May 14 (Bloomberg) -- A handful of Cincinnati-based Internal Revenue Service employees have accomplished what no bipartisan White House dinner ever could: uniting the U.S. Congress.
Capitol Hill lawmakers are now on a mission to dissect how the tax agency wound up targeting Republican-friendly groups for extra scrutiny. Republican Senate Leader Mitch McConnell called it a “travesty” and the chamber’s majority leader, Democrat Harry Reid, termed the matter “very troubling.”
Legislation banning such practices was introduced yesterday, and four committees put the topic on the House and Senate calendars. The House Ways and Means Committee will hold the first hearing into the subject on May 17.
While the top tax collectors at the IRS face grillings in Congress, the ramifications of the outrage are likely to ripple far beyond them.
Even as President Barack Obama yesterday labeled the IRS action “outrageous,” the issue will complicate his ability to press other initiatives, including implementing the health-care law, in which the IRS plays an enforcement role, political scientists and strategists from both parties said yesterday.
“This was dirty, no question, and it will do nothing to improve the tense relationship between the Obama administration and Republican leaders,” said Kenneth Warren, a political science professor at Saint Louis University in Missouri.
At the same time, government watchdog groups and tax attorneys expressed concern the revelations would hobble efforts to police money in politics. Outside groups -- including nonprofits that don’t disclose their donors -- pumped about $1 billion into the 2012 federal elections, three times as much as they did four years earlier, according to the Center for Responsive Politics, based in Washington.
The uproar began last week when Lois Lerner, the IRS official in charge of overseeing tax-exempt groups, apologized for the Cincinnati workers’ review and said the agency was wrong to pay special attention to groups promoting limited government. The extra IRS scrutiny was given to organizations seeking tax-exempt status if they had “tea party” or “patriot” in their name, she said. Her disclosure on May 10 came ahead of an Inspector General’s report expected to be released this week.
In the months before last November’s election, Democracy 21 and the Campaign Legal Center, two Washington-based groups that track political spending, asked the IRS to investigate four high-profile nonprofit groups active in the 2012 presidential race: Crossroads Grassroots Policy Strategies and American Action Network, pro-Republican groups; Priorities USA, which worked to help Obama; and Americans Elect, which was supporting an independent candidate for president.
“These four cases and others like them must not be ignored or swept under the rug because of the wrongful actions of the IRS in the case of the conservative groups who were targeted,” Democracy 21 president Fred Wertheimer said in a statement yesterday.
Rather than scrutinizing the biggest players in last year’s election, at least some of the IRS letters were aimed at state-based, anti-tax Tea Party groups.
Tom Zawistowski, the former president of an Ohio Tea Party group who was among the first to publicize the IRS’s demands last year, said it was distracting and demoralizing for Tea Party groups like his.
His Ohio Liberty Council Corp., later renamed the Ohio Liberty Coalition, was founded to coordinate Tea Party activities in one of the hardest-fought states in the presidential election. The group applied in 2010 to be a tax-exempt social welfare group. After months of silence, the IRS wrote to the group on Jan. 26, 2012, with dozens of questions.
Among the requests, the IRS wanted “a narrative description” of every activity the organization had taken part in during the past two years. The agency also wanted hard-copy printouts of every social-media site, including Facebook, curated by the group. It wanted to know “the names and credentials of instructors” of past and planned events.
“Most of these questions had nothing to do with our tax status,” Zawistowski said. “It was beyond maddening. It didn’t feel right at all.”
He publicized his communications with the IRS on websites including theblaze.com, founded by conservative radio talk show host Glenn Beck. Afterward, Zawistowski fielded calls from other Tea Party groups that had received similar demands.
“This IRS issue stopped me from having time during the election from doing the things I wanted to do,” he said. Heads of Tea Party groups across the country were “terrified” by the IRS inquiries, he said.
Zawistowski provided Bloomberg News with some of the IRS communications other Tea Party groups shared with him, while others posted those documents online.
The Waco Tea Party in Texas, which also had sought tax-exempt status, received an IRS letter dated Feb. 1, 2012, asking for reams of material such as “copies of any agreements you have with others for provision of goods or services, sharing of facilities or other cooperative arrangements, or anything else.”
That request and a line in the letter that responses would be “available for public inspection,” set off alarms for Waco Tea Party president Toby Marie Walker.
“We chose to become a C4 to shield members and donors and vendors from the public,” she said, referring to the tax code that covers nonprofits. “There were so many stories about Tea Party people being racist and extremist, we just didn’t want anyone losing their jobs or business over helping us.”
She said she and other Tea Party groups lost donors and members because “we had to defend ourselves to the IRS and to the public. People assumed we had done something wrong because the IRS doesn’t just pick on people. Well, they do.”
The Hawaii Tea Party received an IRS letter Jan. 26, 2012, demanding information about the group’s board members, officers, employees and their family members.
The IRS also sought details about the Hawaii group’s relationship with the Leadership Institute, an Arlington, Virginia-based organization that trains Tea Party leaders. The IRS wanted to know more about whether Dylan Nonaka, the former executive director of the Hawaii Republican Party, had trained the new Tea Party group.
Still other groups were asked about their connection to Americans for Prosperity, a nonprofit group co-founded more than a decade ago by billionaire industrialists Charles and David Koch. Obama named the organization in 2010 speeches about the corrosive influence of money in politics.
A Jan. 26, 2012, IRS letter to the Georgia Tea Party probed its relationship with Americans for Prosperity. The letter, provided to Bloomberg News by AFP, asked the Georgia group to explain its relationship with the Arlington-based organization and provide the IRS with copies of contracts with and training materials provided by the AFP.
“At the time we thought it was awfully odd for the IRS to be interested in something like that,” said AFP president Tim Phillips in a telephone interview. “Now we know that it was part of a pattern of abuse. This is large-scale and systematic.”
The Washington-based American Center for Law and Justice disputed the IRS’s claim that the singling out of Tea Party groups came from lower-level IRS employees in Cincinnati, saying it has questionable inquiries from four IRS offices.
Some of the organizations affected are considering a lawsuit, said Jay Sekulow, chief counsel of the American Center for Law and Justice, which represents 27 Tea Party groups.
“It is no wonder that, in light of the open and notorious politicization of the IRS vis-a-vis Tea Party and other conservative groups, many Americans view with outright alarm the called-for expansion of the IRS to implement the Affordable Care Act,” Sekulow wrote yesterday in an open letter to Steven Miller, acting commissioner of the IRS. “Agencies like the IRS must be scrupulously apolitical to retain the confidence and trust or the American people.”
The IRS is charged with enforcing most of the laws that changed after Congress approved Obama’s health-care package in 2010. Much of the phased-in measure will be in effect by next year.
Republicans who have never stopped seeking to thwart the health-care law now can wield the IRS treatment of Tea Party groups as evidence that their suspicions about government overreach are well-founded, said Bruce Buchanan, a political science professor at the University of Texas at Austin.
“This will complicate at least to some degree the way the IRS is viewed on health care,” Buchanan said.
Those opposing it “will push the credibility issue for as long as it will hold water,” he said.
Some Tea Party leaders subjected to the IRS’s extensive questioning said they’re now more concerned about the ramifications of the health-care measure and feel validated that the IRS is now -- more than a year later -- acknowledging their claims of having been targeted.
“This is at the heart of governance, at the heart of what the Tea Party is about,” said Zawistowski. “This is Big Brother. This is 1984. And these are the people who will be in charge of Obamacare. I’m happy to be engaged in this fight because it’s the real fight.”
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