Report: IRS Also Targeted Conservative Donors
In addition to targeting conservative and Tea Party groups, in 2011 the IRS also targeted conservative donors to a group created in 2007 to generate support for President George W. Bush's Iraq surge. The IRS reportedly began the audit after the Democratic Congressional Campaign Committee sent a complaint letter.
According to a report in the Wall Street Journal, in 2011 the IRS audited at least five donors to Freedom's Watch: "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."
The gift-tax probe became public in 2011, but the name of the group was concealed at the time.
The Journal notes that though Freedom's Watch's audit was conducted by Lois Lerner's tax-exemptions unit, the "gift-tax audits were conducted by workers in the estate and gift-tax unit," which is "housed in a separate division" of the IRS.
Steven Miller, the recently ousted acting Commissioner of the IRS, implied to Republican lawmakers in 2011 that "the exempt-organizations unit referred the matter to the estate-and-gift tax unit."
According to the Journal, Miller "said the gift tax unit didn’t have access to the names of donors to 501(c)(4) groups. Instead, those names are directly available only to Ms. Lerner’s unit."
Groups such as Freedom's Watch, which is now defunct, do not have to disclose the identity of their donors and, according to the Journal, "are organized under section 501(c)(4) of the tax code," which means they are "allowed to engage in some political-campaign activity."
In February 2010, "Freedom’s Watch was subjected to an IRS audit that focused largely on its political activities." A year later, according to Freedom's Watch's lawyers, "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."
Tax experts told the Journal this effort was "highly unusual" because "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"--and perhaps longer.
A lawyer who heads the election-law practice at Covington and Burling told the WSJ the IRS's action was "kind of like a nuclear bomb going off" that "disrupted that long-standing understanding among election lawyers that this was an area where the IRS wasn’t likely to go.”
After the revelations of the IRS's targeting of conservative groups came to light, many potential donors to conservative and Tea Party groups said even though they wanted to donate to Tea Party and conservative groups, they did not do so because they were afraid the IRS would find out their identities.