The current flap over the Internal Revenue Service demanding proprietary information and targeting Tea Party and other conservative groups that have “Tea Party” or “patriot” in their names has been highlighted by the media in recent days.
The IRS action was based on the fact that the groups they targeted are 501(c)(4) organizations, which are “not organized for profit but operated exclusively for the promotion of social welfare.”
If you are starting a nonprofit organization, the 501(c)(4) designation offers two important advantages: You don’t have to pay taxes, and you don’t have to disclose your donors.
But here is where it gets tricky: The IRS says that promoting social welfare doesn’t include participating in “political campaigns on behalf of or in opposition to any candidate for public office.” Unlike strictly nonpolitical 501(c)(3) groups, however, 501(c)(4) organizations “may engage in some political activities, so long as that is not its primary activity. … To the IRS, ‘political’ means directly endorsing political candidates.”
That explains why the National Rifle Association and AARP, which both have 501(c)(4) status, can lobby on larger issues and not run afoul of the IRS.
A Washington Post article on Tuesday noted that “… the targeting campaign would ‘stay in place for more than 18 months. Of the 298 total applications the IG (Inspector General) reviewed as of Dec. 17, 108 had been approved. … The IG report said that the IRS officials have a range of criteria for potential political cases that include the terms ‘tea party,’ patriots’ and ‘9’12 Project’; issues including government spending, government debt of taxes, education of the public about how to ‘make America a better place to live’; or a statement in the case file criticizing how the country is being run. Applications that met these criteria were added to a ‘Be on the Lookout’ (BOLO) listing, meaning they required further scrutiny.’”
In May, a Sacramento Bee editorial noted, “IRS targeting of Tea Party and conservative groups is outrageous. … The IRS apologized on Friday, but saying sorry isn’t enough. If this is as bad as it looks, heads ought to roll … because their tax status allows them to collect unlimited amounts from individual and corporate donors who can stay anonymous, they are even more pernicious than ‘super PACs’ that, like them, can raise and spend unlimited sums, but have to disclose donors.”
However, most people don’t realize that IRS abuses are nothing new. This has been going on for a very long time. To illustrate the point, following are just a few examples of the many egregious actions it has engaged in over the years to collect taxes it claimed were due:
IRS Abuse Report No. 642
Date: Mon Aug. 6 17:24:32 2001
To: sue@irs.class-action.com
From: ZK
I am a 73-year-old, single (divorced) woman who is struggling to make ends meet, and barely keeping my head above water. I am a California licensed marriage and family therapist and work for the Salvation Army Adult Rehabilitation Center. I am now in my sixth year there. This is a minimum six-month residential drug treatment program. Needless to say, this is not a high-paying job.
For some unfathomable reason, the IRS has decided they need to audit me again. This is the third time in 10 years that they have decided to do so. I’m not on welfare. I get a bare minimum Social Security check based on my ex-husband’s part earnings, not on mine, because I didn’t work then. I stayed home and raised our four children, which is what women did in those days. I do not understand why I am being harassed.
The public relations claim of the IRS stating that they are conducting more appropriate audits certainly does not stand up in my case. This is causing me horrendous stress and anxiety, which was greatly increased when I received a statement from them saying I owed approximately $9,000!!!! This is totally insane. Help!!!
IRS Abuse Report No. 643
Date: Wed Aug. 8 16:06:04 2001
To: sue@irs.class-action.com
From: Anon
IRS smacked me down hard. They took half my military pension for a year (about 6,000 bucks). IRS wants more. I owe more than I can pay. My fleeing for my life and living in the shadows is imminent. There will be a terrible retribution in this god-forsaken country for this evil being perpetrated on IRS victims, it has to happen. Heads have rolled, governments overthrown, and revolutions begun over less heinous power broker crimes. Any single member of the government of these states that doesn’t think these acts of IRS piracy are crimes are fools and traitors. IRS agents, calling it your job don’t make it right. All this from a 21-year decorated Navy retiree. I don’t want to live here anymore … .
IRS Abuse Report No. 644
Date: Sat Sep. 30 10:26:40 2000
To: sue@irs.class-action.com
From: DK
I am a 32-year-old mother of three young children. It all started with an audit back in 1991. I was threatened into taking a plea or they would put me in prison. My audit took three years. My accountant went to prison and I was 22 years old, I had no idea this accountant was a cheat. In 1994, I had a 1-year-old and a 2-year-old. The thought of prison terrified me, my children needed their mom. The outcome was still terrible.
I owed $26,000 due to a shady accountant who thought he did me a favor. I took a guilty plea and received a felony, five years of probation, six months of home jail, and to top it all off I now owed $144,000 after penalties and interest.
How do you start over after that? For the sake of my children I found the strength. In 1994 I worked very hard to get rid of the debt. The IRS took a compromise and they were paid in full! Try getting a job with a felony, what a joke. In 1998 they let me off federal probation one year early for good behavior, but at my dismay I found out they never stopped investigating me.
The IRS went to a grand jury trying to indict me for taxes; they lost. After they lost, they pulled me in their office and told me in front of my attorney to go back to my accountant and find $80,000 that were missing. There was not one cent missing. That was blackmail.
They said if I didn’t take their plea they would charge me with money laundering. That’s not true, I didn’t commit any crime. I was just a target and always will be. Again they go back to indict me, then another plea offer charging me on someone else’s merchant account. How do they get away with this extortion and abuse? I have spent 10 years fighting with the IRS and defending myself from lies.
I would have really liked to have spent those years enjoying my three children. The government took that from me (just another thing they took).
— Harris Sherline is a retired CPA and former chairman and CEO of Santa Ynez Valley Hospital. Click here to read previous columns. The opinions expressed are his own.