Texas Nonprofit Is Cleared After GOP-Prompted Audit

Rep. Sam Johnson (R-Tex.), left, with Rep. Tom DeLay (R-Tex.), wrote a letter to the IRS about complaints of possible tax violations by Texans for Public Justice, a group critical of DeLay. An audit found no wrongdoing by the nonprofit. (By Tim Johnson -- Associated Press)

Zall's biography on his law firm's Web site notes that he was "of counsel" from 1990 to 1998 to the Williams & Jensen law firm, which has long represented DeLay's leadership political action committee, Americans for a Republican Majority (ARMPAC). Barbara Bonfiglio, a principal at Williams & Jensen, was subpoenaed in January 2004 by Travis County District Attorney Ronnie Earle as part of his inquiry into DeLay.

Contacted by telephone on Friday, Zall declined to say if he had done legal work for ARMPAC, explaining that "I don't ordinarily discuss my clients." He said he was not representing the committee when he wrote his letter.

Zall said he could not recall exactly why he became involved, but added that "maybe somebody said something to me." He also confirmed that Bonfiglio was "a longtime friend," and when asked if she had requested his assistance, replied that "anything is possible."

Bonfiglio did not return several phone calls for comment Friday.

In his letter to Johnson, Zall was clear about his desire to protect DeLay.

"The continuing investigation led by . . . Earle against Texas Republicans is becoming a national problem," Zall wrote. "Recent news reports indicate a growing concern in Washington that Earle is attempting to use his local office as part of a calculated scheme to remove a federal elected official from a position of authority in Congress."

The problem, Zall explained, is that Earle "is not acting alone" but with the assistance of "an ostensibly tax-exempt organization." The IRS, he said, "should investigate organizations whose public records indicate . . . apparent noncompliance with tax laws at a time when they are engaging in an apparent attempt to influence national politics."

Portions of Zall's letter were redacted in the copy obtained by McDonald and The Post. But parts that were disclosed included an allegation that the group "may have been engaging in activities which are forbidden by the Internal Revenue Code, and may not have filed" accurate tax returns. It also alleged -- without providing evidence in the IRS-released portions -- improper links between the group and the Texas Democratic Party.

Johnson sent his letter to the IRS requesting the probe on Aug. 3, 2004, and two weeks later, the tax policy adviser on his personal staff, Kathleen Black, sent what she described as "follow-up info" to Floyd Williams, the head of the IRS Office of Legislative Affairs.

In his letter, Johnson said he had "uncovered some disturbing information" about the two Texas nonprofit groups on his own, "as a member of the oversight subcommittee." He added that "coincidentally, I have received a letter from an attorney experienced in tax-exempt law raising significant questions about exemptions and activities of these organizations."

Asked to cite specific information about the groups that the chairman had learned through his service on the oversight committee, Johnson's spokeswoman McCall Cameron said she would look into the matter but did not call back. Neither group has been investigated by the subcommittee, McDonald said.

Everson responded in a letter to Johnson on Sept. 16, 2004, that he had sent the complaint to the IRS office in Dallas -- the national headquarters for examination of nonprofit groups -- under "our standard procedure when we receive referrals for information from third parties."

He wrote that although no results could be provided directly to Johnson, the results could be legally requested by the House Ways and Means committee chairman, Bill Thomas (R-Calif.). Those requests are not subject to public disclosure, according to the IRS.

In December 2004, the IRS's Austin office informed the group that the agency had received an allegation that it may have jeopardized its tax-exempt status "by intervening in a political campaign." McDonald denied it categorically, but the IRS audit went forward from January 2005 until early this month.

Examiners from Austin and Oklahoma City looked at minutes from the group's meetings, its files of correspondence, contracts, donor records and other documents before concluding in a letter dated Feb. 3, 2006, that the group's tax return for 2003 required no change.