NAACP Challenging IRS Probe Into Its Tax-Exempt Status

By Susan Jones | July 7, 2008 | 8:31 PM EDT

( - The National Association for the Advancement of Colored People is basically telling the IRS to put up or shut up.

On Thursday, the NAACP said it will challenge the IRS in federal court -- if the IRS does not refund the $17.65 estimated tax the NAACP recently paid on a controversial speech delivered by NAACP Chairman Julian Bond in July 2004.

The IRS is investigating a complaint that NAACP Chairman Julian Bond tried to steer blacks away from President Bush in the run-up to the presidential election, in violation of its tax-exempt status.

Although the NAACP insists that Bond's speech did not compromise its tax-exempt status, the group said it filed a form with the IRS in September, treating Bond's speech as political activity -- just in case.

If the IRS fails to respond to the refund request in six months, the NAACP said it will ask a federal court to review the refund claim.

"We remain concerned that the IRS's decision to audit the NAACP, particularly the timing of the commencement of this audit, was motivated by politics rather than grounded in federal tax law," said NAACP President Bruce S. Gordon in a press release on Thursday.

Under Internal Revenue Code, federally tax-exempt organizations "are prohibited from directly or indirectly participating or intervening in any political campaign on behalf of, or in opposition to, any candidate for public office."

According to the IRS, that means tax exempt groups cannot endorse a candidate; contribute money, goods, or services to a candidate's campaign; raise funds for or against a candidate; distribute statements for or against a candidate; or conduct "any other activity that favors or opposes a candidate for public office."

Even "activities that encourage people to vote for or against a specific candidate" are forbidden, the IRS says.

What Bond said

At an NAACP convention two years ago, Bond described the 2004 presidential election as a "high-stakes" contest between "two widely disparate views" of who Americans are and what they believe.

"One view wants to march us backward through history -- surrendering control of government to special interests, weakening democracy, giving religion veto power over science, despoiling the environment," Bond said.

"The other view promises expanded democracy and giving the people, not plutocrats, control of government. The differences between the candidates this year are neither incremental nor inconsequential," Bond continued. "Yes, the stakes are high, higher than ever in recent memory, and the consequences of loss almost too dire to bear."

Later, in his own defense, Bond was quoted as saying that non-partisan groups aren't necessarily "non-critical."

The IRS launched an investigation into whether Bond's speech constituted political activity in October 2004.

Standing on principle

On Thursday, the NAACP's Gordon accused the IRS of delaying and withholding information on the case, in an effort to force the NAACP to concede.

"Well, the NAACP doesn't give up so easily," Gordon said. "We must defend the principles at stake and demand better treatment on behalf of the countless organizations in our sector that need clear guidance in this area."

Although the NAACP insists that Bond's speech did not compromise its tax-exempt status, the group said it filed a form with the IRS in September, treating Bond's speech as a "campaign intervention" -- for its own protection, it said.

The NAACP said it spent an estimated $176.48 to disseminate Bond's speech -- including the cost of photocopying, posting of the speech on the website, and so on. As required of groups engaging in political activity, the group paid an estimated tax of 10 percent ($17.65) to the IRS in September.

"Neither the NAACP's decision to report this amount, nor the decision to pay the estimated tax, represents an admission by the NAACP of any liability," said NAACP General Counsel Dennis Courtland Hayes.

Hayes said the NAACP has now filed a claim with the IRS for a $17.65 refund. "If the IRS fails to issue the refund or otherwise respond to our request for a refund within 6 months, the NAACP intends to seek review of the refund claim in federal court," Hayes said.

Question of timing

The NAACP insists the timing of the IRS investigation was politically motivated, coming as it did just weeks before the 2004 election.

Hayes said the IRS has not contacted the NAACP in over a year. However, the agency recently informed the NAACP that its investigation is legitimate and will continue.

"The chilling effect of the IRS actions is profound, and the NAACP cannot stand by and allow our constitutional freedoms to be eroded," Hayes said. And Gordon said the NAACP "strongly believes" that the case involves important First Amendment issues.

IRS Commissioner Mark Everson has rejected accusations that the agency's investigation is politically motivated as "repugnant and groundless."

See Earlier Stories:
IRS Asked If Churches Can Pray for Bush Re-Election (4 Oct. 2004)
Catholic Group to Ask IRS to Revoke Tax-Exempt Status of Florida Church (30 Aug. 2004)

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