Contributed by Chriss Street. Specialist in corporate reorganizations and turnarounds, former Chairman of two NYSE listed companies. His latest book, The Third Way, describes how to achieve management excellence and financial reward by moving organizations from Conflict and Confrontation to Leadership and Cooperation. He lives in Newport Beach, CA.
The Internal Revenue Service admitted on May 10th that “low level” staff in their Cincinnati office, supposedly “not motivated by political bias,” targeted 75 conservative tax exempt organizations for audit and investigation, because they used the names “Tea Party” and “Patriot.” I have obtained a copy of a hand signed memorandum (here) from Steven T. Miller, IRS Acting Commissioner, dated July 7, 2011 revealing that he, while serving as Department of Treasury Deputy Commissioner for IRS Services and Enforcement, ordered similar activity terminated on March 23, 2011.
Coupled with the resignation of IRS Commissioner Douglas H. Shulman the day after the 2012 election, IRS agents may have “knowingly and willfully” retaliated against a conservative “Enemies List” during the 2010 Congressional election and continuing through the 2012 Presidential election.
Lois G. Lerner, IRS Director of Exempt Organizations, apologized for the “inappropriate” targeting of conservative political groups during the 2012 election to “see if they were violating their tax-exempt status.” Ms. Lerner stated that IRS agents singled out dozens of organizations for additional reviews, because they included the words “tea party” or “patriot” in their exemption applications. She also stated in some cases, groups were asked for lists of donors, which violates IRS policy in most cases. Ms. Lerner blamed low-level employees, saying no high-level officials were aware.
But prior to being appointed to her current position on August 15, 2012, Ms. Lerner served since 2005 as the Director of the Exempt Organizations Rulings & Agreements Division where she managed the “determinations letter program” for Exempt Organization, public guidance, and technical assistance for IRS agents conducting examinations of tax-exempt organizations. Steven T. Miller’s “Guidance Memo” was sent directly to IRS TE/GE (Tax Exempt and Government Exempt) management. As the head of “Tax Exempt” determinations, Ms. Lerner was the prime recipient of the hand signed July 7, 2011 memorandum (here) that reiterated the March 23, 2011 suspension of IRS examinations of applications for 501(c)(4) tax exempt entities.
IRS Commissioner Miller’s guidance memo clearly warned:
This is a difficult area with significant legal, administrative, and policy implications with respect to which we have little enforcement history. My office will be coordinating with the Office of Chief Counsel to determine whether there is a need for further guidance in this area.
The memo states the IRS: “should not expend examination resources initiating referrals or developing audits.” This was meant to be a klaxon horn going-off in every IRS office across the nation screaming no IRS agent is allowed to be involved in this activity.
The IRS is wildly sensitive regarding the use of its powers to intimidate political opponents. Despite a substantial lead in the 1972 polls, Richard Nixon’s Committee to Reelect the President (CREEP) created what became known as the “Enemies List” of 576 supporters of Democrat George McGovern’s 1972 Presidential campaign. John W. Dean III, Counsel to President Nixon forwarded the list to the IRS for action:
This memorandum addresses the matter of how we can maximize the fact of our incumbency in dealing with persons known to be active in their opposition to our Administration; stated a bit more bluntly—how we can use the available federal machinery to screw our political enemies.
Donald C. Alexander later refused to use tax audits and investigations to punish the Enemies List. No evidence indicated that President Nixon was personally involved, but the combination of the IRS activity and a break-in at the Democratic National Headquarters became the “Watergate Scandal”. Tape recordings later demonstrated President Nixon knowingly and willfully tried to conceal and cover-up wrong doing. Facing impeachment, President Nixon resigned on August 9, 1974.
Ms. Lerner told an American Bar Association conference the IRS practice was initiated by low-level workers in Cincinnati and was not motivated by political bias. Ms. Lerner said that Agency officials found out about the practice last year and moved to correct it:
That was absolutely incorrect, it was insensitive and it was inappropriate. That’s not how we go about selecting cases for further review … The IRS would like to apologize for that.
But the hand signed memorandum, dated July 7, 2011 from now IRS Commissioner Steven T. Miller indicates Ms. Lerner was directed on March 23, 2011, just four months after the 2010 Congressional elections, to suspend the examinations of typically conservative SB/SE (Small Business and Self-Employed). Based on this memo, IRS agents and their senior management appear to have retaliated against an Enemies Lists in 2010 and 2012. Also by Chriss Street: California Pension Fund Is Hotel California
CHRISS STREET & PAUL PRESTON
Present: “The Agenda 21 Radio Talk Show”
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