IRS scrutiny of nonprofit political groups to be addressed by newly named leaders

Staff and news reports

*Update: See addendum at bottom.

Controversy over disclosures that the Internal Revenue Service’s (IRS) Exempt Organizations Division targeted conservative political groups for special scrutiny will be the responsibility of Joseph H. Grant, who was appointed last week as Commissioner of the Tax Exempt and Government Entities Division. Additionally, the IRS announced that Sheldon Kay was named Chief of Appeals.

The Wall Street Journal reports that the scandal erupted when Lois Lerner, director of the Exempt Organizations Division, confirmed on Friday that Tea Party and other conservative 501(c)(4) nonprofit groups were subjected to “absolutely inappropriate” IRS review.

According to Isaiah Castilla in BolderAdvocacy: “A 501(c)(4) social welfare organization generally pays no taxes on its income, but may not offer its donors a tax deduction. Social welfare organizations may conduct unlimited lobbying and may engage in partisan political campaign work, but only as a secondary activity.

“If an organization’s primary purpose or activity is partisan political activity, the organization does not qualify as a 501(c)(4),” Castilla continued. “Partisan activity is defined as anything that tends to show support or opposition to a candidate or group of candidates.”

IRS regulation of such entities has been called into question by lawmakers, political pundits and journalists.  “The IRS has been either unwilling or unable to regulate them properly,” wrote Kevin Drum in Mother Jones. “So the fact that some of the folks responsible for processing these applications were looking for a way to flag potentially dubious groups is sort of understandable.”

Closer analysis is needed, but the manner in which it has been managed to date drew sharp criticism from President Obama, who termed to practice “outrageous.”

“I’ve got no patience with it,” Mr. Obama said Monday during a joint news conference at the White House with Prime Minister David Cameron of Britain. “I will not tolerate it. And we will make sure that we find out exactly what happened on this.”

As reported by the New York Times, “Mr. Obama’s comments about the IRS left the agency and its leadership alone in answering charges that its employees had put added demands on Tea Party and other conservative groups applying for tax-exempt status from 2010 to 2012, even though none appeared to have been denied the classification.”

On May 8, days before the story broke, the IRS announced its new leadership appointments in a news release. “Joseph [Grant] and Shelly [Kay] are strong leaders who will provide strong leadership and continuity in these critical parts of the IRS,” stated Steven T. Miller, Acting IRS Commissioner.

*NOTE: Media reports confirmed on May 16 that an internal IRS memo says Joseph Grant, commissioner of the agency’s tax exempt and government entities division, will retire June 3.

For other recent PJ stories involving IRS Exempt Organizations Director Lois Lerner, click here and here.

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