October 17, 2016
By David Lee
DALLAS (CN) – A Republican-affiliated group that says the Internal Revenue Service illegally targets conservative groups seeks partial summary judgment on its claim that the IRS uses an unconstitutional test to determine tax-exempt nonprofit status.
Dallas-based Freedom Path sued the IRS and Lois G. Lerner, the former director of the agency’s Exempt Organizations Division, in April 2014 in Federal Court. It claimed that as early as February 2010, the agency targeted tax-exempt applications from groups with names including the words “Tea Party” and “Patriots,” asking for unnecessary information such as donor names.
Last Wednesday, Freedom Path asked the court to grant partial summary judgment because the IRS’ “facts and circumstances” test is too vague and violates the Fifth Amendment.
“Pursuant to Revenue Ruling 2004-6, the determination of whether a communication constitutes issue advocacy versus an exempt-function activity (i.e., political campaign intervention) is based upon a highly subjective evaluation of all the facts and circumstance on each case, instead of by reference to any clearly defined bright-line rules,” the 29-page memorandum in support of the motion states.
Freedom Path says it has “no way of knowing” what speech is protected and what speech would harm its tax-exempt nonprofit status.
“Revenue Ruling 2004-06 essentially establishes the IRS’ position with respect to campaign intervention activity as ‘we know it when we see it,'” the memo states. “And social welfare organizations must guess how much of each kind of activity is allowed and whether they should track their activities based on the dollars spent, time spent, or other measures. Again, even the IRS has publicly acknowledged that the ‘facts and circumstances’ test is ambiguous and confusing.”
Freedom Path says the IRS’ use of subjective intent suggests vagueness, citing a Seventh Circuit ruling that concluded the test “is no standard at all, and makes the tax status of organizations and their donors a matter of the whim” of the agency.
The group calls the test an impermissible burden on free speech “because it sweeps into ‘exempt-function activity’ speech that is clearly issue advocacy, and it is a tool of viewpoint discrimination the IRS has been deploying against speakers for years.”
Lerner was dismissed from the lawsuit in February 2015.
The Justice Department declined to charge her with criminal wrongdoing eight months later.
IRS Commissioner John Koskinen refused to step down in September as he defended himself from Republicans’ impeachment attempts.
He insisted he had not purposefully misled Congress in its investigation of the alleged political targeting.
From Courthouse News.
By David Lee
February 25, 2015
DALLAS (CN) – A federal judge Tuesday dismissed former IRS official Lois Lerner from a Republican-affiliated group’s lawsuit accusing her of targeting conservative groups, for lack of personal jurisdiction over her.
Dallas-based Freedom Path sued the IRS and Lois G. Lerner, the former director of its Exempt Organizations Division, in April 2014. It claimed that its application for tax-exempt status was illegally targeted for “additional and unconstitutional scrutiny ” because of its conservative policies.
As a 501(c)(4) “issue advocacy” group, Freedom Path can raise unlimited amounts of tax-exempt money and need not disclose its donors. It has ties to the Republican Senatorial Committee, former Nevada Senator John Ensign and Utah Senator Orrin Hatch and their staff members or former staffers, according to factcheck.org.
As early as February 2010, the IRS began identifying for scrutiny tax-exempt applications from groups with names including terms such as “Tea Party” and “Patriots,” the complaint stated.
Freedom Path said the criteria were expanded to target organizations with policy positions focused on government spending and constitutional education. Public outcry and congressional criticism was furious. Lerner was placed on administrative leave in May 2013.
Freedom Path claimed the IRS tried to force it to disclose donor identities and other information unnecessary to its application.
On Tuesday, U.S. District Judge Sidney A. Fitzwater dismissed Lerner from the lawsuit. He concluded that Freedom Path did not claim Lerner took any actions in Texas that are relevant to the lawsuit, or that she directed any actions in Texas.
“In fact, Freedom Path does not even allege that Lerner had any personal involvement with its application for tax-exempt status or was even aware of the application,” the 32-page opinion states. “The fact that a federal official has supervisory responsibilities over an office in the forum state is insufficient to establish personal jurisdiction over that official.”
Lerner had argued her dismissal from the lawsuit “is the only result” that complies with due process and Texas law. She clamed that Freedom Path failed to overcome her qualified immunity because it failed to show she violated any “clearly established” constitutional right.
“The First and Fifth Amendment claims in the complaint fail to trump Ms. Lerner’s qualified immunity for at least four reasons,” Lerner’s September 2014 motion to dismiss stated.
“First, plaintiff has not alleged that Ms. Lerner purposely and personally infringed on plaintiff’s First and Fifth Amendment rights. Second, plaintiff failed to sufficiently allege a First Amendment violation. Third, plaintiff failed to adequately allege a Fifth Amendment violation. Finally, plaintiff failed to allege conduct that a reasonable person would know clearly violated plaintiff’s constitutional rights.”
Fitzwater also granted the federal government’s requests to dismiss several of Freedom Path’s claims against the IRS’ related revenue rulings, finding the group failed to plead a plausible injury that is needed to establish constitutional standing. Fitzwater refused to dismiss Freedom Path’s request for an injunction, finding that it does not restrain the assessment or collection of any tax.
IRS officials could not be reached for comment Tuesday evening.
From Courthouse News.
October 27, 2014
By David Lee
WASHINGTON (CN) – A federal judge nixed claims that political bias led to unfair scrutiny on the tax-exempt status of dozens of conservative Tea Party groups.
Houston-based True the Vote and 41 conservative groups led by Franklin, Tenn.-based Linchpins of Liberty filed their separate lawsuits against the Internal Revenue Service in the weeks after an IRS official’s May 2013 public apology before the American Bar Association “for a pattern of misconduct whereby the IRS intentionally and systematically targeted.”
They claimed that the IRS and its officers had violated their First Amendment and Administrative Procedure Act in delaying and singling-out their applications for tax-exempt status beginning in February 2010.
Citing an “IRS Action Plan” that announced the suspension “of ‘be-on-the-lookout,’ or BOLO, lists in the application process for tax exempt status,” U.S. District Judge Reggie Walton in Washington, D.C., dismissed both suits as moot Thursday.
Walton noted that the defendants “publicly announced that they suspended the unconstitutional conduct complained of by the plaintiffs and implemented changes to the tax-exempt review process to assure the public that the conduct will not recur.”
“Thus, the allegedly unconstitutional governmental conduct, which had delayed the processing of the plaintiffs’ tax-exempt applications and spawned this litigation, is no longer impacting the plaintiffs,” the 23-page page opinion in the Linchpins case states.
Compounding these changes is the subsequent approval by the IRS of the groups’ applications, the court found.
“The defendants’ grant of tax exempt status to the plaintiff, and the defendants’ suspension of the alleged IRS targeting scheme during the tax-exempt application process, including remedial steps to address the alleged conduct, coupled with the reduced ‘concern about the recurrence of objectionable behavior’ by government actors convinces the court the ‘voluntary cessation’ exception is not applicable here,” Walton wrote.
True the Vote founder Catherine Engelbrecht noted that she is “stunned” by Walton’s ruling.
“The notion that the IRS can target Americans for years because of their political beliefs is reprehensible,” Engelbrecht said in a statement Sunday. “The court acknowledges in its opinion that the IRS did in fact target True the Vote for our perceived political beliefs, but then it holds that neither the agency nor the individual IRS agents or officers are responsible for this unconstitutional conduct. Right now, we are considering all legal options and will announce our next steps very soon.”
Freedom Path filed a similar federal complaint in Dallas regarding the “additional and unconstitutional scrutiny” of conservative groups based on their policy positions.
In a bid to dismiss the group’s First and Fifth Amendment claims against her last month, Lois Lerner, former head of the Exempt Organizations Unit with the IRS, told U.S. District Judge Sidney Fitzwater that Freedom Path failed to allege any contact between her and Texas.
Fitzwater has yet to rule on Lerner’s motion.
From Courthouse News.
September 18, 2014
By David Lee
DALLAS (CN) – A former Internal Revenue Service director urged a federal judge to drop her from a lawsuit alleging “intentional and systematic” targeting of conservative groups seeking tax-exempt status.
The Dallas-based conservative group sued the IRS and Lois Lerner, the former director of the agency’s Exempt Organizations Division, this past April. It claimed that policy positions caused “additional and unconstitutional scrutiny” on applications for 503(c)(4) tax-exempt status.
As a 501(c)(4) “issue advocacy” group, Freedom Path can raise unlimited amounts of tax-exempt and need not disclose its donors. It has ties to the Republican Senatorial Committee, former Nevada Sen. John Ensign and Utah Sen. Orrin Hatch, and their staff members or former staffers.
Freedom Path alleged IRS employees pulled applications based on conservative names or policy positions, delayed their processing, and made “probing and unconstitutional requests” for more information.
Subsequent acknowledgement by the IRS of that targeting met with congressional and public outrage.
Freedom Works alleged that “the onslaught of this congressional and media attention” led Lerner to finally rein in the practice until the agency could develop new guidelines for officials processing the applications of conservative nonprofits. “Defendant Lerner did not, however, take any action at that time to ensure that the letter previously sent to plaintiff, which contained unconstitutional and inappropriately intrusive information, was retracted,” the group added.
Lerner asked U.S. District Judge Sidney Fitzwater to dismiss Freedom Path’s First and Fifth Amendment claims against her.
She said in an accompanying brief that the court lacks personal jurisdiction over her because Freedom Path failed to allege any contact between her and Texas.
“There are no allegations that Ms. Lerner, who is a resident of Maryland, has had contact with Texas, such that exercising personal jurisdiction over her satisfies the requirements of the Texas long-arm statute and the Due Process Clause of the Fourteenth Amendment,” the 25-page filing states. “Dismissal of the claims … is the only result that comports with due process and Texas law.”
Lerner said Freedom Path failed to overcome her qualified immunity as a federal immunity because it failed to show she violated any “clearly established” constitutional right.
“The First and Fifth Amendment claims in the complaint fail to trump Ms. Lerner’s qualified immunity for at least four reasons,” the memorandum states. “First, Plaintiff has not alleged that Ms. Lerner purposely and personally infringed on Plaintiff’s First and Fifth Amendment rights. Second, Plaintiff failed to sufficiently allege a First Amendment violation. Third, Plaintiff failed to adequately allege a Fifth Amendment violation. Finally, Plaintiff failed to allege conduct that a reasonable person would know clearly violated Plaintiff’s constitutional rights.”
Freedom Path could not be reached for comment Thursday.
From Courthouse News.
April 29, 2014
By David Lee
DALLAS (CN) – The Internal Revenue Service engaged in “intentional and systematic” targeting of conservative groups seeking tax-exempt status, the Republican-affiliated Freedom Path Inc. claims in court.
Dallas-based Freedom Path sued the IRS and Lois G. Lerner, the former director of the agency’s Exempt Organizations Division, in Federal Court.
Freedom Path claims its application for 503 (c)(4) tax-exempt status faced “additional and unconstitutional scrutiny” based on its policy positions.
As a 501 (c)(4) “issue advocacy” group, Freedom Path can raise unlimited amounts of tax-exempt and need not disclose its donors. It has ties to the Republican Senatorial Committee, former Nevada Senator John Ensign and Utah Senator Orrin Hatch and their staff members or former staffers, according to factcheck.org.
The lawsuit states: “Through an illegal scheme hatched and carried out by Internal Revenue Service officials acting under color of federal authority, a group of IRS employees pulled applications from conservative ideological organizations based upon their conservative names or policy positions, delayed processing those applications, and then made probing and unconstitutional requests for additional information.
“The request for additional information received by plaintiff in February 2012, for example, attempted to force plaintiff to disclose the names of its donors and asked multiple other questions that a Treasury Inspector General for Tax Administration [TIGTA] report determined to be unnecessary to plaintiff’s determination of tax-exempt status.”
As early as February 2010, the IRS began identifying for scrutiny tax-exempt applications from groups with the names including terms such as “Tea Party” and “Patriots,” the complaint states.
Freedom Works claims that a year later, the criteria expanded to target organizations with policy positions focused on government spending and constitutional education, among other things.
TIGTA concluded that the IRS’ criteria “gives the appearance that the IRS is not impartial in conducting its mission” and that it focuses too narrowly on the names and policy positions of organizations instead of tax-exempt laws and Treasury regulations, according to the lawsuit.
The IRS later acknowledged targeting conservative groups for higher scrutiny, the complaint states, resulting in outrage from some in Congress and the public.
“Following the onslaught of this congressional and media attention, defendant Lerner finally halted the issuance of further letters requesting additional information until new guidelines were developed and provided to those officials processing the applications of these conservative nonprofits,” the complaint states. “Defendant Lerner did not, however, take any action at that time to ensure that the letter previously sent to plaintiff, which contained unconstitutional and inappropriately intrusive information, was retracted.”
Freedom Path claims that being targeted has dramatically affected it, resulting in lost donor support, use of resources to respond to the IRS’ information requests and use of “considerable funds” on legal fees and public relations.
Freedom Path claims the IRS illegally released its application to ProPublica, a New York-based investigative news organization.
It claims that ProPublica published the information with an article “suggesting that plaintiff had engaged in illegal activities and/or misstated its activities on tax documents.”
The article was reposted on other media outlets, including The Washington Post and The Salt Lake Tribune, the complaint states.
“Such suggestions are unfounded, but they are also the predictable result of news organizations being provided only a portion of the confidential tax return information that plaintiff provided to the IRS during the application process,” the complaint states.”
Freedom Path claims the IRS used an unconstitutional “facts and circumstances” test to evaluate its activities. It says the test violates the U.S. Supreme Court’s “clear guidelines” on issue advocacy and campaign speech.
“The twenty plus factors that the IRS considers when attempting to apply its ‘facts and circumstances’ test are grossly indeterminate, and their application grossly imprecise, so that the IRS is more or less free to come to any conclusions it wishes with respect to a particular public communication,” the complaint states. “As such, the IRS’s ‘facts and circumstances’ test poses a severe restriction on speech that does not withstand constitutional scrutiny.”
IRS spokesman Clay Sanford declined to comment on the lawsuit Monday afternoon.
Freedom Path seeks damages for violations of the First and Fifth Amendment and violations of the Administrative Procedure Act and Internal Revenue Service Code. It also seeks an injunction against use of the “facts and circumstances” test.
It is represented by Orrin Harrison with Gruber Hurst in Dallas and Chris Gober with Gober Hilgers in Austin.
From Courthouse News.