ATF and IRS: COINTELPRO also facilitated prosecutions and convictions of Klansmen who violated federal laws under the jurisdiction of the Alcohol and Tobacco Unit of the Treasury Department (ATTU).261 Tampa agents notified law enforcement officials that a Klansman was carrying a concealed weapon while driving, and Bureau executives made inquiries with the Army Reserve to find out if he was buying rifles and perhaps selling them to his Klan associates.262 Mitch Louisiana Klavern leader Howard M. Lee, for example, held a license to sell firearms, but he allowed other Klansmen to sell hundreds of weapons from his stockpile. The FBI notified the ATTU and the Secret Service, about these sales. The ATTU arrested Lee and charged him with violating the Federal Firearms Act. The agency compiled a list of persons who had bought weapons from Lee, and provided it to the FBI. FBI agents then interviewed the purchasers to cause suspicion and infighting among Klansmen.263 FBI investigators attempted to determine the extent to which Klan groups were acquiring and stockpiling weapons, ammunition and dynamite. FBI agents and local authorities arrested one Klansman was arrested, after an FBI source reported that the Klansman “intended to use [dynamite] for bombing purposes.” By 1967, if agents determined that “illegal weapons such as automatic machine guns, illegal rifles and shotguns are being held by klansmen,” they initiated criminal investigations under the National and/or Federal Firearms Act.264
The FBI’s liason with the Treasury Department was not restricted to pursuing gun running. In Tennessee,
information developed through daily Klan investigations concerning moonshine operations [was] immediately disseminated to [Bureau Deletion] Memphis, as well as to interested law enforcement officials in neighboring counties.
The Memphis ATF Agent in Charge then contacted the Bureau before securing warrants for the arrests "to insure that maximum utilization will be made of publicity through local news media." As a result of this combined operation, a feud developed in the Haywood County area. One Klansman lost his beer license, and the arrests "prompted" Brownsville citizens to "have the UKA Headquarters "ousted from the community." After the Exalted Cyclops of the Shelby Klavern resigned, and the unit disbanded, only 25 people showed up for a subsequent UKA rally in West Tennessee.265
Selective enforcement of the federal laws was not a novel counterintelligence tactic. In the early 1920s, federal agents called in by Louisiana’s Governor, had found evidence implicating the Louisiana Klan in a series of murders. When local juries refused to return convictions, Imperial Kleagle Edward Y. Clarke was convicted on a federal white-slave trafficing charge, resulting in a $5000 fine.266 During the Brown Scare of the 1930s, the FBI collected intelligence on domestic fascists, anti-Semitic agitators and isolationists, a group of which were prosecuted on federal Sedition charges.267 Immediately after the war, a federal tax investigation led to the disbanding of the remnants of the Knights of the Ku Klux Klan, the nationwide franchise operation of Klan units since the early 1920s. In the early 1960s, the Kennedy administration used the Internal Revenue Service to investigate “Radical Right” anticommunist groups.268
Under COINTELPRO, FBI agents solicited tax returns of Klan leaders and Klan organizations from the IRS, and put them to use in covert operations.269 The Bureau also forwarded tax information to the House Committee on Un-American Activities, to use in an exposé of Klan financing.270 As a direct result of the Hearings, the UKA banished a Klan robe-contractor. Louisiana Grand Dragon James Edwards, who cooperated with the Committee, was also ousted, while Grand Dragons of Texas and Alabama resigned.271
On FBI request, the Internal Revenue Service conducted selective tax investigations against Klan leaders.272 During fall 1965, an IRS judgment required the ACCA to furnish receipts and pay taxes on an automobile raffle after FBI agents alerted the tax authorities that the Klan had collected money. This caused consternation among Klansmen.273 IRS investigation of UKA officers found  guilty of income tax evasion, resulting in near-complete neutralization of the West Columbia Klavern.274 Such investigatoins forced Shelton to demand that Flrodia and 275
In March 1966, the Internal Revenue Service demanded that the North Carolina UKA pay $2300 in withholding and social security taxes for each UKA organizer who had worked for the order during 1965.276 In Fall, the North Carolina State Tax Unit found that the UKA was not operating as a non-profit organization, and demanded that each UKA unit pay a $10 franchise tax.277In November, the FBI alerted Virginia Governor Mills Godwin Jr., that the Virginia UKA had failed to comply wih laws requiring it to register, collect and remit taxes on retail sales of various items sold at Klan rallies.278