News stories abound about the IRS’s targeting of organizations seeking tax exemption with the phrase “tea party” and other conservative words in their corporate name.
For a full copy of the Inspector General’s Report, click here.
As the Report confirms, the majority of Form 1023 Applications, if properly prepared by competent legal counsel, are processed by the IRS without considerable questioning and scrutiny. However, over the years, we have also worked on client matters with particularly controversial issues that have experienced considerable and unnecessary IRS scrutiny for otherwise routine 1023 applications, particularly among pro-life organizations. Whether these were isolated incidents based on the agents or indicative of a larger systematic problem, it took significant energy to effective resolve what we believed to be unnecessary questioning, erroneous restrictions regarding advocacy, and unwarranted delays.
Hopefully, these recent revelations and increased public awareness will lead to IRS reforms, clarifying the rules and allowing properly organized entities to achieve favorable tax-exempt recognition without improper delays or questioning so that they can focus on the good work that they do. In the meantime, organizations addressing a potentially controversial subject matter will do well to carefully consider the potential that their message may cause unnecessary barriers for exemption. This is not to imply that they should change their message or accept any governmental pushback. Rather, this potential underscores the importance of carefully developing any materials to be submitted to the IRS, using experienced legal counsel as appropriate.
Recently attorney Sally Wagenmaker was interviewed on Fox News Radio concerning the controversy.