Dallas Morning News: Nonprofit: IRS audit spurred by DeLay ally was abuse

The Austin nonprofit group whose complaint sparked U.S. Rep. Tom DeLay's indictment on campaign finance charges accused one of his allies of dirty tricks, saying Monday that U.S. Rep. Sam Johnson of Plano used his influence to prompt a tax audit. "It's intimidation," said Craig McDonald, founder and director of Texans for Public Justice, which was cleared this month after a 13-month inquiry into whether it violated a ban on partisan activity by tax-exempt groups. "The IRS has every right to audit nonprofit organizations, but we think this was an abuse." Read the article at the Dallas Morning News

Nonprofit: IRS audit spurred by DeLay ally was abuse

Rep. Johnson of Plano defends action; after 13 months, group cleared
Tuesday, February 28, 2006
By TODD J. GILLMAN / The Dallas Morning News

WASHINGTON – The Austin nonprofit group whose complaint sparked U.S. Rep. Tom DeLay's indictment on campaign finance charges accused one of his allies of dirty tricks, saying Monday that U.S. Rep. Sam Johnson of Plano used his influence to prompt a tax audit.

"It's intimidation," said Craig McDonald, founder and director of Texans for Public Justice, which was cleared this month after a 13-month inquiry into whether it violated a ban on partisan activity by tax-exempt groups. "The IRS has every right to audit nonprofit organizations, but we think this was an abuse."

Mr. Johnson, who serves on the House tax-writing committee that oversees the IRS, wrote the agency's commissioner in mid-2004 urging him to open an inquiry.

"Anytime I have reason to believe someone may be breaking the law, I have an obligation to report it to the responsible authorities," he said.

Mr. McDonald's group drew Republican ire in March 2003, when it alleged that a DeLay-founded committee, Texans for a Republican Majority, had illegally raised and spent $600,000 during the 2002 state legislative campaigns. The GOP won control of the state House and subsequently redrew congressional districts at Mr. DeLay's urging.

The group filed a complaint with Travis County District Attorney Ronnie Earle, who obtained indictments against three DeLay lieutenants and several corporations. Mr. DeLay, R-Sugar Land, was indicted in September, costing him his powerful post as House majority leader. He denies the charges, alleging they are driven by politics.

IRS documents and other correspondence show that in July 2004, Mr. Johnson received a letter from Barnaby Zall, a lawyer with ties to Mr. DeLay, alleging that Mr. McDonald's group had targeted Mr. DeLay "for special partisan attack." He urged Mr. Johnson to use his influence on the tax panel to initiate an IRS investigation.

Mr. Zall did not return calls Monday. Mr. McDonald obtained the letters under federal open records law, and they were first reported in Monday's Washington Post.

Two weeks after receiving Mr. Zall's letter, Mr. Johnson forwarded it to IRS commissioner Mark Everson, mentioning his position on the supervisory committee and recommending an investigation.

The IRS opened an audit of Texans for Public Justice in January 2005 and closed it Feb. 3, when it told the group its tax-exempt status remained intact after a review of 2003 filings.

An IRS spokesman said Monday that that federal law bars the agency from discussing the existence or details of any audit.

The congressman defended his actions, stressing that he left it to the IRS to decide whether and how to investigate.

"Just as if someone told me that a neighbor allegedly was stealing cars or vandalizing homes, I would have to report that to the local police," he said.

Staff writer Jake Batsell in Plano contributed to this report.

E-mail tgillman@dallasnews.com