Source: https://taxprof.typepad.com/taxprof_blog/2016/11/the-irs-scandal-day-1281another-federal-court-says-the-irs-continues-to-harass-conservative-groups.html
Timestamp: 2019-09-18 21:20:44
Document Index: 228545610

Matched Legal Cases: ['§ 501', '§ 501', '§ 501', '§ 501', '§ 501', '§ 501', '§ 7428', '§ 501', '§ 501', '§ 501', '§ 501', '§ 7428', '§ 7428', '§ 501', '§ 501', '§ 501', '§ 501', '§ 501', '§ 501']

The IRS Scandal, Day 1281: Another Federal Court Says The IRS Continues To Harass Conservative Groups
NorCal Tea Party Patriots v. IRS, No. 1:13cv341 (D.C. S.D. OH Nov. 4, 2016) (citations omitted):
Did the IRS subject TPTP to viewpoint discrimination in the manner in which it has processed TPTP’s § 501(c)(4) application for tax-exempt status and is that discrimination still ongoing? The Court concludes in the following analysis that TPTP has established at least a likelihood of success on the merits on those questions. The Court first will explain why granting TPTP preliminary injunctive relief to remedy the ongoing harm against TPTP is appropriate. It then will follow from that analysis why the Government is not entitled to summary judgment.
Plaintiffs seek a preliminary injunction requiring the IRS to process TPTP’s § 501(c)(4) application in the ordinary course of business. The Government responds that a preliminary injunction is neither justified nor appropriate. ...
TPTP has made a strong showing of a likelihood of success on the merits on Count II of the Second Amended Class Action Complaint. TPTP alleges that the IRS discriminated against it on the basis of its political viewpoint in the processing of its § 501(c)(4) application. TPTP has put forward evidence demonstrating that the IRS targeted TPTP’s application for special scrutiny and delayed processing because it met the political advocacy criteria found to be inappropriate in the 2013 TIGTA Report. Although the IRS had changed the political advocacy criteria language in May 2012 to focus more on political activities than on party names, an EO screener identified TPTP as a “TEA PARTY” case on the screening checklist in September 2012. Additionally, the IRS Rule 30(b)(6) deponent admitted TPTP’s application was segregated as a Tea Party case. The IRS has held TPTP’s application without further processing since June 2013 after requesting and receiving additional information from TPTP. Processing applications “pursuant to different standards and at different rates depending upon the viewpoint of the applicants [is] a blatant violation of the First Amendment.” Z Street v. Koskinen, 791 F.3d 24, 32 (D.C. Cir. 2015).
The Government responds that the 2015 TIGTA Report proves that the IRS ceased using the inappropriate political advocacy criteria to target dissenting groups at the screening stage based on their political viewpoint no later than June 2013. The Government argues that the Court should not issue an injunction to enjoin behavior which the IRS already has stopped. However, the IRS’s argument misses the mark.
Regardless of the fact the IRS purports to have stopped applying the inappropriate political advocacy criteria in 2013, the evidence is undisputed that the IRS continued to delay processing TPTP’s until August of 2016. The Government appears not to see the forest through the trees when it uses the existence of this lawsuit as grounds to continue the delay that is the subject of this lawsuit. The evidence strongly suggests that the IRS initiated the delay because TPTP’s application was perceived at the screening stage to be a Tea Party case. The Court is not persuaded that the discriminatory animus that motivated the initial decision to segregate and delay TPTP’s application can be neatly separated from the delay that now has continued for three years. Accord True the Vote, Inc. v. Internal Revenue Serv., 831 F.3d 551, 562 (D.C. Cir. 2016) (“It is not at all clear why the IRS proposes that not ceasing [discriminatory conduct] becomes cessation if the victim of the conduct is litigating against it.”).
Moreover, the Court is not convinced that the IRS’s general litigation hold policy justifies the delay in processing TPTP’s application. The Government admitted that it has discretion whether to apply the general litigation hold policy in specific cases during oral arguments in the case of Z Street v. Koskinen, No. 15-5010 (D.C. Cir. May 4, 2015), another case in which a tax-exemption applicant alleged viewpoint discrimination by the IRS.8 Moreover, the litigation hold policy should arise only when an applicant’s tax exemption status is at issue in the litigation. TPTP is not challenging in this suit whether it is entitled to § 501(c)(4) tax-exempt status. There is no disputed issue in this litigation which will affect the IRS’s determination of whether TPTP qualifies for § 501(c)(4) status. Thus, there is no basis to stay determination of the application pending the outcome of this lawsuit. Additionally, the Government has not proven that the so-called cease and desist letter justifies the purported litigation hold. TPTP asked the IRS to process its application during its Rule 30(b)(6) deposition, well after Plaintiffs’ counsel issued the cease and desist letter. Plaintiffs’ counsel later explained at a Court conference that the sole purpose of the cease and desist letter was for the IRS to direct communications regarding the processing of TPTP’s application through its counsel. Yet the IRS has persisted to delay processing the application. Given these facts, TPTP has established a least a likelihood of success on the merits of proving that the IRS’s refusal to finish processing TPTP’s § 501(c)(4) application is a continuation of the discriminatory treatment that appears to have begun when the IRS segregated the application as a Tea Party case.
Likewise, the Government has not proven that a litigation hold was necessary to protect its agents from being named as defendants in this suit. Plaintiffs originally asserted multiple claims against IRS managerial and line-level employees in the Second Amended Class Action Complaint. The Court dismissed the claims against the employees in their individual capacities in its July 17, 2014 Order. It is unclear on what reasonable grounds the agents who process TPTP’s application could be sued given the law of the case doctrine. Also, the evidence that the IRS ceased using the political advocacy criteria to segregate Tea Party-type applications by June 2013 undercuts the Government’s argument. IRS agents who process an application in the ordinary course are not likely to be accused of viewpoint discrimination. The Government’s August 16, 2016 letter explaining that the IRS has decided to process TPTP’s application does not alter this conclusion. To date, the IRS has not issued a decision on the application.
Finally, the Government has not established that a preliminary injunction is inappropriate because such relief is different in kind from the relief sought in Count II of the Second Amended Class Action Complaint. Plaintiffs state in Count II that “[t]his Court may grant declaratory and injunctive relief against the IRS and the Treasury Department . . . declaring that the Defendants’ discriminatory conduct is unlawful and enjoining them from using tax exemption applicants’ political viewpoints to target them and subject them to delay . . . .” The injunctive relief sought in the Motion for Preliminary Injunction is not materially different. TPTP asks the Court for an ordering compelling the IRS to process TPTP’s application in the ordinary course. Such an order would require the IRS to end the three-year delay in processing.
For all these reasons, the Court concludes that Plaintiffs have established TPTP’s likelihood of success on the merits on Count II of the Second Amended Class Action Complaint.
3. Irreparable Harm and the Public Interest
Next, the Government argues that Plaintiffs cannot prove irreparable harm. The Court disagrees. The loss of First Amendment freedoms causes irreparable injury. Liberty Coins, LLC v. Goodman, 748 F.3d 682, 690 (6th Cir. 2014). Additionally, the public interest lies with the protection of constitutional rights.
Nonetheless, the Government argues that no irreparable harm exists in this case because TPTP has an alternative statutory remedy available. In 2015, Congress amended 26 U.S.C. § 7428 to provide a remedy for § 501(c)(4) applicants whose applications have been pending before the IRS for more than 270 days without a determination. Previously, the remedy was available only to § 501(c)(3) applicants. Now § 501(c)(3) and § 501(c)(4) applicants can file suit in the U.S. Tax Court, the Court of Federal Claims, or the District Court for the District of Columbia for a judicial determination of their tax exemption applications if the IRS has not made a determination in 270 days. 26 U.S.C. § 7428(a)&(b). The Government argues that TPTP will not suffer irreparable harm absent an injunction because it can file a § 7428 suit for judicial determination of its application.
The Government made a substantially similar argument in the Z Street case and it was rejected by the D.C. Circuit Court of Appeals. ... The Court agrees with the Z Street analysis. TPTP is not asking the Court to declare its eligibility for a § 501(c)(4) tax exemption. Instead, TPTP seeks an order prohibiting the IRS from delaying its consideration of its § 501(c)(4) application because of its political viewpoint in opposition to the current presidential administration. It seeks for the IRS to process its application in the ordinary course of business as it would any other § 501(c)(4) applicant. Section 7428 does not provide an adequate alternative remedy for the alleged constitutional wrongdoing.
4. Preliminary Injunctive Relief
The Court concludes for the reasons stated above that Plaintiffs have established that TPTP is entitled to injunctive relief pursuant to Rule 65 of the Federal Rules of Civil Procedure. The Court orders the IRS to process TPTP’s § 501(c)(4) application in the ordinary course of business. The IRS shall direct all necessary communications with TPTP through Plaintiffs’ counsel.
Turning to the Motion for Partial Summary Judgment, the Government argues that TPTP’s claim fails as a matter of law on the grounds of mootness or lack of standing. It follows from the foregoing analysis of the preliminary injunction issue that the Court does not agree. ...
The Government argues that the case is moot and that TPTP lacks standing because the IRS has ceased the allegedly wrongful conduct which is the basis of the Count II claim. TIGTA concluded that the IRS discontinued using the inappropriate political advocacy criteria and the BOLO listings to screen cases by June 2013. Plaintiffs do not offer evidence at this point to refute the TIGTA conclusion. The cessation of wrongful conduct by a government entity can moot a case if the cessation appears genuine. Bench Billboard Co. v. City of Cincinnati, 675 F.3d 974, 981 (6th Cir. 2012). However, in True the Vote, Inc. v. Internal Revenue Serv., the D.C. Circuit Court of Appeals was not convinced that statements made by the IRS regarding the suspension of the use of the BOLO listings established that the case was moot. The court explained: “A violation of right that is ‘suspended until further notice’ has not become the subject of voluntary cessation, with no reasonable expectation of resumption, so as to moot litigation against the violation of rights.” This Court agrees. While the cessation of the use of the political advocacy criteria to screen applications did not remedy the alleged ongoing discrimination against TPTP, a preliminary injunction ordering the IRS to process TPTP’s § 501(c)(4) application in the ordinary course will. The Court concludes, therefore, that TPTP has a concrete interest in the outcome of the case, and Count II is not moot. The Court will deny summary judgment to the Government on Count II.
For the foregoing reasons, the Government’s Motion to Strike, or in the Alternative Response to, Plaintiff’s Notice of Intention to Supplement Motion for Preliminary Injunction is GRANTED to the extent that it seeks to respond to Plaintiff’s Notice of Intention to Supplement Motion for Preliminary Injunction; the Government’s Motion for Partial Summary Judgment is DENIED; and the Texas Patriots Tea Party’s Motion for Preliminary Injunction is GRANTED.
The Court orders the IRS to process TPTP’s § 501(c)(4) application in the ordinary course of business, directing all necessary communications and requests for additional information to TPTP’s legal counsel. The risk of harm to the IRS if this injunction is overturned is minimal so the Court will require Plaintiffs to submit only a nominal security deposit of $1.00.
https://taxprof.typepad.com/taxprof_blog/2016/11/the-irs-scandal-day-1281another-federal-court-says-the-irs-continues-to-harass-conservative-groups.html
I wait with glee and anticipation the appointment of a special prosecutor in this matter by the new administration.
Posted by: James McCaffery | Nov 10, 2016 2:04:46 AM
My fervent hope is the IRS realizes there's a new sheriff in town and things have to change. The 2 things I would do, if I were Trump, would be to decertify all government employee unions, therefore giving all government employees a raise. Then I would be looking at all of those who assisted Lois Lerner and send them packing.
Posted by: bflat879 | Nov 10, 2016 9:52:08 AM
We should really take a moment and praise the Obama administration for their commitment to mother nature in the closing days of his administration. They are producing massive amounts of recycled paper products and disposing of computer equipment in the most environmentally beneficial way possible. And they are also using bleachbit extensively in order to pass off a sanitary work environment to the next administration.
Posted by: wodun | Nov 11, 2016 7:00:47 AM