(Catching up on my correspondence.)
Dear Folks at the IRS:
I bet you would love to talk about something — anything — besides the extra scrutiny you have apparently been giving to Tea Party groups applying for tax-exempt status. So here’s a different topic.
Let’s revisit 2005, when U.S. Senate candidate Gabriel Gomez took a federal tax deduction of $281,500 for agreeing not to make any changes to the facade of his historic Cohasset house. By an interesting coincidence, that very same year you were warning taxpayers that such deductions might not be legal. Your “Dirty Dozen” tax scams list for that year (the historic facade scam was number 9) urged people not to be “fooled by false promises peddled by scam artists. They’ll take your money and leave you with a hefty tax bill.” Before reading your list, it had not occurred to me that Mr. Gomez might have been the victim of the false promise of a scam artist, but now I can picture it: the scam artist mounting the steps of the historic Cohasset house carrying a cheap suitcase. He looks like Steve Buscemi.
I so admire your willingness to give Mr. Gomez the benefit of the doubt in this case, and would encourage you to apply it more widely. For example, also in 2005 your “Questionable Refund Program, which uses “data mining” computer techniques, surmised that hundreds of thousands of refund claims appeared that they might be fraudulent. You put a freeze on those claims and did not even notify the taxpayers that their returns were being held. Some 28,000 of the people whose refunds were frozen asked the Taxpayer Advocate Service for help, and in 4 out of 5 cases, they ended up receiving their full or a partial refund. The average income of these taxpayers was $13,300, and more than eight months passed before those who pursued the matter received their refunds. Here’s how bad it was – even Chuck Grassley wrote you a protest letter.
Based on this experience, the Taxpayer Advocate concluded that the filters on your data mining programs might be in need of some adjustment. This seems especially true if, as appears to be the case, the tax return Mr. Gomez filed was not one of ones that was frozen.
So, going forward (and sincerest apologies for getting back to the issue of the tax exempt status of 501(c)(4) social welfare groups), you might want to double check that your data mining filters are programmed to let you investigate whether a group like Karl Rove’s Crossroads GPS, which spent $70 million during the last election, does in fact qualify for tax exempt status under your guidelines. As you say,
the promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office . . . a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity
If your filters don’t tell you that the primary activity of Crossroads GPS is political, it’s definitely time for another adjustment.
With all good wishes,