Redacted History: Tax Privacy and the KKK

By Sam Brunson

Tax Lien by Nick Youngson, CC BY-SA 3.0, Alpha Stock Images, Original image at The Blue Diamond Gallery.

A year and a half ago, I learned that in the 1940s, the IRS revoked the Ku Klux Klan’s tax exemption and sued it for almost $700,000 in back taxes. Two years later, the IRS filed a tax lien against the KKK’s assets. While that may not have been the death blow to the 1920s iteration of the KKK, it was certainly part of the death blow.

I’ve since learned a lot more about the whole story, including how the KKK could claim exemption in the first place. I’ve read dozens of contemporary (and retrospective) newspaper articles about the revocation. Heck, I’ve read through a couple Stetson Kennedy archives. I’m dying to write an article about this piece of history.

There’s only one problem: I don’t know why the KKK lost its exemption.

I mean, I have my ideas. And I could make a persuasive case the it lost its exemption for one of two reasons. But right now I can’t say for certain why the KKK lost its exemption. Journalists at the time didn’t seem particularly interested in the precise legal grounds for revocation. And section 6103 means that the IRS is no help.

Broadly speaking, section 6103 prevents government employees from disclosing any tax returns or tax return information. The current privacy rule was enacted in 1976, in response to the public’s discovering that President Nixon (and prior presidential administrations) had misused taxpayer information for political purposes.

And what does a privacy rule enacted in 1976 have to do with the KKK’s loss of its exemption? The IRS maintains that information about the KKK’s loss of exemption is return information, and that it can’t disclose the information. (How do I know? I’ve had two FOIA requests rejected so far.) It even maintains that information regarding the public lien it filed is subject to section 6103, and that if I want the (again, publicly-filed) lien, I can only get it where it was filed.[fn1]

Actually, the IRS wasn’t quite so categorical: it would be happy to give me the information if I can get signed permission from the taxpayer in question.[fn2] Which is the KKK. The KKK that disbanded in 1946, and therefore does not exist. The KKK led by James Coldescott, who died four years after disbanding the KKK. To get access to the information, I need signed permission from an organization that has not existed for the last 73 years,[fn3] an organization whose leadership and members are all dead.

If this is the case—and it appears to be the case—the privacy rules of section 6103 are overbroad and are harmful.[fn4] They’ve essentially created a black hole in history. I don’t have any illusions that understanding why and how the KKK lost its tax exemption is critical history, but it does represent an important (and poorly-understood) moment in the past, a moment with at least some resonance to today’s world. But as long as section 6103 exists in its current form, this part of our history is lost to us. And it could well be more than just the history of the KKK. There may be other important historical facts lost and irretrievable in the IRS’s archives. There may be other black holes that we cannot see, not because of the destruction of history, but because of the impenetrable nature of section 6103. And that’s a shame.

(BTW, if there’s anyone out there reading who has a copy of the IRS’s decision-making process in revoking the KKK’s exemption, like among a grandparent’s papers or in the back of a used book you bought or something, I’d be eternally grateful if you’d pass it on! My contact information is here.)

[fn1] The Fulton County Superior Court in Georgia, fwiw. Which I suppose I’ll have to visit next time I’m in Atlanta.

[fn2] With its second rejection, the IRS FOIA agent even sent me a hard copy of Form 8821, the Tax Information Authorization.

[fn3] That’s not to say there hasn’t been a KKK in the last 73 years; there was, unfortunately, a successor Klan shortly after the second-wave Klan disbanded. But it was a separate taxpayer, and couldn’t give permission to access the earlier Klan’s tax return information.

[fn4] I’m planning on writing an Essay on the subject of the overbreadth of these post-Nixon tax privacy rules, with a couple recommendations for how we can roll them back while still respecting the legitimate privacy interests of taxpayers.

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