-Caveat Lector- >From Roll Call Online Gingrich Group May Avoid IRS Sanctions After Decision on Progress & Freedom Foundation, ALOF Also Could Be Cleared By Damon Chappie While the Internal Revenue Service has cleared one set of tax-exempt groups linked to former House Speaker Newt Gingrich (R-Ga.), the tax agency has remained silent on another key part of the Gingrich enterprise. The Abraham Lincoln Opportunity Foundation, the charity originally set up to help inner-city youths but which was transformed into a fundraising vehicle to beam Gingrich speeches across the country, may escape IRS sanctions, according to its founder and other tax law experts. A 1996 investigation by the House ethics committee revealed abuses of tax-exempt rules in the operation of ALOF, which Gingrich allies used to fund projects that his political committee, GOPAC, could not afford. ALOF shared the same offices, directors, employees and telephone numbers as GOPAC. Donors were told that tax-deductible contributions to ALOF would count as payments for charter membership in GOPAC, and money flowed freely between the two groups. But the foundation denied any connection to political or partisan groups on its tax returns. In the IRS' ruling earlier this month on the Progress & Freedom Foundation, a successor to ALOF, the agency mentioned ALOF only in passing during a long recitation of the facts of the case. And while it cleared PFF along with the Kennesaw State University Foundation and Reinhardt College for their roles in the production of Gingrich's "Renewing American Civilization" course, the IRS has been silent on ALOF. Howard "Bo" Callaway, the former head of GOPAC and the founder of ALOF, said in a telephone interview that he has heard nothing about ALOF from the IRS. Referring to the IRS ruling on PFF, Callaway said, "It seems to me that the information in there is extremely parallel to what they allege the ALOF did, because the person they were talking about in both cases was the same, Newt Gingrich." If anything, Callaway said he now expects clearance by the IRS of ALOF's activities. "I would expect the same thing. I haven't heard from them and I don't think that at this point I should have heard from them. I wouldn't expect to hear from them." And because ALOF went out of business in 1994, tax lawyers said the IRS may never say anything about it, privately or publicly. Revocation of tax-exempt status -- the sanction feared most by charitable groups -- is no longer a serious threat to a dead organization, although nothing would prevent the IRS from taking that action against ALOF. "Sure they could I guess. Just like you could stab a dead man in the heart," said William Lehrfeld, a tax lawyer who advises conservative-leaning organizations. But University of Miami tax law professor Frances Hill said, "If the service has no curiosity about the Abraham Lincoln group and Gingrich's and Callaway's role, then that goes along with the compartmentalization and the fluffy kind of approach to fact-finding that we see in the other part of this case." The IRS admission that it did not obtain all the facts it needed in the PFF case has perplexed tax attorneys and former IRS officials. Several tax lawyers privately questioned whether the IRS caved in to a series of attacks on different fronts, which included an overhaul of the agency, lawsuits by conservative political groups and a review of political audits ordered by GOP lawmakers. The IRS audit of the Gingrich college course sparked an outcry from other conservative groups, which claimed they were being targeted by the tax agency. In turn, GOP lawmakers initiated a review of IRS audits of such groups by the Joint Committee on Taxation. The decision on PFF reached to the highest levels of the IRS but not to IRS Commissioner Charles Rossotti, according to sources familiar with the decision. Rossotti was recused because of a potential conflict due to his wife's work at a law firm that represented PFF. The Congressional Accountability Project, an ethics watchdog group, has asked the Treasury Department's inspector general to review the IRS ruling to determine whether political pressure was applied. In a Feb. 16 letter to Larry Rogers, the Treasury inspector general for tax matters, CAP Director Gary Ruskin questioned why the IRS decided such an important case on an incomplete record. In its ruling, the IRS said the House ethics committee blocked access to transcripts during its probe. IRS officials refused to comment on the case at all and also declined comment on the request for an IG investigation. Other tax experts said the IRS' reluctance to fully investigate the case of PFF was unusual. "It is strange to me that they didn't do an independent review," said Milton Cerny, a tax attorney with Caplin & Drysdale who headed the IRS exempt-organization section for 28 years. The IRS said crucial testimony that may have made the difference was withheld from the agency, including a transcript of testimony by a close friend and adviser to Gingrich. But the IRS has not disclosed why it did not seek the information on its own, as required by its procedures. According to the IRS handbook for agents conducting such an audit, "You are expected to pursue the examination to the extent necessary to ensure that all significant items necessary for a proper determination of exempt status can be made." Cerny added that he was "mystified about why the service downplayed Gingrich's status as a candidate. It seems to me there was a lot of evidence suggesting that he was using the course to address an electorate audience." Other tax lawyers who studied the case also pointed to the IRS' minimizing of evidence uncovered by the ethics committee and its outside counsel, James Cole. In a March 29, 1993, memo, Gingrich stated that one of the goals of getting Republican activists committed to "Renewing American Civilization" was to set up workshops built around the course. And that is exactly what PFF did, which critics challenged as improper political activity by a non-profit. "They sure ignored a lot of evidence and they were very cute in saying there was a lot of evidence they couldn't get their hands on," said Gail Harmon, a tax attorney. Greg Colvin, a San Francisco tax lawyer and chairman of an American Bar Association panel on charities and politics, agreed. "I was quite surprised at the lengths [the] IRS went to downplay, if not outright disregard, the relevance of Gingrich's statements." Colvin also questioned the lack of focus on Gingrich's role in fundraising for the course with the tax-exempt groups. "The IRS speaks of his role as a teacher but not as an agent of fundraising," he said. The IRS ruling also marks a major shift in that the agency for decades focused heavily on a charitable group's intent in engaging in political activities. "What is revolutionary about this is that they have always talked about intent in a very very fuzzy way. I think they have made it clear that there is very little evidence of intent that they will look at," Harmon said. For Jeffrey Yablon, the lawyer for PFF who handled the IRS audit, getting the tax agency out of analyzing intent has been a long-term goal. Yablon has long argued that intent should not matter. For example, he points to a tax-exempt group that launches a voter registration drive in poor, minority areas. If the IRS focused on intent, it may discover that the reason for the drive was to help the Democratic Party and it would have to deny tax-exempt status. Yablon disagrees that the IRS ruling breaks new ground, but more than a half-dozen tax lawyers said the IRS has shifted significantly. Lehrfeld, who advised Gingrich during the ethics case, said the IRS ruling "is interesting because the gist of the memo basically takes all of the hyperbole and innuendo out of the case that Jim Cole made and treats the stuff done by [PFF] as having the most importance. And then it gives little or no credence to some of the stuff done by bystanders, including one Newt Gingrich." "This is really a breath of fresh air because what it says is that no one else can speak for the tax-exempt organization." Gingrich, even though he taught the course and was the only individual broadcast across the country by satellite, never tied himself to the tax-exempt groups in a formal manner. Instead, former aides on his Congressional and campaign staffs set up and ran the Progress & Freedom Foundation. Lehrfeld said, "This means that you actually have to be on the board or be an officer or have a contract for you to be able to speak with authority for what the organization is." So despite Gingrich's overtly political statements in his speech and other documents, because he wasn't a formal officer, his comments did not impact how the IRS viewed PFF. Other tax layers said that will create an opening for politicians to create stealth tax-exempt groups that do their bidding but have no formal, direct ties to them. Lehrfeld also noted the IRS has now narrowly construed its own victory in the 1989 U.S. Tax Court decision on American Campaign Academy. The case, which also involved Gingrich, has been one of the principle milestones in this area of law and has been cited in many other cases involving charities and politics. Indeed, the ruling in that case persuaded at least one of the GOP ethics members at the time, the now-deceased Rep. Steve Schiff (R-N.M.), to go against Gingrich. <Picture: Back To Top>back to top news scoops � politics � commentary � policy briefings roll call files � classifieds hill directory � let's discuss � about roll call � home Copyright � 1999 Roll Call Inc. 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