September 14, 2006 | Read Time: 4 minutes
Two-year investigation did little to clarify how charities can influence public policy, critics say
After a two-year investigation, the Internal Revenue Service has concluded that the National Association for the Advancement of Colored People did not violate tax laws or rules that prohibit political campaigning and may keep its tax-exempt status. But legal experts are divided about whether the IRS action did much to clarify what charities are allowed to do when it comes to influencing elections.
The IRS started the investigation to explore whether a 2004 speech by Julian Bond, the charity’s chairman, might have violated federal law that says charities may not support or oppose a candidate for public office.
Mr. Bond’s speech contained criticisms of President Bush’s policies and the war in Iraq and was made several months before Election Day.
The NAACP has said that Mr. Bond’s speech was not improper because he was commenting on general issues affecting the nation, and that the group has a long history of speaking out against the policies of both political parties.
The NAACP released a letter it received from the IRS last month stating that the government’s review of video footage of the speech by Mr. Bond and other information indicated that “political intervention did not occur.”
Questions About Motivations
NAACP officials, while pleased with the outcome, criticized the path required to reach it.
“It’s disappointing that the IRS took nearly two years to conclude what we knew from the beginning: The NAACP did not violate tax laws and continues to be politically nonpartisan,” said Bruce S. Gordon, the charity’s president, in a statement. “Tax-exempt organizations should feel free to critique and challenge governmental policies under the First Amendment without fear of IRS intervention.”
The charity had questioned both the timing and motivation behind the government’s investigation, which was started barely a month before the 2004 presidential election. Through Freedom of Information Act requests, the NAACP learned that the investigation was prompted, in part, by eight Republican lawmakers.
Last year, the NAACP’s lawyers sent a letter to the IRS, accusing the agency of yielding to “political pressure rather than sound legal authority” and suggested that the action was in “direct response to the request of political figures who may very well be concerned about voter registration and turnout by African-American voters.”
While the IRS did not comment on its investigation or the NAACP’s position, the agency released a statement calling its procedures “fair, even-handed,” and free from “political considerations.”
Because it questioned the very legitimacy of the investigation, the NAACP refused IRS requests that the charity submit financial documents and other information related to Mr. Bond’s speech, which occurred at the group’s annual convention.
“The NAACP never did provide a substantive response to any of the IRS requests, so the IRS made its decision based on the same information that it had in hand in the beginning,” said Marc Owens, a lawyer for the NAACP who formerly headed the IRS division that oversees nonprofit groups. “It raises real questions about IRS decision making in these political-activity audits.”
Mr. Owens added that the agency’s move to “suddenly back away” from its investigation “should be of considerable concern for the agency and should be of concern to other organizations that may be in similar circumstances but not have the fortitude to stand up to the IRS.”
Kay Guinane, director of nonprofit advocacy programs at OMB Watch, a government watchdog group in Washington, hailed the outcome of the NAACP case as a victory for nonprofit organizations everywhere.
“Nonprofits can now rest assured that their right to criticize public officials and policies remains protected,” she said. “The IRS, in the end, did not consider that to be partisan electioneering and it never has been.”
Bruce Hopkins, a Kansas City, Mo., lawyer who represents numerous charities, said the IRS was justified in undertaking its investigation and lamented that the outcome did nothing to help clarify how charities can talk about public-policy issues around election time without coming under scrutiny.
“This outcome doesn’t mean much for nonprofits because it was just a unique set of circumstances and nothing has come out of this in terms of helping to shape the law,” he said.
Mr. Hopkins said he wonders whether the Bush administration, anxious to mend long-strained relations with the civil-rights group, might have influenced the agency’s decision to conclude its investigation.
Mr. Bush spoke at this year’s NAACP convention in July, his first appearance at the event since becoming president.
“The investigation was not being well received in the exempt- organization community and it’s my belief that the White House just wanted it to go away,” Mr. Hopkins said. “I’m sure the NAACP’s leadership is very happy. It’s a big win.”
The White House said, however, that it did not ask the IRS to end the NAACP inquiry.
Grant Williams contributed to this article.
