If you thought that the political controversy over alleged IRS targeting of Tea Party organizations was confined to the media, think again – the issue has reached the courts. The Southern District of Ohio recently granted class certification in a lawsuit brought by organizations alleging they were targeted by the IRS. Plaintiff groups, which applied for exemption from federal taxes under 26 U.S.C. §§ 501(c)(3) and 501(c)(4), claim that the IRS improperly flagged their applications as “advocacy” cases and subjected them to unwarranted delays and increased scrutiny because of their conservative ideology. Plaintiffs’ claims included violations of the First and Fifth Amendments and the unauthorized inspection of their tax return information in violation of 26 U.S.C. § 6103(a). The groups sought to certify a class on the § 6103(a) claim made up of all organizations that were targeted during the relevant time period, with a subclass of groups that provided additional information to the IRS in response to unnecessary questions.
The district court determined that the groups satisfied the requirements of Federal Rule of Civil Procedure 23 and certified both the principal class and the subclass. The court found that the class was ascertainable based on IRS records, while numerosity, not challenged by defendants, was also satisfied. As to commonality, the court noted that the IRS had treated the advocacy cases the same, even emphasizing during related investigations that it sought to promote consistency in its review of the applications. Moreover, plaintiffs’ claim would turn on common questions such as whether the IRS had inspected the information for reasons other than tax administration purposes. Next, the fact that different requests for information had been sent to members of the subclass did not defeat typicality, as each request was allegedly unnecessary and led to unauthorized inspections. The court also disagreed with defendants’ claim that plaintiffs were too reliant on their counsel, finding they were adequate class representatives who were sufficiently informed about the lawsuit and would fairly represent the class members’ interests. Finally, the court found the class also met the requirements of predominance and superiority. The possibility of affirmative defenses was insufficient to defeat predominance, and the court determined that a class action was an efficient way of handling the litigation.