NACLA vs. the IRS - Taxing Victory
The letter was short and technical. "Gentlemen," it began. "Your return Form 990 for fiscal year ended November 30, 1979 is accepted as filed, and your exempt status under Section...
...IRS & Political Harassment NACLA's confrontation with the IRS began in March 1981 when a form letter from the District Director informed us that Agent D. Levine would like to take a look at our accounts for 1979...
...From the beginning, given the legal weakness of the IRS suit and NACLA's own demonstrated strength in documentation and educational material, it seemed mostly to be a case of harassment...
...Audits are, of course, common...
...In fact, the implications of this case are even more troubling...
...About our JulyAugust 1979 issue on the internationalization of the auto industry, he commented: "Issue is survey of world auto industry-contains no discrnible [sic] propaganda passages except for concluding paragraphs of 3rd article: 'internationalism has served capital well, now it's labor's turn...
...Apparently Agent Levine was not aware of the ruling, for those are precisely the grounds on which he sought to revoke our exemption...
...We won this one, but don't go away...we're sure there will be more to come...
...Then he settled back to read through all our 1979 publications...
...For the moment, however, we can return to the work in which we are supposed to be engaged...
...The IRS was trying to grant exemption to those who agreed with them and punish those who challenged, in a documented and educational fashion, the government's major policy lines...
...Hundreds of hours were consumed on this case by the NACLA staff, our lawyer and our accountant, because one IRS agent didn't like our analysis of the Rockefellers...
...Nor is there any indication that the IRS will stop these harassing tactics...
...Yet our bout with the IRS did little to assure us that the rights of all are equally protected by a neutral Internal Revenue Code...
...With their hit and run tactics, it was clear that the IRS was hoping to intimidate dissident organizations...
...His conclusions would be comical if they weren't so inherently threatening...
...On February 3 Levine moved on his threat, sending us a copy of his report to the national IRS office...
...The IRS is privy to a tremendous amount of confidential information on individual and corporate taxpayers, and even more on tax-exempt organizations...
...The law, it would seem, has little to do with it...
...We agreed to the audit but also began to investigate whether other progressive groups were facing similar IRS challenges...
...The Political Lessons What does it all mean...
...We sent the national office a 200-page "brief," contesting Levine's conclusions, arguing the case's legal and political points and demonstrating that we would fight as long and hard as necessary...
...Enter Agent Levine Agent Levine spent a few sweltering days last July pouring over our financial records without finding anything amiss...
...Court of Appeals for the District of Columbia...
...As we soon learned, a small but significant number of groups had recently faced audits, most notably Mother Jones magazine, another target on the Heritage list...
...The entire staff would like to extend our warmest thanks to our legal team, accountant, the NECLC and above all, our readers, whose letters and donations continually let us know that we were fighting the good fight...
...Certainly, but that didn't mean that we shouldn't treat the threat seriously...
...Not to be outdone by Nixon, Reagan would seek to deprive progressive organizations of tax exemption while simultaneously arguing that self-proclaimed racist schools had every right to that status...
...The IRS official communication noted only that our exempt status was still in effect...
...He then asked the national office to rule on whether our exempt status should be revoked...
...And, as they well know, these hours are in short supply...
...Probably not...
...His purpose, unfortunately, was not to expand his knowledge of Nicaragua, Panama or Brazil, but to ferret out what he called "discrnible [sic] propaganda passages...
...The second issue was political...
...Levine informed our accountant that although he could find nothing wrong with our finances, it was his "intention" to try to revoke NACLA's exemption because of our "partisan" approach and particularly of what we published about the Rockefellers...
...Only a few months before our audit began, NACLA appeared on a Heritage Foundation "hit list" of organizations which would be investigated by the nascent Senate Subcommittee on Security and Terrorism [See "The War at Home: Security and Terrorism," NACLA Report, MayJune 1981...
...Levine's pencil almost tore through the page as he chastised us for a "highly partisan" analysis of the Rockefeller family which was "critical of [the] Republican Party and record in office of Nelson Rockefeller as Governor of New York and Vice President...
...In 1980, when they tried to revoke the exemption of a feminist newspaper, the Big Mama Rag, they were stopped by the U.S...
...And we also publicized our dispute, writing articles, giving interviews and seeking out the advice of other organizations threatened by the IRS...
...We hardly think so...
...Even though the Reagan Administration is actively cutting the ground out from under all nonprofit organizations, tax exemption still can mean life or death for an 39update * update * update update organization such as NACLA...
...Agent Levine would scrutinize what we did, what we said, what we wrote, who worked for us and who supported us...
...Free Speech & Exemption There were really two issues in the NACLA-IRS dispute...
...In it, Levine concluded that NACLA's publications are "written with the substantial use of disparaging terms and innuendoes and [do] not attempt to present a full and fair exposition of the pertinent facts from which its readers may draw informed, independent conclusions...
...A Senate study disclosed that the IRS audited approximately 1,500 organizations and 4,000 individuals during the Nixon presidency at the request of the FBI, and that the information gained through audits was used by a government intent on stifling dissent...
...President Nixon had employed just such information-provided by the IRS-against his opponents...
...A request through the Freedom of Information Act-FOIA-for his work papers revealed a particular concern to find out if NACLA employees were engaged in "organized tax resistance...
...We all heaved a sign of relief...
...Only those progressive organizations which can muster solid political, legal and financial support can withstand the bureaucracy's onslaught...
...Would the force of their arguments alone be enough to carry the day...
...We responded, both to the IRS and to the public...
...Our accountant, Noah Kimerling, also fully backed us with his time and experience...
...Further, there was every indication that President Reagan would follow in the footsteps of his illustrious predecessor...
...The day after we learned of our victory, Agent Levine began an audit of the New York-based Guardian, a major left news weekly...
...While far from agreeing with our conclusions, Agent Levine seemNACLA Report 40update * update update . update ed personally aggrieved by The Incredible Rocky, a comic book by Joel Andreas on the Rockefeller family which we reprinted in 1979...
...In the case of our audit, for example, not only did the IRS request financial information, but also demanded our board minutes, books, records, passbooks, invoices and payroll tax returns as well as everything we had published or distributed that year...
...In translation, we had won our year-and-ahalf long battle with the Internal Revenue Service to retain our status as a tax-exempt, educational organization...
...We were fortunate to be able to count on the farreaching experience of our lawyer, Michael Krinsky, his firm of Rabinowitz, Boudin, Standard, Krinsky & Lieberman and the National Emergency Civil Liberties Committee (NECLC) who immediately came to our defense...
...Can we now rest assured that the IRS will continue to uphold our First Amendment rights...
...But experience has shown that they are hardly a benign exercise for progressive organizations even if records are in tip-top shape...
...A mockery of the First Amendment and fundamental notions of democracy...
...If NACLA, a 16-year-old educational organization, backed by excellent legal advice and fully supported by a major civil rights organization and our readers, had so much trouble, what would happen to a fledgling dissident press without such support...
...The first was a legal technicality and quite simple...
...He took copious, if not careful notes, underlining every offending thought and even redpenciling a cartoon by Jules Feiffer on Carter's human rights policy...
...Once the news spread that NACLA or Mother Jones was threatened, other organizations, fearful of losing their exemption, would begin to tone down their criticism...
...Your return Form 990 for fiscal year ended November 30, 1979 is accepted as filed, and your exempt status under Section 501(c)(3) of the IRC is continued...
...We were being audited...
...The Rocky comic was the straw that broke the camel's back...
...The court noted that taxexempt organizations were alJuly/Aug1982 lowed to have a "viewpoint," and that to charge that they did not present a "full and fair exposition of the pertinent facts" was so vague and overbroad as to violate the guarantees of free speech and due process under the First and Fifth Amendments...
...His letter did not cite a single example to back up his case...
...The national office upheld the right of exempt organizations to their own viewpoints and said that NACLA's publications cannot be said to "constitute the mere presentation of unsupported opinion...
...If anything, NACLA's Case illustrates the opposite...
...Legally, the IRS had no case...
...Yet the internal IRS document on NACLA, which we received through another FOIA request, was more informative...
Vol. 16 • July 1982 • No. 4
