IRS subjects tea party groups to new round of scrutiny, publicizes tax return data

The IRS‘ battle against holdout tea party groups is heating up again, after the tax agency promised it would begin processing their long-delayed applications, but sent a new round of prodding questions demanding still more information.

More jarringly, the IRS then publicly released one of the sets of questions it sent to the Texas Patriots Tea Party — a move the group’s lawyer says puts secret taxpayer return information, supposed to be protected, out in the public.

Tax experts say the IRS may be on safe legal ground, since the filing was made as part of a court case, and that’s one of the few narrow exceptions to strict IRS privacy laws.

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Still, the move to release the information has inflamed an already tense class action legal battle between the IRS and tea party groups who feel the agency is still targeting them more than three years after it promised to cease.

“The IRS has taken the unprecedented step of publicly filing actual return information,” said Edward Greim, who is handling the case on behalf of more than 400 groups targeted by the IRS.

He said the questions asked by the IRS show the agency has not ceased the intrusive questioning that landed it in trouble in the first place back in 2013.

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Mr. Greim said releasing the letter is proof that the IRS can’t be trusted to fairly handle the cases.

“The IRS‘ conscious decision to attach this Section 6103-protected request to a public filing makes it even harder to believe that the IRS can treat TPTP and similar groups fairly and neutrally. This is, and will continue to be, a core focus of our litigation in the coming weeks,” he said.

Both the IRS and officials at the Justice Department, which is acting as the tax agency’s lawyer, declined to comment, citing the ongoing legal battle.

But the tax agency said in court papers that Mr. Greim has been misleading the court, and said the documents were designed to prove that the IRS has been dealing fairly with the TPTP. The IRS said the information it requested focuses on the tea party group’s activities and whether they would be illegal for a tax-exempt group to engage in.

“It is more of the same: spurious attacks on the IRS and mischaracterizations of the facts,” the Justice Department said in its briefs.

The IRS admitted in 2013 that it singled tea party groups out for intrusive scrutiny, including crossing lines by asking questions about the groups’ associations, meetings and even members’ reading habits. Some groups received multiple letters, each time further delaying their applications.

After being dinged by its inspector general, the agency promised it would stop asking inappropriate questions, and insisted it canceled the use of secret targeting lists to single out groups.

But a federal appeals court this summer ruled that as long as some groups are still stuck in the backlog, the IRS is still conducting illegal targeting.

The tax agency, which had been blocking processing, claiming it couldn’t do anything while the court cases were proceeding, quickly kicked into gear and announced they would process the three remaining cases.

In a letter last week to the TPTP, the IRS fired off a new set of questions — the fourth inquiry the group has received since it applied for nonprofit status in 2012. In the new questions, IRS agent Jerry Fierro said he looked over the group’s website and spotted potential trouble spots, including “rallies, parades, educational workshops, speaking events, voter registration drives, fund raisers and straw polls.”

The IRS says those activities could squelch a group’s application.

Mr. Greim, the lawyer for the TPTP, said in making its letter public, the IRS was showing how aggressive its tactics are toward tea party groups. He said the agency, which has held up the TPTP’s application for 41 months, only gave the organization 30 days to respond, and said if the questions aren’t all answered, it could derail the application again.

“The IRS‘ conscious decision to attach this Section 6103-protected request to a public filing makes it even harder to believe that the IRS can treat TPTP and similar groups fairly and neutrally,” Mr. Greim said.

Section 6013 of the tax code prohibits sharing of information from taxpayers’ returns.

Tax experts said the IRS letter is likely considered protected information, but they said the IRS is probably on safe legal ground because the law allows for information to be filed if the taxpayer is a party in a lawsuit and the filing directly relates to an issue in the case.

In addition to the TPTP, two other tea party groups that were targeted by the IRS are still awaiting approval. Unite in Action, a Michigan-based group, applied in 2010, and the Albuquerque Tea Party applied nearly seven years ago, in December 2009.

Jay Sekulow, chief counsel at the American Center for Law and Justice, which represents the other two groups, said they have not received a new set of questions similar to the list sent to the TPTP. But he said he’s been prodding the IRS for a final decision.

“We again demanded that they review their applications and process them in a fair and expeditious manner,” he said in a statement.