6th Circuit Dings IRS in Tea Party Targeting Case

6th Circuit Dings IRS in Tea Party Targeting Case

The Sixth Circuit Court of Appeals issued a blistering rebuke of the IRS today in Tea Party groups’ suit against IRS targeting.

The opinion by Chief Judge Raymond Kethledge on behalf of a three-judge panel opens:

Among the most serious allegations a federal court can address are that an Executive agency has targeted citizens for mistreatment based on their political views. No citizen—Republican or Democrat, socialist or libertarian—should be targeted or even have to fear being targeted on those grounds. Yet those are the grounds on which the plaintiffs allege they were mistreated by the IRS here. The allegations are substantial: most are drawn from findings made by the Treasury Department’s own Inspector General for Tax Administration. Those findings include that the IRS used political criteria to round up applications for tax-exempt status filed by so-called tea-party groups; that the IRS often took four times as long to process tea-party applications as other applications; and that the IRS served tea-party applicants with crushing demands for what the Inspector General called “unnecessary information.”

Yet in this lawsuit the IRS has only compounded the conduct that gave rise to it.

United States v. NorCal Tea Party Patriots, No. 15-3793, slip op. at *2 (6th Cir., Mar. 22, 2016).

The Sixth Circuit reminds us of the insidiousness of the IRS’s underlying behavior:

In 2010, the IRS began to pay unusual attention to 501(c) applications from groups with certain political affiliations. As found by the Inspector General, the IRS “developed and used inappropriate criteria to identify applications from organizations with ‘Tea Party’ in their names.” The IRS soon “expanded the criteria to inappropriately include organizations with other specific names (Patriots and 9/12) or policy positions.” As to the policy positions, the IRS gave heightened scrutiny to organizations concerned with “government spending, government debt or taxes,” “lobbying to ‘make America a better place to live[,]’” or “criticiz[ing] how the country is being run[.]” The IRS collected these criteria on a spreadsheet that would become known as the “‘Be On the Lookout’ listing” (or BOLO listing). These “inappropriate criteria remained in place for more than 18 months.”

. . .

The IRS’s application forms for tax-exempt status themselves request detailed information from every applicant group. For groups subject to the IRS’s inappropriate criteria, however, the IRS also demanded what the IG called “unnecessary information.” Among other things, the IRS demanded that many of these groups provide the following: “the names of donors”; “a list of all issues that are important to the organization[,]” and the organization’s “position regarding such issues”; “the roles and activities of the audience and participants” at the group’s events (typically over a 12-18 month period), and “the type of conversations and discussions members and participants had during the activity”; whether any of the group’s officers or directors “has run or will run for public office”; “the political affiliation of the officer, director, speakers, candidates supported, etc.”; “information regarding employment” of the group’s officers or directors; and “information regarding activities of another organization—not just the relationship of the other organization to the applicant.” These demands, according to the IG, “created [a] burden on the organizations that were required to gather and forward information that was not needed by the [IRS] and led to delays in processing the applications.” Moreover, “[f]or some organizations, this was the second letter received from the IRS requesting additional information, the first of which had been received more than a year before[.]” This second round of letters also warned that the IRS would close the applicant’s case if the IRS did not receive all of the requested information within 21 days—“despite the fact that the IRS had done nothing with some of the applications for more than one year.”

Id. at *4-6 (citations omitted).  Subjected to these extra and unlawful requirements, the NorCal Tea Party Patriots ultimately provided the IRS with more than 3,000 pages of material.  Id. at *6.

The opinion quotes the District Court:

I feel like the government is doing everything it possibly can to make this as complicated as it possibly can, to last as long as it possibly can, so that by the time there is a result, nobody is going to care except the plaintiffs. . . . I question whether or not the Department of Justice [as counsel for the IRS in the District Court] is doing justice.

Id. at *8.  From this, the Court’s negative view of the IRS and Department of Justice’s behavior is obvious.

The discreet issue in today’s decision is whether the IRS should be compelled to disclose so-called “Be on the lookout” lists of organizations the IRS targeted.  According to the 6th Circuit:

The district court ordered production of those lists, and did so again over an IRS motion to reconsider. Yet, almost a year later, the IRS still has not complied with the court’s orders. Instead the IRS now seeks from this court a writ of mandamus, an extraordinary remedy reserved to correct only the clearest abuses of power by a district court.

Id. at *2.  The Sixth Circuit discussed just a few of the many ways the IRS improperly withheld and stalled production of information in this case and then denied the IRS’s petition, upholding the United States District Court for the Southern District of Ohio’s order to produce the lists.

The legal analysis is a little closer than the government’s behavior might imply.  The District Court actually did make a legal error in ordering the IRS to produce the names of entities on the “Be on the lookout” lists.”  However, the Sixth Circuit upheld the order on a different rationale.

Notwithstanding the District Court’s error, the IRS’s attempt to withhold this information and the arguments it used in defending the attempt are highly questionable.  Without delving too far into the technicalities, the IRS claimed that a prohibition on disclosing “return information” meant that it could not disclose information from applications for tax-exempt status, even though the statutory definitions make plain that they are not at all the same thing.

The Circuit Court concluded:

In closing, we echo the district court’s observations about this case. The lawyers in the Department of Justice have a long and storied tradition of defending the nation’s interests and enforcing its laws—all of them, not just selective ones—in a manner worthy of the Department’s name. The conduct of the IRS’s attorneys in the district court falls outside that tradition. We expect that the IRS will do better going forward. And we order that the IRS comply with the district court’s discovery orders of April 1 and June 16, 2015—without redactions, and without further delay.

Id. at *17.

This is pretty heady stuff.  Both the District and Circuit Courts have admonished the government for behaving improperly and trying to hide its own misconduct in targeting political opponents.  It is a great sign that the judiciary has the power and vitality to hold executive agencies accountable for their misconduct, but deeply concerning that those agencies have become so politicized.

Full opinion here:

6th Circuit IRS/Tea Party Targeting

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