Report Finds IRS Program Could Hamper Free Speech for Organizations

PRESS RELEASE Contact: Anna Oman, aoman@ombwatch.org, 202/234-8494 Report Finds IRS Program Could Hamper Free Speech for Organizations WASHINGTON, July 6--A report released today finds fault with the IRS program to enforce the ban on partisan activities by charities. The report's most serious findings suggest that the IRS's Political Activities Compliance Initiative (PACI) threatens the constitutional rights of nonprofit organizations and churches to speak out on issues of the day. It also suggests that the IRS exaggerated the extent of noncompliance in an agency report on its enforcement efforts in 2004. Finally, the potential for abuse of the program in order to harass or retaliate against an organization is of concern during the upcoming election season, according to the report. Charities, educational institutions, and religious organizations are among tax-exempt organizations described in Section 501(c)(3) of the Internal Revenue Code. They are prohibited from participating or intervening in any political campaign on behalf of, or in opposition to, any candidate for public office. In February, the IRS released an assessment of its 2004 enforcement program, in which the agency claimed to have found violations in nearly three-quarters of the cases it reviewed. New analysis presented in the OMB Watch report, however, shows that only 191 of the more than one million 501(c)(3) organizations were investigated, and, for those investigated, no violation was found in 64 percent of cases. According to the report, factors that contribute to the program's potentially chilling effect on constitutionally protected speech are:
  • the vague "facts and circumstances" test that is used to determine if a violation has occurred;
  • secrecy surrounding IRS investigations and enforcement actions;
  • IRS statements that it intends to prevent repeat violations before an election;
  • the threat that an organization's tax-exempt status will be revoked if it continues an activity that has yet to be deemed in violation of tax law; and
  • a lack of deadlines for completing investigations and closing cases.
The report recommends steps to remedy these problems, such as issuing concrete guidance, and creating bright line rules defining partisan intervention, and/or safe harbors. The IRS, according to the report, should also develop complaint standards and investigate how other agencies deal with harassment situations. "The IRS should make clear," explains report author Kay Guinane, "that a charity's right to criticize elected officials is not suspended because an election is taking place." ### Read the report >> OMB Watch is a Washington-based nonprofit government watchdog organization. Its mission is to promote open government, accountability and citizen participation.
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