Domestic Taxes

Taxpayer advocate: Groups seeking tax-exempt status don’t have enough rights

In her mid-year report, Olson also says the IRS needs to do more to help victims of tax preparer fraud and identity theft.

{mosads}The current controversy facing the IRS broke last month, when the agency disclosed and apologized for singling out conservative groups seeking tax-exempt status. Congressional Democrats, citing new information from the IRS, have stressed this week that liberal groups were also placed on watch lists.

Olson, in her special section on exempt organizations, noted that the tax code says that groups seeking 501(c)(4) status should exclusively be social welfare groups, while Treasury regulations say the groups’ primary work must be promoting social welfare.

“There is very little guidance to guide IRS employees in determining whether an organization is operating ‘primarily’ for social welfare purposes or what level of political campaign activity is permissible,” the advocate’s office said in a release.

The IRS, Olson added, has too much of the power in the relationship between the agency and applicants, with groups seeking tax-exempt status “not empowered
to know that the IRS was violating their rights.”

Like Olson, Danny Werfel, the new acting head of the IRS, has also blamed management problems for allowing the targeting to start and continue for so long.

In its special report, Olson finally noted that the exempt organization division has long been resistant to the taxpayer advocate’s office — pushing back, for instance, on directives to process certain applications more quickly.

Olson has long pressed Congress to enact a taxpayer bill of rights, a list of 10 rights that includes the ability to be informed, to be assisted and to certainty. The advocate’s report says that the IRS’s treatment of groups seeking tax-exempt status violated eight of those rights.

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