House Oversight Committee Chairman James Comer is investigating the IRS for going easy on liberal nonprofit groups, saying it appears the tax-collection agency is letting them engage in lobbying and politics despite registering as tax-exempt charities.
Mr. Comer said he’s particularly troubled by One Fair Wage Inc., which pushes for a higher minimum wage for tipped workers and has said in court documents that it does a lot of lobbying and advocacy, both of which are supposed to be severely limited for charities, or 501(c)(3) organizations.
The probe comes a decade after the IRS and then-senior executive Lois Lerner were criticized for unfair treatment of conservative nonprofit groups that the Justice Department later admitted had faced unfair and intrusive scrutiny in their tax-exempt status applications.
Mr. Comer, Kentucky Republican, said the IRS now appears to be going too soft on groups such as One Fair Wage.
“We are concerned that IRS may now be engaged in withholding legitimate enforcement efforts as they pertain to activist groups hiding behind their non-profit statuses,” he said in a letter to the IRS, a copy of which was obtained by The Washington Times.
He told IRS Commissioner Danny Werfel that he wants to see documentation on how the agency trains its employees who handle 501(c)(3) organizations, especially documents related to One Fair Wage.
“Despite restrictions on substantial political campaign activities and lobbying by 501(c)(3) organizations, entities like One Fair Wage, Inc. appear to be primarily engaged in a host of lobbying practices diverting from a charitable mission,” Mr. Comer said.
The Times has reached out to the IRS for comment.
The IRS has struggled with how to handle nonprofits over the years.
The rise of tea party organizations claiming nonprofit status during the Obama administration led to the IRS delaying hundreds of applications and launching investigations, including asking some organization officials about their reading habits and who they associated with.
The IRS scrutiny came as Democrats worried that groups were using tax-exempt status as a workaround to campaign finance laws and pushed the tax-collection agency for action.
With a scathing inspector general’s report looming, Ms. Lerner revealed the IRS‘ illicit behavior using a planted question at an American Bar Association conference in May 2013. Democrats later said liberal groups also faced scrutiny in their nonprofit status applications.
The IRS began years of soul-searching, both about its past actions and about how it wanted to treat nonprofit organizations. At one point the agency proposed new rules to clearly define what is allowed, but had to scrap the idea amid furor over what seemed to be a host of activities that now were supposed to be off-limits.
That has left the agency largely adrift on the issue, and tax experts say audits of nonprofits are very rare.
Mr. Comer says the result has been abuse from groups like One Fair Wage, which “seem[s] to view their charitable work as indistinguishable from their substantial lobbying pursuits.”
For one thing, the group says it is pushing for legislation or ballot measures in 25 states.
It also has been engaged in a lengthy legal battle with Darden Restaurants Inc., which runs chains such as Olive Garden and Ruth’s Chris Steak House. One Fair Wage says that by using an unmitigated tipped wage, Darden is facilitating sexual harassment by making employees dress more suggestively and discrimination in income for Black employees who aren’t tipped as well as White employees.
In its filings the group says its dispute with Darden is taking away from its “core mission of lobbying and advocating to end subminimum cash wage policies and unmitigated tipping policies.”
Mr. Comer said that seems to be pretty clear evidence that One Fair Wage is breaking IRS rules.
One Fair Wage‘s case against Darden was dismissed last year, with a judge saying its claims that Darden’s policies were hurting One Fair Wage‘s lobbying activities were too speculative to sustain the lawsuit. The group has since refiled its complaint.
In the ruling, the judge called One Fair Wage “an advocacy organization.”
The Times has reached out to One Fair Wage.