Below is the text of the letter. An official PDF version of the letter can be viewed at http://bit.ly/ZGeO66.
March 21, 2013
By Email and U.S. First-Class Mail
Steven T. Miller, Acting Commissioner
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224
Re: Unlawful Disclosure of Tax-Exempt Organizations Confidential Taxpayer Information
Dear Acting Commissioner Miller:
As attorneys representing tax-exempt organizations, we are writing to express our grave concern about recent unlawful disclosures of pending applications and unredacted tax returns of certain tax-exempt organizations. We request that the Internal Revenue Service take immediate steps to determine how these disclosures of confidential taxpayer information occurred, to take any and all necessary steps to prevent similar disclosures in the future, and to make a detailed public statement describing these steps to reassure the tax-exempt community.
Recent reports and discussions make it clear one or more IRS employees responded to a public information request from the news organization ProPublica by giving ProPublica pending applications and subsequent extensive correspondence with the IRS regarding the applications from a number of organizations seeking recognition of their exemption from tax under Section 501(c)(4) of the Internal Revenue Code.
As you know, application documents are subject to public disclosure after recognition of the organization’s tax-exempt status, but still-pending (or withdrawn) applications are not. This restriction recognizes that pending applications are often incomplete and may include information about proposed activities that are questioned by the IRS determination agent and that the organization subsequently has a chance to clarify or eliminate from its plans before they are made public.
It is clear that the IRS recognized that the applications should not have been released to Pro Publica. Following the publication of the first article describing the disclosed application of one of the organizations, IRS employees contacted other organizations to warn them that their applications and associated materials “probably” had likewise been improperly disclosed. Indeed, ProPublica subsequently published additional confidential taxpayer information for a number of other organizations with pending applications.
These disclosures come on the heels of another recent allegation of an unredacted copy of a Form 990 annual information return (including an unredacted Schedule B showing major donors to the organization) for a 501(c)(4) organization that was released by someone at the IRS (or at least someone with access to IRS files).
All of these recent disclosures appear to have involved organizations with a conservative political ideology (although we are aware of similar improper disclosures that involved both conservative and liberal or progressive organizations in the past).
We are concerned that these recent reports will have significant negative consequences. Organizations fearful of such disclosures may be less forthcoming and intentionally vague about their activities on applications for exemption, Form 990s, and other filings. Donors may be deterred from giving if they fear their contributions might be improperly disclosed.
Moreover, organizations that espouse particular ideologies may be convinced – and may persuade others – that the IRS or its employees are biased against those ideologies and are engaged in a deliberate effort to undermine the organizations through deliberate improper disclosures. These results are all possible, whether improper disclosures by the IRS are malicious or merely the result of unintentional errors by agency staff.
The IRS is clearly aware that it has a problem – as demonstrated by the calls to organizations that were the victims of the disclosure to ProPublica – but the IRS needs to do more. The recent spate of improper disclosures requires a public statement to make it clear that the IRS has identified how these disclosures came about and describing the concrete steps the IRS has put in place to prevent any further such disclosures. Inaction or silence by the IRS fuels both fear of further disclosures and narratives alleging IRS ideological bias.
We urge you to address these issues promptly and forcefully. This is a public confidence issue where the Service is uniquely-positioned to reassure the public. It should.
Heidi K. Abegg, Webster, Chamberlain & Bean, LLP
Jeffrey Altman, Whiteford Taylor Preston, LLP
Robert Benton, Wiley Rein LLP
Catherine Bitzan Amundsen, Gray Plant Mooty
Jennifer Reedstrom Bishop, Gray Plant Mooty Karen Blackistone Oaks, Gober Hilgers PLLC James Bopp, Jr., The Bopp Law Firm, PC
Eve Borenstein, Borenstein and McVeigh Law Office LLC
Leonard M. Cole, Cole Nonprofits Law, LLC
Gregory L. Colvin, Adler & Colvin
Sarah Duniway, Gray Plant Mooty
Alan P. Dye, Webster, Chamberlain & Bean, LLP Chris Gober, Gober Hilgers PLLC Gail Harmon, Harmon, Curran, Spielberg & Eisenberg, LLP
The firm of Holtzman Vogel Josefiak PLLC
Greg A. Larson, Gray Plant Mooty
D. Eric Lycan, Steptoe & Johnson PLLC
Cleta Mitchell, Foley & Lardner, LLP
Stefan Passantino, McKenna Long & Aldridge LLP
John Pomeranz, Harmon, Curran, Spielberg & Eisenberg, LLP
Hank Raattama, Akerman Senterfitt
Emily Robertson, Robertson Law Office, LLC
Janice Rodgers, Quarles & Brady LLP
Laura Solomon, Laura Solomon & Associates.
Charles M. (Chip) Watkins, Webster, Chamberlain & Bean, LLP
Jeffrey L. Yablon, Pillsbury Winthrop Shaw Pittman LLP
Barnaby Zall, Weinberg, Jacobs & Tolani, LLP
[Firm names are listed for identification purposes only. Inclusion of the firm’s names does not indicate and should not be understood to imply endorsement of the views expressed in this letter by any of these firms or by other attorneys who are part of these firms but not listed here.]
cc: Lois G. Lerner, Director, Exempt Organizations Division, Internal Revenue Service
William J. Wilkins, Chief Counsel, Internal Revenue Service
The Honorable Max Baucus, Chair, U.S. Senate Finance Committee
The Honorable Orin Hatch, Ranking Member, U.S. Senate Finance Committee
The Honorable Dave Camp, Chair, U.S. House of Representatives Ways and Means Committee
The Honorable Sander Levin, Ranking Member, U.S. House of Representatives Ways and Means Committee
Federal Court Ruling Favors Future of Texas Super PACs
Ruling trumps state election code ban on some corporate contributions
AUSTIN, Texas – A federal judge has ruled in favor of a Texas-based political action committee (PAC) by granting a preliminary injunction in a First Amendment lawsuit that may permanently clear the way for so-called "super PACs" to influence state and local political races in Texas.
In September, the PAC Texans for Free Enterprise sued the Texas Ethics Commission challenging the constitutionality of the Texas Election Code provisions that prohibit PACs from accepting corporate contributions for the purpose of making direct campaign expenditures. The Texas Ethics Commission defines direct campaign expenditures as independent expenditures made without the prior consent, approval or cooperation of the candidate benefited.
The lawsuit cites the U.S. Supreme Court's 2010 decision in Citizens United v. Federal Election Commission, which held that corporations and unions can raise and spend an unlimited amount of money to campaign independently for candidates running for office. The Citizens United ruling and other court decisions that followed resulted in a new breed of political committees known as super PACs, which can legally raise and spend corporate money to influence elections for federal offices.
Following the Citizens United decision, the Texas Legislature amended the state election code to repeal all sections of the code prohibiting a single corporation from making direct campaign expenditures. The Legislature did not, however, repeal or amend code provisions that prohibit corporations from contributing to political action committees (i.e., super PACs) for the same purpose, which made it illegal for super PACs to influence state and local races in Texas.
The ruling from Judge Lee Yeakel of the U.S. District Court for the Western District of Texas in Austin prevents the Texas Ethics Commission from enforcing the contribution restrictions in Sections 253.003(b) and 253.094(a) of the Texas Election Code against Texans for Free Enterprise until the conclusion of the lawsuit. Notably, Judge Yeakel held that Texans for Free Enterprise has already established a likelihood of success on the merits of its claims.
With offices in Dallas, TX; Austin, TX; Omaha, Neb.; Lincoln, Neb.; and Washington, D.C., Gober Hilgers PLLC represents international corporations and small businesses, elected officials and candidates, political action committees, and nonprofits in litigation and political compliance matters. For more information, please visit the firm's website at http://goberhilgers.com.
The following essay, written by Chris Gober of Gober Hilgers PLLC, was featured on SCOTUSblog for its online election symposium regarding the role the Supreme Court is likely to play in the upcoming presidential election. Gober was one of six commentators that submitted commentary for the symposium.
In four highly anticipated days, the Supreme Court issued decisions in cases involving three of the most polarizing issues among our electorate: health care, immigration, and corporate political spending. The anticipation mounted not only because these decisions will have an extreme substantive impact on public policy, but also because five Justices on the Court had the potential to change the political narrative less than 135 days before a highly competitive presidential election. Consider the political connotations of these cases.
The Patient Protection and Affordable Care Act, or “Obamacare” in conservative circles, was a sweeping piece of legislation that encompassed almost every traditional hot-button topic: abortion and contraception, end-of-life care, state and individual rights, federal deficits, taxes, and the overall economy. In what was the most politically charged case since Bush v. Gore, the Court had the ability to gut Obama’s signature accomplishment and his first-term legacy in a single opinion.
Arizona’s immigration law, at the time of its passage, was the broadest and strictest anti-illegal immigration measure in U.S. history. Chris Cillizza of TheWashington Post assessed the case as follows: “Virtually any way that the Court decided on the Arizona measure would have forced Romney to respond on an issue he’d rather not address between now and November…The simple political reality on immigration for Romney goes like this: the Republican base is vehemently opposed to illegal immigration or a path to citizenship in any shape or form but to adopt that policy would be essentially write off the growing Hispanic community for years to come.”
The American Tradition Partnership case involved a state’s ability to restrict corporate independent expenditures for state and local races only, buy many Americans hoped that the Court would revisit Citizens United and find that corporate independent expenditures do in fact have the ability to corrupt. Citizens United and its progeny spawned the detested “super PAC” and created more spending flexibility for 501(c)(4)s, which has resulted in an unprecedented amount of political spending that has dramatically altered the political landscape. In reality, that new landscape allows Romney to compete financially with the most prolific fundraising machine ever. Despite not having a competitive primary election, Obama’s campaign has spent more than $208 million in 2012 compared to the $194 million spent by the Romney campaign and his super PAC combined.
As if the implications of these cases were not enough, the Court faces increased charges of over-politicization while its public approval ratings fall. Pundits and politicians alike waited with bated breath while spending an inordinate amount of time predicting the impact of these decisions on the 2012 elections, as if the Justices have some form of super-super-delegate status that could single-handedly change their outcome. But while these decisions will fuel the rhetoric and shape Americans’ positions on these issues over the long term, it is unlikely that the Court will have a direct impact on voters over the next three months. Supreme Court decisions have had little impact on elections historically and 2012 is almost certainly no exception; however, it is plausible that the Court’s decision to uphold the constitutionality of the individual mandate as a tax provides Mitt Romney an opportunity to connect with swing voters on the issue that matters most: the economy.
Polling suggests that the health care law is a net “wash” for the 2012 election, and CNN Polling Director Keating Holland observed that “the court’s decision seems to have hardened existing opinions rather than changing them, making the fight for the dwindling crop of persuadable voters all the more important.” Despite the hardening opinions with respect to the health care law, Romney can appeal to swing voters by framing it in the broader framework of the economy (i.e., how Obamacare is a massive expenditure and expansion of government programs that will be funded by taxing middle class and working people) without engaging in substantive health care discussions. Romney must reinforce the perception that Obama focused on an ideologically driven policy at the expense of the economy and convince voters that the health care law is one of the things that made it worse.
Of course, the ultimate impact of the Court’s decision will also depend on the composition of the electorate, namely the number of persuadable voters up for grabs in November. The percentage of swing voters decreased from twenty-two percent to six percent from 1980 to 2004, but Obama’s shellacking of John McCain in 2008 signaled a reemergence of the independent voter when women and Hispanics fled to Obama. In other words, a key question in this election is whether Romney and Obama are competing for twenty percent of the voters or six percent? If it’s the latter, then the candidates’ respective turn-out operations will prove far more relevant than any Supreme Court decision ever could.
To the extent that independents are at play, then Romney arguably has a chance to defeat Obama if he sticks to James Carville’s playbook from an election more than twenty years ago. During the 1992 presidential race, Carville famously scratched three concise “Rules” on a dry erase board that hung near his desk in the Clinton campaign headquarters to help keep his staff on message. They were:
CHANGE VS. MORE OF THE SAME
THE ECONOMY, STUPID
DON’T FORGET HEALTHCARE
With disappointing job growth and an 8.3% unemployment rate, there is little doubt this election will largely be a referendum on the economy. Yet Carville’s “don’t forget the healthcare” rule may still prove relevant today, and Romney could ultimately be the benefactor of the Court’s decision to uphold the constitutionality of the individual mandate as a tax in a race that will be decided at the margins.
Under Texas law, a corporation that establishes and administers a general-purpose political committee ("PAC") registered with the Texas Ethics Commission ("TEC") may make expenditures to finance the solicitation of political contributions to the PAC from its stockholders, employees, and/or families of stockholders or employees (known as the "solicitable class"). Any solicitations outside of the "solicitable class" must be paid for by the PAC and cannot be paid for by the corporation.
Despite these well-settled guidelines, it is unclear under the Texas Election Code whether a parent corporation may make expenditures to finance the solicitation of political contributions to the PAC from the solicitable class of that parent corporation's wholly owned subsidiaries. In comparison, federal law allows a corporation to solicit the stockholders and executive or administrative personnel of that corporation's subsidiaries, branches, divisions, and affiliates.
On July 23, Chris Gober of Gober Hilgers PLLC filed an advisory opinion request with the TEC seeking a ruling on the issue. The TEC's response could allow corporations to increase their pool of potential PAC donors without having to incur the additional financial and administrative burdens of operating multiple PACs.
The Bipartisan Campaign Reform Act ("BCRA") attempted to prohibit individuals under the age of 18 ("minors") from making contributions to federal candidates and political party committees, but the U.S. Supreme Court struck down the prohibition as unconstitutional in McConnell v. FEC, 540 U.S. 93 (2003).
The decision to contribute is made knowingly and voluntarily by that individual;
The funds, goods, or services contributed are owned or controlled exclusively by that individual, such as income earned by that individual, the proceeds of a trust for which that individual is the beneficiary, or a savings account opened and maintained exclusively in that individual's name; and
The contribution is not made from the proceeds of a gift, the purpose of which was to provide funds to be contributed, or is not in any other way controlled by another individual.
As a practical matter, many campaigns choose to adopt a general policy prohibiting minors from contributing and make exceptions on a case-by-case basis. The reason for adopting such a policy is to preempt potentially impermissible contributions from the minor children of major fundraisers.
"Chis Gober, an attorney for the former senator, responded to our request for comment with this statement: 'Senator Ensign is focused on his veterinarian practice and the opening of Boca Park Animal Hospital, so this matter reached a point where it made more sense to negotiate a settlement and move on. We are appreciative of the Commission's willingness to agree to a final resolution without further waste of resources, and we're happy to put this matter to rest once and for all.'"
On March 25, 2013, Texas Lawyer released their publication "Legal Leaders on the Rise" spotlighting 25 up-and-comers in the Texas legal community. The Texas Lawyer editorial department undertook the project as a way to recognize Texas lawyers under 40 whose accomplishments distinguished them among their peers.
Click here to view the full profile on Chris Gober.
For the second consecutive year, Chris Gober, co-founder of the litigation and political law firm Gober Hilgers PLLC, is being recognized in the Texas Rising Stars listing, placing him among the top young attorneys in Texas.