Suit against IRS could run into speed bumps

Updated

Democratic Representative Chris Van Hollen of Maryland is filing a lawsuit against the Internal Revenue Service and the Treasury Department in an attempt to force the courts to do what Congress won’t: Fix the IRS.

Some tax experts however, are dubious that Van Hollen’s case will yield any concrete solutions.

“It will probably be dismissed within the next 12 months,” said Marcus Owens, a former IRS official who used to oversee the agency’s Tax Exempt Organization.

Van Hollen’s suit argues that the IRS has overreached in its interpretation of the original tax laws governing so-called 501(c)4 organizations that are at the heart of the IRS controversy. The original law enacted by Congress in 1913 says that these organizations must be “exclusively” involved in promoting social welfare.

The IRS currently evaluates these groups based on less stringent criteria, requiring instead that the organizations be “primarily” involved in social welfare.

It’s that lack of clarity that IRS officials admit were the main reason for the use of shortcuts in their screening processes—shortcuts, which the IRS has admitted were ill-conceived.

The problem with Van Hollen’s suit, according to Owens, is that Congress has enacted other laws which could undermine the suit’s arguments.

“As a result, it’s not like a classic case where a court can invalidate regulations as beyond a statute. In this case, the statute has been nuanced over the years,” said Owens.

Those nuances are many, according to Owens, and include laws enacted by Congress in 1950 and 1975 which said, in part, that 501(c)4 groups could, by law, engage in activities that were outside of the scope of “social welfare.”

Van Hollen’s camp is confident that their case won’t be dismissed outright, pointing to what they see as an obvious and clear exploitation of the original 1913 law.

Suit against IRS could run into speed bumps

Updated