IRS Asking Justice Department to Step in on NAACP Audit - March 21, 2005 Vol.6, No.6

March 21, 2005 Vol.6, No.6:

Published: 03/21/2005

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For more information see our background page about the IRS audit of the NAACP.

IRS Asking Justice Department to Step in on NAACP Audit

The Internal Revenue Service is referring to the Justice Department the refusal by the National Association for the Advancement of Colored People to respond to an IRS summons, according to BNA. The case arose in the fall of 2004 when the IRS notified the NAACP it was conducting an examination into whether a speech by Chairman Julian Bond that criticized policies of President Bush constituted prohibited campaign intervention. NAACP has requested the examination be closed, and the IRS has told the NAACP it has made no conclusions about whether illegal partisan activity took place, and that the group is unlikely to lose its tax-exempt status.

In January, the NAACP challenged the legality of an IRS summons and refused to respond, claiming the IRS investigation into alleged prohibited political activities during the 2004 election was politically motivated and procedurally deficient. On Feb. 23, IRS attorneys wrote attorneys for the NAACP saying, "There is ample judicial and statutory authority to support the Service’s action in commencing the examination into the NAACP’s activities, as well as supporting enforcement of the summons at issue." They set a March 11 meeting for the NAACP to respond to the summons, and suggested a March 2 meeting to discuss the case.

In a March 10 letter to the IRS, Marcus Owens, of Caplan and Drysdale, attorney for the NAACP, stated the NAACP’s continuing objection to the summons and declined to attend the March 11 meeting. The letter asked the IRS to close the case immediately and issue a letter stating the NAACP continues to be exempt under 501(c)(3) of the tax code.

The discussion at the March 2 meeting, held by conference call, apparently clarified the IRS’s view of the likely outcome of the case. Owens’ letter summarized the call saying, "Specifically, during our conference call, you assured us that the Service has not drawn any conclusion regarding whether Mr. Bond’s speech at the annual convention in July 2004 constituted prohibited political campaign intervention. Moreover, we understand that the Service is not taking the position that ‘flagrant’ political expenditures were made, and ... that the NAACP’s exempt status likely is not at risk."

Referral of the case to the Justice Department escalates the situation.