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Advocacy Blog
Tuesday, April 08, 2008
Court Ruled the IRS Should Not Have Revoked the Tax Exemption of the Democratic Leadership Council
The U.S. District Court for the District of Columbia ruled that the Internal Revenue Service (IRS) violated its own rules in revoking the tax exemption of the Democratic Leadership Council (DLC). The DLC was granted tax-exempt status as a 501(c)(4) social welfare organization in 1986 and in 2002, the IRS revoked the DLC's tax-exempt status for the years 1997, 1998, and 1999 for its support to Democratic officials. The DLC argues that it acted within the bounds of a 501(c)(4) organization for those three years. Some have questioned IRS's targeting of the DLC, which has not been directly involved in election campaigns.
The opinion states; "the DLC did not omit or misstate a material fact in its 1985 application for that status or operate in a manner materially different from that originally represented when the IRS granted it that status. Accordingly, the IRS violated its regulations when it retroactively revoked that status, and the DLC is entitled to summary judgment and a refund of the taxes it paid for the years in question."
The IRS has to now refund over $20,000 in taxes paid and the government may have to pay the DLC's legal costs. BNA Money and Politics ($$) reports that the case "was viewed as potentially significant by campaign finance experts because it presented a rare instance where the tax status of an exempt organization involved in politics was being litigated in public, rather than handled in secrecy by IRS."
Posted by Amanda Adams
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