All I have to say is that it's pure hypocrisy that nobody says jack when the fbi is all over the criminal occupy movement, but when the IRS is taking a closer look at the anti-tax tea party, then everybody's panties get in a bunch.
While I won't try and quote the tax code on this, there is a definitional question at play here. "Engages in politics" is actually a prohibition against making political contributions. There is no rule that I'm aware of that would prohibit a group of like-minded individuals from forming an organization to share their views on political matters, conduct economic research and publicly advocate for change. There are a number of long-standing organizations that do just that - Citizens for Tax Justice (liberal) and the Heritage Foundation (conservative) being two of them...
The Irs on its own amended the law in 1959 to say that social activity had to the primary rather than sole activity. This in itself was unlawful and they had no authority to do it. The law to this day still prohibits ANY political activity.
Not true. That only applies to 501(c)(3) organiztions. "Although 501(c)(3) organization are absolutely prohibited from engaging in political activity, other 501(c) organizations generally may do so as long as that is not their primary activity". That includes 501(c)(4) type organizations.