Watchdog Group Files Suit to Reform 501(c)(4) Regulations

Watchdog Group Files Suit to Reform 501(c)(4) Regulations

News story posted in U.S. District Court on 22 May 2013| comments
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Summary

Citizens for Responsibility and Ethics in Washington, a 501(c)(3) independent political watchdog organization known for its annual report of the most corrupt members of Congress, has filed suit in U.S. District Court against the Treasury and IRS seeking 1) to compel them to revise the regulations to address serious conflicts between the Internal Revenue Code and existing regulations defining section 501(c)(4) organizations,  and 2) a writ of mandamus compelling the IRS and the Acting IRS Commissioner to revise existing regulations governing the standards for granting tax exempt status to certain organizations under section 501(c)(4) to conform with the requirements set forth in the Tax Code for these organizations. Whereas the Internal Revenue Code requires 501(c)(4) organizations to be operated "exclusively" for the promotion of social welfare, subsequently issued Treasury regulations define "exclusively" as being "primarily engaged in", which argues the plaintiff opens the door for vast amounts of contributions to be funneled through these organizations for political purposes while sidestepping the donor disclosure requirements under the Federal Election Campaign Act.

Citations: Citizens for Responsibility and Ethics in Washington v. U.S. Dept. of Treasury et al.; No. 1:13-cv-00732

Full Text:

CITIZENS FOR RESPONSIBILITY AND
ETHICS IN WASHINGTON
1400 EYE STREET, N.W., SUITE 450
WASHINGTON, D.C. 20005
Plaintiff,
v.
U.S. DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
1500 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20220

DANIEL I. WERFEL, ACTING COMMISSIONER,
INTERNAL REVENUE SERVICE
(IN HIS OFFICIAL CAPACITY)
1500 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20220
Defendants.


UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

COMPLAINT FOR DECLARATORY, INJUNCTIVE, AND MANDAMUS RELIEF

1. This is a civil action under the Administrative Procedure Act ("APA") and the Internal Revenue Code (the "Tax Code") challenging as arbitrary, capricious, and contrary to law the refusal of the Internal Revenue Service ("IRS") to initiate a rulemaking procedure to address serious conflicts between the Tax Code and existing IRS regulations defining those organizations entitled to a tax exemption pursuant to 26 U.S.C. § 501(c)(4), because they operate exclusively for the promotion of social welfare.

2. This lawsuit also seeks a writ of mandamus compelling defendants IRS and the Acting IRS Commissioner to initiate a rulemaking procedure to revise existing regulations governing the standards for granting tax exempt status to certain organizations under 26 U.S.C. § 501(c)(4) to conform with the requirements set forth in the Tax Code for these organizations. The IRS has known about the conflicts between its regulations and the Tax Code for decades, yet has refused to act notwithstanding at least two rulemaking petitions expressly requesting such action during the past two years.

JURISDICTION AND VENUE

3. This Court has personal and subject matter jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 (action arising under the laws of the United States), 1361 (mandamus), 5 U.S.C. §§ 701, 702, and 706 (Administrative Procedure Act), and 28 U.S.C. §§ 2201 and 2202 (Declaratory Judgment Act). The APA gives private parties the right to seek injunctive relief when adversely affected or aggrieved by agency action or inaction, 5 U.S.C. § 702, and empowers courts to compel agency action unlawfully withheld or unreasonably delayed, id. at § 706.

4. Venue in this district is proper pursuant to 28 U.S.C. § 1391(e).

PARTIES

5. Plaintiff Citizens for Responsibility and Ethics in Washington ("CREW") is a non-profit, non-partisan corporation organized under § 501(c)(3) of the Tax Code. CREW is committed to protecting the rights of citizens to be informed about the activities of government officials, ensuring the integrity of government officials, and protecting the integrity of our political system against corruption. CREW works to advance reforms in the areas of campaign finance, lobbying, ethics, and transparency. Further, CREW seeks to ensure campaign finance laws are properly interpreted, enforced, and implemented.

6. To advance its mission, CREW uses a combination of research, litigation, advocacy, and public education to disseminate information to the public about public officials and their actions, and the outside influences that have been brought to bear on those actions. A core part of this work is examining and exposing the special interests that have influenced our elections and elected officials.

7. CREW is hindered in carrying out its core programmatic activities when those individuals and entities that attempt to influence elections and elected officials are able keep their identities hidden. This problem was exacerbated in the 2012 election cycle, when tax-exempt § 501(c)(4) organizations, relying on an IRS regulation requiring that they only be "primarily" engaged in promoting charitable work, were able to pour vast amounts of anonymous money into the political system. As a result, CREW was deprived of information critical to advancing its ongoing mission of educating the public to ensure the public continues to have a vital voice in government decisions.

8. Much of CREW's work in carrying out its central mission focuses on so-called "pay to play" schemes. Toward that end, CREW looks for correlations between donations to the campaign of a member of Congress or candidate and that member's subsequent congressional activities, including pushing issues and legislation that serve the interests of the member's donors. Information that an individual or corporation made a large dollar contribution may be very revealing about the influences that donor has brought to bear on the member post-election. Without the information about who is funding the political activities of § 501(c)(4) organizations, CREW is stymied in fulfilling its central mission.

9. As an example, CREW recently issued a report, Rise of the Machines, detailing the growing political influence of high frequency traders in Washington. CREW's analysis included studying the lobbying and campaign contribution records of 48 companies that specialize in high frequency trading. That data revealed that between the 2008 and 2012 election cycles, the campaign contributions of these firms increased by 673 percent, from $2.1 million during the 2008 election cycle to $16.1 million during the 2012 cycle. CREW was able to obtain this information because of the disclosure requirements to which the organizations receiving those contributions -- federal candidates, party committees, PACs, and super PACs -- are subject under the Federal Election Campaign Act. To the extent any of these firms also made large donations to § 501(c)(4) organizations, the recipient organizations were under no obligation to disclose the sources of the donations.

10. Further, as a result of the operation of the IRS regulation governing § 501(c)(4) organizations, CREW's resources have been drained by the denial of this critical information. When § 501(c)(4) organizations fail to disclose their donors funding the organizations' political activities, CREW must spend time and money attempting to ascertain the source of the contributions through other means, such as pouring through filings made with the Federal Election Commission, Tax Form 990s filed by other tax-exempt groups with the IRS, and corporate annual reports. These reports, however, provide at best only an extremely small fraction of the information, and are no substitute for the disclosures required of tax-exempt organizations engaged in political activities.

11. The IRS is a component of defendant U.S. Department of the Treasury, which is an agency within the meaning of 44 U.S.C. § 2901(14) and 5 U.S.C. § 701(b)(1). The IRS is responsible for implementing the Tax Code, including through the promulgation of regulations and the approval of applications for tax-exempt status pursuant to § 501(c)(4) of the Tax Code. The IRS also has authority to undertake rulemaking.

12. Defendant Daniel I. Werfel is the Acting Commissioner of the IRS, with responsibility for directing and overseeing the activities and business of the IRS, including its rulemaking functions. He is sued in his official capacity only.

STATUTORY AND REGULATORY BACKGROUND

13. In 1913, Congress for the first time provided a tax exemption for "any civic league or organization not organized for profit, but operated exclusively for the promotion of social welfare." Revenue Act of 1913, ch. 16, § II(G)(a), 38 Stat. 172.

14. In the repeated recodifications of this provision over the years, Congress consistently limited the tax exemption to organizations "operated exclusively" for the promotion of social welfare. The current version of the Code provides a tax exemption for:

Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.

26 U.S.C. § 501(c)(4)(A) (emphasis added). Organizations subject to this provision are known as "§ 501(c)(4) organizations."

15. Treasury and IRS regulations promulgated to implement the statute limited the tax exemption for § 501(c)(4) organizations to those "operated exclusively for purposes beneficial to the community as a whole." See, e.g., Treas. Reg. 65, Art. 519, T.D. 3640, 26 Treas. Dec. Int. Rev. 745, 897 (1924); Treas. Reg. 111, § 29.101(8)-1 (1943); Treas. Reg. § 39.101(8)-1 (1954).

16. Congress recodified the statute in 1954. Internal Revenue Act of 1954, Pub. L. No. 83-591, ch. 736, 68A Stat. 163. Five years later, in 1959, the IRS promulgated new regulations identical in substance to the current regulation, under which a "civic league or organization may be exempt as an organization described in section 501(c)(4) if -- (i) It is not organized for profit; and (ii) It is operated exclusively for the promotion of social welfare." Treas. Reg. § 1.501(c)(4)-1(a)(1).

17. While the regulation described in paragraph 16 mirrors the statutory language, the regulation defining the "promotion of social welfare" departs radically from the statute. Specifically,

[a]n organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community. An organization embraced within this section is one which is operated primarily for the purpose of bringing about civic betterments and social improvements.

Treas. Reg. § 1.501(c)(4)-1(a)(2)(i) (emphasis added). In essence, this regulation substitutes the word "primarily" for the statutory term "exclusively."

18. At the same time, the regulations exclude from the definition of the "promotion of social welfare" "direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office." Treas. Reg. § 1.501(c)(4)-1(a)(2)(ii).

19. IRS policy directives implementing these provisions provide that an organization may carry on lawful political activities and still be entitled to tax-exempt status under § 501(c)(4) as long as the organization is primarily engaged in activities that promote social welfare. Rev. Rul. 81-95, 1981-1 C.B. 332.

20. The IRS has not further defined the "primary" activity standard established by its regulations. Instead, in a revenue ruling, the IRS has provided that all facts and circumstances are taken into account in determining the "primary activity" of a 501(c)(4) organization. Rev. Rul. 68-45, 1968-1 C.B. 259.

21. Groups seeking or claiming § 501(c)(4) status have interpreted the "primary activity" requirement to mean § 501(c)(4) organizations can spend up to 49 percent of their total expenditures in a tax year on campaign activities without such campaign activities constituting the "primary" activity of the organization. On information and belief, the IRS is aware of this interpretation.

22. Organizations properly functioning as tax-exempt § 501(c)(4) organizations are not required to disclose to the public the names of their donors. 26 U.S.C. §§ 6104(b), (d)(3).

FACTS GIVING RISE TO PLAINTIFF'S CLAIMS FOR RELIEF

23. The discrepancy between the "operated exclusively" standard of the statute and the "primarily engaged" language of the regulations was a cause of controversy at the IRS both during the drafting of the regulations and for two decades after they were promulgated in 1959. In 1962, the chief counsel for the IRS twice rejected recommendations to deny tax-exempt status under § 501(c)(4) to organizations engaged in some amount of non-social welfare activity. In one case, the organization was conducting political activity, and although the chief counsel noted the difference between the statute and the regulations, he construed the regulations to "in effect deny exemption only to organizations that are primarily engaged in" political activity. G.C.M. ("General Counsel Memo") 32394, 1962 WL 14007. In the other case, the chief counsel similarly noted the discrepancy and concluded, "a policy decision as to whether the language of the statute or the regulations controls should be reached before any significant ruling position is adopted." G.C.M. 32395.

24. The IRS initiated what it referred to as a "regulations project" in 1963, presumably to address this issue, but took no further action on it. G.C.M. 38215, 1979 G.C.M. LEXIS 269, at *3-4, 22.

25. The IRS again revisited this question in the 1970s when, in response to a request for a revenue ruling, a proposed G.C.M. drafted in 1976 suggested a decision should be made as to whether the language of the statute or the regulation controls. Id. at *23. In response, the IRS's Exempt Organizations Division studied the issue and concluded the IRS should recommend to the Department of the Treasury that "the 'primary activities' test be eliminated from the Regulations and an 'exclusive' test tolerating no more than an insubstantial amount of activities not in promotion of the social welfare be substituted." Id. at *24-25.

26. A 1978 internal memorandum attached to a General Counsel Memorandum describes the files underlying the 1959 regulatory drafting process as "addressed to the fact that the statute says 'exclusively' and the Regulations say 'primarily.'" G.C.M. 38215, 1979 G.C.M. LEXIS 209, at *25. While these files addressed the discrepancy in the context of § 501(c)(3), the § 501(c)(4) regulations "were very significantly shaped by reference to, and in conjunction with, decisions made with respect to the section 501(c)(3) Regulations." Id. at *26.

27. Although the IRS considered this issue for the next several years, senior officials rejected the recommendation, leaving the regulations in conflict with the Tax Code. Id. at *8, 17-18, 25. The IRS refused to reconcile its regulations with § 501(c)(4) of the Tax Code despite the acknowledgment by one official that "it has long been recognized [the regulations] are an unduly broad interpretation of the statute." Id. at *20.

28. More recently, on July 27, 2011, two non-partisan, non-profit organizations, Democracy 21 and the Campaign Legal Center, submitted to the IRS a petition for rulemaking on campaign activities by § 501(c)(4) organizations. The petition asked the IRS to act promptly to address the growing problem of large scale spending of secret contributions in federal elections by § 501(c)(4) organizations, by issuing new regulations that conform with the Tax Code and court rulings interpreting the Tax Code. The petitioners noted the urgency behind their request, given the then-upcoming 2012 elections.

29. By letter dated March 22, 2012, Democracy 21 and the Campaign Legal Center supplemented their petition with information about more recent spending on political activities by § 501(c)(4) organizations. The letter noted that since filing their initial petition, the petitioners had "heard nothing from the IRS to indicate that such a rulemaking is under consideration."

30. By letter dated July 17, 2012, Lois G. Lerner, Director of the IRS's Exempt Organizations Division, advised Democracy 21 and the Campaign Legal Center that "[t]he IRS is aware of the current public interest in this issue." The letter stated further, "[w]e will consider proposed changes in this area as we work with the IRS Office of Chief Counsel and the Treasury Department's Office of Tax Policy to identify tax issues that should be addressed through regulations and other published guidance."

31. When the IRS failed to take any action to address the problems with its regulations governing § 501(c)(4) organizations, CREW filed a petition for rulemaking with the IRS, titled "Petition For Rulemaking On Political Activities By Section 501(c)(4) Organizations," on April 9, 2013. CREW's petition incorporated by reference the rulemaking petition submitted in July 2011, and was submitted to update the IRS on the significant impact of the political activities in which § 501(c)(4) organizations were engaged during the 2012 election cycle as a direct result of the loophole created by the IRS's regulation.

32. That update included the fact that, according to the Center for Responsive Politics ("CRP"), a source relied upon by the Treasury Inspector General for Tax Administration in its May 14, 2013 report, Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review, May 14, 2013, Reference Number: 2013-10-053 ("IG Report"), spending by § 501(c)(4) organizations in the 2012 election cycle, based on reporting to the Federal Election Commission, totaled nearly $255 million. Reported spending by groups organized under § 501(c)(4) on political activities during the 2010 elections totaled more than $92.2 million.1

33. CREW's rulemaking petition also advised the IRS that four § 501(c)(4) organizations dominated outside spending in the 2012 election cycle: Crossroads GPS, founded by Karl Rove; Americans for Prosperity, founded by the Koch brothers; Americans for Tax Reform, founded by Grover Norquist; and the American Future Fund, founded by Nick Ryan, a longtime political advisor to former Republican Iowa Congressman Jim Nussle.

34. As set forth in the petition, according to the Center for Responsive Politics, in the 2012 election cycle, Crossroads GPS spent $70,968,744 in independent expenditures; Americans for Prosperity spent $33,542,051 in independent expenditures; American Future Fund spent $24,599,533 in independent expenditures; and Americans for Tax Reform spent $15,794,552 in independent expenditures.

35. Further, CREW's petition provided the IRS with spending information on specific 2012 Senate and House races. In the Virginia Senate race, for example, § 501(c)(4) organizations spent approximately $15 million, or nearly 29 percent of all outside spending.2 Similarly, in the 2012 Nevada Senate race, § 501(c)(4) organizations spent over $12 million, or 43.26 percent of all outside spending.

36. CREW's petition also included the fact that in the 2012 Wisconsin senatorial race, § 501(c)(4) organizations spent over $9 million, more than 20 percent of all outside spending. Likewise, in the 2012 Ohio Senate race, spending by § 501(c)(4) organizations totaled over $8 million, more than 22 percent of all outside spending.

37. CREW's petition also provided 2012 spending data from House races. In the Ohio 6th Congressional District race, § 501(c)(4) organizations spent over $3 million, or nearly 44 percent of all outside spending. In the Pennsylvania 12th Congressional District race, § 501(c)(4) organizations spent nearly $3 million, or close to 30 percent of all outside spending. And in the Colorado 3rd Congressional District race, spending by § 501(c)(4) organizations totaled over $1.6 million, close to 70 percent of all outside spending.

38. Further, CREW's petition for rulemaking highlighted the impact of spending by a specific § 501(c)(4) organization, the American Action Network ("AAN"), on two specific races in 2012. Spending by AAN in the 13th Congressional District race of Illinois race likely resulted in the defeat of Democratic nominee Dr. David Gill. According to reports AAN submitted to the Federal Election Commission, the group spent nearly $1.5 million opposing Dr. Gill, the single largest expenditure by a third-party against him.

39. In the final weeks of that campaign, AAN spent over $1 million on political advertisements that included demonstrably false statements. Dr. Gill lost his race by 1002 votes, or three-tenth of one percent of the votes cast, even though nearly every reputable poll showed Dr. Gill leading his opponent, Rodney Davis, by margins ranging from one to nine percent.

40. In 2012, AAN also spent more than $2.5 million to defeat the Democratic candidate for the 10th Congressional District race in California, Jose Hernandez. This money helped finance negative ads about which Mr. Hernandez's campaign manager stated, "It really makes it somewhat unfair where there's no disclosure, because you don't know who's saying what they're saying and why they're saying it."

41. This political spending by § 501(c)(4) organizations in the 2012 election cycle is the precise type of "direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office" excluded from the definition of the "promotion of social welfare" by Treas. Reg. § 1.5011(c)(4)-1(a)(2)(ii).

42. Groups organized under § 501(c)(4) are able to bypass this exclusion by relying on an IRS regulation that provides such organizations need only be "primarily engaged" in social welfare activities. The direct result is a significant increase in the amount of "dark" or anonymous money that is poured into out political system.

43. By letter dated April 30, 2013, David L. Fish, Manager, of the IRS's Exempt Organizations, responded to CREW's petition for rulemaking. The substance of the IRS's letter, which is virtually identical to its response to the petition from Democracy 21 and the Campaign Legal Center, states as follows:

The IRS is aware of the current public interest in this issue. These regulations have been in place since 1959. We will consider proposed changes in this area as we work with the IRS Office of Chief Counsel and the Treasury Department's Office of Tax Policy to identify tax issues that should be addressed through regulations and other published guidance.

44. In the interim since plaintiff filed its rulemaking petition, the Treasury Inspector General for Tax Administration ("IG") issued a report highlighting many of the problems caused by the IRS's regulation and its implementation. The IG found specifically that the IRS Determinations Unit had developed and used inappropriate criteria to identity § 501(c)(4) applicants that may not meet the IRS regulation's "primary purpose" requirement because of their level of political activities. IG Report, pp. 5-8. At the same time, according to the IG, the Determinations Unit failed to identify some applications indicating significant political campaign intervention. Id. at 9-10.

45. In response to these findings, the IG made a series of recommendations, including the recommendation that the IRS Chief Counsel and the Treasury Department include in Treasury's "Priority Guidance Plan" guidance on measuring the "primary" activity" of § 501(c)(4) organizations. Id. at 17.

46. Had the IRS promulgated a regulation that required all applicants for tax-exempt status under § 501(c)(4) to be operated "exclusively" for the promotion of the social welfare, as the Tax Code requires, the IRS Determinations Unit would have been working under clear guidelines that would not have given them the discretion to apply inappropriate criteria in determining whether to grant tax-exempt status to applicants under § 501(c)(4) of the Tax Code.

47. To date, the IRS has failed to act on plaintiffs rulemaking petition or take any other steps to alter or amend its regulation providing that, contrary to the Tax Code, § 501(c)(4) organizations need only be "primarily" organized for the promotion of social welfare to satisfy the requirements for tax-exempt status.

48. The IRS's refusal to act on plaintiff's petition for rulemaking effectively constitutes a denial of that petition.

PLAINTIFF'S CLAIMS FOR RELIEF

CLAIM ONE

(For A Declaratory Judgment That The IRS's Refusal
To Grant Plaintiffs Petition For Rulemaking To Address
The Critical Conflicts Between Its Regulations Governing
§ 501(c)(4) Organizations And The Tax Code Is Arbitrary,
Capricious, And Contrary To Law, And An Injunction
Prohibiting The IRS From Implementing Its Regulation Until
It Is Amended To Conform With The Tax Code)

49. Plaintiff re-alleges and incorporates by reference all preceding paragraphs as if fully set forth herein.

50. Under § 501(c)(4) of the Tax Code, only groups operating exclusively for the promotion of social welfare are entitled to tax-exempt status.

51. Defendant IRS's implementing regulation defining organizations operating for the promotion of social welfare as those organizations primarily engaged in promoting in some way the common good and general welfare of the people of the community violates the Tax Code by permitting organizations to engage in activity that does not promote social welfare, including political activity.

52. Relying on the IRS's regulation, groups organized under § 501(c)(4) increasingly have engaged in a significant level of political activities while still holding themselves out as tax-exempt § 501(c)(4) organizations with no obligation to disclose their donors. As a result, these groups had a substantial impact on the 2012 election cycle, yet the public and the candidates they opposed had no access to information about who was funding the groups' political activities.

53. Notwithstanding this compelling evidence of serious abuse of the Tax Code directly attributable to the loophole the IRS regulation governing § 501(c)(4) organizations creates, the IRS refused to proceed with rulemaking in response to a petition from the plaintiff. In effectively denying that petition, the IRS reiterated a response it had given another petitioner nearly one year ago seeking identical relief.

54. Defendant's denial of plaintiff's petition to initiate a rulemaking proceeding to conform its regulations governing § 501(c)(4) organizations with the requirements of the Tax Code is arbitrary, capricious, and contrary to law.

55. The failure of the IRS to provide a reasonable explanation, or any explanation at all, for its failure to grant CREW's rulemaking petition is arbitrary, capricious, and contrary to law.

56. Plaintiff is therefore entitled to relief in the form of a declaratory judgment that the IRS's refusal to grant the rulemaking petition and amend its regulations implementing the statutory provision for § 501(c)(4) organizations operating exclusively for the promotion of social welfare is arbitrary, capricious, and contrary to law.

57. Plaintiff also is entitled to an injunction prohibiting the IRS from implementing this regulation until it is amended to conform with the Tax Code.

CLAIM TWO

(For A Writ Of Mandamus Compelling The IRS
To Institute Rulemaking Proceedings)

58. Plaintiff re-alleges and incorporates by reference all preceding paragraphs as if fully set forth herein.

59. The IRS has known for over 50 years its regulation defining organizations operating for the promotion of social welfare as those organizations primarily engaged in promoting in some way the common good and general welfare of the people of the community critically conflicts with the Tax Code.

60. Nevertheless, for over 50 years, the IRS has refused to alter or amend its regulation to conform with the Tax Code requirements that § 501(c)(4) organizations be operated "exclusively" for the promotion of the social welfare. During that period, § 501(c)(4) organizations have relied increasingly on the loophole created by the IRS regulation to pour hundreds of millions of dollars of dark money into political elections, often having a critical impact on their outcome.

61. Most recently, the IRS has unreasonably delayed in acting on a rulemaking petition of plaintiff that requests that the IRS institute rulemaking proceedings to reconcile its regulations governing § 501(c)(4) organizations with the requirements of the Tax Code. As in the past, the IRS stated only a general awareness of the problem created by its own regulation, but refused to take any steps to address it.

62. This inaction has severely prejudiced the interests of the plaintiff and the public in knowing the source of the vast sums of money that have poured into federal elections. It has also created a climate within the IRS that led the Determinations Unit to apply inappropriate criteria in determining the eligibility of applicants for tax-exempt statue under § 501(c)(4) of the Tax Code.

63. Plaintiff is therefore entitled to a writ of mandamus compelling the IRS and Acting Commissioner Daniel I. Werfel to immediately initiate a rulemaking procedure to harmonize IRS regulations with the clear and unambiguous statutory language requiring § 501(c)(4) organizations to be "operated exclusively" for the purpose of promoting the social welfare.

PRAYER FOR RELIEF

WHEREFORE, plaintiff respectfully requests that this Court:

(1) Declare the IRS's refusal to grant plaintiff's petition for rulemaking to address the critical conflicts between its regulations governing § 501(c)(4) organizations and the Tax Code is arbitrary, capricious, and contrary to law;

(2) Enjoin the IRS from implementing its regulations governing § 501(c)(4) organizations until it is amended to conform with the Tax Code;

(3) Issue a writ of mandamus compelling the IRS and Acting Commissioner Daniel I. Werfel to immediately initiate a rulemaking procedure to harmonize the IRS regulations with the clear and unambiguous statutory language requiring § 501(c)(4) organizations to be "operated exclusively" for the purpose of promoting the social welfare;

(4) Award plaintiff its costs, expenses, and reasonable attorneys' fees in this action; and

(5) Grant such other and further relief as the Court may deem just and proper.

Respectfully submitted,

Anne L. Weismann
D.C. Bar No. 298190
Melanie Sloan
D.C. Bar No. 434584
Citizens for Responsibility and
Ethics in Washington
1400 Eye Street, N.W., Suite 450
Washington, D.C. 20005
202-408-5565 (telephone)
202-588-5020 (fax)
aweismann@citizensforethics.org

Attorneys for Plaintiff
Dated: May 21, 2013

FOOTNOTES

1 This number has been revised from what CREW submitted in its rulemaking petition to include inadvertently omitted spending by certain § 501(c)(4) organizations the CRP classified as "partially disclosing," because they are associated with § 527 groups.

2 Since CREW submitted its rulemaking petition, this number changed from the $78 million CREW cited in its rulemaking petition, because the CRP has since updated its numbers based on the receipt of additional information. Accordingly, the numbers cited herein reflect any updates in CRP's numbers.

END OF FOOTNOTES

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