IRS Investigation of NAACP Prompts Criticism by Lawmakers, Legal Experts

The Internal Revenue Service’s investigation of the NAACP and about 60 other charities and churches for possibly breaking federal law on banned political activities has prompted many legal experts and nonprofit officials to worry that the tax status of thousands of charitable groups could now be in jeopardy.

They say the investigation of the NAACP may signal that the IRS has changed its interpretation of the tax code and is applying a far more limited definition of advocacy, which could lead to investigations of many more groups than those now under examination, including ones that have criticized the policies of candidates. Many legal experts and members of Congress also said they feared the investigation of the NAACP was motivated by politics, since it came shortly before Election Day, and they have asked the IRS to justify its actions. The IRS has denied any political motivations.

Under federal law, churches and charities must not participate in a political campaign in behalf of, or in opposition to, a candidate for public office, but tax lawyers say that charities may engage in advocacy related to their missions, including taking positions on issues or praising or criticizing government policies.

Convention Speech

Just days before last week’s presidential election, the NAACP released a letter from the IRS, dated October 8, saying the tax agency was reviewing “whether or not your organization has intervened in a political campaign” in a speech by Julian Bond, the group’s chairman, at the NAACP’s convention in July.

In the speech, the IRS wrote, Mr. Bond “condemned the administration policies of George W. Bush on education, the economy, and the war in Iraq.”

In its letter, the IRS asked the NAACP to provide details about its operations, including the names and identities of board members, the cost of the convention, who authorized Mr. Bond’s speech, and minutes of board meetings in which a decision was made to distribute copies of the speech, which was posted on the charity’s Web site.

According to a transcript of the speech provided by the NAACP, Mr. Bond condemned both the Republican and Democratic parties for what he said were their failures to promote civil rights. “Where one party is shameless, the other party cannot afford to be spineless,” he said.

Mr. Bond urged NAACP chapters to redouble their efforts to get voters to the polls. “If whites and blacks vote in the same percentages as they did in 2000, Bush will be re-defeated by three million votes,” he said.

NAACP officials said the organization did not violate any laws. If the civil-rights group deserves to be audited for criticizing the Bush administration, said Mr. Bond in a telephone conference call, “I think about half the people in this country would find their income taxes under audit.”

Concern About Politics

Some members of Congress and former IRS officials questioned the timing of the IRS’s investigation of the NAACP, which began less than a month before Election Day.

In a letter to the revenue service, Sen. Max Baucus, Democrat of Montana, said the move recalled the Nixon administration’s use of the tax agency to audit the president’s enemies.

Mr. Baucus asked the IRS to disclose whether Bush administration officials had ordered the tax agency to audit the NAACP and the names of the IRS officials who approved the review.

House lawmakers put it even more strongly in a letter to the revenue service. “It is obvious that the timing of this IRS examination is nothing more than an effort to intimidate members of the NAACP, and the communities their organization represents, in their get-out-the-vote effort nationwide,” wrote Reps. Charles B. Rangel, Fortney (Pete) Stark, and John Conyers Jr. “The chilling effect of the IRS’s attack on the NAACP will be felt by the tax-exempt community at large and cannot go unchallenged. We demand that you publicly, specifically and immediately repudiate the recent actions of the IRS taken against the NAACP.”

A former high-ranking official of the Treasury Department who served during a Republican administration said that politics may have been behind the IRS’s decision to audit the NAACP.

“We just haven’t seen anything like this before,” said the former official, who asked for anonymity because of the sensitivity of the matter. “We have an extremely political White House. We have an extremely political Treasury secretary.” With IRS officials eager to curry favor with the Bush administration, the former official added, “it’s not impossible that some of the rules have been pushed a little bit.”

Internal Revenue Commissioner Mark Everson said that he could not comment on the NAACP case. But, he said in a statement, the IRS follows strict procedures in auditing and resolving complaints about such groups. “Any suggestion that the IRS has tilted its audit activities for political purposes is repugnant and groundless,” Mr. Everson said.

The NAACP is far from the only group being investigated.

The IRS announced that a special committee formed some months ago had reviewed more than 100 charities and churches for which the tax agency had received public complaints about alleged political activities. The IRS then selected 60 of those organizations to be audited.

As is its policy, the IRS did not identify the nonprofit organizations or churches that it is investigating.

The NAACP case and the other investigations by the tax agency may reveal that the revenue service is changing its view of what constitutes political activity, according to legal scholars and lawyers for charities.

Frances Hill, a law professor at the University of Miami and an expert on the political rights of tax-exempt organizations, said she was “perplexed and disturbed” that the IRS investigation of the NAACP focused on Mr. Bond’s speech. Ms. Hill said his speech did not violate federal law because his remarks were tied to the group’s mission.

“Historically, the NAACP has been critical of presidents who they feel are lagging on civil rights,” said Ms. Hill. “I have not heard of parsing of speech text with the devotion usually accorded to Holy Scripture. If we’re going to start parsing speech like this, I think we have a new standard and the IRS must be planning to audit hundreds of other groups.”

Ms. Hill added that the IRS has traditionally focused on overt electioneering such as paid newspaper ads. In a high-profile case in 1995, the agency revoked the tax-exempt status of Branch Ministries — operating as the Church at Pierce Creek — for running newspaper advertisements opposing Bill Clinton for president in 1992.

Bruce R. Hopkins, a lawyer in Kansas City, Mo., and the author of numerous legal guides for nonprofit organizations, said he also thought the NAACP investigation represented a change in the tax agency’s definition of what is acceptable and what is not.

“The IRS is going after this organization without first publicly articulating what the law is. They’re trying to make policy out of a specific case, instead of setting policy first,” he said.

If the IRS presses a case against the NAACP, thousands of charities could be affected, Mr. Hopkins said. “I’ve seen all sorts of policy statements in the context of a campaign” made by charities, he said. “If this is the law, I have clients who have violated the law. This move on the part of the IRS is going to have a big impact on a lot of organizations. They’re going to be surprised to hear they’ve been conducting political activities all along.”

Mr. Hopkins said he understood, however, why the IRS might call the speech into question. He said Mr. Bond’s comments made clear which candidate the organization preferred, even though Mr. Bond never called on NAACP members to vote for or against a specific person.

“If you’re critical of policy only, is that intervention?” he said. “Normally, I think the answer’s no. But if you do it in the context of a campaign and you’re so specific in your criticism that it’s obvious whether you support or oppose a candidate, I think it’s a violation of law.”