JULY 24, 2015
IRS Documents Show How the Renegade Tax Agency Used Donor Lists to Steer Audits
Federal Judge Says State Department Must “Answer For” Destruction of Clinton Emails
Judicial Watch Client McCann Testifies to Congress on Deadly Sanctuary Policies
Judicial Watch has released more blockbuster documents from the Internal Revenue Service (IRS) that confirm that the IRS used donor lists of tax-exempt organizations to target those donors for audits. The documents also show that IRS officials specifically highlighted how the U.S. Chamber of Commerce may come under “high scrutiny” from the IRS. We forced these records out through a Freedom of Information lawsuit seeking documents about the selection of individuals for audits, based upon application information and donor lists submitted by Tea Party and other 501(c)(4) tax-exempt organizations.
In a letter dated September 28, 2010, then-Democrat Senate Finance Committee Chairman Max Baucus (D-MT) informs then-IRS Commissioner Douglas Shulman: “I request that you and your agency survey major 501(c)(4), (c)(5) and (c)(6) organizations …” In reply, in a letter dated February 17, 2011, Shulman writes: “In the work plan of the Exempt Organizations Division, we announced that beginning in FY2011, we are increasing our focus on section 501(c)(4), (5) and (6) organizations.”
Sure enough, in 2010, after receiving Baucus’ letter, the IRS considered the issue of auditing donors to 501(c)(4) organizations, alleging that a 35 percent gift tax would be due on donations in excess of $13,000. The documents show that the IRS wanted to cross-check donor lists from 501(c)(4) organizations against gift tax filings and commence audits against taxpayers based on this information.
A gift tax on contributions to 501(c)(4)s was considered by most to be a dead letter since the IRS had never enforced the rule after the Supreme Court ruled that such taxes violated the First Amendment. The documents show that the IRS had not enforced the gift tax since 1982.
But then, in February 2011, at least five donors of an unnamed organization were audited.
The documents show that Crossroads GPS, associated with Republican Karl Rove, was specifically referenced by IRS officials in the context of applying the gift tax. Seemingly in response to the Crossroads focus, on April 20, IRS attorney Lorraine Gardner emails a 501(c)(4) donor list to former Branch Chief in the IRS’ Office of the Chief Counsel James Hogan. Later, this information is apparently shared with IRS Estate Gift and Policy Manager Lisa Piehl while Gardner seeks “information about any of the donors.”
One of the most disturbing bits of information pulled from the documents concerns the U.S. Chamber of Commerce, which sometimes works to support the free-enterprise system in the face of heavy-handed regulatory policies.
Emails to and from Lorraine Gardner point to a bias against the Chamber. An IRS official (whose name is redacted) emails Gardner on May 13, 2011, a leftist blog post responding to the IRS targeting of political and other activities of 501(c)(4), (5) and (6) organizations: “The U.S. Chamber of Commerce is a 501(c)(6) organization and may find itself under high scrutiny. One can only hope.”
The subject line of the email highlights this anti-Chamber of Commerce comment: “we are making headlines notice the end regarding 501(c)(6) applicability enjoy.” This critical comment is forwarded to other IRS officials and shows up attached to another Gardner IRS email chain with the subject line “re: 501(c)(4)” that discusses a pending decision about a tax-exempt entity.
In early May, once the media began reporting on the IRS audits of donors, IRS officials reacted quickly. One official acknowledges the issue “is a biggy” when a reporter from The New York Times contacts the IRS on May 9.
On May 13, 2011, former IRS Director of Legislative Affairs Floyd Williams discusses compliance with “interest” from Capitol Hill: “Not surprisingly, interest on the hill is picking up on this issue … with Majority Leader Reid’s office, has suggested the possibility of a briefing for the Senate Finance Committee staff on general issues related to section 501(c)(4) organizations. I think we should do it as interest is likely to grow as we get closer to elections.”
Later that day, then-Director of the Exempt Organizations Lois Lerner weighs in with an email that confirms that she supported the gift tax audits. Lerner acknowledges that “the courts have said specifically that contributions to 527 political organizations are not subject to the gift tax–nothing that I’m aware of that about contributions to organizations that are not political organizations.” Section 501(c)(4) organizations are not “political organizations.” [Emphasis in original]
Lerner’s involvement and support for the new gift tax contradicts the IRS statement to the media at the time that audits were not part of a “broader effort looking at donations 501(c)(4)’s.” In July 2011, the IRS retreated after a public uproar and soon-to-be Acting IRS Commissioner Steven Miller directed that “examination resources should not be expended on this issue” and that all audits of taxpayers “relating to the application of gift taxes” to 501(c)(4) organizations “should be closed.”
By the way, we had filed a separate lawsuit for records about targeting of individuals for audit in November 2013. In that litigation, the IRS had refused to search any email systems, including Lerner’s records. A federal court ruled the IRS’ search was sufficient and dismissed the lawsuit earlier this month. So it took another lawsuit to get this new info from the IRS!
These documents that we had to force out of the IRS prove that the agency used donor lists to audit supporters of organizations engaged in First Amendment-protected lawful political speech. And the snarky comments about the U.S. Chamber of Commerce and the obsession with Karl Rove’s Crossroads GPS show that the IRS was targeting critics of the Obama administration.
President Obama continues to lie about his IRS scandal. He told a comedian the other day that “there was not some big conspiracy there.” Obama also said, “Congress had passed a crummy law that didn’t give people guidance in terms of what it was they were trying to do. They did it poorly and stupidly.”
How does he know all this? The Department of Justice and the FBI supposedly are still conducting a criminal investigation.
The Treasury for Inspector General for Tax Administration (TIGTA) report exposing the scandal made no mention of “crummy laws” passed by Congress. Its audit revealed the IRS had used “inappropriate criteria” to identify potential political cases. “Early in Calendar Year 2010,” TIGTA wrote, “the IRS began using inappropriate criteria to identify organizations applying for tax-exempt status to (e.g., lists of past and future donors).” The illegal IRS reviews continued for more than 18 months and, TIGTA reported, “delayed processing of targeted groups’ applications preparing for the 2012 presidential election.”
And these documents tell the truth – his IRS hated conservatives and was willing to illegally tax and audit citizens to shut down opposition to Barack Obama’s policies and reelection.
Obama’s IRS falsehood the other day contained an admission that few picked up on. He said, “You don’t want all this money pouring through non-for-profits but you also want to make sure that everybody is getting treated fairly.” Who doesn’t “want all this money pouring through non-for-profits”? Barack Obama. There is no law prohibiting money “flowing through non-profits.” But he didn’t like the idea of this money being used against his reelection or his policies. So his IRS targeted these groups and their donors for lawless oppression.
This president and his administration are out of control.
That’s why your JW is working on several fronts where the growing scandal over IRS audits is concerned.
In September 2014, another Judicial Watch FOIA lawsuit forced the release of documents detailing that the IRS sought, obtained and maintained the names of donors to Tea Party and other conservative groups. IRS officials acknowledged in these documents that “such information was not needed.” The documents also show that the donor names were being used for a “secret research project.”
Let’s review some of the facts Obama chose to ignore.
The House Ways and Means Committee announced at a May 7, 2014, hearing that, after scores of conservative groups provided donor information “to the IRS, nearly one in ten donors were subject to audit.” In 2011, as many as five donors to the conservative 501(c)(4) organization Freedom’s Watch were audited, according to the Wall Street Journal. Bradley Blakeman, Freedom’s Watch’s former president, also alleges he was “personally targeted” by the IRS.
In February 2014, then-Chairman of the Ways and Means Committee Dave Camp (R-MI) detailed improper IRS targeting of existing conservative groups:
Additionally, we now know that the IRS targeted not only right-leaning applicants, but also right-leaning groups that were already operating as 501(c)(4)s. At Washington, DC’s direction, dozens of groups operating as 501(c)(4)s were flagged for IRS surveillance, including monitoring of the groups’ activities, websites and any other publicly available information. Of these groups, 83 percent were right-leaning. And of the groups the IRS selected for audit, 100 percent were right-leaning.
Maybe President Obama can fool a comedian about the IRS scandal, but he isn’t fooling Judicial Watch as we battle his Justice Department and IRS lawyers successfully in court to hold him accountable for his worse-than-Nixon abuse of the IRS.
There is a legal reckoning coming for Hillary Clinton’s notorious email practices and policies. There is too much Judicial Watch legal pressure and too many federal court judges for the Obama administration and the Clinton gang forever to avoid the legal consequences of their email shenanigans. For instance, we are pleased to report that a federal judge has said that the State Department will “have to answer for” any destruction of Hillary Clinton’s email records.
- S. District Court Judge Rudolph Contreras made the statement at a July 9, 2015, status conference concerning a Judicial Watch Freedom of Information Act lawsuit for records about the State Department’s vetting of then-Secretary of State Hillary Clinton’s potential conflicts of interest. The transcript of the July 9 court hearing is available here.
Recall that it was only four months ago, on March 2, 2015, that The New York Times reported then-Secretary Clinton used at least one non-“state.gov” email account to conduct official government business during her entire tenure as the secretary of state. It also was reported that Secretary Clinton stored these records on a non-U.S. government server at her home in Chappaqua, New York.
There are nearly 20 federal lawsuits that touch on Mrs. Clinton and her staff’s use of secret email accounts to conduct official government business. In our various FOIA lawsuits, our lawyers have informed attorneys for the Obama administration that Hillary Clinton’s account and any other secret accounts used by State employees should be secured, recovered and searched.
During this particular court hearing, Judicial Watch attorney Chris Fedeli raised the concerns JW had about the preservation of records, especially email records that were not part of the 55,000 records Clinton turned over to the State Department last year. Apparently, Fedeli struck the right note.
In response, Judge Contreras said he was also “concerned” about the preservation of these records:
If documents are destroyed between now and August 17, the government will have to answer for that, and, you know, if they don’t want to do anything out of the ordinary to preserve between now and then, they can make that choice. I will allow them to make that choice, but they will answer for it, if something happens.
After a Justice Department lawyer attempted to assure him that the administration was asking for government records from former State Department employees, Judge Contreras questioned the State Department’s position that it had no legal obligation to take additional steps to obtain other government records in the custody of Mrs. Clinton and other former officials who used her special email system:
[I]t is to state the obvious that this is not an ordinary case, and everyone should be working to make sure that whatever documents exist today remain in existence.
Judge Contreras also voiced concerns regarding the State Department’s refusal to provide any information about the Clinton email issue:
But I am a little bit mystified that the government is not more forthcoming in just answering questions that will help this case proceed on a systematic basis, and on a basis that will allow everyone to get the answers that will eventually help resolve these cases…
This one court hearing shows that Hillary Clinton and her co-conspirators in the State Department will have to account for each and every email on Hillary Clinton’s notorious email system. That’s encouraging. It’s become clear now to the public at large that Hillary Clinton has been telling fairy tales about the missing emails that are beginning to unravel. “Nothing Mrs. Clinton has said so far on the subject is correct,” The Wall Street Journal’s Kimberly Strassel has charitably observed.
Again, the reckoning is coming.
The court also seemed to reject the Obama administration’s contention that responding to Judicial Watch’s lawsuit in a timely way would derail its compliance with Judge Contreras’ order in another lawsuit (Leopold v. U.S. Department of State, (15-00123)) requiring that the 55,000 pages of Clinton email records be searched and produced under FOIA by January 2016:
My order in Leopold was based on numbers and percentages. To the extent that documents from that universe are produced in this case, they qualify for the numbers in Leopold, don’t they? So that they’re not mutually exclusive from a resource standpoint, are they?
The judge then said his “inclination is to have a search done of the Clinton e-mail database that’s digitized and searchable for this relatively narrow, in my view, relatively narrow request.”
A separate and ongoing Judicial Watch lawsuit forced the disclosure last year of documents that provided a road map for over 200 conflict-of-interest rulings that led to $48 million for the Clinton Foundation and other Clinton-connected entities during Hillary Clinton’s tenure as secretary of state. Previously disclosed documents in this lawsuit, for example, raise questions about funds Clinton accepted from entities linked to Saudi Arabia, China and Iran, among others. Judicial Watch and The Washington Examiner partnered in the first story to break the Clinton conflicts scandal: “State Department approved 215 Bill Clinton speeches, controversial consulting deal, worth $48m; Hillary Clinton’s Chief of Staff copied on all decisions.”
You can see why the State Department and the Clinton operation have been trying to play a rope-a-dope obstruction game with Judicial Watch, courts and Congress for these emails. But it won’t work.
As I write this, news is breaking that Hillary Clinton is the subject of a criminal referral to the Justice Department by two separate inspectors general for an investigation into her potentially criminal mishandling of hundreds of pages of classified information on her email system. The New York Times broke the story (and may have edited it at the behest of the Clinton campaign), but there is no doubt that there is serious criminal liability for Hillary Clinton. If the Justice Department, the State Department, or the FBI were all above-board, there would have been law enforcement activity many months ago. Now we know that the State Department resisted cooperating with the IG investigations. And we can’t trust the Obama Justice Department. The New York Times tells us that it helping Hillary Clinton’s PR effort, too:
On Thursday night and again Friday morning, the Justice Department referred to the matter as a “criminal referral” but later on Friday dropped the word “criminal.”
At the Obama Justice Department, politics always comes first, so it is imperative that no less than a special counsel be appointed to investigate this matter. Under Justice Department regulations:
The Attorney General, or in cases in which the Attorney General is recused, the Acting Attorney General, will appoint a Special Counsel when he or she determines that criminal investigation of a person or matter is warranted and–(a) That investigation or prosecution of that person or matter by a United States Attorney’s Office or litigating Division of the Department of Justice would present a conflict of interest for the Department or other extraordinary circumstances; and (b) That under the circumstances, it would be in the public interest to appoint an outside Special Counsel to assume responsibility for the matter.”
This will be a major ethical test for new Attorney General Loretta Lynch. In the meantime, we will continue our pursuit for information and accountability in the courts.
If you’d like to see how irrelevant and out of touch the typical D.C. debate about “amnesty” for illegal aliens can be, I suggest you watch this video of a Senate Judiciary Committee hearing this week. American citizens told of loved ones who were murdered by illegal aliens thanks to lawless state and national “sanctuary policies.” I attended that hearing in person, so I can tell you it that it will make you both upset and angry.
Judicial Watch was at the hearing because it included the testimony of our client Brian McCann, who did his part earlier to jolt the political class back to reality. McCann is a lifelong resident of Chicago. We are representing him in his lawsuit against Cook County Sheriff Thomas J. Dart. The suit challenges the sheriff’s refusal to cooperate with federal immigration officials or honor immigration detainers issued by U.S. Immigration and Customs Enforcement (ICE) for criminal aliens.
McCann’s written testimony, which is available in full here, brings home the enormous human tragedy attached to illegal immigration and the dangers of open, unsecured borders. Mr. McCann told the committee members about how his brother, William “Denny” McCann, was run over and killed in June 2011 by an unlawfully present criminal alien who had just completed a two-year term of probation for a 2009 DUI conviction. The alien, Saul Chavez, was charged with felony aggravated driving under the influence, but was released by Dart from a Cook County jail in November 2011 despite an ICE immigration detainer. At the time, ICE issued detainers when it learned that criminal aliens are being held by state or local law enforcement officials. The detainers required the criminal aliens be held for an additional 48 hours to enable ICE to take custody of them before they are released. At the time, Cook County jails had released as many as 1,000 criminal aliens sought by ICE in the previous 18 months. We continue this legal fight. Just last month we filed a petition for review with the Illinois Supreme Court.
Denny McCann’s killer is believed to have fled to Mexico. As Brian McCann recounted to the Senate committee:
Denny was crossing Kedzie Avenue on a marked crosswalk four years ago and was violently struck by a drunk driver who dragged Denny under his car for a block in an attempt to flee before Denny died. The family was notified by the Chicago Police and the killer was placed into custody and charged with aggravated DUI causing death. Two days later ICE issued a detainer because the young man was an illegal alien with a prior felony. The family was assured by the Cook County prosecutor that the defendant would not be allowed to post bail and be released. Three months later the Cook County Board passed the ordinance that effectively requires the sheriff to ignore detainers. During the intervening weeks after Denny’s violent death, Cook County President Toni Preckwinkle and former mayoral candidate and Commissioner Jesus Garcia pushed for the ordinance and rammed it through on September 7, 2011. Two months later the killer made bail and absconded to Mexico.
As if Denny McCann’s death was not painful enough for the family, they also had to endure learning that if our government had simply enforced the law, the illegal alien who killed his brother would not be running loose. Here is how Mr. McCann tells it:
Perhaps the most disturbing aspect of this whole ordeal was that we also learned that this illegal alien was prosecuted for another felony two years earlier and ICE was never notified then. He was removed from probation February 2011 and four months later killed Denny. In short, Denny would be alive today and enjoying the birth of a new granddaughter born two weeks ago if the Cook County criminal justice system that included the county board did its job. I received confirmation that he is indeed in Mexico from the FBI and is currently driving a truck. I had to prevail on my congressman to get the FBI to cooperate with my request for information and action. I have not heard from the Bureau in over six months.
Of course, the Obama administration has run away from any serious enforcement of our immigration laws and no longer routinely issues detainers requiring that local police hold illegal alien criminals:
Because ICE no longer routinely issues detainers we are no longer challenging [Sherriff Thomas] Dart’s refusal to honor them. However, we continue to challenge the Sheriff’s policy of prohibiting and restricting communications and the exchanging of information with ICE officials about a person’s citizenship or immigration status. Now under PEP (Priority Enforcement Program) even if ICE requests that Cook County notify them of the impending release of a deportable criminal alien, Cook County would not comply. I find this unacceptable and will fight this policy in the courts until the end. I remain very concerned that the current immigration enforcement policies seem to encourage jurisdictions like Cook County and San Francisco to continue their noncooperation policies.
The other victims who testified that day also told harrowing stories and demanded action.
President Obama’s response was to threaten to veto any legislation that would withhold federal monies from states or localities that continued sanctuary policies that put the public safety at risk. And a report out of The New York Times confirmed what we’ve been highlight for years – that Obama has stopped deporting almost every illegal alien. The story confirms as many as 87 percent of illegals won’t be subject to deportation under Obama’s unlawful sanctuary/amnesty policies.
As we are doing for fine Americans like Brian McCann, Judicial Watch will continue to investigate, litigate and educate. We promise to continue to expose this assault on the rule of law, the public safety, and our nation’s sovereignty.