Before last summer Bruce Bates had no interest in politics. So when he received a notice from the IRS that his marketing and communications firm, Bruce Bates Enterprises, was to be audited, he simply shrugged and began organizing the paperwork. After all, people do get audited, and his one-person business, which he conducts from his home in West Palm Beach, Florida, had nothing to hide.
The audit itself — which lasted three months — changed his outlook completely. It was, in his words, “incredibly brutal.” So brutal, that when at last completed Bates was nearly out of business due to the demands on his time.
“They asked for everything in the book,” Bates told WorldNetDaily. “They wanted floor plans of my house, photographs of my office, a detailed history of my business. I spent all my time trying to comply with all the requests,” he explained, “It was three months of trying to find this little thing or that little thing for them. I had canceled checks and receipts, but they wanted detailed explanations for every one.”
The IRS demanded his phone bills, not just the cover pages showing the amount paid each month, but the 10-15 pages itemizing the calls themselves. Plus they wanted an explanation for every single call, who he called and, ominously, why.
“Bells and whistles started going off at this point,” Bates recalled. “I figured there was a lot more to this than they were admitting.”
After three months of scrutinizing every ink blot in the records, the auditor still had found nothing.
“He allowed all my deductions, couldn’t find any unreported business income, and recommended to his people at the IRS that the audit be closed,” said Bates.
But the case was far from settled. Bates soon learned that the IRS bosses were “furious” at the outcome.
“They said they weren’t going to close the audit, and were going to audit me next year (for 1997) — and they were going to have someone else do the audit,” he said.
For Bates that was “the clincher.” He decided to start his own investigation. The question of whether his audit could have been politically motivated came to mind. Beginning in September 1996, a number of stories had been published in the press indicating the Clinton White House was using the IRS to punish conservative groups and other critics of the administration. Not having much interest in politics Bates had not paid close attention to the allegations. Why would the White House be interested in a 40-year-old marketing consultant, one relatively indifferent to politics?
But Bates had not lived completely out of touch with the political world. During the late 1980s he was director of publications of the National Religious Broadcasters Association. After leaving that organization, he continued to do contract work for them and his name was listed on their masthead for “many years.”
Was this the link? To find out Bates drew upon his expertise developed through years in marketing. He sent questionnaires to a sampling of religious broadcasters asking whether or not they had been audited by the IRS and requesting certain details. The results were astonishing, leaving “no doubt” in his mind that his and other audits were politically motivated.
The returned surveys revealed that one in 11 organizations involved in religious broadcasting are currently being audited, or have been audited within the past five years. Moreover, one out of 20 religious broadcasters were audited in 1997. The IRS itself claims the chances of an individual being audited are one out of 146. From extrapolating the data, Bates estimates that well over 200 religious broadcasters were audited in 1997.
The study further showed that more than half of the audits of religious broadcasters in the last five years were in 1997 alone, indicating a huge upsurge at the very time the IRS has been under congressional scrutiny for conducting politically motivated audits.”
The auditing of religious broadcasters represent one more piece of evidence that the IRS is indeed being used for political purposes — an issue WorldNetDaily has been investigating for the past year.
Last June WorldNetDaily listed 14 non-profit organizations that were under audit or been through the process. In addition, several groups that had received some indication that they were to be audited, and a few whose requests for tax exempt status was delayed were also found. In November, WorldNetDaily found a number of individuals who faced audits for possible political reasons.
Here, an update on some of the cases and a few new ones that have come to light:
The national organization for Christian Coalition still has not received its 501-c-4 status, which it requested in 1990. A 501-c-4 status allows lobbying activities. This leaves the Christian Coalition in limbo as far as the IRS is concerned. The California chapter, which has a 501(c)4, is waiting for its 501(c)3, which it would like to cover its educational efforts.
Former IRS historian and whistleblower Shelly Davis appeared to be headed for an audit, but the threat appears to have lessened for the moment. Davis, author of “Unbridled Power” — a no-holds-barred expose of IRS policies and actions — was sent a letter by the IRS saying she and her live-in boyfriend owed $4,912 in back taxes and interest on the home they own jointly in Manassas, Virginia. They sent a response and the case seems closed. “We did what they wanted,” she says, “and they went away. But I bet they audit me later on,” she added.
Ted Baehr of the Christian Film and Television Commission feels he was let off fairly easily. The audit of his organization took just three-and-a-half days — half a day less than expected. “It could have been a lot worse,” says Baehr.
Indeed, yes. Talk show host Chuck Harder wasn’t so fortunate. As WorldNetDaily reported recently, Peoples Network Inc. which Harder and his wife, Diane, founded in 1989 as a 501-c-3 organization, has been undergoing an audit since the earliest days of the Clinton administration. He believes the IRS was “sicced” on him in retaliation for his outspoken criticism of White House policy and to destroy him and his work. The auditing is scheduled to continue up to the last day of this millennium and could go into the next. After considerable negotiation the IRS agreed to continue the organization’s 501(c)3 status. The present hassle is whether Peoples Network owes back taxes on products they have sold over the years — mostly books, videos, and shortwave radios. Harder argues the latter are integral to the mission of his organization since without them people in many areas of the country would not be able to hear his broadcasts. They should therefore, he says, be exempt. Just like books, videos, and other educational materials.
“Basically, everything that loses money the IRS says is related to their non-profit status, and everything that makes money (like the shortwave radios) the IRS says is not related and they have to pay taxes on it,” says Douglas Perrault, the CPA who dealt with the IRS during the early years of the audit.
Robert Bennington, president of the Las Vegas-based National Audit Defense Network is handling the case for Harder. The Defense Network is an organization of over 1,000 former-IRS agents and directors who assist taxpayers undergoing the audit process. Does Bennington think the Harder audit is politically motivated?
“Let’s say it’s a remarkable coincidence,” he answers. “Especially when you look at the Paula Jones audit, the NRA audit, and all the conservative groups that are being audited — yet there’s no corresponding liberal organizations being audited. They (the IRS) say it’s random and I have no proof it’s otherwise, but I think if you look at the odds of something like this occurring randomly it starts to reach astronomical proportions,” he says.
Speaking of Paula Jones’ case — which the Audit Defense Network is also handling — Bennington points out that the odds of being audited on a given day are 1/365th of one percent chance.
“Paula Jones received an audit notice five days after she turned down President Clinton’s offer for a settlement in the sexual harassment lawsuit,” says Bennington. “The odds of that happening are 5/365th of one percent chance. I’m from Las Vegas — I know about odds.”
Political economist and talk show host Pat Choate was also snagged by the IRS. Choate — who was Ross Perot’s running mate in 1996 — has a small think tank in Washington, D.C., a 501-c-3, called the Manufacturing Policy Institute. Was it his opposition to NAFTA and GATT that drew the attention of the IRS to his organization? Choate doesn’t know. But like so many other critics of White House policy his non-profit was audited.
“Our accountant in our payroll service had made a mistake on two payrolls back in ’94,” Choate recalled. “It’s taken something like three-and-a-half years to get it straightened out.”
His solution was to pay the IRS the $37,000 demanded in back taxes, interest and penalties. He is now suing to get it back — a standard procedure. Ironically, he’s already paid more in legal fees than what he paid the IRS.
A spokesman for Citizens for a Sound Economy has confirmed that the group is being audited but refused to go into details. CSE is the sponsor of “Scrap the Code,” a nationwide tour featuring Dick Armey, R-Texas, and Billy Tauzin, R-Louisiana, debating whether the IRS code should be replaced by either a national sales tax or flat tax. Though declining to speculate on whether the audit was inspired by politcal considerations, the spokesman didn’t rule out that possibility.
“We’re getting a lot of attention and are presenting a couple of serious alternatives to the present system, and I guess the IRS doesn’t like that,” he said. “Is the the audit politically motivated?” he asked rhetorically — “well, people can draw their own conclusions.”
Bates’ report is available on the Internet at http://www.brucebates.com/irs/brdcstrs.htm
