Originally published on Forbes.com.
It looks like the National Organization for Marriage has come to the end of the line in its hope for a big payday from the IRS for the unauthorized disclosure of the Schedule B (donor list) attached to its 2008 Form 990. Form 990 becomes public (The easiest way to find one is on guidestar.org), but the donor list is not publically disclosed. The Fourth Circuit upheld a district court decision denying NOM attorney fees in its suit against the IRS. IRS had admitted that it was wrong in releasing the Schedule B and settled with a payment of $50,000. NOM was seeking $691,025.05 in fees.
The Leak
The disclosure caused a bit of a stir, because it showed that a Mitt Romney related entity had given money to NOM. Also, according to this story, two years after the disclosure Brian Eich was pressured to step down as CEO of Mozilla because of a $1,000 donation supporting California Prop 8 (See Note). The Mozilla story was Day 331 of Paul Caron’s IRS Scandal coverage. The original story of the disclosure was covered by the Tax Prof on April 13, 2012 over a year before the launching of the scandal series.
The Schedule B was provided to Matthew Meisel who turned it over to the Human Rights Campaign which provided it to Huffington Post. HRC’s mission is “Research, advocacy and education to support and protect LGBT individuals and families.” NOM’s mission is to “provide educational outreach and to protect marriage as the union of husband and wife and the natural family that springs therefrom as well as the rights of the faith traditions that support and sustain this marriage culture.”
The two groups do not play nice together. Just last month HRC filed a formal complaint with the IRS because NOM had not responded to a request to view its 2014 Form 990. The extended due date for the return was November 15, 2015 and the complaint was filed on November 23, 2015. Personally, I think that is on the petty side, but maybe that’s just me. On the other hand there is a history of NOM being slow to provide 990s.
The Decision
NOM sued the IRS seeking “statutory damages, actual damages, punitive damages due to “willful and grossly negligent disclosures and inspections of NOM’s return and return information,” and costs and attorneys’ fees under § 7431(c).” As noted the case was settled for $50,000. NOM’s entitlement to attorney fees revolved around whether the government was being reasonable and whether NOM met the definition of “prevailing party”. The IRS had not disputed the statutory damages (as best I can tell that is $1,000 although I might be missing something) but resisted actual and punitive damages. All in, the $50,000 settlement was not enough to make NOM a “prevailing party”.
We conclude that the government adopted a reasonable strategy in conceding statutory damages, but challenging the existence and amount of both actual and punitive damages. Conceding actual damages prematurely could have harmed the government’s position later if NOM had been able to submit evidence enabling it to proceed on the punitive damages issue. In addition, prior to the district court’s ruling on summary judgment, NOM added and subtracted different categories and sums of actual damages to its calculation, thus keeping the type and extent of actual damages in flux. Moreover, NOM bore the burden of proving any actual damages. In light of these considerations, we cannot say that the government acted unreasonably prior to the summary judgment stage of the litigation by waiting to see what NOM’s evidence was and then challenging its sufficiency.
In sum, we conclude that the government’s position was substantially justified. As a result, NOM is not a and is therefore not entitled to attorneys’ fees.
The Waning Of The IRS Scandal?
The NOM disclosure issue wove its way into the IRS scandal narrative. The core scandal is the delay and intrusive questions in processing the exemption applications of Tea Party and similar groups. Earlier this week Paul Caron on The IRS Scandal, Day 943 noted that Brian Leiter of the University of Chicago Law School had queried his readers “Has there really been an IRS scandal going for nearly three years?” Professor Caron maintains that he will keep with the coverage as long as there is something out there. He did indicate that there is not much in the queue right now, so there is some chance the series might go dark at least for a while.
In a private exchange with another blogger on that post, I noted that the NOM litigation was still outstanding. So that’s one down. I’m pretty sure that the Z Street litigation is chugging on. Although Judicial Watch has not added to its IRS scandal blog since Labor Day, I think it is likely that they have some more cats to pull out of the bag.
I wonder whether the IRS scandal will go down in history like the Dreyfus Affair or the Sacco-Vanzetti trial or if it will just fade away.
Professors And Tax Preparers
I noted in the exchange between Professor Leiter and Professor Caron that Professor Leiter hangs Paul Caron with the title Blog Emperor, which I have to think is a little bit on the sarcastic side. Apparently the sobriquet goes back to 2007 and seems to be related to disputes about measurement of blog traffic. My observation is that it strikes me thatblogging professors might be a tad less collegial than blogging tax preparers. Maybe I’ll do a survey.
Correction
I originally attributed the Mozilla matter to the Schedule B National Organization for Marriage leak. That was an error. David Keating of the Center for Competitive Politics wrote me.
You wrote, “two years after the disclosure Brian Eich was pressured to step down as CEO of Mozilla because of his $1,000 donation that was on the list.” The reader would logically conclude the list you are talking about is the Schedule B from the NOM 990. But since only donations of at least $5K appear on a schedule B, that couldn’t be the case. Eich’s donation appeared on the disclosure of the group working to pass Prop. 8 in California.
I’m embarrassed to say that a closer reading of Tax Prof Day 334 would have made me aware of the error. This link was provided
Two days ago, an anonymous tech industry worker wrote a piece about the outrage against Eich at First Things, a journal produced by nonprofit Institute on Religion and Public Life. The anonymous worker stated that Eich’s donation came to light in 2012, “after the Internal Revenue Service leaked a copy of the National Organization for Marriage’s 2008 tax return to a gay-advocacy group.” This information is now being attached and included in coverage on other conservative blogs as well.
But it’s not accurate. The names of donors in the Proposition 8 battle, for and against, have always been public information, even before the election. The Los Angeles Times has a searchable database here. Eich’s name is on it (as is mine—I gave $100 in opposition and ultimately regretted it after seeing the horrible, useless ads they put together to fight Prop. 8). The information came from the California secretary of state’s office, not some IRS leak. This database is not dated, but they were available and were online at some media outlets prior to the 2008 vote.