In addition to targeting conservative-leaning nonprofit groups, in at least one case the Internal Revenue Service took the extra step of targeting a group’s donors as well, the Wall Street Journal reports:
At the same time the Internal Revenue Service was targeting tea-party groups, the tax agency took the unusual step of trying to impose gift taxes on donors to a prominent conservative advocacy group formed in 2007 to build support for President George W. Bush’s Iraq troop surge.
The probe of the group, Freedom’s Watch, began in the unit led by Lois Lerner, the IRS official already under scrutiny for her role in the more recent targeting of conservative groups.
While the IRS confirmed the existence of the gift-tax initiative in 2011, the identity of the group involved—as well as the affiliation of individual donors—remained a mystery.
Former officials of Freedom’s Watch say they believe all five of the IRS audits involved donors to their group, based on conversations with IRS agents and donors at the time of the audits in 2011.
In February 2010, the same month the tea-party targeting started, according to a recent inspector general’s report, Freedom’s Watch was subjected to an IRS audit that focused largely on its political activities, an uncommon but not unprecedented action, election lawyers say. The probe broadened into other areas, including executive compensation.
About a year later, as many as five donors to Freedom’s Watch were subjected to IRS audits of their contributions that sought to impose gift taxes on their donations to the group, according to lawyers and former officials of Freedom’s Watch.
Tax experts say that effort was highly unusual. The IRS generally hadn’t sought to impose the gift tax on donations to tax-exempt groups such as Freedom’s Watch in at least 20 years, perhaps longer, following an unfavorable court ruling and changes in the law by Congress, according to lawyers and IRS documents.
The IRS action “was kind of like a nuclear bomb going off,” said Rob Kelner, who heads the election-law practice at Covington & Burling LLP. “Although we always knew this was a possibility, it disrupted that long-standing understanding among election lawyers that this was an area where the IRS wasn’t likely to go.”