A TAX ON DISSIDENTS!
Flaherty, Francis J .
A Tax on Dissidents! IRS rules leave room for political harassment BY FRANCIS J. FLAHERTY The lawyer for the Center on Corporate Responsibility knew something was amiss. More than two and a half...
...Even under Eisenberg's proposal, the IRS would still have the power to refuse tax exemption to groups that condone illegal acts...
...There's practically no right-wing publication that has tax-exempt status...
...Supreme Court Justice Harry Blackmun was also alarmed by the vagueness of the tax law...
...We have no evidence that the IRS chose [to audit] Mother Jones because of its politics," concedes attorney Silk...
...Other sections of the Code allow donors to deduct from their own income the contributions they make to tax-exempt groups—a great spur to charity...
...The IRS questioned Mother Jones's longstanding exemption after conducting an audit...
...If a W-2 form indicates a worker earned $15,000 but that person reports income of only $10,000 to the Government, it is clear the IRS is acting in good faith when it asks questions...
...But Harper's editor Michael Kinsley objects to charges of discrimination leveled by left-wing magazines...
...The Bar Association also said Congress should explicitly prohibit IRS investigations based on the political views of organizations...
...The attorney for the Washington-based group, which tries to encourage responsible corporate behavior, called the IRS frequently with offers to clear up any remaining difficulties...
...History has shown that the IRS—like the CIA and the FBI—can be used as an ideological police agency...
...That provision affects only the income of the organization...
...Faced with this and other evidence, the Federal judge presiding over the case had no difficulty ruling against the Treasury...
...In cases involving tax exemption, judge after judge repeats the shibboleth that exemption is a privilege and not a right...
...some have trouble obtaining it in the first place...
...I don't see someone going after NACLA, for example, without some direction...
...Those rules, however, are infuriat-ingly vague...
...But perhaps the most attractive solution is one proposed by attorney Eisenberg...
...According to Paulette Caldwell, a New York University law professor and member of the Bar Association committee studying IRS practices, there is no way to decide whether an organization is biased, but there is "ample room" for abuse in the current standard...
...Conversely, Congress can exempt any taxpayer as it sees fit...
...In a 1973 opinion, he wrote that the lack of "clear statutory definition" in Section 501(c)(3) had led to "the almost unfettered power of the [IRS] Commissioner...
...Other publications that have been audited recently include Ms., the feminist monthly, and The Guardian, a radical newsweekly...
...And a law administered by the Postal Service grants special low mailing rates to many tax-exempt organizations...
...That was in 1973, a year when "White House pressure" to harass political activists could be detected at all levels of government—at least by those being bullied...
...Section 501(c)(3) provides that "corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes" shall be "exempt from taxation...
...Bureaucrats don't try to make waves," Wagner says...
...And for many magazines, tax exemption is a matter of financial life or death...
...But gradually there's been this shift to substantive, political questions," he says...
...Those favored with tax-exempt status are compelled to lead a precarious existence...
...The scope of the harassment apparently did not satisfy White House Counsel John W. Dean III...
...Jerome Kurtz, IRS Commissioner during the Carter Administration, disagrees...
...Did politics figure in the Government's decision...
...Each time, IRS agents assured him there were no problems...
...In 1961, for instance, the IRS began conducting audits of right-wing groups after President Kennedy obliquely suggested such a move in a press conference...
...Is witchcraft 'religious...
...Wagner's suspicions are credible, considering the long history of Congressional and Presidential manipulation of the tax system...
...Hundreds of thousands of dollars were assessed against these targets...
...To be considered "educational," an organization must present a "sufficiently full and fair exposition of the pertinent facts" or a "balanced presentation...
...No one has proven the existence of such a drive...
...a planned Congressional investigation of IRS enforcement policies never materialized because the sponsor, New York Representative Benjamin Rosenthal, died last winter...
...In a 1971 memo, he complained to H.R...
...The IRS was sitting on the application, even though the Center had complied with Government requests for minor changes in the organization's charter and statement of purpose...
...Leftist and liberal magazines, in particular, are concerned that the Government may be granting and revoking tax exemptions on grounds based in ideology rather than the Francis J. Flaherty, a contributing editor of The Progressive, specializes in coverage of legal issues...
...One such publication, NACLA Report on the Americas, is issued by the North American Congress on Latin America...
...Mother Jones magazine is bogged down in a four-year-old battle to save its tax exemption...
...A committee of the Bar Association of the City of New York is investigating the issue and will report its findings this year...
...Says Thomas Silk, lawyer for Mother Jones, "the little guy, the unpopular guy, out of the mainstream" is most likely to be scrutinized by the IRS...
...What if we get to the national office after four years and they say, 'Oh gosh, the district office made a mistake.' Think of the great expense and the four years' fighting," says Silk...
...It is "very scholarly," says magazine attorney Michael Krinsky, and "footnoted all over the place...
...But we have a pattern of facts that makes it reasonable to look at that question...
...It suggested limiting White House access to tax files, requiring records to be kept of politicians' requests for IRS information, and dispersing Congressional oversight of IRS activities among several committees to prevent possible manipulation by a few members of Congress...
...Today, a decade later, some suspect that politics is once again influencing IRS decisions regarding tax status and auditing...
...We've only seen the tip of the iceberg," says Arthur Eisenberg, a member of the committee, "but the tip we've seen is a tip suggesting that the IRS is essentially attacking left-leaning groups, or groups that are somewhat critical of government itself...
...Indeed, NACLA Report is not unique in being the target of IRS attention...
...It takes chutzpah for Mother Jones to claim censorship," he says...
...Neither the law nor IRS practice has been rendered less fickle in the decade since he wrote those words...
...Why did they select Mother Jones since it has traditionally lost money...
...There are other ways to end discriminatory tax practices...
...A chill went through the spine" of the organization, according to Krinsky...
...In each case, the tax collectors asserted that the publication was too biased to satisfy the definitions...
...I don't think there's a concerted effort to move against organizations with certain ideological views," he says...
...Look at the list of tax-exempt magazines...
...But critics suggest that the IRS district offices would not be taking aggressive action without receiving politically motivated encouragement from above...
...A1976 Congressional investigation concluded that "in the late 1960s and early 1970s, many groups and persons were selected for investigation by the [IRS] essentially because of their political activism rather than because specific facts indicated tax violations...
...Today's dissidents and activists are not persuaded IRS political crackdowns are a thing of the past...
...Harper's convinced the IRS to grant it tax-exempt status because it's losing money...
...The committee is looking for alternatives to the "balanced presentation" test...
...Tax-exempt magazines, like all other tax-exempt organizations, are governed by Section 501 of the Internal Revenue Code, a tome of more than 6,000 pages that has spawned three equally byzantine volumes explaining its provisions...
...Nonetheless, the tax collectors eventually rejected the application—and the Center sued...
...A. The Masses...
...The key to how the Government distributes its favors is the string of adjectives...
...Tax Code...
...Sure," says Krinsky, pointing out that the IRS report mentioned a NACLA article which allegedly "cast unfounded aspersions on the Rockefeller fam-ily...
...Such cases may seem like extreme examples but they point to the complexity of the problem...
...This, too, is an ill-defined guideline—and one currently being challenged in the Supreme Court by an organization called Taxation with Representation...
...Some lawyers and editors associated with left-wing publications fear the worst: that the IRS is clamping down on exemptions as part of a right-wing campaign to "defund the Left...
...is fighting for a tax exemption in Federal court...
...Some* left-wing periodicals, though, are wondering how to square such assurances with the experience they've had with the IRS...
...They're publications like Ms...
...Today, Congress grants tax exemption to chambers of commerce, business leagues, and elite institutions such as the all-male Century Club in New York City...
...No reform or revision of the rules is likely to remove that jeopardy...
...they can determine, instead, whether the magazine is intended to turn a profit...
...No matter how clear the law is, and no matter how evenhand-edly the IRS applies it, tax-exempt groups are essentially on the dole...
...A standard of this sort would address the problem of IRS bias—both conscious and unconscious...
...Not all the little guys have their tax-exempt status challenged, of course...
...And that power, too, can be abused, and has been: In 1976, the IRS cautioned Big Mama Rag that an exemption would not be granted unless the publication stopped "advocating that homosexuality is a mere preference, orientation, or propensity on par with heterosexuality...
...They depend on their tax exemption for survival, but because they are tax exempt are always at the mercy of the IRS or of Congress...
...The ABA study noted that a special IRS task force was created in 1969—the SSS, or Special Service Staff—in response to White House pressure for investigations of "ideological organizations...
...In 1982, the IRS district office in New York City recommended revoking the magazine's tax exemption because it failed to present a "full and fair exposition of the pertinent facts"—one of the standards an exempt educational institution is required to meet...
...Then Attorney General Robert Kennedy and Meyer Feldman, a White House lawyer, met with IRS officials and "indicated an interest in particular organizations, urging their removal from the audit list or more aggressive action," according to an American Bar Association report issued years later...
...It certainly teaches something...
...He maintains that every nonprofit publication be accorded tax-exempt status...
...We have been unable to obtain information in possession of IRS regarding our political enemies...
...More than two and a half years earlier, the small nonprofit organization had applied to the Internal Revenue Service for tax-exempt status...
...For example, the IRS recently submitted this question to a left-wing periodical applying for tax-exempt status: "What is the position of the organization in reference to the following...
...At the other end of the political spectrum, the right-wing publication Attack...
...But the issue is far less clearly drawn when the Treasury tries to determine whether printed material is "full and fair...
...Stanley Surrey, a Harvard Law School professor and former IRS official, says his "general impression" is that politically biased enforcement "is not a problem...
...Congress can repeal Section 501 at any time...
...it has, for example, promulgated a rule prohibiting 501(c)(3) groups from influencing legislation or intervening in political campaigns...
...Executive Editor Deirdre English says her "inescapable conclusions" are that the IRS is "discriminating against us versus all other non-profit magazines...
...The New York office's decision was reversed by IRS authorities in Washington, but only after a year and a half of expensive legal combat...
...Eisenberg's proposal would clarify the law (though Kurtz wonders how much revenue the Government would lose and says the task of defining "profit"—an issue in the Mother Jones case—is not an easy one...
...A few years ago, Wagner recalls, the IRS asked only objective, technical tax questions about an organization's application...
...Left to their own devices, most IRS agents would consider the tax-exempt National Geographic to be fair and balanced but Big Mama Rag to be biased and unfit for tax exemption...
...IRS agents should not be in a position to decide whether NACLA Reports fairly addresses Latin American events...
...The IRS is fully capable of defining 'nonprofit' and 'publication,'" he contends...
...This is the most overt political maneuvering...
...This may be very well so long as one subscribes to the particular brand of social policy the Commissioner happens to be advocating at the time," Blackmun noted, ". . . but application of our tax laws should not operate in so fickle a fashion...
...The ABA study recommended, therefore, that the IRS be insulated from political pressure...
...In granting the Center its exemption, he found that the plaintiff "was singled out for selective treatment for political, ideological and other improper reasons...
...By the time it was disbanded in 1973, the SSS had compiled files on 11,458 individuals and organizations...
...Or, by way of another example, consider the IRS's refusal to grant tax-exempt status to a group "formed to promote world peace and disarmament by nonviolent direct action including acts of civil disobedience...
...Moreover, within the limits of the Constitution, Congress can set certain conditions on tax-exempt status...
...That's because Americans, by and large, look more kindly on articles about puffins in Iceland than they do on articles about militant feminism...
...In court, when the Center obtained its IRS file, the reason for the delay and denial became clear: Among seven pages of notes written by Richard Cox, assistant director of the IRS Interpretative Division, was the phrase, "Perhaps White House pressure...
...Such abusive practices were stepped up during the Nixon Administration...
...and that the motivations for this assault must be directly linked to our politics—what else...
...Haldeman that "we have been unable to crack down on the multitude of tax-exempt foundations that feed left-wing political causes...
...Liberals claim they're being harassed and conservatives claim they're being harassed...
...We see it in the odious questions the IRS asks about our applications now," says Wagner...
...If the IRS lets its people attack something like NACLA, as strong a publication as you can imagine, then other folks would have to tremble...
...These controversial definitions were the basis for Government challenges to NACLA Report, Attack!, and Big Mama Rag, a Philadelphia-based feminist monthly that battled the Treasury for eight years...
...All the government is asking, Kinsley says, is that Mother Jones abide by the rules of tax exemption...
...Would the Fagin School for Pickpockets be 'educational...
...and Mother Jones...
...Some people would call selling canned goods a religion...
...Whether or not there is a concerted, systematic attempt to harass left-wing magazines, the recent IRS actions have the effect of punishing publications that can ill afford the fight even if they ultimately win...
...asks former Commissioner Kurtz...
...Or consider the Bob Jones University and the Goldsboro Christian Schools—two educational institutions now fighting for their tax exemptions in the Supreme Court—which claim that segregation is a tenet of their religious beliefs...
...B. The Bosses...
...There is an unsettling note to all this...
...The vagueness of these standards often clouds the reasons for IRS enforcement in a particular instance...
...There is a system of values at work, and the potential for discrimination is vast...
...There was a rash of audits of progressive foundations in California a year ago...
...We find that the IRS is tightening up again," says New York attorney Richard Wagner...
Vol. 47 • May 1983 • No. 6
