Insight: IRS has long history of burying non-profits in paperwork

Mon Jun 3, 2013 3:01pm EDT
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By Patrick Temple-West

WASHINGTON (Reuters) - Internal Revenue Service staff have a long history of discouraging applications for tax-exempt status from controversial groups by burying them in complicated questionnaires, according to former IRS officials. Among other reasons, they said, the tactic was sometimes used to persuade groups to drop their applications so the IRS could avoid making a ruling.

This approach - allegedly used in the recent IRS targeting of Tea Party and other conservative groups - has been around for decades, the officials said, citing lengthy questionnaires sent to applicants including religious and gay-rights organizations and a children's summer camp group that promotes atheist thinking.

The recollections of these former officials indicate the recent scandal concerning Tea Party applications may be only the tip of the iceberg, and that IRS workers have long resorted to this unwritten, word-of-mouth tactic towards a wide range of groups.

The IRS has no guidelines or limits regarding questionnaires sent to applicants for tax-exempt status, the former officials said, and no management approval is needed.

"It becomes abusive if every time you're answering a question there's five more," said Marvin Friedlander, a former official in the IRS exempt-organization unit who spent 40 years at the IRS before retiring in 2009. "I don't believe it should be used. I've seen it used," he said, describing what he called "kitchen sink" questioning.

The IRS said using long questionnaires to discourage applications for exemption was not sanctioned practice. "It is not IRS policy to encourage organizations to withdraw their applications during the determination process," the agency said in a written statement, which added that about 70 percent of applications are finished within 120 days.

"There are often instances where additional information and due diligence is necessary to determine if the organization meets the complex tax-exempt requirements."

IRS staffers have wide discretion to ask questions of tax-exempt applicants, making it unclear when a questionnaire crosses the line from an appropriate, back-and-forth inquiry into something more harassing.   Continued...

A woman walks out of the Internal Revenue Service building in New York in this May 13, 2013 photo. REUTERS/Shannon Stapleton