The Bowers decided there was enough interest to start their own nonprofit group and applied to the IRS in December 2009 as a 501(c)(4). The couple held weekly meetings at their shop, inviting local politicians to speak, showing films and discussing books. A woven basket was put out for cash donations, which usually amounted to no more than $15.
“We saw we weren’t the only ones worried about things,” Tom Bower said. “Others thought our country was going in the wrong direction.”
The desire by the Bowers to form a nonprofit group reflected two broader trends in American politics. First was the rise of the tea party movement — hundreds of local organizations, frustrated by spending in Washington and the growing national debt, whose power would soon be seen in local, state and, in 2010, congressional elections.
Second, campaign finance laws were changing. In January 2010, the Supreme Court ruled in Citizens United v. Federal Elections Commission that corporations and unions could spend unlimited funds on elections, setting off a tidal wave of political spending that would wash over the next two election cycles.
Nonprofit groups that do not have to pay taxes are supposed to ensure that political activity is not their primary purpose, so evidence that some of the new organizations seeking tax-exempt status were fronts for campaign organizations drew bipartisan interest. Good-government groups started pressuring the IRS to more closely scrutinize applicants. One such group, Democracy 21, wrote a series of letters to the IRS arguing that many of the groups should not receive favored tax status.
“In all of these cases, the groups were claiming (c)(4) status basically for the purpose of hiding their donors,” said Democracy 21 President Fred Wertheimer.
The IRS is not well equipped to make political judgements. Its accountants and lawyers are sticklers and technocrats, trying to enforce the letter of the law. When the law is left vague — as it is for 501(c)(4)s and political advocacy groups — it could take years to come up with clear guidelines.
“Unless there is a higher-up push to get something done and get guidance done, it doesn’t happen,” said Louisiana State University law professor Philip Hackney, who worked in the chief counsel’s office of the IRS from 2006 to 2011.
By late summer 2010, the IRS officials in Cincinnati, part of what was called a “determinations unit,” decided they needed a better way to track the influx of advocacy groups. It had been an informal process before — just e-mails sent out among the team highlighting groups that might need closer scrutiny.
They created a spreadsheet of group names and activities to watch, called a “be on the lookout” list, or BOLO, borrowing jargon used by police. The list soon included 40 groups, including 22 with “tea party” in their names.