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DOJ Settles Lawsuits Over IRS Targeting Scandal

The Justice Department announced that it has settled lawsuits with conservative groups that had sued over the IRS targeting scandal.

The Justice Department announced that it has settled lawsuits with over 400 Tea Party and conservative groups that had sued over the IRS targeting scandal.

The settlements, which are pending approval by the district courts, stem from two cases brought by groups whose tax-exempt status was significantly delayed by the Internal Revenue Service based on inappropriate criteria. The first case, Linchpins of Liberty v. United States, comprised claims brought by 41 plaintiffs, and the second case, NorCal Tea Party Patriots v. Internal Revenue Service, was a class action suit that included 428 members.

Fox News reported that the settlement involves a payment to the plaintiffs as well as an apology from the IRS. “The IRS admits that its treatment of Plaintiffs during the tax-exempt determination process, including screening their applications based on their names or policy positions, subjecting those applications to heightened scrutiny and inordinate delays, and demanding some Plaintiffs’ information that TIGTA determined was unnecessary to the agency’s determination of their tax-exempt status, was wrong,” the IRS said in court documents. “For such treatment, the IRS expresses its sincere apology.”

A 2013 report from the Treasury Inspector General for Tax Administration found that the IRS had singled out conservative and Tea Party groups for additional scrutiny when they applied for tax-exempt status. Former IRS employee Lois Lerner had been in charge of IRS division that processes applications for tax-exempt groups and became the public face of the scandal when she testified about the situation before Congress. The Justice Department recently announced that it had decided not to prosecute Lerner after reviewing the circumstances surrounding her role in the targeting scandal.

Attorney General Jeff Sessions issued the following statement when the news about the lawsuit settlements was announced:

Chief Justice John Marshall wrote ‘that the power to tax involves the power to destroy … [is] not to be denied.’ And it should also be without question that our First Amendment prohibits the federal government from treating groups differently based solely on their viewpoint or ideology.

But it is now clear that during the last Administration, the IRS began using inappropriate criteria to screen applications for 501(c) status. These criteria included names such as “Tea Party,” “Patriots,” or “9/12” or policy positions concerning government spending or taxes, education of the public to “make America a better place to live,” or statements criticizing how the country was being run.  It is also clear these criteria disproportionately impacted conservative groups.

As a result of these criteria, the IRS transferred hundreds of applications to a specifically designated group of IRS agents for additional levels of review, questioning and delay.  In many instances, the IRS then requested highly sensitive information from applicants, such as donor information, that was not needed to make a determination of tax-exempt status.

The IRS’s use of these criteria as a basis for heightened scrutiny was wrong and should never have occurred. It is improper for the IRS to single out groups for different treatment based on their names or ideological positions. Any entitlement to tax exemption should be based on the activities of the organization and whether they fulfill requirements of the law, not the policy positions adopted by members or the name chosen to reflect those views.

There is no excuse for this conduct. Hundreds of organizations were affected by these actions, and they deserve an apology from the IRS.  We hope that today’s settlement makes clear that this abuse of power will not be tolerated.

About the Author

Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce.