Copyright © 2014 Albuquerque Journal
The Albuquerque Tea Party is still waiting on word from the IRS about its tax-exempt status application more than a year after initial reports that the IRS targeted conservative political groups for extra scrutiny – and nearly five years since it first submitted its application for tax-exempt status as a 501(c)4 group.
Groups with that designation, known as “social welfare” organizations, are allowed to engage in political activity as a secondary function of the organization’s work.
In May 2013, the Albuquerque Tea Party joined 40 other conservative groups in a lawsuit against the IRS filed by the Washington-based American Center for Law and Justice.
The lawsuit followed the disclosure that the tax agency had targeted tea party organizations and others seeking tax-exempt status for extra scrutiny about their political activities. The lawsuit is pending in a Washington federal court.
In the 14 months since the suit was filed, all but nine of the 41 groups that are plaintiffs to the lawsuit have been granted their 501(c)4 tax-exempt status, said David French, senior counsel with the American Center for Law and Justice, which is representing the conservative groups at no charge.
Only the status of the Albuquerque Tea Party and a few others remain unresolved, he said.
“We have seen no rhyme or reason in the ones that have continued to be delayed versus the ones that have been approved,” French said. “It appears utterly random and arbitrary.”
Rick Harbaugh, the past president of the Albuquerque Tea Party, said the IRS reached out to the group last fall to offer an expedited review of the group’s application if the organization would commit to use no more than 40 percent of its spending on political work, such as contributions to candidates.
The tax code prohibits 501(c)4 organizations from conducting political work as their “primary” operation. That language has been interpreted by many to mean at least 51 percent of any 501(c)4 group’s spending must be nonpolitical.
The Albuquerque Tea Party’s operations typically steer clear of political work because the group does not endorse candidates, Harbaugh said. Nonetheless, Harbaugh said, the group rejected the IRS’ offer because it sought a commitment of 60 percent nonpolitical activity rather than the standard 51 percent.
He said the group would not agree to be treated differently than others by the IRS.
“All we’re trying to do is comply with the law,” Harbaugh said. “They (the IRS) are trying to change the law. They were trying to get themselves off the hook, and the way they were trying to do it was to further restrict what we as an organization can do.”
Harbaugh declined to release to the Journal the IRS letter offering an expedited review in exchange for a higher standard of nonpolitical activity.
IRS regional spokesman Bill Brunson declined to comment on the IRS review of the Albuquerque Tea Party, citing agency rules prohibiting disclosure of private information.
Like the Albuquerque Tea Party, none of the other groups the ACLJ represents in its lawsuit against the IRS accepted the offer for expedited review in exchange for limited political activity, said French, the ACLJ counsel.
Accepting the offer would have made the Albuquerque Tea Party and other conservative groups “second-class citizens” in the world of tax-exempt, so-called social welfare organizations, French said.
“The IRS was offering a ‘deal’ that involved the Albuquerque Tea Party and other tea parties agreeing to less freedom and less flexibility than what have been granted to every other (c)4, including the liberal (c)4s,” French said.
Also affecting the groups’ decision to decline the offer was proposed IRS rule changes to the way political activity was defined, he said. Those proposed rules have since been withdrawn.
The group’s unresolved tax status means the group has been forced to stash away about $3,500 in contributions to cover nearly five years of tax bills that would come due if their tax-exempt status is denied, the past president said. If the tax-exempt status is denied, the group will be required to pay taxes on contributions it received.
“That, to us, is very irritating,” Harbaugh said. “They are using us as a punching bag, and there’s not much we can do about it, except smile and take it.”
Also, groups granted 501(C)4 tax-exempt status by the IRS are not required to disclose their donors.
Controversy over IRS dealings with tea party groups is still brewing in Washington.
On Monday, the Republican-controlled U.S. House voted to cut the IRS tax enforcement division by $1.2 billion, The Associated Press reported.
The cuts reflected GOP outrage over the agency’s scrutiny of tea party groups and frustration over the agency’s failure to produce thousands of emails by Lois Lerner, the official formerly in charge of the IRS division that processes applications for tax-exempt status, the AP said.
Meanwhile, a second federal judge has ordered the IRS to explain under oath how the agency lost emails from Lerner, Fox News reported.