Center on Corporate Responsibility, Inc. v. Shultz

The Center on Corporate Responsibility, Inc. (center) (plaintiff) was a nonprofit corporation focused on increasing corporate social responsibility. The center applied to the Internal Revenue Service (IRS) for a letter ruling granting the center tax-exempt status. The IRS indicated that it would likely grant a favorable ruling if the center ceased to engage in corporate proxy contests. The center amended its application to state that the center would not include proxy contests among its advocacy activities. After an atypically long delay, the IRS issued a ruling denying the center tax-exempt status, citing, counterfactually, the center’s engagement in proxy contests as the sole grounds for denial. The center sued the government (defendant) to challenge the ruling. The litigation uncovered substantial evidence of interference from the White House in the IRS’s processing of the center’s application, including memoranda citing the White House’s desire to use IRS administrative actions against so-called left-wing or antiadministration institutions. Moreover, the government’s briefs to the court justifying denial of tax-exempt status to the center relied on novel interpretations of the relevant legal precedents. The district court issued multiple demands for White House records, to which governmental agents responded with productions substantially narrower in scope than that called for in the demands. Eventually, the court elected to rule on the merits of the center’s complaint despite the government’s failure to produce the requested documents.