Court Rebukes IRS for Disclosure Denials in Tea Party Appeal

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In the continuing IRS conservative-targeting controversy, the U.S. Sixth Circuit Court of Appeals recently issued a stinging rebuke to the Department of Justice in United States of America v. NorCal Tea Party Patriots.  Acting on the IRS’s behalf, the DOJ had previously refused the trial court’s order to disclose information related to tax-exemption applications that were delayed, rejected, or otherwise mishandled allegedly due to the applicants’ political positions.  The case has lumbered through the court systems with extensive delays and other government tactics, seemingly aimed at avoiding transparency and the release of damaging information. 

The case started when NorCal Tea Party Patriots applied for IRS tax-exempt recognition in April 2010.  The IRS responded later that year by requesting additional information for exemption processing.  Over the following two years, NorCal provided responsive information – only to receive further IRS demands for exhaustive and sensitive information relating to NorCal’s events, activities, and donors, as well as threats to close their file and treat NorCal as a taxable entity.  NorCal eventually responded with 3,000 pages of documentation in compliance with the IRS request.  

NorCal and others eventually sued the U.S, on the heels of the Treasury Department’s own Inspector General for Tax Administration’s report finding that the IRS had used political criteria adversely against tea-party groups.  Among other things, the Inspector General’s report determined that the IRS served such exemption applicants with crushing demands for “unnecessary information.”  NorCal and others now seek damages, along with the underlying information to validate their claims of unlawful denial of tax-exempt recognition.

As the appellate court determined, the IRS “has only compounded the conduct that gave rise” to the scandal:

The lawsuit has progressed as slowly as the underlying applications themselves:  At every turn the IRS has resisted the plaintiffs’ requests for information regarding the IRS’s treatment of the plaintiff class, eventually to the open frustration of the district court.  At issue here are IRS “Be On the Lookout” lists of organizations allegedly targeted for unfavorable treatment because of their political beliefs.  Those organizations in turn make up the plaintiff class.  The district court ordered production of those lists, and did so again over an IRS motion to reconsider.  Yet, almost a year later, the IRS still has not complied with the court’s order.

Both at the trial court and appellate levels, the DOJ argued that being required to disclose its information about exemption application processing (as part of court discovery) threatened the statutory protections for taxpayer privacy under Section 6103 of the Internal Revenue Code.  The District Court first took serious issue with this refusal, stating:

My impression is the government probably did something wrong in this case.  Whether there’s liability or not is a legal question.  However, I feel like the government is doing everything it possibly can to make this as complicated as it possibly can, to last as long as it possibly can, so that by the time there is a result, nobody is going to care except the plaintiffs. . . . I question whether or not the Department of Justice is doing justice.

The Sixth Circuit agreed that the DOJ's argument was entirely untenable, inconsistent with clear law, and outside our nation's tradition of legal justice.  Admonishing both the DOJ and the IRS, the appellate court emphasized the critical importance of true justice: 

In closing, we echo the district court’s observations about this case.  The lawyers in the Department of Justice have a long and storied tradition of defending the nation’s interests and enforcing its laws—all of them, not just selective ones—in a manner worthy of the Department’s name.  The conduct of the IRS’s attorneys in the district court falls outside that tradition.  We expect that the IRS will do better going forward.  And we order that the IRS comply with the district court’s discovery orders of April 1 and June 16, 2015—without redactions, and without further delay.

The IRS is now legally – and clearly – obligated to produce the contested information.  Read the full Sixth Circuit Opinion here: