One Hundred Years of IRS Political Targeting

by James Bovard, April 15, 2024

One hundred years ago, Senator James Couzens, a Michigan Republican, took to the Senate floor to denounce the Bureau of Internal Revenue for abusing its power and trampling innocent taxpayers. Couzens launched a sweeping Senate investigation of federal tax collectors. One year later, Internal Revenue Commissioner David Blair personally delivered a demand for $10 million in back taxes as Couzens stepped out of the Senate chamber. Couzens fought the case, and eventually proved that he had actually overpaid his taxes by roughly one million dollars, as David Burnham noted in his 1989 classic, A Law Unto Itself: The IRS and the Abuse of Power. But the precedent of the IRS exploiting its power to attack its critics was firmly established.

President Franklin Roosevelt used the IRS to harass newspaper publishers including William Randolph Hearst and Moses Annenberg, publisher of The Philadelphia Inquirer. FDR also dropped the IRS hammer on political critics such as Huey Long and Father Charles Coughlin and prominent Republicans like former Treasury Secretary Andrew Mellon. Perhaps Roosevelt’s most pernicious tax skulduggery occurred in 1944 when he spiked an IRS audit of massive illegal campaign contributions from a government contractor to Congressman Lyndon Johnson. LBJ’s career would likely have been destroyed if Texans had learned of his dirty-dealing. Instead, LBJ survived and scores of thousands of Americans and more than a million Vietnamese died as a result.

President John F. Kennedy raised the political exploitation of the IRS to an art form. Shortly after capturing the presidency, JFK denounced “the discordant voices of extremism” and derided people “who would sow the seeds of doubt and hate” and make Americans distrust their leaders.

At a news conference a few days later, a reporter sought his views on the legality of campaign contributions supporting ”right-wing extremist groups.” Kennedy replied “As long as they meet the requirements of the tax law, I don’t think that the Federal Government can interfere or should interfere with the right of any individual to take any position he wants. The only thing we should be concerned about is that it does not represent a diversion of funds which might be taxable to—for nontaxable purposes. But that is another question, and I am sure the Internal Revenue system examines that.”

Actually, JFK heavily elbowed the IRS to make sure that they targeted the tax-exempt status of conservative organizations that had criticized Kennedy or his agenda. The IRS launched the Ideological Organizations Audit Project which targeted numerous right-leaning groups, including the Christian Anti-Communist Crusade and the American Enterprise Institute. Shortly before his assassination, Kennedy specified that he wanted an “aggressive program” against the IRS targets. JFK also used the IRS to bolster compliance with “voluntary” price controls, targeting steel executives who defied the administration for audits.

A 1976 Senate report noted, “By directing tax audits at individuals and groups solely because of their political beliefs, the Ideological Organizations Audit Project established a precedent for a far more elaborate program of targeting ‘dissidents.’” After Richard Nixon took office, his administration quickly created a Special Services Staff (SSS) to mastermind “all IRS activities involving ideological, militant, subversive, radical, and similar type organizations.” More than 10,000 individuals and groups were targeted because of their political activism or slant between 1969 and 1973, including Nobel Laureate Linus Pauling and the John Birch Society. The IRS was also given a list of Nixon’s official enemies to, in the words of White House counsel John Dean, “use the available federal machinery to screw our political enemies.” Contributors to the Democratic Party were also high on Nixon’s target list as were many left-leaning organizations.

The Nixon administration also vastly expanded a secret computer database—the “Intelligence Gathering and Retrieval System” the IRS began in 1963 to sweep up information on individual Americans and groups. By 1975, the IRS had stockpiled data on almost half a million persons and groups; the program was abolished after its existence became known outside of official circles.

The exposure of Nixon’s IRS abuses profoundly weakened him during the uproar after the Watergate hotel break-in. The second article of his 1974 impeachment charged him with endeavoring to “obtain from the IRS…confidential information contained in income tax returns for purposed not authorized by law, and to cause, in violation of the constitutional rights of citizens, income tax audits or other income tax investigations to be initiated or conducted in a discriminatory manner.” Congress enacted legislation to severely restrict political contacts between the White House and the IRS.

But the IRS continued its freelance work. After Senator Joe Montoya of New Mexico announced plans in 1972 to hold hearings on IRS abuses, the agency added his name to a list of tax protestors who were capable of violence against IRS agents. When IRS Commissioner Donald Alexander was challenged on the listing at a 1975 Senate hearing, he replied, “The only connection that I can think of immediately is that Senator Montoya is, after all, the Chairman of the IRS Appropriations Subcommittee, and some one might have thought that he did violence to our appropriation.” Information from the an IRS investigation of Montoya was leaked to The Washington Post. Partly as a result of the IRS leak, Montoya lost his reelection bid.

In the following decades, the IRS regularly sparked outrage by abusing innocent taxpayers but there was scant controversy about the agency’s politicalization until Bill Clinton took office. In 1995, the White House and the Democratic National Committee produced a 331-page report entitled “Communication Stream of Conspiracy Commerce” which attacked magazines, think tanks, and other entities and individuals who had criticized President Clinton. In the subsequent years, many organizations mentioned in the White House report were hit by IRS audits. More than twenty conservative organizations—including the Heritage Foundation and The American Spectator—and almost a dozen high-profile Clinton critics were audited.

After Barack Obama was elected president, conservative groups mobilized to resist his policies. By mid-2010, conservative organizations were complaining of harassment by the IRS. IRS officials created a BOLO list—“Be On the Look Out”—for conservative organizations applying for nonprofit tax status. IRS officials subsequently stonewalled applications from 300 organizations seeking to get tax exempt status for their donors. The Obama administration perpetually denied that any such targeting was occurring. However, a May 2013 Inspector General report confirmed that IRS employees had devoted far more scrutiny (sometimes amounting to what seemed like harassment) to nonprofit applications that used the terms “tea party” or “patriots” or that criticized government spending or federal deficits.

How often is the IRS currently targeting its critics or political troublemakers? Last year, journalist Matt Taibbi testified before a congressional committee on the vast, federally-funded “Censorship Industrial Complex” exposed by Twitter Files’ revelations of FBI browbeating of social media. On the same day he testified—March 9—an IRS agent swooped down on his New Jersey home, ordering Taibbi to contact the agency regarding his tax returns from two prior years. Maybe the timing of that IRS visit was a coincidence, like someone who forgets to take off their ski mask before entering a bank. The IRS House Judiciary Committee Chairman Jim Jordan (R-OH) was outraged and sent a letter demanding information from the Joe Biden administration since “the IRS’s action could be interpreted as an attempt to intimidate a witness before Congress.” The IRS later revealed that it began investigating Taibbi’s taxes on Christmas Eve 2022, shortly after he began exposing federal censorship abuses.

For a hundred years, presidents of both parties have exploited the tax code to suppress political opposition. In a 1967 decision overturning the conviction of a leftist Oregon lawyer, a federal appeals court declared, “The court will not place its stamp of approval upon a witch-hunt, a crusade to rid society of unorthodox thinkers and actors by using the federal income tax laws” to silence them.

But as long as the federal tax code is incomprehensible to most Americans, the IRS will continue to have vast power over its targets. As Alexander Hamilton, later the nation’s first Secretary of the Treasury, warned in 1782, “Whatever liberty we may boast in theory, it cannot exist in fact while [arbitrary tax] assessments continue.” More than 150 years later, Supreme Court Justice George Sutherland declared in 1933,  “The powers of taxation are broad, but the distinction between taxation and confiscation must still be observed.” Unfortunately, this distinction could be lost on individuals placed in the IRS crosshairs.