Last week, the U.S. Court of Appeals, Sixth Circuit (which covers Michigan, Ohio, Kentucky, and Tennessee) ordered the IRS to produce discovery (the pre-trial exchange of information between the parties in a lawsuit) required by the trial court in an ongoing legal battle with a class of conservative and “Tea Party”-related organizations.
If you’re new to this story–or if you’ve forgotten about it, because it’s been off the radar for a while–Forbes contributor Kelly Phillips Erb (or “taxgirl,” as she’s often known) has a pretty good timeline here. The short version is that after the Citizens United decision, there was a dramatic increase in applications for tax-exemption under Section 501(c)(4) of the Internal Revenue Code. That’s because Citizens United held that the government cannot prevent a nonprofit corporation, for-profit corporation, or a labor union from making “independent political expenditures,” which are expenditures on statements supporting or opposing a political candidate but is made independently of any candidate’s control or cooperation. (Note: That’s not the same as requiring the government to subsidize that speech with a tax exemption, though, which is why 501(c)(3) organizations can lose their tax-exempt status for political speech. Even with 501(c)(4) organizations, political activities must be an insignificant part of their activities.)
These organizations allege that the IRS treated applications from conservative groups unfairly. The IRS specifically looked for applications with terms such as “Tea Party,” “9/12,” and “Patriots,” as well as those advocating positions on taxes and government spending. Those applications were either delayed or subject to pretty heavy requests for information from the IRS. Indeed, the Treasury Inspector General for Tax Administration found that the criteria used were inappropriate. As the Sixth Circuit points out, charges that the government has targeted its own citizens for mistreatment based upon those citizens’ political viewpoints are a serious matter.
As part of the discovery process, the plaintiffs (the organizations alleging mistreatment) wanted to find out what organizations were screened out by the IRS’s “Be On The Lookout” lists, which the IRS has, up to this point, resisted turning over. The Sixth Circuit rejected the IRS’s request to avoid turning over this information in clear terms:
“The lawyers in the Department of Justice have a long and storied tradition of defending the nation’s interests and enforcing its laws—all of them, not just selective ones—in a manner worthy of the Department’s name. The conduct of the IRS’s attorneys in the district court falls outside that tradition. We expect that the IRS will do better going forward. And we order that the IRS comply with the district court’s discovery orders of April 1 and June 16, 2015—without redactions, and without further delay.”
As Nonprofit Quarterly explains, this most likely opens the door for depositions of IRS officials involved in this matter, and depending on the facts that come out of those depositions, this controversy may find its way back into the limelight.
Photo credit, Siyan Ren, via Unsplash.com, licensed under CC-0