This post was originally published on Forbes May 12, 2015
The order from the United States District Court of Colorado in the ongoing lawsuit Citizens Awareness Project Inc versus Internal Revenue Service is giving me flashbacks. The case relates to one of the aspects of the perennial, interminable IRS scandal , on Day 732 by TaxProf count as I write this. The lawsuit is in reaction to the improper release of tax-exempt applications to ProPublica. That story showed up on Day 5 (May 14, 2013) as ProPublica joined in piling on the IRS with a story titled IRS Office That Targeted Tea Party Also Disclosed Confidential Docs From Conservative Groups. The story actually went back to December 2012.
Thursday’s filing was the first reported political expenditure made by the group. The group is likely a 501(c)(4) “social welfare” nonprofit. Such organizations can function like super PACs but are not required to register with the FEC or disclose their donors. They are required to file reports with the IRS.
12/17/2012 - Call from IRS regarding potentially stole[n] 1024; email board regarding situation; $33.33;
2/25/2013 - Call with IRS agent regarding 1024 application. Review and requests for additional information. Review letter from FEC regarding EOY.; $33.33;
5/14/2013 - Call with IRS regarding letter regarding 1024 disclosure, call with Shaun Boyd, strategize with JZ regarding tax scandal, call with Congressman Gardner regarding IRS situation, Emails with EE regarding FOIA request; $633.33;
5/16/2013 - Research Z-Street lawsuit and federal statutes regarding IRS scandal and determinations as to tax exempt status, research existence of conservative organization who dropped 1023 applications for purposes of filing federal suit, Research Simmet v. BOP; $233.33;
5/21/2014 - Research Norcal TP vs. IRS suit, read complaint, research privacy act of 1974; $266.67; and
5/31/2013 - Call Torchinsky regarding on lawsuit, research 26 USC 7431 and cited statutes.; $100.
To the extent CAP claims that some sort of quality control process should have been in place to review Brown's work, CAP does not dispute the IRS's assertion that it had a process since 2010 for randomly spot-checking responses to information requests from the public. The fact that Brown's response did not get randomly selected does not show that the process was so deeply flawed as to create “wanton or reckless disregard of the rights of another.”
The Court sees no gross negligence here. First, taking steps to ensure that Brown personally does not receive media requests is not something the IRS is required to do to avoid gross negligence. Despite thousands of requests, she and her supervisor cannot recall a single wrongful disclosure other than the one to ProPublica. CAP does not challenge this. Second, the fact that the IRS intended to implement more scrutiny for media requests does not mean that the lack of it in this instance (even due to communications lines crossing) created gross negligence. As previously discussed, Brown's department had a quality control process, and the Court has already concluded that its failure to catch this wrongful disclosure in this instance does not support a gross negligence finding. Accordingly, CAP's claim for punitive damages fails as a matter of law.