IRS’s Lois Lerner Was Skeptical of Criminal Prosecution of 501c(4)s

Politico Morning Tax:


DOJ CONTACTED LERNER ABOUT PROSECUTING SOCIAL WELFARE GROUPS. Two days before Lois Lerner broke the IRS scandal news at a tax law conference, the Department of Justice reached out to the former IRS agent to discuss the possibility of prosecuting social welfare organizations that quietly underwrote their political activities against tax-exempt rules. That’s according to emails released by Judicial Watch, a conservative watchdog group that FOIA-ed documents. The email that details the DOJ-Lerner convo doesn’t mention a specific group or even groups that lean toward a certain ideology — just 501(c)4s in general.

THE LERNER EMAIL: Sent on May 8, 2013 to IRS colleagues, including the chief of staff for then-Acting IRS Commissioner Steven Miller: “I got a call today from Richard Pilger Director [of the] Elections Crimes Branch at DOJ…. [Pilger] wanted to know who at IRS the DOJ folks could talk to about Sen. [Sheldon] Whitehouse idea at the hearing that DOJ could piece together false statement cases about applicants who ‘lied’ on their [applications] –saying they weren’t planning on doing political activity, and then turning around and making large visible political expenditures…. DOJ is feeling like it needs to respond, but want to talk to the right folks at IRS to see whether there are impediments from our side and what, if any damage this might do to IRS programs.”

THE ‘WHY’ FACTOR: CONGRESSIONAL PRESSURE? At first glance conspiracy theorists may latch on to this Justice correspondence to suggest a second federal department was involved in the targeting scandal. But a closer look at the emails suggests the departments may have been covering their backs after getting some congressional pressure. Sen. Whitehouse (D-R.I), a prominent campaign finance reformer, wanted to know why the IRS had not referred any suspect (c)4s to DOJ for prosecution and used his time during an April 9, 2013 hearing to press DOJ on the matter. It is in that context that Justice reached out to Lerner.

Campaign Legal Center’s Larry Noble, Lerner’s former boss at the Federal Election Commission, has this to say about the correspondence: “What I get from these emails is two agencies trying to figure out… how to answer this question… They’re not conspiring how to do it but rather answering why they weren’t doing it. Nothing in here leads me to believe they were going to do it but respond to Sen. Whitehouse’s questions as to why they weren’t.”

LERNER WAS SKEPTICAL. Lerner expressed skepticism that any suspect (c)4 groups could really be prosecuted in a later email chain to her IRS colleagues, also released Wednesday. “In looking at their testimony though, it’s all about criminal prosecution of federal campaign laws — so we’re all talking apples and oranges. … In both instances, the issue is whether a particular expenditure was political intervention. Whether there was a false statement or fraud regarding an description of an alleged political expenditure that doesn’t say vote for or vote against is not realistic under current law. Everyone is looking for a magic bullet or scapegoat — there isn’t one. The law in this area is just hard.”

FOOTNOTE: The IRS usually handles unruly (c)4s that don’t follow the rules, internally, by simply revoking tax-exempt status. But Marc Owens, former IRS exempt-orgs chief, said there have been a few charities, 501(c)3s, that were criminally charged for willfully lying to the IRS and secretly funneling funds to political campaigns.



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