bad law. I don’t see our Congress rushing to correct the bad law. It is much more fun to be outraged and posture.
@Andy:
I agree with you on all points.
This is really the bigger issue that I think people should be up in arms about.
While I may disagree with most of the Wetumpka Tea Party’s goals, the fact is I don’t think they were “trying” to put one over on the IRS. I’m sure that they see their goal as being primarily educational. And I think they are an entirely different beast than Crossroads GPS.
I also thing that Wetumpka and other Tea Party organizations applied for official 501(c)4 recognition out of a desire to “follow the rules.” The problem, as I’m happy to see lots of people coming to accept, is that the rules themselves are (1) impossibly constructed, (2) confusing to implement, and (3) being enforced by the wrong organization.
@john personna:
I think you, @Gustopher, @James Pearce, and @Caj are being far to hard on the small scale Tea Parties. I don’t think they were trying to “fool” anyone. Again, no one seems to understand what a 501(c)4 is or can do.
Tea Party Organizations, especially the grassroots ones, are fundamentally hybrid organizations. We just have to look at the description the Wetumpka Tea Party gave as part of the Prayer Team entry:
It’s all there — *Educate*, *Inform*, *Elect* — and its all intermingled.
Based on their understanding of their activities, it makes sense for them to apply for 501(c)4 status. The problem isn’t with these individuals, acting in good faith, it’s with the fact that no one can seem to articulate hard rules for a 501(c)4.
I should note that, like Andy, I see major 501(c)4’s like Crossroads GPS in an entirely different light. There’s little doubt in my mind that Crossroads and other organizations like it are intentionally abusing the 501(c)4 structure in order to get the benefit of anonymous donors. Unfortunately, many of these smaller groups are caught up in their wake.
@john personna:
That nails the bigger point. The 501(c)3 structure leaves little to no wiggle room when it comes to political intervention — it’s not allowed. As I wrote, a 501(c)3 could clearly never have gone anywhere near the Code Red USA GoTV effort.
The problem with the 501(c)4 structure is that it allows “some” political intervention without defining what “some” means. And, as the EO response to the audit points out, the IRS doesn’t want to attempt to better define this criteria (in part, I suspect, because it’s an impossible task).
Until changes are made, its only a matter of time before this situation happens again.
The only rebuttal I can muster — that other groups of similar purpose but of differing political bent were held to a far lesser standard — has been specifically prohibited by the author. There is little question that there were no laws broken in the scrutiny given to the Tea Party groups; the injustice lies in the unequal application of those standards, and whether or not the inequality was politically motivated. And since “selective enforcement” has been disqualified from the outset as a grounds for discussion, the whole purpose of this series of articles seems rather moot.
I will instead simply take careful note of the tactics employed here, and remember the standard — that there is no standard — is that it is perfectly acceptable to hold one’s political adversaries to the highest possible standard, while giving one’s political allies considerable leeway.
Also, for everyone responding with “clearly the Wetumpka Tea Party is a political organization,” please respond to the following point:
According to their website 2012, the Wetumpka Tea Party hosted/co-hosted the following 14 events:
1. 11-2-12 thru 11-6-12 *Code Red USA Get-Out-the-Vote trip to Jacksonville, FL
2. 10-1-12 “Game Plan” of activities before the Nov 6th Presidential Election
3. 9-26-12 Special Guest: Australian, Nick Adams-speaks about American Exceptionalism
4. 9-10-12 Special guests: Marcia Chambliss (Smart Girl Politics) & John Rice discuss Sept 18 vote to raid the AL Trust Fund
5. 7-23-12 Special Guests Gary Palmer (President, AL Policy Institute) & State Sen. Bryan Taylor
6. 6-30-12 SE Regional Training for “Code Red USA”/”Adopt-a-State”
7. 6-11-12 True the Vote – Voter Fraud Presentation
8. 5-21-12 C.L. Bryant creator of the movie Run Away Slave
9. 4-30-12 “Dinner with Sen. Sessions” at Ryan’s Cafeteria in Prattville, AL
10. 4-16-12 “Wetumpka TEA Party’s Happy 3rd Birthday Celebration”
11. 3-29-12 “Film Maker Curtis Bowers and Family” (AGENDA: Grinding America Down)
12. 3-19-12 Wetumpka TEA Party Update and Q & A With WTP President
13. 2-20-12 “River Region Candidate Fair”: Candidates from Elmore, Montgomery, Autauga counties as well as candidates from the statewide races.
14. 1-21-12 Special viewing of the award winning documentary, “AGENDA: Grinding America Down”
Of those 14, only two were definitely Political in nature, as the IRS defines it. The rest definitely had a political (conservative) theme. But how would that be different than an environmental 501(c)4 hosting 12 events with had a political (progressive/liberal/conservationist) theme?
Again, I think Wetumpka definitely should have been investigated. I’m just unsure about how to apply the “primary” rule in their case.
@Jenos Idanian:
To be clear, the reason why I said this is not the place for a discussion of “unequal enforcement” is because it’s not a topic that I addressed anywhere in the article. Therefore, it shouldn’t be used to critique of the content of this article.
BTW, if you’d like to discuss unequal enforcement, I’d suggest jumping over to my “Deep Dive” of the audit, as that *is* something I discuss there. Here’s the article for your convenience:
http://www.outsidethebeltway.com/diving-deeper-into-the-tigta-irs-audit
Beyond that, I will again point out that if one reads the audit, the only section that actually has to do with potential discrimination against Tea Party groups is the first section. That’s the one that explores the audit finding that “The Determinations Unit Used Inappropriate Criteria to Identify Potential Political Cases.”
The other two sections deal with what happened to *any* application determined to be a “potential political case” — a determination that was applied to liberal groups as well, just not a the same rate.
You might be surprised to discover that I agree with the Audit finding that targeting by name was inappropriate. And, beyond that, it was a largely ineffective method of separation (see my comment below for a full explanation).
There is an entirely different question — which I may address in a future post — as to what harm was created by that bias. But that’s a different topic.
Either way, those issues have absolutely nothing to do with the substance of this post.
But, if you really think they matter, make an legitimate argument for why I’m wrong to try and quash that particular line of discussion. Maybe I’ve missed something. That said, after reviewing your comments above, I can tell you that you’ve yet to make your argument stick.
@Matt Bernius:
This was really the key to all my responses:
For the life of me, I haven’t heard a good argument for why a gray area in 501(c)4’s is necessary. I have heard a sort of defense of it, as a status quo, and something that can be refined .. because it exists?
That isn’t really a good reason. As if adding complexity to fix complexity ever worked.
If we are going to continue a policy of treating charitable groups one way, and political groups another, then we simply must defend the division. Groups should be categorized as one or the other. Yes, that would mean that charitable groups could not pass some boundary in political behavior, but so be it.
I think it’s madness to have a system that requires someone like Matt to lay out the full schedule of a group and then to weigh it to see which way it tips. That implies that the IRS must weigh every organization to the same detail, and that every organization may appeal on the same detail, and on and on.
(If you want to do charity and you want to do politics, you form yourself two groups. Solved.)
@Jenos Idanian:
Just to be clear, the Audit found that they were targeted based on inappropriate criteria (see section 1). HOWEVER, the audit contains NO EVIDENCE that once selected for specialist review, Tea Party groups were treated ANY DIFFERENTLY than any other group selected for specialist review (see sections 2 and 3).
Again, the net result of the Section 1 was that of the 91 applications selected based on names containing “Tea Party,” “9/12,” and “Patriots” only 17 were found to have content warranting a specialist review (an 18% success rate). We, unfortunately, know very little about the remaining applications flagged for specialist review due to “potential political intervention.” We don’t know what percentage of that group were “liberal” aligned causes. We don’t know what percentage were “conservative” causes. We do know that the audit found that 69% of these cases were correctly identified.
But in terms of Section 2 and 3 — the issue of the length of time and inappropriate questions — neither of these sections had any finding that Tea Party applications were treated differently. As I keep writing, once a group is flagged as a “Potential Political Case” it’s pretty clear that they got the same crappy treatment. (See: https://www.outsidethebeltway.com/diving-deeper-into-the-tigta-irs-audit )
This article is an attempt at demonstrating some of the issues that lead to that treatment.
Part of the problem is that people are also using loaded words like “investigated” “targeted”. Sending questions for clarifications does not seem to rise to the level of investigation which seems to imply a wrongful action that is not warranted. It appears that the IRS did not do 100% review but sampled or prioritized using search words. As you pointed out in earlier posts, we do not know the characterization of the sample universe so we cannot know the percentage of conservative vs liberal, large vs small, etc 501(c)4 organizations. So at this point, claims of targeting are assertions, not facts at this point.
Rhetoric certainly gets out of hand rather rapidly.
@john personna:
Over the course of doing the research and writing these articles, I have largely come to the same conclusion. I think that the 501(c)4 — at least as it applies to Politics — is irreparably broken. Given that the tax advantages to it are apparently minimal (unless you care about anonymous donors), I fully support the idea of doing away with it, and forcing everyone to form 501(c)3s and 527s.
But how would that be different than an environmental 501(c)4 hosting 12 events with had a political (progressive/liberal/conservationist) theme?
The politically incorrect answer is that the majority of progressive/liberal/conservationist groups are not showing the left equivalent of Agenda: Grinding America Down , which is an “exposé of the communist, socialist, progressive attempt to take over America.” They are partisans, but they are actually trying to reach people and talk about reality. The Tea Party’s version of education is like that of Scientologists and Glenn Beck fans–it’s pure narcissism and delusion. And let’s not even talk about True the Vote.
Click on the Times article and there’s a tale of the Ohio Liberty Coalition, which was passing out material for Romney and sending out campaign event emails. Apparently, the leader of the OLC thought that the IRS was really only interested radio and television spending. He didn’t think that handing out material for Romney was political activity.
It’s almost worse if he’s sincere. I don’t think the IRS handled this well at all, but pretending that the problem was simply in the IRS is a lie. The Tea Party was built by people who hated Obama, and their main educational message was basically that Obama was elected by Acorn and the leader of a Marxist takeover. We can pretend that this is like a group of people who are interested in the environment, or actual tax reform, or educational policy, or getting women or veterans or minorities involved in politics, or gun rights, but it wasn’t really true.
Lots of people hated Bush with a passion and they watched Fahrenheit 9/11, but nobody was dumb enough to believe that they should form a tax-exempt group to talk about how much they hated Bush.
@Modulo Myself:
Hang for a moment with this argument.
First, the entire tax-exempt thing is a misunderstanding of this situation. This really has nothing to do with tax-exemption, as 527 political organizations are also tax-exempt.
Secondly, I think people are getting fixated on the “Tea Party” part and missing the larger issue of the intermingling of politics and social wellfare education.
I create a 501(c)4 dedicated to reducing Gun Violence. And each month I bring in speakers or show films decrying gun violence — including “Bowling for Columbine.” Chances are that the majority of those speakers are going to take issue with conservative/republican politicians who make up the majority of the resistance for Gun Regulation in the country.
Granted, you can say that the speakers would also target some pro-gun Democrats. I agree, but chances are Moderate Republicans didn’t get a lot of love in those Tea Party meetings.
The issue is, from the application of the standards, is there any difference in practice between what my anti-gum group was doing and what the Wetumpka Tea Party was doing?
@Matt Bernius:
I think that summarizes the confusion in 4’s, but the answer lies with the 3’s.
501(c)3’s can talk about their desire to reduce gun violence, and they can give “Legislative Scorecards” on those goals but they are always aware of their boundaries.
@john personna:
Correct, because the 501(c)3’s boundaries are easily and clearly defined. Where as the 501(c)4’s boundaries are NOT. And in a bureaucratic review system that makes all the difference and creates all the problems.
And that will be the subject of the (most likely) final article I’m writing on this subject.
@Matt Bernius:
Well, if the gun control group bought ads for Democrats and their social welfare consisted of showing movies once a month, then they shouldn’t qualify as a 501(c)4. What’s to stop this group from simply being a funnel for undisclosed tax exempt donations for campaigns?
@Matt Bernius:
Granted, with this line of reasoning, I don’t really understand how Rove’s group or the Obama group ended up getting the classification.
@Modulo Myself:
Actually according the the rules, they could buy limited ads for pro-gun Democrats, provided (a) the subject of the ad was gun control and (b) they did not coordinate with the candidate’s election campaigns.
Again, I give you the 501(c)4, the bastard child of drunken one night stand involving a 501(c)3 and a 527.
I don’t know about Obama’s group, but Crossroads has still not gotten its official designation. Which, btw, doesn’t prevent it from operating as a 501(c)4 — which gets to the complex issue of what damage was actually done to the 73 inappropriately targeted Tea Party Groups.
I just want to say that your guest posts and the resulting threads are excellent, Matt. I’d be glad to see you become a regular.
@Matt Bernius:
Yeah. I get it. You think this all comes down to some poor IRS bureaucrats tasked with approving/denying applications from quasi-political groups without any clear guidelines as to what kind/how much political activity was permissible/impermissible.
Even if I were to accept that characterization, it still leaves a glaring question.
If the guidelines were so lacking or incomprehensible, why didn’t any Tea Party group have its application denied? It is completely illogical that the IRS would subject any organization to the level of scrutiny that some of these organizations faced unless they were looking for evidence of disqualifying political activity. The IRS requested extensive documentation. So much that a lot of these groups felt they were getting jerked around and complained to members of Congress. Even if it was ultimately a judgement call on the part of the IRS agent responsible for the inquiry, you would expect some percentage of Tea Party groups to be denied 501(c)(4) status if it was simply a matter of poor guidelines.
Think about your explanation from the point of view of an IRS examiner. “I have no idea what constitutes impermissible political activity because I’ve been given no guidelines, so let me create a lot of extra work for myself by requesting a shit ton of information from this Tea Party group whose application I’m eventually going to approve anyway.”
@Septimius:
Strangely, I think that was the White House’s perspective. They would rather have had all 501(c)4 applications skate than have a political kerfuffle.
And this is skating, because … well, ask your evil twin. You offer him the choice to be a 527 and have higher reporting responsibilities, etc, or you let him be a 501(c)4 and just report his “political stuff.”
What does an evil twin choose?
@Septimius:
Ahh… another critique that had absolutely nothing to do with the content of this specific article…
Three points (and again, I’m having a hard time seeing how anything you just stated contradicts anything I have written above… please feel free to point out what I’m missing):
1. The issue is not whether applications should have been denied. It’s whether or not they warranted specialist review. Its entirely possible that when the additional, clarifying information was provided, they all passed. The issue is that the lack of clarity on standards is in part what led to the additional questions being asked.
2. We currently know that no Tea Party group has been denied 501(c)4 status. However, unless I’ve missed something, that’s not the same as saying every Tea Party group has been approved. Part of the issue with the “Pro-Publica leak” is that they got a copy of Crossroads GPS’s application and, at least as of writing, Crossroads has yet to receive official recognition.
3. The Audit did not release ANY denial rates for non-Tea Party applications flagged for Potential Political Intervention. Without that number/rate we have no substantive basis for judging whether or not the Tea Party approval rate is normal or not normal.
In theory, any group that made it to the specialist review should have had something in their application that suggested a potentially disqualifying activity. Again, see the potential examples listed above.
So perhaps I’m being dense, but your point doesn’t make sense. Or rather, it’s describing the system AS ITS SUPPOSED TO OPERATE.
The issue, as stated in section 1 of the Audit, was that process broke down and a shorthand check — the use of BOLO list terms like Tea Party, 9/12, and Patriots — was adopted by the first level reviewers. As the audit breaks down, and I again restate in the comments section, this was found to be both (a) ineffective and (b) inappropriate.
However, the point you and others keep glossing over, is the fact that once the secondary review process was begun, all applications, regardless of party, got caught up in the exact some treatment (delays and unnecessary questions) which was by the AUDIT’s account (not mine) created by a bureaucratic screw ups and a lack of understanding of the 501(c)4 form.
Why. Back up this with logic not just simple assertion.
BECAUSE AS THE AUDIT STATES (SEE SECTIONS 2 AND 3) THIS IS WHAT HAPPENED IN ALL CASES OF SPECIALIST REVIEW! TO EVERYONE!
If you have substantive counter evidence that proves this wrong, bring it. Otherwise argue from fact and *not* speculation.
@Matt Bernius:
Absolutely false. According to your precious audit, page 18:
There were over 300 applications flagged for specialist review during the timeframe of the audit, yet only 170 received additional information requests. So, THIS IS NOT WHAT HAPPENED IN ALL CASES OF SPECIALIST REVIEW! TO EVERYONE!
@Septimius:
I really think you might have missed some stuff, both in your reading of the passage, and in an attempt to contextualize its contents with regards to the larger audit.
First you seem to have missed the use of the modifier in whole or in part which means that some subset of the 98 received questions that were in part found to be *necessary* alongside questions that were found to be unnecessary. Unfortunately, the audit does not provide any deeper dive into that data.
Additionally, your reading ignores the possibility that, in some cases, there might have been no need, based on the submitted application, to send out the request for additional information.
Further, You also might have missed the fact that on February 29, 2012, the EO sent out a directive that not more requests for new information should be sent out (see Audit p38/ PDF p45). The audit does not go into detail about how many of the 130 applications that did not receive requests for additional information were affected by that decision.
This is especially relevant given the review backlog created by the fact that specialists stopped reviewing all “potentially political cases” for 13 months while waiting for review criteria from the EO’s technical unit.
Beyond all of that, the audit contains no breakdown, to my knowledge, of what percentage of BOLO Tea Party applications (the issue in section 1) were part of those 98 applications. You are just assuming that all of the cases were Tea Party groups. That misses the fact that Liberal groups received similar requests for additional information.
Again, if you’ve got better data, please bring it. But so far you’re making some jumps that I don’t see the actual evidence backing up.
@Matt Bernius:
I didn’t make the assertion that the Determinations Unit treated all potential political applicants equally. You did.
My response was simply to point out that you are factually incorrect in making your claim. It really has nothing to do with my original comment. You are inferring that the applicants who didn’t receive requests for more information either didn’t need to provide more information or were caught in the 13 month window when no action was taken. The audit doesn’t address that. Do you have any facts to back that up?
Matt, thanks for these articles. What happens if one of these groups has it’s application for 501(c)4 status denied or in the case of Emerge America revoked? Do they have to pay back taxes on whatever income they had? Or can they reapply as a 527?
@Septimius:
Thanks for the response. If that’s the level of literalism you’re using, we’re not going to have a particularly productive debate.
You’re entirely correct in that there is no direct fact to back that up — the Audit doesn’t specifically say that it happened for X reasons. However, as I write above, the Audit provides a significant amount of contextual information that points to logical reasons for this to occur other than intentional political bias.
As far as I can tell, you are asserting that this happened because of political bias.
Until more information is released, we won’t know if either of us is correct. In the meantime, I’d be interested in your take on the questions that I posed in this post:
https://www.outsidethebeltway.com/open-irs501c4-discussion-crime-and-damages/
@Scott O:
This is a very important point that I haven’t had a chance to get to either…
My understanding is that if 501(c)4 status is revoked, then they are liable for back-taxes from the revocation date. I don’t know how retroactive revocations can be (paging Tax Lawyers). And I’m not sure if they are allowed to retroactively apply for 527 status.
In the case of groups apply for 501(c)4 status, if they are denied, my understanding is that they are going to owe back taxes for as long as they’ve been operating as a 501(c)4,
@Matt Bernius:
As far as I can tell, it seems that what you’ve learned from all of your extensive reading of the TIGTA audit and research into tax-exempt classifications is that the U.S. Tax Code is confusing. Congratulations on discovering what most people learn the first time they file an income tax return.
@ Matt Bernius
I think you should be careful here. You seem to be letting a desire to gather and understand the actual facts of the case interfere with a perfectly good opportunity for histrionics.