The IRS program that came to be used against the domestic dissidents of the 1960s was first used against Communists in the 1950s. As part of its COINTELPRO against the Communist Party, the FBI arranged for IRS investigations of Party members, and obtained their tax returns. In its efforts against the Communist Party, the FBI had unlimited access to tax returns: it never told the IRS why it wanted them, and IRS never attempted to find out. In 1961, responding to White House and congressional interest in right-wing organizations, the IRS began comprehensive investigations of right-wing groups to identify contributors and ascertain whether or not some of them were entitled to their tax exempt status. Left-wing groups were later added, in an effort to avoid charges that such IRS activities were all aimed at one part of the political spectrum. Both right- and left-wing groups were selected for review and investigation because of their political activity and not because of any information that they had violated the tax laws.
While the IRS efforts begun in 1961 to investigate the political activities of tax exempt organizations were not as extensive as later programs in 1969-1973, they were a significant departure by'the IRS from normal enforcement criteria for investigating persons or groups on the basis of information indicating noncompliance. By directing tax audits at individuals and groups solely because of their political beliefs, the Ideological Organizations Audit Project (as the 1961 program was known) established a precedent for a far more elaborate program of targeting "dissidents."Page 94-95:
The Special Service Staff: IRS Targeting of Ideological Groups. In 1969, the IRS established a Special Service Staff to gather intelligence on a category of taxpayers defined essentially by political criteria. The SSS attempted to develop tax cases against the targeted taxpayers and initiated tax fraud investigations against some who would otherwise never have been investigated.
The SSS originated as a result of pressure from the permanent Subcommittee on Investigations of the Senate Committee on Government Operations and from President Nixon, acting through White House assistants Tom Charles Huston and Dr. Arthur Burns.According to the IRS Commissioner's memorandum, Dr. Burns expressed to him the President's concern
over the fact that tax-exempt funds may be supporting activist groups engaged in stimulating riots both on the campus and within our inner cities.
The administration did not supply any facts to support the assertion that such groups were violating tax laws.
After the SSS was established, the FBI and the Justice Department's Interdivisional Information Unit (IDIU) became its largest sources of names. An Assistant IRS Commissioner requested the FBI to provide information regarding "various organizations of predominantly dissident or extremist nature and/or people prominently identified within those organizations." The FBI agreed, believing, as one intelligence official put it, that SSS would "deal a blow" to "dissident elements."
Among the material received by SSS from the FBI was a list of 2,300 organizations categorized as "Old Left," "New Left," and "Right Wing." The SSS also received about 10,000 names on IDIU computer printouts. SSS opened files on all these taxpayers, many of whom were later subjected to tax audits and some to tax fraud investigations. There is no reason to believe that the names listed by the FBI or the IDIU were selected on the basis of any probable noncompliance with the tax laws. Rather, these groups and individuals were targeted because of their political and ideological beliefs and activities.