When CVFC, a conservative veterans’ group in California, applied for tax-exempt status with the Internal Revenue Service, its biggest expenditure that year was several thousand dollars in radio ads backing a Republican candidate for Congress.
The Wetumpka Tea Party, from Alabama, sponsored training for a get-out-the-vote initiative dedicated to the "defeat of President Barack Obama" while the IRS was weighing its application.
And the head of the Ohio Liberty Coalition, whose application languished with the IRS for more than two years, sent out emails to members about Mitt Romney campaign events and organized members to distribute Romney’s presidential campaign literature.
Representatives of these organizations have cried foul in recent weeks about their treatment by the IRS, saying they were among dozens of conservative groups unfairly targeted by the agency, harassed with inappropriate questionnaires and put off for months or years as the agency delayed decisions on their applications.
But a close examination of these groups and others reveals an array of election activities that tax experts and former IRS officials said would provide a legitimate basis for flagging them for closer review.
"Money is not the only thing that matters," said Donald B. Tobin, a former attorney with the Justice Department’s tax division who is a law professor at Ohio State University. "While some of the IRS questions may have been overbroad, you can look at some of these groups and understand why these questions were being asked."
The stakes are high for both the IRS and lawmakers in Congress, whose election fortunes next year will hinge in no small part on a flood of political spending by such advocacy groups. They are often favored by strategists and donors not for the tax benefits – they typically not do have significant income subject to tax – but because they do not have to reveal their donors, allowing them to pour hundreds of millions of dollars into elections without disclosing where the money came from.
The IRS is already separately reviewing roughly 300 tax-exempt groups that may have engaged in improper campaign activity in past years, according to agency planning documents. Some election lawyers said they believed a wave of lawsuits against the IRS and intensifying congressional criticism of its handling of applications were intended in part to derail those audits, giving political nonprofit organizations a freer hand during the 2014 campaign.
After the tax agency was denounced in recent weeks by Obama, lawmakers and critics for what they described as improper scrutiny of at least 100 groups seeking IRS recognition, The examined more than a dozen of the organizations, most of them organized as 501(c)(4) "social welfare" groups under the tax code, or in some cases as 501(c)(3) charities. None ran major election advertising campaigns, according to the Campaign Media Analysis Group, the main activity of a small number of big-spending tax-exempt groups that emerged as major players in the 2010 and 2012 elections.
But some organized volunteers, distributed pamphlets and held rallies leading up to the 2010 elections or the 2012 presidential election, as conservatives fought to turn out Obama.
A report issued this month by the Treasury Department’s inspector general, J. Russell George, found that inappropriate criteria, including groups’ policy positions, were used to flag some cases and that specialists in the IRS office in Cincinnati, which reviews all tax-exemption requests, sometimes asked questions that were irrelevant to the application process.
And agency officials have acknowledged that specialists inappropriately used keywords like "Tea Party" and "Patriots" in searching through applications.
But some former IRS officials disputed several of George’s conclusions, including his assertion that it was inappropriate to ask groups about their donors, or whether their leaders had plans to run for public office. While unusual, the former officials said, such questions are not prohibited if relevant to an application under consideration.
"The IG was as careless with terminology as the Cincinnati office was," said Marcus S. Owens, who headed the IRS’ exempt organizations division until 2000. "Half of those questions have been found to be germane in court decisions."
IRS agents are obligated to determine whether a 501(c)(4) group is primarily promoting "social welfare." While such groups are permitted some election involvement, it cannot be an organization’s primary activity. That judgment does not hinge strictly on the proportion of funds a group spends on campaign ads, but on an amorphous mix of facts and circumstances.
"If you have a thousand volunteer hours and only spend a dollar, but those volunteers are to help a particular candidate, that’s a problem," Tobin said.
Agents may examine when and for how long a group advocates policy positions, in part to see whether those positions are associated with a specific candidate, which can be relevant to the group’s tax status, tax lawyers and former IRS officials said.
Agents may look at what a group publishes in print or on a website, whether it provides funds to other organizations involved in elections or whether a group’s officers are also employed by political parties. They may also consider other public information, former officials and tax experts said, though they are required to ask the organization to provide those materials or comment on them before the information can be included in an application review.
"My experience has been that the agents immediately start Googling to see what the organization is doing outside of the application," said Kevin J. Shortill, a former tax law specialist in the IRS’ exempt organization division. "And that explains why you get these requests for information like, ‘Please print out your website and send it in.’"
Emerge America, which trained women to run for office, was granted 501(c)(4) recognition in 2006, but its status was revoked in 2012. Training people how to run for office is not in itself partisan activity, but the IRS determined that the group trained only Democratic women and was operated to benefit one party.
At least some of the conservative groups that are complaining about IRS treatment were clearly involved in election activities on behalf of Republicans or against Democrats.
When CVFC, the veterans’ group, first applied for IRS recognition in early 2010, it stated that it did not plan to spend any money on politics. The group, whose full name in its application was CVFC 501(c)(4), listed an address shared with a political organization called Combat Veterans for Congress PAC. CVFC told the IRS that it planned to email veterans about ways in which they "may engage in government" and provide "social welfare programs to assist combat veterans to get involved in government."
But later in 2010, as it awaited an IRS ruling, the organization spent close to $8,000 on radio ads backing Michael Crimmins, a Republican and a former Marine, for a House seat in San Diego, according to Federal Election Commission records.
The spending is not detailed in the group’s tax return for 2010, raising questions about whether it properly accounted for the expense to the IRS. The group also checked off a box marked "No" when asked if it had engaged in direct or indirect political activities on behalf of a candidate for political office.
The group received two rounds of questions from the IRS in 2012, according to its lawyer, Dan Backer. They included queries about the group’s donors and its exact relationship with Combat Veterans for Congress PAC. The agency also asked about CVFC’s activities, but the group neglected to bring up its radio ads in its follow-up responses.
Backer called the agency’s questions "sweepingly overbroad" and said the group had answered them appropriately.
In Alabama, the Wetumpka Tea Party organized a day of training for its members and other Tea Party activists across the region in the run-up to the 2012 election. The training was held under the auspices of the Adopt-a-State program, a nationwide effort that encouraged Tea Party groups in safely red or blue states to support Tea Party groups in battleground states working to get out the vote for Republicans.
Adopt-a-State was a key component of Code Red USA, a get-out-the-vote initiative organized by a conservative political action committee. The goal of Code Red USA was made clear in one of its fundraising videos, which told supporters: "On Nov. 6, 2012, Code Red USA authorizes the defeat of President Barack Obama."
Becky Gerritson, Wetumpka’s president, said in an emailed statement that her group engaged "mostly in education on all sorts of topics" and that the day of training was just one of a variety of events that it held for "educational purposes."
Some groups appeared to be confused or misinformed about the IRS rules applying to their activity.
Tom Zawistowski, president of the Ohio Liberty Coalition, another Tea Party group that has complained about the scrutiny it received from the IRS, sent out regular emails to members about Romney campaign events and organized protests around the state to "demand the truth about Benghazi" when Obama visited before the 2012 election. The coalition also canvassed neighborhoods, handing out Romney campaign "door hangers," Zawistowski said.
The IRS usually considers such activities to be partisan. But when Zawistowski consulted his group’s lawyers, he said, he came away understanding that the IRS was most concerned with radio or television advertising. He said he believed that other activities, like distributing literature for the Romney campaign, would not raise concerns.
"It’s not political activity," he said.