Curbing Political Dissent, Maintaining the Official Line, and Suppressing Unpopular Views
Peter K. Bros had a title that would please almost any bureaucrat worthy of the name. He was Chief, Rulings Section Number 2, Exempt Organization Technical Branch, Internal Revenue Service, Department of the Treasury, Washington, D.C. On October 23, 1981, Bros wrote an official letter to the Minnesota Association for the Improvement of Science Education.1
Three months before, the association had asked the IRS to grant it tax-exempt status for the general purpose of promoting and defending the teaching of good science. Hardly a matter for lifted eyebrows. More exactly, the association wanted to encourage the continued “teaching of evolution in the public schools as the only recognized scientific theory of the origin of life on earth.”
From the angry tone of Bros’s letter, it is clear that the IRS official was personally upset with the request. The tax official expressed his concern in words that appeared to align the IRS with the passionate opposition of many fundamentalist Christians to the widely accepted theory of evolution.
“What do you consider to be pseudo-scientific versions of the origin of life on earth?” Bros asked. “When you advocate that ‘evolution’ should be taught in the schools, state specifically what you mean by ‘evolution’ or what ‘theory of evolution’ should be taught. What gives you the standing or the prerogative to deem certain version[s] of the origin of life on earth as pseudo-scientific? Why are you opposed to permitting the granting of equal time in school curricula to the teaching of the theory of creationism?”
Bros also asked the organization to “substantiate your statement that the number of professional biologists and geologists with Ph.D’s from accredited universities who believe in creationism is extremely small” and requested copies of the minutes of all of the association’s meetings.
Sister Lucy Knoll, a science teacher in the Catholic school system of Minneapolis and the association’s secretary, understood the power of the IRS and its individual bureaucrats. Within two weeks, she dispatched a low-keyed six-page response with detailed answers to Bros’s questions. “In science, evolution means that the universe and the earth are very old—billions of years old—and that they have been gradually and continually changing over time,” she informed the tax man. “The pseudo scientific versions of the origin of life on earth are those that are derived from other than scientific data. Pseudo scientific versions are put forward by … numerous groups in our society, especially by religious fundamentalists whose views of what the Bible teaches are contrary to modern science.”
Sister Knoll asked Bros two questions. Then she answered them. “What data suggests that the earth was stocked with various life forms by flying saucers, as claimed by the Ancient Astronaut Society? What data suggests that creation took place in six solar days less than 10,000 years ago, as ‘scientific creationists’ frequently claim? There is none. All that these people can do is object to certain methodologies of science and then claim that their version is correct by default. That is not science.”
Sister Knoll’s formal response to Bros was relatively straightforward. But the complaint she wrote to Roscoe Egger, commissioner of the IRS during most of the Reagan administration, had a far different tone.
“The letter from Mr. Bros is partisan in the extreme and expresses his hostility toward the scientific view of the origin of life on earth,” she told Egger. “The questions he asks are those one might expect from a totalitarian regime.”
Sister Knoll demanded that the association’s request for tax exemption be assigned to another official. “We certainly would understand being asked to answer questions related to lobbying, fund raising and so forth, but not those which demand that we defend the scientific method and suggest that we have some special ‘prerogative.’”
But the nun did not let it go at that. She and the board members of the Minnesota Association for the Improvement of Science Education shot off angry letters to their two senators and congressman.
“To us these questions represent nothing less than the return of the spirit of McCarthyism,” wrote John D. Bohlig, the association’s attorney. “The inquisitor obviously adheres to the doctrines of ‘scientific creationism’ and deems it best to use the power of his office to promote his personal religion.”
Senators David Durenberger and Rudy Boschwitz and Representative Bruce Vento contacted the IRS. A few months later, the association won its tax-exempt status. In the grand tradition of all great bureaucracies, however, the IRS blandly insisted that it had all been a misunderstanding. Bros’s original request, the IRS informed Durenberger, was merely intended to make sure that the association was presenting a “full and fair exposition of the facts” of the case. “We regret that our letter was interpreted as being hostile toward the position espoused by the Association. This certainly was not the intent.”
Because of the personal grit of Sister Knoll and her friends, this story had a happy ending.
DOWN WITH SLAVERY ON THE PLANTATION, UP WITH SLAVERY IN THE FAMILY
In too many cases, however, the social and religious views of the administration in power or of the officials who run the IRS have influenced how the agency interpreted the tax laws of the nation. The result: The IRS has long exercised significant power over a range of matters that are far removed from the collection of taxes. The IRS does not just enforce the laws in an evenhanded and uniform way.
Such selective enforcement of the tax laws is not new nor is it unique to the IRS. In 1867, for example, a Massachusetts court ruled on suits brought by heirs to the Phillips fortune, which challenged the decision of Phillips to create two charitable trusts. One trust had been established to support the cause of black people, the second for women. The court held that the trust created to generate public sentiment on behalf of blacks was charitable while the trust to equalize the treatment of women was not. The court justified the distinction on murky grounds: The laws involving slavery would change because of newly created public sentiment—and not by actions of the trustees—while in the case of women’s suffrage the trustees would be improperly active.2
William J. Lehrfeld, a Washington lawyer with years of experience in the subtle problems of tax exemption, offers another explanation of the court’s decision that he finds plausible. “What may have perpetuated one trust over the other was the fact that, at the time, the status quo [in Boston] would not have been affected by anti-slavery sentiment but would be if the suffragettes created sentiment in favor of equal treatment for women.”
When Congress writes the nation’s tax laws, it often makes explicit decisions to use taxes to influence the behavior of the American people. In 1894, for example, Congress decided to encourage taxpayers to support worthy causes by allowing them to deduct contributions from their federal income tax.3 More recently, when Congress became concerned about the wasteful consumption of energy, it authorized an exemption for families who spent money improving the insulation of their homes. When done in an open way, the use of tax laws for such purposes is completely appropriate.
But because Congress frequently writes laws that are vague, ambiguous, or open-ended, the IRS itself has functioned as the controlling agent, a largely invisible bureaucracy that has exercised a great deal of influence over many aspects of our daily lives. Sometimes the IRS has exercised its authority through Kafkaesque bullying, bringing serious tax charges against organizations that have fallen out of favor. From the government’s point of view, such prosecutions have the advantage of forcing the leaders of the unpopular organizations to exhaust themselves and their financial resources on defending against the allegations of the agency rather than on promoting their unpopular cause.
On many other occasions, the IRS has denied tax exemptions to groups seeking to educate the public on socially taboo subjects, just as the Massachusetts court forbade the creation of a trust to promote the rights of women.
A third way the IRS has exercised its power is by unilaterally lifting the tax-exempt status it previously had granted because the activities of the organizations were no longer viewed as proper.
Over the years, the IRS’s actions against unpopular groups and movements have been triggered by pressures from several different sources. There have been occasions when the president or the White House staff was the villain. There have also been a substantial number of cases when the IRS has responded to prodding from a powerful congressional figure. Most surprising, perhaps, are the numerous instances when middle-level bureaucrats of the IRS itself, offended by some particular movement or organization, have on their own initiative used the powers of their agency for political harassment.
THE IRS’S VIEWS ON NICARAGUA DURING THE REAGAN ERA
The IRS’s response to Sister Lucy Knoll and the theory of evolution is one example where an individual IRS official, and not the White House or Congress, appears to have been the source of the implied threat to withhold tax-exempt status. But at about the same time that Bros was launching his quixotic little campaign on behalf of creationism, an IRS agent in New York took an action that may well have been triggered by the Reagan White House.
In February 1982, a New York IRS agent named David S. Levine sent a report to the agency’s Washington office asking whether the IRS should yank the tax-exempt status of the North American Congress on Latin America (NACLA), an organization that had repeatedly criticized the policies of the Reagan administration. Levine’s report said the organization had been distributing publications that contained a substantial number of “disparaging terms and innuendos.” He further argued that the NACLA material did not “attempt to present a full and fair exposition of pertinent facts from which its readers may draw informed, independent conclusions.”4
Shortly after Levine sent his report to Washington, the IRS agent initiated a formal action against NACLA by mailing a copy of the report to the suspect organization. Because it had long been criticized by President Reagan and other influential figures around the president, NACLA was convinced that Levine’s action had been ordered by the White House. In January 1978, for example, long before his election as president, Reagan had twice attacked NACLA by name. This criticism was echoed in a 1981 Heritage Foundation report. At that time, the foundation’s report was regarded as the policy wish list of the incoming Reagan administration. The report described NACLA as one of a number of radical organizations that could become “internal security problems” and that “have had influence on federal policy making in recent years.” The foundation called upon the Reagan administration to increase government surveillance of NACLA and other such groups.5
The few IRS documents available do not answer the question whether the agency’s attempt to take away NACLA’s tax exemption was directly or indirectly triggered by Reagan or his staff. But Steve Volk, then president of NACLA, is convinced that the move was political and that the administration hoped to achieve more than simply taking away tax-exempt status from a single articulate critic. “With their hit-and-run tactics, it was clear that the IRS was hoping to intimidate dissident organizations,” he said in a 1988 interview. “Once the news spread that NACLA or the magazine Mother Jones was threatened, other organizations, fearful of losing their exemption, would begin to tone down their criticism.”
NACLA strenuously objected to the IRS’s proposal, and some months later the organization was informed that its status would not be changed. Volk, now an assistant professor of Latin American history at Oberlin College, said that the IRS allegations had absolutely no basis in law. But he added that putting together the material to respond to the charges had been a painful and time-consuming chore that had seriously reduced the time he could devote to preparing NACLA’s reports. “That’s where the IRS really hurt us,” Volk said.
Other organizations and individuals who had questioned the administration’s Central American policy at about the same time came under similar pressures. One such organization was the Quixote Center, another Washington-based tax-exempt organization.
Finally, a number of U.S. citizens who visited Nicaragua as part of a broad effort to educate themselves about Central America have reported being audited by the IRS shortly after they returned home. Because in the mid-1980s, at least five hundred groups around the country opposed the Reagan administration’s Central American policy and at least sixty thousand Americans visited Nicaragua, it is not possible to demonstrate that these audits were the product of an articulated policy.
But documents written by many generations of White House, Justice Department, and IRS officials prove that in almost every administration since the IRS’s inception the information and power of the tax agency have been mobilized for explicitly political purposes. Because political manipulation certainly violates the spirit of the law—and sometimes its letter too—the use of the agency’s authority for nontax purposes normally has remained only a private suspicion of those who were targeted.
One of the rare exceptions to this general rule of secrecy, where the IRS proudly boasted of its unlawful enforcement drive, was the agency’s concerted effort to muzzle a number of leftist and communist organizations shortly after World War II.
GETTING THE COMMIES AND THE LEFTISTS
During the 1930s the federal government had routinely granted tax-exempt status to almost anyone who asked, including a few dozen organizations that had not sought to hide their ties to the Soviet Union or to communism. On February 5, 1930, for example, the American Society for Cultural Relations with Russia, Inc., was routinely granted an exemption.
But with the defeat of Germany and Japan, and the growth of the Soviet Union as a world power, a strong wave of anticommunism swept across the United States. To counter allegations that the State Department and other federal agencies had been infiltrated by Communist agents, President Truman in 1947 issued an executive order authorizing the dismissal from government of anyone found to be affiliated with subversive organizations. The Truman order, however, said nothing about tax policy.
This silence did not trouble the IRS. On February 4, 1948, George J. Schoeneman, commissioner of internal revenue, announced a bold, new, and basically dishonest policy concerning tax-exempt organizations. The commissioner’s brief, bland statement encompassed a kind of doublethink that might have astonished even George Orwell.
“The tax laws do not contemplate and it has never been our policy to grant tax exemption or other tax privileges to subversive organizations,” Schoeneman ruled. “Whenever we discover an organization that obtained exemption by misrepresenting its purposes and activities, we revoke these privileges immediately.”
There had been no change in the law under which organizations of every political hue had been granted tax exemption. The IRS had not issued a ruling defining what it meant by “subversive organization.” The agency had brought no formal charges against the targeted organizations that would have allowed them to respond. Without the benefit of a single hearing, Schoeneman announced the revocation of exemptions for a small number of organizations, including the National Council of American-Soviet Friendship, Hollywood Writers’ Mobilization, Ohio School of Social Science, Samuel Adams School, School of Jewish Studies (New York City) and the Philadelphia School of Social Science and Art.6
For a country that repeatedly emphasizes that it is a nation of laws, not men, it is important to remember that the first wave of IRS revocations was carried out under administrative fiat, not law. In fact, almost two years would pass before Congress enacted the Subversive Activities Control Act of 1950, one section of which explicitly stated that no Communist group registered with the Justice Department’s Control Board was entitled to tax exemption or was eligible to receive deductible contributions.
Despite the absence of a legal mandate, the political climate was such that none of the six organizations named in Schoeneman’s first statement, or the dozens of others that lost their tax-exempt status in subsequent rulings, ever challenged the IRS in court.7
The withdrawal of tax exemptions, however, was not the only action that the IRS took in its publicly announced political action campaign against Communists and leftists. On March 23, 1954, two years after Dwight D. Eisenhower had been elected President, IRS agents in New York began auditing the Communist Party of the United States of America (CPUSA). Two years later, the IRS struck when the director of the agency’s Lower Manhattan District ruled that the party owed the government $261,050.38 in taxes and $65,262.60 in penalties. The agency filed levies and liens against the party, thus seizing all of its known assets. In addition, the CPUSA’s offices in New York, Philadelphia, San Francisco, Los Angeles, and Chicago were padlocked.8
The raid came on Passover of 1954, John Abt recalled in an interview more than thirty years later. “I was in my law office, trying to catch up on some of my work. The phone rang and someone from party headquarters said we had been raided by the IRS, that our doors had been chained and padlocked and levies and liens had been placed against us.”
Abt, then a party lawyer, said he knew almost nothing about tax law. “I called up a friend to find out what a jeopardy assessment was. In addition to party headquarters, they also had raided the Daily Worker. My memory is that the seizure stopped the Worker from being published for a short period, maybe a week.”
Abt said that because the bank accounts had been seized the party began operating on a cash basis and continued to do so for about ten years. “The party had to carry on all of its operations in cash. We paid our employees in cash, our utilities in cash, everything. When we got our dues, we also took them in cash.”
In August 1956 the CPUSA formally denied its liability for the assessed taxes in Tax Court. In one of Abt’s pleadings, the lawyer charged that the government had singled out his client “for taxation under the income tax laws while continuing to treat all other political parties as exempt.” He added that this action was “arbitrary and discriminatory, denies petitioner due process of law, and violates rights guaranteed to it by the First Amendment.” The party and the IRS began what developed into a tortuous, indecisive, and lengthy battle in the courts.
After ten years of legal wrangling, senior IRS and Justice Department officials began to realize that they might well lose the case. This outcome became likely when a federal court of appeals ordered the case back to the trial court because the “plausible claims of discriminatory treatment [against the Communist party] must be explored.”
In 1967, Mitchell Rogovin, who at that time was assistant attorney general for tax matters, sent a confidential memorandum to Attorney General Ramsey Clark recommending that the case be settled. Copies of this and several other government documents were made available to me by a former IRS employee indirectly involved in the case.
Rogovin was opposed to further probing in open court because he knew the government had illegally used the tax law to go after the Communist party. The case was a poor one for the government, he secretly warned Clark, because it looked as though some of the judges suspected that the IRS “was using the tax laws to obtain disclosure of financial records to be used against the petitioner or its members in subversive activities cases.”
Another official who came to doubt the IRS’s case against the CPUSA was Arthur B. White, head of the agency’s interpretive division. In a never-released fourteen-page analysis of the case, White said that the essential problem was that the IRS had an extraordinary Alice in Wonderland policy when it came to political parties. He specifically cited a 1947 IRS ruling about the John Hay Republican Association in Philadelphia in which the commissioner had advised the association that “while political organizations were technically not exempt from tax, it would not be the policy of the Bureau to require purely political organizations to file income tax returns.”
Given the IRS’s long history of totally ignoring political parties, the only way it could have fairly targeted the CPUSA would have been to argue that the party fell into a special category, that it was not really a political organization. Unfortunately, however, the Justice Department had told the court of appeals several years before that the CPUSA did not stand “in a posture generally different from that of any other political party.”
Given the hysterical cold-war mood of the United States during the 1950s, it probably is not surprising that the IRS unilaterally withdrew the tax-exempt status from a dozen “subversive” groups and charged the Communist party with failing to pay its taxes. But the utilization of the tax collection powers of the IRS for the clearly political goal of silencing these groups certainly was improper.
Of course, many Americans would argue that the Communist party was trying to overthrow the government of the United States and thus was not entitled to constitutionally protected rights, such as freedom of association and speech. A variation of this is the argument that the unusual enforcement powers that Congress gave to the IRS solely for the purpose of collecting taxes should be employed against individuals who are suspected of being drug dealers or organized-crime figures. It seems likely that a good number of citizens would today forgive the IRS for bending the tax laws when it came to the CPUSA or the Mafia. But would these same citizens also forgive the Internal Revenue Service for subjecting the National Council of Churches (NCC) to a ten-year investigation because of its open political involvement in the battles to end racial segregation and the Vietnam war?
RACISM, JINGOISM, AND THE IRS
A few years ago, the Reverend Dean M. Kelley, director for governmental relations at the National Council of Churches, applied to the Internal Revenue Service for a copy of all the files it maintained on the council. Kelley’s request was made under the provisions of the Freedom of Information Act. Months later, the IRS provided the council with a massive stack of documents, reports, and handwritten notes. Sections of many of the hundreds of pages of documents had been deleted or are illegible. But they clearly document the continuous visceral opposition of the IRS to the liberal policies of the Council of Churches under two entirely different administrations, one led by Lyndon Johnson and the other by Richard Nixon.
One neatly typed document turned over to Kelley summarized some of the key dates in the IRS’s decade-long investigation of the National Council of Churches. The first entry in the summary was April 1, 1964: “Manhattan District requested by National Office to conduct fact gathering examination of the NCC for National Office.”
The summary gives no indication why Washington ordered the investigation, but a brief handwritten note that appears to have been drafted at the same time suggests the conservative mind-set of the agency. The memo said a review of the Manhattan district’s existing files “indicates that the NCC sponsors many conferences that turn out to be militant and disruptive.” The memo then quoted a staff study of the Alabama Legislative Commission to Preserve Peace. “On June 7, 1963, the NCC set up a Commission on Religion and Race ‘to engage the churches more directly in the present racial revolution.’” The IRS memo offers no warning about the racist views of the Alabama legislature of that period.
Also in the IRS’s file from that period was page after page of extracts drawn from newspapers all over the country about the council’s involvement in various civil rights activities. One clipping, for example, came from the July 2, 1965, issue of the Chicago Daily News. It reported that an official of the council had said that Chicago Mayor Richard J. Daley was “childish and immature” when he linked Communist agitators to the civil rights demonstrations against segregation in the Chicago school system.
The language of an internal IRS report suggests that the tax agency remained deeply disturbed about the council’s civil rights activities until at least 1969. “Allegations have been made in a number of areas and by a number of people that the general board of the National Council of Churches is an ultra-liberal, Leftist-oriented body of churchmen who have diverted great sums of money through the Inter-Religious Foundation for Community Organizations to extremist, dissident, militant and revolutionary causes,” it concluded.
The IRS report then listed some of the causes supported by the council that the agency appeared to find abhorrent. The council, for example, had issued papers supporting the right of citizens to organize nonviolent sit-in demonstrations. The council had also called for the “redistribution of power and opportunity for social and economic betterment in the United States.”
In an interview in the Manhattan office of the council, Kelley said that the IRS’s investigation of the national organization representing many of the major Protestant church groups appeared to have two very distinct focuses. “The first episode came in the mid-1960s at the time of the civil rights struggles,” he said. Kelley added that, although there was no way he could prove it, he was convinced the IRS investigation had been triggered by a particular conservative senator who was disturbed by the council’s activities. “After a lot of back and forth, our general counsel, Charles H. Tuttle, asked the staff to make a list of all our activities that could be remotely considered an attempt to influence legislation.
“We scrambled around and pulled everything together,” Kelley continued. “When the list was compiled, [former] Judge Tuttle concluded that the council’s total legislative effort came to something like two or three percent of our activities and he so notified the IRS. I guess they then felt they had satisfied their obligation to [a leading southern senator] and they sort of disappeared.”
Kelley said the second go-around with the IRS began in the late 1960s and was directly focused on the activities of the council relating to the Vietnam war. As a result of the agency’s concerns about these activities, it launched a formal, time-consuming audit and nationwide investigation of the council. Government documents show that despite the desires of top IRS officials, however, the agency never was able to obtain sufficient evidence to bring tax charges against the council.
According to handwritten minutes, Commissioner Randolph W. Thrower held a meeting on June 29, 1970, exclusively devoted to the council and an affiliated organization, Clergy and Laymen Concerned about Vietnam. Present at the session, in addition to Thrower, were three senior Justice Department lawyers and Donald Bacon, assistant IRS commissioner for compliance.
The notes indicate that, even though the agency’s audit and investigation had not yet commenced, Thrower, President Nixon’s first commissioner, wanted the council to know that the IRS wasn’t fooling around. “Openly ask for records. If refuse—consider prompt action.”
In the margin to the immediate left of the second paragraph of the minutes, the person taking the notes had written the word “commissioner,” thus indicating that this paragraph represented Thrower’s direct command. Two sentences were heavily underlined. “Delisting of NCC. Even without resorting to summons.”
Kelley said that initially the agency had been given complete access to the council’s books for 1967, 1968, and 1969. But he said that the tax men were asked to leave when the council’s lawyer learned about their investigation. The council had just become aware of a new provision of the 1969 Tax Reform Act that expressly prohibited IRS examination of church records.
“So there was a little standoff for about a year,” Kelley recalled. “Then the Treasury issued a regulation which eviscerated the amendment prohibiting the IRS from examining the churches and back came the agents.”
The IRS investigative team created elaborate flowcharts that illustrated the major sources of income going to Clergy and Laymen Concerned about Vietnam through the council during 1968 and 1969. One of the flowcharts concerned “substantial contributions by individual” while the second focused on “substantial contributions by foundation.”
IRS agents from all over the United States appear to have been involved in the investigation. On April 29, 1971, for example, Bob Handley, an agent in Los Angeles, sent a package of documents to one of his colleagues in Washington. “Attached are two photocopies of cancelled checks. The one made payable to American Report is actually the publication of CLERGY AND LAYMEN CONCERNED ABOUT VIETNAM. The One made out to CUBA PROJECT, a radical group, supports Castro’s crowd, NOTE both cancelled checks have been endorsed by the NATIONAL COUNCIL OF CHURCHES. Would you please make this available to Bill Heath, Exempt Org. coordinator on the NATIONAL COUNCIL OF CHURCHES.”
The intimidating IRS investigation of the council’s activities in connection with the Vietnam war continued until the end of 1972. On December 7 of that year, Peter Persutty, a New York revenue agent, telephoned the office of a midlevel agency official in Washington and left a brief message that signaled the end of Thrower’s war.
Persutty had been the lead agent actually examining the council’s books at its headquarters on the Upper West Side of Manhattan. The message taken by the secretary in Washington said that Persutty had called to report that only 8 percent of the council’s funds had been used for activities that did not fall in the tax-exempt areas and that this percentage was “not enough to affect C-3 [tax] status.” At that time, the IRS policy was to keep the legally acceptable percentage secret. The IRS’s long campaign against the National Council of Churches was over.
DOWN SOUTH
The evidence is overwhelming that the IRS’s interest in the National Council of Churches was first triggered by the agency’s gut-level opposition to the council’s liberal views about race and was not a legitimate concern about enforcing the tax laws. Even so, if this was the only case where racism appears to have influenced the agency’s enforcement of the tax laws, it might be considered an aberration. There are a number of additional cases, however, that suggest that for many years civil rights activities were a major worry of the agency.
In 1954, the liberal Mississippi publisher Hodding Carter took the then daring step for a southern newspaper of endorsing as the law of the land the Supreme Court’s school desegregation decision. Almost immediately Carter’s newspaper, the Delta Democrat Times, became the subject of a long series of annual IRS audits. Like many who are selected for intense IRS attention, the Carter family has never been able to uncover documents that would support their belief that the audits were politically motivated. However, the publisher’s son, W. Hodding Carter III, is convinced that the agency’s audits were triggered by IRS officials in Mississippi who shared the profound anger felt by the state’s political, business, and social leaders toward his father’s relatively moderate editorial stance on race.
The Carter family was hardly the only object of special IRS attention as the South moved into this difficult period of social change. In the late 1950s, for example, the IRS and the tax agency of Alabama began auditing Dr. Martin Luther King, Jr.9 After the auditors raised several questions about some deductions he was unable to document, King settled, paying the IRS $500 in back taxes. He also settled with the state of Alabama, which had at the same time also brought tax charges against him.
Shortly after accepting the settlement in the civil case, however, Alabama had second thoughts. The result: King became the first person ever prosecuted by the state on felony tax charges. Because of his controversial civil rights activities in Alabama, conviction and a long prison sentence seemed almost certain. As a result of this fear, King and his lawyers spent a great deal of time searching every available record. Just before the case went to trial, the lawyers discovered that King had maintained a personal diary that contained detailed contemporaneous notes that proved the Alabama charges were false. The notes were so persuasive, in fact, that on May 28, 1960, an Alabama jury defied the prejudices of those times and found King not guilty.
A few years after the IRS audit of King and Alabama’s use of its tax laws to harass the civil rights leader, the IRS again demonstrated its concern about his activities. Sometime in 1964 the Federal Bureau of Investigation labeled the Southern Christian Leadership Conference a “Black Nationalist-Hate Type Organization” and asked the IRS for any information it might have about the group. The IRS gave the FBI the tax returns of King and the conference and a number of its investigative files, according to the Senate Select Committee on Intelligence. The committee did not report what the FBI did with the returns.10
The IRS interest in civil rights activists did not end with the National Council of Churches, Hodding Carter, and Martin Luther King. An investigation by Jason Berry, a New Orleans-based reporter, discovered that the agency audited a large number of civil rights activists working in the South. He further discovered the many of these activists were subjected to repeated audits.
Berry disclosed, for example, that in 1973, 1974, and 1975 the IRS had audited at least sixty southern civil rights activists or liberal politicians. They included Julian Bond, then a Georgia state senator; his brother James Bond, an Atlanta city councilman; eight black Atlanta officials; Ben Brown, then with the Democratic National Committee in Washington; and Charles Evers, the mayor of Fayette, Mississippi.
In late 1976, pressed by Representative Charles Rangel, Democrat of New York, the Oversight Subcommittee of the House Ways and Means Committee ordered the General Accounting Office to investigate Berry’s findings concerning the IRS’s interest in twenty-eight specific civil rights activists who during the early seventies had done organizing work in Mississippi.
The GAO investigators were thorough. They examined the tax returns, audit case files, and intelligence records of the twenty-eight civil rights workers and interviewed many of the IRS officials who had worked in the state during the period in question. In January 1978, the GAO sent its completed report to Congress. The official investigation found that the twenty-eight activists had been audited at least forty-five times.
Despite the suspicious nature of the repeated audits, the summary statement of investigation rejected Berry’s theory that the IRS activities resulted from official policy: “IRS followed normal procedures in initiating, conducting and closing the audits. IRS also followed normal procedures in obtaining limited information on some of the 28 taxpayers through its intelligence-gathering apparatus and in using that information.”
A reading of the full report, however, discloses that the GAO investigators were uncertain about their findings. The full report also underlined the near impossibility of developing concrete evidence about the actual motive for a particular audit even when, as in this case, the investigators were given access to normally secret IRS documents.
The GAO report first noted that all over the United States citizens sometimes feel they have been unfairly harassed. “Indeed, it is not unreasonable to assume that an IRS examiner may, on occasion, go beyond the limits of propriety, and contrary to policy, harass a taxpayer,” the GAO said. “It would be difficult for any organization with 85,000 employees, like the IRS, to assure proper conduct by its employees all the time. The allegations in this instance, however, did not charge that a particular examiner harassed a particular taxpayer during a particular audit. The allegations charged instead that the IRS, as an organization, purposefully used its audit authority to harass Mississippi civil rights activists. GAO found no evidence to support that allegation.”
The GAO thus said that it had found no procedural aberrations or internal documents that proved the audits were the product of a formal policy of harassment but that it had no way of determining whether the racial biases of individual agents or supervisors may have played a role in some or all of the forty-five audits.
On the other hand, a great deal of concrete evidence does indicate that John F. Kennedy mobilized the legal might of the IRS against an entirely different target: the right-wing fundamentalist ministers who had been so critical of his religion and his brother Robert during his presidential campaign and his first months in the White House.
The first indirect warning of the forthcoming campaign came in a speech by Kennedy on November 18, 1961. The subject of the speech was the difficult cold war with communism and how, “under the strains and frustrations imposed by constant tension and harassment, the discordant voices of extremism are once again heard in the land. Men who are unwilling to face up to the danger from without,” Kennedy said, “are convinced that the real danger is from within.”
The president then called on the nation to ignore the voices of fear and suspicion. “Let our patriotism be reflected in the creation of confidence in one another, rather than crusades of suspicion.” Kennedy did not have to tell his audience that his administration had been the primary target for these critics.
Having defined this new enemy, the president waited a week to suggest how it should be dealt with. The occasion was a question at a news conference seeking his views on the legality of campaign contributions that supported the activities of “right-wing extremist groups.”
Kennedy’s response began in a statesmanlike way. “As long as they meet the requirements of the tax law, I don’t think that the Federal government can interfere or should interfere with the right of any individual to take any position he wants. The only thing we should be concerned about is that it does not represent a diversion of funds which might be taxable to—for nontaxable purposes. But that is another question and I am sure the Internal Revenue system examines that.”
At the time Kennedy spoke, in fact, the IRS had an unannounced policy of rarely auditing such groups because such examinations were “difficult and time-consuming” and “rarely were productive of revenue.”
But IRS Commissioner Mortimer H. Caplin was a team player. Within a day or two of President Kennedy’s November 1961 press conference, the agency launched a test audit of twenty-two “extremist organizations.”
The first IRS document providing an overall description of the agency’s response to the presidential nudge was written a bit more than a year and a half later. It was a secret memo that Caplin sent to Myer Feldman, deputy special counsel to President Kennedy. The document was dated July 11, 1963.
A copy of the Feldman memo that was retained in the IRS commissioner’s files subsequently was made available to me. In the period after the original was sent to the White House, Caplin’s secretary jotted down a series of handwritten notes in the margin of the copy describing several crucial events in the history of the IRS’s effort to curb right-wing critics of the president. One notation, for example, indicates that on July 20, Caplin met with Attorney General Kennedy to discuss the special IRS investigation. Another brief jotting indicates that on the next day the commissioner “met with Feldman at White House to bring him up to date.”
President Kennedy himself took a direct interest in Caplin’s project. According to yet another brief note scribbled on the copy of the Feldman memo, the leader of the free world on July 23 informed the commissioner that the IRS was now at liberty to move against the organizations that the agency had identified as possible targets. “President Kennedy called Commissioner re attached,” the note reads. “Wants the IRS to go ahead with aggressive program—on both sides of center.”
The “both sides of center” reference had crept into the documents shortly after the president first indicated that he would like an investigation focused on the right. The talk about examining both the right and the left was a political cover devised by Caplin to protect the president against the truthful charges that he was using the IRS to mount a vendetta against his political enemies.
The creation of this cover was explicitly acknowledged by Commissioner Caplin in a May 1962 memorandum he sent the under secretary of treasury. “Inasmuch as we are not certain any of these organizations [of the right] or their benefactors are failing to comply with the tax laws, we thought it prudent to avoid any possible charges that the service is giving special attention to a group with a special ideology. In furtherance of this goal, we are planning to examine the returns of a representative group of alleged left-wing organizations.”
The left-wing groups included the Anti-Defamation League of B’nai B’rith, the League for Industrial Democracy, Inc., the American Veterans Committee, Inc., and Fair Play for Cuba.
But almost all of Caplin’s memo to the under secretary of treasury concerned the other end of the political spectrum. “The activities of so called extremist right-wing political action organizations have recently been given a great deal of publicity by magazines, newspapers and television programs. This publicity, however, has made little mention of the tax status of these organizations or their supporters. Nevertheless, the alleged activities of these groups are such that we plan to determine the extent of their compliance with Federal tax laws. In addition, we propose to ascertain whether contributors to these organizations are deducting their contributions from taxable income.”
Caplin then listed twelve organizations that the IRS field offices already had been directed to examine, including the Christian Anti-Communist Crusade, the Life-Line Foundation, the Conservative Society of America, the John Birch Society, and Robert Welch, Inc.
Another indication of the political weight of the Kennedy administration effort against the right is an August 21, 1963, memorandum written by Mitchell Rogovin, who was then an ambitious young special assistant to Commissioner Caplin. The memo concerned the briefings that Rogovin had provided the attorney general and White House assistant Myer Feldman on the political audit program.
Rogovin said that the attorney general offered to have the Justice Department defend the IRS if any of the organizations sued the agency. This offer is revealing because it suggests that Robert Kennedy supported the program even though he recognized that it might be challenged in federal court.
Rogovin also disclosed that Myer Feldman had requested that he call off the IRS investigation of two of the organizations already selected for the special audit program. “In reviewing the organizations listed by the Service, he suggested we delete the DAR [Daughters of the American Revolution] and the Zionist Organization of America,” the IRS staffer wrote. Rogovin did not explain the reasons for Feldman’s request. Presumably, however, the White House was worried about the backlash that might occur among conservative white women and the Jewish community if the audits of the two groups ever became widely known.
In April 1976, the Senate Select Intelligence Committee, then controlled by the Democrats and headed by the late Senator Frank Church of Idaho, concluded that the Kennedy administration project to mobilize the IRS against the right had led to more extensive political abuses during the Johnson and Nixon years.
“By directing tax audits at individuals and groups solely because of their political beliefs, the Ideological Organizations Audit Project [as the 1961 Kennedy program was known] established a precedent for a far more elaborate program of targeting ‘dissidents,’” the committee concluded.11
The actual enforcement actions initiated by the IRS when the Kennedy team was in charge were all directed toward the right. According to a 1963 report by Caplin, the agency recommended revoking the exempt status of H. L. Hunt’s Life-Line Foundation and of Dr. Fred Schwarz’s Christian Anti-Communist Crusade. Similar action was not recommended for the John Birch Society because it did not claim tax exemption. But Caplin informed the White House that the IRS investigations had discovered that some taxpayers contributing to the John Birch Society had improperly claimed business deductions for their subscriptions to American Opinion magazine, the society’s publication. As for the ten left-wing groups, Caplin reported that nine had been given a clean bill of health and that one “requires further study.”
During the Johnson administration, as already noted, the focus of the IRS’s never-acknowledged effort at political control swung from the right wing to individuals and organizations concerned with racial matters or with opposing the U.S. presence in Vietnam. Unlike the Kennedy period, no evidence has yet emerged that directly links President Johnson to what became increasingly frenetic efforts by the FBI and the IRS to defang and declaw the critics of his administration.
However, not too much should be made of this lack of documentary evidence. On January 1, 1967, Cartha DeLoach, J. Edgar Hoover’s deputy, wrote a memorandum to Hoover stating that the White House had informed him that “the President does not want any record made” that would prove his direct involvement in FBI intelligence operations directed at war critics. DeLoach added that any FBI documents on such sensitive matters were to be directed to a low-level White House staff member who did not have direct contact with Johnson. The stated reason for this policy: Anyone who saw the FBI papers actually going to Johnson would not suspect that “the president had requested such information.”12
The record contains a great deal of information, however, proving that the IRS, the FBI, and several other federal agencies were involved in a large number of such projects during the years that LBJ occupied the White House.
Between 1957 and 1975, the IRS gave tax information to the Central Intelligence Agency at least thirteen times. Because most of the requests involved CIA investigations of its own employees or were under circumstances proper to its charter, the requests would not have been illegal if they had been made through appropriate channels. The CIA, however, was not comfortable about the transmittal records that are created when working within lawful channels, so the spy agency obtained the tax records in an informal and illegal manner.
But beyond the questionable procedures involved in most of the CIA’s penetrations of the IRS, the substance of several of the CIA inquiries was clearly improper.
In late 1966, for example, top officials of the CIA heard rumors that Ramparts magazine, a muckraking publication based in San Francisco, was working on a story about secret CIA funding of some of the operations of what was then called the United States National Students Association (USNSA). A preliminary investigation confirmed the rumors.
What to do? On February 1, 1967, a senior CIA agent met with three top officials of the IRS—Thomas Terry, assistant to the commissioner; Leon Green, assistant to the chief of compliance; and John Barber, chief of the rules unit of the IRS’s Exempt Organizations Branch.
The day after the meeting, the CIA official wrote a memo describing the session with the IRS. It indicated that the tax agency was willing to tailor its treatment of Ramparts according to the concerns of the spy agency. The name of the writer was deleted from the memo, presumably for security reasons, when it subsequently was published by the Senate Select Committee on Intelligence. The CIA official, after telling the IRS about the forthcoming exposé, said that he “impressed upon them the Director’s concern and expressed our certainty that this is an attack on the CIA in particular, and the administration in general, which is merely using the USNSA and [deleted name of a foundation] as tools.”13
The CIA official then got to the serious business. “I suggested that the corporate tax returns of Ramparts, Inc., be examined and that any leads to possible financial supporters be followed up by examination of their individual tax returns,” he wrote. “The returns can be called in for review by the Assistant Commissioner for Compliance without causing any particular notice in the respective IRS districts. The proposed examinations would be made by Mr. Green who would advise me if there was any information on the returns worth following up.”
Although the IRS officials appeared to have been sympathetic to the CIA’s plight, the request to initiate an investigation of a publication that had broken no tax laws made everyone a little nervous. “This matter contains the elements for political repercussions against the Internal Revenue Service as well as this agency and Mr. Terry feels we can make no move until he has briefed the Commissioner. Mr. Terry will brief the Commissioner as soon as possible and contact me when he has done so.”
Thomas Terry, now a San Francisco lawyer, remembers the Ramparts meeting but says he does not recall what action, if any, the IRS took in response to the CIA request. “I have a vague recollection that the CIA people reported that individuals connected with Ramparts were under investigation and I assume they expressed their concern in terms of national security,” he said in an interview. Terry added, however, that auditing a magazine because of something it was about to print would not have been “appropriate and we could not have done that.”
Follow-up memos, however, suggest otherwise. Two weeks after the February 1 meeting, a second CIA memo dated February 15, 1967, said that the agency had in fact obtained the tax return of Edward Keating and that on the return Keating had reported he was the owner of Ramparts. The CIA said that the “statement of ownership, management and circulation published in the January 1967 issue of Ramparts, as required by law and postal regulations, lists five stockholders.… This is not consistent with the sole ownership of Keating as reported to Revenue as recently as fiscal year 1965. We intend to check this fact and so does Revenue in as much as Keating has been claiming 100 percent losses on his own tax return.” A third CIA memo, this one written sometime in May, indicated that the spy agency had come back to the IRS with information from its informants that the CIA summarized as proving that Keating should be officially audited.*
It is not known whether the IRS, in the end, acted on the CIA’s information about Keating. Attempts to locate him in the summer of 1989 were not successful. The fact remains, however, that the IRS did conduct an audit of Robert Scheer, then a young reporter with Ramparts. At the time, of course, Scheer had no knowledge of the CIA’s requests to the IRS. “In some ways, it was pretty funny because I didn’t have any money,” Scheer recalled during an interview in the spring of 1989. “But it also was pretty scary.”
Joseph Ippolito, the San Jose, California, accountant who prepared the tax returns for Ramparts and many of its writers and editors, said he was uncertain about what had triggered Scheer’s audit. “The guy the IRS sent down from San Francisco had a lot of time in the government and I remember thinking he was kind of heavy for a young kid like Scheer,” Ippolito said. “He wasn’t a bad guy, though, and we had lunch. While we were eating he told me in passing that Scheer was ‘a sensitive tax case.’ The IRS guy didn’t explain exactly what he meant.”
On the other hand, the accountant said, Scheer had been traveling all over the country to give speeches to radical college groups and had failed to keep all the receipts he needed to back up his claimed deductions. “His claims were legitimate but because he didn’t always have the backup for them, he ended up owing the government a little more money.”
Ippolito said that the IRS never audited Ramparts itself.
FIGHTING THE WAR CRITICS
Perhaps because the law specifically prohibited the CIA from engaging in most domestic intelligence activities, the spy agency was relatively unimaginative when it came to using the IRS to curb the voices of dissent that swept the country in the late 1960s and early 1970s. Of course, there were no such general restrictions to hobble the FBI. One of the bureau’s most devious little operations began on May 31, 1968, when the FBI asked the IRS for the tax returns of six particularly irritating nay-sayers.
One of the six was a professor at a midwestern university. After the Washington office of the FBI had obtained his tax return, it was sent to the local FBI office in the city where he lived. According to a later investigation by the Senate Intelligence Committee, the local FBI office studied the return and decided the professor had some questionable deductions.
On July 18, 1968, the local FBI office sent a memo to bureau headquarters in Washington requesting permission to trigger an IRS audit. The memo said that the professor’s tax return showed he had made “a claim for home maintenance deductions when, in fact, he doubtless has only the usual type of study found in many homes rather than actual office space.” The ingenious G-men discovered another matter they thought of interest. The professor’s contributions to the Student Non-Violent Coordinating Committee, the Students for a Democratic Society, and a third relatively unknown protest group, the local FBI office reported, “may also be productive of embarrassing consequences.”
The local FBI office, however, was interested in more than the passive collection of intelligence. It wanted to organize a government strike against the professor. “Most importantly,” the memo said, “if IRS contact with [the professor] can be arranged within the next two weeks their demands upon him may be a source of distraction during the critical period when he is engaged in meetings and plans for disruption of the [forthcoming] Democratic National Convention. Any drain upon the time and concentration which [the professor] can bring to bear upon this activity can only accrue to the benefit of the government and general public.”
Almost immediately, FBI headquarters in Washington flashed a green light to the local FBI office to initiate its plan. At that point, FBI agents in the midwestern city passed the tips about the professor’s possible tax problems to the local IRS office.
The IRS agents immediately initiated the audit desired by the FBI. In the end, however, the FBI’s hope that the professor’s involvement in the demonstrations at the 1968 Democratic convention would be limited as a result of the IRS action was not fulfilled: The professor took advantage of IRS rules that grant taxpayers the right to request a temporary postponement of an audit. The Senate Intelligence Committee did not disclose the outcome of the professor’s audit.
CLAWING BACK AT THE BLACK PANTHERS
A great deal of the pressure on federal law enforcement agencies to move against civil rights activists and critics of the Vietnam war came from President Johnson, President Nixon, FBI Director Hoover, and CIA Director Richard Helms. It is well to remember, however, that powerful members of Congress were also pressing the agencies to act against the dissenters. Especially after the assassination of Dr. Martin Luther King, Jr., in April 1968 and the subsequent riots in Washington, D.C., and a number of other cities, conservative members of Congress repeatedly demanded that the IRS become actively involved in collecting political intelligence.
The details of congressional involvement in encouraging the IRS and other agencies to collect information about a variety of political activists remained secret until after the serious abuses of the Watergate era had been firmly pinned on President Nixon. Subsequent investigations by the Joint Committee on Internal Revenue Taxation and the Senate Judiciary Subcommittee on Constitutional Rights, however, prove that Congress played a leading role in the IRS’s decision to become active during this turbulent period.
In September 1968, for example, Philip Manuel, an investigator with the Senate Government Operations Committee, met with IRS officials and demanded more information about black activist groups such as the Student Non-Violent Coordinating Committee and the Congress of Racial Equality. Manuel also wanted intelligence about Students for a Democratic Society. A 1975 staff study by a Senate Finance subcommittee found that Manuel and his colleagues complained to the IRS that the agencies “have not done more in gathering real hard facts.”14
Two weeks after meeting with Manuel, the IRS informed Senator John McClellan, the conservative Arkansas Democrat who headed the Government Operations Committee, that the agency “would cooperate with the committee’s investigation.” Washington also ordered IRS district directors in thirteen cities to cooperate.
The pressure from Senator McClellan’s staff for more political intelligence from the IRS continued throughout the remaining months of Lyndon Johnson’s presidency in 1968 and into the first heady days of the Nixon administration.
The Nixon White House soon showed it was at least as worried about the demonstrations as Senator McClellan and President Johnson. On June 16, 1969, IRS Commissioner Randolph Thrower wrote a memorandum for the record about a meeting he had had that day with Arthur Burns, then head of the White House office of domestic policy. According to Thrower, Burns said that Nixon was concerned “over the fact that tax-exempt funds may be supporting activist groups engaged in stimulating riots both on the campus and within our inner cities.”
The record further indicates that two weeks later, on July 1, 1969, another White House staff member expressed interest in IRS efforts to investigate “ideological organizations.” We know this because about a year later Tom Charles Huston sent Roger Barth, an assistant to Commissioner Thrower, to request an update on the IRS’s “review of the operations of ideological organizations. I would be interested in knowing what progress has been made since July 1, 1969, when we first expressed our interest in this matter.”
It was also on July 1 that Donald Bacon, the assistant IRS commissioner for compliance, sent Barth a long note concerning the “recent high level interest shown in the activities of Ideological Organizations.…” He explained that his division had been collecting all known facts about “the National Student Association, the Black Panther Party, Students for a Democratic Society, the Progressive Labor Party and the Inter-religious Foundation for Community Organization.”
Meanwhile in the IRS’s Atlanta office, again on July 1, Special Agent E. D. Hughes filed a travel expense authorization request for a trip to Washington. Hughes’s request, which was approved, said, “My presence in Washington, D.C. is necessary to assist the National Office with a report on militant organizations…. The report was requested by and will be submitted to the White House.”
Two and a half weeks later, Bacon, assistant commissioner for compliance, sent the other IRS assistant commissioners and the agency’s chief counsel a confidential statement about the formation of a group to coordinate all IRS activities involving “ideological militant, subversive, radical and similar type organizations.”
A few days later, an IRS official, in a memo about the new group’s first formal meeting, wrote that the participants were engaged in “an extremely important and sensitive matter in which the highest levels of government are interested.” For some reason, this memo did not indicate who had written it.
While boasting about high-level backing, the memo contained an unusual confession: The work of the group had nothing to do with the lawful mission of the IRS and everything to do with the agency’s political standing among the power brokers of Washington. “From a strictly revenue standpoint, we may have little reason for establishing this committee or expending the time and effort which may be necessary, but we must do it. We have gotten too much adverse publicity about exempt organizations.…”
AN UNFORTUNATE NAME: THE SSS
By the middle of August, Paul H. Wright, IRS manager of what was soon officially named the Special Service Staff, began submitting progress reports. One described the establishment of formal relations with the FBI and the McClellan committee. Another disclosed the rental of a postal box under an assumed name so that the SSS could secretly subscribe to “communist endorsed newspapers” without the knowledge of the publications. By August 20, Wright claimed he had collected data on seven hundred individuals or organizations about whom “there is ample evidence of activities involving arson, fire-bombing, civil disorders, stores of ammunition, printing and distribution of publications advocating revolution against the government of this country.”
It was heady stuff.
Donald Bacon, the assistant IRS commissioner under whose wing the SSS was located, appeared to have no doubts about the new project. Using vague phrases that made no reference to possible tax abuses, he asked Hoover to provide the secret new intelligence group with information about “various organizations of predominantly dissident or extremist nature and/or people prominently identified with these organizations.” Bacon apparently did not believe it was necessary to define what he meant by a “predominantly dissident or extremist” organization of person. D. J. Brennan, an FBI intelligence official, recommended that the bureau comply with the request because the SSS would “deal a blow” to “dissident elements.”
Among the material the FBI sent along was a list of 2,300 organizations categorized as “Old Left,” “New Left,” and “Right Wing.” The SSS also received about ten thousand names from the Interdivision Information Unit (IDIU), a computerized intelligence file started by Ramsey Clark when he was running the Justice Department for President Johnson.
Once news of the secret IRS political surveillance group became public in a Time magazine article in the summer of 1973, the SSS was immediately abolished by Donald Alexander, then the commissioner. The SSS was so improper it simply could not stand the light of day. In the following year, several congressional committees launched investigations. The Senate Judiciary Subcommittee on Constitutional Rights concluded that the establishment of the SSS was not legal and that its operations undermined public faith in the IRS. Finally, it said, the activities of the SSS endangered the constitutionally guaranteed right to free speech.
The Senate Select Committee on Intelligence said that its investigation had determined that thousands of individuals and organizations in the files of the SSS had been targeted “because of their political and ideological beliefs and activities,” not “on the basis of probable noncompliance with the tax laws.”
In recent years, some Americans have sought to minimize the importance of the domestic intelligence operations of this period by suggesting that little harm was done. The Senate Select Intelligence Committee, however, noted that many of the individuals and organizations whose names were obtained by the SSS “were later subjected to tax audits and some tax fraud investigations.”
The names on the SSS lists illustrate the ridiculous problem created by the inability of government officials to define the threat that obsessed them. Selected for special attention were Nobel laureate Linus Pauling, Senators Charles Goodell of New York and Ernest Gruening of Alaska, Representative Charles Diggs of Michigan, journalists Joseph Alsop and Jimmy Breslin, and Mitchell Rogovin, the former IRS official. Organizations ranged from the right-wing John Birch Society to the upper-middle-class good-government lobby Common Cause. Also on the list were the Legal Aid Society, the Associated Catholic Charities, the Carnegie Foundation, Playboy magazine, and even one federal agency, the U.S. Civil Rights Commission.
Ever since Richard Nixon resigned as president of the United States, a substantial number of Americans have taken comfort in the false notion that he was a unique monster whose term in office marked the beginning, and the end, of improper activities by the IRS. The record clearly shows that this notion is incorrect.
There thus was and is no single devil who can conveniently be blamed for runaway government of the post–World War II period. The Nixon officials were right when they claimed that Kennedy was guilty too. Of course, they should also have mentioned Herbert Hoover, Franklin Roosevelt, Harry Truman, Dwight Eisenhower, and Lyndon Johnson.
The incremental creation of domestic intelligence programs within the federal government led to a situation where the special talents of many agencies—sometimes to investigate, sometimes to prosecute, and sometimes to subject to such administrative penalties as tax audits—were routinely leveled against those who chose to dissent, whether lawfully or otherwise.
Given the narrow focus of the IRS’s mission to collect the nation’s taxes, the agency’s broad opposition to political dissent sometimes was breathtaking. Consider, for example, Revenue Ruling 75–384, an advisory opinion the agency issued in the mid-1970s at the request of a nonprofit organization that had been formed to promote “peace and disarmament.” This organization was unusual because its application for tax-exempt status included an explicit statement that its actions on behalf of peace might involve civil disobedience. The organization asked the IRS whether that might pose a problem.
The answer came in one of the agency’s public rulings, a relatively brief advisory opinion designed to provide general guidance. For reasons of privacy, the name of the individual or organization asking the question is deleted from the public version of the ruling.
The IRS said that the peace group couldn’t qualify as a tax-exempt charity for several reasons. Under one of the major rules of charity, the agency said, no trust can be created for a purpose that is illegal. The IRS added that a trust would be illegal if it had been established to promote “an object which is in violation of the criminal law, or if the trust tends to induce the commission of a crime, or if the accomplishment of the purpose is otherwise against public policy.”
The IRS ruling then held that charitable trusts, and by implication all tax-exempt organizations, “are subject to the requirement that their purposes may not be illegal or contrary to public policy.” The IRS was worried about groups that questioned public policy, especially if they expressed their questions through any form of civil disobedience.
THE THREAT OF PUBLIC INTEREST LAW FIRMS
At times, the IRS’s opposition to those who challenge its understanding of the status quo has gone far beyond those difficult citizens who exercise their rights to free speech by organizing noisy demonstrations concerning sensitive questions of race and national security. On one occasion, for example, the IRS actually sought to deny tax exemption to a handful of lawyers who sought to use the federal courts as a forum where important questions of social equity could be decided lawfully.
The story goes back a long way. In 1876, the German Society of New York established an office to provide legal aid to the poor. By the beginning of World War I, legal aid societies had been established in forty-one cities. In 1916, another group of citizens established the American Civil Liberties Union (ACLU). And in 1939, the NAACP’s Legal Defense Fund was created to undertake court actions to protect the rights of blacks. Thus the accepted role for tax-exempt law groups developed slowly: to look out for the interests of unpopular or disenfranchised minorities.
But as Oliver A. Houck pointed out in his brilliant 1984 analysis in the Yale Law Journal, the definition of the appropriate role for public interest law firms was not static.15 In 1968, for example, a small group of citizens formed the Environmental Defense Fund. A year later, some others created the Center for Law and Social Policy. And in 1970, Ralph Nader held a news conference announcing that a group of lawyers not connected with his organization had asked the IRS to grant them tax-exempt status for what they initially called the Project for Corporate Responsibility. The purpose of all these new groups was to reach out beyond the worthy minorities represented by the NAACP and the ACLU and attempt to represent a larger public on such subjects as protecting the environment from industrial pollution.
Both the IRS and the Nixon White House were worried. Were the new groups charitable? Were they accountable? Did they not offer services that put law firms without tax exemption at a disadvantage?
Again, as persuasively argued by Houck, an associate professor at the Tulane Law School, the new firms did not unbalance the scales of justice. They were, in fact, an attempt to balance them. Under the tax laws and procedures in place before these new firms were created, corporations were allowed to deduct as necessary business expenses the costs of defending their interests in court. The salaries of lawyers representing the immediate interests of government agencies such as the Nuclear Regulatory Commission were, of course, paid by taxpayers. The only groups not directly or indirectly subsidized by the taxpayers were those representing consumers, environmentalists, and other broadly defined public-interest groups.
The IRS was at first baffled by the new groups, which challenged the performance both of business and of government regulatory agencies. Some requests for tax-exempt status were stalled, some were granted, and others were denied. But on October 9, 1970, an IRS press release announced that it had temporarily suspended the issuance of all new rulings for public interest groups that brought legal actions “for what they determine to be the public good in some chosen field of national interest.” Concerning donations to the new firms the agency had already approved, the IRS appeared to execute a retroactive retreat. The IRS, the press release said, was “in no position at this stage to make any judgment about the deductibility of contributions … to currently tax exempt firms of the type being studied.”
The IRS’s clumsy but sweeping suspension of rule making had the effect of once again enlisting the power of the agency against those who challenged the status quo and, in this case, for those large corporations that pollute the air and water of the nation. Unlike many of the protests of the civil rights and anti–Vietnam war groups, however, the new challenge was not mounted on the streets. Instead, the public interest groups made the explicit assumption that they would obtain a fair hearing in the federal courts.
The IRS decision was incomprehensible. So absurd, in fact, that the roof fell in on the agency. Senate hearings were scheduled. Nineteen former Cabinet members joined in writing a letter demanding qualification of the new groups. Even Washington’s most prestigious corporate law firms—Arnold & Porter, Caplin & Drysdale, and Wilmer, Cutler & Pickering—joined the chorus of criticism against the IRS.
On November 17, 1970, five weeks after it had announced the suspension and four days before it was scheduled to defend its policy before a Senate committee, the agency totally reversed itself. The IRS said it had completed a study of the problem and would immediately begin issuing tax-exempt rulings to public interest law firms under newly developed guidelines.
While the IRS’s open effort to stop these law firms apparently had been defeated, forces within the Nixon White House and the IRS were not yet prepared to give up their war against the young upstarts who sought to challenge corporate America.
We know this because at the very same time that the IRS was publicly announcing that it was prepared to approve the applications of the public interest law firms, it was privately doing the exact opposite. The case in point involves the Project for Corporate Responsibility, which went through an extraordinary two-and-a-half-year period of IRS delays before the agency finally rejected its application.
The Project for Corporate Responsibility first filed its application for tax-exempt status on September 3, 1970, just one month before the IRS announced its short-lived decision to suspend its consideration of such applications.
Then on April 16, June 2, and August 18, 1971, and August 18, September 27, and October 24, 1972, the IRS asked the project for additional information. Somehow the IRS could not make up its mind. Regularly, through May 1, 1973, lawyers for the project kept asking the IRS for a decision. Finally, on May 2, they filed suit asking the court to order the IRS to rule one way or the other. Two weeks later, senior IRS officials rejected the recommendation of their professional staff and ruled that the project was not entitled to tax-exempt status because it did not meet the definition of a charity. The negative decision, of course, meant the project was not qualified to receive tax-deductible contributions.
The lead lawyer for the group, which now had changed its name to the Center for Corporate Responsibility, was Tom Troyer, a highly respected partner in the well-established Washington law firm of Caplin & Drysdale. With the blessing of the court, Troyer began discovery proceedings in the files of the IRS and the White House. He also received some inadvertent help from John Dean, President Nixon’s legal adviser. On June 29, 1973, Dean presented the Senate Watergate Committee with White House memos written in 1970 and 1971 indicating that attempts were being made to force the IRS to take administrative actions against “left wing” and “activist” organizations whose views the White House found offensive.
As Troyer’s discovery proceedings continued, he too found more and more indications of political intervention. For example, the center’s application had in fact been approved within the IRS. This initial decision was reversed, however, after it was referred to Roger Barth, a former Nixon political operative who had recently been appointed the agency’s deputy counsel. (Barth had begun his career in the IRS as the assistant to the commissioner.)
Equally suggestive was a handwritten note Troyer noticed on one of the thousands of pages he had obtained from the IRS. The October 7, 1971, note was written by Richard Cox, then the assistant director of the IRS’s Interpretive Division. “Perhaps White House Pressure,” Cox scribbled in his clear hand.
On December 12, 1973, Federal Judge Charles R. Richey handed down his decision, one of the rare instances when the agency has been formally convicted of the political manipulations that it so regularly practices.
“A showing of political influence renders the Service’s ruling null and void,” Judge Richey wrote. “It is outside the law. The court is concerned not only with direct political intervention, but also with the creation of a political atmosphere generated by the White House in the Internal Revenue Service which may have affected the objectivity of those participating in the ruling in the plaintiff’s case.”
Over the years, the targets of IRS hostility have usually been political activists of one kind or another—right-wing fundamentalist ministers, Communists, civil rights activists, the Ku Klux Klan, public interest lawyers. But sometimes the agency’s weapons have been aimed at those whose principal crime seems to have been to offend the sensibilities of an agency bureaucrat. For many Americans, for example, the gradual emergence of gays and lesbians into public life has been one of the most disturbing developments of the last twenty-five years.
IRS V. GAY
Stanley S. Weithorn is a New York lawyer who for many years has specialized in the nuances of tax-exempt law. Weithorn and his wife live on Long Island, and he maintains a large sunny office on the nineteenth floor of a Manhattan office building. Weithorn’s clients include a wide range of different, sometimes controversial, philanthropic organizations. So when Aryeh Neier, national director of the American Civil Liberties Union, called and asked him for help, Weithorn immediately understood the case could be contentious.
“Aryeh said he had an important case,” Weithorn recalled. “He said it involved a group that had been established to carry out an educational program to acquaint the public about gay life. I met the leaders of the group in late 1974. The purpose of the proposed organization was to collect and disseminate factual information about the role of homosexual men and women in American life in hopes of reducing the prejudices against them. They were serious people with a serious program.”
The name of the organization was the Fund for Human Dignity. After several months of preparation, on March 17, 1975, Weithorn submitted an application for tax-exempt status. “If you excluded the word ‘homosexual’ from the papers, it was a totally routine application that would have been routinely approved at the local level. But as I expected would happen, the matter was immediately referred to Washington.”
Then came a long period of administrative hassling by the IRS. On September 15, 1975, Milton Cerny, Chief of Rulings Section Number 2, Exempt Organizations Technical Branch, sent Weithorn a letter with a number of specific questions.
Several questions were revealing. “Will you advocate in any way the position that homosexuality is a mere preference, orientation, or propensity, which is on a par with heterosexuality or should be otherwise regarded as normal?”
The IRS clearly was uneasy about the possibility that the fund might contend that homosexual life was not a perversion. Cerny posed the question long after leading medical authorities, including the American Psychiatric Association and the American Psychological Association, had formally concluded that homosexuality was simply one form of sexual behavior and was not, in itself, a “mental disorder.”
Another group of IRS questions was even more revealing of the agency’s hostility. “Will you sponsor any social activities? If so, describe these activities. Will these activities be conducted or utilized so as to not encourage or facilitate homosexual practices to a consequential degree?”
It was during this period, Weithorn said, that he got a telephone call from the IRS in Washington. “They told me that they were leaning toward a favorable ruling, but that to get it we would have to accept four specific conditions.”
The IRS conditions shocked Weithorn. “The first condition was that we should promise never to issue a statement indicating that homosexuality is not a disease. We didn’t have to say it was a sickness but the IRS clearly didn’t want us to quote the ruling of the American Psychiatric Association,” the lawyer said.
“The second condition was that any discussion panel we formed would have to have what they called ‘true balance,’ specifically would have to include an avowed enemy of homosexual life. To me this was like telling a peace group that any panel it formed would have to include General Curtis LeMay.
“Third, the IRS said that even though we would be an educational organization, we must agree not to prepare any material for radio and television. The agency’s position here seemed to be that such programs might affect the life-styles of children.
“The final condition was that if the fund organized a meeting, there should not be any ‘social interchange.’ The IRS was a bit vague on this condition. But it appears the bureaucrats thought it might prevent the mass orgies they seemed to think were a normal part of all homosexual meetings.”
Weithorn told the IRS that the four conditions were totally unacceptable, which of course meant that the group’s request was not approved. In turn, the failure of the fund to obtain tax-exempt status meant that foundations and individuals withheld their contributions, and the planned operations of the organization had to be sharply curtailed. The IRS, at least for a time, appeared to have achieved its actual goal.
Immediately after Jerome Kurtz was appointed IRS commissioner by President Carter, Weithorn appealed for a new hearing on the agency’s effort to muzzle the Fund for Human Dignity. Seven weeks later, the IRS gave the fund a favorable ruling.
THE IRS, THE CATHOLIC CHURCH, AND OTHER KINDS OF SEXUAL ACTIVITY
The IRS’s initial response to the application of the Fund for Human Dignity is a perfect example of how it sometimes treats an unpopular group that, at the time of the incident, had very little political power. Of course, there are endless examples of the opposite side of this coin: how far the IRS will go to bend the law for groups with genuine political strength.
One of the most blatant and difficult such examples involves the Roman Catholic Church and its use of tax-exempt funds for directly political purposes. A well-established provision of the tax law explicitly states that religious, educational, and charitable groups with tax exemption may not “participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.”
Toward the end of the Carter administration, Gail Harmon, a Washington lawyer representing the National Abortion Rights Action League, began sending to the IRS scores of documents distributed by church-connected groups located throughout the United States. Harmon contended that the newsletters, leaflets, questionnaires, reports, and articles proved that the Catholic Church in its campaign against abortion had violated the law forbidding tax-exempt groups from direct political activities. There was a newsletter printed by a Catholic Church in Pennsylvania listing the political candidates for state and national elections who “favor life.” There were articles written by a Minnesota priest, the “Diocesan Pro-Life Director,” endorsing specific candidates. There was a Missouri newspaper article describing how the official newspaper of the local archdiocese refused to sell advertising space to a congressional candidate with a position on abortion that was unacceptable to the Catholic Church. In several letters to Harmon, the IRS acknowledged receiving her material. But it took no public action.
Then, in 1981, a large group of organizations favoring abortion rights brought suit against three parties: the Roman Catholic Church, the IRS, and the agency’s boss, Treasury Secretary Donald Regan. The charge against the church was that it had violated the tax exemption law by repeatedly using tax exemption contributions for political purposes. The charge against the IRS and the treasury secretary was that they had “consistently overlooked these violations and failed and refused to do their duty to enforce the Code and the Constitution.”
To buttress their court case, the consortium, Abortion Rights Mobilization, quoted extensively from “A Pastoral Plan for Pro-Life Activities,” adopted in November 1975 by both the U.S. Catholic Conference and the National Conference of Bishops. One section of the plan called for the creation of congressional pro-life action groups that would “work for qualified candidates who will vote for a constitutional amendment and other pro-life issues.”
The suit also cited many specific examples of the church’s direct involvement in political campaigns similar to those documented for the IRS by Harmon. In September 1980, for example, Humberto Cardinal Medeiros, Roman Catholic archbishop of Boston, attacked two congressional candidates in a letter sent to 410 parishes a few days before a primary election. The letter was read from many pulpits and published in the official archdiocesan paper.
The pro-choice groups contended that in the case of the Catholic Church the IRS has flagrantly engaged in selective enforcement of the law concerning the use of tax-exempt funds. The result, they say, is that the church is receiving an illegal subsidy from the government to promote its views by open political activities.
Almost a decade later, the suit is still pending and the IRS has still failed to revoke the tax-exempt status of the Catholic Church as clearly required by law. What makes the agency’s inaction in this case such an unusually clear example of selective enforcement is its 1964 decision to revoke the tax-exempt status of Christian Echoes, a nonprofit church organized in Oklahoma by Dr. Billy James Hargis, an ordained minister.
The IRS decision was partly based on its finding that Christian Echoes had sought to influence congressional decisions on dozens of social issues: the Nuclear Test Ban Treaty, civil rights legislation, Medicare, and proposals that the United States withdraw from the United Nations. In addition, the agency said that the conservative fundamentalist church had intervened in political campaigns by attacking the likes of John F. Kennedy and William Fulbright and supporting Barry Goldwater and Strom Thurmond.
Dr. Hargis appealed the ruling to the federal courts, contending that it violated the First Amendment guarantee of freedom of religion. The U.S. Court of Appeals in Denver, however, rejected this argument. It said that the revocation was constitutional because, although the exercise of religion was indeed a right that is fully protected by the First Amendment, tax exemption is a separate privilege that is granted by the government under a set of rules established by law.
The suit brought against the Catholic Church by Abortion Rights Mobilization has been before various federal courts since 1981 and could well be there for another decade before it is resolved. In congressional testimony in 1987, however, Commissioner Lawrence B. Gibbs argued that the current tax exemption laws include so many ambiguities and nuances that they had become a “seedbed for taxpayer controversy.” He added that some of the recent changes in the statutes had continued a set of problems that “adversely affects our ability to administer the law even-handedly.”
After comparing the overtly political pro-life activities of the Catholic Church with the work of Christian Echoes against its enemies, Gibbs’s contention does not wash. The problem created by these two cases is not the product of murky law; the problem is that the law has put the IRS in an impossible place. Given the political power of the Roman Catholic Church, it is inconceivable that the IRS would ever revoke its tax-exempt status, no matter what it did. But with a little pressure from an annoyed President Kennedy, the IRS was perfectly willing to begin the process that ultimately would cause Christian Echoes, a far smaller institution, to lose its tax exemption.
What else could the IRS do? Members of the Catholic Church comprise one of the major voting blocs in the United States. President Reagan had repeatedly trumpeted his opposition to abortion and had been elected with the open support of many Catholics. President Kennedy had publicly urged the IRS to enforce the tax laws against fundamentalist right-wing ministers, who at that time were an insignificant political force. But while selective enforcement may be a necessary part of national politics, it is very damaging to the ideal of justice and to the public respect that the IRS must keep if our tax-supported society is to survive.
More important, perhaps, are the difficult underlying questions that are raised by this and dozens of other similar cases. What mechanisms can be put in place to assure the American people that the IRS does not routinely suppress unpopular social views whether expressed by the left or by the right? How can we prevent future presidents from forcing the IRS to attack the political enemies of the administration in power? What is the purpose of tax exemption? Given the complexity of the law and the understandable passions of many of the officials who can influence the agency’s actions, is evenhanded tax enforcement possible? Should a federal enforcement agency as powerful as the IRS be given the power to define which causes are worthy of charity and which are not?
*The Senate Select Intelligence Committee only printed the first CIA memo in the transcript of its hearing on the IRS. The second and third memos, however, were mentioned in a front-page story on October 3, 1975, in The New York Times that was written by Nicholas M. Horrock. The occasion of Horrock’s story was the previous day’s hearing by the Select Committee when the 1967 memos were made public. Why the committee did not publish all of the CIA memos that were released to the public at its hearing could not be determined.