The Internal Revenue Service may have been caught violating federal tax law: In October 2010, the agency sent a database on 501(c)(4) social-welfare groups containing confidential taxpayer information to the Federal Bureau of Investigation, according to documents obtained by a House panel.
The information was transmitted in advance of former IRS official Lois Lerner’s meeting the same month with Justice Department officials about the possibility of using campaign-finance laws to prosecute certain nonprofit groups. E-mails between Lerner and Richard Pilger, the director of the Justice Department’s election-crimes branch, obtained through a subpoena to Attorney General Eric Holder, show Lerner asking about the format in which the FBI preferred the data to be sent.
“This revelation that the IRS sent 1.1 million pages of nonprofit tax-return data – including confidential taxpayer information – to the FBI confirms suspicions that the IRS worked with the Justice Department to facilitate the potential investigation of nonprofit groups engaged in lawful political speech,” Oversight Committee chairman Darrell Issa, a California Republican, and subcommittee chairman Jim Jordan wrote in a letter to IRS commissioner John Koskinen. The two lawmakers also raise questions about the timing of the meeting, just weeks before the 2010 midterm elections, when Republicans recaptured a majority in the House of Representatives.
The Justice Department never prosecuted social-welfare groups, and e-mails from IRS officials show their awareness that, as a result of the Supreme Court’s 2010 decision in the Citizens United case, which allowed unlimited amounts of money from nonprofit groups and labor unions to flow into the political process, the law did not favor a crackdown on anonymous donations to politically orientated nonprofits, which sprouted up on all sides in the wake of the ruling. “We don’t have the law to do something,” an IRS official responsible for tax-exempt organizations said in a September 2010 e-mail.
The documents were subpoenaed as a part of the Oversight Committee’s ongoing investigation into the IRS’ targeting of right-leaning groups, which took place against the backdrop of the Citizens United ruling. E-mails cited in a committee report released in March show that the decision caused a lot of angst for Lerner and her colleagues in the IRS’s Exempt Organizations division, and she noted in public remarks that the agency was under pressure to “fix the problem” created by the decision.
Though the Justice Department never took nonprofit groups to court, the committee has argued that Lerner attempted engaged in a politicized witch hunt against conservative groups by implementing a system where applications for tax exemption were inappropriately scrutinized and by jump-starting efforts to rewrite the rules by which 501(c)(4) social-welfare groups can qualify for tax exemption. Those rules prompted an outcry from groups on both sides of the political spectrum and the agency is currently rewriting them.
Issa and Jordan have requested from the IRS all documents relating to the transmittal of the database. “This revelation likely means that the IRS – including possibly Lois Lerner – violated federal tax law by transmitting this information to the Department of Justice in 2010,” they said.