Feds Stumble in Tax Spat With Tea Party Groups

CINCINATTI (CN) - Accused of unfairly scrutinizing Tea Partiers, the Internal Revenue Service must reveal what groups applied for tax-exempt status and when, a federal judge ruled.

U.S. District Judge Susan Dlott's order Wednesday comes in an ongoing class action against the IRS led by California-based NorCal Tea Party Patriots, which says the agency singled out groups like them based upon their names and political positions after they applied for tax-exempt status.

For the IRS, political-sounding names that seemed to identify with the Tea Party "such as 'We the People' or 'Take Back the Country'" raised major red flags, according to the complaint.

After considering the latest version of the complaint last year, the court has advanced claims that the IRS violated the First and Fifth Amendments to the U.S. Constitution and Section 6103 of Title 26, a statute tahat protects the confidentiality of tax-return information.

With the IRS having presented a list of 298 applicants for tax-exempt status to the Treasury Inspector General for Tax Administration, the Tea Partiers seek to certify a class of "all dissenting groups targeted for additional scrutiny by the IRS from January 20, 2009, through July 15, 2013."

The IRS has balked during discovery, however, claiming that the documents that the plaintiffs need to identify potential class members are exempt from discovery because the records appear on tax forms containing the very material that Section 6103 protects.

Disagreeing that they are seeking the application files themselves, the plaintiffs said they only want the spreadsheets that the IRS created to track applicants.

Judge Dlott agreed Wednesday that such information is important to the proceedings and not exempt.

"The Court concludes that the return information sought is directly related to the issue of class certification in this federal court proceeding," the ruling states. "Plaintiffs seek the return information of the putative class members to prove to the court that Federal Rule of Civil Procedure 23(a) and 23(b) requirements such as typicality, commonality, and whether the IRS acted on a grounds that applied generally to the putative class are satisfied."

The plaintiffs are represented by David Langdon of West Chester, Ohio.

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