Tea Party groups win in appeals court.

• Author: Schreiber, Sally P.

Organizations claiming the IRS targeted them for their political beliefs notched a victory in the Sixth Circuit when the court denied the IRS's petition to avoid having to disclose information about other organizations that were on the IRS's controversial "be on the lookout" list of organizations (NorCal Tea Party Patriots, No. 15-3793 (6th Cir. 3/22/16)).

The plaintiffs in the case, applicants for recognition under Sec. 501(c)(4) that claimed they were targeted because of their political beliefs as "Tea Party organizations," alleged that the IRS used political criteria to single out applications filed by these groups; that the IRS often took four times as long to process their applications as it did with others; and that the IRS made "crushing demands" for what the Treasury Inspector General for Tax Administration (TIGTA) called "unnecessary information." TIGTA and the IRS Taxpayer Advocate's Office concluded that the IRS had indeed engaged in this behavior when reviewing Sec. 501(c)(4) applications.

The lead plaintiff, NorCal, submitted its application in April 2010. In July 2010, the IRS requested additional information, which consisted of 120 more pages of material. The IRS did nothing for 18 months and then asked for a large amount of additional information and gave the organization three weeks to comply, which it did, supplying 3,000 pages of material in response.

The plaintiffs sued the IRS and IRS officials, making claims under the Privacy Act (5 U.S.C. [section]552a) and the First and Fifth amendments to the Constitution. They also claimed that the IRS's collection and internal exchange of information about their donors, along with other sensitive information not usually required in an application for tax-exempt status, violated the Sec. 6103 prohibition on unauthorized inspection of confidential return information.

The plaintiffs sought, among other things, class certification of a group of plaintiffs that had been targeted by the IRS and asked for the names of those organizations and the names of the IRS employees who had reviewed the applications. In response, the IRS asserted that the applications were return information (and even, at first, that the employee names were return information), which it was prohibited from disclosing under Sec. 6103. The court characterized the IRS's position as "one of continuous resistance" (slip op. at 7).

After a district court ordered the IRS to produce the requested documents, the IRS filed a...