Tea Party Patriots Inc And IRS - Who Is Being Unreasonable ?

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WASHINGTON, DC - MARCH 28:  U.S. Rep. Michele ...

The Wall Street Journal just reported that anger at the IRS is fueling a Tea Party comeback.   Tea Party Patriots Inc (TPP) spends a lot of energy on promoting the scandal narrative, but seems to ignore an important question.  That question is whether Tea Party Patriots, Inc. should be entitled to exempt status under 501(c)(4) ?  Put another way, is TPP a social welfare organization or a political organization ?

I've been following this dispute for some time, having read a lot of Tea Party material, some of which, like the Form 990 for Tea Party Patriots, Inc, you can only get if you specifically ask them for it.  I have also read the TIGTA reports.  I think I am one of the few people who read TIGTA reports before the "scandal" (We are on Day 111 according to the Taxprof.)  I'm having trouble coming to a conclusion.  Maybe you can help me out.

Tea Party Patriots, Inc.

Tea Party Patriots, Inc. (TPP) is not the entire Tea Party movement.  It is one organization, although in some ways it is a pretty substantial organization.  It raised over $20,000,000 in the year ended May 31, 2012.  Very little of that went to grass roots Tea Party groups.  The Wall Street Journal article focuses on Jenny Beth Martin, TPP's president.  From the article we learn:

Tea-party activists helped the GOP gain control of the House of Representatives and install more conservative senators in the 2010 election. Mrs. Martin was named one of Time magazine's "100 Most Influential People in the World" that year...

For some reason Tea Party Patriots, Inc did not call itself a political organization, despite all the good work the movement did getting all those conservatives elected.  No.  It says it is a social welfare organization.  The IRS had doubts about that, which has Mrs. Martin upset:

"It was harassment, pure and simple, to weaken us going into the 2012 election," Mrs. Martin says.

If you are not a political organization, why would that be an issue ?

The Latest Outrage

Apparently the IRS is still struggling with the question of whether Tea Party Patriots Inc is political rather than social welfare:

Just last week, Mrs. Martin says, the Patriots received a new letter from the IRS asking for additional information about the group's activities, including copies of all direct-mail solicitations and telemarketing scripts before the 2012 election and any advertising materials in 2013. "This is beyond anger and frustration," she says.

Now why in the world would they be asking for "telemarketing scripts" ?

We Really Should Not Have Accountants Trying To Figure This Stuff Out

The foot-soldiers of IRS enforcement are revenue agents.  To become a revenue agent you need pretty much the same education that you need to get into public accounting.  Combine that with 30 years of trying from time to time to outwit revenue agents makes me figure I must be able to think a little like they do.  Here is why I think the revenue agents might think the "telemarketing scripts" are relevant

The TPP raised a lot of money doing telemarketing in the year ended May 31, 2012.  They also spent a lot of money having those calls made.  One of the companies, Campaign HQ raised $699,656 at a cost of  $539,838.  As it happens, though, they don't call people up and say "Would you please give us $100, so we can spend $85 calling up other people ?"

Campaign HQ put a recording of one of the calls up on its website to show what good work it does.  Unfortunately the recording is no longer available, but I did write down the introduction which went like this:


Looking at numbers and listening to Brenda, I could not help but think of the scene in Charlie Wilson's War in which Tom Hanks tells the story of driving voters to the polls, telling them that he does not want to influence them, but thinks they should know that Mr. Hazard intentionally killed his dog.

I could not help but think that the main point of the exercise was not to raise money, but to break even, while getting that "last chance to stop Obamacare " and "left wing voter fraud" firmly planted in Larry's mind.

Cleta Mitchell, an attorney at Foley Lardner, who specializes in the type of stuff explained to me how wrong I was. Brenda was asking Larry for money to support their cause not telling him how to vote.  Brenda was not mentioning any candidate or political party.  I asked if maybe “Obamacare” was not, kind of sort of, mentioning a candidate.  She said absolutely not.  Obamacare is shorthand for the Affordable Care Act and you can’t expect people opposed to ACA to call it that, since, to them, the term is Orwellian.  They think it should be called the Unaffordable Care Act.

Putting myself in the shoes of a revenue agent, the answer is obvious.  Call in the district counsel, who will end up kicking it up to the Chief Counsel.

Why is it still dragging ? Think about it. If you work for the IRS, being in any way associated with this mess promises to be bad for your career.

Targeting Or Not

I'm willing to be agnostic on whether there is a left-wing inspired IRS witch hunt against all those small Tea Party groups.  I'm more inclined to think that it is people hopped up on the scandal narrative, who don't realize what a painful drawn out process it is to deal with the IRS on just about anything that is not routine.  The scandal narrative serves to further bog down the process.  And, of course, if I was an IRS grunt who didn't think about the Tea Party at all back in 2010 or maybe even thought highly of them, I would probably hate them now.

Putting that all aside, though, Tea Party Patriots Inc is a $20,000,000 organization.  Regardless of "targeting", it deserves to be looked at based on its size.  Is it a political organization or a social welfare organization ? What do you think ?

You can follow me on twitter  @peterreillycpa.

