The lawsuits from True the Vote and Linchpins of Liberty against the IRS for discriminatory conduct are back on. In a single unanimous ruling from a three-judge panel at the DC Circuit, the dismissals of both lawsuits have been reversed, and the cases remanded back to their district courts. The judges ruled that lower courts erred by declaring the discrimination moot simply because the IRS claimed it has stopped taking discriminatory action. In one case, the court notes that the tax-exempt application hasn’t ever been processed, making such a claim ridiculous (via Hans Bader):

As to element 2, it is absurd to suggest that the effect of the IRS’s unlawful conduct, which delayed the processing of appellant-plaintiffs’ applications, has been eradicated when two of the appellant-plaintiffs’ applications remain pending.

The court notes that the facts of damaging discriminatory conduct are beyond debate — and that the IRS dragged its feet on responding to it even when discovered. Instead, the court notes, they just changed the parameters of the discrimination slightly:

Although the TIGTA reports that some change was made in the criteria in June of 2011, the report goes on to observe that by January 2012, “criteria again focused on the policy positions of organizations instead of tax-exempt laws and Treasury Regulations.” Id. at 7. In the meantime, the employees using these improper criteria delayed, denied, and generally mishandled the applications of disfavored applicants. “As of December 17, 2012, many organizations had not received an approval or denial letter for more than two years after they submitted their applications. Some cases ha[d] been open during two election cycles (2010 and 2012).” Id. at 11.

The audit report is replete with details of discriminatory processing and delay. For example, “[t]he Determinations Unit sent requests for information that we later (in whole or in part) determined to be unnecessary for 98 (58 percent) of 170 organizations that received additional information request letters.”

The IRS claimed that it had stopped doing this, and argued to the district courts that it should be considered a “voluntary cessation” necessary for a mootness finding. The appeals court didn’t buy it:

Here, voluntary cessation has never occurred. The IRS has admitted to the Inspector General, to the district court, and to us that applications for exemption by some of appellantplaintiffs have never to this day been processed. The IRS proudly boasts that “no more than ‘two’ applications for exemption remain pending with the IRS.” Appellee United States Br. in Linchpins of Liberty, at 14. Further, they claim, “the vast majority of the plaintiffs lack a personal stake in the outcome of the lawsuit . . . .” Id. We would advise the IRS that a heavy burden of establishing mootness is not carried by proving that the case is nearly moot, or is moot as to a “vast majority” of the parties. Their heavy burden requires that they establish cessation, not near cessation.

Furthermore, the court found, the IRS argument and the district courts’ findings sets up a catch-22 that’s worthy of the novel of the same name:

The IRS offers a rather puzzling explanation for why the continued failure to afford proper processing to at least some of the victim applicants should not prevent a finding of cessation. That explanation is that the organizations whose applications were still pending “were involved in ‘litigation’ with the Justice Department . . . .” Id. at 27. The Service’s brief further illuminates this point with a footnote explaining that “[u]nder long-standing procedures, administrative action on an application for exemption is ordinarily suspended if the applicant files suit in court.” Id. at 28 n.4. It is not at all clear why the IRS proposes that not ceasing becomes cessation if the victim of the conduct is litigating against it. The IRS position is reminiscent of Catch-22 from the novel of the same name. Under that “catch,” World War II airmen were not required to fly if they were mentally ill. However, anyone who applied to stop flying was evidencing rationality and therefore was not mentally ill. See Joseph Heller, Catch-22 (1971). “You are entitled to an exemption from flying,” the government said, “but you can’t get it as long as you are asking for it.”

Parallel to Joseph Heller’s catch, the IRS is telling the applicants in these cases that “we have been violating your rights and not properly processing your applications. You are entitled to have your applications processed. But if you ask for that processing by way of a lawsuit, then you can’t have it.” We would advise the IRS: if you haven’t ceased to violate the rights of the taxpayers, then there is no cessation. You have not carried your burden, be it heavy or light.

Documents within the IRS show that the cessation is hardly permanent:

The IRS’s response to the Inspector General’s Report further caused the Service to announce that it “specifically . . . has suspended the use of BOLO lists in the application process for tax-exempt status . . . .” Id. (internal punctuation omitted) (emphasis added). And most tellingly, the IRS announced that “[e]ffective immediately, the use of watch lists to identify cases or issues requiring heightened awareness is suspended until further notice . . . .” Id. (emphasis added).

A violation of right that is “suspended until further notice” has not become the subject of voluntary cessation, with no reasonable expectation of resumption, so as to moot litigation against the violation of rights. Rather, it has at most advised the victim of the violation – “you’re alright for now, but there may be another shoe falling.”

It’s not a complete victory; the decision does affirm the dismissal of the Bivens claims, which would have made individual IRS employees and managers legally liable. The agency itself remains on the hook in the lawsuit, though, and the case will get restarted — unless the IRS appeals this decision to the Supreme Court. Given the facts as laid out in this opinion, though, a reversal appears unlikely … while questions might be legitimately raised as to how the two lower courts got it so wrong in the first place.

Addendum: The court’s straightforward recognition that discriminatory conduct occurred must have come as a shock to the Washington Post’s editorial board, which insisted in June that nothing of the kind occurred. Jerome Woehrle wrote at the time that the Post had displayed a remarkable ignorance about the type of tax exemption sought:

A recent Washington Post editorial by the paper’s management echoes this contempt for civil liberties in milder form, acting as an apologist for the IRS’s harassment of conservative groups. It implies that if any such groups were targeted, they probably deserved it, saying that “Nonprofits that may engage in political activity deserve IRS attention, because the government should not be subsidizing political groups through the tax code.” But nonprofits are not forbidden to be “political,” and of those that are “political,” the vast majority are liberal. Yet, according to NPR, the list of targeted groups was “top-heavy with conservative groups”: “282 conservative groups were on the IRS list, about two-thirds of the total number of groups that got additional scrutiny.”

Moreover, the Post’s claim about “subsidizing political groups” has no basis, because the targeting scandal involved 501(c)(4) groups, not 501(c)(3) groups. Contributions to 501(c)(4) groups are not tax-deductible, and in exchange for this loss of a valuable tax benefit, they are permitted to be quite political, although IRS rules say they cannot be predominantly engaged in elections (as opposed to activities like lobbying).

By contrast, donations to 501(c)(3) groups are tax-deductible, and in exchange, they cannot endorse political candidates at all, and are sharply limited in the amount of lobbying they do. But nothing stops a 501(c)(4) like a Tea Party group from lobbying all day long for legislation it believes to be in the public interest. That is perfectly legal under both the tax laws and the IRS regulations, and the IRS thus had no basis for holding up their applications for 501(c)(4) status. As a lawyer notes in a comment at this link, the premise of the Washington Post’s editorial was simply “Wrong,” because “There is no such subsidy to 501(c)(4) groups, because they — unlike 501(c)(3)’s — can’t receive tax-deductible contributions, as the Supreme Court made clear in Regan v. Taxation with Representation (1983).”

There seems to be a considerable amount of ignorance surrounding these cases. Some of it appears to be willful.