The IRS and the Legion audits
The American Legion is raising concerns about also being a victim of IRS targeting, prompting a Republican senator to demand answers from the agency.
The veterans’ service group says it recently learned about a so-called IRS “audit manual” that requires American Legion posts to keep dates of service and member records or perhaps face a $1,000-a-day fine, according to The Daily Caller.
Our National Judge Advocate, Phil Onderdonk, was actually quoted extensively in the original Daily Caller piece:
“The American Legion has recently learned of the so-called IRS ‘audit manual’ and is concerned that portions of it attempt to amend statutes passed by Congress and approved by the president,” American Legion legal counsel Philip Onderdonk, Jr. told The Daily Caller.
“Resolutions recommending action by the Legion’s legislative division on two of the most egregious sections of the IRS document are being presented for a vote by members at The American Legion’s annual national convention in Houston [this] week. If the resolutions are adopted, the Legion will be empowered as a body to urge correction of the veterans service organization-related portion(s) of the IRS manual and suggest congressional review of the entire 38 section IRS document,” Onderdonk said.
First, let’s go back to what is actually happening here. According to the US Code for Veterans Service Organizations, codified under 501(c)(19), in order to qualify, posts must have
at least 75% of the members are past or present members of the U.S. Armed Forces and that at least 97.5% of all members of the organization are past or present members of the U.S. Armed Forces, cadets (including only students in college or university ROTC programs or at armed services academies) or spouses, widows, widowers, ancestors, or lineal descendants of any of those listed here…
There are other requirements, but that is the one chiefly at play here. (It is a two pronged test, with the other prong being the “purposes requirement” which no one is alleging we are violating.)
Now, the way this has always been done in the past is that the IRS would get access to the Membership List for a Post, and then do interviews or research to ensure that this requirement threshold is met. The big change here is that without telling anyone, the IRS changed their “Field Examination Guidelines” to require that individual Posts had to maintain the “membership applications, DD Forms 214, or other discharge documents.” The problem here is that, because Posts had no prior warning that Posts needed to keep the DD214’s, it’s virtually impossible to go back, mid-Year on our memberships, and get those documents. The usual way this is done is that the Post Adjutant confirms that the individual is qualified for Membership, and then either returns that documentation or destroys it. The reasoning on this is fairly obvious; most posts do not have the ability to secure such documentation, and no one wants to leave a trove of personal information unsecured.
As Judge Onderdonk presciently predicted, there were numerous resolutions passed at convention this year.
(Note, this second one is pretty big. It resolved that Congress should either drop the requirement or “provide clarifying language that the minimum percentage be based upon the aggregate enrollments based on the entire national organization of the veterans service organization rather than on a local community-based post.”)
I’m sure I will have more in the near future as Congress and the IRS move on this.