NAACP Releases Information on IRS Audit

5/31/2006

Seven Republican members of Congress filed complaints with the IRS in 2004, claiming the National Association for the Advancement of Colored People (NAACP) engaged in partisan electioneering, leading to an IRS probe, according to agency documents released to the NAACP under the Freedom of Information Act (FOIA). The NAACP has asked the Treasury Inspector General for Tax Administration (TIGTA) to review the IRS's failure to fully respond to its FOIA requests.

The Internal Revenue Service (IRS) launched an examination of the NAACP on Oct. 8, 2004, claiming a speech Chairman Julian Bond made during the organization's annual convention that criticized President George Bush's education and foreign policies crossed the line from issue advocacy to partisan electioneering. On May 17, the NAACP publicly released over 500 pages of documents the IRS has gathered since it began the audit. The documents (all 28 megabytes worth) are available online.

The documents include letters sent from members of Congress on behalf of their constituents, including Sens. Lamar Alexander (R-TN) and Susan Collins (R-ME), Rep. Jo Ann Davis (R-VA), the late Senator Strom Thurmond (R-SC), and former Reps. Larry Combest (R-TX), Joe Scarborough (R-FL) and Robert Ehrlich (R-MD).

Ehrlich, the current governor of Maryland, forwarded to the IRS a letter December 2000 written by Richard Hug, chief fundraiser for Ehrlich's current re-election campaign, requesting "the IRS investigate the non-profit status of the NAACP." The letter claims that "[t]his organization has become increasingly political in recent years, particularly under its present leadership, and I would suspect much of its contributed funds are being used for political purposes."

Thomas J. Miller, the technical advisor to the IRS Exempt Organizations division, responded in a letter, assuring Ehrlich that the agency would follow up: "We have forwarded the information you provided to that office of appropriate action."

Hug told NBC4 that the letter was prompted by a television advertisement sponsored by an NAACP affiliate, the National Voter Fund, a 501(c)(4) social action organization. In the ad, the daughter of James Byrd, a black man dragged to death by three white men in a pickup truck, faulted then-Texas Gov. George W. Bush for not instituting a hate-crime law. According to Hug, the ads were an attack on Bush from a group that is prohibited from political campaigning. While the NAACP as a charity exempt under Section 501(c)(3), is subject to the ban on partisan activity, the National Voter Fund as a 501(c)(4) organization, is not subject to this prohibition. IRS rules allow charities to be affiliated with 501(c)(4) organizations, a common practice for organizations across the political spectrum.

Once the audit was initiated, the NAACP filed three FOIA requests with the IRS in Feb. 2005, seeking information on what triggered the audit. According to a recent NAACP press release, the IRS sent a partial response in March 2005, consisting of "some heavily and inconsistently redacted documents that apparently originated from files in the IRS National Office."

A fourth FOIA request was submitted to TIGTA on June 8, 2005, for information acquired in TIGTA’s investigation of the IRS enforcement program. On Sept. 9, 2005 the Inspector General for TIGTA released 241 pages. Bruce Gordon, NAACP President and CEO, called it "extremely frustrating that over a year has elapsed with no sign of the documents," adding that "it seems the IRS can rush to initiate an audit but prefers to drag its feet when responding to this taxpayer's request for information to which we are entitled."

TIGTA has not yet responded to the NAACP's request for a review of the IRS handling of the information requests. But on May 23, House Ways and Means Committee Ranking Member Charles Rangel (D-NY) added his support in a letter to IRS Congressional Affairs, urging the IRS to respond to the NAACP's FOIA requests. Rangel notes, "…[T]he IRS owes the NAACP an explanation of why, if this is the case, the requested documents cannot be disclosed. Instead of acting promptly and communicating effectively with the NAACP, the IRS has left the organization under a cloud of uncertainty."

On March 29, the NAACP announced steps it has taken to force the case into court if the IRS does not close it favorably within six months. To force a resolution, the NAACP has paid what it estimates it would owe if the IRS found it has violated the ban on partisan activity. The excise tax rate is 10 percent of the cost of a prohibited communication. In this case the NAACP estimated it spent $176.48 to disseminate Bond's speech, so it sent the IRS $17.65. NAACP General Counsel Dennis Hayes said this in no way represents an admission of wrongdoing. Instead, the NAACP has filed for a refund of the $17.65. If the organization does not receive the refund by September, it will go to court for a review of their claim.