Originally published on Forbes.com.
Judge James C. Cacheris has ruled last week (10/16/14) that the National Organization for Marriage is not entitled to the nearly $700,000 in legal fees that it was seeking in connection with its suit against the IRS, which was decided by Judge Cacheris on June 3, 2014. (Decisions are in the District Court for the Eastern District of Virginia. Sorry I could not find free links.) I’m aggravated.
The decision has me aggravated not at Judge Cacheris but at Craig Bergman, the producer and narrator of UnFair: Exposing The IRS. UnFair used a dramatized one-sided version of most of the recent IRS “scandals” to make the case that the income tax should be repealed and replaced with a sales tax (“Fair Tax”) administered by the states. What was really aggravating was that the Fair Tax legislation includes a “sales tax administration authority” which will issue exemption certificates to tax-exempt organizations, which is what is at the heart of most of the scandalous items in the documentary. Maybe a sales tax would be better than an income tax, but “scandals” about granting exemptions that would still exist under the sales tax don’t get you from here to there.
National Organization For Marriage
Included in UnFair was an interview with Brian Brown, who in 2012 drew a salary of $230,000 as President of the National Organization for Marriage, Inc(NOM). NOM is a 501(c)(4) and was the plaintiff in the case. The mission of NOM is to:
..provide for educational outreach and 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.
If that was my goal, I think what I would focus on politically would be to get the economy so that a man graduating from high school would be able to get a job that would allow him to support a wife and some kids. Or if he was going to be a professional to get his education without be under crushing debt. That doesn’t seem to be NOM’s focus. They seem to be mainly worried about marriage being ruined by gay people getting involved in it other than as providers of decorations and music. Maybe a dose of Xanax for gay summer weddings would help them get over it.
Craig Bergman and Brian Brown spent quite a bit of time discussing how bad gay marriage was before Craig made the tax connection that without the Sixteenth Amendment the plaintiffs in DOMA cases would not have had standing to object to DOMA (That’s inaccurate, but we’ll pass on that for now). Finally they got to the scandal. The scandal was that the donor list that NOM attached to its 2008 Form 990 was released. So there is a lawsuit and there needs to discovery, etc. I couldn’t find a clip of the interview but this discussion by Brian Brown in another venue will give you the flavor.
I understand that the interview might have been done quite a while ago. It takes a while to make a documentary, but still it seems to me that they could have put something in to the effect that there was in fact a court decision in June (about five months before the documentary hit the theaters) that found that the worst allegations against the IRS were groundless. At any rate, here is something of a review of the bidding.
The Scandal
A 501(c)(4) organization has to file Form 990. Part of Form 990 is Schedule B which lists large contributors. If you ask the IRS for an organization’s Form 990 they will send it to you, although frankly I just rely on GuideStar. The Schedule B, however, is not public and is supposed to be redacted. So when NOM’s Schedule B for 2008 was made public in 2012, there was a lot of concern. Ironically, the juiciest tidbit that a Romney PAC called “Free and Strong America” donated $10,000 to NOM was publicly available information because the PAC was required to publicly disclose the outgoing money even though NOM was not required to publicly disclose the incoming money. That aspect seemed to go generally unremarked, although there was this tax blogger who noted it.
It gets worse. It turned out that the Schedule B did come from the IRS and it was obtained by someone named Matthew Meisel asking for NOM’s 990. Matthew Meisel was a member of a “gay activist group within Bain and Co“. Apparently Bain prides itself on being gay friendly. Who knew? At any rate Matthew Meisel pleaded the fifth when he was questioned about how he got the form.
Conspiracy or ___Up?
As noted there was a decision in this case in June. The version of the story that Judge Cacheris bought goes like this. Matthew Meisel requested NOM’s 2008 Form 990. Wendy Peters, a clerk in the IRS’s Return and Income Verification Services unit, was tasked with complying with the request. When she sent the form out she neglected to redact the donor information. In other words, she screwed up. She had no idea who Matthew Meisel was or what the National Organization for Marriage was.
The coverage on how credible this conclusion is seems to vary based on what point of view you have. We have from Mark Steyn “Letting the IRS Get Away with It” and from Keen News Service “Judge dismisses most of NOM lawsuit against IRS over disclosure to HRC“” among others.
Of course, there was a judge reviewing the whole matter. I know what you are thinking. Probably one of those liberals nominated by Carter or one of Hillary’s pals nominated by Clinton or maybe somebody nominated by the evil Obama himself with instructions to squash this case. The thought crossed my mind. Only it turns out that James C. Cacheris was nominated by Ronald Reagan. In 2011 Judge Cacheris ruled that the law banning direct political contributions by corporations unconstitutional. For whatever it is worth the Fourth Circuit ruled that he got it wrong. To further complicate the story the defendants in the case were Hillary supporters, but the Republican National Committee filed an amicus brief on their behalf (i.e. RNC thought Judge Cacheris had it right).
So I guess there ends up being enough there to support either “phony scandal” or “successful IRS cover-up” . If it was a thriller you could probably do even better with some sort of elaborate false flag operation engineered by the Bain Capital Gay Mafia for villainous purposes too deep for ordinary mortals to understand. Nonetheless, I think UnFair, which purported to be a documentary should have included something on the decision.
The Latest
The decision on the attorney fees is pretty lawyerly. After Judge Cacheris ruled against the most egregious allegations, the IRS agreed to pay NOM 50 grand for the damage it caused by screwing up. Whether that entitled NOM to recover attorney fees depended on whether NOM:
substantially prevailed both as to the amount in controversy and as to the most significant issue or set of issues presented, and second, because the Government’s position was not substantially justified.
What the “amount in controversy” was was a really complicated discussion, since there was the potential for punitive damages. The judge ended up coming up with over 200 grand in controversy, making the recovery less than 25%, which is not substantially prevailing. In terms of “most significant issue” it was also found that NOM had not prevailed.
NOM argues “the primary and most significant issue in this case was whether the IRS unlawfully disclosed NOM’s 2008 IRS Form 990, Schedule B,” and if so, whether such disclosure was the cause of its actual damages. The Government offers a broader interpretation of the case, arguing that NOM filed this lawsuit to prevent the Government’s “deliberate attempt to chill the First Amendment activity of NOM,” and that the primary issues concerned whether the disclosure was willful, grossly negligent, or part of a bigger governmental conspiracy against NOM. This case presented many significant issues, separate and apart from the Government’s admission as to the single inadvertent disclosure, the majority of which were dismissed by the Court on summary judgment. Accordingly, NOM did not substantially prevail in this regard either.
A Plague On All Their Houses?
The administration could have shed more light on this by granting Matthew Meisel, who is not being prosecuted, immunity. Of course the Republicans investigating Teapartygate could clear a lot of things up by granting Lois Lerner immunity. Looking at NOM, however, you have to wonder what they were up to dumping 700 grand into this case which is entirely tangential to their mission of supporting traditional marriage. NOM grossed $7,207,412 in 2011 and $11,052,833 in 2012, so $691,025 is a lot of money to put into a litigation lottery ticket.
Other Coverage
Coverage on the attorney fee portion of the case just decided has been pretty light and seems to be celebratory on the part of pro-marriage equality groups. “NOM denied HUGE reimbursement of legal fees” is the headline in Holy Bullies and Headless Monsters
Check out Goodasyou for the juicier bit of the transcripts. And The Slowly Boiled Frog points out how this decision is especially embarrassing for NOM. The organization has initially won a $50,000 settlement in the case from the IRS.
Now while I know folks are tempted to dance in the spray of NOM’s monetary humiliation,
What follows is a discussion about NOM’s activities in Russia. Alvin McEwen finishes with
All in all, it’s been a really crappy two weeks for NOM and it’s been my pleasure in helping to bring it to you.
My own view is that we would all be a lot better off, if the IRS and tax policy were declared to be the Switzerland of the Culture War, but that’s probably unrealistic.