'Phony scandal'? How the IRS targeted a Virginia Tea party farmer

This is a rush transcript from "On the Record," July 25, 2013. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: A Virginia farmer and Tea Party member says she knows firsthand that the IRS scandal is very real. Martha Boneta says the IRS is targeting her. She joins us. Martha, we read about your story in The Washington Examiner. You're a farmer out in Virginia, is that correct?


VAN SUSTEREN: All right, and now -- Paris, Virginia. All right, what happened?

BONETA: Well, you know, it was my childhood dream to be a farmer and I started farming. I never imagined that, you know, trying to fulfill my dream would involve so many hurdles with, you know, government overregulating. And they actually cited me for having a birthday party on private property for eight little girls.

VAN SUSTEREN: All right. That's the -- that's the county.


VAN SUSTEREN: So if I get it right, is that the -- there's an environmental group. You have an organic farm.


VAN SUSTEREN: But an environmental group and the county were the ones who were sort of going after you and giving you a hard time on a birthday party and some other things on your farm.

BONETA: That's correct.

VAN SUSTEREN: And at some point -- that's still going on, your sort of dispute or turf war with them?


VAN SUSTEREN: At some point, though, all of a sudden, the IRS decides to audit you.

BONETA: Yes. And as it's been reported, what was unusual and unique about this is that one of the officials in my county had disclosed that I was the subject of an IRS audit to more than one individual in my county before I ever even received the audit.

VAN SUSTEREN: So he -- so -- do you have any idea how this official in the county knew about the audit before you knew about it?

BONETA: That's all, you know, part of the investigation right now.

VAN SUSTEREN: And in fact, the IRS -- there's an IRS watchdog looking at this, right, or Treasury?


VAN SUSTEREN: Now, in terms of the audit that you had, what kind of questions were they asking you in the audit?

BONETA: A lot, a large volume of questions. What was unique about this is that some of the questions were directly pertaining to the issues that I had with the county.

VAN SUSTEREN: All right, now one of the things the county was upset about, at least (INAUDIBLE) made some allegation you were running a boarding house or (INAUDIBLE)

BONETA: Correct.

VAN SUSTEREN: Were you running a boarding house there?

BONETA: No. Not at all.

VAN SUSTEREN: Ever running a boarding house?


VAN SUSTEREN: Why did they think you were running a boarding house, or why did they accuse you?

BONETA: That's a very good question, and that was -- that's what made the audit itself unique because the questions were about a boarding facility, whether I had a boarding operation.

VAN SUSTEREN: All right, so you have the county asking you or accusing you of having a boarding facility. You said you don't have one. And then suddenly, you have an IRS audit, and they ask you about a boarding house. Now, in your IRS -- in your tax return, did you ever take any deductions or get any -- or any income reflected for a boarding house?

BONETA: No. Not at all.

VAN SUSTEREN: OK. So this idea of the boarding house comes totally out of -- out of the air.

BONETA: Correct.

VAN SUSTEREN: Just that other than the fact that the county is asking you the same questions.

BONETA: Yes. That's correct.

VAN SUSTEREN: Is there -- is there anything else that -- about the IRS investigation that was peculiar?

BONETA: Of course, the volume of questions was absolutely enormous. And you know, an auditor did come to the farm and ask me questions while I put eggs into egg cartons.

VAN SUSTEREN: So this is -- so this is a -- how many acres do you have at this farm?

BONETA: Shy of 70.

VAN SUSTEREN: And it's organic.


VAN SUSTEREN: And you do farm it yourself or do you have help?

BONETA: Yes. Well, we farm it ourselves and we do have, you know, people that help us.

VAN SUSTEREN: And how do you get -- how do you sell your products?

BONETA: Well, until, you know, recently, people would come to the farm with their families and they would, you know, collect their vegetables and their eggs and their honey, and that's what we did, and you know, before the county came in and started overregulating it and imposing all of these restrictions.

VAN SUSTEREN: You're a Tea Party member. What's your affiliation with the Tea Party movement.

BONETA: Well, I am a member of the Tea Party, and I'm affiliated with a number of Tea Party groups, you know, throughout Virginia. And you know, most of all, you know, I think that this issue not only affects, you know, Tea Party members, but I think it affects all -- all Americans because nobody should have to live in fear of being targeted because of who they are or what they stand for and what they believe in.

VAN SUSTEREN: Have you ever been audited before?


VAN SUSTEREN: This is your first time.

BONETA: Uh-huh.

VAN SUSTEREN: Is there anything peculiar about your tax return? Is it complex?

BONETA: I mean, other than the fact that I have a farm, I don't know that there is anything else particularly unusual about it.

VAN SUSTEREN: Martha, was it -- has it been terrifying or scary?

BONETA: It's absolutely terrifying. It's terrifying to know that my -- that my IRS audit, my personal private tax returns were even disclosed publicly by somebody before I even became aware of the audit. And the process has been absolutely terrifying for me and my family.

VAN SUSTEREN: And I should say they're denying that -- they're saying it's just a mere coincidence.

BONETA: Yes. They say coincidences do happen.

VAN SUSTEREN: Meanwhile, the -- at least the Treasury IG -- the Treasury inspector general is looking into it.


VAN SUSTEREN: Well, good luck, Martha.

BONETA: Thank you.

VAN SUSTEREN: There are -- you know, there's a lot of complaints about the IRS these days. We're hearing more and more. Nice to see you.

BONETA: Thank you. Nice to see you.

VAN SUSTEREN: And the president of Linchpins of Liberty saying the only thing phony about the IRS scandal is the Obama administration's response. Kevin Kookogey is -- joins us. Kevin, nice to see you. I should say Kookogey. I always get your name wrong.



KOOKOGEY: Oh, that's all right. It's not an easy one.

VAN SUSTEREN: I know, but you know, I've actually...

KOOKOGEY: Thanks for having me back.

VAN SUSTEREN: I actually practice it, which makes it worse, you know, that I make the mistake. All right, tell me, what do you think -- what's your response to the president saying that this -- these are phony scandals?

KOOKOGEY: Well, as you said, the only thing phony is the administration's response because they continue to pretend that they have not violated our constitutional rights. For almost 31 months now, the IRS has unlawfully delayed and obstructed my application for tax-exempt status. They are conditioning our rights on how we choose to exercise them. And the IRS continues to insist that I disclose the identity of the students that I teach, some of whom are minors, the locations where I teach them, and my political views on almost everything possible.

VAN SUSTEREN: Has anything changed since the last time you were here on "On the Record"? I mean, has there been any sort of progress in terms of the -- of your getting the exemption, or has -- have any of your business interests been -- had any sort of impact as a result of this?

KOOKOGEY: Well, unfortunately, there has been a huge -- a huge problem with my business in that on June 5th, 2013, which is, incidentally, the day after I last appeared on this program and the day after I testified before Congress, I received a call from one of my dear friends, a long-time client, who expressed such uncomfortableness with my speaking on these political views that they decided that it was no longer appropriate for us to be in business together. So that was 75 percent of my family's business.

And if there's something I'd like to say to the administration, is I would like them and Jay Carney and the president himself to tell my family that this is phony.

VAN SUSTEREN: Well, the president said on May 15th -- I'll quote from him -- he says, "I have reviewed the Treasury Department's watchdog report and the misconduct that is uncovered is inexcusable."

Now, I don't know what happened between the inexcusable on May 15th to yesterday and today, where now he says it's phony. So I don't know what happened in between. Any thoughts?

KOOKOGEY: Well, he's contradicted himself, as you pointed out. And fortunately for us, Greta, the truth does not depend on what Barack Obama says it is. The truth exists separate and apart from that. And if he doesn't master the truth, the truth will master him.

VAN SUSTEREN: How painful is this to you?

KOOKOGEY: Well, of course it's painful in the way that it has affected my family, it's affected my business. Remember, before, I had explained that I've also -- as I testified before Congress, I had lost a $30,000 grant.

But in addition to that, when you speak the truth without regard to the consequences of speaking that truth for yourself, the inspirational part is that it gives voice to the concerns of many people. And I received after my testimony over 200 emails from people all over the country and including China and Poland who were excited that I was standing up for what I believe.

So yes, there's the negative side, but there's also the positive side that someone is standing up. And I'm not the only one, but we're definitely -- there's a group of us who are standing up together, and that gives us strength in numbers.

VAN SUSTEREN: Kevin, thank you very much for joining us. And I'll practice again on your name. I hope I do better next time.

KOOKOGEY: Thank you so much, Greta. I appreciate it.