Political tax-exempt groups get fair oversight-US IRS

WASHINGTON, March 21 Wed Mar 21, 2012 7:03pm EDT

WASHINGTON, March 21 (Reuters) - U.S. Internal Revenue Service Commissioner Douglas Shulman assured lawmakers on Wednesday that the agency is playing by the book in its oversight of tax-exempt groups that spend money on liberal or conservative agendas.

Democratic and Republican senators, in letters to Shulman last week, raised concerns about the IRS' role as referee over tax-exempt 501(c)4 groups.

Amid a boom in political spending this election year, Democrats have asked the IRS for greater scrutiny of these groups, while Republicans have questioned whether the IRS is discriminating against certain ones.

Earlier this year, some Tea Party 501(c)4 groups received IRS questionnaires asking about their qualifications for tax-exempt status.

"This notion that we are targeting anyone, I think, is off," Shulman said during a congressional hearing on Wednesday.

A committee of three career IRS executives, who are not based in Washington, look at 501(c)4s' tax filings to see if audits are needed, Shulman said.

"Those career civil servants effectively serve as the filter for information that's coming from outside sources" to the IRS questioning a group's 501(c)4 status, said Ofer Lion, a counsel with law firm Hunton and Williams LLP.

The committee serves to "deflect any later accusations ... that the IRS is sort of playing politics with the organizations that it does pursue," he said.

IRS policies have not been changed to single out any Democratic or Republican 501(c)4 groups, Shulman said.

These organizations must promote "social welfare" to maintain their tax exempt status. Their primary objectives cannot be political. But the line is increasingly blurry.

Two major political 501(c)4 groups include Priorities USA, which is backing President Barack Obama, and Crossroads GPS, a conservative group co-founded by Karl Rove. Both groups also have political action committee sister organizations.

The Republican presidential candidates have PACs supporting them. These groups must publicly disclose their donors, unlike 501(c)4 organizations. (Reporting By Patrick Temple-West; Editing by Kevin Drawbaugh)

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