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Federal judge tosses IRS lawsuits

A federal judge sided with the IRS on Thursday, tossing out two lawsuits filed against the tax agency over its improper scrutiny of Tea Party groups seeking tax-exempt status.

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Judge Reggie Walton of the U.S. District Court in Washington ruled in the separate cases, but his finding in each was basically the same. Because the IRS changed how it considered Tea Party applications for tax-exempt status, and approved most of the groups involved in the lawsuit, Walton ruled the conservative organizations had no reason to sue.

“The allegedly unconstitutional governmental conduct, which had delayed the processing of the plaintiffs’ tax-exempt applications and spawned this litigation, is no longer impacting the plaintiffs,” Walton wrote in throwing out the lawsuit filed by 41 separate conservative organizations.

Those groups, coming from 22 states, sought monetary damages from a range of IRS officials, including Lois Lerner, the former agency official at the center of the Tea Party controversy.

The American Center for Law and Justice, which represents the organizations, said last week that 28 of the groups had been approved for tax-exempt status, but that another seven were still awaiting a verdict – including one, the Albuquerque Tea Party, that first applied almost five years ago.

True the Vote, a Texas-based group with Tea Party ties that saw its application for 501(c)(3) status held up for years, filed the other lawsuit, saying the IRS’s treatment cost the organization money and hurt its ability to work on voting issues.

The plaintiffs in both lawsuits said Thursday they were disappointed by Walton’s decision.

Catherine Engelbrecht, True the Vote’s president, said the group was “stunned” their lawsuit was dismissed and was considering all its legal options.

“The court acknowledges in its opinion that the IRS did in fact target True the Vote for our perceived political beliefs, but then it holds that neither the agency nor the individual IRS agents or officers are responsible for this unconstitutional conduct,” Engelbrecht said.

Jay Sekulow of the American Center for Law and Justice called the decision “disappointing.”

“However, it does not deter our efforts to seek justice for our clients. We are reviewing the decision and plan to appeal,” Sekulow said.

Thursday’s decisions were the latest in a string of judicial victories for the IRS in federal court, which suggests Tea Party groups might continue to face an uphill climb in the judiciary. In August, Walton, a George W. Bush appointee, also denied True the Vote’s request to allow an independent expert to search for emails from Lerner that the IRS said it couldn’t find.

Another conservative group, Judicial Watch, currently has a separate lawsuit against the IRS pending. The judge in that case, Emmet Sullivan, asked the IRS in August for more information about how the agency tried to retrieve Lerner’s missing emails.

The two lawsuits Walton tossed on Thursday were both filed in May 2013, shortly after Lerner apologized for the IRS’s singling out of Tea Party groups. Lerner’s apology quickly led to the exit of several top IRS officials, including the acting commissioner.

The IRS also acknowledged that it kept Tea Party groups on so-called “be on the lookout” lists, or BOLOs. But Democrats say that the IRS’s scrutiny also snared liberal groups, and the agency had overhauled how it considered applications by June 2013. 

Lerner, who retired from the IRS last year after being placed on leave, was later voted in contempt of Congress by the House and saw Republicans refer her to the Justice Department for potential prosecution.

Walton ruled in both cases that the conservative groups weren’t allowed to seek monetary damages from Lerner and the other government officials, including Treasury Secretary Jack Lew and Danny Werfel, the former interim IRS chief.

That’s because, Walton said, the tax code already lays out a taxpayer’s potential remedy when their tax-exempt application is denied. Echoing a previous decision, Walton added that it “would make the collection of taxes chaotic if a taxpayer could bypass the remedies provided by Congress simply by bringing a damage action.”

Both lawsuits also accused the IRS of breaking confidentiality rules by seeking a raft of information that the agency didn’t need to rule on the groups’ tax-exempt status. But in throwing out those claims, Walton said there’s a difference between how taxpayer information is acquired and how it is handled.

“Even assuming that the defendants improperly acquired the plaintiff’s tax return information, that does not compel a finding that such information was improperly inspected,” Walton said.