Update: A transcript of this conversation was added to this post.

Last week, ProPublica's Kim Barker and Justin Elliott explained how the IRS sent us tax-exempt applications for nonprofit status from conservative groups.  We also noted some of the dysfunction that exacerbated the problems at the IRS’s Exempt Organizations office in Cincinnati.

In-between those stories, ProPublica editor-in-chief Steve Engelberg sat down with Barker to talk about the burgeoning scandal and ProPublica’s role in it.  The pair discussed who sent the documents to us, whether it was deliberate or a mistake, why we published some of the information, what was Barker’s first thought when she found out she got the Crossroads GPS application and whether we burned a source at the IRS?  On that latter point, Barker told Engelberg, “I’d love to be able to say I have some Deep Throat source in the IRS that sends me stuff – that just isn’t the case.  They don’t even return my phone calls.”

We hope this podcast clears up any questions you might’ve had about the situation. 

Transcript:

Steve Engelberg:  Hi, I'm Steve Engelberg and welcome to the ProPublica Podcast. As most of you know by now, the Internal Revenue Service recently admitted to targeting the tax exempt status applications of some conservative groups. According to an Inspector General's report in the matter, the IRS delayed approval and gave extra scrutiny to groups that had conservative sound names like "Tea Party," "Patriots," "We, The People," or "Take Back the Country."

Last year, ProPublica focused on the ways in which certain groups on the left and right told the IRS they were doing social welfare work but misled the agency about the extent of their political activities. During the course of that series, we made a number of public records requests to the IRS to see tax exempt applications ourselves.

In fact, in December 2012 the IRS sent us applications for Karl Rove's Crossroads GPS and other groups whose applications had not yet been approved and were not supposed to be made public.

Joining us in the podcast to talk about ProPublica's involvement in this story is the lead reporter, Kim Barker. We're going to set the record straight on what we received, how we got it, when it came in, and what we did with it.

Last year, Kim, you were covering the subject of campaign finance. You were focused on the issue of these dark money groups...so‑called "501(c)(4)s." What's dark money mean? What's dark about them?

Kim Barker:  They don't have to report their donors to the FEC. Anybody can cover campaign finance. It's pretty easy to look at the FEC website and to see who's spending money on what, who's giving to who. The groups that I found particularly interesting were these groups that did not have to report their donors. That's really what we spent last year investigating.

Steve:  OK, so a group is a 501(c)(4). They're chartered by the IRS. What makes them special? What's their tax status?

Kim:  Well, chartered by the IRS. Interesting. Interesting point there because they're not, really. You can go out tomorrow, Steve, and form a 501(c)(4) and you don't actually have to be approved by the IRS to do so. A 501(c)(4) is simply a social welfare nonprofit. It is primarily supposed to be involved in improving the public good of the community and making things better. But it also is allowed to do a certain amount of lobbying and it's allowed to be involved in politics as long as it can prove that its primary purpose is, indeed, social welfare.

These groups essentially were allowed to keep their donors secret to the FEC because they were able to say, "I'm not a political action committee. My major thing that I'm doing out here is social welfare."

So the FEC typically might file a letter saying, "Who are your donors?" but then it doesn't really pursue things because the groups come back and say, "We're not a political committee," so they don't have to tell anybody where this money is coming from.

Steve:  OK, let's say I want the IRS to give their stamp of approval to my group. I'm going to start "Steve's Group to Make America Better." I'm going to file an application. Now, that application is going to ask certain things about what? What am I going to have to tell the IRS?

Kim:  It's called a form 1024. This application asks you really basic questions. Who are the people behind your group? What is the primary purpose of your group? What do you plan to do? How will you spend your activities? Divide them up into percentages. Maybe 50 percent on education. Maybe you want to improve the environment. Maybe you want to work on how government works. You can have all these different, vague descriptions of what your primary purpose is. Then they'll go along and ask you, "How much will different people make from this particular organization? How are you going to raise money?" They'll also ask you, "Do you plan to spend money to influence or elect certain candidates for office or not?" You have to answer yes or no to that question.

It's a long questionnaire. You would probably have to hire a lawyer, unfortunately Steve, to actually fill it out properly.

Steve:  OK, so I do that. Now I've got my Steve's Group application in and you're Kim, investigative reporter and you believe that Steve's Group might not be all it says it or maybe we're going to engage in politics. The IRS is looking at my application. Can you ask for it?

Kim:  I can ask for anything I want. They don't have to give it to me, but I can file as many FOIAs as I want to the IRS and ask for certain information. A lot of this is public. As soon as a nonprofit...whether it's a charity or a social welfare nonprofit or a trade association. As soon as they are recognized as tax exempt by the IRS, that document automatically becomes public. In fact, if I go to the actual organization...I show up in person and say, "I want this document," they're supposed to give it to me within 24 hours.

Does that happen? Not necessarily, but the IRS has to release these documents once these groups are recognized as tax exempt. They've got 30 days to do so.

Steve:  So this is a pretty important point. When I, Steve's Group, writes my document it's not exactly the deep, dark secrets of Steve's Group because I know it's going to get made public if I'm approved, right? This is everything I know is eventually going to be on the public record.

Kim:  Sure, which is why you'll have some sort of vague descriptions. They're very interesting for a reporter to look at and to compare what a group told the IRS in the very beginning with what it actually ended up doing later on.

Steve:  You mentioned that you filed these FOIA requests...Freedom of Information Act requests. Now, does the IRS announce to you which groups have been approved?

Kim:  No. In fact, they will send back a response to me saying, "We have no record of the tax exempt status of these particular groups," and then will list them. It doesn't tell me whether a group has actually applied. It doesn't tell me whether a group has actually been denied. It just says, "We have no record of the tax exempt status of this particular group." Then it will send me the applications for the groups that have been recognized.

Steve:  To do your job then it would be typical of you to maybe find the name of a group in the FEC records, the Federal Election Commission records, and then file a request with the IRS to see if they've been approved. That's how you do your job.

Kim:  That's pretty much what I was doing last year. I think the IRS probably got very tired of me sending in one or two requests every month and sometimes two or three a week asking for these particular documents. I must have on my desk...I've got hundreds of these documents there.

Steve:  To be clear on this, because this gets into some of the rather interesting, inaccurate statements that have been made about this. We can go through a few of them here. First of all, the request in question which came back to you from the IRS that's now the subject of some coverage and controversy. When did you file that one? When did you ask for the information?

Kim:  I sent the letter in. It was dated November 15th of 2012. I asked for the applications for 67 different groups that had spent money on the elections according to FEC records. These were the groups I didn't yet have the applications of because plenty of them, obviously with my previous reporting, I already had. I sent in this very long request for applications for 67 different groups that I didn't already have. Then in return, the IRS sent me back information dated November 28th. That included information for 31 of these groups. I believe it was something like 30 applications and one notice that they could not find the application but that the group had been recognized.

I've got information for 31 groups. The other groups? They had no record of the tax exempt status of those groups. That could mean that those groups have applied. It could also mean they haven't yet applied. It could mean their applications are pending.

We really have no idea about those other groups, but I can say that that request included information for conservative groups, for liberal groups, for middle of the road groups. The only criteria I had for requesting that information was groups that had spent money on the election and did not disclose their donors.

Steve:  Just to be clear, in case anyone's forgotten the excitement of last fall, November 15th was after the election, right?

Kim:  It is true. That was actually after the election.

Steve:  OK, because that's been a little bit of a point of confusion. Now, when this material came back to you, was there anything in the material relating, for example, to the confidential donor information as Senator McConnell has suggested? Was there anything of that nature given to you by the IRS?

Kim:  No. I wish. I would love to have confidential donor information. I did not get any of that information. What I got that was confidential were nine applications of groups that had not yet been recognized as tax exempt.

Steve:  Now again, to be clear, these are the applications that will be made public if the IRS ultimately approves the requests. These are applications written by the group expecting them to be made public, correct?

Kim:  Yeah, but they would not be made public if the group is, for instance, rejected.

Steve:  And among them was Crossroads GPS. What was your first thought when you saw a Crossroads GPS document in there?

Kim:  "Holy cow! Crossroads GPS was recognized by the IRS and we are the first journalism outlet to get this. We've got to get this up right away." That was my first reaction because everybody wanted this application. Every journalist wanted this application because this was the group...Remember, the biggest social welfare nonprofit spending on the election in 2012. It spent more than $70 million on the election that was reported to the FEC and millions more on these issue ads that mentioned candidates before they had to reported. It spent a lot of money.

Everybody was very interested in what Crossroads told the IRS when it first applied. I really thought that I had that kind of scoop. That the IRS had recognized them and that we were going to be the first ones to report that.

Steve:  And then what happened?

Kim:  Then I looked for their recognition letter. The recognition letter is typically something that the IRS attaches to the front of these applications. It says, "You are hereby recognized as a social welfare nonprofit," and it is stamped with a date. This application did not have that letter and it did not have that date.

Steve:  Which suggested to you, perhaps, that this had been sent to us in error.

Kim:  It did, because I had never seen this before. Then I looked through all of the applications and I found a total of 12, in fact, that did not have these recognition letters. Then I went through these particular 12 and I called all the organizations to find out whether they had been recognized or not. Many folks didn't get back to me, but Crossroads confirmed our suspicions, which were that they had not been recognized by the IRS as far as they knew.

Now, in doing all the reporting that I did and in going through the IRS database that they've got. It's very cumbersome to use. It lists the different organizations. I found out that only nine of the applications were supposed to be confidential. Only nine of these groups had not yet been recognized by the IRS.

Steve:  Now these groups that we got these applications for that turned out to not be the stuff that was supposed to be given to us in the first place, were they all conservative groups?

Kim:  All nine of those groups were conservative groups. We chose to write two stories. The first story was simply about the Crossroads GPS application and what it said, because it said that it was going to have, I believe, limited political activity. We found that that was interesting to compare what it said on its application with the fact that it spent more than $70 million. Again, this was an application that everybody was interested in. We put that out there. We wrote a story about that. We were very transparent about the fact that we weren't supposed to have this and we even wrote about the fact that the IRS had basically told me that if you publish this, publishing this is a felony and you're risking five years in prison and a $5,000 fine.

What we ended up doing after the advice of legal counsel was redacting financial information because that's the one thing that everybody said, "Well, that could be construed as confidential because they have not yet been recognized by the IRS." So we published the application and we wrote a story about it while redacting the financial information.

Then we did a second story. We did not do a story on all of the other groups that had not been recognized by the IRS, just the ones that had told the IRS on their applications that they would not engage in politics but then turned around and did in 2012. We felt like that was also a story.

As part of that story, we also talked about how we got these documents and the fact that we had been told that we could face five years in prison and a $5,000 fine.

Steve:  I should just point out to our listeners that we did...ProPublica...seek and receive an outside legal opinion which suggested that the IRS's interpretation of this law was not correct and that we had every right to publish this. So far, we have not been accused of any wrongdoing in this matter. Now, these stories were published in December of last year right after we received this material, correct? We made no secret of this.

Kim:  One was published in mid‑December, the one on Crossroads and I'm fairly certain that the other story was published in early January of this year.

Steve:  Now, all of this suddenly came right back into the news again with the revelation that several employees of the office in Cincinnati, Ohio of the IRS that handled this had been improperly targeting groups with the name "Tea Party" in their title. At that point, we decided to come out with another story to remind readers of what we had already said in December and January. What was that story about? Why was it newsworthy?

Kim:  I felt like when I saw what was coming out about the head of the Exempt Organizations Division last Friday apologizing in advance for what was going to come out in this Inspector General's report this week and basically blaming folks in Cincinnati for improperly targeting the Tea Party. It made me look at where we got the documents in the first place from and where we were requesting them from, which was the same office in Cincinnati. It seemed worth it to point out the same office that was now getting blamed for improperly targeting the Tea Party had also been the one that sent us documents that we weren't supposed to get.

Steve:  Did anyone leak to you a document relating to confidential material from the IRS?

Kim:  I was sent, in response, to a public records request applications for nine different groups that were still confidential. I don't know why I was sent them, but I had requested them and they were sent as part of a response to a public records request that also included information on 22 other groups that I had requested information on.

Steve:  There's no evidence that we are aware of that this operation here at ProPublica and Investigative Newsroom, that these documents were sent to us deliberately or accidentally. We have no...

Kim:  We have no idea. I'd love to be able to say I have some Deep Throat source in the IRS that sends me stuff. It just isn't the case. They don't even return my phone calls. Yeah, we have no idea why we got them or how we got them except by the mail.

Steve:  Except by the mail. Essentially what happened is material lands in our office in an official envelope responding to an official request and we write about it. In no way are we burning a source here because we have no source. We have no reason to believe that this was given to us as a kind of leak or a revelation. This arrived through the usual means.

Kim:  I mean, Steve, all we know is we requested the documents and we got them in the mail. That's all we know.

Steve:  Obviously, at this point, from what Attorney General Holder has said, there will be an investigation into, among other things, how those documents ended up in an envelope sent to us and who knows what they'll find.

Kim:  Right. I have no idea.

Steve:  Kim, one of the things that people have pointed out is that in our writing in general on the subject of 501(c)(4)s, we've written about a fair number of conservative leaning groups and not so many liberal groups. Is there a reason for that?

Kim:  Yes, it's because more conservative groups have been using social welfare nonprofits to spend money on politics. In 2012, I believe it was about 84 percent of the money that was spent on the elections by these social welfare nonprofits and anonymous spending groups came from the conservative side. We do write about the liberal groups. What, to me, is interesting about a lot of these liberal groups that have been engaged in this is they don't even bother applying to the IRS. They just go and form a 501(c)(4). They spend money on politics. They file their annual returns that they're supposed to file and they do not apply to the IRS because the IRS does not require these groups to even be approved to operate.

Steve:  That is a fact that you reported at some length in your coverage over the last year.

Kim:  Yes. It is a fact that I've reported many times.

Steve:  That was Kim Barker. To read more of our reporting on this issue, go to ProPublica.org/darkmoney. Thanks for listening. For ProPublica, I'm Steve Engelberg. We'll catch you next time