I.R.S. Handcuffs Tax-Exempt Groups

The IRS continues to get smacked around in the partisan arena, with the Republicans smelling blood and baring their teeth, and the Obama administration having no hesitation in throwing agency bureaucrats overboard to save their sinking ship.

The scandal’s momentum has caused reporters and others to dig deeper, to give credence and airtime to previously-neglected stories, and to instead overhype what in other seasons would be ignored.

An anti-abortion group released a recording of a conversation with an IRS agent in which the agent told them that they couldn’t be a tax-exempt organization if they “use your religious belief to tell other people you don’t have a belief” or “take all kinds of confrontation activities [sic] and also put something on a website and ask people to take action against the abortion clinic” or “go to the front of the abortion clinic and… come for protesting activity, and then go up to the woman and tell the woman they should not do that.” “When you conduct religious activities,” the agent told the group, “meanwhile you have to respect other people’s beliefs, other people’s religion. You cannot use any kind of, you know, confrontation way, or to, or against other groups or devalue other groups, other people’s beliefs. OK?”

In a letter to the group in response to their tax-exempt status application (they were applying for 501(c)3 which has stricter guidelines than the 501(c)4 groups that have been the main focus of the recent IRS scandal), the agent had asked the group to “assure:”

  • that the information you distribute or present to the public are not representing biased and unsupported opinions;
  • that the information presented or distributed are with sufficiently full and fair exposition of the pertinent facts as to permit an individual or the public to form an independent opinion or conclusion

The letter went on to claim that “Activities that are conducted to expose the racist agenda (as you claimed) of the abortion industry” were an example of activities that are “neither educational nor charitable in nature.”

The agent claimed that:

[A]n organization’s activities may not be considered serving educational purpose, if an organization carries out activities that aims to deny or reduce the rights of another segment of the community; that are designed to influence public opinion in favor of its advocated position; that may have adverse effect on the day to day operation of public health facilities that may be detrimental to the community as a whole; and that show a type of propaganda to defy other’s beliefs or viewpoints on the same matter.

A second letter contained more of the same, telling the group that because their educational material was “condemnatory and opinionated” and made claims with “no data source provided and no explanation given on how the conclusion is made” and included expressions that were “aimed to inflame the hostility to the community health clinic or family planning clinic which hold opposition position or practice on the issues of abortion,” and included “no intelligent discussion of the subject of abortions and no information presented to inform the public concerning alternatives to the present law and practice related to abortions,” that the group might not qualify for tax-exempt status.

(The IRS eventually backed down and granted the group tax-exempt status last month.)

The president of another anti-abortion group told Congressional investigators that an IRS agent had told them “that we needed to send in a letter with the entire board’s signatures stating that under penalty of perjury we would not picket/protest or organize groups to picket/protest outside of Planned Parenthood. Upon receiving such a letter, she indicated that the IRS would allow our application to go through.”

Such restrictions on the attitudes the group must have or profess towards people with contrary beliefs, what sorts of arguments their outreach material must contain, and what activities it must refrain from engaging in, do not appear to have much support in the law. But apparently IRS agents have come to believe that it is part of their mandate to police groups that are applying for tax-exempt status in this way.

Here’s an excerpt from the latest draft of my upcoming book on the tactics of successful tax resistance campaigns that speaks to this:

Troubles with Tax-Exempt Status

The legal conditions of tax-exempt, non-profit status in the United States have proven to be a powerful way for the government to make activist groups timid. Anti-abortion tax resister Jerry DePyper noted that this was a big reason why he was making no headway in trying to get the tax resistance tactic on the agenda of the large anti-abortion groups. He spoke with two leaders in that movement and reported: “Both… say that no recognized pro-life leader would want to risk it because of the legal issues with the IRS, and they don’t want to lose their tax-exempt status.”

Ruth Benn of NWTRCC had a similar experience:

I was talking about a potential war tax resistance workshop with a group for which I have great respect and who are very supportive of war tax resistance. When I suggested a certain activity as part of the workshop, the organizer hurriedly said, “Oh, no, we couldn’t sponsor that; we’re 501(c)3 [the section of the legal code that governs tax-exempt non-profits].”

For this and related reasons, some tax resisting groups, like Catholic Worker and NWTRCC, have never tried to apply for tax-exempt non-profit status. In 1972 the IRS told Catholic Worker that it owed some $300,000 in taxes and penalties because of this. The tax agency eventually retreated, acknowledging that Catholic Worker was a de facto non-profit charity, even if it was never going to fill out the de jure paperwork. This episode turned out to be a good propaganda opportunity for Catholic Worker. The New York Times editorialized: “Surely the IRS must have genuine frauds to investigate. Surely there must be some worthwhile work this agency could be doing instead of obstructing acts of corporal mercy for the poor.” Dorothy Day added:

The New York Evening Post also editorialized on our situation. The National Catholic Reporter and the Commonweal editors also registered their protest and other papers followed suit. Letters come in daily from our friends, reassuring, comforting, indignant at the government, a few of them indignant at us, that we cause them so much worry.…

…[T]he CW refuses to pay taxes, or to “structure itself ” so as to be exempt from taxes. We are afraid of that word “structure.” We refuse to become a “corporation.”… [W]e do not intend to “incorporate” the Catholic Worker movement.