IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN .... Ohio... · simi valley moorpark tea...

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IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION-CINCINNATI

NORCAL TEA PARTY PATRIOTS, FAITH )

AND FREEDOM COALITION OF OHIO, )

SIMI VALLEY MOORPARK TEA PARTY, ) Case No. 1:13-cv-00341

TAMPA 9-12 PROJECT, SOUTH DAKOTA )

CITIZENS FOR LIBERTY, INC., TEXAS ) JUDGE SUSAN J. DLOTT

PATRIOTS TEA PARTY, AMERICANS )

AGAINST OPPRESSIVE LAWS, INC., )

SAN ANGELO TEA PARTY, PRESCOTT )

TEA PARTY, AND TEXAS PUBLIC POLICY )

FOUNDATION ON BEHALF OF )

THEMSELVES, THEIR MEMBERS, AND )

THE CLASS THEY SEEK TO REPRESENT, )

)

Plaintiffs, )

)

vs. )

)

THE INTERNAL REVENUE SERVICE, )

THE UNITED STATES OF AMERICA, )

LOIS LERNER, STEVEN MILLER, )

DOUGLAS SHULMAN, WILLIAM WILKINS, )

SARAH HALL INGRAM, JOSEPH GRANT, )

HOLLY PAZ, CARTER HULL, BRENDA )

MELAHN, CINDY THOMAS, BONNIEESRIG, )

STEVEN F. BOWLING, MITCHELL STEELE, )

CARLY YOUNG, JOSEPH HERR, STEPHEN )

SEOK, ELIZABETH HOFACRE, GRANT )

HERRING, and CURRENTAND FORMER )

EMPLOYEES OF THE INTERNAL REVENUE )

SERVICE IDENTIFIED AS JOHN DOES 1-100, )

)

Defendants. )

SECOND AMENDED CLASS ACTION COMPLAINT

COME NOW NorCal Tea Party Patriots, Faith and Freedom Coalition of Ohio, Simi

Valley Moorpark Tea Party, Tampa 9-12 Project, South Dakota Citizens for Liberty, Inc., Texas

Patriots Tea Party, Americans Against Oppressive Laws, Inc., San Angelo Tea Party, Prescott

Tea Party, and Texas Public Policy Foundation (“Plaintiffs”), on behalf of themselves, their

Case: 1:13-cv-00341-SJD Doc #: 114 Filed: 10/07/14 Page: 1 of 75 PAGEID #: 1982

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members, and the class they seek to represent, and for their Second Amended Class Action

Complaint1 against the Internal Revenue Service, the United States of America (the “United

States”), the named individual Defendants and current and former employees of the Internal

Revenue Service, identified as John Does 1-100 (collectively, “Defendants”), state as follows:

SUMMARY OF THE CLAIM

1. This is a class action against the United States Internal Revenue Service, the

United States of America, the named individual Defendants, and certain of their officers and

agents (John Does 1-100) who are yet to be identified. Each plaintiff is an organization

comprised of individual citizens who have joined together to exercise their rights to freedom of

speech and expression. While these groups were formed for a variety of specific purposes, they

have at least one important characteristic in common: their apparent dissent from the policies or

ideology of the Executive Branch of the United States Government under its current

Administration (hereafter, the Plaintiffs, their members, and the class they seek to represent are

referred to as “dissenting groups”). Because their primary purposes are charitable or to promote

the common good and general welfare of the citizens of their respective communities, the

dissenting groups sought recognition of exemption from taxation by the Internal Revenue

Service under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code. However, the IRS

1 On January 23, 2014, Plaintiffs filed their Second Amended Class Action Complaint

(Doc. #71). Subsequently, counsel who had entered their appearance for the IRS and Treasury

Department suggested that the United States of America was the proper named defendant for

certain official capacity claims and, in papers, began to take positions on behalf of the United

States of America. Accordingly, this Second Amended Complaint replaces the Treasury

Department with the United States of America. Other than this change of name and an alteration

of certain relevant allegations to refer to the United States of America instead of the Treasury

Department, this corrected Second Amended Complaint is in all other ways identical to Doc.

# 71. This filing is made with written consent of the Defendants under Rule 15(a)(2). The

allegations in this Second Amended Class Action Complaint are made subject to the Court’s July

17, 2014 Order on the Motions to Dismiss (Doc. #102) and are made without prejudice to any

right to appeal by Plaintiffs.


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and/or its agents targeted the dissenting groups for intensive and intrusive scrutiny, probing

pervasively into their members’ associations, speech, activities, and beliefs.

2. Elements within the Executive Branch of the federal government, including

Defendants, brought the vast powers, incomprehensible complexity, and crushing bureaucracy of

the IRS to bear on groups of citizens whose only wrongdoing was their presumed dissent from

the policies or ideology of the Administration. In other words, these citizens were targeted based

upon their political viewpoints.

3. Defendants employed an array of tactics, including extra scrutiny, intimidation,

harassment, invasion of privacy, discriminatory audits, disclosure of private information, and

years of delay.

4. Dissenting groups suffered years of delay and expense while awaiting recognition

of their tax exemption (which, for many, still has not come). They also were forced to waste

valuable time and money answering the IRS’s questions. The result was a chilling and muzzling

of free speech and association. Hundreds of other citizen groups who met the IRS’ criteria—at

first, groups with “tea party” sounding words in their names, but later, various groups whose

members dissented from government policies and philosophy—suffered the same fate.

Accordingly, Plaintiffs bring this suit on their own behalf, on their members’ behalf, and for the

putative class. They assert three claims: (1) damages for violation of 5 U.S.C. § 552a (the

Privacy Act of 1974); (2) damages against the individual and John Doe Defendants under Bivens

v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971) (“Bivens”),

and injunctive and declaratory relief against the IRS and the United States pursuant to 28 U.S.C.

§§ 2201 and 2202, for violation of the First and Fifth Amendments; and (3) damages under 26


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U.S.C. § 7431 against the United States for violation of 26 U.S.C. 6103 (for inspection and

disclosure of return information).

JURISDICTION AND VENUE

5. Jurisdiction is proper in this Court pursuant to 5 U.S.C. § 552a (“the Privacy

Act”), 26 U.S.C. § 7431 (damages action for inspection of return information), 28 U.S.C. § 1331

(“original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the

United States”), and 28 U.S.C. § 2201 (Declaratory Judgment Act). As set forth below,

Plaintiffs’ damages claims against the individual and John Doe Defendants arise under the First

and Fifth Amendments of the United States Constitution and constitute a civil action cognizable

in federal courts under Bivens.

6. Venue is proper in this district because it is the district in which many of the

relevant agency records are situated. 5 U.S.C. § 552(a)(g)(5). Additionally, venue is proper in

this district because “a substantial part of the events or omissions giving rise to the claim

occurred” at the offices of the Internal Revenue Service in Cincinnati, Ohio and many of the

defendants and, upon information and belief, at least some of John Does 1-100 reside in the

vicinity of Cincinnati, Ohio. 28 U.S.C. §§ 1391(b)(2) and (e)(1)(A) and (B).

PLAINTIFFS

7. The NorCal Tea Party Patriots is a non-profit organization located in Colfax,

California. Its purpose is to support and conduct non-partisan research, education, and

informational activities to increase public awareness of legislation and legislators. Its mission is

three-fold: (1) fiscal responsibility; (2) constitutionally limited government; and (3) free

markets. NorCal has, from time to time, been comprised of a six-member board of directors,


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including its chairman/secretary, Virginia (“Ginny”) Rapini, who associated together in a

corporate, tax-exempt form to maximize the effectiveness of their expression.

8. Faith and Freedom Coalition of Ohio is a non-profit organization located in

Columbus, Ohio. It was founded to support core tenets of faith and freedom.

9. Simi Valley Moorpark Tea Party is a non-profit organization located in Simi

Valley, California. It was organized to support the U.S. Constitution’s basic principles.

10. The Tampa 9-12 Project is a volunteer non-profit organization, with more than

2,000 members, located in Tampa, Florida. It holds classes on history, politics, economics, and

current events. It also hosts candidate forums, conducts research, and promotes social welfare.

11. The South Dakota Citizens for Liberty, Inc., is a non-profit located in Rapid City,

South Dakota. It opposes irresponsible tax and spending policies, supports the Constitution, and

communicates principles of limited government.

12. Texas Patriots Tea Party is a non-profit organization located in Burleson, Texas.

It is devoted to educating the public regarding our history and form of government.

13. Americans Against Oppressive Laws, Inc. is a non-profit organization located in

North Port, Florida. It is dedicated to promoting the awareness of oppressive laws and the need

to curtail them.

14. San Angelo Tea Party, Inc. is a non-profit located in San Angelo, Texas. It is

devoted to such goals as inspiring citizen participation, individual liberty, limited government,

and upholding the Constitution.

15. Prescott Tea Party is a non-profit organization located in Prescott, Arizona. It is

devoted to educating the public about principles of limited government and the Constitution.


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16. Texas Public Policy Foundation is a non-profit organization located in Austin,

Texas. Its purpose is to sponsor scholarly research on various issues of public policy and

disseminate those research results to the public.

DEFENDANTS

17. The Internal Revenue Service (“IRS”) is the chief tax collection agency of the

United States and is a division of the United States Department of the Treasury.

18. The United States of America is this country’s foremost governmental body and

is responsible for the actions and conduct of the IRS and the IRS’s employees.

19. The IRS Exempt Organizations Rulings and Agreement Office is located in

Washington, D.C., and has final authority within the IRS to grant or deny tax-exempt status.

20. The Rulings and Agreement Office exercises supervisory authority over the

Determinations Unit located in Cincinnati, Ohio. The Determinations Unit makes the initial

decision as to whether an organization will be granted tax-exempt status. The Determinations

Unit also receives guidance and expertise by the Technical Unit of the Rulings and Agreement

Office in Washington, D.C. Other IRS units around the country have also been involved in the

wrongs described below.

21. Lois Lerner was the Director of the Tax-Exempt Organization Unit for the IRS

during most of the relevant time period. Ms. Lerner was aware of, supervised, implemented,

directed, and concealed the targeting of dissenting groups. After pleading the Fifth Amendment

before Congress, Ms. Lerner was placed on paid administrative leave by the IRS. Upon

information and belief, Ms. Lerner resides in the Washington, D.C. area.

22. Steven Miller was Acting IRS Commissioner during the period of time in which

dissenting groups were targeted. Mr. Miller supervised, directed, was aware of, and attempted to


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conceal the actions of the IRS and its employees. Upon information and belief Mr. Miller

resides in the Washington, D.C. area.

23. Douglas Shulman was IRS Commissioner during the relevant time period. Mr.

Shulman was aware of, supervised, directed, and concealed the targeting of dissenting groups.

Upon information and belief, Shulman resides in the Washington, D.C., area.

24. William Wilkins is, and was during the relevant time period, the Chief Counsel of

the IRS. Mr. Wilkins was aware of, supervised, directed, implemented, and concealed the

targeting of dissenting groups. Upon information and belief, Wilkins resides in the Washington,

D.C., area.

25. Sarah Hall Ingram was Commissioner of the Tax Exempt and Government

Entities Division of the IRS during part or all of the relevant time period. Ingram supervised,

directed, was aware of, and attempted to conceal the actions of the IRS and its employees. Upon

information and belief, Ingram resides in the Washington, D.C. area.

26. Joseph Grant was Commissioner of the Tax Exempt and Government Entities

Division of the IRS during part or all of the relevant time period. Mr. Grant supervised, directed,

was aware of, and attempted to conceal the actions of the IRS and its employees. Upon

information and belief, Grant resides in the Washington, D.C. area.

27. Holly Paz was first Acting Manager of the Technical Unit of Rulings and

Agreements, and then Acting Director (and Director) of Rulings and Agreements, during the

relevant time period. Paz supervised, directed, was aware of, and attempted to conceal the

actions of the IRS and its employees. Further, Paz reportedly sat in on all interviews by the

Inspector General’s Office of IRS employees with the express purpose of intimidating employees

from telling the truth and suppressing the facts of the IRS targeting. As of July 15, 2013, Paz


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was reportedly placed on paid administrative leave. Upon information and belief, Paz resides in

the Washington, D.C. area.

28. Carter Hull was a lawyer at the IRS in Washington, D.C. Hull directed,

supervised, was aware of, and concealed the targeting of dissenting groups. Upon information

and belief, Hull carefully managed one or more of the Cincinnati IRS agents’ efforts to target

dissenting groups. Hull promptly retired from the IRS as soon as his role became public. Upon

information and belief, he resides in the Washington, D.C. area.

29. Brenda Melahn is the now retired Program Director of the West Virginia IRS

office. Melahn directed, supervised, concealed, and coordinated with Cincinnati and Washington

regarding the targeting of dissenting groups. Upon information and belief, Melahn resides in

West Virginia.

30. Cindy Thomas was the Program Manager of the Determinations Unit in

Cincinnati, Ohio, during part of all of the relevant time period. Thomas directed, supervised,

concealed, and coordinated with Washington, D.C., regarding the targeting of dissenting groups.

Upon information and belief, Thomas was involved from the beginning in conceiving and

implementing the targeting strategy. Upon information and belief, Thomas resides in the

Cincinnati, Ohio, area.

31. Bonnie Esrig was a manager in the Determinations Unit in Cincinnati, Ohio. She

participated in the implementation, direction, supervision, development of criteria, concealment,

and coordination with Washington, D.C. regarding the targeting of dissenting groups. Upon

information and belief, Esrig resides in the Cincinnati, Ohio area.

32. Steven F. Bowling was a manager in the Determinations Unit of the IRS in

Cincinnati, Ohio. He participated in the implementation, direction, supervision, development of


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criteria, concealment, and coordination with Washington, D.C., regarding the targeting of

dissenting groups. Upon information and belief, Bowling resides in the Cincinnati, Ohio area.

33. Mitchell Steele was a front-line worker in the Determinations Unit of the IRS in

Cincinnati, Ohio. He directly implemented the targeting of dissenting groups through his

interactions with them, including demands for improper information, invasion of privacy,

harassment, intimidation, and delay. Upon information and belief, Steele resides in the

Cincinnati, Ohio area.

34. Carly Young was a front-line worker in the Determinations Unit of the IRS in

Cincinnati, Ohio. She directly implemented the targeting of dissenting groups through her


harassment, intimidation, and delay. Upon information and belief, Young resides in the


35. Joseph Herr was a front-line worker in the Determinations Unit of the IRS in



harassment, intimidation, and delay. Upon information and belief, Herr resides in the Cincinnati,

Ohio area.

36. Stephen Seok was a front-line worker in the Determinations Unit of the IRS in



harassment, intimidation, and delay. Upon information and belief, Seok resides in the



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37. Elizabeth Hofacre was a front-line worker in the Determinations Unit of the IRS

in Cincinnati, Ohio. She directly implemented the targeting of dissenting groups through her


harassment, intimidation, and delay. Upon information and belief, Hofacre resides in the


38. Grant Herring was a front-line worker in the Determinations Unit of the IRS in



harassment, intimidation, and delay. Upon information and belief, Herring resides in the


39. John Does 1-100 are current and former employees of the Department of the

Treasury, the IRS, and specifically, the subdivisions described in ¶¶ 18-19 above.

FACTUAL BACKGROUND

40. On May 14, 2013, the Treasury Inspector General for Tax Administration issued a

report entitled, “Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for

Review” (“IGR”). A true and accurate copy of the IGR is attached hereto as Exhibit A. The

conclusions in the report are true and are incorporated and alleged herein. However, as alleged

in greater detail below, the wrongdoing of the IRS extends beyond the conclusions of the IGR

both as to time period and scope.

The Importance of IRS Recognition of Tax-Exempt Status

41. The Plaintiffs (and putative plaintiff class) applied for recognition of tax-exempt

status under Section 501(c)(4) of the Internal Revenue Code because having recognition of that


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status is valuable. In fact, Plaintiffs were willing to pay a user fee of several hundred dollars in

order to receive the IRS’s recognition.

42. Tax-exempt status benefits the Plaintiffs because it avoids double taxation;

individual members and donors have already paid taxes on their income, and want to be able to

pool their after-tax resources for social welfare purposes without effectively paying tax a second

time though the levy of a tax on the social welfare corporation. Thus, tax exemption is not a

subsidy or advance from the public purse for 501(c)(4) groups like the Plaintiffs, it is a

forbearance by the government from burdening Plaintiffs’ social welfare activities by taxing

contributions to social welfare groups that have already been subject to one round of individual

or corporate taxation.

43. Additionally, social welfare groups like the Plaintiffs benefit by receiving

advance IRS recognition of their tax-exempt status. The alternative to recognition is to become

a so-called “self-declarer,” an organization that files Form 990 (a tax return) without having filed

Form 1023 or 1024 (for 501(c)(3) and (c)(4) organizations, respectively). Self-declarers are

subject to year-round voluntary compliance checks, and if an organization refuses to submit, it

can be referred for a mandatory examination (i.e., an audit) of its books and records. If a check

or audit finds that an organization is not operating under the applicable exemption based on all of

the facts and circumstances, the organization will face a crippling and unexpected tax and

penalty. For organizations like the Plaintiffs, such a tax and penalty would effectively end the

organization’s operations, including its expressive activities. The risk of such an unpredictable

penalty compelled Plaintiffs to seek recognition of their 501(c)(4) status. The IRS’s recognition

provides certainty that, so long as the organization is not run in a materially different way than

that originally disclosed to the IRS, it will not face a surprise death penalty.


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44. For at least the reasons discussed above, tea party and other groups, including

Plaintiffs, applied for IRS recognition of their tax-exempt status beginning in 2010. However,

Plaintiffs’ applications were delayed and they were singled out for special scrutiny based upon

their names or policy positions.

The Design and Extent of Defendants’ Scheme

45. In or about March 2010, the Determinations Unit began singling out for special

scrutiny requests for tax-exemption for groups identified as “Tea Party,” “Patriots,” “912

Project,” and applications involving political-sounding names that seemed to identify with the

Tea Party, such as “We the People” or “Take Back the Country.”

46. These criteria were later expanded to target groups whose issues included

government spending, government debt, expanding/limiting government, or taxes.

47. Groups dedicated to educating the public by advocacy/lobbying to “make

America a better place to live” were also targeted, as were groups committed to “educating on

the Constitution and bill of rights.”

48. Also targeted for special scrutiny were groups who had a statement in the case file

criticizing “how the country is being run.”

49. The IRS now admits that, at a minimum, these criteria were “inappropriate” and

“violated the IRS Mission Statement.” “Charting a Path Forward at the IRS,” Acting

Commissioner Daniel Werfel, June 24, 2013, at 29 (the “Werfel Report,” available at

www.irs.gov/PUP/newsroom/Initial%20Assessment%20and%20Plan%20of%20Action.pdf).

50. The IRS’s knowledge that this discrimination was illegal is further evidenced by

IRS officials’ scheme to keep the people’s duly elected representatives in the dark about it. As

alleged in more detail below, when members of Congress asked IRS officials, including


www.irs.gov/PUP/newsroom/Initial%20Assessment%20and%20Plan%20of%20Action.pdf

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defendants Shulman and Miller, whether the IRS was targeting certain groups for different

treatment, the IRS officials provided misleading and deceptive responses to conceal the scheme.

Additionally, in responding to written questions from Congress on May 4, 2012, well after she

had learned of the targeting, defendant Lerner falsely stated that the intrusive demands for

information were simply “development letters the IRS sends to organizations in the ordinary

course of the application process.” Further, the White House denied any knowledge that the IRS

was targeting dissenting groups until April or May of 2013.

51. The IRS has now admitted that “not only did [it] not properly inform Congress

about the issues as they were occurring, but… we failed to do so even after Congressional

committees specifically began asking questions on the topic.” Werfel Report, 51.

52. The IRS has also admitted that senior managers allowed the conduct to continue

and failed to inform Congress. “Senior IRS leadership did not effectively oversee activities

within EO, failing to take appropriate, proactive steps to identify and help address significant

emerging operational risks. Even after senior IRS leadership was informed of the inappropriate

activities in question, it failed both to effectively put an end to the activity and to inform the

proper committees in Congress in a timely fashion, despite requests from Congress on this

topic.” Werfel Report, 10.

53. The public was unaware that the IRS was targeting dissenting groups for special

scrutiny until May of 2013.

54. There is no evidence that liberal or “progressive” political groups or groups

supporting the re-election of President Barack Obama or the election of Democrats were targeted

for similar delay, intrusive questions, or impairment of their First Amendment rights. Indeed, a

May 15, 2013 Washington Post analysis of the IRS public database of nonprofit organizations


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showed that groups with the word “progressive” in their names “suffered no similar slowdown

pattern,” and their number of approvals “increased each year from 17 in 2009 to 20 in 2012.”

See http://www.washingtonpost.com/wp-srv/special/politics/irs-targets-conservative-groups/

(visited December 9, 2013).

55. On June 26, 2013, J. Russell George on behalf of TIGTA, responded to questions

raised by Congressman Sander Levin about whether the IRS had, in fact, also targeted groups

with liberal-sounding tags for extra scrutiny during the period May 2010 to May 2012. George

stated, “We reviewed all cases that the IRS identified as potential political cases and did not limit

our audit to allegations related to the Tea Party… From our audit work, we did not find evidence

that the criteria you identified, labeled ‘Progressives,’ were used by the IRS to select potential

political cases during the 2010 to 2012 timeframe we audited.” George stated that although the

term “Progressives” did appear on a BOLO spreadsheet labeled “Historical,” unlike other BOLO

entries, that BOLO “did not include instructions on how to refer cases that met that criteria.”

George concluded that there was no evidence that “’Progressives’ was a term used to refer cases

for scrutiny for political campaign intervention.”

56. There was extreme delay for these dissenting groups compared to those not

targeted for extra scrutiny. It took the IRS an average of 238 days to approve the applications of

other groups and an average of 574 days to process the dissenting groups selected for higher

scrutiny. For politically favored groups, the process may have been much faster. After

watchdog groups complained that a foundation named after Barack H. Obama, the father of the

President of the United States, was a sham charity and was operating without having received

tax-exempt status, the IRS’ Cincinnati Determinations Unit processed its application in just 34

days, granting tax-exempt status retroactively to the date it had begun its fundraising in 2009.


http://www.washingtonpost.com/wp-srv/special/politics/irs-targets-conservative-groups/

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See http://www.washingtonpost.com/politics/irs-stalled-conservative-groups-but-gave-speedy-

approval-to-obama-foundation/2013/05/16/90c53e8a-be57-11e2-89c9-3be8095fe767_story.html

(viewed May 19, 2013). The Obama foundation’s tax-exemption letter was signed by Lois

Lerner. Id.

57. The IGR identifies 296 organizations whose applications were targeted for review

by the Cincinnati office alone based on their name or conservative or libertarian political views.

Other reports suggest the number may exceed 500. Only through discovery will the full scope of

this viewpoint discrimination be identifiable.

58. Once the IRS decided to begin targeting dissenting groups for special scrutiny it

issued the first of several “be on the lookout” or “BOLO” listings. The initial BOLO listing

simply identified the Tea Party movement. Further BOLO listings included the additional

dissenting criteria described above.

59. Once a dissenting group was targeted for special review, its file was forwarded to

a team of specialists within the Determinations Unit in Cincinnati.

60. Once forwarded to the specialist for greater review, the organization was

subjected to unreasonable delays and often harassing, illegal, and discriminatory demands for

private information.

61. The IRS’ intent to engage in viewpoint discrimination is further evidenced by the

fact that from March of 2010 until July of 2011 the IRS simply referred to these cases as the “tea

party cases.”

62. Nina Olsen, the IRS National Taxpayer Advocate (“NTA”), and the Taxpayer

Advocate Service (“TAS”) issued a report to Congress on the targeting of dissenting groups on

June 30, 2013, entitled “Special Report To Congress: Political Activity and the Rights of


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Applicants for Tax Exempt Status” (hereafter, “Advocate Report”). A true and correct copy of

the Advocate Report is attached hereto as Exhibit B.

63. The Advocate Report recommended “apology payments” to targeted groups to

show that the government “recognizes its mistake and the taxpayer’s burden.”

64. Neither the NTA nor TAS were informed by the IRS of the delays, as the law

requires. They were therefore unable to intervene in any meaningful way to stop the targeting.

In the few cases in which the TAS tried to intervene, it was resisted at every turn by Defendants.

65. The law requires that cases delayed more than 30 days beyond normal processing

time be referred to the TAS. Defendants violated the law by not referring any of the class

members’ cases even though at least hundreds of cases were so delayed. In this regard, the IRS

admits that officers in its Exempt Organizations unit (including each named Defendant) were

required to refer the delayed cases (including Plaintiffs’) to TAS. None did so. See Werfel

Report at 33.

66. The Advocate Report lists numerous violations by Defendants of dissenting

groups’ rights, including:

a. the right to be informed, which Defendants violated by failing to post their

criteria, standards, form letters, and BOLOs;

b. the right to timely processing;

c. the right to be assisted;

d. the right to be heard;

e. the “’right to privacy’ [which] was violated when the IRS burdened them with

unnecessary questions . . .”


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f. the “’right to confidentiality’ was violated by the request for donor

information that would otherwise be non-public were it provided in the annual

Form 990 filing.” (In other words, “The IRS’s request for donor lists also

meant that donors would be disclosed to the public.”); and

g. the “right to a fair and just tax system,” which “was demonstrably violated by

the EO’s failure to design the application process” to elicit information in an

impartial manner.

67. The conduct and acts set forth in Paragraph 58 did in fact occur, and did in fact

violate the rights identified by the Advocate Report.

68. As the Advocate Report also observes, the information requested from dissenting

groups was “excessive.”

69. Additionally, as the Advocate Report explains, Defendants’ failure to post their

criteria, standards, form letters, and BOLOs violated the law.

Specific Conduct of Individual Named Defendants

70. Holly Paz told Congressional investigators in 2013 that an IRS agent in Cincinnati

flagged the first “tea party” case in February 2010. According to Paz, the agent forwarded the

application to a manager because it appeared to be politically sensitive. The manager informed

Paz, who then had the application assigned to a legal expert in Washington.

71. Steven Grodnitzky, Manager of the Technical Unit in Washington, D.C., told

Congressional investigators that the IRS viewed “tea party” (conservative or libertarian)

differently than other advocacy-related social welfare organizations, and began to track them,

because of the significant media attention surrounding the emergence of the tea party in 2010.


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72. Likewise, Stephen Seok, a Determinations Unit specialist in Cincinnati who

handled at least one Plaintiff, told Congressional investigators that “tea party” organizations

differed from other organizations: “Normal (c)(4) cases we must develop the concept of social

welfare, such as the community newspapers, or the poor, that types. These [Tea Party]

organizations mostly concentrate on their activities limiting government, limiting government

role, or reducing government size, or paying less tax. I think it’s different from the other social

welfare organizations which are (c)(4).”

73. Upon information and belief, Elizabeth Hofacre was the Cincinnati agent (an

Exempt Organizations Specialist) who flagged the first tea party case. Hofacre’s manager at the

time was Joseph Herr, also in Cincinnati, Ohio. Herr asked Hofacre to begin pulling and

reviewing applications of organizations with “tea party,” “patriots,” “9/12,” “We the People,”

“Take Back the Country,” or similar titles in their names. According to the TIGTA report, a

specialist (who upon information and belief was Hofacre) continued to search for Tea Party

groups until the precursor to the BOLO listing was established in May 2010.

74. In approximately the middle of March 2010, Holly Paz, then the Acting Manager

of the Technical Unit in Washington, D.C., contacted Cincinnati and asked that certain Tea Party

cases be transferred to Washington, D.C. The cases were to be reviewed by the Chief Counsel’s

office, which was headed by Chief Counsel William Wilkins and included attorney Carter Hull.

Accordingly, upon information and belief, Wilkins learned about the targeting at this time, and

had the opportunity to stop it but failed to do so.

75. Hull’s main contact was Elizabeth Hofacre. Hull and his supervisor at the time,

Acting Manager of the Technical Unit, Steven Grodnitzky, instructed Hofacre to send drafts of

correspondence to Hull for his suggestions. Cindy Thomas, as the manager responsible for


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Hofacre, agreed with this plan. Hofacre has testified that she never before had to send copies of

applications, applicant responses, and draft development letters to Washington, D.C., for review.

Hofacre also testified that she was unable to process the targeted applications until she received

guidance from Hull and the Technical Unit in Washington, D.C.

76. Soon afterwards, in April 2010, with the agreement of Cindy Thomas, the Acting

Manager of the Technical Unit, Steven Grodnitzky directed that a Sensitive Case Report

(“SCR”) be prepared regarding the Tea Party cases; it was shared with the Director of Rulings

and Agreements (either David Fish or Holly Paz) and a summary of the SCR was shared with

Lois Lerner, Director of Exempt Organizations.

77. Later, in July 2010, Elizabeth Hofacre sent a spreadsheet to Carter Hull

summarizing her findings on the tea party review. Hofacre accidentally sent the spreadsheet to

every person in the IRS Exempt Organizations Rulings and Agreements unit. Accordingly, no

later than April 2010, senior IRS officials were aware that tea party cases were being scrutinized

in Cincinnati.

78. At this time, as Program Manager, Cindy Thomas was the highest-ranking official

in the Cincinnati Determinations Unit. By July 2010, Thomas had asked specialists (and their

individual and territory managers) in the Determinations Unit to be on the lookout for Tea Party

applications.

79. By August 2010, the first BOLO listing was issued with the following criteria:

“various local organizations in the Tea Party movement… applying for exemption under

501(c)(3) or 501(c)(4).” Upon information and belief, Thomas, her counterpart in the Technical

Unit, Grodnitzky, and their immediate supervisor, the Director of Rulings and Agreements (first


20

David Fish, and after January 2011, Holly Paz) either drafted this BOLO item, approved it, or

ratified its use by her subordinates.

80. In addition to Hofacre, the following individuals served as managers or specialists

in the Determinations Unit in Cincinnati who ultimately reported to Cindy Thomas:

a. Joseph Herr. Herr had been in charge of a group of specialists that searched

for groups for “development” and additional delay. Herr also sent out

intrusive development letters of his own, including a March 16, 2012 letter to

the Dayton Ohio Tea Party, and a February 1, 2012 development letter to

South Dakota Citizens for Liberty.

b. Grant Herring. Herring sent two intrusive development letters to the Faith and

Freedom Coalition of Ohio in June 2012, to the San Angelo Tea Party on

January 12, 2012; and to the Simi Valley Moorpark Tea Party in September

2012.

c. Stephen Seok. Seok sent an intrusive development letters to the Faith and

Freedom Coalition of Ohio on February 14, 2012; and invasive development

letters to Richmond Tea Party, Inc., on January 9, 2012, and Wetumpka Tea

Party February 3, 2012.

d. Mitchell Steele. Steele sent intrusive development letters to Liberty Township

Tea Party (an Ohio organization), Kentucky 9/12 Project, and Shenandoah

Tea Party, all of which are putative class members. Steele’s letter to Liberty

Township inquired into its political association with an individual who was

not a member of Liberty.


21

e. Carly Young. Young sent an intrusive development letter to Plaintiff NorCal

on January 27, 2012, and also sent intrusive letters to TheTeaParty.net asking

the group to identify board members who might run for public office. Young

also sent intrusive development letters to the San Antonio Tea Party.

f. Steven F. Bowling. Bowling was manager of Group 7822, the Emerging

Issues group, and supervised and approved Elizabeth Hofacre’s and other

employees’ use of “tea party” and other viewpoint-based criteria to single out

groups for development, delay, and intrusive questioning, including Plaintiffs.

g. Brenda Melahn. Melahn was part of a group of Cincinnati specialists that

targeted conservative and libertarian groups for extra scrutiny and delay.

h. Bonnie Esrig. Esrig was part of a group of Cincinnati specialists that targeted

conservative and libertarian groups for extra scrutiny and delay.

81. After her initial contact with the Cincinnati office in the spring of 2010, Holly Paz

instructed Cincinnati IRS employees in the Determinations Unit to pull and "hold" tea party

cases while employees in Washington, D.C., reviewed test cases.

82. As a result of the unusual requirement for IRS staff in Washington, D.C.

(including but not limited to Carter Hull and Steven Grodnitzky), to review and approve all

correspondence between Determinations Unit specialists in Cincinnati and applicants in other

parts of the country that had been targeted for additional “development,” targeted organizations’

applications were delayed.

83. In October 2010, Carter Hull sent Holly Paz a memorandum describing the

targeting and coordination of “tea party” cases in Cincinnati. This included a list of all of the

“tea party” cases Hull had received from Hofacre.


22

84. In February 2011, Paz (now, promoted to the position of Director of Rulings and

Agreements, one step below Lois Lerner) emailed Lerner to assure her that Hull was reviewing

every Cincinnati communication with the targeted organizations, and that no targeted

organizations would be approved out of Cincinnati until the test cases being handled in

Washington, D.C., “go all the way through the process here [in Washington, D.C.].”

85. Ultimately, Hull had to stop giving guidance to Elizabeth Hofacre in Cincinnati

because he was awaiting word from the Chief Counsel on how to proceed. Hull testified to

Congress that he understood that all of the cases would ultimately have to be reviewed by Lois

Lerner’s senior advisor, Judith Kindell, and also by the Chief Counsel’s office. Hull testified

that in his experience, that was unusual.

86. In March 2011, Hull was instructed by Lois Lerner’s chief technical adviser,

Judith Kindell, to forward his recommendations to the Chief Counsel for review, and upon

information and belief, he did. Upon information and belief, the Chief Counsel received Hull’s

report and either approved or failed to stop the targeting and questioning scheme.

87. In May of 2011, Hull continued to work on test cases, including a

conservative/libertarian Ohio applicant for tax exempt status (and member of the putative

plaintiff class), American Junto. Hull sent detailed and intrusive questionnaires directly to Ohio,

asking an American Junto organizer about his involvement with other 501(c)(4) applicants.

American Junto eventually gave up its effort to achieve tax exempt status.

88. Little development occurred until the summer of 2011, as Cindy Thomas

continued to have her staff hold applications while awaiting guidance from the Technical Unit in

Washington, D.C.


23

89. On June 1, 2011, Holly Paz emailed Cindy Thomas, copying Brenda Melahn,

indicating that Lerner wanted to be briefed about what makes a “Tea Party case” and wanted to

think about whether criteria were resulting in “over” (not “under”) inclusion. Thomas turned to

John Shafer, a Cincinnati Group Manager in charge of screening, noting that the BOLO

spreadsheet at the time simply said, “Organizations involved with the Tea Party movement

applying for exemption under 501(c)(3) or 501(c)(4).” Thomas asked, “Do the applications

specify ‘tea party?’ If not, how do we know applicant is involved with the tea party movement?”

90. Shafer responded with the four criteria referenced in Paragraph 92 below, copying

Steven F. Bowling, who was Group Manager for emerging cases, Group 7822 (including the Tea

Party cases), and Bonnie Esrig. The TIGTA report notes that Paz (the Acting Director of

Rulings and Agreements) “commented that the criteria being used to identify Tea Party cases

may have resulted in over-inclusion.” After this disclosure, neither Thomas nor Paz did anything

to stop the criteria from being used or to publish this agency guidance for public review.

91. On July 5, 2011, Lois Lerner and other Technical Unit officials in Washington,

D.C., called Cindy Thomas, in Cincinnati, Ohio, to discuss changes to the BOLO list.

92. A briefing paper received by Lerner, and, upon information and belief, Paz, in late

June or early July 2011 specifically informed them that “Advocacy Org. Applications” were

being screened because they were “advocating on issues relating to government spending, taxes,

and similar matters. Often there is possible political intervention or excessive lobbying.” The

four criteria being used to separate out groups were: (1) use of “Tea Party,” “Patriots,” or “9/12

Project” in the case file; (2) “Issues include government spending, government debt, or taxes;”

(3) “Education of the public by advocacy/lobbying to ‘make America a better place to live’”; (4)

“Statements in the case file criticize how the country is being run.”


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93. As a result of the call and the above-referenced memo, Lerner decided that the

BOLO criteria should now be changed to something much more general: “organizations involved

with political, lobbying, or advocacy…” Lerner also decided that her office would prepare a

document with recommended actions for the Cincinnati cases that had been identified.

94. However, despite her knowledge that hundreds of organizations had been shunted

into special screening and were already experiencing lengthy delays based on four viewpoint-

based criteria, Lerner failed to remedy the disparate treatment, expedite the examinations, or

make the IRS’s new guidance known to the public or taxpayer advocate. Instead, she

inaugurated a series of meetings, working groups, and guidance drafts, which, as discussed

below, ultimately led to even more intrusive questionnaires being sent to the targeted dissenting

groups in January 2012. It would be another year before groups that stuck with the IRS process

began to receive determination letters.

95. In a July 19, 2011, email to Janine Cook, an attorney in the Chief Counsel’s

office, Holly Paz demonstrated her and Lois Lerner’s reluctance to approve the targeted

organizations. Paz wrote, “Lois would like to discuss our planned approach for dealing with

these cases. We suspect we will have to approve the majority of the c4 applications.”

96. However, neither Lerner nor Paz acted to approve Plaintiffs’ applications.

Instead, after July, internal IRS meetings briefly intensified.

97. According to the TIGTA report, on August 4, 2011, personnel of the Rulings and

Agreements office, which was then directed by Holly Paz, met (presumably at Paz’s direction)

with the Chief Counsel of the IRS, William Wilkins, “so that everyone would have the latest

information on the issue.” Further, according to the TIGTA report, the guide sheet or “check


25

sheet” was reviewed by Counsel and was reviewed and commented on by “various EO function

Headquarters office [the office of Lerner] employees.”

98. As of November 6, 2011, the delay continued, as (according to TIGTA) Paz told

the Technical Unit Manager that the guide sheet was “too lawyerly” and would have to be

rewritten with input from Cindy Thomas’s Determinations Unit.

99. Upon information and belief, on November 16, 2011, Carter Hull sent or directed

to be sent to the Cincinnati Determinations Unit a list of over 160 cases, along with comments

and guidance on how to handle allegedly “political” organizations, including Plaintiff Faith and

Freedom Coalition of Ohio. Among the items allegedly justifying further review was “anti-

Obama rhetoric” or “negative Obama commentary” of some groups, despite the fact that such

political speech could not have related to a candidate for office.

100. On December 16, 2011, a team of specialists under Thomas, which included,

upon information and belief, all of the specialists in Cincinnati who sent out demands for

information in the first three months of 2012, began to meet to consider the backlog of

applications from targeted entities.

101. As discussed in more detail below, specialists did indeed send out new demands

for information to entities in January and February 2012, including several Plaintiffs.

102. On February 29, 2012, Lerner directed Paz to develop a letter that clearly told

organizations what would happen to them if they failed to respond to Cincinnati with new

demands for information. Indeed, Lerner herself signed one such letter, addressed from

Cincinnati and directing that the recipient make a response to Cincinnati, to Plaintiff South

Dakota Liberty Council in March 2012.


26

103. Not infrequently, Lois Lerner approved letters to go out under her signature from

the Cincinnati, Ohio, office of her Exempt Organizations division. In addition to the South

Dakota Liberty Council letter, a letter to a member of the putative plaintiff class went out under

Lerner’s signature on March 16, 2002, to the Ohio Liberty Council Corp. In fact, even after

being on leave from the IRS since May 2013, Lerner’s auto-signature appears on letters in

August 2013 with a Cincinnati, Ohio, return address.

104. Also on February 29, 2012, Lerner halted the sending of any additional request

letters from Cincinnati until the Determinations Unit could receive an additional set of guidance.

Upon information and belief, Lerner took this action only because information about the IRS’s

recent demands for information were beginning to leak out into the media.

105. In March 2012, information about the IRS’s requests was continuing to leak out.

In a March 8, 2012 email, rather than probing into the targeting scheme and having it halted,

Steve Miller requested that if taxpayers complained about providing donor information

(information that TIGTA later found was unnecessary), taxpayers would be told they could opt

not to send it in, but might need to send it in later. This limited concession from Miller ratified

the targeting and investigative scheme. According to the TIGTA report, approximately two

weeks later, Miller met with Lerner’s technical adviser to “discuss concerns with the media

attention the Tea Party applications were receiving.”

106. In April 2012, the office of Joseph Grant or Sarah Hall Ingram (Grant was

Ingram’s successor) received “template” questions for targeted organizations that had been

developed by a team of specialists reporting to Cindy Thomas. There is no record that Ingram or

Grant took any steps to halt the targeting and delay after they learned about it, even though they

had the power to do so. Instead, in an April 30, 2013 letter to TIGTA responding to its report,


27

Grant blamed “front line career employees” (i.e., the employees in Cincinnati) for having an

inadequate process.

The Motivation of Senior Management Defendants

107. Upon information and belief, Lois Lerner saw it as part of her role to rein in

conservative and libertarian-leaning tax-exempt entities that she believed the United States

Supreme Court was allowing to run roughshod over the federal campaign finance system and

Federal Elections Commission. As early as 2009, Lerner disclosed confidential tax information

to the FEC.

108. In October 19, 2010, comments on the Citizens United decision at Duke

University’s Sanford School of Public Policy, Lerner stated: “What happened last year was the

Supreme Court- the law kept getting chipped away, chipped away in the federal election arena.

The Supreme Court dealt a huge blow, overturning a 100-year old precedent that said basically

corporations couldn't give directly to political campaigns.” Lerner also penned a July 10, 2012

email to colleague Sharon Light about a National Public Radio article reporting on a Democratic

Senatorial Campaign Committee complaint to the Federal Election Commission “accusing a trio

of ‘social welfare’ groups of actually being political committees.” The article noted that “The

three groups have all told the IRS they are social welfare organizations, just like thousands of

local civic groups, and definitely not political committees.” Commenting on the complaint,

Lerner stated, “Perhaps the FEC will save the day.”

109. Lerner was concerned that if her division’s targeting of tea party groups was

allowed to operate too freely from Cincinnati and was not carefully managed, it would become

politically explosive. In part for that reason, she attempted to assert control over the process. In

a February 2011 email, Lerner advised her staff—including then-Exempt Organizations


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Technical Manager Michael Seto and then-Rulings and Agreements Director Holly Paz—that the

“Tea Party matter [is] very dangerous. This could be the vehicle to go to court on the issue of

whether Citizen’s United overturning the ban on corporate spending applies to tax exempt rules.

Counsel and [Lerner adviser] Judy Kindell need to be in on this one… Cincy should probably

NOT have these cases. Holly please see what exactly they have please.”

110. Responding to Lerner, Paz wrote: “Tea Party - Cases in Determs are being

supervised by Chip [Carter] Hull at each step - he reviews info from TPs, correspondence to TPs,

etc. No decisions are going out of Cincy until we go all the way through the process with the c3

and c4 cases here. I believe th [redacted] will be ready to go over to Judy soon.”

111. Lerner responded to Paz and Seto as follows: “Thanks—even if we go with a

[501(c)(4)] on the Tea Party cases, they may want to argue they should be [501(c)(3)s, so it

would be great if we can get there without saying the only reason they don’t get a 3 is political

activity.” The reasonable inference is that Lerner wanted to use non-political criteria pretexts for

granting or denying tax-exempt status, even though a review of political activity would actually

inform the IRS’s decisions.

112. Immediately following this exchange, Seto emailed his staff: “Below is Lois’ and

Holly’s directions on certain technical areas, such a [redacted] etc. Please do not allow any cases

to go out before we brief Lois and Holly.”

113. Even within the IRS, Lerner attempted to foster an impression with individuals

outside of the conspiracy that the problem had already been identified and fixed, and was more

cosmetic than real. For example, in June 25, 2012, correspondence with Richard Daly in which

he disclosed to Lerner, Sarah Hall Ingram, and Holly Paz the fact that TIGTA would investigate

how “we” [i.e., Exempt Organizations] deal with c4 applications in Cincinnati, Lerner


29

commented, “It is what it is. Although the original story isn't as pretty as we'd like, once we

learned this were off track, we have done what we can to change the process, better educate our

staff and move the cases.”

114. Later, after seeing the TIGTA report but just before it was made public in May

2013, Lerner changed her tune. She pre-arranged to have a friend ask her a public question

about the IRS targeting at a meeting of Tax Section of the American Bar Association where she

would be speaking. In her response, Lerner stated, “That was wrong, that was absolutely

incorrect, insensitive, and inappropriate—that’s not how we go about selecting cases for further

view. We don’s select for review because they have a particular name.” Lerner also admitted

that “[I]n some cases, cases sat around for a while.” “[S]ome letters…were far too broad, asking

questions of these organizations that weren’t really necessary for the type of application.”

115. Even in May 2013, Lerner was dishonest in public statements about the scandal,

claiming at first that she had only recently learned about the targeting through media reports, and

failing to disclose that she had been intimately involved at least since 2011.

116. Shortly after the ABA conference, Cindy Thomas emailed Lerner, accusing her of

misplacing the blame on Cincinnati workers: "Was it also communicated at that conference in

Washington that the low-level workers in Cincinnati asked the Washington office for assistance

and the Washington office took no action to provide guidance to the low-level workers?"

117. Thomas has also stated that Joseph Grant, who was Lerner’s immediate superior

(and successor to Ingram), had visited the Cincinnati office in approximately May 2012, a year

before the scandal broke in the press, to assure employees that they would not be blamed for the

agency’s mistakes. Upon information and belief, Holly Paz visited Cincinnati with Grant. A year


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later, Thomas’ May 2013 email to Lerner stated: “Based on the [news] articles, Cincinnati wasn’t

publicly ‘thrown under the bus’ [but] instead was hit by a convoy of Mack trucks.”

118. Additionally, Paz (who, as alleged above, served in a variety of roles within the

Technical Unit and as Director of Rulings and Agreements), claimed to Congressional

investigators in the summer of 2013 that targeting of conservative groups did not occur, and that

local Cincinnati workers simply used “tea party” as a shorthand for all political cases. However,

Paz knew better. During the previous year, Paz had actually served as the IRS’s liaison for the

TIGTA investigation which found that targeting had occurred, even sitting in on 36 of 41

interviews TIGTA conducted with IRS workers, many of whom were her subordinates.

Additionally, as alleged in paragraphs 90-93 above, Paz had first-hand knowledge that the

BOLO was being used to pull applications of “local organizations in the Tea Party movement,”

and Cindy Thomas had specifically requested direction by email on “how… we know applicant

is involved with the tea party movement?” In Congressional testimony on May 21, 2013, then-

Acting Commissioner Steve Miller admitted that this BOLO was, in fact, “partisan” targeting.

119. Other officers in IRS management also attempted to cover up the agency’s

conduct. According to the IRS, Acting Commissioner Steve Miller was first informed on May 3,

2012 — when he was deputy commissioner — that applications for tax-exempt status by tea

party groups were inappropriately singled out. Miller later briefed Congress about the reports

but failed to mention that tea party groups were being targeted inappropriately.

120. In March 2012, then-Commissioner Douglas Shulman testified falsely before the

House Ways and Means Committee. In response to a specific question about whether Tea Party

groups were being targeted “based on political leanings,” Shulman claimed to have knowledge of

the recent media allegations and the IRS’s process for the 501(c)(4) groups involved, and based


31

upon this, claimed that “There is absolutely no targeting.” The following is a partial transcript of

the hearing, with emphasis added:

REP. CHARLES BOUSTANY: One other question. It’s come to my attention,

I’ve gotten a number of letters, we’ve seen some recent press allegations that the

IRS is targeting certain Tea Party groups cross the country — requesting owners’

documents requests, delaying approval for tax-exempt status and that kind of

thing. Can you elaborate on what’s going on with that? Can you give us

assurances that the IRS is not targeting particular groups based on political

leanings?

DOUG SHULMAN: Thanks for bringing this up because I think there’s been a lot

of press about this and a lot of moving information, so I appreciate the

opportunity to clarify. First, let me start by saying, yes, I can give you

assurances. As you know, we pride ourselves on being a non-political, non-

partisan organization. I am the only — me and our chief counsel — are the only

presidential appointees, and I have a five-year term that runs through presidential

elections, just so we will have none of that kind of political intervention in things

that we do. For 501 (c)(4) organizations, which is what’s been in the press,

organizations do not need to apply for tax exemption. Organizations can actually

hold themselves out as 501 (c)(4) organizations and then file a 990 with us. The

organizations that have been in the press are all ones that are in the application

process… When people apply for 501 (c)(4) status, what we do is engage them in

a number of questions about making sure that we understand their primary

purpose around this and other sorts of engagement. And so what’s been

happening has been the normal back-and-forth that happens with the IRS. None of

the alleged taxpayers– and obviously I can’t talk about individual taxpayers and

I’m not involved in these — are in an examination process. They’re in an

application process which they moved into voluntarily. There is absolutely no

targeting. This is the kind of back-and-forth that happens when people apply

for 501 (c)(4) status.

121. Subsequent disclosures by Congress continue to reveal that the targeting of

dissenting groups was much more widespread than reported by the IGR or discussed in the

Advocate Report. The targeting involved more IRS offices, personnel, groups, and a broader

time period. Reports to date have merely disclosed the tip of the iceberg, and only discovery will

reveal the full scope of this targeting.


32

Demands for Burdensome Information Disclosure, Delay, and Chilling

122. One tactic utilized by the IRS to harass, intimidate, and discriminate against

dissenting groups critical of the current Administration was to demand disclosure of information

not authorized by the Internal Revenue Code or any other federal law.

123. Plaintiffs, like the vast majority of dissenting groups, are mom and pop

operations, run by ordinary citizens, often new to the process of formally organizing to express

their views, to educate their fellow citizens, and promote the common good and general welfare.

Like most tea party organizations, Plaintiffs often operate on shoe string budgets and rely on

members and volunteers to perform the vast majority of their activities. Plaintiffs do not have

large corporate structures or in-house legal teams to respond to massive and technical requests

for information.

124. Yet as evinced in great detail in below, these broad and sophisticated inquiries are

exactly the kinds of requests the IRS made of the dissenting groups who fit its criteria for special

scrutiny.

125. The IRS engaged in a tactic of suffocating Plaintiffs and other similarly situated

groups with requests that were so searching and extensive that they would have presented a

serious challenge even for sophisticated businesses.

126. The breadth of the requested information has been described by the IGR as

inappropriate, unnecessary, and burdensome.

(1) NorCal Tea Party Patriots

127. An example of the sort of information the IRS sought from dissenting groups is

found in two sets of demands from NorCal Tea Party Patriots. NorCal received the first demand

from Elizabeth Hofacre, of Group 7822 in Cincinnati, Ohio, late in 2010, several months after


33

making its application. On behalf of the IRS, Hofacre demanded certain ordinary items, such as

bylaws, contact information for an officer to answer questions, confirmation of NorCal’s

website, a list of board members, copies of promotional materials distributed to the public at

events, and explanation of items on the group’s balance sheet. However, Hofacre also made the

following unnecessary demands about internal group discussions and meetings, board members’

backgrounds, and NorCal’s political association with other groups:

a. “Provide resumes” of board members;

b. “Provide examples of legislative matters discussed at meetings;”

c. “Provide a list of legislators who have presented at your meetings;”

d. “Explain your relationship with the Tea Party Patriots…”

e. “Provide copies of literature from your leadership conference on 6/19/10.”

128. Hofacre’s letter advised NorCal that it could fall into one of three groups: (1)

groups that could be processed immediately based on the information already submitted; (2)

groups that could be processed with “minor additional information;” and (3) “those that require

additional development.” The letter stated that applications falling into the third category would

be “assigned to an Exempt Organizations specialist for technical review. You can expect to be

contacted within approximately 90 days from the date of this notice.”

129. NorCal objected to providing Hofacre responsive information about its

discussions at its internal meetings and deliberations, its board members’ backgrounds, or its

confidential political associations with other like-minded groups. Nonetheless, it responded to

Hofacre’s first inquiry because the alternative would have been a loss of its application (“user”)

fee and the denial of recognition of tax-exempt status. This, in turn, would have required it to

pay taxes on contributions and other income that would otherwise have been used for its


34

expressive social welfare purposes. Faced with this Hobson’s choice, NorCal decided to press

forward with its application, and awaited Ms. Hofacre’s response.

130. However, neither Hofacre nor any other IRS employee or officer contacted

NorCal “within 90 days” of the notice. After doing nothing with NorCal’s application (or any

dissenting group’s application) for thirteen months (as will be discussed below), IRS Exempt

Organizations Specialist Carly Young, of Group 7828 in Cincinnati, Ohio, sent a second demand

for information to NorCal Tea Party Patriots. See January 27, 2012 demand, attached hereto as

Exhibit C. On behalf of the IRS, Young demanded that NorCal gather and provide information

under penalty of perjury by February 17, 2012. The January 27, 2012 letter demanded

information that far exceeded the IRS’s needs in lawfully considering NorCal’s request for an

exemption.

131. For example, the IRS demanded the following information:

a. a list of all events and activities conducted since July 2010, including the time,

location, and content schedule of each event; the names and credentials of any

instructors; detailed contents of the speeches or forums, names of the speakers

or panels, and their credentials, and the amount paid for each speaker; the

names of persons from NorCal Tea Party Patriots and the amount of time they

will or had spent spend on the event, as well as the compensation paid to each

person, Id., ¶ 1;

b. information about NorCal Tea Party Patriots’s website and internet related

activities, such as the amounts incurred for these activities for 2010 and 2011,

and the amounts to be incurred in 2012 and 2013, Id., ¶ 2;


35

c. copies of any newsletters or emails distributed to members or the public, Id., ¶

3;

d. copies of any new publication and/or advertising materials that were not

already provided in the application or response submitted in July 2010, Id., ¶

4;

e. whether NorCal Tea Party Patriots had conducted or would conduct rallies or

exhibitions for or against any public policies, legislation, public officers,

political candidates, and the like, Id., ¶ 5;

f. the time, location, and content of each scheduled rally or exhibition; copies of

handouts that NorCal Tea Party Patriots did or would provide to the public,

Id.;

g. the names of NorCal’s members and the amount of time each person would

spend on the event; and the percentage of time and resources the NorCal Tea

Party Patriots planned to spend conducting these activities in relation to its

total activities for the year, Id.;

h. whether NorCal Tea Party Patriots had or would conduct candidate forums or

any other events where political candidates were asked to speak, the names of

the candidates, time and location of events, number of people in attendance,

copies of all handouts distributed at these events, any recordings of the events,

and a transcript of speeches given by the political candidates, Id., ¶¶ 6-7;

i. materials or other communications distributed by NorCal Tea Party Patriots

on behalf of another organization or person, including copies of these


36

materials, an indication of when and where the materials were distributed, and

the names of the persons distributing the materials, Id., ¶ 8;

j. whether NorCal Tea Party Patriots had or intended to conduct voter education

activities, such as voter registration drives, voting drives, or distribute voter

guides; the names of the members who had or would conduct these efforts and

copies of all materials distributed to further these efforts, Id., ¶ 9;

k. whether NorCal Tea Party Patriots had or planned to make any attempts to

influence the outcome of specific legislation, Id., ¶ 11;

l. information about NorCal Tea Party Patriots’s direct or indirect

communications with members of legislative bodies. The IRS then demanded

copies of these written communications, Id., ¶ 12;

m. the names of other IRC 501(c)(3), 501(c)(4), or 527 organizations, together

with the name, employer identification number, and address of each such

organization, a detailed description of the nature of the relationship between

NorCal Tea Party Patriots and the other organizations, the nature of their

contacts, and a list of shared employees, volunteers, and other resources, Id., ¶

13;

n. copies of all solicitations made by NorCal Tea Party Patriots and copies of all

documents related to fundraising events, Id., ¶ 14;

o. information about NorCal Tea Party Patriots’s board of directors and the

board’s activities, including all copies of corporate minutes from August 2010

to present, the titles, duties, work hours, and compensation of the board


37

members, officers, and employees, and the names of any board members or

officers who has or intends to run for a public office, Id., ¶ 16;

p. extensive information about NorCal Tea Party Patriots’ membership,

including the number of members, the nature of its membership (individuals

or organizations), copies of member application forms, membership fee

schedule, the roles and duties of its members, and copies of NorCal’s

website’s features that are designed to be available exclusively to its members

only, Id., ¶ 17;

q. information on the income NorCal Tea Party Patriots received and raised from

its inception to the time the information was requested, and its projected

income for 2012 and 2013, Id., ¶ 18;

r. the names of donors, contributors, and grantors and whether these persons had

or intended to run for office and which office, the amounts and dates of the

contributions, and a detailed description of how NorCal Tea Party Patriots

used these monies; the amount of membership fees NorCal Tea Party Patriots

received each year; and the amounts of fundraising received each year, Id.;

and

s. detailed information about the expenses NorCal Tea Party Patriots had

incurred from its inception to the time the information was requested and all

anticipated expenses for 2012 and 2013; the compensation, salary, wage, and

reimbursement expenses for each year of NorCal Tea Party Patriots’s

existence. Id., ¶ 19.


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132. Like so many other similarly situated dissenting groups, NorCal Tea Party

Patriots was given this unreasonable deadline – January of 2012 – to respond to this onerous

request. As the IGR points out, dissenting groups were given unreasonable periods of time to

respond to these requests even though the IRS had done nothing to process their request for tax-

exempt status for 13 months.

133. Additionally, the IRS has admitted that “some applicants were subjected to overly

burdensome and intrusive questionnaires and data requests that went beyond an acceptable level

of fact finding.” See Werfel Report, p. 10.

134. Again, NorCal objected to Carly Young’s requests, which she stated would be

made public and were even more intrusive and burdensome than Hofacre’s initial set of requests.

However, NorCal felt that the alternative to disclosure—loss of its application fee, loss of the

benefit of recognition, and now, loss of even the benefit of exempt status through treatment as a

taxable entity—was even worse. For this reason, NorCal responded to Young’s requests with yet

another set of confidential and internal information.

135. NorCal ultimately received its recognition letter on August 2, 2012, over two

years after it had filed its application in March 2010.

136. By that late date, however, NorCal had suffered substantial injury which took

several forms.

137. First, NorCal faced a period of over two years in which it was uncertain whether it

would be recognized by the IRS as a tax exempt social welfare organization, and therefore avoid

paying taxes on its contributions. Second, NorCal had to conduct its activities with the

knowledge that it was receiving some sort of special, in-depth scrutiny from the IRS, and that the

scrutiny related specifically to NorCal’s viewpoint in its political expression and associations.


39

Yet it also knew that if it tried to opt out of the process by refusing to answer the IRS’s probing

questions, it would not have even the undesirable second-best option of acting as a self-declared

organization. Instead, it would be treated as a taxable entity. From the summer of 2010 to

August 2012, these effects actually did cause NorCal—and would have reasonably caused a

person of ordinary firmness—to curtail both the overall extent of its expressive activities and the

amount of time and resources it spent communicating with the public and with allied groups on

controversial issues, such as Obamacare.

138. Additionally, the delay in receiving recognition of its exempt status inhibited

NorCal in other ways. NorCal’s failure to achieve recognition denied it an important incentive

for supporters and potential supporters to donate to NorCal—the understanding that, like other

social welfare organizations, NorCal would be able to use the full amount of the contribution and

would not have to pay a tax on it—and thus cost NorCal support. Further, the knowledge that

NorCal might well be handicapped by the imposition of taxes, and quickly wither on the vine,

provided a disincentive for volunteers and supporters to devote their limited time and energy to

NorCal instead of other organizations. Both effects actually did cost NorCal supporters.

139. Additionally, the very act of responding to unnecessary IRS questions about its

expressive activities caused NorCal to divert time and resources away from those activities.

140. Finally, the failure to achieve recognition of exempt status for over two years

burdened NorCal in other ways (as the IRS recognized in the IGR), as state exempt status and the

Postal Service’s reduced rates hinged on achieving IRS recognition.

141. The IRS’s delays and chilling of NorCal’s speech came at a crucial time for

NorCal. The NorCal delay crossed two campaign cycles, including much of the presidential

cycle in 2012. Campaign cycles are important for NorCal and the other Plaintiffs because they


40

are mass events that focus the American public on the major policy issues of our day. The 2012

presidential election was particularly important to NorCal, Plaintiffs, and dissenting groups

because it alerted potential supporters to the ideology and public policy of the incumbent

President and Administration. Additionally, at the state level, many initiative petition and

referendum campaigns coincide with candidate election cycles. Accordingly, for tax-exempt

groups (including NorCal and Plaintiffs) to truly fulfill their expressive and social welfare

purposes, it was and is critical to have an exemption during the windows of heightened public

awareness and debate that election cycles bring.

142. Instead, the IRS saddled dissenting groups with delays during these crucial

windows of opportunity. This delay was especially damaging to groups like NorCal and the

other Plaintiffs. As the IGR points out, such groups often withdrew their applications or may not

have begun conducting the planned social welfare work they had in mind.

143. When the purpose of a group is, like NorCal, to inform and educate the public

about the main policy issues of the day, delays through two election cycles can seriously hamper

or even destroy the group’s ability to fully and equally participate in the national policy debate.

As discussed above, this is the injury NorCal suffered. Put simply, the IRS and its employees

used their power to intimidate, coerce, and chill the expressive activity of dissenting groups.

(2) Faith and Freedom Coalition of Ohio

144. The Faith and Freedom Coalition of Ohio (“FFCO”) applied for recognition of

exempt status under Section 501(c)(4) of the Internal Revenue Code on March 4, 2011. Almost

a year later, on February 14, 2012, IRS Exempt Organizations Specialist Stephen Seok sent

FFCO requests for information that were virtually identical to those that Specialist Carly Young

had sent to NorCal in January 2012. Seok demanded that FFCO respond in just three weeks, by


41

March 7, 2012, or have its case closed, which would mean that the IRS “will treat you as a

taxable entity.”

145. FFCO objected to Seok’s demands for information, which he stated would be

made public. FFCO felt that disclosure of its confidential information was a penalty even worse

than the loss of its application fee, loss of the benefit of recognition, and now, loss of even the

benefit of exempt status through treatment as a taxable entity.

146. On June 19, 2012, Exempt Organizations Specialist Grant Herring sent FFCO a

letter telling it to disregard Seok’s February request for information, but making further demands

for information. (See Exhibit D, attached).

147. Herring’s letter demanded that FFCO “list each program/activity you have

conducted from inception until now.” It demanded, for each program, the time, location, and

description; copies of handouts, pamphlets, and other literature distributed to the public; names

of speakers or panel members and their credentials; whether or not any speaker spoke in favor of

a candidate and if so, whether the organization publically disclaimed or endorsed those

statements.

148. Not content with this second demand, on June 28, 2012, Herring sent yet a third

demand letter. (See Exhibit E, attached).

149. It repeated the previous demand regarding each program. It then demanded to

know how “each of the activities you’ve described – voter registrations, candidate forums,

candidate debates, town hall meetings, citizenship and citizen action seminars – will be

conducted.”

150. Herring’s letter warned that if the IRS did not hear from FFCO “we will assume

you no longer want us to consider your application for exemption and we will close your case.”


42

151. Defendants’ treatment of FFCO directly contradicts the assertion in the IGR

Report and in subsequent IRS statements that the demands for irrelevant information ceased after

the January-February 2012 form letters.

152. The IRS failed to recognize FFCO’s tax-exempt status until September 17, 2012.

153. By that late date, however, FFCO had suffered substantial injury which took

several forms.

154. First, FFCO faced a period of over eighteen months in which it was uncertain

whether it would receive recognition of exempt status, and therefore avoid paying taxes on its

contributions. Second, FFCO had to conduct its activities with the knowledge that it was

receiving some sort of special, in-depth scrutiny from the IRS, and that the srcutiny related

specifically to FFCO’s viewpoint in its political expression and associations. Yet it also knew

that if it tried to opt out of the process by refusing to answer the IRS’s probing questions, it

would not have even the undesirable second-best option of acting as a self-declared organization.

Instead, it would be treated as a taxable entity. From the summer of 2011 to September 2012,

these effects actually did cause FFCO—and would have reasonably caused a person of ordinary

firmness—to curtail both the overall extent of its expressive activities and the amount of time

and resources it spent communicating with the public and with allied groups on controversial

issues, such as Obamacare.

155. Additionally, the delay in receiving recognition of its exempt status inhibited

FFCO in other ways. FFCO’s failure to achieve recognition denied it an important incentive for

supporters and potential supporters to donate to FFCO—the understanding that, like other social

welfare organizations, FFCO would be able to use the full amount of the contribution and would

not have to pay a tax on it—and thus cost FFCO support. Further, the knowledge that FFCO


43

might well be handicapped by the imposition of taxes, and quickly wither on the vine, provided a

disincentive for volunteers and supporters to devote their limited time and energy to FFCO as

opposed to other organizations. Both effects actually did cost FFCO supporters.

156. Additionally, the very act of responding to unnecessary IRS questions about its

expressive activities caused FFCO to divert time and resources away from those activities.

157. Finally, the failure to achieve recognition of exempt status for over two years

burdened FFCO in other ways (as the IRS recognized in the IGR), as state exempt status and the

Postal Service’s reduced rates hinged on achieving IRS recognition.

158. The IRS’s delays and chilling of FFCO’s speech came at a crucial time for FFCO.

The FFCO delay coincided with much of the presidential cycle in 2012. Campaign cycles are

important for FFCO and the other Plaintiffs because they are mass events that focus the

American public on the major policy issues of our day. The 2012 presidential election was

particularly important to FFCO, Plaintiffs, and dissenting groups because it alerted potential

supporters to the ideology and public policy of the incumbent President and Administration.

Additionally, at the state level, many initiative petition and referendum campaigns coincide with

candidate election cycles. Accordingly, for tax-exempt groups (including FFCO and Plaintiffs)

to truly fulfill their expressive and social welfare purposes, it was and is critical to have an

exemption during the windows of heightened public awareness and debate that election cycles

bring.

159. Instead, the IRS saddled dissenting groups with delays during these crucial

windows of opportunity. This delay was especially damaging to groups like FFCO and the other

Plaintiffs. As the IGR points out, such groups often withdrew their applications or may not have

begun conducting the planned social welfare work they had in mind.


44

160. When the purpose of a group is, like FFCO, to inform and educate the public

about the main policy issues of the day, delays through two election cycles can seriously hamper

or even destroy the group’s ability to fully and equally participate in the national policy debate.

As discussed above, this is the injury FFCO suffered. Put simply, the IRS and its employees

used its power to intimidate, coerce, and chill the expressive activity of dissenting groups.

(3) Simi Valley Moorpark Tea Party

161. On July 25, 2011, Simi Valley Moorpark Tea Party (“Simi Valley”) applied for

recognition of exempt status under Section 501(c)(4) of the Internal Revenue Code. The IRS

acknowledged receipt of the application in August 2011. Nine months later, on May 11, 2012,

Simi Valley received a notice stating that “our initial screening of your application indicated that

your case should be assigned to an Exempt Organizations Specialist.” The letter made no

promises about when Simi Valley would hear from the IRS again, merely stating that “we are

experiencing delays…”

162. Not until September 19, 2012, over a year after Simi Valley had applied and long

after the IGR claims that targeting had ceased, did Simi Valley receive from the IRS any further

communication. It was a demand from Specialist Grant Herring, of Group 7824 in Cincinnati,

Ohio, for irrelevant information. (See Exhibit F, attached). Like the letters sent to the other

Plaintiffs, Herring’s letter informed Simi Valley that the requested information would be made

public, but that withdrawal from the process would result in the IRS treating Simi Valley as a

taxable entity.

163. Herring’s letter demanded detailed descriptions of each meeting Simi Valley had

had and copies of materials they had handed out. It also demanded information about the steps


45

that the group would take in the 2012 election cycle, “particularly expenditures to influence the

election of political candidates.”

164. Simi Valley objected to Herring’s requests. However, Simi Valley felt that the

alternative to disclosure—loss of its application fee, loss of the benefit of recognition, and now,

loss of even the benefit of exempt status through treatment as a taxable entity—was even worse.

For this reason, Simi Valley responded to Herring’s requests with a set of confidential and

internal information.

165. Simi Valley’s application was finally granted in November 2012.

166. By that late date, however, Simi Valley had suffered a sixteen-month delay. It

suffered actual and substantial injury of the same types suffered by NorCal and FFCO as set

forth in paragraphs 136-143, above.

(4) Tampa 912 Project, Inc.

167. The Tampa 912 Project (“Tampa 912”) applied for recognition of exempt status

under Section 501(c)(4) of the Internal Revenue Code in February 2010. On August 2, 2010,

Tampa 912 received its first response—a letter from Exempt Organizations Specialist A. Morris,

Group 7880, in Baltimore, Maryland, demanding responses to several questions by August 23,

2010. As with the other Plaintiffs, Morris’ letter stated that Tampa 912’s failure to make these

public disclosures would result not only in the loss of the advance-recognition benefit, but in

treatment by the IRS as a taxable entity. This letter also indicates that IRS’s conduct was not

limited to its Cincinnati office.

168. The letter requested information concerning educational materials presented at all

meetings, and research materials produced or disseminated by the organization “on social,

domestic, economic, defense and foreign policy issues.” (See Exhibit G, attached).


46

169. The letter also demanded the methodology the Tampa 9-12 Project intended to

use in conducting its voter registration drives and demanded copies of the voter registration

materials.

170. Tampa 912 objected to Morris’s requests. However, Tampa 912 felt that the

alternative to disclosure—loss of its application fee, loss of the benefit of recognition, and now,

loss of even the benefit of exempt status through treatment as a taxable entity—was even worse.

For this reason, Tampa 912 responded to Morris’s requests with a set of confidential and internal

information.

171. Tampa 912’s application was finally granted in January 2011.

172. By that late date, however, Tampa 912 had suffered an eleven-month delay. It

suffered actual and substantial injury of the same types suffered by NorCal and FFCO as set

forth in paragraphs 136-143, above.

(5) South Dakota Citizens for Liberty

173. South Dakota Citizens for Liberty, Inc. (“SDCL”) applied for recognition of tax-

exempt status on September 3, 2010. Its tax-exempt status was not granted until almost two

years later – June 20, 2012.

174. On February 1, 2012, almost a year and a half after SDCL filed its application,

Specialist Joseph Herr, of Group 7821 in Cincinnati, Ohio, mailed SDCL an extensive list of

questions almost identical to the request Carly Young sent to NorCal and Stephen Seok sent to

FFCO. The demand for information had a deadline of February 22, 2012, informed SDCL that

its responses would be public, and threatened that SDCL would be treated as a taxable entity if it

failed to respond. See Ex. H hereto.

175. SDCL objected to Herr’s requests and initially did not respond.


47

176. However, on March 16, 2012, Lois Lerner, Director of Exempt Organizations,

wrote to SDCL enclosing Herr’s previous demands. Lerner asserted that “all the facts and

circumstances of [SDCL] must be considered” in deciding whether SDCL was “primarily

engaged in the promotion of social welfare,” asserting a position that nothing was outside of the

scope of permissible inquiry for the IRS. Lerner directed SDCL to make its response to Herr in

Ohio.

177. After receiving Lerner’s instruction to communicate its confidential information

to Herr in Ohio, SDCL felt that the alternative to disclosure—loss of its application fee, loss of

the benefit of recognition, and now, loss of even the benefit of exempt status through treatment

as a taxable entity—was even worse. For this reason, SDCL responded to Lerner’s and Herr’s

requests with a set of confidential and internal information.

178. SDCL ultimately received two recognition letters, one dated June 20, 2012,

from Lois Lerner, and one dated July 6, 2012, from Holly Paz. SDCL’s application had taken

almost two years. By the summer of 2012, however, SDCL had suffered actual and substantial

injury of the same types suffered by NorCal and FFCO as set forth in paragraphs 136-143,

above.

(6) Texas Patriots Tea Party

179. Texas Patriots Tea Party (“TPTP”) applied for recognition of tax-exempt status

under Section 501(c)(4) of the Internal Revenue Code on or about June 19, 2012.

180. On or about January 7, 2013, seven months later, TPTP received a demand from

Janine Estes, Group 7829 in Cincinnati, Ohio, for additional and unnecessary information,

including all information TPTP had published or distributed and all materials for TPTP’s

workshops. See Ex. I hereto. Like the letters to the other Plaintiffs, Estes’ demand letter stated


48

that TPTP’s response would be public, and that TPTP would be treated as a taxable entity if it

failed to respond.

181. TPTP objected to Estes’ requests and did not wish to respond. However, TPTP

felt that the alternative to disclosure—loss of its application fee, loss of the benefit of

recognition, and now, loss of even the benefit of exempt status through treatment as a taxable

entity—was even worse. For this reason, TPTP responded to Estes’ requests with a set of

confidential and internal information.

182. On February 12, 2013, Estes followed up with additional requests. Again, TPTP

objected and did not wish to respond, but again, made a response because it still felt that the

alternative to public disclosure was even worse than disclosure.

183. On May 14, 2013, TPTP wrote Estes and demanded action on its application.

Estes made no response.

184. On June 26, 2013, Estes wrote TPTP again, sending Letter 5228, the IRS’s

“Optional Expedited Process for Certain Exemption Applications.” Estes promised that the IRS

would approve TPTP’s long-delayed application if TPTP would promise under oath that its

social welfare and political activities met certain thresholds in the past, and would meet those

same thresholds in the future. However, the definitions of “political activities,” while more

specific than then-current IRS guidance, encompassed a much broader range of conduct than IRS

guidance had encompassed to date. Finally, the letter informed TPTP that its compliance with

these new, stricter guidelines would be subject to examination at any time.

185. Estes and the IRS did not send similar demands to existing organizations that had

already qualified under Section 501(c)(4), or to other organizations that had applied but had not


49

been delayed as part of the targeting of conservative, libertarian, “tea party,” and dissenting

groups.

186. TPTP was once again faced with the choice of accepting more stringent

limitations on its expressive activity than other 501(c)(4) organizations (by accepting Estes’

proposed deal), or by accepting a different set of limitations on its expressive activity (identical

to the limitations experienced by NorCal, FFCO, and every other applicant that experienced

delay, as set forth in paragraphs 136-143) by continuing to operate under uncertainty and delay

while the IRS kept TPTP’s application (by rejecting Estes’ deal). Faced with this Hobson’s

choice, TPTP decided not to accept Estes’ proposed deal.

187. Accordingly, TPTP continues to wait for IRS action on its 2012 application. In

the meantime, the delay is causing it to suffer injury of the same kind suffered by NorCal and

FFCO, as set forth in paragraphs 136-143, above.

(7) Americans Against Oppressive Laws, Inc.

188. On October 7, 2011, Americans Against Oppressive Laws, Inc. (“AAOL”) filed

its application for recognition of exempt status under Section 501(c)(4) of the Internal Revenue

Code. It is still pending.

189. On May 22, 2013, over 18 months after AAOL first submitted its application,

Specialist Faye Ng, Group 7826, responded with a request for more information. See Ex. J

hereto. Ng requested irrelevant information, including information relating to a trademark search

it had conducted. Like the other letters received by Plaintiffs, Ng’s letter informed AAOL that

its responses would be public, but that a failure to respond would result in the IRS treating

AAOL as a taxable entity. Despite the IRS’s 18-month delay, Ng demanded a response in just 3

weeks.


50

190. AAOL objected to Ng’s requests and did not wish to respond. However, AAOL

felt that the alternative to disclosure—loss of its application fee, loss of the benefit of

recognition, and now, loss of even the benefit of exempt status through treatment as a taxable

entity—was even worse. For this reason, AAOL responded to Ng’s requests with a set of

confidential and internal information.

191. In its response, AAOL told Ng and the IRS about the effect its delay had had on

the organization: “I’m sorry but because of the delay by the IRS in obtaining the tax exempt

approval, I was forced to shut the web site down and therefore no longer have the educational

content of the site. I cannot financially take any chances to set up a web site again until this

approval is granted.” In response to another question, AAOL stated: “I have attached a copy of

the only brochure that we ever produced. I was not able to continue with the printing for future

printings because I did not have the tax-exempt approval from the IRS that I applied for nearly 2

years ago.” Further, under penalties of perjury, AAOL disclaimed any effort to “get involved in

political parties and / or promoting politicians…”

192. Nonetheless, the IRS and Ng have failed to grant approval. In the interim, due to

the delay in receiving its recognition, AAOL has suffered the same injuries and for the same

reasons as those suffered by NorCal and FFCO, as set forth in paragraphs 136-143, above.

193. Additionally, AAOL received an offer from Ng for “Optional Expedited

Approval” that was identical to the letter received by TPTP, as set forth above. AAOL was

faced with the same choice as TPTP in deciding whether to accept the restrictions on expressive

activity in Ng’s letter, or to submit to continued delay and the attendant injuries of waiting for

the IRS to finish processing his September 2011 application. Like TPTP, AAOL faced this

Hobson’s choice by deciding not to accept the restrictions in Ng’s “optional” approval process.


51

194. Accordingly, AAOL continues to wait for IRS action on its 2012 application. In

the meantime, the delay is causing it to suffer injury of the same kind suffered by NorCal and

FFCO, as set forth in paragraphs 136-143, above.

(8) San Angelo Tea Party

195. The San Angelo Tea Party applied for recognition of tax-exempt status on March

16, 2010. On September 29, 2010, it received its first demand for excessive disclosure from

Exempt Organizations Specialist Elizabeth Hofacre. (See Exhibit K, attached).

196. Hofacre’s letter was almost identical to the first demand she had made to NorCal.

The letter demanded such things as its Facebook pages, resumes of its board members, the topics

covered at meetings for the past year, copies of all literature distributed at the meetings, and all

contracts with third parties.

197. San Angelo objected to providing Hofacre responsive information about its

discussions at its internal meetings and deliberations, its board members’ backgrounds, or its

confidential political associations with other like-minded groups. The alternative was a loss of

its application (“user”) fee and the denial of recognition of tax-exempt status. This, in turn,

would have required it to pay taxes on contributions and other income that would otherwise have

been used for its expressive social welfare purposes. As a result of Hofacre’s demand, San

Angelo sharply curtailed its operations.

198. Next, in January 2012, the San Angelo Tea Party received from Grant Herring a

form demand for information similar to the second request Carly Young sent to NorCal that

same month. It also received a follow-up phone call from IRS agent Grant Herring. Herring’s

demand, like the other long-form letters received by Plaintiffs in January and February 2012,

stated that San Angelo’s responses would be public, but that a failure to respond would mean


52

that San Angelo would be treated as a taxable entity. Faced with this Hobson’s choice between

burdens on its expression through a burdensome and delayed application process, and burdens on

its expression through an inability to gain recognition of its tax status, the San Angelo Tea Party

withdrew its application. (See Exhibit L, attached).

(9) Prescott Tea Party

199. The Prescott Tea Party applied for recognition of tax-exempt status under Section

501(c)(3) of the Internal Revenue Code in November 2009. On April 14, 2010, it received a

demand for additional information from Carter Hull, an attorney in the Washington, D.C. Office

of the IRS. Hull demanded information about all of the group’s political activities, including its

rallies, emails, protests, and any other steps about “how you encourage members to voice their

opinions.” He also insisted on copies of their email blasts, video presentations, and mailings.

200. Prescott objected to providing Hull with responsive information about its

confidential and internal political discussions and associations. The alternative was a loss of its

application (“user”) fee and the denial of recognition of tax-exempt status. This, in turn, would

have required it to pay taxes on contributions and other income that would otherwise have been

used for its expressive and educational purposes. As a result of Hull’s demand, Prescott weighed

the severity of the injury to its expressive activity under either choice presented—to respond or

to withdraw. Ultimately, Prescott decided to withdraw its application.

(10) Texas Public Policy Foundation

201. A particularly egregious violation of First Amendment rights has been suffered by

the Texas Public Policy Foundation (“TPPF”). In or around the spring of 2012, the IRS illegally

released TPPF’s 990 form with the donor information un-redacted. Subsequently, this highly


53

confidential information was widely circulated in the media. Said release was illegal,

intentional, malicious, and politically motivated.

202. Upon information and belief, other dissenting groups’ confidential information

has been wrongfully disseminated both within and outside the government.

203. Now, donors and members of TPPF receive solicitations and other harassing

contacts because private entities have accessed and used TPPF’s donor list. This discourages

donations. Further, the disclosure caused TPPF to expend good will and devote substantial staff

time to remedying the disclosure and assuring donors that there will be no further harm from

associating with TPPF, when that good will and time could instead have been used to promote

political association and TPPF’s’ political speech.

COUNT ONE: THE PRIVACY ACT

204. Plaintiffs incorporate the allegations in Paragraphs 1-203 as though fully set forth

herein.

205. 5 U.S.C. § 552a, known as the Privacy Act, grants all citizens certain protections

regarding private information. The Defendants violated the Privacy Act in several particulars.

206. Section 552a(e)(1) requires that the agency “maintain in its records only such

information about an individual as is relevant and necessary to accomplish a purpose of the

agency required to be accomplished by statute or by Executive Order of the President”.

207. The Defendants violated this provision by requiring that Plaintiffs produce

information about their members’ free expression and association that was neither relevant nor

necessary to any lawful purpose. Much of the information sought from Plaintiffs and similarly

situated groups was not relevant to any lawful purpose of the IRS.


54

208. The IRS’s demand for the information described in ¶ 131, above, violates §

552a(e)(1) and § 552a(e)(3).

209. The provisions of § 552a(e)(3)(A) were violated because the IRS’s request for

information did not specify the authority which authorized the solicitation of the information and

did not specify whether disclosure of the information was mandatory or voluntary. In this case it

could only be voluntary since it was not authorized by law, but the IRS did not so notify the

recipients.

210. The provisions of § 552a(e)(3)(B) were violated because the IRS did not notify

the recipients of the principal purpose for which the information was to be used – in this case,

intimidation and delay based on a group’s viewpoint.

211. The provisions of § 552a(e)(3)(C) were violated because recipients were not made

aware of the routine uses that were to be made of the information. They were not made aware of

it because no lawful routine use was contemplated.

212. The provisions of § 552a(e)(3)(D) were violated because no notice was provided

to recipients of the effects of not providing the information. The IRS could not tell recipients

that it was incapable of imposing any penalty upon them for not responding since the requests

themselves were illegal.

213. The provisions of § 552a(e)(4) were violated in that the IRS did not publish in the

Federal Register any of the required information regarding this system of records which it was

illegally soliciting and maintaining.

214. The provisions of § 552a(e)(5) were violated in that the IRS made no effort to

maintain these records with “such accuracy, relevance, timeliness, and completeness as is

reasonably necessary to ensure fairness to the individual in the determination.” The very


55

purpose for which these records were collected was to ensure unfairness and delay to dissenting

groups.

215. The provisions of § 552a(e)(7) were violated in that the law requires that the IRS

“maintain no record describing how any individual exercises rights guaranteed by the First

Amendment unless expressly authorized by statute or by the individual about whom the record is

maintained…” The information demanded regarding the First Amendment activities of

Plaintiffs, their associated members, and similar groups, as outlined in ¶ 131, above, illustrate a

clear and intentional violation of this section.

216. The provisions of § 552a(e)(10) were violated in that Defendants did not establish

safe guards to ensure the security and confidentiality of the records and prevent embarrassment,

inconvenience, or unfairness to the targeted groups. On information and belief, Defendants have

improperly disclosed information obtained from dissenting groups to media sources and groups

with a political agenda consistent with Defendants’ agenda.

217. The Privacy Act in § 552a(g)(1) provides civil remedies for individuals who have

been injured by activities such as the IRS has undertaken. Plaintiffs assert causes of action under

subsection (d) because the IRS has failed to comply with several provisions of the Privacy Act in

such a way as to have an adverse effect on Plaintiffs and their members.

218. Plaintiffs’ standing is two-pronged. First, Plaintiffs sue on their own behalf as

expressive associations of individuals that have assumed the corporate form and have sought

exemptions to protect the organizations from paying taxes on the resources the individuals

contribute to the groups for their expressive purposes.

219. Second, Plaintiffs assert associational standing on behalf of all their members.

Plaintiffs have associational standing on the following basis.


56

a. First, Plaintiffs’ members have standing in their own right. They have been

injured because the IRS unnecessarily requested, retained, and shared

information about their individual expressive activities and beliefs. For

example, the IRS asked for the names of speakers at events (not excluding

members), their credentials, and the amount of time members spent at events

(or would spend at upcoming events). See ¶ 131.a, supra. The IRS asked for

“the names of… members and the amount of time each person would spend

on [events].” ¶ 131.g, supra. It asked for “any recordings of events,” (¶

131.h, supra), which would indiscriminately disclose members’ political

speech. It asked for the “names” of persons—which could include

members—who would distribute materials from other organizations (¶ 131.i);

the “names of members” who conducted voter education or registration drives

(¶ 131.j); a list of “employees” or “volunteers” shared with other

organizations (¶ 131.m); information about the board of directors and its

activities, and the names of any members who sought to run for public office

(¶ 131.o); copies of membership application forms, descriptions of the roles

and duties of members, and copies of website areas available only to members

(¶ 131.p); the names of donors, contributors, and grantors (¶131.r); and

detailed information regarding the topics discussed at meetings and written

communications handed out at meetings (see generally ¶¶ 131-200).

Accordingly, the IRS’s demands were targeted to reveal specific facts about

the political speech, beliefs, and activities of the individuals who banded

together to form each Plaintiff-entity, and who therefore made up each


57

Plaintiff’s membership. Individuals require breathing space to develop, test,

share, and act upon political beliefs by disclosing them to the audience, in the

forum, and in the circumstances of their choosing—or of not disclosing them

at all. The IRS’s disclosure demands violated this core principle by asking

Plaintiff’s members to report their own political beliefs and activities, and the

political beliefs and activities of their associates. The IRS’s demands

therefore proximately caused individuals to suffer damages as set forth in ¶

220, below.

b. Second, the individual privacy interests Plaintiffs seek to protect are not only

germane to their organizations’ purposes, they are and fundamental to

Plaintiffs’ very existence. Each Plaintiff was formed to advance social

welfare and the education of society. Plaintiffs perform this function through

coordinating their individual members’ expression. But prior to expression,

the individuals comprising each Plaintiff must have privacy. Unless Plaintiffs

are first able to provide their individual members the privacy and breathing

space necessary to conceive, form, and test ideas, Plaintiffs cannot coordinate

their individual members’ expression of those jointly conceived, formed, and

tested ideas. Therefore, by impairing individual members’ interest in the

privacy of their association, the IRS impaired Plaintiffs themselves.

c. Third, neither the claim Plaintiffs assert nor the damages they request require

the participation of Plaintiffs’ individual members in the lawsuit. The IRS

targeted the privacy interests and expression of individual members by

making blanket disclosure demands to the individuals’ associations, the


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Plaintiffs. Then, at the request of the IRS, Plaintiffs provided information on

their individual members. The costs of Plaintiffs’ member-specific responses

were equally borne by all members whose information was disclosed.

Additionally, the Privacy Act provides that for low-dollar claims, a uniform

minimum of $1,000 per member is to be assessed as damages. For all of these

reasons, the participation of individual members of the Plaintiffs is

unnecessary in the litigation, and the government should be able to litigate the

case by dealing with the Plaintiffs, the parties it tried to use to harvest the

individuals’ private information.

220. Wherefore, pursuant to § 552a(g)(4) Plaintiffs state that they and their members

have been damaged as a direct and proximate cause of Defendants’ actions by:

• The collection of irrelevant and unnecessary information on Plaintiffs, their officers,

members, donors, speakers, and protected First Amendment activities.

• The invasion of the privacy of Plaintiffs and the above-referenced individuals.

• The harassment, burden, and expense of complying with demands for information

that were not lawful.

• The loss of donations, membership fees, and grants due to the Defendants’ invasion

of the privacy of Plaintiffs and all people associated with them.

• The cost of bringing this action together with reasonable attorney’s fees.

COUNT TWO: VIOLATIONS OF THE U.S. CONSTITUTION


herein.

(a) Bivens Claim


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222. The United States Supreme Court ruled in Bivens (see ¶ 4, supra) that federal

officers are subject to personal liability for any violation of constitutional rights of which a

reasonable officer would be aware. Bivens is available where there is a constitutional violation

and the victim has no other remedy. Other than the damages for the privacy intrusion pled

above, Plaintiffs and similarly situated groups and individuals have no statutory remedy for the

systematic targeting of dissenting groups based upon the content of their beliefs and expression.

This is a constitutional tort and a clear violation of the First and Fifth Amendments.

223. The First Amendment of the U.S. Constitution prohibits the government from

retaliating or discriminating against groups in any fashion based upon their political viewpoints.

Relatedly, the government cannot extend benefits to groups or refrain from taking acts against

groups based upon unconstitutional conditions.

224. Each Plaintiff, and the class of Plaintiffs, formed organizations in order to

promote social welfare (under Section 501(c)(4)) or educate the public on matters of public

concern (under Section 501(c)(3)). Each Plaintiff, and the class of Plaintiffs, engaged in and

desired to engage in expressive activity by communicating to their members and the general

public their dissatisfaction with policies that they believe to be deeply detrimental to American

society and to the Republic. This communication involved expression of dissatisfaction with

policies of the current Administration. All of the Plaintiffs engaged in expressive activity that

evidenced a viewpoint hostile to that of the current Administration.

225. Tax-exempt status is a government benefit for the Plaintiffs or, alternatively, is

the government’s forbearance of collecting taxes from, and thereby penalizing, Plaintiffs and

other groups formed by individuals for social welfare or educational purposes that Congress has

decided should not be taxable activities.


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226. Additionally, IRS recognition of tax-exempt status is a thing of value for

Plaintiffs for the reasons set forth in Paragraphs 41-44 above.

227. The decision of certain IRS officers to target specific applicants for tax

exemption, like and including Plaintiffs, for (1) delayed and extended processing; and (2)

intrusive and public disclosure of their confidential political speech and association, is an adverse

action that injured Plaintiffs in the specific manner set forth in Paragraphs 136-143; 153-160;

164-166; 170-172; 177-178; 186-187; 192-194; 197-198; 199-200; and 201-203.

228. This adverse action and injury is objectively likely to chill a person of ordinary

firmness from engaging in the expressive activity in which the Plaintiffs were, in fact, engaged.

This is so because (from among other reasons) delays in receiving exempt status are likely to

cause supporters to refrain from contributing time or money to an entity that might be subject to

crippling and disadvantageous taxation. Time and money is better spent on organizations that

have an exemption and do not suffer this severe handicap. Additionally, supporters who hold

views that are unpopular or are inimical to the interests of the Administration in control of the

government and IRS are likely to avoid associating with organizations which will be required to

make public disclosure of their shared views and association.

229. As set forth above, this result in fact occurred, inhibiting the activity of some

Plaintiffs, while causing other Plaintiffs to give up their attempt to receive IRS recognition of

their tax-exempt status. The IRS’s own IGR report explains that delaying recognition of tax-

exempt status of Plaintiffs and other similarly situated groups had the effect of impairing their

members’ expressive associational effectiveness in the 2010 and 2012 election cycles.

230. Further, as set forth above, the IRS officials’ delay and burdensome requests were

motivated at least in part by Plaintiffs’ expressive activity and expressed anti-Administration


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viewpoints. IRS workers originally decided to begin tracking “tea party” groups in 2010 because

of the intense media attention their anti-administration speech was generating. At least one

Defendant, Stephen Seok, believed that “tea party” applicants were fundamentally different from

other social welfare organizations because of their ideology. Officials used a BOLO list to select

Plaintiffs and like organizations for delay and burdensome requests based on their names, using

tags frequently employed by anti-Administration groups, such as “Tea Party,” “912,” or other

criteria, to single out Plaintiffs for delay and intrusive, unnecessary questioning. The BOLO list

also relied on viewpoints expressed by c(4) applicants, such as the need to reduce the size of

government. Further, IRS officials used the term “Tea Party”—an explicit reference to one

political viewpoint—to describe the body of cases that would be delayed for additional scrutiny.

Later, the IRS used information in Plaintiffs’ applications and on their websites to single out

anti-Administration groups, like and including Plaintiffs, for delayed and intrusive review.

231. The IRS has admitted that even if there is a lack of clarity in the provisions of the

tax code relating to the line between social welfare and political activity, and even if this lack of

clarity played some role in the delays experienced by Plaintiffs or like organizations, “The lack

of clarity did not cause the inappropriate screening and poor managerial oversight noted in the

TIGTA report, nor does it excuse them.” Werfel Report, 28.

232. Dissenting groups like Plaintiffs and their members were denied equal protection

of the law. Upon information and belief, applications from favored groups for tax-exempt status

were processed far more swiftly than dissenting groups. The benefits of tax-exempt status were

thus conferred based on political viewpoint -- not equally, as the law requires. Likewise, the

political expression of dissenting groups as a class was greatly burdened by IRS agents,


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individual Defendants, and officers John Does 1-100, while favored groups (including those

using the title “progressive” in their names) were afforded full privileges of the law.

233. Plaintiffs, their members, and similarly situated dissenting groups were likewise

denied Due Process of the law by the IRS agents’ actions. The constitutional protections of

dissenting groups and the limitations imposed upon the IRS by both the Constitution and statutes

were systematically ignored to deprive dissenting groups and their members of their

constitutional rights.

234. Plaintiffs assert standing on their own behalf, and associational standing on behalf

of their members, on the same basis set forth in ¶¶ 218-219 of this Complaint.

235. Plaintiffs name John Does 1-100 as defendants because the government has not

disclosed all the identities of the specific agents or officers in the Determinations Unit or the

other subdivisions of the IRS or the United States listed in ¶¶ 18-20 of this Complaint. They are

referenced here by their actions and by the unconstitutional intent and effects of their actions,

and Plaintiffs will plead the identities of specific other agents and officers as it learns them in

discovery.

236. The following IRS Agents committed a constitutional tort by selecting Plaintiffs

and like groups for further development and delay, and subjecting them to that delay because

their names indicated that they held anti-Administration views. Each individual Defendant took

actions, as set forth above more fully at Paragraphs 70-120 and 127-203.

a. Elizabeth Hofacre: searched for and pulled organization applications using

viewpoint-based criteria, and sent intrusive development letters to at least one

organization;


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b. Steven F. Bowling: managed team that developed and used viewpoint-based

criteria to identify applicants for “development”;

c. Bonnie Esrig: worked on team that developed and used viewpoint-based

criteria to identify applicants for “development;”

d. Brenda Melahn: worked on team that developed and used viewpoint-based

criteria to identify applicants for “development;”

e. Stephen Seok: sent intrusive development letters to at least one organization;

f. Grant Herring: sent intrusive development letters to at least one organization;

g. Carly Young: sent intrusive development letters to at least one organization;

h. Joseph Herr: sent intrusive development letters to at least one organization;

i. Mitchell Steele: sent intrusive development letters to at least one organization;

j. Cindy Thomas: approved and ratified targeting, and failed to stop targeting,

delays, and intrusive questions even after learning about them;

k. Holly Paz: approved and ratified targeting, and failed to stop targeting, delays,

and intrusive questions even after learning about them, failed to publish

targeting guidelines, and failed to notify Taxpayer Advocate of targeting

scheme, questions, and delays;

l. Lois Lerner: sent development letter to at least one organization requesting

that earlier letter be answered; approved and ratified targeting, failed to stop

targeting, delays, and intrusive questions even after learning about them,

failed to publish targeting guidelines, and failed to notify Taxpayer Advocate

of targeting scheme, questions, and delays;


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m. Sarah Hall Ingram: approved and ratified targeting, failed to stop targeting,

delays, and intrusive questions even after learning about them, failed to

publish targeting guidelines, and failed to notify Taxpayer Advocate of

targeting scheme, questions, and delays;

n. Joseph Grant: approved and ratified targeting, failed to stop targeting, delays,

and intrusive questions even after learning about them, failed to publish

targeting guidelines, and failed to notify Taxpayer Advocate of targeting

scheme, questions, and delays;

o. William Wilkins: approved and ratified targeting, failed to stop targeting,

delays, and intrusive questions even after learning about them, failed to

publish targeting guidelines, and failed to notify Taxpayer Advocate of

targeting scheme, questions, and delays;

p. Steven Miller: failed to stop targeting, delays, and intrusive questions even

after learning about them, failed to publish targeting guidelines, and failed to

notify Taxpayer Advocate of targeting scheme, questions, and delays;

q. Douglas Shulman: failed to stop targeting, delays, and intrusive questions

even after learning about them, failed to publish targeting guidelines, and

failed to notify Taxpayer Advocate of targeting scheme, questions, and delays.

237. Additionally, each of the above-described actions violated clearly established law.

It is well-established that an officer of the federal government cannot act against a person in

retaliation for the exercise of First Amendment rights, or attach unconstitutional conditions to the

receipt of government benefits. It is well-established that an officer of the federal government

cannot act to deny a person equal protection under the law or due process of law. Further, the


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IRS has admitted that the conduct of its employees was at a minimum inappropriate and in clear

violation of the IRS Mission Statement, and the IRS Taxpayer Advocate has stated that the

conduct was so wrongful that damages should be paid to affected groups. Accordingly, a

reasonable official in the position of each Defendant would have known that the contours of the

right against retaliation for First Amendment expression and the rights of equal protection and

due process fairly encompassed the targeting of applicants, based on political viewpoint, for

lengthy delays and intrusive, unnecessary questioning.

238. In sum, because of their political viewpoints, dissenting groups were subjected to

harassment, intimidation, delay, discrimination, expense, intrusiveness, and embarrassment all as

a part of a scheme by IRS agents, named Defendants, and officers John Does 1-100 to suppress

their political activity and punish their political views.

239. Plaintiffs and their members experienced damages, including loss of

constitutional rights, interference with their liberty, delay and denial of government benefits,

unequal treatment, loss of donations, increased tax burdens including state and local, loss of

postal privileges, the expense of responding to the harassing tactics of the IRS, court costs, and

attorneys’ fees.

240. The actions of the named federal agents and of the individual and Doe Defendants

were willful, malicious, reckless, and intended to do harm to Plaintiffs, their members, and

similar groups. Accordingly, Plaintiffs are entitled to damages from the individual and Doe

Defendants.

(b) Claim Against the IRS and the United States

241. Additionally, for the reasons discussed above, the IRS and the United States

committed the same constitutional violations as the Doe Defendants. This conduct has caused


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irreparable harm to Plaintiffs, and there is no other adequate remedy at law. This Court may

grant declaratory and injunctive relief against the IRS and the United States, pursuant to 28

U.S.C. §§ 2201 and 2202, declaring that the Defendants’ discriminatory conduct is unlawful and

enjoining them from using tax exemption applicants’ political viewpoints to target them and

subject them to delay and unnecessary requests for information.

COUNT THREE: RETURN INFORMATION


herein.

243. “Return information shall be confidential,” and with limited exceptions, cannot be

disclosed or inspected by employees of the federal government. 26 U.S.C. § 6103.

244. Return information includes, among other things:

(A) a taxpayer’s identity, the nature, source, or amount of his income, payments, receipts,

deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld,

deficiencies, overassessments, or tax payments, whether the taxpayer’s return was, is

being, or will be examined or subject to other investigation or processing, or any other

data, received by, recorded by, prepared by, furnished to, or collected by the Secretary

with respect to a return or with respect to the determination of the existence, or possible

existence, of liability (or the amount thereof) of any person under this title for any tax,

penalty, interest, fine, forfeiture, or other imposition, or offense,

(B) any part of any written determination or any background file document relating to such

written determination (as such terms are defined in section 6110(b) which is not open to

public inspection under section 6110.

26 U.S.C. § 6103(b)(2).

245. All information furnished by Plaintiffs in response to the IRS’s requests was

return information pursuant to Section 6103.

246. As discussed above, the Defendants demanded information from Plaintiffs that

was not necessary to determine their tax-exempt status. Defendants made these demands


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knowing that they were unnecessary for determining Plaintiffs’ status, and knowing that

Plaintiffs had been selected for special scrutiny and delay based on their political viewpoint.

247. Defendants inspected Plaintiffs’ information and shared it amongst themselves

even though they knew it was unnecessary for making a decision on Plaintiffs’ tax-exempt

status, and even though they knew it had been sought based on Plaintiffs’ political viewpoint.

Accordingly, the inspection, review, and disclosure was objectively unnecessary, and

subjectively not undertaken, “for tax administration purposes” under 26 U.S.C. § 6013(h).

248. In one case, Defendants released a Plaintiff’s return information—the list of

donors on the Form 990 of the Texas Public Policy Foundation—to the public at large. See

Paragraph 201-203, supra.

249. The United States has waived sovereign immunity and has provided taxpayers a

cause of action for damages for knowing or negligent unauthorized inspection of tax return

information in violation of Section 6103. 26 U.S.C. § 7431.

250. Each inspection and disclosure was made at least with gross negligence, or was

made willfully.

251. The inspections and disclosures resulted from viewpoint discrimination and were

undertaken even though the IRS knew the information was not necessary for determining

Plaintiffs’ status, and at least for these reasons, among others, the inspections and disclosures did

not result from good faith, but erroneous interpretations of Section 6103.

252. Plaintiffs did not request the IRS to make the inspections or disclosures.

253. Accordingly, each inspection or disclosure violates Section 6103 and entitles

those Plaintiffs who submitted information in response to the IRS’s demands, as set forth under

Paragraphs 64-84, to damages under Section 7431 of the Internal Revenue Code.


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COUNT FOUR: CLASS ACTION


herein.

255. Plaintiffs ask this Court to certify a class action of all dissenting groups targeted

for additional scrutiny by the IRS from January 20, 2009 through July 15, 2013.

256. The class definition would include all groups who applied for tax-exempt status

and were targeted for special scrutiny by to the specialists in the IRS Determinations Unit in

Cincinnati, Ohio or any other IRS office or agents. The class would include all members whose

applications were delayed and/or additional information sought during this time period, based

upon their political viewpoints, including but not limited to the criteria utilized by the

Determinations Unit in what they refer to as “the tea party cases.” This criteria would include

any of the following:

• groups identified as “Tea Party,” “Patriots,” “912 Project”;

• applications involving political sounding names, such as “We the People” or “Take

Back the Country”;

• groups whose issues included government spending, government debt, or taxes;

• groups dedicated to education of the public by advocacy/lobbying to “make America

a better place to live”

• groups who had a statement in the case file criticizing “how the country is being run”;

and

• group who otherwise dissented from Administration policy and were subjected to

additional scrutiny for their viewpoint.

257. This case meets all of the prerequisites of Rule 23(a).


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258. This class is so numerous that joinder of all members is impracticable. The exact

number of all class members can only be determined through discovery. The IGR identifies 296

groups singled out for special treatment based on their political views. Media reports suggest the

number to be 500 or more.

259. There are questions of law or fact common to the class. All of the members of the

class suffered the same sorts of constitutional violations articulated in Count Two. All were

subjected to harassment, discrimination, special scrutiny, and interference with their

constitutional rights because of their presumed political views. The same constitutional

standards apply to each member of the class and common questions of law apply. Many

members of the class were subjected to demands of additional information that violate the

Privacy Act as articulated in Count One, and provided return information which was then

inspected, as articulated in Count Three. This class was already defined by the IRS based on

commonality of its presumed political views and the decision that the IRS would discriminate in

the same manner across the entire class. In other words, the IRS through its own criteria defined

the class and chose to discriminate on a class-wide basis against everyone who met the class

definition.

260. The common questions of law and fact include:

a. Was there a scheme by the IRS and its employees to target dissenting

groups based upon their political viewpoint?

b. How did the scheme originate?

c. Who ordered it?

d. Who was involved?

e. When did the scheme begin and has it ended?


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f. May the IRS award or deny benefits based upon political viewpoint?

g. Did the IRS violate the Privacy Act in its treatment of dissenting groups?

h. Was the IRS’ demand for excessive information wrongful and tortious?

i. Were the constitutional rights of dissenting groups violated by defendants

tactics of extra scrutiny, intimidation, harassment, invasion of privacy,

discriminatory audits, disclosure of private information, and delays?

j. How many groups were involved in the targeting? To date, the IRS has

given various answers. The IRS’ count does not agree with the IGR

account, nor with independent accounts.

k. How was the targeting specifically conducted and concealed?

l. Are the IRS’ standards for evaluating the political activity of organizations

appropriate, legal, and constitutional?

261. Plaintiffs’ claims are typical of the claims of the class. Plaintiffs were singled out

and treated to similar discrimination and harassment by the IRS as the other members of the class

as articulated above. The claims in this case are particularly typical because the IRS

intentionally chose to treat groups it considered critical of the government, with a dissenting

point of view, in the same or similar discriminatory fashion.

262. Plaintiffs will fairly and adequately protect the interests of the class. Plaintiffs’

interests are the same as other members of the class in holding the IRS responsible for its illegal

activity, ensuring that it never happens again, and being fairly compensated for the results of this

illegal activity.

263. The provisions of Rule 23(b)(2) apply because the IRS has acted on grounds that

apply generally to the class such that final injunctive relief would be appropriate for the class as


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a whole. The IGR recognizes that more steps need to be taken to ensure that this type of

discrimination does not occur again within the IRS. The class will seek injunctive relief from

this Court, including but not limited to:

• A declaration that the IRS may not discriminate in any of its activities based upon the

political viewpoint of the applicant or taxpayer;

• That the IRS must not take any action or enforce any rule that interferes with the First

Amendment rights and activity of any citizen;

• That the IRS must destroy all records obtained or maintained illegally and in violation

of the Privacy Act or any provision of the U.S. Constitution relating to class members

or any donors, officers, members, or volunteers of the class members;

• That the IRS establish clear training and guidelines for all employees to prevent this

sort of invasion of privacy and discriminatory activity from occurring again in the

future.

264. The provisions of Rule 23(b)(3) are met in that questions of law or fact common

to class members predominate over individual questions and class action is superior to other

available methods for fairly and efficiently adjudicating the controversy.

265. The common questions of law and fact are overwhelming as described above and

incorporated here by reference.

266. Individual questions are minimal. For example, some groups may not have

received additional requests for information. Therefore, they may have a reduced or no claim

under the Privacy Act. To the extent additional information requests created varying burdens on

individuals, that can be resolved through individual damage criteria or creation of subclasses.


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267. All groups suffered the same violations of constitutional rights. The IRS selected

the class members based on the presumed content of their views and expressive activity – and

then treated them in an illegal fashion. All class members suffered this same harm and were

damaged from the same course of conduct.

268. A single action adjudicating the legal rights of dissenting groups would be more

efficient than individual litigation. As noted, class membership will likely run into the hundreds,

greatly inconveniencing the judicial system, and requiring needless duplication. A single unified

discovery process would greatly expedite this litigation and prevent needless, repetitive

document productions and depositions from Defendants.

269. The efficiency of the unified discovery process and the prohibitive expense and

complexity that would attend individual cases are illustrated by the following:

a. The IRS estimates that information relating to the events in the IGR total over

646 gigabytes. That is more than 64 million pages of documents.

b. Washington officials claim the activity started in Cincinnati. Cincinnati

employees say it began in Washington. Perhaps dozens of depositions will

need to be taken to sort out the facts. It would be an inefficient use of judicial

time and resources to engage in this process multiple times.

c. There is a maze of bureaucracy, documents, emails, policies, and conflicting

stories in this case. A unified process is best to sort it out.

270. Likewise, a single trial court ruling upon the constitutional, Privacy Act, and

return information claims would greatly improve judicial efficiency.

271. All of these factors illustrate the benefits of concentrated litigation in a single

forum.


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272. No other class action has been filed. In the weeks after the instant action was

filed, only two other cases have been filed on behalf of certain groups related to these facts.

Other than those two, no additional cases had been filed as of August 5, 2013. Both of those

cases are pending in Washington, D.C. -- which is not likely to be the most convenient forum.

Those plaintiffs can choose to participate in the class or opt out. Thus, no other litigants’

activities should be impaired.

WHEREFORE, Plaintiffs pray that this Court:

• Enter an Order certifying this case as a class action and appointing their lawyers as

class counsel;

• Award Plaintiffs actual damages pursuant to 5 U.S.C. § 552a(g)(4) for violation of the

Privacy Act, including but not limited to, costs of complying with additional requests

for information, loss of donors and membership fees for the delay, uncertainty, and

intrusiveness, but in any event no less than $1,000 for each individual member, plus

the cost of litigation, and reasonable attorney’s fees.

• Award Plaintiffs damages for violation of their constitutional rights, including

damages for loss of benefit of tax exempt status, cost of complying with burdensome

requests, loss of donors and membership fees, damages for impairment of

constitutionally protected rights, punitive damages, litigation costs, and reasonable

attorney’s fees.

• Award Plaintiffs declaratory and injunctive relief, pursuant to 28 U.S.C. §§ 2201 and

2202, as set forth above.

• Award Plaintiffs damages pursuant to 26 U.S.C. §7431(c) for each inspection or

disclosure of their return information, including $1,000 for each instance in which


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actual damages are below this amount, or actual and punitive damages, plus costs and

reasonable attorney’s fees.

A JURY TRIAL IS DEMANDED ON ALL ISSUES SO TRIABLE.

Respectfully Submitted,

Edward D. Greim (pro hac vice)

Todd P. Graves (pro hac vice)

GRAVES GARRETT LLC

1100 Main Street, Suite 2700

Kansas City, Missouri 64105

Tel: (816) 256-3181

Fax: (816) 256-5958

[email protected]

[email protected]

David R. Langdon (OH Bar No. 0067046)

Trial Attorney

Joshua B. Bolinger (OH Bar No. 0079594)

Langdon Law LLC

8913 Cincinnati-Dayton Rd.

West Chester, Ohio 45069

Tel: (513) 577-7380

Fax: (513) 577-7383

[email protected]

[email protected]

Bill Randles, Mo. Bar No. 40928

Bev Randles, Mo. Bar No. 48671

Bill & Bev Randles Law Group, LLP

5823 N. Cypress Avenue

Kansas City, Missouri 64119

Tel: (816) 820-1973

[email protected]

[email protected]

(pro hac vice application forthcoming)


mailto:[email protected]






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CERTIFICATE OF SERVICE

I herby certify that on October 7, 2014, I electronically filed the foregoing with the Clerk

of the Court using the CM/ECF system, which will automatically send a notice of electronic

filing to all persons registered for ECF as of this date.

Attorney for Plaintiffs


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