The Wall Street Journal - The New IRS Math

9/20/2000 - The Wall Street Journal editorial on the findings of Edward Coleman, former director of the IRS' exempt organizations division, supporting Landmark's complaint to the IRS about unreported political activity at the National Education Association.

The wheels of Washington's bureaucracy don’t always grind slowly. Within two months of receiving a letter from Democratic Congressman David Skaggs in 1996, the IRS launched audits against both the Heritage Foundation and Citizens Against Government Waste. So it will be interesting to watch what the IRS does with a far more substantive — and well-documented — complaint against the National Education Association. All the more so now that a former IRS officer who has reviewed the case agrees it cries out for a full investigation.

That man is Edward D. Coleman, a 27-year veteran of the IRS’s exempt-organizations function, who served as the division’s director from 1986 to 1990. We reported on this case back in June, when the Landmark Legal Foundation lodged a complaint alleging that the NEA was not reporting the full extent of its political activities. Since 1994, the NEA has reported spending zero dollars for political activities on its Form 990s, the tax form required of all tax-exempt organizations. That’s zero, as in nothing. And this from the union that has consistently sent the largest chunk of delegates to recent Democratic national conventions.

Unlike then-Congressman Skaggs, however, the Landmark people didn’t just make an accusation. They documented it with mounds of supporting evidence, showing that the numbers the NEA reports to the IRS do not square with their own budgets, handbooks and workshops. At the time the initial complaint was filed, the Associated Press quoted two other former senior IRS officers, also with experience in the same exempt-organizations division, that it all looked pretty fishy.

Landmark asked Mr. Coleman to review their complaint. That he has now done. In a letter to Landmark president Mark Levin dated Saturday, Mr. Coleman said he reviewed allegations that the NEA systematically mixed its political activities into all aspects of union activities, that its strategic priorities include political activities, that its UniServ directors (local administrators) were involved in political activities, and that it had engaged in various other political activities that don’t jibe with the "0" the NEA reported to the IRS.

Mr. Coleman goes through these allegations point by point. His conclusion is clear. "In sum," he writes, based on my review of the complaint and supporting exhibits that were filed with the IRS, I think that there is a very strong basis for the IRS to select NEA for an examination. A field examination would enable the IRS to corroborate the extent of the NEA’s political undertakings and expenditures and to ascertain why the NEA has not reported any political expenditures on line 81a of its Forms 990.

"In addition, the IRS should determine why NEA has not filed Forms 1120-POL, U.S. Income Tax Return for Certain Political Organizations, and paid the appropriate tax.

"Accordingly, I concur with your analysis of NEA’s alleged political expenditures and your recommendation of an IRS examination of NEA. NEA certainly appears to have filed inaccurate Forms 990 and neglected to pay taxes on Forms 1120-POL."

Why wouldn't the NEA report these kind of things? Too, this is the union itself and not its PAC. Therefore, any political expenditures reported would be taxable. Even more important perhaps, under the Supreme Court’s 1988 Beck decision — whose enforcement Bill Clinton blocked in one of his first Presidential acts — unionists have a right to a refund of that percentage of their dues that go to political purposes. If no money is reported spent for politics, workers get no refunds.

The NEA responded to our question via e-mail, saying it hadn’t heard from the IRS, noting that Mr. Coleman had been "compensated" for his opinion and citing a May 1999 IRS audit that it says found everything in order.

We wouldn’t presume to judge whether the NEA has in fact violated the law. But surely it’s worth noting that three former IRS officers who are in a better position to judge think Landmark has a good case for an investigation. And in a section titled "facts" in a recent agreement with the AFL-CIO over another election complaint, the Federal Election Commission referred to the 1996 Democratic National Committee campaign as "partially financed by the DNC and national allied organizations such as the AFL-CIO, the National Education Association (NEA) and Emily’s List."

The Landmark complaint with the IRS, of course, does not deal with the NEA’s activities this election year; we won’t know what it reports about campaign 2000 until after the President is sworn in. Meantime, the NEA’s "Strategic Plan and Budget, Fiscal Years 2000-2002," calls for millions in additional spending on political advocacy. We await the roar of criticism from the chorus of campaign-finance reformers over the NEA’s behavior.

In his L.A. acceptance Al Gore himself put his finger on the problem. "So often," he told the cheering crowd, "powerful forces and powerful interests stand in your way." And none more powerful and influential than the teachers union that stands at his side