Racists Escaped Extra Tax Scrutiny

As long as you don’t call yourself “tea party”…

Members of the National Socialist Movement on a 2010 march in LA (Getty Images)

WASHINGTON — The IRS targeting of conservative groups appears to have stopped before it reached the true far right: The racist and militia groups that operate beyond the pale of American politics.

Many of those groups, their members and those who monitor hate groups say, are routinely denied non-profit status because of their racist views. But at least one of the foundations that backs racist — or “racialist,” as the far right term has it — work says it has had no problems with the IRS during the latest allegations of a tax crackdown on the right.

Even as Washington scrambles to understand and tighten the vague tax rules around tax exempt organizations, one rule is relatively clear: No tax breaks for white supremacists. Political groups on both sides use the vague language in the tax code to turn donations for political activity into tax exempt charitable giving. That same vague language makes it hard for the IRS to stop these groups in any clear way. That’s what led to a search for fixed rules inside the IRS, according to the IRS inspector general’s report, and, finally, the improper targeting of conservative groups that IRS leaders apologized for. Republicans have charged the move was driven by politics, not the bureaucracy.

The IRS is backing off its latest attempts to draw ideological lines, but decades earlier, it won a rare battle with racist groups. After the IRS denied tax exempt status to the Mississippi-based white supremacist group The Nationalist Movement in the late 1980s, the group sued the IRS and lost. That established rules the IRS still uses to deny tax exempt status to racist groups. Vagaries still exist, and some groups that espouse racial politics still have tax exempt status. But as a general rule, Nazis don’t get to be charities. The rule is so set in stone, that experts say they don’t even bother seeking charitable status anymore.

The primary test is whether the organization “makes substantial use of inflammatory and disparaging terms,” said Ellen Aprill, a professor at Loyola Law School.

The fight began with a 1983 Supreme Court ruling finding Bob Jones University could be denied tax exempt status because the government’s “fundamental, overriding interest in eradicating racial discrimination in education” justified denying the school the tax breaks afforded other educational institutions. Later cases, helped refine these rules leading to regulations now used to deny racist groups tax exempt status under the claim that they are neither “educational” or “charitable.” This is known as the “methodology test.”

Aprill said groups a racial focus that still get tax exempt status, but they are generally able to prove some kind of educational purpose to their work.

“The IRS is between a rock and a hard place — people get upset when it does grant exemption, trying not to impose personal or even majority beliefs, and when it does not — accusing it of imposing personal or majority beliefs,” she said. “In the Bob Jones case, the court said that a group could not be exempt if it violated fundamental public policy, but except for discrimination on the basis of race in education, did not say how we know when there is such a violation.”

Indeed, Henry Wolff, a spokesperson for the New Century Foundation, a tax-exempt group that funds American Renaissance — which has warned of “The War On White Heritage” — said the group had no problem with the tax authorities.

“They’re going after groups with obvious-sounding names,” he said. “Ours is innocuous.”

New Century Foundation, which lacks “patriot,” “tea party,” “9/12” or any of the other words and phrases used by the IRS to trigger extra paper work. NCF has had tax exempt status of “several years,” Wolff said.

“We haven’t received any extra scrutiny,” he said.

Other racist — they call themselves “racialist” — are openly political groups, and thus aren’t eligible for non-profit status; and yet others typically don’t apply, said Heidi Beirich, intelligence director at the Southern Poverty Law Center.

“They basically never apply,” she said. “We did a search after the IRS business became public and there are basically no tax exempt organizations coming out of the militia movement.”

“The antigovernment folks, like the militias, already hate the IRS and the government so they basically weren’t surprised,” she said.

A scan of racist groups’ websites doesn’t turn up much mention of the IRS scandal. There are a couple of aggregated articles about the scandal on the far-right VDare — which focuses on race and immigration — for example, but regular contributor John Derbyshire wrote he “doubt[s] that President Obama knew what was going on.”

The group’s regular “E-Dispatches” have offered little mention of the IRS scandal since it sparked up.

The actual Nazis, however, find some vindication in the story; Capt. Brian Culpepper, leader of the 4th Regional Command for the Detroit-based National Socialist Movement, a Nazi group, said in an email that the “alleged wrongdoing and abuse of power is mind boggling.”

Outside the racist right, the government rarely invokes public policy exceptions to deny groups non-profit status, though tax agents may have raised it in examining pro-Israel groups that oppose U.S. policy in the Middle East.

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