Although many dabble, there probably are few lawyers in Connecticut whose practice primarily focuses on the problems of tax-exempt organizations. Their work concerns the drafting of the organizational documents, the filing of exemption applications with the Internal Revenue Service, wrestling with problems of public charity against private foundation status, avoiding potential tax penalties, and dealing with IRS audits. Of course, allowance of a charitable contribution deduction is always a crucial issue. The relationship between these practitioners and the IRS was rather a friendly one, with IRS officials frequently appearing at regularly scheduled seminars of the Exempt Organizations Committee of the American Bar Association.
This situation changed suddenly and perhaps irrevocably at the annual meeting of that committee held in Washington, D.C., in April of this year. Lois Lerner, then the head of the IRS Exempt Organizations Division, was asked a rather innocuous question as to whether there had been particular problems with the determination process, especially with regard to Section 501(c)(4) (social welfare) organizations. Her comment was that some IRS officials in the Cincinnati office had unreasonably focused on exemption applications filed by certain organizations, based on irrelevant material, such as the names of the organizations (i.e., “Tea Party” or “Patriot” or the like) leading to lengthy delays, and intrusive questions. She indicated that the situation would be remedied. Initially she denied the question was “planted,” but later conceded that it was.
