IRS Handbook Still Includes Rule Allowing Agents to Target Conservatives

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Posted by Elizabeth McKee on Friday, March 31st, 2017, 1:21 PM PERMALINK

At a conference before the American Bar Administration in May 2013, Lois Lerner unleashed a political uproar by admitting the IRS unjustly targeted conservative organizations filing for tax-exempt status. Nearly four years after Lerner’s admission, the institutional mechanisms that allowed the IRS to target right-leaning groups have not been remedied. A study released by the Cause of Action Institute reveals Rule 7.29.3, which allowed the IRS to unjustly scrutinize groups based on their political viewpoints, is still a part of the IRS handbook.

Rule 7.29.3 of the Internal Revenue Manual advises tax law specialists to develop “Sensitive Case Reports” for certain groups requesting tax-exempt status that are “likely to attract media or Congressional attention.” According to Cause of Action’s study:

“The dangers in this approach are manifold. First, by focusing on media or congressional attention instead of looking at the merits of an application under the law, the IRS automatically politicizes the process in an attempt to avoid potential embarrassment, all at the expense of taxpayer rights. Second, the vague and open-ended standard used by the IRS allows partisan officials to selectively delay and obstruct those applications receiving higher scrutiny without a way to hold the officials accountable for their decisions. Third, given the power of the president to influence media coverage, no overt collusion or decision is necessary for the opponents of an administration to receive extra IRS scrutiny as a matter of course.”

The rule, which was adopted on July 14, 2008, led to the creation of a “Be on the Lookout List” (BOLO) in 2010. The list advised agents to flag applications that referenced "Tea Party," "Patriots" or "9/12 Project,” advocated education about the Constitution or the Bill of Rights, criticized how the government was being run, or that lobbied to “make America a better place to live.”

In June 2016, the IRS released a list of 426 organizations that were selected for increased scrutiny based on the criteria laid out in the BOLO. Of these, 60 have the word “tea” in their name, 33 include the word “patriot,” 30 include the number “912,” and eight refer to the Constitution.

The BOLO created unnecessary hurdles that blocked the applications of flagged organizations. During the three-year period between 2009 and 2012, only one conservative political advocacy group was approved for tax-exempt status.

When questioned about the targeting of organizations with a conservative viewpoint, Lois Lerner blamed the scandal on two unnamed “rogue agents” in the IRS’s Cincinnati office; however, we now know that institutional procedures within the IRS allowed and supported the agency’s attack on conservative organizations. In July, Judicial Watch released documents revealing that “top Washington IRS officials, including Lois Lerner and Holly Paz, knew that the agency was specifically targeting ‘Tea Party’ and other conservative organizations two full years before disclosing it to Congress and the public.”

Formal investigations into the scandal have been blocked at every turn by the IRS. In June 2014, IRS Commissioner John Koskinen testified before the House Ways and Means Committee that Lois Lerner’s hard drive had crashed and been destroyed; the American Center for Law and Justice notes that John Koskinen has contributed over $100,000 to the Democratic Party. Koskinen was later censured by the House Committee on Oversight and Government Reform, but retained his position as IRS Commissioner.

Four years ago, Senator Orrin Hatch asserted that more needed to be done in order to prevent tax audits from becoming a tool to undermine dissident political opinions. The senator declared, ““We need to have ironclad guarantees from the IRS that it will adopt significant protocols to ensure this kind of harassment of groups that have a constitutional right to express their own views never happens again.”

Despite Senator Hatch’s concerns, little has been done to protect political organizations from IRS targeting. Although they no longer use the BOLO, the rule that allows the IRS to subjectively target partisan organizations is still in full force. In January, Americans for Tax Reform reported that the IRS may still be targeting conservative groups. The Albuquerque Tea Party recently had their application for tax-exempt status denied by the IRS - seven years after they first applied.

According to Cause of Action’s study, amending the IRS handbook to abolish Rule 7.29.3 would be a relatively simple process. The study reports, “The IRS has the authority to change its internal policy at any moment, which means it can remove the problematic rules at its discretion. Doing so would eliminate the agency procedure that enabled the targeting scandal. To date, the agency has not made the required changes to its rules.” Until the agency removes Rule 7.29.3 from their handbook, the targeting of outspoken political organizations will remain an official component of standard IRS procedures.

 

 

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