Doubling down

WASHINGTON—In 2008, Tennessee resident Kevin Kookogey birthed an idea to educate and mentor young people in conservative thought and the foundations of Western civilization. He began meeting with young adults one-on-one over coffee, or inviting several to his house for a Saturday morning breakfast. It was a process he says looked very similar to missionary work: “It’s like sharing the gospel.”

Kookogey founded Linchpins of Liberty in 2010, and in order to raise money, on Jan. 3, 2011, he submitted an application for nonprofit status to the Internal Revenue Service (IRS). The request should have taken only two to four months to process, but the agency stonewalled Kookogey for almost three years, asking him to provide a litany of information ranging from the political affiliations of his mentors to donor lists and the identities of his students—including minors.

The IRS finally approved Linchpins of Liberty in December 2013, but not before Kookogey says the agency effectively killed it: Linchpins froze formal operation when Kookogey realized he was being targeted, and the organization lost a $30,000 launch grant when its nonprofit application was still pending at the end of 2011. “It’s like a lifeguard throwing a life preserver to a swimmer that’s already dead,” said the 46-year-old, who is a homeschooling father of six.

The new rules would bar 501(c)(4)s from conducting voter registration drives, distributing voter guides, using any candidate’s name, or using words such as ‘oppose,’ ‘support,’ and ‘reject.’

Members of both parties expressed outrage last year when Lois Lerner, then director of the IRS tax-exempt division, acknowledged the agency improperly scrutinized conservative groups with names like “tea party” or “patriot” during the 2010 and 2012 election cycles. “It’s inexcusable, and Americans are right to be angry about it, and I’m angry about it,” said President Barack Obama in a May 15 statement. “I’ll do everything in my power to make sure that nothing like this ever happens again.” But as the nation awaited firings and prosecutions, none came. Many conservative groups claim they’re still being targeted, and the vast majority say federal officials investigating the IRS have not interviewed them.

Now the Obama administration is on the cusp of enacting new IRS regulations that conservative groups—and a few liberal ones—say will codify the practices that were universally denounced only nine months ago. On Black Friday, Nov. 29, the IRS quietly issued proposed regulations for social welfare organizations—classified in the tax code as 501(c)(4)s—which includes groups like Americans for Prosperity and Tea Party Patriots on the right, and Sierra Club and MoveOn.org on the left. The new rules would bar them from, among many other things, conducting voter registration drives, distributing voter guides, using any candidate’s name,or using words such as “oppose,” “support,” and “reject.” (A 501(c)(4) nonprofit currently may endorse or oppose political candidates and help political campaigns. A 501(c)(3) may lobby on political issues, but without endorsing or opposing political candidates and with only a limited part of its budget.)

The administration portrayed the rules as clarification for social welfare groups in the wake of the targeting, but House Ways and Means Committee Chairman Dave Camp, R-Mich., cast doubt on that explanation during a Feb. 5 hearing. Camp produced a 2012 email from a senior Treasury Department official to IRS employees, including Lois Lerner, referencing an “off-plan” project related to 501(c)(4) guidelines. (The IRS normally posts future regulations online.) Camp said interviews with IRS staff revealed that plans to change the regulations date back to 2011, showing the administration “fabricated” its public rationale. “You don’t get to change the rules in the middle of the game to justify your bad behavior,” Jay Sekulow, chief counsel for the American Center for Law and Justice (ACLJ), told members of a House Oversight and Government Reform subcommittee in February.

At last count, the IRS had received more than 140,000 public comments on the proposed regulations, easily an agency record. Most of those are negative, including a 26-page filing from the American Civil Liberties Union, but not all: Democrats and some campaign finance experts argue the change will help close a loophole for 501(c)(4) organizations. Donald Tobin, a professor at Ohio State University’s Moritz College of Law, told me social welfare groups were never intended to be involved in politics and pour hundreds of millions of dollars into elections. He called the new regulations “a good first step” to correct the problem: “Right now you have significant abuse by a lot of groups.”

Political groups have flocked to the 501(c)(4) status since 2000, when lawmakers started requiring 527 political organizations, such as the Republican National Committee and the Democratic Congressional Campaign Committee, to disclose their donors. Even Obama, after his 2012 reelection, relaunched his campaign as a 501(c)(4) organization to raise money and promote his second term agenda. Tobin says it was never supposed to be that way, and it’s “just not true” that groups would be silenced or have to shut down under the new rules: “They can form a 527 and engage in this all they want.”

The regulations may be aimed at eliminating stealth election money, but caught in the crosshairs are people like Dianne Belsom, leader of the Laurens County Tea Party in South Carolina. Her group—which has been waiting since July 22, 2010, for IRS approval—averages about 40 to 50 attendees at its monthly meetings, and it only brings in about $2,000 a year from member dues and random donations. She said her tax liability would be negligible, but, “It’s the principle of the thing. In a sense we have a club made up of people who pay small membership fees—money they’ve already paid taxes on.”

Conservative groups also say disclosing donors would hurt them because of past targeting and the threat of more targeting in the future. After Kevin Kookogey, an entertainment lawyer by trade, provided public testimony at a congressional hearing last June, his largest client, accounting for about 75 percent of his income, dropped him over the controversy. Kookogey said more than one friend asked him to stop sending email updates about the IRS saga, because they didn’t want the government to know they were associated with him. “People have every reason to be concerned and afraid of their government,” Kookogey said, citing disclosure of the National Security Agency (NSA) domestic spying program as more evidence of government overreach.

For Richmond, Texas, resident Catherine Engelbrecht, targeting meant much more than intrusive questions: At a hearing in February, Engelbrecht told lawmakers she and her husband had lived quiet lives as small-business owners for nearly 20 years, experiencing no investigations or audits during that time. Then in 2010, she applied for 501(c)(3) and 501(c)(4) nonprofit status for her respective civic organizations, True the Vote and King Street Patriots. Since then, the IRS has audited her and her business twice each, part of 15 inquiries from the tax agency, the FBI, the Occupational Safety and Health Administration (OSHA), the Texas Commission on Environmental Quality, and the Bureau of Alcohol, Tobacco, Firearms, and Explosives. Taken as a whole, Engelbrecht told me, “you can’t make any other rational conclusion except that something is coordinated.”

Democrats at the hearing pushed back against Engelbrecht’s conclusion, saying she has no evidence the investigations were connected and suggesting a manufacturing company warrants an unannounced OSHA inspection. Engelbrecht’s attorney, Cleta Mitchell, who represents a dozen targeted groups, said she filed Freedom of Information Act (FOIA) requests to see what triggered the visits, and she got nothing in return. Sekulow, who represents Linchpins of Liberty and 40 other conservative organizations, told me his team has learned Lois Lerner was sharing information with other government agencies, and she was sending documents to her private email account: “Who knows where they went from there.”

The revelation that Barbara Bosserman, the lead DOJ investigator of IRS abuses, donated $6,750 to Obama campaigns and the Democratic National Committee didn’t build faith in the process. Republicans called for her removal from the investigation, but the Justice Department in a statement said it is “contrary to department policy” and federal law to consider the political affiliation of career employees when making personnel decisions.

Democrats continue to stress that the investigation is ongoing, but their leader has already passed judgment: During a Super Bowl Sunday interview, Obama told Fox News’ Bill O’Reilly there was “not even a smidgen of corruption” at the IRS. Following Engelbrecht’s testimony, which came days after the president’s statement, Rep. Matt Cartwright, D-Pa., said he remains “deeply troubled” over the alleged targeting and admitted “it’s fair to criticize” Obama’s early judgment. A Fox News poll released Feb. 13 found 64 percent of Americans—including 51 percent of Democrats—think the targeting is an example of corruption at the IRS, and 71 percent want Congress to continue investigating.

Sekulow told lawmakers he believes the Justice Department is no longer “institutionally capable” of properly investigating the targeting and said the only solution is to appoint a special prosecutor. Rep. Trey Gowdy, R-S.C., a former prosecutor, agreed, noting 13 DOJ employees in six months have not had time to interview a single one of Sekulow’s 41 clients, yet “the president of the United States has already prejudged the outcome of this investigation.”

House and Senate Republicans, who insist the agency can’t propose a solution without knowing the full extent of the problem, have introduced legislation to delay implementation of the new 501(c)(4) regulations until the investigation is complete. The House measure passed out of the Ways and Means Committee Feb. 11 on a party-line vote. Republicans in House and Senate leadership also sent a February letter to new IRS Commissioner John Koskinen urging him to abandon the changes, saying although he inherited the proposal when he joined the agency, he’s now responsible for the outcome.

What will happen if the new regulations take effect? Most of those intrusive IRS questions will become fair game, and 501(c)(4) organizations will be tasked with keeping meticulous records of “candidate-related political activity,” even when no candidate is mentioned. Some groups may choose to shut down or opt for 527 status, but those unwilling to disclose donors may gravitate to another loophole: corporations. Thanks to the 2010 Supreme Court case Citizens United v. Federal Election Commission, organizations could form a corporation and, although they would have to pay taxes on income, they would not have to disclose donors.

Meanwhile, Sekulow’s 41 clients are forging ahead with a lawsuit against the federal government and individual officials involved in the targeting, including Lerner—who abruptly retired in September—in a case that may end up at the Supreme Court. The Justice Department in December filed a motion to dismiss the suit, and ACLJ filed its response in mid-February.

Kookogey said the lawsuit can only do so much to repair the damage: Although he wasn’t politically engaged, many of the targeted 501(c)(4) groups were prevented from raising money that could have altered the 2012 election. “That’s done. You can’t go back and unring that bell,” he said. “There isn’t enough money in the world that could ever account for the harm.”

Timeline

Jan. 21, 2010 U.S. Supreme Court issues Citizens United ruling, lifts limits on political donations for corporations and labor unions.

March 2010 IRS agents identify first 10 tea party cases for extra scrutiny.

Aug. 9, 2010 President Obama publicly warns of groups like Americans for Prosperity influencing elections.

June 29, 2011 Lois Lerner learns of conservative targeting.

March 22, 2012 Then-IRS head Douglas Shulman tells Congress the IRS is not targeting groups based on political views.

June 14, 2012 Treasury Department official mentions “off-plan” 501(c)(4) project in email to IRS staff, including Lerner.

May 10, 2013 Lerner apologizes for improper scrutiny of conservative groups.

May 13, 2013 Attorney General Eric Holder says FBI will work with DOJ to “see if any laws were broken.”

May 14, 2013 Treasury Department’s inspector general issues report on “inappropriate” IRS scrutiny of conservative groups.

May 15, 2013 Obama calls IRS abuse “inexcusable” and pledges not to let it happen again. Acting IRS Commissioner Steven Miller resigns.

May 22, 2013 Lerner invokes Fifth Amendment right not to testify before Congress.

May 29, 2013 ACLJ files lawsuit for 25 targeted organizations (16 more later joined).

June 4, 2013 Six witnesses testify before Congress about IRS targeting.

Sept. 23, 2013 Lerner retires.

Nov. 29, 2013 IRS proposes restrictive guidelines for 501(c)(4) organizations.

Feb. 2, 2014 Obama says there is “not even a smidgen of corruption” at the IRS.

Feb. 6, 2014 Catherine Engelbrecht tells House subcommittee of 15 visits from five federal agencies after filing nonprofit application.

Feb. 27, 2014 House passes the Stop Targeting of Political Beliefs by the IRS Act.