Thursday, July 26, 2012

IRS needs to do its job and revoke tax-exempt status of lobbying groups

A recent effort in Congress to require more accountability of independent political groups that have non-profit, tax-exempt status recently failed. But the Internal Revenue Service (IRS) has all the tools needed, including a strong whistleblower program, to crack down on the flaunting of tax rules by political lobbying organizations that claim nonprofit, tax-exempt status.

The reason legislative solutions are being proposed is that the IRS has failed to do its job, allowing thinly veiled fronts to raise funds using their tax-exempt status, then use those funds to engage in political lobbying.

In what is apparently the first action of its kind against a political, tax-exempt organization, Phillips & Cohen LLP filed on behalf of Common Cause a whistleblower claim with the IRS against the American Legislative Exchange Council (ALEC) asserting that it is a lobbying organization masquerading as a “public charity.” If the IRS were to enforce its rules, perhaps more whistleblowers would come forward and provide key information to stop such violations.