James Pilcher

The Cincinnati Enquirer

CINCINNATI — A federal judge ruled this month in a lawsuit in the ongoing IRS Tea Party saga that there was "a strong showing" that the agency had discriminated against conservative groups because of their political stances.

And U.S. District Court Judge Michael R. Barrett wrote in a decision that a group suing the IRS "has made a strong showing of a likelihood of success" on its claim that its free speech rights were violated by the delay in processing the application.

He ordered the IRS to continue processing the application from the group, called the Texas Patriots Tea Party, even as the IRS fights the group’s lawsuit.

"The Government appears not to see the forest through the trees when it uses the existence of this lawsuit as grounds to continue the delay that is the subject of this lawsuit," Barrett wrote in his Nov. 4 decision. "The evidence strongly suggests that the IRS initiated the delay" because the Texas group was affiliated with the Tea Party.

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A Cincinnati native, Barrett was appointed to the federal bench in 2006 by then-President George W. Bush following a stint as chairman of the Hamilton County Republican Party.

The latest ruling could set a precedent in the ongoing saga over alleged unfair treatment of such organizations and make it easier for them to go through the non-profit application process, lawyers in the case say. That's because it could force the IRS to speed up and reconfigure how it determines whether such groups can get nonprofit status throughout its system, and not just for the Texas group.

"We are suing in part for what we think is a violation of our First Amendment right to free speech, and we feel this ruling gives us that," said Kansas City-based lawyer Eddie Greim who is one of the lead lawyers for the Tea Party groups in the case. "If it holds up, this could establish the basic principle that the IRS will be judged on in the future."

In a statement, the IRS said that it had told Congress in August and several times since then that it had started processing the remaining cases that had been on hold “due to litigation in the courts.”

“The IRS is committed to resolving these cases as quickly as possible under our procedures, which reflect changes made since 2013," the agency said.

IRS scandal won't go away

The Texas Patriots lawsuit reached class action status in January and now includes several other conservative groups. A total of four lawsuits against the IRS are still alive nationally, including two filed in Washington, D.C. The latest ruling involves the Texas organization alone.

All the suits were filed shortly after IRS officials in 2013 acknowledged they had singled out conservative-leaning "public interest" groups for extra attention while reviewing their applications for nonprofit status. Such a designation allows people to donate with no tax penalty, and such groups can conduct some political activity as long as it is not "the majority" of their actions.

Conservative groups claimed that the slow process put a chill on such contributions during the 2012 election cycle, raising the possibility that the scrutiny was a way to slow down fundraising and campaigning by conservatives by the Obama administration.

That led to a major scandal and several investigations by Congress, the Justice Department and even with the IRS itself. It also caused the resignations or firings of several top IRS officials, including then-Commissioner Steven Miller as well as other administrators tied to the targeting.

IRS official retires after Tea Party controversy

An FBI and Justice Department investigation found in 2015 that the IRS's nonprofit approval system was rife with mismanagement and poor judgment, but that there wasn't enough evidence to prove that IRS agents acted in political ways or should be criminally prosecuted.

But the IRS completely stopped processing the Texas group's nonprofit application that was originally filed in 2012 once the suit was filed, saying it had lost jurisdiction because of the ongoing case.

Barrett ruled that process should continue, but also that the IRS could not use either its previous process it used for such conservative groups nor the expedited replacement system the agency offered after the scandal broke.

"That replacement was dangled to us ... but instead was even more onerous than the original system because it asked us to pledge things that were improper or illegal," Greim said, saying that groups had to promise not to exceed 40% of their time on political activities.

Barrett wrote that the IRS's review of Texas group's application should be part of "the regular business practices" of the IRS, Barrett wrote, and not the way it was previously done for Tea Party groups or the expedited process.

Do documents show bias/targeting?

It's unclear how these cases will be handled by the incoming Trump administration, although one conservative watchdog group is asking investigations into the scandal be resumed once President-elect Trump takes office.

"Inertia is always on the side of bureaucracy, and the IRS really only has two political appointees, so they need to get someone in there that show concern over what happened and are committed to finding out what exactly did happen," said Judicial Watch President Tom Fitton.

Judicial Watch this week released more than a thousand new documents obtained through a Freedom of Information Act lawsuit that show officials in Cincinnati and Washington knew IRS agents in Cincinnati were targeting conservative groups by their party affiliations and by "guilt by association."

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The documents include handwritten notes from meetings that indicate IRS official Holly Paz knew conservative groups were being targeted by agency employees in Cincinnati for extra questioning. Paz was based in Washington but traveled to Cincinnati frequently.

"They think they know what the org is really doing, rather than looking at actual activities ... Q’s were not activity based, but guilt by association questions — like q’s asking party affiliations," according to a handwritten note taken by an unnamed IRS official during a meeting with Paz obtained by Judicial Watch.

Paz, who reported to a key figure in the scandal, Lois Lerner, said in a meeting that the Cincinnati office was paralyzed by how to process the influx of applications from conservative groups. Lerner, whose emails also showed some controversial decisions, resigned over the scandal. Paz was put on administrative leave after the scandal broke. and later transferred to another division.

"We're getting document after document showing the IRS both in Washington and Cincinnati knew that people were doing things outside the rules," said Judicial Watch's Finton. "If they were asking inappropriate questions based on guilt by association or party affiliations, then I don't know what more you need to show that something inappropriate was going on, if not illegal."