Testimony of Washington’s Involvement in 501(c)(4) Scandal
Asindicated by some of the stories appearing under titles posted in today’s TaxProf blog, which continues its broad coverage of the IRS scandal(s) (thank you, PaulCaron!), testimony is emerging from the congressional hearings that at leastone IRS attorney in Washington was heavily involvedin the process of targeting conservative groups applying for recognition ofexemption under Internal Revenue Code section 501(c)(4). One significant story appears here in ABC News. Here are some of the more poignant excerptsof the coverage:
Gary Muthert, anIRS agent there [in the Cincinnati office],said his local supervisor told him in March 2010 to check the applications fortax-exempt status to see how many were from groups with “tea party”in their names. The supervisor’s name was blacked out in the transcript.
“He told methat Washington, D.C., wanted some cases,” Muthert said of his supervisor.
Muthert said hecame up with fewer than 10 applications. But after checking some of the group’swebsites, he noticed similar groups with “patriots’ or “9-12project” in their names, so he started looking for applications thatmentioned those terms too.
Over a two-monthperiod, Muthert said he found about 40 applications that mentioned tea party,patriots or 9-12 project — the latter being groups which aspire to reinstill apost-9/11 spirit of unity in the country. …
Muthert said hissupervisor told him that someone in Washington wanted to see seven of theapplications, so Muthert prepared the files. …
Elizabeth Hofacre, also an agent inthe Cincinnati office, told investigators she was in charge of processingapplications from tea party groups — once they were selected by other agents —from April 2010 to October 2010. Hofacre said her supervisor in Cincinnati,whose name was blacked out in the transcript, told her to handle theapplications.
But, she said, an IRS lawyer inWashington, Carter Hull, micromanaged her work and ultimately delayed theprocessing of applications by tea party groups.
Hull is a lawyer in the divisionthat handles applications for tax-exempt status. But, Hofacre said, his interestin the cases was highly unusual.
“It was demeaning,” shesaid. “One of the criteria is to work independently and do research andmake decisions based on your experience and education, whereas on this case, Ihad no autonomy at all through the process.”
Thistestimony comes from the very people with whom many tax professionals (insideand outside of government) empathize. TheIRS is underfunded. The exemptorganizations division is overburdened. Thereare indeed limits on the political activities of section 501(c)(4) entities,and it is not only appropriate but also imperative for agents to engage in thedifficult process of determining, in a politically neutral manner, whetherentities that plan to engage in them – be they tinted red or blue – will satisfy theadmittedly ambiguous criteria for exemption. The determination agents’ jobs are hard enough. I believe that we would do theseagents a real injustice by dismissing their testimony or failing to followwhere it leads.
Although much commentary on the controversy has, in my opinion, from the beginning beentainted by partisanship and is becoming even more so (again, in my opinion), wemust not ignore the facts. The factsstand apart from the political and policy implications that we draw fromthem. We do not yet know all of thefacts, but we should continue to welcome them. Once we have all of the facts, we can then decide what tomake of them. Opinions, of course, will vary. Nonetheless, the real facts may causeus all to revise the stories we are telling ourselves about the nature andsignificance of the whole affair.
JRB