WASHINGTON — Dozens of tea party groups and other conservative organizations of the kind subjected to improper scrutiny by the Internal Revenue Service operated with small budgets and rarely displayed overt partisan activities, according to an Associated Press review of public tax filings by 93 such activist groups. A few groups built million-dollar operations and political ties that could have been legitimate grounds for IRS investigation, tax law experts said.
The AP reviewed 990 tax returns for nonprofit groups that were made publicly available and posted on both the Guidestar and the Foundation Center websites, searching between 2009 and 2011 under the terms "tea party," ''patriot" and other terms frequently used by tea party groups. Several tea party groups also made their tax returns available to the AP. The returns detailed revenues and expenses for the groups, as well as other details. Donors' identifies, however, are shielded from disclosure under federal tax code provisions.
Only 21 of the 93 groups reported annual gross receipts higher than $25,000 between 2009 and 2011, according to the AP review. The $25,000 figure is a threshold for the IRS because an organization's financial strength and revenue sources are important factors in determining its tax-exempt status. Nonprofit groups reporting less than $25,000 a year are allowed to file a short-form, postcard tax return instead of a detailed filing — one indication of a low-budget operation.
The median income for all the groups was just $16,700 a year. That figure includes several tea party organizations that boasted million-dollar budgets and a cluster of others with more than $100,000 in annual revenues. The well-funded activist groups were led by the Georgia-based Tea Party Patriots Inc., the nation's biggest tea party group, which started out with more than $700,000 in annual revenues in 2009 and grew to $20.2 million annually in 2012.
Facing IRS delays in tax-exempt status since late 2010, the Tea Party Patriots also set up a separate "super" political action committee last January, a sign of the group's growing campaign involvement. Overt political ties and activity are red flags for IRS scrutiny, tax law experts said, and returns from several groups hint in that direction, including voter turnout efforts and rallies. But while the tax returns of many of the groups reflected interests in fiscal responsibility and other pet conservative issues, there was little clear evidence of direct campaign ties.
Some tax law experts said that if IRS officials had considered finances and political involvement in their oversight of the wave of applications by tea party groups in recent years, the agency could have quickly determined whether low-budget groups qualified for tax-exempt status. The agency's blunder, said former top IRS official Marcus S. Owens, was seizing on every activist group that appeared to have a tea party or "patriot" background.
"The big boys who suddenly look like they won the lottery are the ones who should expect a knock on the door," said Owens, who headed the IRS' oversight of tax exempt groups in the 1990s. He added: "The agency should have applied better filters than looking for every tea party group under the rug."
The tea party tax filings showed that many of the groups reported low expenses. The median yearly expense for the 93 groups was $12,770. That figure also included high-spending groups like the Tea Party Patriots, which showed $17.6 million in expenses in 2011.
The contrast between many of the low-budget tea party groups and the few with big bank accounts was most striking in their spending.
Many tea party groups showed minor payments for basic operations — travel costs, office supplies, insurance, meals and items for rallies.
The Faulkner County Tea Party of Conway, Ark., which earned $7,847 in 2010, listed $570 for senior citizen transportation and $873 for a website and communications. The First Coast Tea Party Inc. of Jacksonville, Fla., noted $14 for cookbook expenses and $101 for Christmas ornaments. The Laurens County Tea Party of Laurens, S.C., which took in $2,400 in income in 2010 and is seeking tax-exempt status, listed $204 for buying T-shirts for members.
Those low-budget expenses also rarely showed evidence of direct political activity. The Faulkner County Tea Party described itself as "nonpartisan," promoting "fiscal responsibility, conservative principles and values in government, at all levels." The group paid $912 for a "meeting facility expense" and $180 in advertising in 2012. Even during the 2010 campaign, the group spent just $162 on a voter guide,
On the high end, Tea Party Patriots lavished $5.7 million in payments to three direct mail contractors and $1.8 million on fundraising and nearly $1.4 million on telemarketing in 2012. The group paid nearly $700,000 to Campaign Headquarters, an Iowa operation that advertises its voter contact phone and GOTV operations. In January, the activist group set up the Tea Party Patriots Citizens Fund super PAC, promising to seek unlimited contributions.
Unlike nonprofits regulated by the IRS, super PACs are monitored by the Federal Election Commission. Following the lead of multimillion-dollar campaign operations like GOP strategist Karl Rove's Crossroads GPS and the Democratic-leaning Priorities USA, large and small tea party groups have pressed for tax-exempt status over the last four years.
Some tea party groups have applied as educational groups under the 501(c)(3) tax code, while many others have sought 501(c)(4) status as social welfare groups. Under IRS rules, (c)(4) groups can be involved in politics if it is not their primary purpose, but (c)(3) groups are banned from most direct political involvement. Under federal law, both tax-exempt nonprofits can seek unlimited donations and do not have to disclose the identities of their donors.
An inspector general's report on the IRS' handling of tea party groups noted that auditors were poorly trained in distinguishing between the nonprofit classifications. "It led to inappropriate enforcement of the tax laws," said Jay Sekulow, a lawyer representing nearly two dozen tea party groups with the IRS.
The Houston-based King Street Patriots organization has been waiting since July 2010 for a decision on its tax-exempt status for itself and an allied group, True the Vote, a leading national conservative group aimed at confronting vote fraud. Catherine Engelbrecht of Richmond, Texas, an official of both groups, complained that she and her husband are not only wrangling with the IRS but have fielded inquiries from other federal agencies.
Engelbrecht said the couple has been contacted in recent months by the FBI's domestic terrorism unit, the federal Bureau of Alcohol, Tobacco, Firearms and Explosives and the Occupational Safety and Health Administration. Her patriots group is well-financed, listing $140,000 in revenue and $130,000 in expenses in its 2010 tax filings. True the Vote listed $64,000 in income and $38,000 in expenses the same year. The 2010 filings were the only recent returns that are publicly available.
The group was at the forefront of conservative efforts to target vote fraud in the 2012 election and said it trained as many as 1 million election monitors. Engelbrecht said her group was nonpartisan, but top Democratic Party election lawyers and activists closely monitored the group's Election Day activities and accused it of close ties with Republican Party vote-suppression efforts.
Engelbrecht said she worries that tea party groups were being targeted by the government.
"I'm very concerned," she said, about a "coordinated effort by the federal government to single out private citizens."