Sixth Circuit Admonishes IRS: "Do Better"

“Among the most serious allegations a federal court can address are that an Executive agency has targeted citizens for mistreatment based on their political views. No citizen—Republican or Democrat, socialist or libertarian—should be targeted or even have to fear being targeted on those grounds.”[1] These sobering opening words from Judge Kethledge on March 22, 2016, concern a case where the truth is stranger than fiction, at least in a post-Nixon world. In that case—United States of America v. NorCal Tea Party Patriots, et al., in the United States Court of Appeals for the Sixth Circuit—the Executive agency is the IRS, and the targeted citizens are political groups applying for 501(c) tax-exempt status. As you might remember, certain conservative or right-wing groups have claimed that the IRS was slow-walking, if not outright denying, applications for tax-exempt status based solely on the group’s political affiliation. Specifically, certain groups would allegedly be added to the IRS’s “Be On the Lookout” lists, or “lists of organizations allegedly targeted for unfavorable treatment because of their political beliefs.”[2] Borrowing the Sixth Circuit’s explanation, “[i]n 2010 . . . . the IRS ‘developed and used inappropriate criteria to identify applications from organizations with “Tea Party” in their names.’ The IRS soon ‘expanded the criteria to inappropriately include organizations with other specific names (Patriots and 9/12) or policy positions.’ As to the policy positions, the IRS gave heightened scrutiny to organizations concerned with ‘government spending, government debt or taxes,’ ‘lobbying to “make America a better place to live”’ or ‘criticiz[ing] how the country is being run’ . . . . These ‘inappropriate criteria remained in place for more than 18 months.’ Applicants whom the IRS flagged with ‘Be On the Lookout’ criteria were sent to so-called ‘team of specialists,’ where the applicants ‘experienced significant delays and requests for unnecessary information.’”[3] Indeed, as of December 2012, some applications that the IRS flagged with the “Be On The Lookout” criteria had been open “for more than 1,000 days.”[4] By contrast, the IRS’s goal for processing all types of applications for tax-exempt status that same year was a mere 121 days.[5]

Now, because of the Sixth Circuit’s ruling, those groups get to move forward in their case against the IRS. At issue before the Sixth Circuit was a discovery dispute between the targeted groups as plaintiffs and the IRS as the defendant. The plaintiffs sought discovery of basic information relevant to class certification from the IRS. At every step, the IRS had built a proverbial house of cards to shield and deny that information. In fact, the district court stated in October 2015 that “the government is doing everything it possibly can to make this as complicated as it possibly can, to last as long as it possibly can…”; the IRS even ignored a district court’s order to supply the information and appealed to the Sixth Circuit via writ of mandamus. Yet, the Sixth Circuit evaluated the merits of the IRS’s technical and statutory claims and summarily denied them, finding “[t]he conduct of the IRS’s attorneys in the district court falls outside [their long a storied tradition of defending the nation’s interests and enforcing its laws]. We expect that the IRS will do better going forward. And we order that the IRS comply with the district court’s discovery orders…without redactions, and without further delay.”[6]

Justice Brandeis once wrote “[i]f the broad light of day could be let in upon men’s actions, it would purify them as the sun disinfects.”[7]  This information that has been ordered to be released could be damning. It is no wonder that the IRS has fought so hard to keep the rest of us in the dark, but an antiseptic is long overdue.

–By Tony Nasser, Esq., Barnes Law, & Derek A. Jordan, RLS, Esq., Barnes Law

Tony Nasser is associated with Barnes Law, licensed to practice law in California.

Derek Jordan is associated with Barnes Law, licensed to practice law in Tennessee.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] United States of America v. NorCal Tea Party Patriots, et al., No.15-3793, slip op. at 2 (S.D. Ohio filed March 22, 2016).

[2] Ibid.

[3] Id. at 4–5 (internal citations omitted).

[4] Id. at 5.

[5] Ibid.

[6] Id. at 17.

[7] https://sunlightfoundation.com/blog/2009/05/26/brandeis-and-the-history-of-transparency/