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IRS settlement with nonprofit group won't be disclosed

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NEWS MEDIA UPDATE   ·   WASHINGTON, D.C.   ·   Freedom of Information   ·   June 15, 2005


IRS settlement with nonprofit group won’t be disclosed

  • The Internal Revenue Service does not have to disclose documents relating to an audit settlement it reached with a tax-exempt Christian organization, a federal appeals court ruled last week in narrowly construing an exception to a law requiring confidentiality.

June 15, 2005  ·   A provision in the Internal Revenue Code that makes public certain documents filed by organizations applying for tax-exempt status should be interpreted narrowly, the U.S. Court of Appeals for the District of Columbia ruled last week.

The court’s June 7 ruling, which resulted from efforts to obtain certain tax records of the Christian Broadcasting Network, affects public access to tax documents of tax-exempt organizations.

CBN had been a tax-exempt organization since 1961, but was audited by the IRS after allegedly donating $8 million to CBN founder Pat Robertson’s 1988 presidential campaign. The network issued a March 1998 press release about the audit settlement announcing that the organization’s tax-exempt status had been renewed retroactively to 1987.

Tax Analysts, a tax watchdog group that publishes tax magazines, books, databases and CDs, filed a Freedom of Information Act request with the IRS seeking a copy of the agreement and any related documents. The IRS refused, citing FOI Act Exemption 3, which exempts from disclosure information kept secret by dozens of other federal laws.

Generally, tax return information falls under Exemption 3 since tax information is confidential under section 6103 of the tax code. But section 6104 makes certain IRS documents of tax-exempt organizations public. The appeal court’s ruling centered around the proper interpretation of the section 6104 exception, which specifically makes public the application for tax exemption and any documents in support of it, as well as any documents issued by the IRS regarding the application.

Tax Analysts sued, arguing that the agreement with CBN and the related documents fell into the requirement for disclosure found in section 6104. However, the federal appeals court upheld an August 2004 ruling by the federal district court in Washington, D.C., that this exception to confidentiality should be construed narrowly and that section 6104 requires only that documents filed for granted tax-exemption applications be opened to the public. Documents provided to the IRS in relation to an organization’s tax-exempt status as part of an audit, agreement, or other type of investigation are not public, the court ruled.

William Dobrovir, attorney for Tax Analysts, said this interpretation of the law hinders public scrutiny of nonprofit organizations.

“It means that the IRS and charitable organizations can make all kinds of deals in secret when the organization is under investigation,” he said, adding that the only remedy to the problem will be legislative changes to the tax code.

(Tax Analysts v. Internal Revenue Service, Media Counsel: William Dobrovir, Warrenton, Va.)AG


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