Washington Times-June 21, 2000
Perseverance triumphs over IRS
By James C. Miller III
Call it another profile in courage. A citizen stands up to
political assaults and government intimidation, pays a tremendous
price, but is vindicated. That citizen is Jeff Eisenach, and his
story needs to be told.
After serving the Reagan administration with distinction
(during which he took time off to get a Ph.D. in economics at the
University of Virginia), Mr. Eisenach aided Pete du Pont in his
presidential effort, and then became a friend and confidant of
former House Speaker Newt Gingrich, eventually serving as
executive director of GOPAC, the well-known Republican political
training organization. In 1993, he left GOPAC and, together with
former Reagan Science Adviser Jay Keyworth, established the
Progress and Freedom Foundation (PFF) to study the relationship
between liberty and technological advance.
PFF's relationship with Mr. Gingrich made the organization a
natural target. It wasn't long before critics were drawing a bead
on Renewing American Civilization, the college course Mr.
Gingrich taught from 1993 to 1995 and which PFF facilitated by
helping with research and distributing materials to the two dozen
or so colleges and universities that offered the course for
credit. Mr. Gingrich's opponents began attacking the course in
1993, before he had even given the first lecture, but it wasn't
until June 1995 that the Baltimore office of the Internal Revenue
Service assaulted PFF.
Mr. Eisenach's initial response to their inquiries was what
he called "aggressive cooperation," and by September he had
provided the IRS with everything its agents had requested and
more. Confident that PFF had done nothing wrong � indeed, PFF's
involvement in the course had been approved by some of the most
venerable tax lawyers in town � Mr. Eisenach looked forward to a
full exoneration.
That was not to be. Instead of closing the investigation,
the IRS decided to go public. Prohibited by law from disclosing
directly even the existence of an investigation, the agents
threatened to achieve the same result by "interviewing" such
"witnesses" as vocal Gingrich critic Rep. David Bonior, Michigan
Democrat, and former Gingrich congressional opponent Ben Jones.
The IRS made no pretense that either Mr. Bonior or Mr. Jones had
any original information about the issues it was auditing, nor
was it coy about the rationale behind its strategy.
Asked why the agency was investigating PFF, one of the
agents was surprisingly frank. "Some animals," he said, "are more
equal than others." On the other hand, the agents said PFF could
avoid all this by simply admitting wrongdoing, giving up its
tax-exempt status, and paying substantial penalties � in other
words, pleading guilty and welcoming capital punishment. Mr.
Eisenach's response was that PFF had not violated a single tax
law or regulation, and was not going to admit otherwise.
Rebuffed, the IRS changed tactics. In 1996, it hit PFF with
a "mega" demand for documents. It declared its audit of tiny PFF
to be under its "Comprehensive Examination Program," a process
usually reserved for major hospitals and university systems, and
which might be described as "autopsy without benefit of death."
Then, to the astonishment of practically everyone, the agents
demanded responses to a questionnaire in which board members and
their spouses were to report every detail of their political
affiliations and activities. PFF continued its policy of
"aggressive cooperation" on the document demands, and even handed
over copies of board members' biographies, but as for the
outrageous invasion of privacy posed by the questionnaire, Mr.
Eisenach told the IRS to go to hell.
The IRS wasn't even Mr. Eisenach's biggest problem in 1996.
By then the "politics of personal destruction" was in full swing,
and a second battle front opened on PFF. The House Ethics
Committee appointed Special Counsel James Cole to investigate Mr.
Gingrich's involvement with the course, and Mr. Cole seemed
determined to find wrongdoing whether any existed or not.
A former prosecutor with no experience in tax law, Mr. Cole
concocted a theory that seemed designed to put Mr. Gingrich � and
Mr. Eisenach � behind bars for tax fraud. Mr. Gingrich's
attorneys, in the meantime, were making the situation worse by
filing statements with the Ethics Committee that, though
ultimately irrelevant, were false. Meanwhile, Mr. Cole made
demand upon demand on PFF for documents and affidavits.
For Mr. Eisenach, those were frightening days. PFF was
suffering badly from the costs and distractions of two
simultaneous investigations. Fund-raising was off by 50 percent.
During summer 1996, the staff was cut in half, but the debts
continued to pile up. By the end of 1996, it wasn't clear that
PFF would survive.
In January 1997, Mr. Cole issued a report to the House
Committee alleging "clear violations" of the tax laws. Wisely,
the committee demurred on this issue and deferred to the IRS
investigation, which went forward throughout 1997 and into 1998.
Mr. Eisenach kept his back straight and let his hair grow
(literally). Cooperation with the IRS in their investigation was
one thing. Admitting a violation of law when none had occurred
was quite another.
In early 1998, the parties engaged in settlement
negotiations. The suggestion was made that PFF give up its tax
status retroactively and pay substantial penalties, but be
allowed to apply for a new tax exemption going forward. It seemed
a relatively painless way out, but after discussions with his
board Mr. Eisenach refused, saying, "We haven't done anything
wrong." Finally, in July 1998, exasperated with Mr. Eisenach's
refusal to cave and apparently doubtful of the legal merits of
its case, the Baltimore office kicked the matter upstairs, asking
the national office for a "technical advice memorandum."
A few months later, the ordeal came to an end. In a 74-page
opinion � the longest ever issued about a tax-exempt organization
� the IRS national office gave PFF a clean bill of health. With
respect to the Gingrich course, the office concluded that the
Foundation's activities "were broadly funded, were consistent
with its stated exempt purposes, were scholarly in nature, and
were distributed broadly and/ or taught in general-curriculum
colleges and universities."
Specifically, the IRS found that the course content was
educational, substantive and not biased toward any political
point of view. The opinion even quoted Mr. Eisenach: "The case
was about whether a political leader can, in the 1990s, undertake
to develop a set of ideas within an academic framework and,
having done so, advocate those ideas in his political life."
This case was about something else as well: a principled
individual's willingness to stand up against the power and
persistence of a misguided state. For those who value freedom and
want to protect it, they have the example of Jeff Eisenach.
James C. Miller III is counselor to Citizens for a Sound Economy
and is a board member of the Progress and Freedom Foundation.
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