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Author: xLife Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1961196  
Subject: Re: Lamest scheme ever Date: 5/17/2013 2:54 PM
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The "Tea Party" is not a single organization - remember, we're talking literally scores of different groups that filed. The fact that another organization with a similar, or even the same, name as an applicant might be engaged in campaing activities does not mean that the applicant is engaged in those activities.

I agree, but that's why the IRS was, in my opinion, correct to ask for additional information. The Al Qaeda Bowling Club, may have nothing at all to do with Al Qaeda, but it's not crazy to ask them to prove it.

Government is not allowed to treat people differentially just because of the name they choose for their organization like that.

Sure they are. See above.

It should be noted that political activity is expressly permitted to 501(c)(4) organizations - indeed, the IRS has made it clear that attempting to influence legislation is itself a social welfare activity:

As long as the legislation that an organization attempts to influence is germane to its social welfare purposes, the organization is engaged in activities that further social welfare purposes.


We can play "Read the IRS Rules" all day. Whether these groups were primarily social welfare organizations or political organizations doesn't really matter. Both are eligible for tax-exempt status. But when a group files for (c)(4) status, it's not only reasonable, it's expected that the IRS verify the group's eligibility by asking groups that engage in political activity to prove that they're primarily social welfare organizations, not political groups. What the IRS did wrong in this case is to use a reasonable, but impermissible "flag" to identify groups that were likely to be primarily political in their activities.


Once the IRS failed to grant them that tax-exempt status, it would have been foolhardy for them to proceed based on the assumption that their activities would have ultimately been found to be tax exempt.

To my knowledge (and alarm) the IRS didn't deny any of the applications in question. It asked the groups for more information. (And some of that information they weren't allowed to ask for.) Again, political organizations are eligible for the same tax exemptions as 501(c)(4) groups. Political groups don't even have to apply for the tax-exemption, which has to make you wonder why the tea party groups bothered to apply for 501(c)(4) status. Ignorance, I suppose.


I would point out that no one from the Administration has claimed that the IRS' activity was appropriate (or harmless, for that matter).

The IRS's behavior was inappropriate. While its supposed to check out these dubious applications, it's not supposed to use explicitly political criteria for determining which applications to scrutinize. Also, the agents or clerks were confused by the regulations and asked these groups (and probably others) to provide information the IRS was not entitled to ask for.

It was harmful as was well, but not to the questioned groups -- except, as I've said, for the time and cost of dealing with the IRS requests. (But then they could have avoided all that by not applying for a tax-exempt status they neither needed nor qualified for.) What the IRS did was harmful because it calls into question its political independence and fairness even though there's little, if any evidence, that this kaffuffle was anything other than bureaucratic confusion and incompetence.

The real harm, to my mind, is that the larger issue of whether or not political organizations masquerading as social welfare organizations should receive preferential tax treatment or not has been lost in all this. Now, any attempt to curtail this abusive practice will be suspect.
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