D.C. Circuit Revives Conservatives’ IRS Case

(CN) — The Internal Revenue Service must stop targeting conservative or anti-Obama groups by refusing to process their applications for nonprofit tax exemption, the D.C. Circuit ruled.

Franklin, Tenn.-based Linchpins of Liberty, leading 41 conservative groups, as well as Houston-based True the Vote Inc., separately sued the IRS and several individual employees in D.C. Federal Court in 2013.

The lawsuits came just weeks after an IRS official publicly apologized before the American Bar Association for the agency's pattern of "intentionally and systematically" targeting conservative organizations applying for tax exemption, according to one complaint.

The groups, who filed as charitable or educational 501(c)(3) organizations or 501(c)(4) social welfare groups, say the IRS delayed and singled out their applications starting in early 2010, based on their conservative or anti-Obama administration names.

The IRS made "harassing, probing, and unconstitutional requests for additional information that ... required applicants to disclose, among other things, donor lists, direct and indirect communications with members of legislative bodies, Internet passwords and user names, copies of social media and other Internet postings, and even the political and charitable activities of family members," according to the Linchpins' complaint.

The groups alleged violations of the First Amendment and Administrative Procedure Act, and sought money damages, an injunction and a declaratory judgment.

But U.S. District Judge Reggie Walton dismissed both lawsuits as moot in 2014, noting that the IRS had worked to end some of their unconstitutional actions after the plaintiffs sued.

Though the plaintiffs appealed, the D.C. Circuit partially affirmed the lower court's ruling Friday.

"The complaint in this case makes only conclusory allegations and 'general averments' regarding the handling of tax return information," Judge David Sentelle wrote for the three-judge panel. "Further, '[b]ecause Sec. 7431 represents a waiver of sovereign immunity, it must be 'strictly construed, in terms of its scope, in favor of the sovereign.'"

Yet the appeals court rejected the finding that the constitutional claims were moot.

"The IRS has admitted to the Inspector General, to the district court, and to us that applications for exemption by some of appellant-plaintiffs have never to this day been processed," Sentelle wrote.

The agency gave a "rather puzzling" explanation for its misconduct — that the two pending applicants were involved in "litigation" with the Justice Department, according to Friday's ruling.

"The IRS position is reminiscent of Catch-22 from the novel of the same name," Sentelle wrote.

The judge later added: "The IRS is telling the applicants in these cases that 'we have been violating your rights and not properly processing your applications. You are entitled to have your applications processed. But if you ask for that processing by way of a lawsuit, then you can't have it.' We would advise the IRS: if you haven't ceased to violate the rights of the taxpayers, then there is no cessation. You have not carried your burden, be it heavy or light."

Finding that the government failed to show that "interim relief or events have completely and irrevocably eradicated the effects of the alleged violation," the D.C. Circuit reversed the dismissal of the lawsuits for injunctive and declaratory relief.

Jay Sekulow, chief counsel of the American Center for Law & Justice in Franklin, Tenn., said the plaintiffs are "delighted" with the ruling.

"We have maintained from the outset of this case that the IRS engaged in unconstitutional targeting against our clients," Sekulow said in a statement. "Today, the court of appeals has cleared the way for our case to move forward."

Another of the plaintiffs' attorneys, Julian Fortuna with Taylor English Duma in Atlanta, said the court "correctly and definitively reversed the district court's flawed mootness decision" on the constitutional claims.

"We are looking forward to vigorously litigating those claims and obtaining appropriate relief for our clients upon the court ordered remand of the case," Fortuna wrote.

Justice Department spokeswoman Nicole Navas declined to comment on the ruling.

The individual defendants' D.C.-based attorneys, Brigida Benitez with Steptoe & Johnson and Jeffrey Lamken with Mololamken, did not return requests for comment Tuesday.

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