TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, July 1, 2016

The IRS Scandal, Day 1149

IRS Logo 2Investor's Business Daily editorial, IRS Scandal: No End To Lois Lerner's Lawlessness:

Justice:  IRS official Lois Lerner didn't merely target conservative groups to take away their tax-free status, as first suspected, but also handed over more than a million pages of tax returns to the Justice Department. That's a crime.

It's now apparent, if it wasn't before, that the Internal Revenue Service -- which was created solely to collect revenues due the government, not to persecute the administration's political enemies -- has become a kind of rogue agency.

Its chief, John Koskinen, is being threatened with impeachment for not telling the truth in testimony before Congress. But Lerner, more than even Koskinen, has become a symbol of IRS arrogance and illegality.

As Eliana Johnson of the National Review reported this week, Lerner transmitted some 1.25 million pages of tax returns of mostly Tea Party and conservative groups to the Justice Department in October 2010. In Johnson's words, this was "likely the largest unauthorized disclosure of tax-return information in history."

For some perspective, this took place at the start of a three-year period during which the same groups found their applications for tax-free status inexplicably held up, while those for liberal groups were more or less routinely rubber-stamped.

But the actual transmission of their tax returns as part of a fishing expedition by Lerner is the big problem here -- because she also transmitted IRS Schedule B data, which includes the names and addresses of contributors to those conservative groups. That's a big no-no.

Unfortunately for Lerner, tax returns are nearly sacrosanct under the law. Only an active investigation into criminal acts would allow the IRS to give the tax returns to the Justice Department. And then, by law, Justice would have to specifically request them. They didn't in this case.

By the way, a good-government group called the Cause of Action Institute has been dredging all this information up as part of its ongoing litigation in the case. We wish them luck.

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Comments

So, "experienced career prosecutors and supervising attorneys at the department" did not know about the transmission of the tax returns ? With the White House involved ... they knew they wanted to remain career.

Posted by: Snowbird | Jul 1, 2016 8:16:44 AM

Can the members of the Tea Party and Conservative groups sue Lerner for illegally sharing their information? I'm assuming the tax forms of the 400+ groups who were targeted by Lerner and her co-workers are most likely the victims of her crime.

Posted by: Bittman | Jul 1, 2016 8:39:54 PM

Mr. Bittman: Under IRC 7431, taxpayers whose returns or return information were disclosed illegally can sue the United States for statutory ($1k/ disclosure) or “actual” damages. The damages would be payable from the federal Judgment Fund, which means you and I--and LLerner--would pay indirectly. But first, a violation or violations of IRC 6103 would have to be proven. The facts as presented in most of the news articles suggest the possibility, but not the certainty, of such violations. Moreover, the article digested above incorrectly states (as do most of the articles digested in TaxProf Blog) that DOJ must request tax returns and/or return information before the disclosures can be made by the IRS. Under IRC 6103(h)(3)(A), which is the most common authority for transmitting returns and return information to DOJ, a prior request is not necessary. To this point, we do not know if LLerner’s disclosures described in the media were part of referred cases ((h)(3)(A) disclosures) or if DOJ made a written request ((h)(3)(B) disclosures). Most of the commentary in response to the digested articles here prejudges the case based on insufficient facts and assumes that violations occurred. This is a very technical area of law, however, which has given rise to literally hundreds of reported decisions (and many hundreds more unreported decisions) since the law was enacted in 1976.

NB: IRC 7431 has a two-year s/l, the disclosures occurred in 2010, and articles referring to them have been digested here for at least a couple of years.

Posted by: Publius Novus | Jul 2, 2016 8:10:24 AM

Pubs,

"Most of the commentary in response to the digested articles here prejudges the case based on insufficient facts and assumes that violations occurred."

Or in your case, perhaps willful ignorance or cherry-picking of the facts. If the letter of the law had been followed, we would know exactly why Lerner disclosed *1.25 million pages* of confidential tax return information to the DOJ back in 2010.

Per USC 6103 (p)(3)(C) Public Report on Disclosures:

"The [Treasury] Secretary shall, within 90 days after the close of each calendar year, furnish to the Joint Committee on Taxation for disclosure to the public a report... which (i) provides with respect to each Federal agency, each agency, body, or commission... and the Government Accountability Office the number of (I) requests for disclosure of returns and return information, (II) instances in which returns and return information were disclosed pursuant to such requests or otherwise, (III) taxpayers whose returns, or return information with respect to whom, were disclosed pursuant to such requests, and (ii) describes the general purposes for which such requests were made."

As the National Review article linked to in the previous post indicated, the Joint Committee on Taxation’s 2010 disclosure report does NOT show a request from or referral to the DOJ that matches the one Lerner sent in October 2010.

The law clearly requires that details of disclosures of confidential tax returns be reported, and most importantly WHY such disclosures were made, to the public by the Treasury Department via the Joint Committee on Taxation. And in the absence of any evidence that such reporting actually occurred in this case, any reasonably open-minded person might conclude that it never happened, as required by law.

Of course, you're certainly welcome to maintain your position that the IRS did nothing wrong, despite Lerner later pleading the 5th before Congress, and of course Koskinen making false statements before Congress and presiding over the destruction of subpoenaed evidence. Though in the absence of evidence that the IRS bothered to follow its own disclosure rules as required by law, it's not a very tenable position to take. It's just a little ironic that you cast aspersions on others for allegedly prejudging the issue of IRS malfeasance while you've clearly taken a firm position on the entire scandal that has not and will not change even when new evidence of wrongdoing comes to light...

Posted by: MM | Jul 2, 2016 12:25:46 PM