The IRS unit headed by Lois Lerner not only harassed conservative nonprofits seeking tax exempt status, it evidently set in motion harassment of donors to nonprofits. Talk about a chilling effect! The details are laid out in a Wall Street Journal story:
At the same time the Internal Revenue Service was targeting tea-party groups, the tax agency took the unusual step of trying to impose gift taxes on donors to a prominent conservative advocacy group formed in 2007 to build support for President George W. Bush's Iraq troop surge.
The probe of the group, Freedom's Watch, began in the unit led by Lois Lerner, the IRS official already under scrutiny for her role in the more recent targeting of conservative groups. (snip)
In February 2010, the same month the tea-party targeting started, according to a recent inspector general's report, Freedom's Watch was subjected to an IRS audit that focused largely on its political activities, an uncommon but not unprecedented action, election lawyers say. The probe broadened into other areas, including executive compensation.
About a year later, as many as five donors to Freedom's Watch were subjected to IRS audits of their contributions that sought to impose gift taxes on their donations to the group, according to lawyers and former officials of Freedom's Watch.
When news of the gift tax audits was made public, the resulting outcry resulted in it being stopped. But the identity of Freedom Watch was not known until the Journal published its story.
The gift tax is aimed at people seeking to avoid estate and inheritance taxes, and is not normally focused on groups with nonprofit status.
This is a serious abuse of taxation authority. So far there is no evidence of anyone but conservatives being subjected to this harassment.
hat tip: Ed Lasky and Cliff Thier