Pity Lois Lerner. She chose a poor time to act as Director of the IRS’s Exempt Organizations division, what with the Tea Party scandal, which resulted first in her being placed on paid administrative leave, and then to her resignation.
Even after her tenure at the IRS, though, Ms. Lerner can’t catch a break. On Halloween, Judicial Watch broke the news that she provided detailed, confidential information concerning the tax exempt application status and returns of conservative groups to the FEC in violation of federal law.
As the article points out, our tax returns and return information are confidential. Section 6103 of the Internal Revenue Code prohibits current and former officers and employees of the United States from disclosing taxpayers’ returns or return information (except in certain circumstances that wouldn’t apply here). Any improper disclosure is a felony, punishable by a fine of up to $5,000, up to 5 years in prison, or both.
And the case seems pretty open-and-shut. If the news reports are correct, Ms. Lerner shared information with the FEC and, in doing so, broke the law. So not only is she recently unemployed, she’s a felon facing fines and jail time.
Of course, Ms. Lerner’s future behind bars depends entirely on whether she broke the law in providing information to the FEC. And, it turns out, she probably didn’t.[fn1]
We need, of course, to look at the specific information about Tea Party groups Ms. Lerner sent to the FEC. According to the news, she sent:
- Their annual information returns (Forms 990);
- Their applications for a tax exemption (Form 1024);
- Articles of Incorporation and other corporate documents; and
- Correspondence between the Tea Party Groups and the IRS.
Now, under section 6103(b), all of that information would qualify either as a return or “return information.” So why am I asserting that no laws were broken?
Because the Internal Revenue Code doesn’t end at section 6103. In fact, you just have to go one section further, to section 6104, and you see a huge exception to the general rule of nondisclosure.
Section 6104 requires the IRS to make available to public inspection certain information related to organizations exempt from taxation under section 501(c) and (d) (which would include Tea Party groups applying for exemption under section 501(c)(4)).
As to the particular information disclosed: under section 6104(b), annual returns (meaning Forms 990) must be disclosed.
Under section 6104(a), applications for exempt status, together with any information submitted in support of such applications, must be included. That clearly includes the Form 1024. But it also includes the Articles of Incorporation and other corporate documents—if you look at page 3 of the Instructions for Form 1024, you see that the IRS requires Articles of Incorporation to be file with the application.
Finally, the email correspondence: that would probably fit in the category of information submitted in support of the application. But we probably don’t need to rely on its broad category: the Treasury Regulations provide that the IRS is required to make public all of its letters to an applicant, as well as any document, including those not required, submitted by an applicant for tax-exempt status.
But, you may ask, what if I want to get application information about organizations applying for a tax exemption under section 501(c)(4)? Wasn’t this just preferential treatment of the FEC?
Yeah, it probably was preferential treatment of the FEC. I doubt that you’ll get information back within 10 minutes, at least unless you know people I don’t know. But can you get the information? Yes; in fact, on its website, the IRS provides a bunch of information about disclosure for tax-exempt organizations, including how to get a copy of tax-exempt organizations’ application information and information return.
When I was a young attorney, one of the partner’s at my firm drove in that, in reading the Treasury Regulations, even if we found an answer, we needed to read to the end of the section, because there may be exceptions to or clarifications of that answer later on. The same holds true with the Code: while public disclosure of confidential tax information is a felony, that doesn’t mean all tax information is confidential. And when in doubt, it’s probably not the best idea to accuse someone of being a felon.
Update: a friend pointed out to me that, under section 6104(d)(3)(A), an exempt organization is not required to publicly disclose the name or address of contributors. That said, it’s not clear from the news stories that the IRS provided that information to the FEC, or that such provision would, itself, constitute a felony.
[fn1] That doesn’t mean she’s not a felon, of course. Some estimate that, because of vague laws and strict liability criminal statutes, most Americans commit three felonies a day. If that’s true, Ms. Lerner is almost undoubtedly a felon. But so am I and so are you.