IRS Hearings Highlight Ambiguity Of Nonprofits In Politics

The congressional hearings about the IRS's handling of Tea Party applications for tax-exempt status raise the question of why and how tax-exempt groups engage in politics in the first place.

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SCOTT SIMON, HOST:

This is WEEKEND EDITION from NPR News, I'm Scott Simon. In the two weeks since the Internal Revenue Service scandal erupted, the acting commissioner has been ousted, the head of the relevant section has been put on administrative leave. The Justice Department has begun investigating the scrutiny given to conservative groups that sought tax exempt status and three congressional committees have held hearings bombarding IRS officials with questions.

But beneath all of it lies the tax agency's basic inability to say just how much political activity is permissible for groups with tax-exempt status. NPR's Peter Overby reports.

PETER OVERBY, BYLINE: The IRS published a list of 176 groups that were caught in its profiling between 2010 and 2012, but that now have been granted tax-exempt status. Most of them are conservative, typically with Tea Party or patriot names, and most of them are no officially 501(c)(4) social welfare organizations. That means they can spend nearly half their money on politics, and unlike most other political players, they don't have to reveal the names of their donors.

But the rules on political activity remain as vague as ever. Steven Miller, the departing IRS commissioner, pleaded for more clarity at the House Ways and Means Committee.

STEVEN MILLER: With respect to political activity, it would be a wonderful thing to get better rules, to get more clear rules.

OVERBY: For example, the IRS gave 501(c)(4) status to Ohio First For a Better Government based in Dayton. By the time the approval came, it had a new name, the more generic Jobs and Progress Fund, and it was running ads attacking Republican Congressman Aaron Schock, two states away in Illinois.

(SOUNDBITE OF POLITICAL AD)

UNIDENTIFIED MAN: Just four years in Congress and Aaron Schock has voted for massive tax increases and mountains of debt. It's, well, shocking.

OVERBY: It was actually part of an intra-party fight. Schock was weighing a bid for governor at the time. Last month he decided against it. Ohio attorney, David Langdon, founder of the Jobs and Progress Fund, didn't respond to messages yesterday. Another name on the IRS' approved list is the Constitution Education Foundation. It's a 501(c)(3) charity, so it basically cannot get into partisan politics.

The founder, Gary Hippensteel, of The Woodlands, Texas, says he applied and then started making regular calls to the reviewing officer. One day the reviewing officer said the application had been pulled out of the line.

GARY HIPPENSTEEL: And they were, and I quote, they were "waiting for guidance from above." And I didn't think that they were praying.

OVERBY: Hippensteel says demands came for more information. They were stuck, volunteers were leaving. They had to close the office. He says it took two years and two months to get approval. He points to longstanding liberal tax-exempt groups and says conservatives have been unfairly targeted.

HIPPENSTEEL: The IRS has had, you know, 10 to 20 years of full-fledged experience with how to deal with this issue. They changed their policies to deal with this.

OVERBY: Bob Schulz of Queensbury in upstate New York had a slightly better experience last year. He was seeking 501(c)(4) status for We the People of New York, a group promoting the right to petition the government. The IRS immediately said there's a big backlog and it asked for more information.

BOB SCHULZ: I did feel they could have, based on all the information we included in our original application, I felt they had everything they needed.

OVERBY: Schulz actually has some sympathy for the IRS employees.

SCHULZ: Collecting the taxes is a huge task and they have a tough job to do.

OVERBY: But Schulz also has been in battles with the IRS going back to the 1990s, all about tax exempt issues.

SCHULZ: From my personal experience, there's a dark side to the IRS. The IRS can be used.

OVERBY: Now the question is, can the IRS be fixed. As of this week, it's up to a new temporary commissioner, Danny Werfel, to find out. Peter Overby, NPR News, Washington.

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