Judicial Watch announced on Thursday that it received previously sealed court documents, including depositions of IRS officials Lois Lerner, the former director of the Exempt Organizations Unit of the Internal Revenue Service (IRS), and Holly Paz, her top aide and former IRS director of Office of Rulings and Agreements, which show that they knew most Tea Party organizations were legally entitled to tax-exempt status in the run up to the Obama reelection in 2012.
The release comes in the December 2017 amicus curiae brief (friend of the court) filed by Judicial Watch in NorCal Tea Party Patriots, et al. v. The Internal Revenue Service, et al. (No. 1:13-cv-00341). Judicial Watch argued that the documents sought may shed light on government misconduct, and the shielding of internal government deliberations does not serve the public’s interest.
Lerner’s and Paz’s depositions were sealed by Judge Barrett in April 2017, after Lerner’s and Paz’s lawyers claimed the two officials were receiving threats. The court finally ordered the unsealing of the depositions four years after plaintiffs requested the depositions be unsealed and only after plaintiffs filed for a writ of mandamus to force action in the U.S. Court of Appeals for the Sixth Circuit. (In December 2017, Judicial Watch submitted an amicus curiae (friend of the court) brief in support of plaintiffs’ request that the depositions should be unsealed.)
The sworn depositions were given in 2017 by Lerner and Paz. In the newly unsealed deposition transcripts, the two IRS officials repeatedly have memory lapses and regularly plead ignorance of the fundamental matters in question.
The unsealed Lerner and Paz deposition transcripts reveal through sworn testimony the bureaucratic tangle created by the Obama IRS to single out, delay and deny the processing of conservative, especially Tea Party non-profit groups’ applications for tax-exempt status and to disclose their donors’ names. At the same time, Paz admits under questioning that she knew from the beginning there was not sufficient legal basis to deny most of the targeted groups tax exempt status:
Q: [T]he organizations had filed applications representing …what they were organized for and what they have done and also their intended activities, and you thought that … for the majority of those applications that that would warrant the recognition of exemption?
The Witness [Paz]: My recollection is that at the time, my thinking was that the majority of the (c)(4) applications, while they may have indicated some amount of political activity, that we would not have enough basis to make a determination that that would be their primary activity and deny them exempt status.
Q: And, therefore, they would receive an approval or recognition of exemption?
The records also include an unsealed court filing by NorCal Tea Party Patriots that provides a detailed description of the ordinary process by which the IRS determines whether to grant an organization tax exempt status and how the process under Lerner deviated from that norm after the IRS brought Tea Party groups under special scrutiny following the Citizens’ United Supreme Court decision. (The Citizens United decision held that the First Amendment prohibits the government from restricting independent expenditures for political campaigns by corporations, including nonprofit corporations, labor unions, and other associations.)
The NorCal Tea Party Patriots filing details:
Lerner expressed strong feelings about the Supreme Court’s 2010 Citizens United v. FECdecision. In a June 1, 2012, email exchange with [redacted], Lerner wrote that “Citizens Unitedis by far the worst thing that has ever happened to this country.” Later in the same email exchange, Lerner expanded on her views of Citizens United:
We are witnessing the end of “America.” There has always been the struggle between the capitalistic ideals and the humanistic ideals. Religion has usually tempered the selfishness of capitalism, but the rabid, hellfire piece of religion has hijacked the game and in the end, we will all lose out. It’s all tied together— money can buy the Congress and the Presidency, so in turn, money packs the SCt. and the court backs the money—the “old boys” still win.”
Lerner sought to reverse the impact of Citizens United. In a June 11, 2012, email exchange with Robert Stern [former chair of the Council on Governmental Ethics Laws] about Stern’s report discussing states’ responses to Citizens United, Lerner wrote:
I like it! Very easy to find specific information, as well as get the big picture— you done good! Now, if you can only fix the darn law!”
In a February 13, 2012, email exchange among Lerner and various of her subordinates about [proposed] federal legislation that would require tax-exempt organizations to disclose their donors, Lerner wrote: “Wouldn’t that be great? And I won’t hold my breath.”
The NorCal Tea Party Patriots filing also describes Lerner’s targeting Tea Party groups after Citizens’ United:
Lerner began to worry that applicants for exemption would rely on Citizens United to challenge the IRS’s regulations on political activities by (c)(3) and (c)(4) organizations.
Lerner particularly worried that Tea Party groups would seek to challenge IRS regulations. In an email exchange concerning the February 1, 2011, SCR [Sensitive Case Report], Lerner told Paz and others: “Tea Party Matter very dangerous…This could be the vehicle to go to court on the issue of whether Citizen’s United [sic] overturning the ban on corporate spending applies to tax exempt rules. Counsel and Judy Kindell need to be in on this one please needs to be in this. Cincy should probably NOT have these cases—Holly please see what exactly they have please.’
Later in that exchange, Lerner directed her subordinates to find a reason other than political activity to deny the Tea Party applicants exemption under § 501(c)(3) to prevent them from challenging the exemption rules based on Citizens United:
Thanks—even if we go with a 4 on the Tea Party cases, they may want to argue they should be 3s, so it would be great if we can get there without saying the only reason they don’t get a 3 is political activity.
“These new transcripts expose new details and the cover-up of how the Obama IRS intentionally suppressed the Tea Party movement during the 2012 presidential campaign,” said Judicial Watch President Tom Fitton. “These documents show how the Obama administration easily used the IRS to suppress an entire political movement threatening his reelection. The Obama IRS abuse is the epitome of election interference. Given this largely unchecked abuse by the IRS, the Biden administration’s massive new expansion of the IRS should concern all Americans.”
Lois Lerner retired with full federal benefits in September 2013.
The original NorCal Tea Party Patriots lawsuit in which Lerner and Paz gave depositions was a class-action lawsuit against the Internal Revenue Service, the Department of the Treasury and named individual officials claiming that:
Elements within the Executive Branch of the federal government, including Defendants, brought the vast powers, incomprehensible complexity, and crushing bureaucracy of the IRS to bear on groups of citizens whose only wrongdoing was their presumed dissent from the policies or ideology of the Administration. In other words, these citizens were targeted based upon their political viewpoints.
The lawsuit was settled in 2017 when the Justice Department awarded the plaintiffs over $3.5 million for “attorneys’ fees, costs and expenses, and incentive awards.” In settling the case, the DOJ admitted the IRS abused its power and the criteria it used to screen applications for 501(c) status was inappropriate. Then-Attorney General Jeff Sessions stated:
The IRS’ use of these criteria as a basis for heightened scrutiny was wrong and should never have occurred. It is improper for the IRS to single out groups for different treatment based on their names or ideological positions. Any entitlement to tax exemption should be based on the activities of the organization and whether they fulfill requirements of the law, not the policy positions adopted by members or the name chosen to reflect those views.
Judicial Watch uncovered troves of documents about the Obama IRS scandal (see, for example, here and here). Judicial Watch filed at least nine Freedom of Information Act lawsuits about the IRS scandal, and much of what is known about the scandal resulted from Judicial Watch litigation and investigations.
Here is a partial summary of Judicial Watch disclosures:
· In September 2014, a Judicial Watch FOIA lawsuit forced the release of documents detailing that the IRS sought, obtained and maintained the names of donors to Tea Party and other conservative groups. IRS officials acknowledged in these documents that “such information was not needed.” The documents also show that the donor names were being used for a “secret research project.”
· In April 2015, Judicial Watch released court ordered IRS documents that included an email from Lerner asking that a program be set up to “put together some training points to help them [IRS staffers] understand the potential pitfalls” of revealing too much information to Congress. The documents also contain a Lerner email from 2013 in which she says she is willing to take the blame on some aspects of the scandal. She also indicates that she “understands why the IRS criteria” leading to the targeting of Tea Party and other opponents of the President Obama “might raise questions.”
· In July 2015, records showed the IRS scandal also included the Justice Department and FBI as well. According to documents obtained by Judicial Watch under court order, in an October 2010 meeting, Lerner, Justice Department officials and the FBI planned for the possible criminal prosecution of targeted nonprofit organizations for alleged illegal political activity. As part of that effort, the Obama IRS gave the FBI 21 computer disks, containing 1.25 million pages of confidential IRS returns from 113,000 non-profit, 501(c)(4) social welfare groups as part of its prosecution effort. According to a letter from then-House Oversight Committee Chairman Darrell Issa (R-CA) to IRS Commissioner John Koskinen, “This revelation likely means that the IRS – including possibly Lois Lerner – violated federal tax law by transmitting this information to the Justice Department …”
· Also in July 2015, Judicial Watch released Obama IRS documents confirming that the agency used donor lists of tax-exempt organizations to target those donors for audits. The documents also show IRS officials specifically highlighted how the U.S. Chamber of Commerce may come under “high scrutiny” from the IRS.
· In July 2016, Judicial Watch through a federal court order in one of its FOIA lawsuits (Judicial Watch v Department of Justice (No. 1:14-cv-01239)) obtained FBI “302” documents, which contain detailed narratives of FBI agent investigations, revealing that top Washington IRS officials, including Lois Lerner and Holly Paz, knew that the agency was specifically targeting “Tea Party” and other conservative organizations two full years before disclosing it to Congress and the public.
The FBI 302 documents also confirm the Treasury Inspector General for Tax Administration (TIGTA) 2013 report that said, “Senior IRS officials knew that agents were targeting conservative groups for special scrutiny as early as 2011.” Lerner did not reveal the targeting until May 2013, in response to a planted question at an American Bar Association conference. The documents reveal that then-acting IRS Commissioner Steven Miller actually wrote Lerner’s response, where she admits:
They [IRS staff] used names like Tea Party or Patriots and they selected cases simply because the applications had those names in the title. That was wrong, that was absolutely incorrect, insensitive, and inappropriate.
· In November 2016, after the IRS refused to acknowledge its targeting of conservative groups, Judicial Watch forced the release of IRS records revealing the agency used “inappropriate political labels” to screen the tax-exempt applications of conservative organizations. IRS agents were targeting organizations requesting tax-exempt status based on “guilt by association” and “party affiliation.” Judicial Watch brought to light that the IRS was going to require 501(c)(4) nonprofit organizations to restrict their alleged political activities in exchange for “expedited consideration” of their tax-exempt applications. FBI “302” documents uncovered by Judicial Watch also reveal that IRS officials stated that the agency was targeting conservative groups because of their ideology and political affiliation in the summer of 2011.
· Judicial Watch also separately uncovered in its lawsuit Judicial Watch, Inc. v. Internal Revenue Service (No. 1:13-cv-01559) that Lerner was under significant pressure from both Democrats in Congress and the Obama Justice Department and FBI to prosecute and jail the groups the IRS was already improperly targeting. In discussing pressure from Senator Sheldon Whitehouse (D-RI) to prosecute these “political groups,” Lerner admitted, “it is ALL about 501(c)(4) orgs and political activity.”
· In March 2017, Judicial Watch obtained IRS documents through its FOIA lawsuit Judicial Watch v. Internal Revenue Service (No. 1:15-cv-00220) that contain admissions by IRS officials that the agency used “inappropriate political labels” to screen the tax-exempt applications of conservative organizations. Other records uncovered reveal that the IRS was going to require 501(c)(4) nonprofit organizations to restrict their alleged political activities in exchange for “expedited consideration” of their tax-exempt applications.
· In June 2018, Judicial Watch obtained internal IRS documents through one of its FOIA lawsuits (Judicial Watch, Inc. v. Internal Revenue Service (No. 1:13-cv-01559)) revealing that Sen. John McCain’s former staff director and chief counsel on the Senate Homeland Security Permanent Subcommittee, Henry Kerner, urged top IRS officials, including then-director of exempt organizations Lois Lerner, to “audit so many that it becomes financially ruinous.” Kerner was appointed by President Trump as Special Counsel for the United States Office of Special Counsel.
In response to Judicial Watch’s litigation, the IRS initially claimed that emails belonging to Lerner were supposedly missing. Later, IRS officials conceded that the “missing” emails were on IRS back-up systems.