IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN .... Ohio... · simi valley moorpark tea...
Transcript of IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN .... Ohio... · simi valley moorpark tea...
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IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION-CINCINNATI
NORCAL TEA PARTY PATRIOTS, FAITH )
AND FREEDOM COALITION OF OHIO, )
SIMI VALLEY MOORPARK TEA PARTY, ) Case No. 1:13-cv-00341
TAMPA 9-12 PROJECT, SOUTH DAKOTA )
CITIZENS FOR LIBERTY, INC., TEXAS ) JUDGE SUSAN J. DLOTT
PATRIOTS TEA PARTY, AMERICANS )
AGAINST OPPRESSIVE LAWS, INC., )
SAN ANGELO TEA PARTY, PRESCOTT )
TEA PARTY, AND TEXAS PUBLIC POLICY )
FOUNDATION ON BEHALF OF )
THEMSELVES, THEIR MEMBERS, AND )
THE CLASS THEY SEEK TO REPRESENT, )
)
Plaintiffs, )
)
vs. )
)
THE INTERNAL REVENUE SERVICE, )
THE UNITED STATES OF AMERICA, )
LOIS LERNER, STEVEN MILLER, )
DOUGLAS SHULMAN, WILLIAM WILKINS, )
SARAH HALL INGRAM, JOSEPH GRANT, )
HOLLY PAZ, CARTER HULL, BRENDA )
MELAHN, CINDY THOMAS, BONNIEESRIG, )
STEVEN F. BOWLING, MITCHELL STEELE, )
CARLY YOUNG, JOSEPH HERR, STEPHEN )
SEOK, ELIZABETH HOFACRE, GRANT )
HERRING, and CURRENTAND FORMER )
EMPLOYEES OF THE INTERNAL REVENUE )
SERVICE IDENTIFIED AS JOHN DOES 1-100, )
)
Defendants. )
SECOND AMENDED CLASS ACTION COMPLAINT
COME NOW NorCal Tea Party Patriots, Faith and Freedom Coalition of Ohio, Simi
Valley Moorpark Tea Party, Tampa 9-12 Project, South Dakota Citizens for Liberty, Inc., Texas
Patriots Tea Party, Americans Against Oppressive Laws, Inc., San Angelo Tea Party, Prescott
Tea Party, and Texas Public Policy Foundation (“Plaintiffs”), on behalf of themselves, their
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members, and the class they seek to represent, and for their Second Amended Class Action
Complaint1 against the Internal Revenue Service, the United States of America (the “United
States”), the named individual Defendants and current and former employees of the Internal
Revenue Service, identified as John Does 1-100 (collectively, “Defendants”), state as follows:
SUMMARY OF THE CLAIM
1. This is a class action against the United States Internal Revenue Service, the
United States of America, the named individual Defendants, and certain of their officers and
agents (John Does 1-100) who are yet to be identified. Each plaintiff is an organization
comprised of individual citizens who have joined together to exercise their rights to freedom of
speech and expression. While these groups were formed for a variety of specific purposes, they
have at least one important characteristic in common: their apparent dissent from the policies or
ideology of the Executive Branch of the United States Government under its current
Administration (hereafter, the Plaintiffs, their members, and the class they seek to represent are
referred to as “dissenting groups”). Because their primary purposes are charitable or to promote
the common good and general welfare of the citizens of their respective communities, the
dissenting groups sought recognition of exemption from taxation by the Internal Revenue
Service under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code. However, the IRS
1 On January 23, 2014, Plaintiffs filed their Second Amended Class Action Complaint
(Doc. #71). Subsequently, counsel who had entered their appearance for the IRS and Treasury
Department suggested that the United States of America was the proper named defendant for
certain official capacity claims and, in papers, began to take positions on behalf of the United
States of America. Accordingly, this Second Amended Complaint replaces the Treasury
Department with the United States of America. Other than this change of name and an alteration
of certain relevant allegations to refer to the United States of America instead of the Treasury
Department, this corrected Second Amended Complaint is in all other ways identical to Doc.
# 71. This filing is made with written consent of the Defendants under Rule 15(a)(2). The
allegations in this Second Amended Class Action Complaint are made subject to the Court’s July
17, 2014 Order on the Motions to Dismiss (Doc. #102) and are made without prejudice to any
right to appeal by Plaintiffs.
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and/or its agents targeted the dissenting groups for intensive and intrusive scrutiny, probing
pervasively into their members’ associations, speech, activities, and beliefs.
2. 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.
3. Defendants employed an array of tactics, including extra scrutiny, intimidation,
harassment, invasion of privacy, discriminatory audits, disclosure of private information, and
years of delay.
4. Dissenting groups suffered years of delay and expense while awaiting recognition
of their tax exemption (which, for many, still has not come). They also were forced to waste
valuable time and money answering the IRS’s questions. The result was a chilling and muzzling
of free speech and association. Hundreds of other citizen groups who met the IRS’ criteria—at
first, groups with “tea party” sounding words in their names, but later, various groups whose
members dissented from government policies and philosophy—suffered the same fate.
Accordingly, Plaintiffs bring this suit on their own behalf, on their members’ behalf, and for the
putative class. They assert three claims: (1) damages for violation of 5 U.S.C. § 552a (the
Privacy Act of 1974); (2) damages against the individual and John Doe Defendants under Bivens
v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971) (“Bivens”),
and injunctive and declaratory relief against the IRS and the United States pursuant to 28 U.S.C.
§§ 2201 and 2202, for violation of the First and Fifth Amendments; and (3) damages under 26
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U.S.C. § 7431 against the United States for violation of 26 U.S.C. 6103 (for inspection and
disclosure of return information).
JURISDICTION AND VENUE
5. Jurisdiction is proper in this Court pursuant to 5 U.S.C. § 552a (“the Privacy
Act”), 26 U.S.C. § 7431 (damages action for inspection of return information), 28 U.S.C. § 1331
(“original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the
United States”), and 28 U.S.C. § 2201 (Declaratory Judgment Act). As set forth below,
Plaintiffs’ damages claims against the individual and John Doe Defendants arise under the First
and Fifth Amendments of the United States Constitution and constitute a civil action cognizable
in federal courts under Bivens.
6. Venue is proper in this district because it is the district in which many of the
relevant agency records are situated. 5 U.S.C. § 552(a)(g)(5). Additionally, venue is proper in
this district because “a substantial part of the events or omissions giving rise to the claim
occurred” at the offices of the Internal Revenue Service in Cincinnati, Ohio and many of the
defendants and, upon information and belief, at least some of John Does 1-100 reside in the
vicinity of Cincinnati, Ohio. 28 U.S.C. §§ 1391(b)(2) and (e)(1)(A) and (B).
PLAINTIFFS
7. The NorCal Tea Party Patriots is a non-profit organization located in Colfax,
California. Its purpose is to support and conduct non-partisan research, education, and
informational activities to increase public awareness of legislation and legislators. Its mission is
three-fold: (1) fiscal responsibility; (2) constitutionally limited government; and (3) free
markets. NorCal has, from time to time, been comprised of a six-member board of directors,
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including its chairman/secretary, Virginia (“Ginny”) Rapini, who associated together in a
corporate, tax-exempt form to maximize the effectiveness of their expression.
8. Faith and Freedom Coalition of Ohio is a non-profit organization located in
Columbus, Ohio. It was founded to support core tenets of faith and freedom.
9. Simi Valley Moorpark Tea Party is a non-profit organization located in Simi
Valley, California. It was organized to support the U.S. Constitution’s basic principles.
10. The Tampa 9-12 Project is a volunteer non-profit organization, with more than
2,000 members, located in Tampa, Florida. It holds classes on history, politics, economics, and
current events. It also hosts candidate forums, conducts research, and promotes social welfare.
11. The South Dakota Citizens for Liberty, Inc., is a non-profit located in Rapid City,
South Dakota. It opposes irresponsible tax and spending policies, supports the Constitution, and
communicates principles of limited government.
12. Texas Patriots Tea Party is a non-profit organization located in Burleson, Texas.
It is devoted to educating the public regarding our history and form of government.
13. Americans Against Oppressive Laws, Inc. is a non-profit organization located in
North Port, Florida. It is dedicated to promoting the awareness of oppressive laws and the need
to curtail them.
14. San Angelo Tea Party, Inc. is a non-profit located in San Angelo, Texas. It is
devoted to such goals as inspiring citizen participation, individual liberty, limited government,
and upholding the Constitution.
15. Prescott Tea Party is a non-profit organization located in Prescott, Arizona. It is
devoted to educating the public about principles of limited government and the Constitution.
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16. Texas Public Policy Foundation is a non-profit organization located in Austin,
Texas. Its purpose is to sponsor scholarly research on various issues of public policy and
disseminate those research results to the public.
DEFENDANTS
17. The Internal Revenue Service (“IRS”) is the chief tax collection agency of the
United States and is a division of the United States Department of the Treasury.
18. The United States of America is this country’s foremost governmental body and
is responsible for the actions and conduct of the IRS and the IRS’s employees.
19. The IRS Exempt Organizations Rulings and Agreement Office is located in
Washington, D.C., and has final authority within the IRS to grant or deny tax-exempt status.
20. The Rulings and Agreement Office exercises supervisory authority over the
Determinations Unit located in Cincinnati, Ohio. The Determinations Unit makes the initial
decision as to whether an organization will be granted tax-exempt status. The Determinations
Unit also receives guidance and expertise by the Technical Unit of the Rulings and Agreement
Office in Washington, D.C. Other IRS units around the country have also been involved in the
wrongs described below.
21. Lois Lerner was the Director of the Tax-Exempt Organization Unit for the IRS
during most of the relevant time period. Ms. Lerner was aware of, supervised, implemented,
directed, and concealed the targeting of dissenting groups. After pleading the Fifth Amendment
before Congress, Ms. Lerner was placed on paid administrative leave by the IRS. Upon
information and belief, Ms. Lerner resides in the Washington, D.C. area.
22. Steven Miller was Acting IRS Commissioner during the period of time in which
dissenting groups were targeted. Mr. Miller supervised, directed, was aware of, and attempted to
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conceal the actions of the IRS and its employees. Upon information and belief Mr. Miller
resides in the Washington, D.C. area.
23. Douglas Shulman was IRS Commissioner during the relevant time period. Mr.
Shulman was aware of, supervised, directed, and concealed the targeting of dissenting groups.
Upon information and belief, Shulman resides in the Washington, D.C., area.
24. William Wilkins is, and was during the relevant time period, the Chief Counsel of
the IRS. Mr. Wilkins was aware of, supervised, directed, implemented, and concealed the
targeting of dissenting groups. Upon information and belief, Wilkins resides in the Washington,
D.C., area.
25. Sarah Hall Ingram was Commissioner of the Tax Exempt and Government
Entities Division of the IRS during part or all of the relevant time period. Ingram supervised,
directed, was aware of, and attempted to conceal the actions of the IRS and its employees. Upon
information and belief, Ingram resides in the Washington, D.C. area.
26. Joseph Grant was Commissioner of the Tax Exempt and Government Entities
Division of the IRS during part or all of the relevant time period. Mr. Grant supervised, directed,
was aware of, and attempted to conceal the actions of the IRS and its employees. Upon
information and belief, Grant resides in the Washington, D.C. area.
27. Holly Paz was first Acting Manager of the Technical Unit of Rulings and
Agreements, and then Acting Director (and Director) of Rulings and Agreements, during the
relevant time period. Paz supervised, directed, was aware of, and attempted to conceal the
actions of the IRS and its employees. Further, Paz reportedly sat in on all interviews by the
Inspector General’s Office of IRS employees with the express purpose of intimidating employees
from telling the truth and suppressing the facts of the IRS targeting. As of July 15, 2013, Paz
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was reportedly placed on paid administrative leave. Upon information and belief, Paz resides in
the Washington, D.C. area.
28. Carter Hull was a lawyer at the IRS in Washington, D.C. Hull directed,
supervised, was aware of, and concealed the targeting of dissenting groups. Upon information
and belief, Hull carefully managed one or more of the Cincinnati IRS agents’ efforts to target
dissenting groups. Hull promptly retired from the IRS as soon as his role became public. Upon
information and belief, he resides in the Washington, D.C. area.
29. Brenda Melahn is the now retired Program Director of the West Virginia IRS
office. Melahn directed, supervised, concealed, and coordinated with Cincinnati and Washington
regarding the targeting of dissenting groups. Upon information and belief, Melahn resides in
West Virginia.
30. Cindy Thomas was the Program Manager of the Determinations Unit in
Cincinnati, Ohio, during part of all of the relevant time period. Thomas directed, supervised,
concealed, and coordinated with Washington, D.C., regarding the targeting of dissenting groups.
Upon information and belief, Thomas was involved from the beginning in conceiving and
implementing the targeting strategy. Upon information and belief, Thomas resides in the
Cincinnati, Ohio, area.
31. Bonnie Esrig was a manager in the Determinations Unit in Cincinnati, Ohio. She
participated in the implementation, direction, supervision, development of criteria, concealment,
and coordination with Washington, D.C. regarding the targeting of dissenting groups. Upon
information and belief, Esrig resides in the Cincinnati, Ohio area.
32. Steven F. Bowling was a manager in the Determinations Unit of the IRS in
Cincinnati, Ohio. He participated in the implementation, direction, supervision, development of
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criteria, concealment, and coordination with Washington, D.C., regarding the targeting of
dissenting groups. Upon information and belief, Bowling resides in the Cincinnati, Ohio area.
33. Mitchell Steele was a front-line worker in the Determinations Unit of the IRS in
Cincinnati, Ohio. He directly implemented the targeting of dissenting groups through his
interactions with them, including demands for improper information, invasion of privacy,
harassment, intimidation, and delay. Upon information and belief, Steele resides in the
Cincinnati, Ohio area.
34. Carly Young was a front-line worker in the Determinations Unit of the IRS in
Cincinnati, Ohio. She directly implemented the targeting of dissenting groups through her
interactions with them, including demands for improper information, invasion of privacy,
harassment, intimidation, and delay. Upon information and belief, Young resides in the
Cincinnati, Ohio area.
35. Joseph Herr was a front-line worker in the Determinations Unit of the IRS in
Cincinnati, Ohio. He directly implemented the targeting of dissenting groups through his
interactions with them, including demands for improper information, invasion of privacy,
harassment, intimidation, and delay. Upon information and belief, Herr resides in the Cincinnati,
Ohio area.
36. Stephen Seok was a front-line worker in the Determinations Unit of the IRS in
Cincinnati, Ohio. He directly implemented the targeting of dissenting groups through his
interactions with them, including demands for improper information, invasion of privacy,
harassment, intimidation, and delay. Upon information and belief, Seok resides in the
Cincinnati, Ohio area.
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37. Elizabeth Hofacre was a front-line worker in the Determinations Unit of the IRS
in Cincinnati, Ohio. She directly implemented the targeting of dissenting groups through her
interactions with them, including demands for improper information, invasion of privacy,
harassment, intimidation, and delay. Upon information and belief, Hofacre resides in the
Cincinnati, Ohio area.
38. Grant Herring was a front-line worker in the Determinations Unit of the IRS in
Cincinnati, Ohio. He directly implemented the targeting of dissenting groups through his
interactions with them, including demands for improper information, invasion of privacy,
harassment, intimidation, and delay. Upon information and belief, Herring resides in the
Cincinnati, Ohio area.
39. John Does 1-100 are current and former employees of the Department of the
Treasury, the IRS, and specifically, the subdivisions described in ¶¶ 18-19 above.
FACTUAL BACKGROUND
40. On May 14, 2013, the Treasury Inspector General for Tax Administration issued a
report entitled, “Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for
Review” (“IGR”). A true and accurate copy of the IGR is attached hereto as Exhibit A. The
conclusions in the report are true and are incorporated and alleged herein. However, as alleged
in greater detail below, the wrongdoing of the IRS extends beyond the conclusions of the IGR
both as to time period and scope.
The Importance of IRS Recognition of Tax-Exempt Status
41. The Plaintiffs (and putative plaintiff class) applied for recognition of tax-exempt
status under Section 501(c)(4) of the Internal Revenue Code because having recognition of that
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status is valuable. In fact, Plaintiffs were willing to pay a user fee of several hundred dollars in
order to receive the IRS’s recognition.
42. Tax-exempt status benefits the Plaintiffs because it avoids double taxation;
individual members and donors have already paid taxes on their income, and want to be able to
pool their after-tax resources for social welfare purposes without effectively paying tax a second
time though the levy of a tax on the social welfare corporation. Thus, tax exemption is not a
subsidy or advance from the public purse for 501(c)(4) groups like the Plaintiffs, it is a
forbearance by the government from burdening Plaintiffs’ social welfare activities by taxing
contributions to social welfare groups that have already been subject to one round of individual
or corporate taxation.
43. Additionally, social welfare groups like the Plaintiffs benefit by receiving
advance IRS recognition of their tax-exempt status. The alternative to recognition is to become
a so-called “self-declarer,” an organization that files Form 990 (a tax return) without having filed
Form 1023 or 1024 (for 501(c)(3) and (c)(4) organizations, respectively). Self-declarers are
subject to year-round voluntary compliance checks, and if an organization refuses to submit, it
can be referred for a mandatory examination (i.e., an audit) of its books and records. If a check
or audit finds that an organization is not operating under the applicable exemption based on all of
the facts and circumstances, the organization will face a crippling and unexpected tax and
penalty. For organizations like the Plaintiffs, such a tax and penalty would effectively end the
organization’s operations, including its expressive activities. The risk of such an unpredictable
penalty compelled Plaintiffs to seek recognition of their 501(c)(4) status. The IRS’s recognition
provides certainty that, so long as the organization is not run in a materially different way than
that originally disclosed to the IRS, it will not face a surprise death penalty.
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44. For at least the reasons discussed above, tea party and other groups, including
Plaintiffs, applied for IRS recognition of their tax-exempt status beginning in 2010. However,
Plaintiffs’ applications were delayed and they were singled out for special scrutiny based upon
their names or policy positions.
The Design and Extent of Defendants’ Scheme
45. In or about March 2010, the Determinations Unit began singling out for special
scrutiny requests for tax-exemption for groups identified as “Tea Party,” “Patriots,” “912
Project,” and applications involving political-sounding names that seemed to identify with the
Tea Party, such as “We the People” or “Take Back the Country.”
46. These criteria were later expanded to target groups whose issues included
government spending, government debt, expanding/limiting government, or taxes.
47. Groups dedicated to educating the public by advocacy/lobbying to “make
America a better place to live” were also targeted, as were groups committed to “educating on
the Constitution and bill of rights.”
48. Also targeted for special scrutiny were groups who had a statement in the case file
criticizing “how the country is being run.”
49. The IRS now admits that, at a minimum, these criteria were “inappropriate” and
“violated the IRS Mission Statement.” “Charting a Path Forward at the IRS,” Acting
Commissioner Daniel Werfel, June 24, 2013, at 29 (the “Werfel Report,” available at
www.irs.gov/PUP/newsroom/Initial%20Assessment%20and%20Plan%20of%20Action.pdf).
50. The IRS’s knowledge that this discrimination was illegal is further evidenced by
IRS officials’ scheme to keep the people’s duly elected representatives in the dark about it. As
alleged in more detail below, when members of Congress asked IRS officials, including
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defendants Shulman and Miller, whether the IRS was targeting certain groups for different
treatment, the IRS officials provided misleading and deceptive responses to conceal the scheme.
Additionally, in responding to written questions from Congress on May 4, 2012, well after she
had learned of the targeting, defendant Lerner falsely stated that the intrusive demands for
information were simply “development letters the IRS sends to organizations in the ordinary
course of the application process.” Further, the White House denied any knowledge that the IRS
was targeting dissenting groups until April or May of 2013.
51. The IRS has now admitted that “not only did [it] not properly inform Congress
about the issues as they were occurring, but… we failed to do so even after Congressional
committees specifically began asking questions on the topic.” Werfel Report, 51.
52. The IRS has also admitted that senior managers allowed the conduct to continue
and failed to inform Congress. “Senior IRS leadership did not effectively oversee activities
within EO, failing to take appropriate, proactive steps to identify and help address significant
emerging operational risks. Even after senior IRS leadership was informed of the inappropriate
activities in question, it failed both to effectively put an end to the activity and to inform the
proper committees in Congress in a timely fashion, despite requests from Congress on this
topic.” Werfel Report, 10.
53. The public was unaware that the IRS was targeting dissenting groups for special
scrutiny until May of 2013.
54. There is no evidence that liberal or “progressive” political groups or groups
supporting the re-election of President Barack Obama or the election of Democrats were targeted
for similar delay, intrusive questions, or impairment of their First Amendment rights. Indeed, a
May 15, 2013 Washington Post analysis of the IRS public database of nonprofit organizations
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showed that groups with the word “progressive” in their names “suffered no similar slowdown
pattern,” and their number of approvals “increased each year from 17 in 2009 to 20 in 2012.”
See http://www.washingtonpost.com/wp-srv/special/politics/irs-targets-conservative-groups/
(visited December 9, 2013).
55. On June 26, 2013, J. Russell George on behalf of TIGTA, responded to questions
raised by Congressman Sander Levin about whether the IRS had, in fact, also targeted groups
with liberal-sounding tags for extra scrutiny during the period May 2010 to May 2012. George
stated, “We reviewed all cases that the IRS identified as potential political cases and did not limit
our audit to allegations related to the Tea Party… From our audit work, we did not find evidence
that the criteria you identified, labeled ‘Progressives,’ were used by the IRS to select potential
political cases during the 2010 to 2012 timeframe we audited.” George stated that although the
term “Progressives” did appear on a BOLO spreadsheet labeled “Historical,” unlike other BOLO
entries, that BOLO “did not include instructions on how to refer cases that met that criteria.”
George concluded that there was no evidence that “’Progressives’ was a term used to refer cases
for scrutiny for political campaign intervention.”
56. There was extreme delay for these dissenting groups compared to those not
targeted for extra scrutiny. It took the IRS an average of 238 days to approve the applications of
other groups and an average of 574 days to process the dissenting groups selected for higher
scrutiny. For politically favored groups, the process may have been much faster. After
watchdog groups complained that a foundation named after Barack H. Obama, the father of the
President of the United States, was a sham charity and was operating without having received
tax-exempt status, the IRS’ Cincinnati Determinations Unit processed its application in just 34
days, granting tax-exempt status retroactively to the date it had begun its fundraising in 2009.
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See http://www.washingtonpost.com/politics/irs-stalled-conservative-groups-but-gave-speedy-
approval-to-obama-foundation/2013/05/16/90c53e8a-be57-11e2-89c9-3be8095fe767_story.html
(viewed May 19, 2013). The Obama foundation’s tax-exemption letter was signed by Lois
Lerner. Id.
57. The IGR identifies 296 organizations whose applications were targeted for review
by the Cincinnati office alone based on their name or conservative or libertarian political views.
Other reports suggest the number may exceed 500. Only through discovery will the full scope of
this viewpoint discrimination be identifiable.
58. Once the IRS decided to begin targeting dissenting groups for special scrutiny it
issued the first of several “be on the lookout” or “BOLO” listings. The initial BOLO listing
simply identified the Tea Party movement. Further BOLO listings included the additional
dissenting criteria described above.
59. Once a dissenting group was targeted for special review, its file was forwarded to
a team of specialists within the Determinations Unit in Cincinnati.
60. Once forwarded to the specialist for greater review, the organization was
subjected to unreasonable delays and often harassing, illegal, and discriminatory demands for
private information.
61. The IRS’ intent to engage in viewpoint discrimination is further evidenced by the
fact that from March of 2010 until July of 2011 the IRS simply referred to these cases as the “tea
party cases.”
62. Nina Olsen, the IRS National Taxpayer Advocate (“NTA”), and the Taxpayer
Advocate Service (“TAS”) issued a report to Congress on the targeting of dissenting groups on
June 30, 2013, entitled “Special Report To Congress: Political Activity and the Rights of
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Applicants for Tax Exempt Status” (hereafter, “Advocate Report”). A true and correct copy of
the Advocate Report is attached hereto as Exhibit B.
63. The Advocate Report recommended “apology payments” to targeted groups to
show that the government “recognizes its mistake and the taxpayer’s burden.”
64. Neither the NTA nor TAS were informed by the IRS of the delays, as the law
requires. They were therefore unable to intervene in any meaningful way to stop the targeting.
In the few cases in which the TAS tried to intervene, it was resisted at every turn by Defendants.
65. The law requires that cases delayed more than 30 days beyond normal processing
time be referred to the TAS. Defendants violated the law by not referring any of the class
members’ cases even though at least hundreds of cases were so delayed. In this regard, the IRS
admits that officers in its Exempt Organizations unit (including each named Defendant) were
required to refer the delayed cases (including Plaintiffs’) to TAS. None did so. See Werfel
Report at 33.
66. The Advocate Report lists numerous violations by Defendants of dissenting
groups’ rights, including:
a. the right to be informed, which Defendants violated by failing to post their
criteria, standards, form letters, and BOLOs;
b. the right to timely processing;
c. the right to be assisted;
d. the right to be heard;
e. the “’right to privacy’ [which] was violated when the IRS burdened them with
unnecessary questions . . .”
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f. the “’right to confidentiality’ was violated by the request for donor
information that would otherwise be non-public were it provided in the annual
Form 990 filing.” (In other words, “The IRS’s request for donor lists also
meant that donors would be disclosed to the public.”); and
g. the “right to a fair and just tax system,” which “was demonstrably violated by
the EO’s failure to design the application process” to elicit information in an
impartial manner.
67. The conduct and acts set forth in Paragraph 58 did in fact occur, and did in fact
violate the rights identified by the Advocate Report.
68. As the Advocate Report also observes, the information requested from dissenting
groups was “excessive.”
69. Additionally, as the Advocate Report explains, Defendants’ failure to post their
criteria, standards, form letters, and BOLOs violated the law.
Specific Conduct of Individual Named Defendants
70. Holly Paz told Congressional investigators in 2013 that an IRS agent in Cincinnati
flagged the first “tea party” case in February 2010. According to Paz, the agent forwarded the
application to a manager because it appeared to be politically sensitive. The manager informed
Paz, who then had the application assigned to a legal expert in Washington.
71. Steven Grodnitzky, Manager of the Technical Unit in Washington, D.C., told
Congressional investigators that the IRS viewed “tea party” (conservative or libertarian)
differently than other advocacy-related social welfare organizations, and began to track them,
because of the significant media attention surrounding the emergence of the tea party in 2010.
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72. Likewise, Stephen Seok, a Determinations Unit specialist in Cincinnati who
handled at least one Plaintiff, told Congressional investigators that “tea party” organizations
differed from other organizations: “Normal (c)(4) cases we must develop the concept of social
welfare, such as the community newspapers, or the poor, that types. These [Tea Party]
organizations mostly concentrate on their activities limiting government, limiting government
role, or reducing government size, or paying less tax. I think it’s different from the other social
welfare organizations which are (c)(4).”
73. Upon information and belief, Elizabeth Hofacre was the Cincinnati agent (an
Exempt Organizations Specialist) who flagged the first tea party case. Hofacre’s manager at the
time was Joseph Herr, also in Cincinnati, Ohio. Herr asked Hofacre to begin pulling and
reviewing applications of organizations with “tea party,” “patriots,” “9/12,” “We the People,”
“Take Back the Country,” or similar titles in their names. According to the TIGTA report, a
specialist (who upon information and belief was Hofacre) continued to search for Tea Party
groups until the precursor to the BOLO listing was established in May 2010.
74. In approximately the middle of March 2010, Holly Paz, then the Acting Manager
of the Technical Unit in Washington, D.C., contacted Cincinnati and asked that certain Tea Party
cases be transferred to Washington, D.C. The cases were to be reviewed by the Chief Counsel’s
office, which was headed by Chief Counsel William Wilkins and included attorney Carter Hull.
Accordingly, upon information and belief, Wilkins learned about the targeting at this time, and
had the opportunity to stop it but failed to do so.
75. Hull’s main contact was Elizabeth Hofacre. Hull and his supervisor at the time,
Acting Manager of the Technical Unit, Steven Grodnitzky, instructed Hofacre to send drafts of
correspondence to Hull for his suggestions. Cindy Thomas, as the manager responsible for
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Hofacre, agreed with this plan. Hofacre has testified that she never before had to send copies of
applications, applicant responses, and draft development letters to Washington, D.C., for review.
Hofacre also testified that she was unable to process the targeted applications until she received
guidance from Hull and the Technical Unit in Washington, D.C.
76. Soon afterwards, in April 2010, with the agreement of Cindy Thomas, the Acting
Manager of the Technical Unit, Steven Grodnitzky directed that a Sensitive Case Report
(“SCR”) be prepared regarding the Tea Party cases; it was shared with the Director of Rulings
and Agreements (either David Fish or Holly Paz) and a summary of the SCR was shared with
Lois Lerner, Director of Exempt Organizations.
77. Later, in July 2010, Elizabeth Hofacre sent a spreadsheet to Carter Hull
summarizing her findings on the tea party review. Hofacre accidentally sent the spreadsheet to
every person in the IRS Exempt Organizations Rulings and Agreements unit. Accordingly, no
later than April 2010, senior IRS officials were aware that tea party cases were being scrutinized
in Cincinnati.
78. At this time, as Program Manager, Cindy Thomas was the highest-ranking official
in the Cincinnati Determinations Unit. By July 2010, Thomas had asked specialists (and their
individual and territory managers) in the Determinations Unit to be on the lookout for Tea Party
applications.
79. By August 2010, the first BOLO listing was issued with the following criteria:
“various local organizations in the Tea Party movement… applying for exemption under
501(c)(3) or 501(c)(4).” Upon information and belief, Thomas, her counterpart in the Technical
Unit, Grodnitzky, and their immediate supervisor, the Director of Rulings and Agreements (first
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David Fish, and after January 2011, Holly Paz) either drafted this BOLO item, approved it, or
ratified its use by her subordinates.
80. In addition to Hofacre, the following individuals served as managers or specialists
in the Determinations Unit in Cincinnati who ultimately reported to Cindy Thomas:
a. Joseph Herr. Herr had been in charge of a group of specialists that searched
for groups for “development” and additional delay. Herr also sent out
intrusive development letters of his own, including a March 16, 2012 letter to
the Dayton Ohio Tea Party, and a February 1, 2012 development letter to
South Dakota Citizens for Liberty.
b. Grant Herring. Herring sent two intrusive development letters to the Faith and
Freedom Coalition of Ohio in June 2012, to the San Angelo Tea Party on
January 12, 2012; and to the Simi Valley Moorpark Tea Party in September
2012.
c. Stephen Seok. Seok sent an intrusive development letters to the Faith and
Freedom Coalition of Ohio on February 14, 2012; and invasive development
letters to Richmond Tea Party, Inc., on January 9, 2012, and Wetumpka Tea
Party February 3, 2012.
d. Mitchell Steele. Steele sent intrusive development letters to Liberty Township
Tea Party (an Ohio organization), Kentucky 9/12 Project, and Shenandoah
Tea Party, all of which are putative class members. Steele’s letter to Liberty
Township inquired into its political association with an individual who was
not a member of Liberty.
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e. Carly Young. Young sent an intrusive development letter to Plaintiff NorCal
on January 27, 2012, and also sent intrusive letters to TheTeaParty.net asking
the group to identify board members who might run for public office. Young
also sent intrusive development letters to the San Antonio Tea Party.
f. Steven F. Bowling. Bowling was manager of Group 7822, the Emerging
Issues group, and supervised and approved Elizabeth Hofacre’s and other
employees’ use of “tea party” and other viewpoint-based criteria to single out
groups for development, delay, and intrusive questioning, including Plaintiffs.
g. Brenda Melahn. Melahn was part of a group of Cincinnati specialists that
targeted conservative and libertarian groups for extra scrutiny and delay.
h. Bonnie Esrig. Esrig was part of a group of Cincinnati specialists that targeted
conservative and libertarian groups for extra scrutiny and delay.
81. After her initial contact with the Cincinnati office in the spring of 2010, Holly Paz
instructed Cincinnati IRS employees in the Determinations Unit to pull and "hold" tea party
cases while employees in Washington, D.C., reviewed test cases.
82. As a result of the unusual requirement for IRS staff in Washington, D.C.
(including but not limited to Carter Hull and Steven Grodnitzky), to review and approve all
correspondence between Determinations Unit specialists in Cincinnati and applicants in other
parts of the country that had been targeted for additional “development,” targeted organizations’
applications were delayed.
83. In October 2010, Carter Hull sent Holly Paz a memorandum describing the
targeting and coordination of “tea party” cases in Cincinnati. This included a list of all of the
“tea party” cases Hull had received from Hofacre.
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84. In February 2011, Paz (now, promoted to the position of Director of Rulings and
Agreements, one step below Lois Lerner) emailed Lerner to assure her that Hull was reviewing
every Cincinnati communication with the targeted organizations, and that no targeted
organizations would be approved out of Cincinnati until the test cases being handled in
Washington, D.C., “go all the way through the process here [in Washington, D.C.].”
85. Ultimately, Hull had to stop giving guidance to Elizabeth Hofacre in Cincinnati
because he was awaiting word from the Chief Counsel on how to proceed. Hull testified to
Congress that he understood that all of the cases would ultimately have to be reviewed by Lois
Lerner’s senior advisor, Judith Kindell, and also by the Chief Counsel’s office. Hull testified
that in his experience, that was unusual.
86. In March 2011, Hull was instructed by Lois Lerner’s chief technical adviser,
Judith Kindell, to forward his recommendations to the Chief Counsel for review, and upon
information and belief, he did. Upon information and belief, the Chief Counsel received Hull’s
report and either approved or failed to stop the targeting and questioning scheme.
87. In May of 2011, Hull continued to work on test cases, including a
conservative/libertarian Ohio applicant for tax exempt status (and member of the putative
plaintiff class), American Junto. Hull sent detailed and intrusive questionnaires directly to Ohio,
asking an American Junto organizer about his involvement with other 501(c)(4) applicants.
American Junto eventually gave up its effort to achieve tax exempt status.
88. Little development occurred until the summer of 2011, as Cindy Thomas
continued to have her staff hold applications while awaiting guidance from the Technical Unit in
Washington, D.C.
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89. On June 1, 2011, Holly Paz emailed Cindy Thomas, copying Brenda Melahn,
indicating that Lerner wanted to be briefed about what makes a “Tea Party case” and wanted to
think about whether criteria were resulting in “over” (not “under”) inclusion. Thomas turned to
John Shafer, a Cincinnati Group Manager in charge of screening, noting that the BOLO
spreadsheet at the time simply said, “Organizations involved with the Tea Party movement
applying for exemption under 501(c)(3) or 501(c)(4).” Thomas asked, “Do the applications
specify ‘tea party?’ If not, how do we know applicant is involved with the tea party movement?”
90. Shafer responded with the four criteria referenced in Paragraph 92 below, copying
Steven F. Bowling, who was Group Manager for emerging cases, Group 7822 (including the Tea
Party cases), and Bonnie Esrig. The TIGTA report notes that Paz (the Acting Director of
Rulings and Agreements) “commented that the criteria being used to identify Tea Party cases
may have resulted in over-inclusion.” After this disclosure, neither Thomas nor Paz did anything
to stop the criteria from being used or to publish this agency guidance for public review.
91. On July 5, 2011, Lois Lerner and other Technical Unit officials in Washington,
D.C., called Cindy Thomas, in Cincinnati, Ohio, to discuss changes to the BOLO list.
92. A briefing paper received by Lerner, and, upon information and belief, Paz, in late
June or early July 2011 specifically informed them that “Advocacy Org. Applications” were
being screened because they were “advocating on issues relating to government spending, taxes,
and similar matters. Often there is possible political intervention or excessive lobbying.” The
four criteria being used to separate out groups were: (1) use of “Tea Party,” “Patriots,” or “9/12
Project” in the case file; (2) “Issues include government spending, government debt, or taxes;”
(3) “Education of the public by advocacy/lobbying to ‘make America a better place to live’”; (4)
“Statements in the case file criticize how the country is being run.”
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93. As a result of the call and the above-referenced memo, Lerner decided that the
BOLO criteria should now be changed to something much more general: “organizations involved
with political, lobbying, or advocacy…” Lerner also decided that her office would prepare a
document with recommended actions for the Cincinnati cases that had been identified.
94. However, despite her knowledge that hundreds of organizations had been shunted
into special screening and were already experiencing lengthy delays based on four viewpoint-
based criteria, Lerner failed to remedy the disparate treatment, expedite the examinations, or
make the IRS’s new guidance known to the public or taxpayer advocate. Instead, she
inaugurated a series of meetings, working groups, and guidance drafts, which, as discussed
below, ultimately led to even more intrusive questionnaires being sent to the targeted dissenting
groups in January 2012. It would be another year before groups that stuck with the IRS process
began to receive determination letters.
95. In a July 19, 2011, email to Janine Cook, an attorney in the Chief Counsel’s
office, Holly Paz demonstrated her and Lois Lerner’s reluctance to approve the targeted
organizations. Paz wrote, “Lois would like to discuss our planned approach for dealing with
these cases. We suspect we will have to approve the majority of the c4 applications.”
96. However, neither Lerner nor Paz acted to approve Plaintiffs’ applications.
Instead, after July, internal IRS meetings briefly intensified.
97. According to the TIGTA report, on August 4, 2011, personnel of the Rulings and
Agreements office, which was then directed by Holly Paz, met (presumably at Paz’s direction)
with the Chief Counsel of the IRS, William Wilkins, “so that everyone would have the latest
information on the issue.” Further, according to the TIGTA report, the guide sheet or “check
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sheet” was reviewed by Counsel and was reviewed and commented on by “various EO function
Headquarters office [the office of Lerner] employees.”
98. As of November 6, 2011, the delay continued, as (according to TIGTA) Paz told
the Technical Unit Manager that the guide sheet was “too lawyerly” and would have to be
rewritten with input from Cindy Thomas’s Determinations Unit.
99. Upon information and belief, on November 16, 2011, Carter Hull sent or directed
to be sent to the Cincinnati Determinations Unit a list of over 160 cases, along with comments
and guidance on how to handle allegedly “political” organizations, including Plaintiff Faith and
Freedom Coalition of Ohio. Among the items allegedly justifying further review was “anti-
Obama rhetoric” or “negative Obama commentary” of some groups, despite the fact that such
political speech could not have related to a candidate for office.
100. On December 16, 2011, a team of specialists under Thomas, which included,
upon information and belief, all of the specialists in Cincinnati who sent out demands for
information in the first three months of 2012, began to meet to consider the backlog of
applications from targeted entities.
101. As discussed in more detail below, specialists did indeed send out new demands
for information to entities in January and February 2012, including several Plaintiffs.
102. On February 29, 2012, Lerner directed Paz to develop a letter that clearly told
organizations what would happen to them if they failed to respond to Cincinnati with new
demands for information. Indeed, Lerner herself signed one such letter, addressed from
Cincinnati and directing that the recipient make a response to Cincinnati, to Plaintiff South
Dakota Liberty Council in March 2012.
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103. Not infrequently, Lois Lerner approved letters to go out under her signature from
the Cincinnati, Ohio, office of her Exempt Organizations division. In addition to the South
Dakota Liberty Council letter, a letter to a member of the putative plaintiff class went out under
Lerner’s signature on March 16, 2002, to the Ohio Liberty Council Corp. In fact, even after
being on leave from the IRS since May 2013, Lerner’s auto-signature appears on letters in
August 2013 with a Cincinnati, Ohio, return address.
104. Also on February 29, 2012, Lerner halted the sending of any additional request
letters from Cincinnati until the Determinations Unit could receive an additional set of guidance.
Upon information and belief, Lerner took this action only because information about the IRS’s
recent demands for information were beginning to leak out into the media.
105. In March 2012, information about the IRS’s requests was continuing to leak out.
In a March 8, 2012 email, rather than probing into the targeting scheme and having it halted,
Steve Miller requested that if taxpayers complained about providing donor information
(information that TIGTA later found was unnecessary), taxpayers would be told they could opt
not to send it in, but might need to send it in later. This limited concession from Miller ratified
the targeting and investigative scheme. According to the TIGTA report, approximately two
weeks later, Miller met with Lerner’s technical adviser to “discuss concerns with the media
attention the Tea Party applications were receiving.”
106. In April 2012, the office of Joseph Grant or Sarah Hall Ingram (Grant was
Ingram’s successor) received “template” questions for targeted organizations that had been
developed by a team of specialists reporting to Cindy Thomas. There is no record that Ingram or
Grant took any steps to halt the targeting and delay after they learned about it, even though they
had the power to do so. Instead, in an April 30, 2013 letter to TIGTA responding to its report,
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Grant blamed “front line career employees” (i.e., the employees in Cincinnati) for having an
inadequate process.
The Motivation of Senior Management Defendants
107. Upon information and belief, Lois Lerner saw it as part of her role to rein in
conservative and libertarian-leaning tax-exempt entities that she believed the United States
Supreme Court was allowing to run roughshod over the federal campaign finance system and
Federal Elections Commission. As early as 2009, Lerner disclosed confidential tax information
to the FEC.
108. In October 19, 2010, comments on the Citizens United decision at Duke
University’s Sanford School of Public Policy, Lerner stated: “What happened last year was the
Supreme Court- the law kept getting chipped away, chipped away in the federal election arena.
The Supreme Court dealt a huge blow, overturning a 100-year old precedent that said basically
corporations couldn't give directly to political campaigns.” Lerner also penned a July 10, 2012
email to colleague Sharon Light about a National Public Radio article reporting on a Democratic
Senatorial Campaign Committee complaint to the Federal Election Commission “accusing a trio
of ‘social welfare’ groups of actually being political committees.” The article noted that “The
three groups have all told the IRS they are social welfare organizations, just like thousands of
local civic groups, and definitely not political committees.” Commenting on the complaint,
Lerner stated, “Perhaps the FEC will save the day.”
109. Lerner was concerned that if her division’s targeting of tea party groups was
allowed to operate too freely from Cincinnati and was not carefully managed, it would become
politically explosive. In part for that reason, she attempted to assert control over the process. In
a February 2011 email, Lerner advised her staff—including then-Exempt Organizations
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Technical Manager Michael Seto and then-Rulings and Agreements Director Holly Paz—that the
“Tea Party matter [is] very dangerous. This could be the vehicle to go to court on the issue of
whether Citizen’s United overturning the ban on corporate spending applies to tax exempt rules.
Counsel and [Lerner adviser] Judy Kindell need to be in on this one… Cincy should probably
NOT have these cases. Holly please see what exactly they have please.”
110. Responding to Lerner, Paz wrote: “Tea Party - Cases in Determs are being
supervised by Chip [Carter] Hull at each step - he reviews info from TPs, correspondence to TPs,
etc. No decisions are going out of Cincy until we go all the way through the process with the c3
and c4 cases here. I believe th [redacted] will be ready to go over to Judy soon.”
111. Lerner responded to Paz and Seto as follows: “Thanks—even if we go with a
[501(c)(4)] on the Tea Party cases, they may want to argue they should be [501(c)(3)s, so it
would be great if we can get there without saying the only reason they don’t get a 3 is political
activity.” The reasonable inference is that Lerner wanted to use non-political criteria pretexts for
granting or denying tax-exempt status, even though a review of political activity would actually
inform the IRS’s decisions.
112. Immediately following this exchange, Seto emailed his staff: “Below is Lois’ and
Holly’s directions on certain technical areas, such a [redacted] etc. Please do not allow any cases
to go out before we brief Lois and Holly.”
113. Even within the IRS, Lerner attempted to foster an impression with individuals
outside of the conspiracy that the problem had already been identified and fixed, and was more
cosmetic than real. For example, in June 25, 2012, correspondence with Richard Daly in which
he disclosed to Lerner, Sarah Hall Ingram, and Holly Paz the fact that TIGTA would investigate
how “we” [i.e., Exempt Organizations] deal with c4 applications in Cincinnati, Lerner
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commented, “It is what it is. Although the original story isn't as pretty as we'd like, once we
learned this were off track, we have done what we can to change the process, better educate our
staff and move the cases.”
114. Later, after seeing the TIGTA report but just before it was made public in May
2013, Lerner changed her tune. She pre-arranged to have a friend ask her a public question
about the IRS targeting at a meeting of Tax Section of the American Bar Association where she
would be speaking. In her response, Lerner stated, “That was wrong, that was absolutely
incorrect, insensitive, and inappropriate—that’s not how we go about selecting cases for further
view. We don’s select for review because they have a particular name.” Lerner also admitted
that “[I]n some cases, cases sat around for a while.” “[S]ome letters…were far too broad, asking
questions of these organizations that weren’t really necessary for the type of application.”
115. Even in May 2013, Lerner was dishonest in public statements about the scandal,
claiming at first that she had only recently learned about the targeting through media reports, and
failing to disclose that she had been intimately involved at least since 2011.
116. Shortly after the ABA conference, Cindy Thomas emailed Lerner, accusing her of
misplacing the blame on Cincinnati workers: "Was it also communicated at that conference in
Washington that the low-level workers in Cincinnati asked the Washington office for assistance
and the Washington office took no action to provide guidance to the low-level workers?"
117. Thomas has also stated that Joseph Grant, who was Lerner’s immediate superior
(and successor to Ingram), had visited the Cincinnati office in approximately May 2012, a year
before the scandal broke in the press, to assure employees that they would not be blamed for the
agency’s mistakes. Upon information and belief, Holly Paz visited Cincinnati with Grant. A year
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later, Thomas’ May 2013 email to Lerner stated: “Based on the [news] articles, Cincinnati wasn’t
publicly ‘thrown under the bus’ [but] instead was hit by a convoy of Mack trucks.”
118. Additionally, Paz (who, as alleged above, served in a variety of roles within the
Technical Unit and as Director of Rulings and Agreements), claimed to Congressional
investigators in the summer of 2013 that targeting of conservative groups did not occur, and that
local Cincinnati workers simply used “tea party” as a shorthand for all political cases. However,
Paz knew better. During the previous year, Paz had actually served as the IRS’s liaison for the
TIGTA investigation which found that targeting had occurred, even sitting in on 36 of 41
interviews TIGTA conducted with IRS workers, many of whom were her subordinates.
Additionally, as alleged in paragraphs 90-93 above, Paz had first-hand knowledge that the
BOLO was being used to pull applications of “local organizations in the Tea Party movement,”
and Cindy Thomas had specifically requested direction by email on “how… we know applicant
is involved with the tea party movement?” In Congressional testimony on May 21, 2013, then-
Acting Commissioner Steve Miller admitted that this BOLO was, in fact, “partisan” targeting.
119. Other officers in IRS management also attempted to cover up the agency’s
conduct. According to the IRS, Acting Commissioner Steve Miller was first informed on May 3,
2012 — when he was deputy commissioner — that applications for tax-exempt status by tea
party groups were inappropriately singled out. Miller later briefed Congress about the reports
but failed to mention that tea party groups were being targeted inappropriately.
120. In March 2012, then-Commissioner Douglas Shulman testified falsely before the
House Ways and Means Committee. In response to a specific question about whether Tea Party
groups were being targeted “based on political leanings,” Shulman claimed to have knowledge of
the recent media allegations and the IRS’s process for the 501(c)(4) groups involved, and based
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upon this, claimed that “There is absolutely no targeting.” The following is a partial transcript of
the hearing, with emphasis added:
REP. CHARLES BOUSTANY: One other question. It’s come to my attention,
I’ve gotten a number of letters, we’ve seen some recent press allegations that the
IRS is targeting certain Tea Party groups cross the country — requesting owners’
documents requests, delaying approval for tax-exempt status and that kind of
thing. Can you elaborate on what’s going on with that? Can you give us
assurances that the IRS is not targeting particular groups based on political
leanings?
DOUG SHULMAN: Thanks for bringing this up because I think there’s been a lot
of press about this and a lot of moving information, so I appreciate the
opportunity to clarify. First, let me start by saying, yes, I can give you
assurances. As you know, we pride ourselves on being a non-political, non-
partisan organization. I am the only — me and our chief counsel — are the only
presidential appointees, and I have a five-year term that runs through presidential
elections, just so we will have none of that kind of political intervention in things
that we do. For 501 (c)(4) organizations, which is what’s been in the press,
organizations do not need to apply for tax exemption. Organizations can actually
hold themselves out as 501 (c)(4) organizations and then file a 990 with us. The
organizations that have been in the press are all ones that are in the application
process… When people apply for 501 (c)(4) status, what we do is engage them in
a number of questions about making sure that we understand their primary
purpose around this and other sorts of engagement. And so what’s been
happening has been the normal back-and-forth that happens with the IRS. None of
the alleged taxpayers– and obviously I can’t talk about individual taxpayers and
I’m not involved in these — are in an examination process. They’re in an
application process which they moved into voluntarily. There is absolutely no
targeting. This is the kind of back-and-forth that happens when people apply
for 501 (c)(4) status.
121. Subsequent disclosures by Congress continue to reveal that the targeting of
dissenting groups was much more widespread than reported by the IGR or discussed in the
Advocate Report. The targeting involved more IRS offices, personnel, groups, and a broader
time period. Reports to date have merely disclosed the tip of the iceberg, and only discovery will
reveal the full scope of this targeting.
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Demands for Burdensome Information Disclosure, Delay, and Chilling
122. One tactic utilized by the IRS to harass, intimidate, and discriminate against
dissenting groups critical of the current Administration was to demand disclosure of information
not authorized by the Internal Revenue Code or any other federal law.
123. Plaintiffs, like the vast majority of dissenting groups, are mom and pop
operations, run by ordinary citizens, often new to the process of formally organizing to express
their views, to educate their fellow citizens, and promote the common good and general welfare.
Like most tea party organizations, Plaintiffs often operate on shoe string budgets and rely on
members and volunteers to perform the vast majority of their activities. Plaintiffs do not have
large corporate structures or in-house legal teams to respond to massive and technical requests
for information.
124. Yet as evinced in great detail in below, these broad and sophisticated inquiries are
exactly the kinds of requests the IRS made of the dissenting groups who fit its criteria for special
scrutiny.
125. The IRS engaged in a tactic of suffocating Plaintiffs and other similarly situated
groups with requests that were so searching and extensive that they would have presented a
serious challenge even for sophisticated businesses.
126. The breadth of the requested information has been described by the IGR as
inappropriate, unnecessary, and burdensome.
(1) NorCal Tea Party Patriots
127. An example of the sort of information the IRS sought from dissenting groups is
found in two sets of demands from NorCal Tea Party Patriots. NorCal received the first demand
from Elizabeth Hofacre, of Group 7822 in Cincinnati, Ohio, late in 2010, several months after
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making its application. On behalf of the IRS, Hofacre demanded certain ordinary items, such as
bylaws, contact information for an officer to answer questions, confirmation of NorCal’s
website, a list of board members, copies of promotional materials distributed to the public at
events, and explanation of items on the group’s balance sheet. However, Hofacre also made the
following unnecessary demands about internal group discussions and meetings, board members’
backgrounds, and NorCal’s political association with other groups:
a. “Provide resumes” of board members;
b. “Provide examples of legislative matters discussed at meetings;”
c. “Provide a list of legislators who have presented at your meetings;”
d. “Explain your relationship with the Tea Party Patriots…”
e. “Provide copies of literature from your leadership conference on 6/19/10.”
128. Hofacre’s letter advised NorCal that it could fall into one of three groups: (1)
groups that could be processed immediately based on the information already submitted; (2)
groups that could be processed with “minor additional information;” and (3) “those that require
additional development.” The letter stated that applications falling into the third category would
be “assigned to an Exempt Organizations specialist for technical review. You can expect to be
contacted within approximately 90 days from the date of this notice.”
129. NorCal objected to providing Hofacre responsive information about its
discussions at its internal meetings and deliberations, its board members’ backgrounds, or its
confidential political associations with other like-minded groups. Nonetheless, it responded to
Hofacre’s first inquiry because the alternative would have been a loss of its application (“user”)
fee and the denial of recognition of tax-exempt status. This, in turn, would have required it to
pay taxes on contributions and other income that would otherwise have been used for its
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expressive social welfare purposes. Faced with this Hobson’s choice, NorCal decided to press
forward with its application, and awaited Ms. Hofacre’s response.
130. However, neither Hofacre nor any other IRS employee or officer contacted
NorCal “within 90 days” of the notice. After doing nothing with NorCal’s application (or any
dissenting group’s application) for thirteen months (as will be discussed below), IRS Exempt
Organizations Specialist Carly Young, of Group 7828 in Cincinnati, Ohio, sent a second demand
for information to NorCal Tea Party Patriots. See January 27, 2012 demand, attached hereto as
Exhibit C. On behalf of the IRS, Young demanded that NorCal gather and provide information
under penalty of perjury by February 17, 2012. The January 27, 2012 letter demanded
information that far exceeded the IRS’s needs in lawfully considering NorCal’s request for an
exemption.
131. For example, the IRS demanded the following information:
a. a list of all events and activities conducted since July 2010, including the time,
location, and content schedule of each event; the names and credentials of any
instructors; detailed contents of the speeches or forums, names of the speakers
or panels, and their credentials, and the amount paid for each speaker; the
names of persons from NorCal Tea Party Patriots and the amount of time they
will or had spent spend on the event, as well as the compensation paid to each
person, Id., ¶ 1;
b. information about NorCal Tea Party Patriots’s website and internet related
activities, such as the amounts incurred for these activities for 2010 and 2011,
and the amounts to be incurred in 2012 and 2013, Id., ¶ 2;
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c. copies of any newsletters or emails distributed to members or the public, Id., ¶
3;
d. copies of any new publication and/or advertising materials that were not
already provided in the application or response submitted in July 2010, Id., ¶
4;
e. whether NorCal Tea Party Patriots had conducted or would conduct rallies or
exhibitions for or against any public policies, legislation, public officers,
political candidates, and the like, Id., ¶ 5;
f. the time, location, and content of each scheduled rally or exhibition; copies of
handouts that NorCal Tea Party Patriots did or would provide to the public,
Id.;
g. the names of NorCal’s members and the amount of time each person would
spend on the event; and the percentage of time and resources the NorCal Tea
Party Patriots planned to spend conducting these activities in relation to its
total activities for the year, Id.;
h. whether NorCal Tea Party Patriots had or would conduct candidate forums or
any other events where political candidates were asked to speak, the names of
the candidates, time and location of events, number of people in attendance,
copies of all handouts distributed at these events, any recordings of the events,
and a transcript of speeches given by the political candidates, Id., ¶¶ 6-7;
i. materials or other communications distributed by NorCal Tea Party Patriots
on behalf of another organization or person, including copies of these
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materials, an indication of when and where the materials were distributed, and
the names of the persons distributing the materials, Id., ¶ 8;
j. whether NorCal Tea Party Patriots had or intended to conduct voter education
activities, such as voter registration drives, voting drives, or distribute voter
guides; the names of the members who had or would conduct these efforts and
copies of all materials distributed to further these efforts, Id., ¶ 9;
k. whether NorCal Tea Party Patriots had or planned to make any attempts to
influence the outcome of specific legislation, Id., ¶ 11;
l. information about NorCal Tea Party Patriots’s direct or indirect
communications with members of legislative bodies. The IRS then demanded
copies of these written communications, Id., ¶ 12;
m. the names of other IRC 501(c)(3), 501(c)(4), or 527 organizations, together
with the name, employer identification number, and address of each such
organization, a detailed description of the nature of the relationship between
NorCal Tea Party Patriots and the other organizations, the nature of their
contacts, and a list of shared employees, volunteers, and other resources, Id., ¶
13;
n. copies of all solicitations made by NorCal Tea Party Patriots and copies of all
documents related to fundraising events, Id., ¶ 14;
o. information about NorCal Tea Party Patriots’s board of directors and the
board’s activities, including all copies of corporate minutes from August 2010
to present, the titles, duties, work hours, and compensation of the board
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members, officers, and employees, and the names of any board members or
officers who has or intends to run for a public office, Id., ¶ 16;
p. extensive information about NorCal Tea Party Patriots’ membership,
including the number of members, the nature of its membership (individuals
or organizations), copies of member application forms, membership fee
schedule, the roles and duties of its members, and copies of NorCal’s
website’s features that are designed to be available exclusively to its members
only, Id., ¶ 17;
q. information on the income NorCal Tea Party Patriots received and raised from
its inception to the time the information was requested, and its projected
income for 2012 and 2013, Id., ¶ 18;
r. the names of donors, contributors, and grantors and whether these persons had
or intended to run for office and which office, the amounts and dates of the
contributions, and a detailed description of how NorCal Tea Party Patriots
used these monies; the amount of membership fees NorCal Tea Party Patriots
received each year; and the amounts of fundraising received each year, Id.;
and
s. detailed information about the expenses NorCal Tea Party Patriots had
incurred from its inception to the time the information was requested and all
anticipated expenses for 2012 and 2013; the compensation, salary, wage, and
reimbursement expenses for each year of NorCal Tea Party Patriots’s
existence. Id., ¶ 19.
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132. Like so many other similarly situated dissenting groups, NorCal Tea Party
Patriots was given this unreasonable deadline – January of 2012 – to respond to this onerous
request. As the IGR points out, dissenting groups were given unreasonable periods of time to
respond to these requests even though the IRS had done nothing to process their request for tax-
exempt status for 13 months.
133. Additionally, the IRS has admitted that “some applicants were subjected to overly
burdensome and intrusive questionnaires and data requests that went beyond an acceptable level
of fact finding.” See Werfel Report, p. 10.
134. Again, NorCal objected to Carly Young’s requests, which she stated would be
made public and were even more intrusive and burdensome than Hofacre’s initial set of requests.
However, NorCal felt that the alternative to disclosure—loss of its application fee, loss of the
benefit of recognition, and now, loss of even the benefit of exempt status through treatment as a
taxable entity—was even worse. For this reason, NorCal responded to Young’s requests with yet
another set of confidential and internal information.
135. NorCal ultimately received its recognition letter on August 2, 2012, over two
years after it had filed its application in March 2010.
136. By that late date, however, NorCal had suffered substantial injury which took
several forms.
137. First, NorCal faced a period of over two years in which it was uncertain whether it
would be recognized by the IRS as a tax exempt social welfare organization, and therefore avoid
paying taxes on its contributions. Second, NorCal had to conduct its activities with the
knowledge that it was receiving some sort of special, in-depth scrutiny from the IRS, and that the
scrutiny related specifically to NorCal’s viewpoint in its political expression and associations.
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Yet it also knew that if it tried to opt out of the process by refusing to answer the IRS’s probing
questions, it would not have even the undesirable second-best option of acting as a self-declared
organization. Instead, it would be treated as a taxable entity. From the summer of 2010 to
August 2012, these effects actually did cause NorCal—and would have reasonably caused a
person of ordinary firmness—to curtail both the overall extent of its expressive activities and the
amount of time and resources it spent communicating with the public and with allied groups on
controversial issues, such as Obamacare.
138. Additionally, the delay in receiving recognition of its exempt status inhibited
NorCal in other ways. NorCal’s failure to achieve recognition denied it an important incentive
for supporters and potential supporters to donate to NorCal—the understanding that, like other
social welfare organizations, NorCal would be able to use the full amount of the contribution and
would not have to pay a tax on it—and thus cost NorCal support. Further, the knowledge that
NorCal might well be handicapped by the imposition of taxes, and quickly wither on the vine,
provided a disincentive for volunteers and supporters to devote their limited time and energy to
NorCal instead of other organizations. Both effects actually did cost NorCal supporters.
139. Additionally, the very act of responding to unnecessary IRS questions about its
expressive activities caused NorCal to divert time and resources away from those activities.
140. Finally, the failure to achieve recognition of exempt status for over two years
burdened NorCal in other ways (as the IRS recognized in the IGR), as state exempt status and the
Postal Service’s reduced rates hinged on achieving IRS recognition.
141. The IRS’s delays and chilling of NorCal’s speech came at a crucial time for
NorCal. The NorCal delay crossed two campaign cycles, including much of the presidential
cycle in 2012. Campaign cycles are important for NorCal and the other Plaintiffs because they
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are mass events that focus the American public on the major policy issues of our day. The 2012
presidential election was particularly important to NorCal, Plaintiffs, and dissenting groups
because it alerted potential supporters to the ideology and public policy of the incumbent
President and Administration. Additionally, at the state level, many initiative petition and
referendum campaigns coincide with candidate election cycles. Accordingly, for tax-exempt
groups (including NorCal and Plaintiffs) to truly fulfill their expressive and social welfare
purposes, it was and is critical to have an exemption during the windows of heightened public
awareness and debate that election cycles bring.
142. Instead, the IRS saddled dissenting groups with delays during these crucial
windows of opportunity. This delay was especially damaging to groups like NorCal and the
other Plaintiffs. As the IGR points out, such groups often withdrew their applications or may not
have begun conducting the planned social welfare work they had in mind.
143. When the purpose of a group is, like NorCal, to inform and educate the public
about the main policy issues of the day, delays through two election cycles can seriously hamper
or even destroy the group’s ability to fully and equally participate in the national policy debate.
As discussed above, this is the injury NorCal suffered. Put simply, the IRS and its employees
used their power to intimidate, coerce, and chill the expressive activity of dissenting groups.
(2) Faith and Freedom Coalition of Ohio
144. The Faith and Freedom Coalition of Ohio (“FFCO”) applied for recognition of
exempt status under Section 501(c)(4) of the Internal Revenue Code on March 4, 2011. Almost
a year later, on February 14, 2012, IRS Exempt Organizations Specialist Stephen Seok sent
FFCO requests for information that were virtually identical to those that Specialist Carly Young
had sent to NorCal in January 2012. Seok demanded that FFCO respond in just three weeks, by
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March 7, 2012, or have its case closed, which would mean that the IRS “will treat you as a
taxable entity.”
145. FFCO objected to Seok’s demands for information, which he stated would be
made public. FFCO felt that disclosure of its confidential information was a penalty even worse
than the loss of its application fee, loss of the benefit of recognition, and now, loss of even the
benefit of exempt status through treatment as a taxable entity.
146. On June 19, 2012, Exempt Organizations Specialist Grant Herring sent FFCO a
letter telling it to disregard Seok’s February request for information, but making further demands
for information. (See Exhibit D, attached).
147. Herring’s letter demanded that FFCO “list each program/activity you have
conducted from inception until now.” It demanded, for each program, the time, location, and
description; copies of handouts, pamphlets, and other literature distributed to the public; names
of speakers or panel members and their credentials; whether or not any speaker spoke in favor of
a candidate and if so, whether the organization publically disclaimed or endorsed those
statements.
148. Not content with this second demand, on June 28, 2012, Herring sent yet a third
demand letter. (See Exhibit E, attached).
149. It repeated the previous demand regarding each program. It then demanded to
know how “each of the activities you’ve described – voter registrations, candidate forums,
candidate debates, town hall meetings, citizenship and citizen action seminars – will be
conducted.”
150. Herring’s letter warned that if the IRS did not hear from FFCO “we will assume
you no longer want us to consider your application for exemption and we will close your case.”
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151. Defendants’ treatment of FFCO directly contradicts the assertion in the IGR
Report and in subsequent IRS statements that the demands for irrelevant information ceased after
the January-February 2012 form letters.
152. The IRS failed to recognize FFCO’s tax-exempt status until September 17, 2012.
153. By that late date, however, FFCO had suffered substantial injury which took
several forms.
154. First, FFCO faced a period of over eighteen months in which it was uncertain
whether it would receive recognition of exempt status, and therefore avoid paying taxes on its
contributions. Second, FFCO had to conduct its activities with the knowledge that it was
receiving some sort of special, in-depth scrutiny from the IRS, and that the srcutiny related
specifically to FFCO’s viewpoint in its political expression and associations. Yet it also knew
that if it tried to opt out of the process by refusing to answer the IRS’s probing questions, it
would not have even the undesirable second-best option of acting as a self-declared organization.
Instead, it would be treated as a taxable entity. From the summer of 2011 to September 2012,
these effects actually did cause FFCO—and would have reasonably caused a person of ordinary
firmness—to curtail both the overall extent of its expressive activities and the amount of time
and resources it spent communicating with the public and with allied groups on controversial
issues, such as Obamacare.
155. Additionally, the delay in receiving recognition of its exempt status inhibited
FFCO in other ways. FFCO’s failure to achieve recognition denied it an important incentive for
supporters and potential supporters to donate to FFCO—the understanding that, like other social
welfare organizations, FFCO would be able to use the full amount of the contribution and would
not have to pay a tax on it—and thus cost FFCO support. Further, the knowledge that FFCO
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might well be handicapped by the imposition of taxes, and quickly wither on the vine, provided a
disincentive for volunteers and supporters to devote their limited time and energy to FFCO as
opposed to other organizations. Both effects actually did cost FFCO supporters.
156. Additionally, the very act of responding to unnecessary IRS questions about its
expressive activities caused FFCO to divert time and resources away from those activities.
157. Finally, the failure to achieve recognition of exempt status for over two years
burdened FFCO in other ways (as the IRS recognized in the IGR), as state exempt status and the
Postal Service’s reduced rates hinged on achieving IRS recognition.
158. The IRS’s delays and chilling of FFCO’s speech came at a crucial time for FFCO.
The FFCO delay coincided with much of the presidential cycle in 2012. Campaign cycles are
important for FFCO and the other Plaintiffs because they are mass events that focus the
American public on the major policy issues of our day. The 2012 presidential election was
particularly important to FFCO, Plaintiffs, and dissenting groups because it alerted potential
supporters to the ideology and public policy of the incumbent President and Administration.
Additionally, at the state level, many initiative petition and referendum campaigns coincide with
candidate election cycles. Accordingly, for tax-exempt groups (including FFCO and Plaintiffs)
to truly fulfill their expressive and social welfare purposes, it was and is critical to have an
exemption during the windows of heightened public awareness and debate that election cycles
bring.
159. Instead, the IRS saddled dissenting groups with delays during these crucial
windows of opportunity. This delay was especially damaging to groups like FFCO and the other
Plaintiffs. As the IGR points out, such groups often withdrew their applications or may not have
begun conducting the planned social welfare work they had in mind.
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160. When the purpose of a group is, like FFCO, to inform and educate the public
about the main policy issues of the day, delays through two election cycles can seriously hamper
or even destroy the group’s ability to fully and equally participate in the national policy debate.
As discussed above, this is the injury FFCO suffered. Put simply, the IRS and its employees
used its power to intimidate, coerce, and chill the expressive activity of dissenting groups.
(3) Simi Valley Moorpark Tea Party
161. On July 25, 2011, Simi Valley Moorpark Tea Party (“Simi Valley”) applied for
recognition of exempt status under Section 501(c)(4) of the Internal Revenue Code. The IRS
acknowledged receipt of the application in August 2011. Nine months later, on May 11, 2012,
Simi Valley received a notice stating that “our initial screening of your application indicated that
your case should be assigned to an Exempt Organizations Specialist.” The letter made no
promises about when Simi Valley would hear from the IRS again, merely stating that “we are
experiencing delays…”
162. Not until September 19, 2012, over a year after Simi Valley had applied and long
after the IGR claims that targeting had ceased, did Simi Valley receive from the IRS any further
communication. It was a demand from Specialist Grant Herring, of Group 7824 in Cincinnati,
Ohio, for irrelevant information. (See Exhibit F, attached). Like the letters sent to the other
Plaintiffs, Herring’s letter informed Simi Valley that the requested information would be made
public, but that withdrawal from the process would result in the IRS treating Simi Valley as a
taxable entity.
163. Herring’s letter demanded detailed descriptions of each meeting Simi Valley had
had and copies of materials they had handed out. It also demanded information about the steps
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that the group would take in the 2012 election cycle, “particularly expenditures to influence the
election of political candidates.”
164. Simi Valley objected to Herring’s requests. However, Simi Valley felt that the
alternative to disclosure—loss of its application fee, loss of the benefit of recognition, and now,
loss of even the benefit of exempt status through treatment as a taxable entity—was even worse.
For this reason, Simi Valley responded to Herring’s requests with a set of confidential and
internal information.
165. Simi Valley’s application was finally granted in November 2012.
166. By that late date, however, Simi Valley had suffered a sixteen-month delay. It
suffered actual and substantial injury of the same types suffered by NorCal and FFCO as set
forth in paragraphs 136-143, above.
(4) Tampa 912 Project, Inc.
167. The Tampa 912 Project (“Tampa 912”) applied for recognition of exempt status
under Section 501(c)(4) of the Internal Revenue Code in February 2010. On August 2, 2010,
Tampa 912 received its first response—a letter from Exempt Organizations Specialist A. Morris,
Group 7880, in Baltimore, Maryland, demanding responses to several questions by August 23,
2010. As with the other Plaintiffs, Morris’ letter stated that Tampa 912’s failure to make these
public disclosures would result not only in the loss of the advance-recognition benefit, but in
treatment by the IRS as a taxable entity. This letter also indicates that IRS’s conduct was not
limited to its Cincinnati office.
168. The letter requested information concerning educational materials presented at all
meetings, and research materials produced or disseminated by the organization “on social,
domestic, economic, defense and foreign policy issues.” (See Exhibit G, attached).
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169. The letter also demanded the methodology the Tampa 9-12 Project intended to
use in conducting its voter registration drives and demanded copies of the voter registration
materials.
170. Tampa 912 objected to Morris’s requests. However, Tampa 912 felt that the
alternative to disclosure—loss of its application fee, loss of the benefit of recognition, and now,
loss of even the benefit of exempt status through treatment as a taxable entity—was even worse.
For this reason, Tampa 912 responded to Morris’s requests with a set of confidential and internal
information.
171. Tampa 912’s application was finally granted in January 2011.
172. By that late date, however, Tampa 912 had suffered an eleven-month delay. It
suffered actual and substantial injury of the same types suffered by NorCal and FFCO as set
forth in paragraphs 136-143, above.
(5) South Dakota Citizens for Liberty
173. South Dakota Citizens for Liberty, Inc. (“SDCL”) applied for recognition of tax-
exempt status on September 3, 2010. Its tax-exempt status was not granted until almost two
years later – June 20, 2012.
174. On February 1, 2012, almost a year and a half after SDCL filed its application,
Specialist Joseph Herr, of Group 7821 in Cincinnati, Ohio, mailed SDCL an extensive list of
questions almost identical to the request Carly Young sent to NorCal and Stephen Seok sent to
FFCO. The demand for information had a deadline of February 22, 2012, informed SDCL that
its responses would be public, and threatened that SDCL would be treated as a taxable entity if it
failed to respond. See Ex. H hereto.
175. SDCL objected to Herr’s requests and initially did not respond.
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176. However, on March 16, 2012, Lois Lerner, Director of Exempt Organizations,
wrote to SDCL enclosing Herr’s previous demands. Lerner asserted that “all the facts and
circumstances of [SDCL] must be considered” in deciding whether SDCL was “primarily
engaged in the promotion of social welfare,” asserting a position that nothing was outside of the
scope of permissible inquiry for the IRS. Lerner directed SDCL to make its response to Herr in
Ohio.
177. After receiving Lerner’s instruction to communicate its confidential information
to Herr in Ohio, SDCL felt that the alternative to disclosure—loss of its application fee, loss of
the benefit of recognition, and now, loss of even the benefit of exempt status through treatment
as a taxable entity—was even worse. For this reason, SDCL responded to Lerner’s and Herr’s
requests with a set of confidential and internal information.
178. SDCL ultimately received two recognition letters, one dated June 20, 2012,
from Lois Lerner, and one dated July 6, 2012, from Holly Paz. SDCL’s application had taken
almost two years. By the summer of 2012, however, SDCL had suffered actual and substantial
injury of the same types suffered by NorCal and FFCO as set forth in paragraphs 136-143,
above.
(6) Texas Patriots Tea Party
179. Texas Patriots Tea Party (“TPTP”) applied for recognition of tax-exempt status
under Section 501(c)(4) of the Internal Revenue Code on or about June 19, 2012.
180. On or about January 7, 2013, seven months later, TPTP received a demand from
Janine Estes, Group 7829 in Cincinnati, Ohio, for additional and unnecessary information,
including all information TPTP had published or distributed and all materials for TPTP’s
workshops. See Ex. I hereto. Like the letters to the other Plaintiffs, Estes’ demand letter stated
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that TPTP’s response would be public, and that TPTP would be treated as a taxable entity if it
failed to respond.
181. TPTP objected to Estes’ requests and did not wish to respond. However, TPTP
felt that the alternative to disclosure—loss of its application fee, loss of the benefit of
recognition, and now, loss of even the benefit of exempt status through treatment as a taxable
entity—was even worse. For this reason, TPTP responded to Estes’ requests with a set of
confidential and internal information.
182. On February 12, 2013, Estes followed up with additional requests. Again, TPTP
objected and did not wish to respond, but again, made a response because it still felt that the
alternative to public disclosure was even worse than disclosure.
183. On May 14, 2013, TPTP wrote Estes and demanded action on its application.
Estes made no response.
184. On June 26, 2013, Estes wrote TPTP again, sending Letter 5228, the IRS’s
“Optional Expedited Process for Certain Exemption Applications.” Estes promised that the IRS
would approve TPTP’s long-delayed application if TPTP would promise under oath that its
social welfare and political activities met certain thresholds in the past, and would meet those
same thresholds in the future. However, the definitions of “political activities,” while more
specific than then-current IRS guidance, encompassed a much broader range of conduct than IRS
guidance had encompassed to date. Finally, the letter informed TPTP that its compliance with
these new, stricter guidelines would be subject to examination at any time.
185. Estes and the IRS did not send similar demands to existing organizations that had
already qualified under Section 501(c)(4), or to other organizations that had applied but had not
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been delayed as part of the targeting of conservative, libertarian, “tea party,” and dissenting
groups.
186. TPTP was once again faced with the choice of accepting more stringent
limitations on its expressive activity than other 501(c)(4) organizations (by accepting Estes’
proposed deal), or by accepting a different set of limitations on its expressive activity (identical
to the limitations experienced by NorCal, FFCO, and every other applicant that experienced
delay, as set forth in paragraphs 136-143) by continuing to operate under uncertainty and delay
while the IRS kept TPTP’s application (by rejecting Estes’ deal). Faced with this Hobson’s
choice, TPTP decided not to accept Estes’ proposed deal.
187. Accordingly, TPTP continues to wait for IRS action on its 2012 application. In
the meantime, the delay is causing it to suffer injury of the same kind suffered by NorCal and
FFCO, as set forth in paragraphs 136-143, above.
(7) Americans Against Oppressive Laws, Inc.
188. On October 7, 2011, Americans Against Oppressive Laws, Inc. (“AAOL”) filed
its application for recognition of exempt status under Section 501(c)(4) of the Internal Revenue
Code. It is still pending.
189. On May 22, 2013, over 18 months after AAOL first submitted its application,
Specialist Faye Ng, Group 7826, responded with a request for more information. See Ex. J
hereto. Ng requested irrelevant information, including information relating to a trademark search
it had conducted. Like the other letters received by Plaintiffs, Ng’s letter informed AAOL that
its responses would be public, but that a failure to respond would result in the IRS treating
AAOL as a taxable entity. Despite the IRS’s 18-month delay, Ng demanded a response in just 3
weeks.
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190. AAOL objected to Ng’s requests and did not wish to respond. However, AAOL
felt that the alternative to disclosure—loss of its application fee, loss of the benefit of
recognition, and now, loss of even the benefit of exempt status through treatment as a taxable
entity—was even worse. For this reason, AAOL responded to Ng’s requests with a set of
confidential and internal information.
191. In its response, AAOL told Ng and the IRS about the effect its delay had had on
the organization: “I’m sorry but because of the delay by the IRS in obtaining the tax exempt
approval, I was forced to shut the web site down and therefore no longer have the educational
content of the site. I cannot financially take any chances to set up a web site again until this
approval is granted.” In response to another question, AAOL stated: “I have attached a copy of
the only brochure that we ever produced. I was not able to continue with the printing for future
printings because I did not have the tax-exempt approval from the IRS that I applied for nearly 2
years ago.” Further, under penalties of perjury, AAOL disclaimed any effort to “get involved in
political parties and / or promoting politicians…”
192. Nonetheless, the IRS and Ng have failed to grant approval. In the interim, due to
the delay in receiving its recognition, AAOL has suffered the same injuries and for the same
reasons as those suffered by NorCal and FFCO, as set forth in paragraphs 136-143, above.
193. Additionally, AAOL received an offer from Ng for “Optional Expedited
Approval” that was identical to the letter received by TPTP, as set forth above. AAOL was
faced with the same choice as TPTP in deciding whether to accept the restrictions on expressive
activity in Ng’s letter, or to submit to continued delay and the attendant injuries of waiting for
the IRS to finish processing his September 2011 application. Like TPTP, AAOL faced this
Hobson’s choice by deciding not to accept the restrictions in Ng’s “optional” approval process.
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194. Accordingly, AAOL continues to wait for IRS action on its 2012 application. In
the meantime, the delay is causing it to suffer injury of the same kind suffered by NorCal and
FFCO, as set forth in paragraphs 136-143, above.
(8) San Angelo Tea Party
195. The San Angelo Tea Party applied for recognition of tax-exempt status on March
16, 2010. On September 29, 2010, it received its first demand for excessive disclosure from
Exempt Organizations Specialist Elizabeth Hofacre. (See Exhibit K, attached).
196. Hofacre’s letter was almost identical to the first demand she had made to NorCal.
The letter demanded such things as its Facebook pages, resumes of its board members, the topics
covered at meetings for the past year, copies of all literature distributed at the meetings, and all
contracts with third parties.
197. San Angelo objected to providing Hofacre responsive information about its
discussions at its internal meetings and deliberations, its board members’ backgrounds, or its
confidential political associations with other like-minded groups. The alternative was a loss of
its application (“user”) fee and the denial of recognition of tax-exempt status. This, in turn,
would have required it to pay taxes on contributions and other income that would otherwise have
been used for its expressive social welfare purposes. As a result of Hofacre’s demand, San
Angelo sharply curtailed its operations.
198. Next, in January 2012, the San Angelo Tea Party received from Grant Herring a
form demand for information similar to the second request Carly Young sent to NorCal that
same month. It also received a follow-up phone call from IRS agent Grant Herring. Herring’s
demand, like the other long-form letters received by Plaintiffs in January and February 2012,
stated that San Angelo’s responses would be public, but that a failure to respond would mean
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that San Angelo would be treated as a taxable entity. Faced with this Hobson’s choice between
burdens on its expression through a burdensome and delayed application process, and burdens on
its expression through an inability to gain recognition of its tax status, the San Angelo Tea Party
withdrew its application. (See Exhibit L, attached).
(9) Prescott Tea Party
199. The Prescott Tea Party applied for recognition of tax-exempt status under Section
501(c)(3) of the Internal Revenue Code in November 2009. On April 14, 2010, it received a
demand for additional information from Carter Hull, an attorney in the Washington, D.C. Office
of the IRS. Hull demanded information about all of the group’s political activities, including its
rallies, emails, protests, and any other steps about “how you encourage members to voice their
opinions.” He also insisted on copies of their email blasts, video presentations, and mailings.
200. Prescott objected to providing Hull with responsive information about its
confidential and internal political discussions and associations. The alternative was a loss of its
application (“user”) fee and the denial of recognition of tax-exempt status. This, in turn, would
have required it to pay taxes on contributions and other income that would otherwise have been
used for its expressive and educational purposes. As a result of Hull’s demand, Prescott weighed
the severity of the injury to its expressive activity under either choice presented—to respond or
to withdraw. Ultimately, Prescott decided to withdraw its application.
(10) Texas Public Policy Foundation
201. A particularly egregious violation of First Amendment rights has been suffered by
the Texas Public Policy Foundation (“TPPF”). In or around the spring of 2012, the IRS illegally
released TPPF’s 990 form with the donor information un-redacted. Subsequently, this highly
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confidential information was widely circulated in the media. Said release was illegal,
intentional, malicious, and politically motivated.
202. Upon information and belief, other dissenting groups’ confidential information
has been wrongfully disseminated both within and outside the government.
203. Now, donors and members of TPPF receive solicitations and other harassing
contacts because private entities have accessed and used TPPF’s donor list. This discourages
donations. Further, the disclosure caused TPPF to expend good will and devote substantial staff
time to remedying the disclosure and assuring donors that there will be no further harm from
associating with TPPF, when that good will and time could instead have been used to promote
political association and TPPF’s’ political speech.
COUNT ONE: THE PRIVACY ACT
204. Plaintiffs incorporate the allegations in Paragraphs 1-203 as though fully set forth
herein.
205. 5 U.S.C. § 552a, known as the Privacy Act, grants all citizens certain protections
regarding private information. The Defendants violated the Privacy Act in several particulars.
206. Section 552a(e)(1) requires that the agency “maintain in its records only such
information about an individual as is relevant and necessary to accomplish a purpose of the
agency required to be accomplished by statute or by Executive Order of the President”.
207. The Defendants violated this provision by requiring that Plaintiffs produce
information about their members’ free expression and association that was neither relevant nor
necessary to any lawful purpose. Much of the information sought from Plaintiffs and similarly
situated groups was not relevant to any lawful purpose of the IRS.
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208. The IRS’s demand for the information described in ¶ 131, above, violates §
552a(e)(1) and § 552a(e)(3).
209. The provisions of § 552a(e)(3)(A) were violated because the IRS’s request for
information did not specify the authority which authorized the solicitation of the information and
did not specify whether disclosure of the information was mandatory or voluntary. In this case it
could only be voluntary since it was not authorized by law, but the IRS did not so notify the
recipients.
210. The provisions of § 552a(e)(3)(B) were violated because the IRS did not notify
the recipients of the principal purpose for which the information was to be used – in this case,
intimidation and delay based on a group’s viewpoint.
211. The provisions of § 552a(e)(3)(C) were violated because recipients were not made
aware of the routine uses that were to be made of the information. They were not made aware of
it because no lawful routine use was contemplated.
212. The provisions of § 552a(e)(3)(D) were violated because no notice was provided
to recipients of the effects of not providing the information. The IRS could not tell recipients
that it was incapable of imposing any penalty upon them for not responding since the requests
themselves were illegal.
213. The provisions of § 552a(e)(4) were violated in that the IRS did not publish in the
Federal Register any of the required information regarding this system of records which it was
illegally soliciting and maintaining.
214. The provisions of § 552a(e)(5) were violated in that the IRS made no effort to
maintain these records with “such accuracy, relevance, timeliness, and completeness as is
reasonably necessary to ensure fairness to the individual in the determination.” The very
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purpose for which these records were collected was to ensure unfairness and delay to dissenting
groups.
215. The provisions of § 552a(e)(7) were violated in that the law requires that the IRS
“maintain no record describing how any individual exercises rights guaranteed by the First
Amendment unless expressly authorized by statute or by the individual about whom the record is
maintained…” The information demanded regarding the First Amendment activities of
Plaintiffs, their associated members, and similar groups, as outlined in ¶ 131, above, illustrate a
clear and intentional violation of this section.
216. The provisions of § 552a(e)(10) were violated in that Defendants did not establish
safe guards to ensure the security and confidentiality of the records and prevent embarrassment,
inconvenience, or unfairness to the targeted groups. On information and belief, Defendants have
improperly disclosed information obtained from dissenting groups to media sources and groups
with a political agenda consistent with Defendants’ agenda.
217. The Privacy Act in § 552a(g)(1) provides civil remedies for individuals who have
been injured by activities such as the IRS has undertaken. Plaintiffs assert causes of action under
subsection (d) because the IRS has failed to comply with several provisions of the Privacy Act in
such a way as to have an adverse effect on Plaintiffs and their members.
218. Plaintiffs’ standing is two-pronged. First, Plaintiffs sue on their own behalf as
expressive associations of individuals that have assumed the corporate form and have sought
exemptions to protect the organizations from paying taxes on the resources the individuals
contribute to the groups for their expressive purposes.
219. Second, Plaintiffs assert associational standing on behalf of all their members.
Plaintiffs have associational standing on the following basis.
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a. First, Plaintiffs’ members have standing in their own right. They have been
injured because the IRS unnecessarily requested, retained, and shared
information about their individual expressive activities and beliefs. For
example, the IRS asked for the names of speakers at events (not excluding
members), their credentials, and the amount of time members spent at events
(or would spend at upcoming events). See ¶ 131.a, supra. The IRS asked for
“the names of… members and the amount of time each person would spend
on [events].” ¶ 131.g, supra. It asked for “any recordings of events,” (¶
131.h, supra), which would indiscriminately disclose members’ political
speech. It asked for the “names” of persons—which could include
members—who would distribute materials from other organizations (¶ 131.i);
the “names of members” who conducted voter education or registration drives
(¶ 131.j); a list of “employees” or “volunteers” shared with other
organizations (¶ 131.m); information about the board of directors and its
activities, and the names of any members who sought to run for public office
(¶ 131.o); copies of membership application forms, descriptions of the roles
and duties of members, and copies of website areas available only to members
(¶ 131.p); the names of donors, contributors, and grantors (¶131.r); and
detailed information regarding the topics discussed at meetings and written
communications handed out at meetings (see generally ¶¶ 131-200).
Accordingly, the IRS’s demands were targeted to reveal specific facts about
the political speech, beliefs, and activities of the individuals who banded
together to form each Plaintiff-entity, and who therefore made up each
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Plaintiff’s membership. Individuals require breathing space to develop, test,
share, and act upon political beliefs by disclosing them to the audience, in the
forum, and in the circumstances of their choosing—or of not disclosing them
at all. The IRS’s disclosure demands violated this core principle by asking
Plaintiff’s members to report their own political beliefs and activities, and the
political beliefs and activities of their associates. The IRS’s demands
therefore proximately caused individuals to suffer damages as set forth in ¶
220, below.
b. Second, the individual privacy interests Plaintiffs seek to protect are not only
germane to their organizations’ purposes, they are and fundamental to
Plaintiffs’ very existence. Each Plaintiff was formed to advance social
welfare and the education of society. Plaintiffs perform this function through
coordinating their individual members’ expression. But prior to expression,
the individuals comprising each Plaintiff must have privacy. Unless Plaintiffs
are first able to provide their individual members the privacy and breathing
space necessary to conceive, form, and test ideas, Plaintiffs cannot coordinate
their individual members’ expression of those jointly conceived, formed, and
tested ideas. Therefore, by impairing individual members’ interest in the
privacy of their association, the IRS impaired Plaintiffs themselves.
c. Third, neither the claim Plaintiffs assert nor the damages they request require
the participation of Plaintiffs’ individual members in the lawsuit. The IRS
targeted the privacy interests and expression of individual members by
making blanket disclosure demands to the individuals’ associations, the
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Plaintiffs. Then, at the request of the IRS, Plaintiffs provided information on
their individual members. The costs of Plaintiffs’ member-specific responses
were equally borne by all members whose information was disclosed.
Additionally, the Privacy Act provides that for low-dollar claims, a uniform
minimum of $1,000 per member is to be assessed as damages. For all of these
reasons, the participation of individual members of the Plaintiffs is
unnecessary in the litigation, and the government should be able to litigate the
case by dealing with the Plaintiffs, the parties it tried to use to harvest the
individuals’ private information.
220. Wherefore, pursuant to § 552a(g)(4) Plaintiffs state that they and their members
have been damaged as a direct and proximate cause of Defendants’ actions by:
• The collection of irrelevant and unnecessary information on Plaintiffs, their officers,
members, donors, speakers, and protected First Amendment activities.
• The invasion of the privacy of Plaintiffs and the above-referenced individuals.
• The harassment, burden, and expense of complying with demands for information
that were not lawful.
• The loss of donations, membership fees, and grants due to the Defendants’ invasion
of the privacy of Plaintiffs and all people associated with them.
• The cost of bringing this action together with reasonable attorney’s fees.
COUNT TWO: VIOLATIONS OF THE U.S. CONSTITUTION
221. Plaintiffs incorporate the allegations in Paragraphs 1-220 as though fully set forth
herein.
(a) Bivens Claim
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222. The United States Supreme Court ruled in Bivens (see ¶ 4, supra) that federal
officers are subject to personal liability for any violation of constitutional rights of which a
reasonable officer would be aware. Bivens is available where there is a constitutional violation
and the victim has no other remedy. Other than the damages for the privacy intrusion pled
above, Plaintiffs and similarly situated groups and individuals have no statutory remedy for the
systematic targeting of dissenting groups based upon the content of their beliefs and expression.
This is a constitutional tort and a clear violation of the First and Fifth Amendments.
223. The First Amendment of the U.S. Constitution prohibits the government from
retaliating or discriminating against groups in any fashion based upon their political viewpoints.
Relatedly, the government cannot extend benefits to groups or refrain from taking acts against
groups based upon unconstitutional conditions.
224. Each Plaintiff, and the class of Plaintiffs, formed organizations in order to
promote social welfare (under Section 501(c)(4)) or educate the public on matters of public
concern (under Section 501(c)(3)). Each Plaintiff, and the class of Plaintiffs, engaged in and
desired to engage in expressive activity by communicating to their members and the general
public their dissatisfaction with policies that they believe to be deeply detrimental to American
society and to the Republic. This communication involved expression of dissatisfaction with
policies of the current Administration. All of the Plaintiffs engaged in expressive activity that
evidenced a viewpoint hostile to that of the current Administration.
225. Tax-exempt status is a government benefit for the Plaintiffs or, alternatively, is
the government’s forbearance of collecting taxes from, and thereby penalizing, Plaintiffs and
other groups formed by individuals for social welfare or educational purposes that Congress has
decided should not be taxable activities.
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226. Additionally, IRS recognition of tax-exempt status is a thing of value for
Plaintiffs for the reasons set forth in Paragraphs 41-44 above.
227. The decision of certain IRS officers to target specific applicants for tax
exemption, like and including Plaintiffs, for (1) delayed and extended processing; and (2)
intrusive and public disclosure of their confidential political speech and association, is an adverse
action that injured Plaintiffs in the specific manner set forth in Paragraphs 136-143; 153-160;
164-166; 170-172; 177-178; 186-187; 192-194; 197-198; 199-200; and 201-203.
228. This adverse action and injury is objectively likely to chill a person of ordinary
firmness from engaging in the expressive activity in which the Plaintiffs were, in fact, engaged.
This is so because (from among other reasons) delays in receiving exempt status are likely to
cause supporters to refrain from contributing time or money to an entity that might be subject to
crippling and disadvantageous taxation. Time and money is better spent on organizations that
have an exemption and do not suffer this severe handicap. Additionally, supporters who hold
views that are unpopular or are inimical to the interests of the Administration in control of the
government and IRS are likely to avoid associating with organizations which will be required to
make public disclosure of their shared views and association.
229. As set forth above, this result in fact occurred, inhibiting the activity of some
Plaintiffs, while causing other Plaintiffs to give up their attempt to receive IRS recognition of
their tax-exempt status. The IRS’s own IGR report explains that delaying recognition of tax-
exempt status of Plaintiffs and other similarly situated groups had the effect of impairing their
members’ expressive associational effectiveness in the 2010 and 2012 election cycles.
230. Further, as set forth above, the IRS officials’ delay and burdensome requests were
motivated at least in part by Plaintiffs’ expressive activity and expressed anti-Administration
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viewpoints. IRS workers originally decided to begin tracking “tea party” groups in 2010 because
of the intense media attention their anti-administration speech was generating. At least one
Defendant, Stephen Seok, believed that “tea party” applicants were fundamentally different from
other social welfare organizations because of their ideology. Officials used a BOLO list to select
Plaintiffs and like organizations for delay and burdensome requests based on their names, using
tags frequently employed by anti-Administration groups, such as “Tea Party,” “912,” or other
criteria, to single out Plaintiffs for delay and intrusive, unnecessary questioning. The BOLO list
also relied on viewpoints expressed by c(4) applicants, such as the need to reduce the size of
government. Further, IRS officials used the term “Tea Party”—an explicit reference to one
political viewpoint—to describe the body of cases that would be delayed for additional scrutiny.
Later, the IRS used information in Plaintiffs’ applications and on their websites to single out
anti-Administration groups, like and including Plaintiffs, for delayed and intrusive review.
231. The IRS has admitted that even if there is a lack of clarity in the provisions of the
tax code relating to the line between social welfare and political activity, and even if this lack of
clarity played some role in the delays experienced by Plaintiffs or like organizations, “The lack
of clarity did not cause the inappropriate screening and poor managerial oversight noted in the
TIGTA report, nor does it excuse them.” Werfel Report, 28.
232. Dissenting groups like Plaintiffs and their members were denied equal protection
of the law. Upon information and belief, applications from favored groups for tax-exempt status
were processed far more swiftly than dissenting groups. The benefits of tax-exempt status were
thus conferred based on political viewpoint -- not equally, as the law requires. Likewise, the
political expression of dissenting groups as a class was greatly burdened by IRS agents,
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individual Defendants, and officers John Does 1-100, while favored groups (including those
using the title “progressive” in their names) were afforded full privileges of the law.
233. Plaintiffs, their members, and similarly situated dissenting groups were likewise
denied Due Process of the law by the IRS agents’ actions. The constitutional protections of
dissenting groups and the limitations imposed upon the IRS by both the Constitution and statutes
were systematically ignored to deprive dissenting groups and their members of their
constitutional rights.
234. Plaintiffs assert standing on their own behalf, and associational standing on behalf
of their members, on the same basis set forth in ¶¶ 218-219 of this Complaint.
235. Plaintiffs name John Does 1-100 as defendants because the government has not
disclosed all the identities of the specific agents or officers in the Determinations Unit or the
other subdivisions of the IRS or the United States listed in ¶¶ 18-20 of this Complaint. They are
referenced here by their actions and by the unconstitutional intent and effects of their actions,
and Plaintiffs will plead the identities of specific other agents and officers as it learns them in
discovery.
236. The following IRS Agents committed a constitutional tort by selecting Plaintiffs
and like groups for further development and delay, and subjecting them to that delay because
their names indicated that they held anti-Administration views. Each individual Defendant took
actions, as set forth above more fully at Paragraphs 70-120 and 127-203.
a. Elizabeth Hofacre: searched for and pulled organization applications using
viewpoint-based criteria, and sent intrusive development letters to at least one
organization;
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b. Steven F. Bowling: managed team that developed and used viewpoint-based
criteria to identify applicants for “development”;
c. Bonnie Esrig: worked on team that developed and used viewpoint-based
criteria to identify applicants for “development;”
d. Brenda Melahn: worked on team that developed and used viewpoint-based
criteria to identify applicants for “development;”
e. Stephen Seok: sent intrusive development letters to at least one organization;
f. Grant Herring: sent intrusive development letters to at least one organization;
g. Carly Young: sent intrusive development letters to at least one organization;
h. Joseph Herr: sent intrusive development letters to at least one organization;
i. Mitchell Steele: sent intrusive development letters to at least one organization;
j. Cindy Thomas: approved and ratified targeting, and failed to stop targeting,
delays, and intrusive questions even after learning about them;
k. Holly Paz: approved and ratified targeting, and failed to stop targeting, delays,
and intrusive questions even after learning about them, failed to publish
targeting guidelines, and failed to notify Taxpayer Advocate of targeting
scheme, questions, and delays;
l. Lois Lerner: sent development letter to at least one organization requesting
that earlier letter be answered; approved and ratified targeting, failed to stop
targeting, delays, and intrusive questions even after learning about them,
failed to publish targeting guidelines, and failed to notify Taxpayer Advocate
of targeting scheme, questions, and delays;
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m. Sarah Hall Ingram: approved and ratified targeting, failed to stop targeting,
delays, and intrusive questions even after learning about them, failed to
publish targeting guidelines, and failed to notify Taxpayer Advocate of
targeting scheme, questions, and delays;
n. Joseph Grant: approved and ratified targeting, failed to stop targeting, delays,
and intrusive questions even after learning about them, failed to publish
targeting guidelines, and failed to notify Taxpayer Advocate of targeting
scheme, questions, and delays;
o. William Wilkins: approved and ratified targeting, failed to stop targeting,
delays, and intrusive questions even after learning about them, failed to
publish targeting guidelines, and failed to notify Taxpayer Advocate of
targeting scheme, questions, and delays;
p. Steven Miller: failed to stop targeting, delays, and intrusive questions even
after learning about them, failed to publish targeting guidelines, and failed to
notify Taxpayer Advocate of targeting scheme, questions, and delays;
q. Douglas Shulman: failed to stop targeting, delays, and intrusive questions
even after learning about them, failed to publish targeting guidelines, and
failed to notify Taxpayer Advocate of targeting scheme, questions, and delays.
237. Additionally, each of the above-described actions violated clearly established law.
It is well-established that an officer of the federal government cannot act against a person in
retaliation for the exercise of First Amendment rights, or attach unconstitutional conditions to the
receipt of government benefits. It is well-established that an officer of the federal government
cannot act to deny a person equal protection under the law or due process of law. Further, the
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IRS has admitted that the conduct of its employees was at a minimum inappropriate and in clear
violation of the IRS Mission Statement, and the IRS Taxpayer Advocate has stated that the
conduct was so wrongful that damages should be paid to affected groups. Accordingly, a
reasonable official in the position of each Defendant would have known that the contours of the
right against retaliation for First Amendment expression and the rights of equal protection and
due process fairly encompassed the targeting of applicants, based on political viewpoint, for
lengthy delays and intrusive, unnecessary questioning.
238. In sum, because of their political viewpoints, dissenting groups were subjected to
harassment, intimidation, delay, discrimination, expense, intrusiveness, and embarrassment all as
a part of a scheme by IRS agents, named Defendants, and officers John Does 1-100 to suppress
their political activity and punish their political views.
239. Plaintiffs and their members experienced damages, including loss of
constitutional rights, interference with their liberty, delay and denial of government benefits,
unequal treatment, loss of donations, increased tax burdens including state and local, loss of
postal privileges, the expense of responding to the harassing tactics of the IRS, court costs, and
attorneys’ fees.
240. The actions of the named federal agents and of the individual and Doe Defendants
were willful, malicious, reckless, and intended to do harm to Plaintiffs, their members, and
similar groups. Accordingly, Plaintiffs are entitled to damages from the individual and Doe
Defendants.
(b) Claim Against the IRS and the United States
241. Additionally, for the reasons discussed above, the IRS and the United States
committed the same constitutional violations as the Doe Defendants. This conduct has caused
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irreparable harm to Plaintiffs, and there is no other adequate remedy at law. This Court may
grant declaratory and injunctive relief against the IRS and the United States, pursuant to 28
U.S.C. §§ 2201 and 2202, declaring that the Defendants’ discriminatory conduct is unlawful and
enjoining them from using tax exemption applicants’ political viewpoints to target them and
subject them to delay and unnecessary requests for information.
COUNT THREE: RETURN INFORMATION
242. Plaintiffs incorporate the allegations in Paragraphs 1-141 as though fully set forth
herein.
243. “Return information shall be confidential,” and with limited exceptions, cannot be
disclosed or inspected by employees of the federal government. 26 U.S.C. § 6103.
244. Return information includes, among other things:
(A) a taxpayer’s identity, the nature, source, or amount of his income, payments, receipts,
deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld,
deficiencies, overassessments, or tax payments, whether the taxpayer’s return was, is
being, or will be examined or subject to other investigation or processing, or any other
data, received by, recorded by, prepared by, furnished to, or collected by the Secretary
with respect to a return or with respect to the determination of the existence, or possible
existence, of liability (or the amount thereof) of any person under this title for any tax,
penalty, interest, fine, forfeiture, or other imposition, or offense,
(B) any part of any written determination or any background file document relating to such
written determination (as such terms are defined in section 6110(b) which is not open to
public inspection under section 6110.
26 U.S.C. § 6103(b)(2).
245. All information furnished by Plaintiffs in response to the IRS’s requests was
return information pursuant to Section 6103.
246. As discussed above, the Defendants demanded information from Plaintiffs that
was not necessary to determine their tax-exempt status. Defendants made these demands
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knowing that they were unnecessary for determining Plaintiffs’ status, and knowing that
Plaintiffs had been selected for special scrutiny and delay based on their political viewpoint.
247. Defendants inspected Plaintiffs’ information and shared it amongst themselves
even though they knew it was unnecessary for making a decision on Plaintiffs’ tax-exempt
status, and even though they knew it had been sought based on Plaintiffs’ political viewpoint.
Accordingly, the inspection, review, and disclosure was objectively unnecessary, and
subjectively not undertaken, “for tax administration purposes” under 26 U.S.C. § 6013(h).
248. In one case, Defendants released a Plaintiff’s return information—the list of
donors on the Form 990 of the Texas Public Policy Foundation—to the public at large. See
Paragraph 201-203, supra.
249. The United States has waived sovereign immunity and has provided taxpayers a
cause of action for damages for knowing or negligent unauthorized inspection of tax return
information in violation of Section 6103. 26 U.S.C. § 7431.
250. Each inspection and disclosure was made at least with gross negligence, or was
made willfully.
251. The inspections and disclosures resulted from viewpoint discrimination and were
undertaken even though the IRS knew the information was not necessary for determining
Plaintiffs’ status, and at least for these reasons, among others, the inspections and disclosures did
not result from good faith, but erroneous interpretations of Section 6103.
252. Plaintiffs did not request the IRS to make the inspections or disclosures.
253. Accordingly, each inspection or disclosure violates Section 6103 and entitles
those Plaintiffs who submitted information in response to the IRS’s demands, as set forth under
Paragraphs 64-84, to damages under Section 7431 of the Internal Revenue Code.
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COUNT FOUR: CLASS ACTION
254. Plaintiffs incorporate the allegations in Paragraphs 1-253 as though fully set forth
herein.
255. Plaintiffs ask this Court to certify a class action of all dissenting groups targeted
for additional scrutiny by the IRS from January 20, 2009 through July 15, 2013.
256. The class definition would include all groups who applied for tax-exempt status
and were targeted for special scrutiny by to the specialists in the IRS Determinations Unit in
Cincinnati, Ohio or any other IRS office or agents. The class would include all members whose
applications were delayed and/or additional information sought during this time period, based
upon their political viewpoints, including but not limited to the criteria utilized by the
Determinations Unit in what they refer to as “the tea party cases.” This criteria would include
any of the following:
• groups identified as “Tea Party,” “Patriots,” “912 Project”;
• applications involving political sounding names, such as “We the People” or “Take
Back the Country”;
• groups whose issues included government spending, government debt, or taxes;
• groups dedicated to education of the public by advocacy/lobbying to “make America
a better place to live”
• groups who had a statement in the case file criticizing “how the country is being run”;
and
• group who otherwise dissented from Administration policy and were subjected to
additional scrutiny for their viewpoint.
257. This case meets all of the prerequisites of Rule 23(a).
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258. This class is so numerous that joinder of all members is impracticable. The exact
number of all class members can only be determined through discovery. The IGR identifies 296
groups singled out for special treatment based on their political views. Media reports suggest the
number to be 500 or more.
259. There are questions of law or fact common to the class. All of the members of the
class suffered the same sorts of constitutional violations articulated in Count Two. All were
subjected to harassment, discrimination, special scrutiny, and interference with their
constitutional rights because of their presumed political views. The same constitutional
standards apply to each member of the class and common questions of law apply. Many
members of the class were subjected to demands of additional information that violate the
Privacy Act as articulated in Count One, and provided return information which was then
inspected, as articulated in Count Three. This class was already defined by the IRS based on
commonality of its presumed political views and the decision that the IRS would discriminate in
the same manner across the entire class. In other words, the IRS through its own criteria defined
the class and chose to discriminate on a class-wide basis against everyone who met the class
definition.
260. The common questions of law and fact include:
a. Was there a scheme by the IRS and its employees to target dissenting
groups based upon their political viewpoint?
b. How did the scheme originate?
c. Who ordered it?
d. Who was involved?
e. When did the scheme begin and has it ended?
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f. May the IRS award or deny benefits based upon political viewpoint?
g. Did the IRS violate the Privacy Act in its treatment of dissenting groups?
h. Was the IRS’ demand for excessive information wrongful and tortious?
i. Were the constitutional rights of dissenting groups violated by defendants
tactics of extra scrutiny, intimidation, harassment, invasion of privacy,
discriminatory audits, disclosure of private information, and delays?
j. How many groups were involved in the targeting? To date, the IRS has
given various answers. The IRS’ count does not agree with the IGR
account, nor with independent accounts.
k. How was the targeting specifically conducted and concealed?
l. Are the IRS’ standards for evaluating the political activity of organizations
appropriate, legal, and constitutional?
261. Plaintiffs’ claims are typical of the claims of the class. Plaintiffs were singled out
and treated to similar discrimination and harassment by the IRS as the other members of the class
as articulated above. The claims in this case are particularly typical because the IRS
intentionally chose to treat groups it considered critical of the government, with a dissenting
point of view, in the same or similar discriminatory fashion.
262. Plaintiffs will fairly and adequately protect the interests of the class. Plaintiffs’
interests are the same as other members of the class in holding the IRS responsible for its illegal
activity, ensuring that it never happens again, and being fairly compensated for the results of this
illegal activity.
263. The provisions of Rule 23(b)(2) apply because the IRS has acted on grounds that
apply generally to the class such that final injunctive relief would be appropriate for the class as
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a whole. The IGR recognizes that more steps need to be taken to ensure that this type of
discrimination does not occur again within the IRS. The class will seek injunctive relief from
this Court, including but not limited to:
• A declaration that the IRS may not discriminate in any of its activities based upon the
political viewpoint of the applicant or taxpayer;
• That the IRS must not take any action or enforce any rule that interferes with the First
Amendment rights and activity of any citizen;
• That the IRS must destroy all records obtained or maintained illegally and in violation
of the Privacy Act or any provision of the U.S. Constitution relating to class members
or any donors, officers, members, or volunteers of the class members;
• That the IRS establish clear training and guidelines for all employees to prevent this
sort of invasion of privacy and discriminatory activity from occurring again in the
future.
264. The provisions of Rule 23(b)(3) are met in that questions of law or fact common
to class members predominate over individual questions and class action is superior to other
available methods for fairly and efficiently adjudicating the controversy.
265. The common questions of law and fact are overwhelming as described above and
incorporated here by reference.
266. Individual questions are minimal. For example, some groups may not have
received additional requests for information. Therefore, they may have a reduced or no claim
under the Privacy Act. To the extent additional information requests created varying burdens on
individuals, that can be resolved through individual damage criteria or creation of subclasses.
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267. All groups suffered the same violations of constitutional rights. The IRS selected
the class members based on the presumed content of their views and expressive activity – and
then treated them in an illegal fashion. All class members suffered this same harm and were
damaged from the same course of conduct.
268. A single action adjudicating the legal rights of dissenting groups would be more
efficient than individual litigation. As noted, class membership will likely run into the hundreds,
greatly inconveniencing the judicial system, and requiring needless duplication. A single unified
discovery process would greatly expedite this litigation and prevent needless, repetitive
document productions and depositions from Defendants.
269. The efficiency of the unified discovery process and the prohibitive expense and
complexity that would attend individual cases are illustrated by the following:
a. The IRS estimates that information relating to the events in the IGR total over
646 gigabytes. That is more than 64 million pages of documents.
b. Washington officials claim the activity started in Cincinnati. Cincinnati
employees say it began in Washington. Perhaps dozens of depositions will
need to be taken to sort out the facts. It would be an inefficient use of judicial
time and resources to engage in this process multiple times.
c. There is a maze of bureaucracy, documents, emails, policies, and conflicting
stories in this case. A unified process is best to sort it out.
270. Likewise, a single trial court ruling upon the constitutional, Privacy Act, and
return information claims would greatly improve judicial efficiency.
271. All of these factors illustrate the benefits of concentrated litigation in a single
forum.
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272. No other class action has been filed. In the weeks after the instant action was
filed, only two other cases have been filed on behalf of certain groups related to these facts.
Other than those two, no additional cases had been filed as of August 5, 2013. Both of those
cases are pending in Washington, D.C. -- which is not likely to be the most convenient forum.
Those plaintiffs can choose to participate in the class or opt out. Thus, no other litigants’
activities should be impaired.
WHEREFORE, Plaintiffs pray that this Court:
• Enter an Order certifying this case as a class action and appointing their lawyers as
class counsel;
• Award Plaintiffs actual damages pursuant to 5 U.S.C. § 552a(g)(4) for violation of the
Privacy Act, including but not limited to, costs of complying with additional requests
for information, loss of donors and membership fees for the delay, uncertainty, and
intrusiveness, but in any event no less than $1,000 for each individual member, plus
the cost of litigation, and reasonable attorney’s fees.
• Award Plaintiffs damages for violation of their constitutional rights, including
damages for loss of benefit of tax exempt status, cost of complying with burdensome
requests, loss of donors and membership fees, damages for impairment of
constitutionally protected rights, punitive damages, litigation costs, and reasonable
attorney’s fees.
• Award Plaintiffs declaratory and injunctive relief, pursuant to 28 U.S.C. §§ 2201 and
2202, as set forth above.
• Award Plaintiffs damages pursuant to 26 U.S.C. §7431(c) for each inspection or
disclosure of their return information, including $1,000 for each instance in which
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actual damages are below this amount, or actual and punitive damages, plus costs and
reasonable attorney’s fees.
A JURY TRIAL IS DEMANDED ON ALL ISSUES SO TRIABLE.
Respectfully Submitted,
Edward D. Greim (pro hac vice)
Todd P. Graves (pro hac vice)
GRAVES GARRETT LLC
1100 Main Street, Suite 2700
Kansas City, Missouri 64105
Tel: (816) 256-3181
Fax: (816) 256-5958
David R. Langdon (OH Bar No. 0067046)
Trial Attorney
Joshua B. Bolinger (OH Bar No. 0079594)
Langdon Law LLC
8913 Cincinnati-Dayton Rd.
West Chester, Ohio 45069
Tel: (513) 577-7380
Fax: (513) 577-7383
Bill Randles, Mo. Bar No. 40928
Bev Randles, Mo. Bar No. 48671
Bill & Bev Randles Law Group, LLP
5823 N. Cypress Avenue
Kansas City, Missouri 64119
Tel: (816) 820-1973
(pro hac vice application forthcoming)
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CERTIFICATE OF SERVICE
I herby certify that on October 7, 2014, I electronically filed the foregoing with the Clerk
of the Court using the CM/ECF system, which will automatically send a notice of electronic
filing to all persons registered for ECF as of this date.
Attorney for Plaintiffs
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