In September 1989 the New York Times magazine published an excerpt of "The IRS: A Law Unto Itself," a book by former Times reporter David Burnham. Burnham detailed how the Internal Revenue Service had misused its power in an attempt to stifle political dissent:
During the Johnson and Nixon Administrations, the focus of the I.R.S.'s effort at political control was individuals and organizations demonstrating for civil rights and against the American presence in Vietnam. . . . On June 16, 1969, Randolph W. Thrower, I.R.S. Commissioner during the Nixon Administration, wrote a memorandum for the record about a meeting he had had that day with Arthur F. Burns, then counselor to the President. According to Thrower, Burns said that Richard M. Nixon was concerned ''over the fact that tax-exempt funds may be supporting activist groups engaged in stimulating riots both on the campus and within our inner cities.''
In December 1973, Judge Charles Richey handed down a decision in which he "formally reprimanded" the agency for "engaging in political manipulations" in denying nonprofit status to a left-wing outfit called the Project on Corporate Responsibility:
''A showing of political influence renders the Service's ruling null and void,'' Judge Richey wrote. ''It is outside the law. The court is concerned not only with direct political intervention, but also with the creation of a political atmosphere generated by the White House in the Internal Revenue Service which may have affected the objectivity of those participating in the ruling in the plaintiff's case.''
Fast-forward four decades, and we have this story from the Washington Post:
The Internal Revenue Service on Friday said that it inappropriately selected tea party political groups for special scrutiny in the 2012 campaign. . . .
The IRS official who oversees tax-exempt groups, Lois Lerner, acknowledged at a conference on Friday the actions were wrong and apologized, according to the Associated Press. Lerner said groups with the words "tea party" or "patriot" in their applications for tax-exempt status faced additional screening.
In a statement, the IRS said the screening occurred by career employees in Cincinnati who, between 2010 and 2012, were seeking to centralize work related to tax exempt organizations. The agency said that while it made errors, they were not politically motivated.
The groups in question were applying for status as 501(c)(4) nonprofit "social welfare" corporations. A 501(c)(4)'s operations are tax-exempt, but its contributions, unlike those of a 501(c)(3) charity, are not. Other famous examples of 501(c)(4)s are Organizing for Action, the reconstituted Obama campaign, and Citizens United, victor in the famous 2010 Supreme Court case affirming that the government may not engage in censorship merely because speech is delivered via a corporation.
Corbis
The free-speech rights of 501(c)(4)s, however, are not absolute. Although Citizens United freed them from regulation by the Federal Election Commission, the IRS may withhold tax-exempt status if they engage in too much political activity, or if such activity is not germane to the ostensible social-welfare mission.
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