IRS Chief Counsel’s Office’s Involvement in Section 501(c)(4) Controversy

Aswe have noted in other postings, Paul Caron’s TaxProf Blog is daily coveringthe controversy surrounding the IRS’s processing of applications for tax exemptionfiled by hopeful section 501(c)(4) entities, particularly what may well havebeen an unprecedented process reserved solely for tea party and similargroups.  It is not always easy to seethrough the fog generated by partial facts, extensive spinning, and wishfulthinking promulgated by observers speaking from all sides of the controversy.  Moreover, the sheer volume of titlesappearing in news sources can obfuscate what is most significant.

One piece of congressional testimonythat does strike me as significant has emerged over the past few days.  As reported in the online version of theWashington Post, IRS attorney Carter Hull testified that the chief counsel’s office for the Internal Revenue Servicecontributed to the development of the agency’s controversial guidelines forreviewing “tea party” cases.  Hullreportedly testified that his superiors told him that the chief counsel’soffice “would need to review some of the first applications the agency screenedfor additional scrutiny because of potential political activity.”

While thePost story notes that the Chief Counsel for the IRS, William Wilkins, wasappointed to his position by President Obama, an article in the National ReviewOnline points out that “the officials from thechief counsel’s office who participated in the August 2011 meeting operated farbelow him [i.e., Wilkins] in the chain of command.”  These facts hardly point directly to the WhiteHouse, or even to anyone appointed by the President.  They are, however, a far cry from the initialnarrative that assigned blame to relatively low-level exemption agents inCincinnati.  The latter article continues,“Why the chief counsel’s office became involved in the matter remains unclear,but witness testimony suggests it was [Lois] Lerner’s office that pushed toinvolve the agency’s top lawyers.”

Asunpleasant as the continued coverage of this controversy may be for many, asanti-climactic as it may end up being for others, and as annoyingly partisan asthe investigation has already become, I (for one) would still like to know exactlyhow the IRS settled upon its process of reviewing section 501(c)(4) applicants.  There must be more than one lesson for tax andnonprofits lawyers – public and private – that one can mine from the truefacts.  

JRB