The Republican-led House Oversight Committee is launching a new investigation into whether the IRS is turning a blind eye to potentially unlawful political activity by left-leaning nonprofits.
“The Committee on Oversight and Accountability is investigating substantial political campaigning and lobbying by 501(c)(3) tax exempt entities, and the ability of the Internal Revenue Service (IRS) to identify and enforce related violations of tax laws,” committee Chairman James Comer (R-Ky.) wrote in a letter to IRS Commissioner Daniel Werfel on Feb. 14.
His letter focuses specifically on an organization called One Fair Wage, a registered 501(c)(3) nonprofit that advocates that restaurant and service industry workers who are paid only in tips receive a full minimum wage in addition to their tips.
Mr. Comer noted that the Internal Revenue Code (IRC) states that 501(c)(3) may be operated “exclusively for religious, charitable, scientific, testing for public safety, literary, or educational” and related purposes. As noted by Mr. Comer, the IRC goes on to state that 501(c)(3) entities—contributions to which are tax deductible—are specifically prohibited from political campaigning for or against specific political candidates and cannot devote a substantial portion of their time and efforts to lobbying or influencing legislation.
The Kentucky Republican noted that One Fair Wage states on its website that it “is moving legislation and ballot measures in 25 states to raise wages and end subminimum wages for millions of workers.”
One Fair Wage’s lawyers argued that the restaurant group’s wage policies injured One Fair Wage directly because the nonprofit has had to devote its attention to fielding complaints from Darden Restaurant employees, distracting from its “core mission of lobbying and advocating to end subminimum cash wage policies and unmitigated tipping policies.”
U.S. District Judge Edward M. Chen of the Northern District of California also referred to One Fair Wage as an “advocacy organization” in an August 2023 ruling dismissing the lawsuit.
While the statements and activities of One Fair Wage represented the only examples Mr. Comer provided of 501(c)(3) potentially engaging in prohibited political activities, he questioned whether the IRS has scrutinized tax-exempt entities with a neutral political standard.
“A Committee investigation previously found that the IRS systematically targeted perceived conservative tax-exempt applicants for additional scrutiny instead of neutrally enforcing regulations for tax-exempt charities and organizations,” Mr. Comer wrote, noting a 2014 Republican House Oversight Committee report that concluded that the IRS had unfairly scrutinized applicants for tax-exempt status with perceived conservative leanings.
Many of the entities implicated in this heightened IRS scrutiny were 501(c)(4) organizations, which have historically been given greater latitude to engage in political speech and advocacy than 501(c)(3)s. Donations to 501(c)(4)s also cannot be deducted from one’s taxes.
The allegations that IRS officials applied heightened scrutiny based on political leanings had roiled the agency for years and inspired multiple lawsuits, audits, and investigations.
“We are concerned that the IRS may now be engaged in withholding legitimate enforcement efforts as they pertain to activist groups hiding behind their non-profit statuses,” Mr. Comer said.
His letter calls on the IRS to turn over guidance and training materials for IRS employees and contractors dealing with tax-exempt status enforcement. He also called for the IRS to provide any records it has on One Fair Wage specifically. He gave the IRS until Feb. 28 to turn over the requested records.
NTD News reached out to the IRS for comment on the questions and concerns raised by the Republican committee chair, but the agency declined to respond.
NTD News also reached out to One Fair Wage with a request for comment, but the organization didn’t respond by press time.
