IRS notches legal victory in tea party cases

IRS notches legal victory in tea party cases



The decisions have major implications for tea party groups suing the IRS over the issue. | AP Photo



By RACHAEL BADE | 10/23/14 3:23 PM EDT Updated: 10/23/14 11:56 PM EDT

The IRS may have inadvertently figured out how to win its legal battles against aggrieved tea party groups: Give them what they wanted in the first place — tax-exempt status.

That was a major reason a Republican-appointed federal judge on Thursday threw out two lawsuits brought by more than 40 conservative groups seeking remedies for being singled out in the tea party targeting scandal, a victory for the IRS.

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Judge Reggie Walton of the U.S. District Court of the District of Columbia dismissed almost all counts brought against the tax-collecting agency in two cases, ruling that both were essentially moot now that the IRS granted the groups their tax-exempt status that had been held up for years.

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Walton, a President George W. Bush-appointee, also said individual IRS officials could not be fined in their individual capacity for allowing such treatment because it could hurt future tax enforcement.

The ruling, which the groups could appeal, has serious implications for tea party groups suing the IRS, suggesting they may never receive compensation for the long waits they endured for a ruling on their status.

The inspector general report that ignited the targeting controversy last year found that applications sat in limbo for as long as several years and that the groups were asked inappropriate questions about their donors, political affiliations and random things like social media posts.

Republicans said they were outraged at Walton’s decision.

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“You get targeted and harassed for three years but, oh, because you finally get [tax-exempt status], the three years of harassment doesn’t mean anything?” asked Rep. Jim Jordan (R-Ohio), who heads a congressional subpanel investigating the controversy. “I find that argument lacking tremendously in light of what these people went through.”

But others said the agency needs to do more — not less — to scrutinize nonprofit groups that don’t follow the rules and over-engage in political activities. To obtain the status in question, political activity must not be the groups’ primary activity — a vague and difficult-to-administer test.

“Judge Walton got it right — there is no ongoing injury to these groups,” said Paul S. Ryan, senior counsel at the Campaign Legal Center, which backs tighter rules on political nonprofits. “The IRS needs to enforce tax law with respect to nonprofit political groups more aggressively.”

A furor erupted in May 2013, after a Treasury inspector general report blasted the IRS for using discriminatory labels to sort through applicants seeking tax-exempt status using terms like “tea party ” and “patriots."

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Soon after a raft of right-leaning organizations that applied for tax-exempt status sued the government. Some had had their applications put on hold for years; others were asked what were later ruled inappropriate questions about donors and political views during the application process.

The groups in their suits alleged that the IRS violated their First and Fifth Amendment rights with the inappropriate “be on the lookout” list that used words like tea party to hold up their applications. They sought monetary relief for their trouble as well as injunctive relief barring the IRS from discriminating against conservative groups ever again.

The agency has since changed its practices, including scrapping the lists.

When the suits at hand were filed, 22 of the groups had already received their tax-exempt status, five had dropped their applications altogether and just over a dozen were still waiting to hear from the IRS.

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Since then, the IRS had approved all but two, rendering much of the arguments moot, the judge said — and preventing him from considering the case.

“After the plaintiff initiated this case, its application to the IRS for tax-exempt status was approved by the IRS. The allegedly unconstitutional governmental conduct, which delayed the processing of the plaintiff’s tax exempt application and brought about this litigation, is no longer impacting the plaintiff,” Walton said in his decision to throw out True the Vote’s lawsuit against the IRS.



Read more: http://www.politico.com/story/2014/10/irs-tea-party-legal-victory-112145.html#ixzz3H3ymYcFm