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Monday, February 27, 2012

Is IRS Unfairly Targeting Tea Parties?

The following report indicates that the Internal Revenue Service may be targeting for scrutiny -- and trying to deter the operation of -- certain conservative political groups, like some Tea Party groups, which have applied for tax-exempt status under Section 501(c)(4) of the Internal Revenue Code.  This section provides that an organization's net income can be exempted if the IRS determines the organization is organized exclusively for social welfare purposes, even if it engages in some political activity.  Of course, political organizations can avail themselves of other exemptions such as that under Section 527.

The report is alarming, however, because it includes details of the IRS sending long, specific questionnaires to Tea Party groups asking for invasive information about individual members.  Now, there is no right to an exemption from a particular law or regulation; however, Americans are used to the Fourteenth Amendment equal protection principle giving rise to the expectation of equal treatment by the government of all comers similarly situated.  Are similar community groups, such as Occupy Wall Street, treated with the same level of scrutiny?  If not, the disparity raises the specter of organized political reprisals for certain political views, of what becomes content-based enforcement targeted at certain people whose views may be considered "unpopular." 

The possibility that the government's regulatory power may be used to favor certain speech and disfavor certain other speech (like that of the Tea Party) clearly has serious First Amendment concerns. 

Already, courts have long struck down laws which target certain conduct or content of speech.  Here, however, the nascent claim will be one of content-based enforcement; that is, focusing government enforcement resources on certain organizations with a decided bent towards reducing government waste and the public payroll.

While Tea Party organizations -- and numerous other social organizations -- have several options for tax treatment and generally can find ways to avoid having membership fees and other benign receipts treated as "taxable income," organizations receiving detailed inquiries and wishing to preserve the confidentiality of their operations should seek qualified legal counsel -- such as the author -- who can represent them and explain patiently the nature of the organization, its activity and its purposes.

Eric Dixon is a New York lawyer with a strong background in securities and corporate law, private equity transactions, government regulations, government investigations and corporate investigations, and election law.  Mr. Dixon has represented several dozen political candidates and organizations, including a few Tea Party organizations, on various matters including ballot access, voter fraud and other legal issues.

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