On Feb. 24 the Internal Revenue Service (IRS) released its much-anticipated assessment of its program created in 2004 to enforce the ban on partisan election activity by charities and religious organizations. The report found that nearly 75 percent of organizations investigated had violated the ban. At the same time, the agency released guidance that includes detailed examples based on the types of situations that led to investigations in 2004. While continuing to expand its educational efforts, the IRS also announced it will step up enforcement for the 2006 election cycle, releasing new procedures for expedited handling of referrals alleging violations, in an effort to end any ongoing violations. The day of the release of both the report and new procedures, IRS Commissioner Mark Everson cited the need for increased enforcement in a speech to the City Club of Cleveland, noting that there has been "a dramatic increase in the amount of money financing politics." He asked the audience, "Are we going to let these political activities spread to our charities and churches?", to which he answered by calling for action "before it is too late." Everson described the 2004 enforcement program that was intended to "stop improper activity during-not after-the election cycle," and went on to explain that in 2006 the IRS will start the program earlier in the year; expand staff dedicated to the project; and increase its outreach and educational efforts. The report on the 2004 Political Activities Compliance Initiative (PACI) said it reviewed complaints filed against 132 nonprofit (501(c)(3)) organizations, 22 of which were found to not merit further investigation. The IRS has completed 82 of the remaining 110 examinations, finding partisan activity occurred in 58 of reviewed cases. Of these only three warranted revocation of tax-exempt status. In the remaining 55 cases the IRS issued written advisories and, for one organization, an excise tax. According to the IRS advisories were issued "when the Service believes the organization engaged in prohibited political activity, but the activity appeared to be a one-time, isolated violation, and the organization corrected the violation where possible...and took affirmative steps to ensure it would not violate the prohibition in the future." Groups that receive advisories are warned that future violations risk revocation of exempt status. The common fact situations, noted in the report, that led to findings that groups had crossed the line into partisan activity were:

• Distribution of printed materials that encourage members to vote for a candidate (24 alleged, 9 determined)
• Endorsements from the pulpit (19 alleged, 12 determined)
• Support for a candidate on the organization's website (15 alleged, 7 determined)
• Distribution of partisan voter guides or candidate ratings (14 alleged, 4 determined)
• Campaign signs displayed (12 alleged, 9 determined)
• Preferential treatment given some candidates to speak at events (11 alleged, 9 determined) and
• Cash contributions to a political campaign (7 alleged, 5 determined)

Twenty-eight cases remain open. IRS enforcement activity in 2006 will be expanded, using a centralized process allowing quick response to referrals and complaints. Cases will be classified as:

• Type A (single issue/non-complex), which would typically be resolved through correspondence and involve only one organization,
• Type B (multiple issue/complex), involving multiple organizations or issues, and required review of books and records, and
• Type C (egregious/repetitive), that require immediate IRS action.

Special procedures apply to churches, in compliance with tax code provisions intended to limit government intrusion into church affairs. Fact Sheet 2006-17 summarizes the IRS interpretation of the ban on intervention in elections in a variety of fact situations, covering voter mobilization and education, individual activity by leaders, candidate appearances, issue advocacy vs. political campaign intervention, voter guides, websites, business activity, and multiple or combined activities. Its issue advocacy section states that "501(c)(3) organizations may take positions on public policy issues, including issues that divide candidates in an election for public office" but "must avoid any issue advocacy that functions as political campaign intervention." The IRS will consider all facts and circumstances to determine which is which, and lists factors that help determine whether a statement is issue advocacy or partisan, examining whether an activity:

• Identifies one or candidates
• Expresses approval or disapproval of one or more candidates' position on an issue or an action taken
• Is made close to the date of the election or refers to voting and the election
• Raises an issue that distinguishes candidates
• Is part of an ongoing series on the issue that are not timed to the election and
• Is timed to influence an non-electoral event, such as a vote on specific legislation.

The new procedures do not establish criteria for the IRS to filter out referrals made by people or groups that intend to harass political opponents or watchdog groups. Shortly after the IRS announcement the Washington Post reported that Rep. Sam Johnson (R-TX), a member of the House Ways and Means Committee who sits on a committee with oversight of the IRS, sent a letter to the IRS requesting an investigation of Texans for Public Justice. The group, founded in 1997, tracks the influence of money on politics in Texas and publishes detailed reports on campaign spending and corporate lobbying. A 2003 report by Texans for Public Justice on illegal corporate spending in the 2002 reelection campaign of Rep. Tom Delay's (R-TX) led to a criminal indictment for Delay. The 2003 IRS examination of Texans for Public Justice, which included two auditors reviewing its books, found no violations. Founder Craig McDonald said the audit was "political retaliation by Tom DeLay's cronies to intimidate us for blowing the whistle on DeLay's abuses." The IRS said political considerations do not enter into its decisions, noting that two career employees must agree there is cause for a review before it can proceed. The Texas case illustrates the potential problems inherent in the IRS's 2006 enforcement plan. The combination of abuse of the enforcement system in order to harass and the IRS's expedited procedures could silence nonprofits critical of public officials. The new enforcement process appears to focus on deterrence prior to any finding of wrongdoing. Hopefully the IRS will continue to fine tune its procedures to address these problems.