IRS Handbook Still Includes Rule Allowing Agents To Target Conservatives

Elizabeth McKee, Americans For Tax Reform

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.

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