The IRS Hustle

At about the same time the IRS was targeting grassroots Tea Party groups and more formal organization’s like Freedom’s Watch, the Internal Revenue Service held a training and leadership conference in Anaheim, Calif., for 1,900 employees.

The highlights of the conference included a Star Trek spoof video, another of Gilligan’s Island, and finally, the Cupid Shuffle.  The Star Trek and Gilligan’s Island videos cost taxpayers $60,000 and the dance video, $1,600.  The videos were produced in the IRS’ New Carrollton, Md., offices.

Meanwhile, the agency was targeting Freedom Watch’s individual donors to try to slap them with a gift tax on their donations.  The gift tax is legal, but generally reserved for taxpayers trying to give their money away to relatives before they die and the money is subject to an estate tax.  According to a report on the front page of the Wall Street Journal’s weekend edition, the tax is legitimate but that the IRS generally doesn’t impose it upon  tax-exempt organizations.

The now-defunct Freedom’s Watch, which began in 2007 and had a $56 million budget, spent about $10.7 million on political issue ads.  Under section 501(c)(4) of the tax code, such groups are allowed to endorse candidates, as long as that isn’t their primary focus.  The WSJ’s article reads “engage in some political activity” but our understanding when forming our Tea Party was that there were two types of groups.  The first was absolutely allowed to engage in political activities, take out ads, and endorse candidates.  The second had a more limited budget ceiling and a more limited mandate, involving public education but not endorsing any candidates.

Clearly, Freedom’s Watch had a higher budget and their goal was absolutely broader and politically oriented with a larger audience. 

According to the Wall Street Journal:

“In February 2010, the same month the Tea Party-targeting started, according to a recent inspector general’s report, Freedom’s Watch was subjected to an IRS audit that focused largely on its political activities, an uncommon but not unprecedented action, election lawyers say.  The probe broadened into other areas, including executive compensation.

“About a year later, as many as five donors to Freedom’s Watch were subjected to IRS audits of their contributions that sought to impose gift taxes on their donations to the group, according to lawyers and former officials of Freedom’s Watch.

“Tax experts say that effort was highly unusual.  The IRS generally hadn’t sought to impose the gift tax on donations to tax-exempt groups such as Freedom’s Watch in at least 20 years, perhaps longer, following an unfavorable court ruling and changes in the law by Congress, according to lawyers and IRS documents.

“The legislation didn’t except donations to 501(c)(4) groups such as Freedom’s Watch, and for years the IRS has taken the position that the gift tax still applies to donations to 501(c)(4)’s.  But in recent years, it hasn’t enforced that position, lawyers say.

“Freedom Watch’s two-year audit came after two complaint letters were sent to the IRS, one by the Democratic Congressional Campaign Committee, the party’s House election arm, and another entity whose name is redacted in letters provided by to Jeff Altman (Freedom Watch’s attorney) by the IRS.”

This confirms that the audits were politically motivated.  Freedom’s Watch was part of the audit, but the focus was on the donors.  The only charge the IRS can really make against the donors is that they were attempting to donate away part of their estates, a charge difficult to prove.  The real effect it had was of discouraging large donations by wealthy donors.

The audit was led, admittedly by Lois Lerner, out of the Cincinnati IRS office in the exempt organizations unit, conducted by workers in the estate and gift-tax unit, a separate division of the enormous bureaucracy of the IRS.

 For the IRS to be targeting legitimate grassroots organizations and their larger counterparts, while attending expensive conferences on leadership training (“How to Cheat on the Taxpayer,” “Money Talks:  How to Silence Limited-Government Activists,” and “Nothing is Certain But Death, Taxes, and Death Taxes:  Your Guide to a Life-Long Career in the IRS”) in a weak economy gives fuel to the Tea Party fire:  Taxed Enough Already, indeed.

The bottom line is that the IRS is Obama’s financial terror arm.  Take away their guns and they’ll just find another way to defend themselves.  Take away their money and threaten them with prison-time to boot if they evade the tax, and they will sit down and shut up.






Published in: on June 7, 2013 at 1:15 pm  Leave a Comment  

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