(The Center Square) – For an Ohio-based nonprofit think tank, a federal appeals court hearing this week was both legal and personal.
In 2013, The Buckeye Institute opposed Medicaid expansion in Ohio. Soon after taking that position, “our organization was selected for audit by the Internal Revenue Service,” the organization said.
Some donors to the institute worried that they could also be subjected to “retaliatory individual audits,” the institute said.
That prompted some donors to stop giving, while others shifted to smaller, anonymous donations.
In late 2022, the institute filed a federal lawsuit challenging the requirement to disclose the names of its donors, calling it a First Amendment free speech violation.
The following year, a federal judge ruled against requests for summary judgement for both The Buckeye Institute and the IRS, which appealed.
The Sixth Circuit Court of Appeals heard oral arguments this week.
“Do you think that plaintiffs like Buckeye should have any concern that their information might be misused?,” Judge Chad Readler, asked the federal government’s attorney, Michael Weisbuch.
During the administration of former president Barack Obama, there were allegations that the IRS was targeting certain organizations, Readler said.
“The Department of Justice later acknowledged that, apologized for it,” the judge said.
The concerns are legitimate, Weisbuch said.
“I think weaponization of the tax law is a problem that we’ve seen,” the attorney said. “I think for this specific disclosure requirement, it’s less of a concern.”
The IRS could still audit The Buckeye Institute, even if there was no requirement that it disclose its donors, Weisbuch said.
“[Buckeye] is not challenging the IRS auditing authority,” the attorney said.
Brett Nolan, an attorney representing The Buckeye Institute, said the IRS disclosure requirement could have a “chilling” effect on donors. The information from donors collected by the government and stored on its databases could be leaked to the public, the attorney told the judges.
“A donor that has associated with Buckeye might face effects from that,” he said.
Those could include harassment, reprisals and social ostracism, he said.
Although one purpose of collecting the data from donors is for detecting fraud, Nolan cited an IRS presentation from 2018 where the IRS said it lacked the ability to use the information for systematic fraud protection.
“That is new information, evidence that we have obtained,” Nolan said. “There might be more out there.”
