TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Tuesday, February 14, 2017

The IRS Scandal, Day 1377:  Republicans Still Want IRS Chief's Head

IRS Logo 2Washington Examiner, Republicans Still Want IRS Chief's Head:

Ways and Means Committee Chairman Kevin Brady, R-Texas, became the latest GOP lawmaker to call for IRS Commissioner John Koskinen's head.

"Frankly, in my view, he's the most corrupt IRS commissioner that I've ever dealt with," Brady said on Monday. He "continues … to mislead Congress, and until he's removed, I don't think the IRS will ever regain its credibility.

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February 14, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Saturday, February 4, 2017

The IRS Scandal, Day 1367:  White House Mum On Fate Of IRS Boss Koskinen

IRS Logo 2Newsmax, White House Mum on Fate of IRS Boss Koskinen:

The fate of controversial Internal Revenue Commissioner John Koskinen at the hands of President Donald Trump remained uncertain as of Thursday.

At the regular briefing for reporters at the White House, Newsmax reminded Press Secretary Sean Spicer numerous House Republicans recently met with Vice President Mike Pence and urged him to tell the President to sack the controversial IRS boss.

"Had Pence brought their intentions to the president and, if so, what was the fate of Koskinen?" we asked.

"I have nothing to update you on," replied the president's top spokesman.

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February 4, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Thursday, February 2, 2017

The IRS Scandal, Day 1365:  55 GOP Members Of Congress Ask Trump To Fire Koskinen

IRS Logo 2Letter to President Trump (Jan. 30, 2017):

Dear President Trump,

The consideration of the impeachment of IRS Commissioner John Koskinen in the House in late 2016 was a clear indication that Congress and the American people have no confidence in Commissioner Koskinen or his ability to discharge his duties.

The IRS, through its targeting of citizens for their political beliefs, has forfeited the trust of a free people. The IRS has admitted to improperly targeting conservative groups, delaying applications for tax-exempt status from 2010-2012, with at least 75 groups selected for extra scrutiny. Moreover, in August 2016, the D.C. Circuit Court of Appeals ruled that the IRS had yet to demonstrate that officials have definitively ceased targeting conservative groups. The ruling came at the heels of evidence that two targeted conservative groups continued to have delayed applications for tax-exempt status pending at the IRS.

Congressional investigations, hearings, and actions have shown that Commissioner Koskinen misled Congress, obstructed investigations into the IRS, and failed to comply with Congressional subpoenas. Commissioner Koskinen's willful deception and obstructionism has only further eroded any remaining confidence.

Pursuant to 26 U.S.C. § 7803, you have the authority to remove Commissioner Koskinen. We encourage you to dismiss him in the most expedient manner practicable. Such an action would restore the credibility of our Federal tax authority and the faith the American people have in their Constitutional rights to free speech and association.

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February 2, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Tuesday, January 31, 2017

The IRS Scandal, Day 1363:  The Final Chapter On The End Of My Daily Coverage

IRS Logo 2Peter J. Reilly (Forbes), IRS Scandal Daily Coverage The Final Chapter:

Last week, Paul Caron, the TaxProf, dean of the tax blogosphere, called an end to daily coverage of "The IRS Scandal" on Day 1352.  This was 552 days beyond the point that I had opined that the series had "jumped the shark". To be clear, I was not suggesting that the Prof stop covering the scandal, just that there be an occasional day here and there on which there was nothing to report.  So it just took another 552 posts for that to happen.  It is worth noting that there were more Happy Days episodes after Fonzie jumped the shark than before, so maybe it was not such a bad call on my part.

Regardless, in order to make case for shark jumping I went through the series in two posts which are here and here.  For the sake of completeness I thought it would be nice to go through the rest of the series to see how it is that the Prof managed to keep it going for over a year after my shark jumping call.  Over a year ago, on Day 943, Professor Caron indicated that he was running out of material and it might be ending soon.  Things changed on Day 984.  He had thought that it might end at 1,000, but the certification of a class action lawsuit - NorCal Tea Party Patriots v IRS  promised significant material for some time to come.

Just as a reminder.  Day 1, May 10, 2013, is where the TaxProf count starts with the headline - IRS Admits to Targeting Conservative Groups in 2012 Election. ...

Day 1024 is in a class all by itself as we learn that Donald Trump has been audited so many times perhaps because he is such a strong Christian. ...

Scattered among the days are full scale commentary pieces about the scandal.  I'm not going to give you a lot of links, but instead am putting out the three pieces that lay out the two extreme positions and a more intermediate one.  On Day 1008 in recognition of the scandal millennium (by TaxProf day count) Jennifer Kabbany wrote in the National Review one of the best summaries of the scandal true believer creed. ...

The series also contains reference to the counter narrative.  On Day 1144, we hear from Ralph Nader. ...

A more nuanced view, one that I find interesting although not persuasive, is put out by Joe Kristan. He believes what happens was a form of self-weaponization on the part of the IRS.

The self-weaponization of the bureaucracy against its political opponents is hugely depressing. The government workforce is overwhelmingly on the side of the political party that favors an ever-larger state. There are plenty of Lois Lerners in the IRS and throughout the Leviathan. The Tea Party scandal, and the complete lack of accountability for its perpetrators, gives no reason to hope those who don’t share that worldview can expect a fair shake. That’s especially true when the sitting president (referring to President Obama) shows no interest in discouraging such behavior

This view is buttressed by an entry on Day 965 with reports about federal employees giving more political donations to Democrats than Republicans.  ...

Most of the commenters on the coverage tended to support the anti-IRS narrative.  When I showed up, there would often be a brickbat thrown.  My favorite was from somebody who goes by Porkypine:

Peter J. Reilly's writings on this matter in Forbes have tended to be IRS/Administration apologias, under a thin cloak of reasonableness. Too thin to cover the way he hovers between disingenuousness and mendacity in these efforts, however.

There was one though who joined me in scandal skepticism. That is Publius Novus whose last supportive comment was:

I am a Reilly Agnostic. I too would like to see what's under the rocks. Specifically, I would like to hear testimony from LLerner after an immunity grant. And if the Republicons were honest about pursuing this mess, they would grant immunity. Why not Mr. Chaffetz?

It is interesting to note that Paul Caron himself called for Lerner immunity in a piece on USA Today which was featured way back on Day 369.  I have not had any luck in figuring out who Publius Novus actually is,  Paul Caron has told me that he doesn't know.  Joe Kristan suggested Judge Crater, a joke that was too obscure for me to get.  Well, he or she should not have any trouble finding me.

And those comments are probably an indication of one of the best things about the TaxProf's chronicle.  It took the people who follow it out of their bubbles.  It will be interesting to see whether the crusade picks up again.  I can see in the coming weeks as the practicality of the Obamacare replacement or the wall building becomes challenging, that representatives of the Trump administration and the Republican congressional majority will start pining for the days when the buck did not stop with them. Then they will recall that Lois Lerner was probably the best enemy that they ever had and the scandal will get another lease on life.

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January 31, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, January 28, 2017

The IRS Scandal, Day 1360: VP Pence, GOP House And Senate Push Trump To Fire Koskinen

IRS Logo 2Newsmax, Pence Will Urge Trump to Sack IRS Boss:

Responding to the urging of House Republicans, Vice President Mike Pence will soon call on President Trump to fire or force the resignation of controversial Internal Revenue Service Commissioner John Koskinen. Newsmax learned this Thursday afternoon from several lawmakers at the House Republican Retreat in Philadelphia. ...

Emerging from a closed-door meeting with the vice president Thursday morning at the House Republican Retreat in Philadelphia, Rep,. Chris Collins (R.-N.Y.) confirmed that the subject of sacking Koskinen was raised. "[Pence] said 'I can hear you,'" said Collins, who said the vice president "promised us" he would share with President Trump the strong belief of Republicans in Congress that "Koskinen must go."

Washington Examiner, Led by Republican Study Committee, 50 House GOPers Tell Trump to Fire IRS Chief:

A faction of conservatives is circumventing leadership brass and calling directly on President Trump to tell IRS Chief John Koskinen, "You're fired."

Rep. Mark Walker, R-N.C., will make the ask. The chairman of the Republican Study Committee has quietly but urgently been circulating a letter inside the GOP conference to build support. He's now got 50 congressmen signed onto the letter. 

The Hill, McConnell: Trump Should Replace IRS Commissioner:

Senate Majority Leader Mitch McConnell (R-Ky.) says President Trump should replace John Koskinen, the IRS commissioner who faced an impeachment vote in the House last year. “I think he’s been a disaster and I’d be shocked if we don’t have a new one,” McConnell told The Hill on Friday. ...

The Trump transition team said in December that the then-president-elect had not yet made a decision on whether to replace Koskinen immediately or allow him to serve out the remaining year of his term.

Politico, GOP Airs Old Grievances in Private Pence Meeting:

Congressional Republicans used a private audience with Vice President Mike Pence on Thursday to rehash years-old political controversies — even suggesting Pence fire the IRS commissioner, according to sources in the room.

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January 28, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (12)

Thursday, January 26, 2017

The IRS Scandal, Day 1358: More Reflections On The End Of My Daily Coverage

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William Jacobson (Cornell), TaxProf Ends Daily Coverage of IRS Scandals:

After 1352 days, thank you for your service, Sir.

Pepperdine Law Professor Paul Caron, also known as TaxProf at the TaxProf blog, started daily coverage of the IRS scandal(s) several years ago. The College Fix has some good background on the endeavor.

TaxProf probably didn’t think it would last this long. But once you start to cover something daily, it’s hard to stop.

After 1352 days, Tax Prof stopped daily coverage. ...

Thank you for your service, Sir.

Mark Meckler, the man behind the Convention of States movement, writes that monitoring the IRS can’t stop, TaxProfBlog stops daily blog about IRS harassment of conservative groups, so now we need to do this:

Just because Donald Trump is now in office doesn’t mean conservatives can take their eyes off the federal government.

On this blog, I’ve written extensively about the IRS’s targeting of Tea Party groups and have often linked to Paul Caron who has kept a daily update on the scandal at the TaxProfBlog. Unfortunately, his coverage has come to an end ….

…. thank you for the amazing service you provided. But in the meantime, we can’t let up and allow this corruption to go unpunished and allow the tax agency to walk away free from its responsibility. Trump vowed to remove corruption from Washington, and we look forward to watching him make good on his promise.

I agree with Glenn Reynolds at Instapundit who wrote, “There hasn’t been sufficient accountability for the IRS’s gross misbehavior here, but I think that Caron has done a tremendous service by keeping the issue alive for so long. I remain deeply disappointed at how many of his fellow tax professors criticized him for doing so, because they didn’t want Obama and the Democrats to look bad.”

We must stay the fight.

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January 26, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, January 24, 2017

The IRS Scandal, Day 1356: Reflections On The End Of My Daily Coverage

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Peter J. Reilly (Forbes), TaxProf Calls An End To Day By Day IRS Scandal Coverage:

Paul Caron, the TaxProf, dean of the tax blogosphere has called the end of an era.  We were all distracted with the inauguration, an admittedly important even, but given the number of peaceful transitions of power we have had since 1800, well 1860 anyway, not really that remarkable.  Professor Caron declared that he was ending daily coverage of the IRS scandal with Day 1352.

His announcement is particularly meaningful to me. Check out the lead paragraph:

In response to inquiries from Peter J. Reilly (Forbes) and Brian Leiter (University of Chicago Law School), I previously discussed when I would stop my daily coverage of the IRS Scandal.

Professor Caron explained

My answer is the same as it has been throughout the scandal: I will stop when the daily commentary in the press and blogosphere on the scandal (from both the right and the left) ends. At several points in the scandal, as I was running out of content, a new chapter would unfold and my daily coverage would continue.

At any rate, his mention of me in this context gives me a sense of having really arrived in the tax blogosphere after over seven years since my very first post. ...

I remain the last IRS scandal agnostic. Frankly, I don't think you needed a big conspiracy to account for the IRS getting its works gummed with exempt applications from groups calling themselves a party but claiming they were mostly not political.  On the other hand, both Joe Kristan and George Will think there is a scandal and that is a tough pair to be dismissive of. ...

In October 2015 I wrote two posts in which I indicated that the quality of the TaxProf's series was being diluted, by the addition of extraneous matter. ... The core scandal had been about difficulties processing applications for exempt status. Conservative groups were not getting their exempt status revoked for single statements.

There were quite a few strands of stories that were legitimately connected to the core scandal. Lois Lerner's emails, the congressional investigations, emails lost on servers, how quickly Koskinen moved the investigation on are examples. But extraneous material started creeping in. ...

It seems that the IRS Scandal even more than usual is something that is viewed through ideological glasses. ...

I reached out for some comments on the closing of the day by day scandal coverage.  Joe Kristan refereed me to his post, which ironically became Day 1353.

Thanks to TaxProf Paul Caron for staying on this undercovered story. The IRS and Lois Lerner admitted the targeting on Day 1. People have been trying to walk that back ever since, either by moving the goal posts (“the President was never implicated”) or by pretending the targeting never happened. The tax agency taking on itself the task of targeting political organizations is scarier than it doing so at the bidding of the White House.

Now we wait to see whether the new President will disarm the IRS, or wield it.

Robert Flach, the Wandering Tax Pro wrote me:

I did not follow the professor's coverage. I agreed with you that he "jumped the shark" way back. I felt he was truly beating a dead horse.

I personally strongly oppose the Tea Party and the religious right - but I am also no fan of the Commissioner and felt he mismanaged the IRS. ...

Paul Streckfus of the EO Tax Journal wrote me:

It's probably time, even if Lois Lerner is the gift that keeps on giving. What's interesting is whether Trump wants to keep the scandal alive. The wild card is the House Freedom Caucus. They probably expect Sessions to open another investigation of Lois Lerner. If so, Caron may have stopped his countdown too soon!

The scandal has really devastated the IRS exempt function.  The groundwork for the next scandal has been laid in this one. The next scandal will be about how nobody is watching exempt organizations creating a playground for scoundrels.

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January 24, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, January 21, 2017

The IRS Scandal, Day 1353: Will The Trump IRS End, Or Embrace, Targeting Of Disfavored Groups?

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Joe Kristan (Tax Update Blog), Obama’s Tax Policy: How Much Will Survive?:

Obama tax policy was a sharp break from the Bush years. The Trump years, in turn, will likely veer off the Obama path in many areas. Here’s my list of the big developments in tax policy during the Obama years, and my guesses as to how they will fare under Trump. ...

IRS Scandal.  IRS exempt organizations official Lois Lerner blew open the Tea Party scandal by planting a staged question at a May 2013 conference. The modified limited hangout failed to contain the scandal, which still is working through courtrooms 1351 days later. Commissioner Koskinen’s apathetic and clumsy response to the admission that right-leaning organizations were targeted for special scrutiny on their exemption applications (and remember, this was admitted at the start, only to be walked back later) sowed distrust, and appropriations reductions, that cripple the agency still.

I would be surprised if Koskinen stays in office much past tomorrow. The real question is whether the new administration reverses the weaponization of the IRS, or just adopts it.

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January 21, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, January 20, 2017

The IRS Scandal, Day 1352: The End Of My Daily Coverage

IRS Logo 2

In response to inquiries from Peter J. Reilly (Forbes) and Brian Leiter (University of Chicago Law School), I previously discussed when I would stop my daily coverage of the IRS Scandal:

My answer is the same as it has been throughout the scandal: I will stop when the daily commentary in the press and blogosphere on the scandal (from both the right and the left) ends. At several points in the scandal, as I was running out of content, a new chapter would unfold and my daily coverage would continue. Currently, the scandal has gone mostly quiet and I have only a few posts left in the queue. So it may be that my daily coverage will end soon, and will be resumed if and when the scandal heats up again.

With Donald Trump's inauguration, I am ending my daily coverage as the scandal again has gone mostly quiet.  I will continue to sporadically blog the scandal when there is news about it (indeed, I have a post in the queue for tomorrow).  But I will no longer provide coverage each day.  I hope readers have found my coverage useful, and will continue to come here for updates on the scandal.

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January 20, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (20)

Thursday, January 19, 2017

The IRS Scandal, Day 1351:  Two Federal Judges Order Five Officials To Preserve Emails Sought In FOIA Lawsuits; Judicial Watch Fears Another Lois Lerner Situation As Obama Administration Leaves Power

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Politico, Judge Orders 4 Homeland Security Officials to Preserve Private-Account Emails:

A federal judge has ordered four current or former top officials at the Department of Homeland Security, including Secretary Jeh Johnson, to preserve emails in their private accounts that may be responsive to a Freedom of Information Act lawsuit.

U.S. District Court Judge Randolph Moss issued the order Wednesday morning to Johnson, former Deputy Secretary Alejandro Mayorkas, former chief of staff Christian Marrone, and former General Counsel Stevan Bunnell, telling them to copy relevant messages to thumb drives.

Moss said the Justice Department indicated that all four men agreed to preserve any responsive messages that might be in their private accounts, but he still granted the preservation order sought by the conservative group Judicial Watch, which said it feared the government might lose easy access to the records as Obama appointees ship out.

“Given the Department’s representation, the Court has no reason to doubt that the four individuals have agreed to comply fully with their obligations to preserve any potentially responsive emails and that they have every intention of doing so,” wrote Moss, an appointee of President Barack Obama.

“Nonetheless, out of the abundance of caution, the Court will order an additional preservation step to minimize the risk of any inadvertent loss of potentially responsive emails. Specifically, the Court will order the individuals to copy any emails from the relevant time period in any private email accounts that might contain responsive materials onto portable thumb drives, to be kept in the individuals’ personal possessions,” the judge added. “Copying the emails to a physical drive will minimize the risk that any responsive email might be inadvertently deleted.” ...

In a separate Judicial Watch case before another judge, the Justice Department indicated Wednesday that one of its top officials has no record of an email he apparently sent to a top Clinton campaign official in May 2015 previewing an upcoming congressional hearing and an expected DOJ filing in a court case related to Clinton’s emails.

Assistant Attorney General for Legislative Affairs Peter Kadzik sent the message with the subject line “Heads Up” to Clinton campaign chairman John Podesta. Clinton campaign aides said the communication was routine, but Donald Trump’s campaign has alleged it showed improper collusion between Justice and the Clinton camp. The contact is one focus of a Justice inspector general investigation announced last week.

The message from Kadzik to Podesta was one of tens of thousands of messages that were hacked from Podesta’s account and posted online by WikiLeaks during the campaign in an effort U.S. intelligence agencies have concluded was part of a Russian government-led drive to influence the U.S. presidential election and bolster Trump’s chances. ...

U.S. District Court Judge Emmet Sullivan issued a preservation order Wednesday at Judicial Watch’s request and instructed the government to report by this morning on its efforts to comply.

Before It's News, Federal Judge Orders DHS Officials to Not Destroy Email:

Even though the judge says the doesn’t doubt their intent, of course he does. He’d have to have been utterly brain dead to not see what is going on from Lois Lerner to Hillary Clinton and beyond. Even as this was happening, another federal judge was discovering that the word of an Obama official that they’d complied with the law wasn’t worth a whole lot.

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January 19, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, January 18, 2017

The IRS Scandal, Day 1350:  Even Trump Adviser Buys Myth Of 'Scandal-Free Administration,' Despite IRS, Five Other Scandals

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Wall Street Journal: Obama’s ‘Scandal-Free Administration’ Is a Myth, by John Fund (National Review) & Hans Von Spakovsky (Heritage Foundation):

You often hear that the Obama administration, whatever its other failings, has been “scandal-free.” Valerie Jarrett, the president’s closest adviser, has said he “prides himself on the fact that his administration hasn’t had a scandal and he hasn’t done something to embarrass himself.”

Even Trump adviser Peter Thiel seems to agree. When the New York Times’s Maureen Dowd observed during an interview that Mr. Obama’s administration was “without any ethical shadiness,” Mr. Thiel accepted the premise, saying: “But there’s a point where no corruption can be a bad thing. It can mean that things are too boring.”

In reality, Mr. Obama has presided over some of the worst scandals of any president in recent decades. Here’s a partial list: ...

IRS abuses. Mr. Obama’s Internal Revenue Service did something Richard Nixon only dreamed of doing: It successfully targeted political opponents. The Justice Department then refused to enforce Congress’s contempt citation against the IRS’s Lois Lerner, who refused to answer questions about her agency’s misconduct. ...

All of these scandals were accompanied by a lack of transparency so severe that 47 of Mr. Obama’s 73 inspectors general signed an open letter in 2014 decrying the administration’s stonewalling of their investigations. ...

The president’s journalistic allies are happily echoing the “scandal-free” myth. Time’s Joe Klein claims Mr. Obama has had “absolutely no hint of scandal” in his presidency. The media’s failure to cover the Obama administration critically has been a scandal in itself—but at least the president can’t be blamed for that one.

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January 18, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, January 17, 2017

The IRS Scandal, Day 1349:  Peggy Noonan On The Obama Presidency And The IRS Scandal

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Wall Street Journal op-ed: The Trump Cabinet’s Good Opening Week, by Peggy Noonan:

Mr. Obama’s has not been a successful presidency. In foreign affairs his two terms, added to George W. Bush’s two terms, produced 16 years of unsuccess—an entire generation. Richard Haass, head of the Council on Foreign Relations, put it gently in conversation this week: Mr. Bush tried to do too much, which was unrealistic; Mr. Obama attempted too little, its own, perhaps more consequential unrealism.

In domestic matters he put all his chips on health care and bullied it through without a single Republican vote, leaving his party fully owning it and the other with no investment in saving it. His relationship with Congress started out at impasse, proceeded to fraught and ended in estrangement. He saw this all as the other side’s fault. In his dealings with the Hill he was often imperious, sometimes a snot. He allowed executive agencies such as the IRS to ruin their public reputations and stonewall scandal after scandal. His most famous words as president came not in formal addresses but extemporaneous misjudgments—“red line,” ISIS as the “jayvee team”—plus an attempt to mislead: “If you like your plan, you can keep your plan.”

He left his party weaker, in terms of public offices held, than at any point since the 1920s.

He spent an unprecedented amount of time campaigning against, and assailing in the bitterest terms, his successor. Donald Trump was “uniquely unqualified,” “temperamentally unfit.” America chose him anyway. They were choosing Mr. Obama’s exact opposite, just as in choosing Sen. Obama in 2008 they went with the opposite of Mr. Bush. When they want the opposite of what you are, they are not registering approval.

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January 17, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, January 16, 2017

The IRS Scandal, Day 1348: How The Trump Administration Can Stop IRS Abuse Of Political Groups

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Weekly Standard, How the Trump Administration Can Stop IRS Abuse of Political Groups:

For more than six years, the Internal Revenue Service has been trying to fend off accusations that its process for granting tax-exempt status discriminated against applicants expressing political views at odds with those of the Obama administration. This discrimination against political viewpoints the Democrats disapprove of is a clear, even astonishing, violation of the First Amendment. For that reason, the IRS has lost many more of these battles than it has won. It’s lost battles not only in court against the victimized non-profits; it’s even lost against the Treasury Department’s own inspector general, which conducted a detailed study and concluded that many of the most serious accusations of discrimination were true.

In its court battles the IRS has been represented by the Justice Department, whose job it is to represent federal agencies when they are sued. No one will be shocked to learn that under the Obama administration, and Attorneys General Eric Holder and Loretta Lynch, DOJ lawyers have used every tool at their disposal to defeat the IRS’s accusers even when those accusers are agreeing with Treasury’s inspector general. That means that, according to the Obama administration’s own inspector general report, those victimized non-profits are right in claiming that they were discriminated against because of their political views.

That litigation strategy needs to change.

Upon President Trump’s inauguration, the Justice Department will get a new boss: Jeff Sessions, President Trump’s nominee for Attorney General. The moment he takes office, General Sessions should direct the Justice Department lawyers—all of whom report to him—to change their litigation stance to reflect an important adage about how government lawyers should do business: “the government wins when justice is done.”

It’s time to see that justice is done in these cases.

Up until now, the government’s strategy has been to make the IRS cases take as long as possible and to resist every demand for discovery—the process by which litigants can request that their adversaries produce documents, or provide testimony, revealing what was really going on inside the IRS.

I represent the plaintiff in one of these cases—Z STREET v. Koskinen—which challenges the IRS’s six year delay in processing the application for tax-exempt status by an organization whose views on the Middle East were at odds with President Obama’s. In discovery, we’ve asked for information about how the IRS went about deciding what to do with (and to) our organization. But the IRS has produced virtually nothing that sheds light on its decision-making process. Other organizations in court against the IRS have been given the same treatment by the Justice Department’s litigation teams.

All of the members of those government lawyer teams report to the U.S. Attorney General. That means that when the new sheriff arrives in town he can give new orders on how these cases ought to be handled.

Attorney General Sessions should direct these lawyers to stop resisting discovery, and to stop trying to prevent the litigants—and the public—from finding out what the IRS was really doing to all of these organizations for all these years. This is not a matter of political payback, like the question whether Hillary Clinton ought to be prosecuted for what many think are her misdeeds, at the State Department and with the Clinton Foundation. It’s just a matter of letting the truth be told. Z STREET, like many of the plaintiffs in the other cases against the IRS, is not seeking money damages. We just want to know the truth about what the IRS was doing to us, and why, and at whose direction.

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January 16, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Sunday, January 15, 2017

The IRS Scandal, Day 1347:  IRS Chief Counsel William Wilkins Resigns, Effective Jan. 20; GOP Questioned His Role In Tea Party Targeting

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Accounting Today, IRS Names Acting Chief Counsel Following William Wilkins’ Departure:

The Internal Revenue Service has chosen William M. Paul to step into the role of acting chief counsel after William Wilkins stepped down this week. ...

Wilkins has been the IRS’s chief counsel since 2009. Like many Obama administration officials, he is leaving just ahead of the incoming Trump administration. He is one of only two political appointees at the IRS.

Wilkins drew some controversy in the midst of the Tea Party targeting scandal in 2013 when it was revealed that he had met with President Obama only two days before the IRS provided new guidance to its Exempt Organizations unit on how to handle applications for tax-exempt status from political groups. Wilkins testified before Congress that he didn’t recall many of the details of his interactions with Treasury Department officials during the period when the new guidance was being drawn up, provoking outraged reactions from Republican leaders of the House Oversight Committee blasting him for his cautious testimony. ...

IRS Commissioner John Koskinen [said] ... "I also want to thank Bill Wilkins for nearly eight years of dedicated service here as Chief Counsel at the IRS. As many in the wider tax community recognize, Bill has done an exceptional job leading the legal division of the IRS during a challenging period.”

Prior TaxProf Blog coverage:

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January 15, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (11)

Saturday, January 14, 2017

The IRS Scandal, Day 1346:  The Trump Dossier, The Left, And Tea Party Targeting

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Wall Street Journal: Dumpster Diving for Dossiers, by Kimberley A. Strassel:

Washington and the press corps are feuding over the Trump “dossier,” screaming about what counts as “fake news.” The pity is that this has turned into a story about media ethics. The far better subject is the origin of the dossier itself.

“Fake news” doesn’t come from nowhere. It’s created by people with an agenda. This dossier—which alleges that Donald Trump has deep backing from Russia—is a turbocharged example of the smear strategy that the left has been ramping up for a decade. Team Trump needs to put the scandal in that context so that it can get to governing and better defuse the next such attack.

The more that progressives have failed to win political arguments, the more they have turned to underhanded tactics to shut down their political opponents. (For a complete account of these abuses, see my book, “The Intimidation Game.”) Liberals co-opted the IRS to crack down on Tea Party groups. They used state prosecutors to launch phony investigations. They coordinated liberal shock troops to threaten corporations. And they—important for today’s hysteria—routinely employed outside dirt diggers to engage in character assassination.

This editorial page ran a series in 2012 about one such attack, on Frank VanderSloot. In 2011 the Idaho businessman gave $1 million to a super PAC supporting Mitt Romney. The following spring, the Obama re-election campaign publicly smeared Mr. VanderSloot (and seven other Romney donors) as “wealthy individuals with less-than-reputable records.”

This national shaming, by the president no less, painted a giant target on Mr. VanderSloot’s back. The liberal media slandered him daily on TV and in print. The federal bureaucracy went after him: He was ultimately audited by the IRS and the Labor Department.

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January 14, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, January 13, 2017

The IRS Scandal, Day 1345:  Donald Trump, The Intelligence Community, And Lois Lerner

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Communities Digital News, Chuck Schumer and the CIA Like Their Targets Shaken, Not Stirred:

Between 2010 and 2012, roughly 426 conservative organizations were targeted for extra scrutiny by the IRS. A 298-page report by the Office of Inspector General says the IRS targeted organizations for harassment with names that included the words “tea,” “liberty,” “patriot” or “constitution” in their titles.

Subsequent congressional hearings revealed the IRS colluded with the Justice Department, the Federal Election Commission and leading Democratic members of Congress on which tea party groups to target. One of those congressional members is today’s Democratic Senate Minority Leader, Chuck Schumer.

In 2012, Schumer joined several of his Democratic colleagues in drafting a letter urging the IRS to investigate tea party organizations “focused on federal election activities” and applying for 501(c)(4) tax-exempt status.

When Democrats lost control of the U.S. Senate in 2014, Schumer expressed his fear to members of the Center for American Progress that tea party groups could out fundraise Democratic-friendly organizations, thus purchasing more commercial time for political ads.

“It is clear that we will not pass anything legislatively [to curtail tea party influence] as long as the House of Representatives is in Republican control, but there are many things that can be done administratively by the IRS and other government agencies—we must redouble those efforts immediately,” Schumer said.

When Lois Lerner, who headed the tax-exempt division of the IRS, was subpoenaed to appear before congress to explain her agency’s targeting, she exercised her Fifth Amendment right against self-incrimination. She eventually resigned, with the Obama Justice Department exonerating her of any criminal wrongdoing.

Lerner is retired and drawing a comfortable federal pension.

History, they say, is prelude. ...

MSNBC host Rachel Maddow described Trump’s skepticism of America’s spy agencies as “taking shots,” “antagonism” and “taunting of the intelligence community.”

Schumer, her guest, peered over his bifocal readers and spoke in hushed tones, “[If] you take on the intelligence community, they have six ways from Sunday to come back at you. So, even for a practical, supposedly hard-nosed businessman, he’s being really dumb to do this.”

Tuesday, Buzzfeed released a leaked, 35-page dossier supposedly compiled by British intelligence officer Christopher Steele—and in the possession of U.S. intelligence agencies—containing unsubstantiated claims Russian intelligence possess compromising information on Trump for purposes of blackmail and, incredibly, claiming Trump is in essence a Russian spy. ...

Move over IRS. The shadowy U.S. intelligence community, with its state-of-the-art domestic and global spying operations, missile-bearing drones and license to kill, is morphing into a political targeting apparatus beyond Lois Lerner’s wildest dreams.

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January 13, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, January 12, 2017

The IRS Scandal, Day 1344:  Democrats Remind Jeff Sessions AG Enforces 'Every Law,' Yet Were Silent When DOJ Declined To Prosecute Lois Lerner

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Western Journalism Review, Democrats Remind Jeff Sessions AG Enforces 'Every Law,' They Were Silent These 7 Times Under Obama:

Sen. Dianne Feinstein (D-CA) reminded Sessions and America that the Attorney General must enforce every law, regardless of the nation's top law enforcement official's views on those laws. ...

While it's absolutely imperative that Sessions uphold the rule of law if he's confirmed, that charge is a little hypocritical as President Obama's Attorney Generals ignored laws that went against the Obama Administration's agenda.

Here are seven times Obama's Attorney Generals side-stepped the law. ...

3. DOJ Concluded IRS Scrutiny Of Tea Party Groups Wasn't Politically Motivated, Despite Evidence To The Contrary

On October 23, 2015, the Department of Justice announced that it would not bring charges against Lois Lerner, the former Internal Revenue Service (IRS) official who was at the center of the conservative targeting controversy.

The IRS admitted to inappropriately targeting groups with the words “patriot” or “tea party” in their names for increased scrutiny of their tax-exempt applications.

Lerner, who oversaw the tax-exempt section of the IRS, denied that the targeting was politically motivated and DOJ announced that it concluded the IRS's actions were not politically motivated. In a letter to Congress, Assistant Attorney General Peter Kadzik said:

We found no evidence that any IRS official acted based on political, discriminatory, corrupt, or other inappropriate motives that would support a criminal prosecution.”

Republicans blasted the IRS when it was discovered that 24,000 of Lerner's emails were lost and could not be recovered.

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January 12, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (10)

Wednesday, January 11, 2017

The IRS Scandal, Day 1343:  IRS Let Lois Lerner Off The Hook By Paying $12 Million For Email Backup System It Did Not Use

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Daily Caller, ‘Wastebook’ Reveals IRS Wrong-Doing, IT Errors During Lerner Scandal:

Even as the Internal Revenue Service (IRS) was struggling to explain to Congress why it could not produce copies of former IRS official Lois Lerner’s emails, the agency was paying $12 million for an email backup system that it could not and did not use.

The agency’s inability helped Lerner get off the hook for using the IRS to target conservative and Tea Party nonprofit applicants during the 2010 and 2012 campaigns.

Soon after the Lerner scandal, IRS officials bought the system designed to prevent the loss of emails, but then didn’t bother to turn it on. They also broke federal procurement rules in how they bought the system.

The fiasco was highlighted by Sen. Jeff Flake, an Arizona Republican, in the latest edition of his Wastebook, released Tuesday.

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January 11, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, January 10, 2017

The IRS Scandal, Day 1342:  New Chair of House Oversight Committee Pledges To Increase IRS Accountability

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The Hill, Oversight Panel Will Focus on IRS, Medicare, New Chairman Says:

Rep. Vern Buchanan (R-Fla.), the new chairman of the House Ways and Means Committee's oversight panel, said the subcommittee's priorities in the 115th Congress will include combating fraud in Medicare and Social Security, increasing IRS accountability, and protecting people from identity theft.

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January 10, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, January 9, 2017

The IRS Scandal, Day 1341:  Another View Of The Republicans' Reactivation Of The Holman Rule And Lois Lerner

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The Moderate Voice: Preventing the Upcoming Barbarian Apocalypse, by Hart Williams:

House Republicans this week reinstated an arcane procedural rule that enables lawmakers to reach deep into the budget and slash the pay of an individual federal worker — down to a $1 — a move that threatens to upend the 130-year-old civil service. The Holman Rule, named after an Indiana congressman who devised it in 1876, empowers any member of Congress to offer an amendment to an appropriations bill that targets a specific government employee or program. ...

[W]hat does this mean? Well it means that any congressman or senator (almost exclusively GOP) can, in essence, terminate/eliminate almost any civil service employee who incites their wrath. ...

This is a de facto prescription to overturn ALL regulatory enforcement that the “Free Market” pirates of the House GOP deem “bad for business.” And, for a year, the Republicans in Congress can PURGE the Civil Service of all those “obstructionist” employees who insist on doing their jobs as prescribed by law. Think of what they did to Lois Lerner of the IRS, for example, who only attempted to enforce the charitable regulations of the IRS code. In a little-noted move thereafter, the GOP congress essentially gutted all 501(c)4 provisions, making it perfectly legal to launder dark money with zero accountability for political purposes — a complete overturning of the original intent of Congress in CREATING the section 501 provisions prohibiting charitable activities from being partisan POLITICAL activities, or, in essence, allowing the rich to engage in politics on your dime, Mr. and Mrs. US Taxpayer.

The implications of this “rule” are staggering when you apply the “if this goes on” test to it. And recall that you don’t really need to go after ALL civil service employees to create a chilling effect. Just make a few examples of “uppity” civil servants.

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January 9, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (13)

Sunday, January 8, 2017

The IRS Scandal, Day 1340:  Tax Professors Discuss The Future Of Tax Administration And Enforcement After 'What The Media Often Refer To As The 'IRS Targeting Scandal''

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Association of American Law Schools Annual Meeting Discussion Group, The Future of Tax Administration and Enforcement (Jan. 7, 2016):

AALS Discussion Groups provide an in-depth discussion of a topic by a small group of invited discussants selected in advance by the Annual Meeting Program Committee. In addition to the invited discussants, additional discussants were selected through a Call for Participation. There will be limited seating for audience members to observe the discussion groups on a first-come, firstserved basis.

Enforcement and effective administration of tax laws pose challenges for every country, developed and developing. Moreover, how the tax law is administered determines the substantive effects of the laws on the books.

In the United States, the agency responsible for helping taxpayers voluntarily comply with federal tax laws and for coercing the recalcitrant into complying—the Internal Revenue Service (IRS)—is not only underfunded, its image was badly damaged by what the media often refer to as the “IRS targeting scandal.” The IRS is thus in crisis. Over the last couple of years, it has reduced service to taxpayers, reduced enforcement efforts, experienced hacks of its confidential taxpayer information, and sent out billions of dollars in fraudulent refunds claimed by identity thieves. Other tax collection agencies, both in U.S. and abroad, also struggle with resource and cybersecurity issues.

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January 8, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, January 7, 2017

The IRS Scandal, Day 1339:  House GOP Reactivates 'Holman Rule,' Would Have Permitted Reducing Lois Lerner's Pay To $1

IRS Logo 2Washington Post, House Republicans Revive Obscure Rule That Allows Them to Slash the Pay of Individual Federal Workers to $1:

House Republicans this week reinstated an arcane procedural rule that enables lawmakers to reach deep into the budget and slash the pay of an individual federal worker — down to $1 — a move that threatens to upend the 130-year-old civil service.

The Holman Rule, named after an Indiana congressman who devised it in 1876, empowers any member of Congress to propose amending an appropriations bill to single out a government employee or cut a specific program.

The use of the rule would not be simple; a majority of the House and the Senate would still have to approve any such amendment. At the same time, opponents and supporters agree that the work of 2.1 million civil servants, designed to be insulated from politics, is now vulnerable to the whims of elected officials. ...

Democrats and federal employee unions say the provision, which one called the “Armageddon Rule,” could prove alarming to the federal workforce because it comes in combination with President-elect Donald Trump’s criticism of the Washington bureaucracy, his call for a freeze on government hiring and his nomination of Cabinet secretaries who in some cases seem to be at odds with the mission of the agencies they would lead.

Weekly Standard, House GOP Revives Rule Allowing Them To Slash Salaries of Corrupt Federal Workers:

[T]here can be no question that federal workers have far too many civil service protections. After the IRS held a press conference admitting that they had improperly targeted conservative groups, Lois Lerner, the IRS official deemed most responsible, didn't face any meaningful consequences. Instead it was revealed that she recently received $129,000 in bonuses and retired with an annual pension that could possibly exceed $100,000.

Even after Lerner left, John Koskinen, the new interim head of the IRS, ignored congressional subpoenas as the IRS destroyed evidence relating to the investigation of Lerner and engaged in egregious stonewalling. It's pretty clear that the IRS was in no way fearful of suffering any consequences for persecuting thousands of ordinary Americans and flouting Congress.

Western Journalism, GOP House Revives 140-Year-Old Rule That Has Swamp-Dwelling Bureaucrats Sweating Bullets:

The rule would let lawmakers target civil servants who abuse their posts but still have union protections. The rule could, for instance, have been used on former Internal Revenue Service official Lois Lerner, locus of the IRS’ intimidation scandal.

While Lerner faced minimal consequences for her wide-ranging role in the scandal — she refused to reveal much of anything to congressional investigators — The Weekly Standard pointed out that she received $129,000 in bonuses and a yearly pension that could top $100,000.

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January 7, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (12)

Friday, January 6, 2017

The IRS Scandal, Day 1338:  Commissioner Koskinen Says Trump Transition Team Has No 'Axes To Grind' Against IRS

IRS Logo 2The Hill, IRS Chief: Agency's Discussions With Trump Team 'Very Positive':

IRS Commissioner John Koskinen said Thursday that his agency has had “very positive discussions” with the Trump transition team.

“They’ve been very straight-forward, very factual ... productive discussions,” Koskinen told reporters.

Republicans have frequently criticized the IRS, particularly in the wake of 2013 revelations that the agency had subjected conservative groups’ applications for tax-exempt status to extra scrutiny.

But Koskinen said there’s been no indication that transition officials have “any axes to grind” or any focus other than learning about how the IRS operates.

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January 6, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, January 5, 2017

The IRS Scandal, Day 1337:  The IRS Is The Third Biggest 'Tax Offender Of 2016'

IRS Logo 2Taxable Talk: The 2016 Tax Offender of the Year, by Russ Fox:

Every year I hope that I won’t find any deserving individuals of the Tax Offender of the Year Award. To win this award, you need to do more than cheat on your taxes; it has to be a Bozo-like action or actions. As usual, we had plenty of nominees.

Coming in third this year is the Internal Revenue Service. What did the IRS do to deserve this award? Well, we have the IRS Scandal; it’s still unresolved. If we were to believe the IRS nothing untoward happened! I’m sure that’s why Commissioner Koskinen faced an impeachment resolution. And remember the data breaches? It wasn’t 104,000 people who were victimized back in 2015 (the “Get Transcript Hack) nor was it 334,000 taxpayers. There were over 700,000 people impacted (and over 500,000 unsuccessful attempts)! As Joe Kristan says, “The IRS: Protecting your identity since 1913.” Or not.

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January 5, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, January 4, 2017

The IRS Scandal, Day 1336:  Fragmented Oversight Of Nonprofits In The United States

IRS Logo 2Lloyd Hitoshi Mayer (Notre Dame), Fragmented Oversight of Nonprofits in the United States: Does It Work? Can It Work?, 91 Chi.-Kent. L. Rev. 937 (2016):

The United States is well known for its distinctive, although not unique, division of political authority between the federal government and the various states. This division is particularly evident when it comes to oversight of nonprofit organizations. The historical focus of federal government oversight has been limited primarily to qualification for tax exemption and other tax benefits, with more plenary power resting with state authorities. Over time, however, the federal government’s role has come to overlap significantly with that of the states, and many nonprofits have become subject to regulation by multiple states as their operations and donor bases expand across state lines.

This Article draws on the growing literature addressing fragmentation of oversight in other contexts to identify possible advantages and disadvantages of such fragmentation with respect to nonprofits. It concludes that the current allocation of responsibilities between the states and the federal government, including the limited areas of overlap, results in relatively effective oversight given the resource and other constraints under which these governments operate. It further concludes, however, that there are certain areas where improvement is possible. More specifically, it recommends federal consolidation of information gathering and financing of oversight, increased coordination between the federal government and the states with respect to enforcement actions, and increased coordination among states with respect to regulation of charitable solicitations. It also recommends that the federal government should both halt and consider rolling back its encroachment into the legal requirements for governance of nonprofits as they relate to the primarily state law fiduciary duty of

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January 4, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, January 3, 2017

The IRS Scandal, Day 1335:  Politics, Disclosure, And State Law Solutions For 501(c)(4) Organizations

IRS Logo 2Linda Sugin (Fordham), Politics, Disclosure, and State Law Solutions for 501(c)(4) Organizations, 91 Chi.-Kent. L. Rev. 895 (2016):

In 2013, the Internal Revenue Service (IRS) suffered its worst scandal in a generation over its treatment of tea-party related organizations. Some of the facts are undisputed: Following the Supreme Court's 2010 Citizens United decision, people rushed to organize section 501(c)(4) organizations that would be active in politics. The IRS was overwhelmed by applications, and the regulatory standard provided little guidance. The agents, who were not lawyers, used a shorthand to identify organizations that might not meet the standard of being “operated exclusively for the promotion of social welfare.” The Treasury watchdog found that “[t]he IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions.” Instead of identifying possible ineligible organizations by their names (including “Patriots” and “9/12”), the IRS should have determined eligibility for exemption by analyzing whether the organizations satisfied the regulatory requirements concerning political activity. Since that time, the IRS has been paralyzed in this area, and the Federal Election Commission has been deadlocked.

The post-Citizens United explosion of (c)(4) political activity—and the federal government's dysfunction—did not go unnoticed by the states. While the federal government was at an impasse, some states attempted to bridge the gap. Federal law determines tax exemption, but state law defines charitable and noncharitable nonprofit organizations and regulates their governance. If nonprofit organizations are operated to the detriment of the public interest, state attorneys general have the power to investigate and discipline them. New York and California have both attempted to address the same concerns about secret money in politics that led to the IRS scandal and proposed regulations.

This article asks whether the states can (and should) use state nonprofits law to solve the problem of dark money spent by nonprofit non-charitable organizations. Since the problem of (c)(4) politicking is not a revenue issue, the Internal Revenue Service is clearly not the ideal regulator. Dark money may be solely an election law problem, in which case it would be exclusively in the domain of the FEC and state election regulators, and not in the purview of state nonprofits law. However, if there are concerns about nonprofit organizations in politics that implicate the policies relating to nonprofits, there might be something beyond election law at issue that state nonprofit law might address. There are three reasons why state charity regulators might intervene in this area: (1) to protect charities, (2) to protect voters, and (3) to protect donors to nonprofit organizations. If dark money is damaging the reputation and integrity of the nonprofit sector as a whole, states may legitimately regulate noncharitable nonprofits to protect charities from negative consequences. The general public seems to confuse 501(c)(3) with 501(c)(4) organizations, failing to appreciate their legal distinction. Consequently, states have an interest in preventing reputational damage to charitable organizations on account of bad behavior by noncharitable nonprofit organizations. In addition, states may be justified in regulating politicking nonprofits to protect the public itself, either as donors or as voter. Much of state nonprofit law is designed to protect donors, so if regulating political speech is designed to protect donors who might unwittingly support political activity, then state nonprofits regulators are in a familiar institutional role. Donor confusion is understandable since 501(c)(4) organizations are categorized as “social welfare” organizations; donors may reasonably expect that their donations support social welfare activities, rather than politicking.

The final state policy, protecting the public as voters, veers away from nonprofits law into clear election law territory. Nevertheless, state attorneys general have an interest in preventing the public from being misled. State nonprofits law is already concerned with preventing fraud perpetrated by bogus charities and unscrupulous solicitors. If it is fraudulent to pretend to be someone else or to speak anonymously in a political communication, then nonprofit regulators might approach the problem as analogous to charitable solicitation. Both political campaign activity and charitable solicitations raise First Amendment issues. The Supreme Court has repeatedly struck down statutory limits on charitable solicitation under the First Amendment, but it has allowed states to prosecute charitable fundraisers for misleading potential donors.

This article proceeds as follows: The next Part provides a brief background to the current situation and explains why federal tax law is not the appropriate locus of regulation. After that, I describe the steps that California and New York have taken to reduce the influence of dark money in their elections. Both states were motivated by specific incidents involving out-of-state interests, and both states faced substantial pressures from constituencies opposed to regulation. Part IV considers possible state law policies for regulating dark money, and Part V considers the regulatory solutions that correspond to those policies. Part VI steps back to assess the desirability of state nonprofit law regulation, considering the legal and practical problems with states undertaking this regulation. Although the states can achieve some important goals, the conclusion in Part VII expresses skepticism at the states' ability to solve the (c)(4) politicking mess.

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January 3, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, January 2, 2017

The IRS Scandal, Day 1334:  The IRS’s Diminished Role In Overseeing Tax-Exempt Organizations

IRS Logo 2Evelyn Brody (Chicago-Kent) & Marcus Owens (Loeb & Loeb, Washington, D.C.), Exile to Main Street: The I.R.S.’s Diminished Role in Overseeing Tax-Exempt Organizations, 91 Chi.-Kent. L. Rev. 859 (2016):

The Chicago-Kent conference on charity oversight took place on Day 924 of the TaxProf blog's “IRS Scandal”—Day 1 being the Friday two-and-a-half years ago that the Internal Revenue Service's Lois Lerner apologized for inappropriate use of Tea Party and other names in selecting applicants for Internal Revenue Code § 501(c)(4) status for further review. This article examines the IRS's role in administering the regime for federally tax-exempt organizations. Our focus, however, should not obscure the very real corrosive impact, whether deserved or pretextual, that the IRS's exempt-organization imbroglio has had on the health of the entire agency, and thus to the revenue needs of the federal government.

The IRS—an agency which in the best of times suffers from a siege—is now starved for resources both financial and political. The IRS has predictably and understandably responded to the “scandal” by retreating into a shell of bureaucratic reshuffling, management mumbo-jumbo, and paper moving. There has never been a better time to apply for tax-exempt status or push the boundaries of permissible activities.

Will the IRS's decision to exile the Exempt Organization Division from Washington, D.C. to Cincinnati save the agency as well as the exempt-organization function by removing its operations from the glare of Washington's perpetual partisan politics? Or will this attempt to jettison the albatross from the sinking ship instead stifle the effectiveness of the IRS's role in charity and nonprofit oversight, suggesting—as co-author Marcus Owens has written about at length—the need for a new and independent agency to carry out that role?

This article proceeds in three parts. Part I describes the framework for federally tax-exempt organizations engaged in advocacy and political activity, and recites the sorry saga of the recent unpleasantness. Part II summarizes the IRS's managerial reaction. Part III focuses on the IRS's new procedure for granting speedy recognition of tax-exemption to new small charities—perhaps setting the agency up for the next debacle. Our conclusion sets out the not-so-great choices, mindful that the goal is to avoid making the wrong mistake. ...

On July 21, 2015, President Barack Obama commented to Jon Stewart, host of The Daily Show on Comedy Central: “When there was that problem with the IRS, everyone jumped . . ., saying, ‘Look, you've got this back office, and they're going after the Tea Party.’ Well, it turned out, no, Congress had passed a crummy law that didn't give people guidance in terms of what it was they were trying to do. They did it poorly and stupidly.” The president added: “The truth of the matter is that there was not some big conspiracy there. They [(the IRS)] were trying to sort out these conflicting demands. You don't want all this money pouring through not-for-profits, but you also want to make sure everybody is being treated fairly.” Alluding to the bigger problem, he emphasized: “Now, the real scandal around the IRS right now is that it has been so poorly funded that they cannot go after these folks who are deliberately avoiding tax payments . . . .”

Jon Stewart, of course, did not point out to the president that ambiguous concepts—such as “unrelated business activity” and “educational”—are the hallmark of the federal tax rules applicable to tax—exempt organizations, and have defied specific definition since their enactment.

The IRS has taken a series of major organizational and procedural steps, clearly moving as quickly as it can to address the May 2013 TIGTA Report's recommendations and to align the Exempt Organizations Division (and the Employee Plans Division) with the organizational structures of the rest of the IRS National Office. These changes, though, are being developed by an entirely new cadre of senior management, virtually all of whom lack significant experience in the function or with the tasks required to administer the relevant substantive sections of the Internal Revenue Code.

In addition, the agency is proceeding piecemeal, focusing initially on the exemption-application processing function, to be followed at some point by a review of the examination function. In view of the huge amounts of funds flowing into the nonprofit sector, particularly to social welfare organizations exempt under section 501(c)(4), the IRS's sense of urgency is understandable. However, this emphasis on granting recognition of exemptions now and (possibly) asking questions later does not seem sustainable. The nonprfit sector and practitioners should be alert to developments to target noncompliance, as they are likely to occur quickly, and without an opportunity for public comment and discussion. In addition, the decoupling of the enforcement function from the interpretative function, now located in a different organization unit (the Office of Chief Counsel), suggests that there may be a greater risk for inconsistent or incorrect positions being taken in IRS audits.

As for small charities, regardless of whether Congress or the IRS adopts the five-year provisional-exemption proposal described in Part III, the agency should expand information collection. Importantly, a charity that grows sufficiently—which could happen even before five years pass—will have to file a Form 990-EZ or even a Form 990. Thus, the IRS should require a successful Form 1023-EZ applicant, when it first files one of those information returns, to submit the organizational documents and certain other information (notably, about activities and related party transactions and relationships) that would have been required on a full Form 1023 application. In addition, the IRS should continue sampling to ensure the eligibility of 1023-EZ applicants.

The bigger question—should the IRS be the locus of federal regulation of charities?—might more usefully be narrowed to “should the IRS be the locus of regulation for political activity by tax-exempt organizations?” If significant abuse arises, particularly if due even in part to the reduction in scrutiny of applications for tax-exempt status and in audit enforcement, one of us has proposed that it might be appropriate to move the entire regulatory function over tax-exempt organizations to a different governmental or quasi-governmental structure.

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January 2, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Sunday, January 1, 2017

The IRS Scandal, Day 1333:  Republicans Weasel Out Of Impeaching IRS Commissioner John Koskinen

IRS Logo 2Canada Free Pass, Republicans Weasel Out of Impeaching IRS Boss John Koskinen:

Republican leaders managed to derail a measure to impeach IRS Commissioner John Koskinen ..., sending the debate back to a committee for more study, where it will die when the Congress adjourns at the end of this year.

Conservatives had pushed for impeaching Mr. Koskinen, saying he cannot be allowed to get away with having misled Congress on the investigation into the IRS’s tea party targeting.

But GOP leaders, eager to clean up business and shut down for the year, ahead of a busy 2017, led the push to shunt the impeachment aside. Joined by Democrats, the House voted 342-72 to send the debate back to the Judiciary Committee.

“Members have different opinions about what to do,” said Rep. Bob Goodlatte, Virginia Republican and committee chairman, as he asked lawmakers to give him a chance to sort things out. But with lawmakers looking to clear out of town this week, the move essentially kills the impeachment drive in this Congress. Democrats had tried to expunge the impeachment resolution altogether, but lost a test vote on a near party-line tally.

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January 1, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Saturday, December 31, 2016

The IRS Scandal, Day 1332:  The House GOP's Ridiculous Impeachment Crusade

IRS Logo 2MSNBC The MaddowBlog, Congress Holds IRS Impeachment Vote as Trump Eyes New Commissioner:

The 114th Congress is, mercifully, nearly over, but as we saw yesterday, lawmakers aren’t quite done considering ridiculous ideas. The Wall Street Journal reported:

The House of Representatives turned aside an attempt by conservative hard-liners to impeach IRS Commissioner John Koskinen for his handling of congressional investigations into the tax agency.

Instead, in a 342-72 vote, the House sent the issue back to the Judiciary Committee, which hasn’t held a formal impeachment hearing or voted on the matter.

The vote effectively ends the impeachment crusade, at least for a while. The House’s GOP majority could start the process anew next year, but there wouldn’t be any point. The fact that this even reached the House floor yesterday is something of an embarrassment. Circling back to our previous coverage, the IRS “scandal” was discredited years ago — Koskinen wasn’t even at the tax agency when the imaginary controversy unfolded — and as Rep. Elijah Cummings (D-Md.) documented in May, charges that Koskinen was part of some kind of after-the-fact cover-up don’t make any sense.

Koskinen took on the job of improving the IRS out of a sense of duty — the president asked this veteran public official to tackle a thankless task, and Koskinen reluctantly agreed. For his trouble, a sizable group of far-right House Republicans have tried to impeach him, for reasons even they have struggled to explain.

Of course, whether or not Congress approves, Koskinen won’t lead the IRS much longer. As the Journal’s article added, Koskinen, who’s now 77, “serves a fixed term that ends in November 2017. [Donald Trump] could force him out or could wait until the end of Mr. Koskinen’s term and appoint his successor, who must be confirmed by the Senate.”

And that raises some interesting possibilities. Politico reported a couple of weeks ago that Trump will be in a position to nominate Koskinen’s successor, and there’s nothing to stop the Republican president “from appointing an IRS chief who will go easy on him.” ...

Trump may soon name the head of an agency that’s examining whether Trump broke the law. What could possibly go wrong?

Postscript: One more relevant tidbit from the Politico piece: “The IRS also reviews the president’s and vice president’s returns each year, but those audits aren’t required by law, and Trump could stop them.”

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December 31, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, December 30, 2016

The IRS Scandal, Day 1331:  Rep. Jim Jordan Offers Resolution To Impeach IRS Commissioner John Koskinen

Thursday, December 29, 2016

The IRS Scandal, Day 1330:  House Republicans And Democrats Forge Rare Bipartisan Agreement To Block Impeachment Of IRS Commissioner

IRS Logo 2Breitbart News, House Republicans Join Democrats to Block Impeachment of IRS Commissioner:

In a rare moment of bipartisanship, House Republicans and House Democrats came together to block a privileged motion by members of the House Freedom Caucus aimed at forcing the whole House to vote on the impeachment of IRS Commissioner John Koskinen.

From the House floor, Rep. Jim Jordan (R.-Ohio), the chairman of the House Freedom Caucus, forcefully called for the House to hold the commissioner accountable by passing House Resolution 828, calling for the impeachment of Koskinen for high crimes and misdemeanors.

As the Ohio congressman began to speak, House Democrats began to clamor in disapproval. Turning to his colleagues on the other side of the aisle, Jordan said: “You might want to listen to what we have to say first and then you can moan and groan.” ...

Minority Leader Rep. Nancy Pelosi (D.-Calif.) made the motion to table consideration of the bill, which would have effectively killed the bill, given that there are fewer than 10 business days left on the session’s calendar. That motion failed, 180-to-230.

Then, it was time for the Republicans to kill their own proposal. House Judiciary Committee Chairman Rep. Robert W. Goodlatte (R.-Va.) offered a motion to table to his committee, which passed 342-to-72.

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December 29, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, December 28, 2016

The IRS Scandal, Day 1329:  Did The IRS's Targeting Of Conservative Groups Lead It To Grant Tax-Exempt Status To 'Hate Groups'?

IRS Logo 2Chronicle of Philanthropy, Dozens of ‘Hate Groups’ Have Charity Status, Chronicle Study Finds:

The federal government has granted tax-exempt status to more than 60 controversial nonprofits branded by critics as "hate groups," including anti-immigrant and anti-gay-rights organizations, white nationalists, and Holocaust deniers, according to a Chronicle of Philanthropy analysis.

The issue is a thorny one for the Internal Revenue Service, which must balance First Amendment rights against concerns that it is essentially granting government subsidies to groups holding views that millions of Americans may find abhorrent. Complicating matters, the IRS is already under fire from critics who say the agency has discriminated against conservative political organizations. ...

Still shaken by the revelation that agency leaders had singled out conservative advocacy groups’ applications for tax-exempt status for extra scrutiny, the IRS has little incentive to investigate organizations based on the content of their messages.

The Surly Subgroup:  White Nationalists Groups are Charitable? Apparently so According to IRS, by Phillip Hackney (LSU):

How do [hate groups] qualify [for tax exempt status]? ... There are two answers. ...

Reason 2: The IRS is afraid. This seems like a reasonable argument after all the Tea Party difficulties that the IRS experienced, BUT . . . the IRS has denied other controversial groups tax exemption who are ostensibly educating as well. See: Principle Voices of Polygamy private letter ruling where the IRS denied a group advocating for polygamy on the basis that what it violated public policy by advocating for something that is illegal. The point is that the IRS went after an advocacy group in 2013. With that said, the Tea Party controversy occurred in 2013 and so maybe this is a reason it would not go after such groups now.

Salon, White Nationalists Have Raised Millions Thanks to Tax-Exempt Charities:

Some tax experts said the IRS is still feeling the sting from conservative critics over its 2013 concession that it unfairly gave extra scrutiny to tea party groups seeking tax exemptions. “I don’t think they’re feeling very brave right now,” said Ellen Aprill, a tax law professor at Loyola Law School in Los Angeles.

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December 28, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, December 27, 2016

The IRS Scandal, Day 1328:  House's Referral Back To Judiciary Committee Is Likely To Kill Koskinen Impeachment

IRS Logo 2Forbes: House Says No To Renewed Efforts To Impeach IRS Commissioner, by Kelly Phillips Erb:

A motion to table the measure failed while a motion to simply refer the matter back to the Judiciary Committee passed with a 342-72 vote. The final tally showed 166 Republicans joining 176 Democrats to vote yes, 72 Republicans voting no, and 19 members who did not vote. You can see how your Representative voted here.

If that sounds like progress, it's not: it's a step backward. Earlier this year, the House sidestepped a similar resolution introduced by Rep. Jason Chaffetz (R-UT) to move impeachment proceedings forward; yet another resolution from the fall of 2015 also failed

Since impeachment is a legal proceeding, while anyone can make a motion to start the process, the Judiciary Committee determines whether there are sufficient grounds for impeachment. With respect to this matter, Judiciary Chair Bob Goodlatte (R-VA) scheduled hearings to investigate the matter: the third was held in September. Following those hearings, the Judiciary Committee did not bring a resolution or recommendation to the floor, and there is no reason to believe that the result will be any different this time.

In fact, this week, Goodlatte indicated that there were differences of opinion in the House regarding the measure to impeach Koskinen. The House would need a majority of votes to impeach the Commissioner and move the measure to the Senate. All 183 Democrats in the House are expected to vote against impeachment, and a number of Republicans will likely follow suit.

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December 27, 2016 in Congressional News, IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Monday, December 26, 2016

The IRS Scandal, Day 1327:  Delay In Koskinen Impeachment Is Discordant Note In Kumbaya Between Trump And GOP Congress

IRS Logo 2Washington Post, It’s Mostly Kumbaya So Far for Trump and GOP in Congress:

President-elect Donald Trump is signaling a cease-fire in his battle with the Republican leadership in Congress, which he repeatedly skewered during his election-season attacks on the Washington establishment.

Trump has, by all accounts, patched up his once-turbulent relationship with House Speaker Paul D. Ryan (R-Wis.). To fill top jobs in his administration, Trump has chosen five sitting lawmakers, as well as the wife of Senate Majority Leader Mitch McConnell (R-Ky.). And he has passed up opportunities to meddle in congressional business in ways that might have pleased his populist base but frustrated Republican leaders.

The detente in Trump’s war on GOP leaders reflects the unifying power of victory, the moderating influence of Vice President-elect Mike Pence and incoming White House chief of staff Reince Priebus, and, most of all, a shared desire to make good on years of Republican campaign promises. ...

But it is clear that the members of Trump’s inner circle often are not on the same page, which could spell trouble for his legislative agenda.

For instance, members of the hard-right House Freedom Caucus claimed to have Trump’s backing when they defied Ryan and launched an early-December bid to impeach Internal Revenue Service Commissioner John Koskinen.

Priebus intervened in an attempt to halt a floor vote, as reported by Politico, but conservatives forced one anyway. The Freedom Caucus was emboldened — and encouraged behind the scenes — by Bannon, whose former website, Breitbart News, wrote favorably about it, and by Bossie, who supported the impeachment push as president of Citizens United. Impeachment was effectively buried in the end, handing GOP leaders the win.

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December 26, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Sunday, December 25, 2016

The IRS Scandal, Day 1326: Only 72 House Republicans Voted Against Delay In Impeachment Of IRS Commissioner

IRS Logo 2Atlanta Journal Constitution, House Refuses to Move Forward on Impeachment of IRS Chief:

A last minute effort in Congress to push for an impeachment vote against the head of the Internal Revenue Service fell far short of the votes needed for victory, leaving more conservative Republicans fuming about the message and the lack of support to further investigate the Obama Administration’s Tea Party targeting scandal.

Republicans led by Rep. Jim Jordan (R-OH) argued IRS Commissioner John Koskinen had deliberately refused to turn over documents to Congress, accusing him of actively impeding the Congressional investigation into the targeting of more conservative groups by the tax agency.

“Koskinen has gotten away with stonewalling Congress, obstructing justice, breaching public trust,” Jordan said. “It’s time Congress held him accountable.” ...

The final roll call though was not close, as the House voted 342-72 to send the matter to the Judiciary Committee, where it may simply die a quiet death. ... Here are the 72 Republicans who voted against delay on the IRS impeachment resolution:

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December 25, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, December 24, 2016

The IRS Scandal, Day 1325: House Impeachment Leader Grills Witness Over Giving Koskinen 'Excellence In Public Service' Award

IRS Logo 2Government Executive, Lawmaker Seeking to Impeach IRS Chief Targets Public Service Award:

[A] House oversight hearing was supposed to address time-and-attendance troubles at the U.S. Patent and Trademark Office. But one congressman actively seeking the impeachment of the Internal Revenue commissioner used his time to question a good-government nonprofit for having given IRS chief John Koskinen a public service award.

Rep. Jim Jordan, R-Ohio, acted a day after the full House voted 342-72 to refer an impeachment motion favored by the Freedom Caucus to the Ju­di­ciary Com­mit­tee, where observers expect it to die. (House leaders have expressed fears that the resolution would only tie up the Senate.)

At the House Oversight and Government Reform Committee subcommittee hearing on the Patent Office, Jordan reiterated his central complaint about Koskinen: that 422 backup tapes under congressional subpoena that may have contained 24,000 emails involving Lois Lerner, who was at the center of the dispute over alleged IRS bias against conservative nonprofits, were destroyed “on his watch.”

Jordan then zeroed in on David Chu, the president of the Institute for Defense Analyses who, separately, chaired the independent panel for the National Academy of Public Administration that performed a key study of Patent Office teleworking. “What does NAPA stand for?” Jordan asked. “Do you know who it gave the Elliot Richardson award to?” Chu did not recall. Jordan then stated it was Commissioner Koskinen who won the award last spring. “How was he chosen? Did he give money to NAPA?” Jordan asked Chu to speculate on “who was passed over” so Koskinen could get the award, but he declined.

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December 24, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, December 23, 2016

The IRS Scandal, Day 1324: Ways & Means Committee Seeks Information From IRS About Continued Targeting Of Organizations Based On Political Beliefs — This Time, Pro-Israel Groups

IRS Logo 2House Ways & Means Committee Press Release, Brady, Roskam Send Letter Expressing Concern Over Continued IRS Targeting of Pro-Israel Groups:

House Ways and Means Committee Chairman Kevin Brady (R-TX) and Oversight Subcommittee Chairman Peter Roskam (R-IL) sent a letter to the Internal Revenue Service (IRS) requesting information regarding the agency’s practice and policies when reviewing an organization’s application for tax-exempt status, specifically when the organization expresses support for the State of Israel. This letter is another part of the Committee’s aggressive oversight to hold the IRS accountable to the American taxpayer.

Despite the IRS’s assurances that it has ceased its targeting of people based on their political or ideological beliefs, Chairmen Brady and Roskam are concerned about recent reports suggesting the Obama Administration has directed the agency to discriminate against organizations supporting the State of Israel. These reports are especially concerning in light of the IRS’s previous practice of giving special scrutiny to pro-Israel applications for tax-exempt status.   The Chairmen expressed their displeasure with the IRS’s discriminatory actions, writing:

“It is distressing that the United States government subjected Americans to discriminatory treatment because of their political and religious beliefs. It is more distressing that it took seven years for one such group to get fair treatment by the IRS, even as the IRS told Congress that it no longer discriminated against such groups. And perhaps most alarmingly, recent press accounts suggest that even after all of this history, the IRS might even be pursuing new discriminatory policies … Despite the IRS’s claim to Congress that it stopped political targeting in 2013, the IRS and Administration’s actions over the past seven years lend credibility to these reports.”

The Chairmen request that the IRS respond with its tax-exempt review policies and procedures by January 11, 2017.

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December 23, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, December 22, 2016

The IRS Scandal, Day 1323:  Tea Party Group Decries IRS's 'Latest Bob And Weave To Avoid Accountability'

IRS Logo 2Following up on yesterday's post, The IRS Scandal, Day 1322: Government Denies That It Continues To Harass Tea Party Group:  

Plaintiff Texas Patriots Tea Party’s Reply in Support of its Motion to Clarify Preliminary Injunction:

In its response, the IRS again reverses position. Three weeks ago, after it insisted it would deny TPTP unless it responded within 30 days, emergency relief was needed just to allow the current motion. Yet now, the IRS professes bewilderment: had TPTP only asked, its request would have been granted. This claim is stunning. Just a week before TPTP moved for relief, TPTP stated its position in a conference with the Court. A far from “amenable” IRS adamantly opposed it. The IRS rewrites history, perhaps, to obscure the true reason for its last-minute change of heart: it wants this Court to pronounce that the IRS’s new position is a benevolent accommodation of TPTP, outside of the “ordinary course.” This plea for the Court’s blessing is the sole remaining issue now that the IRS agrees to TPTP’s request, but this Court should deny it. The IRS’s latest bob and weave is another effort to avoid accountability. It cynically trades “accommodation” of TPTP for judicial approval of its continuing use of “neutral” policies that exacerbate the targeted groups’ injuries. Most depressingly, it shows that 42 months into this case, the IRS remains more focused on saving face than unwinding the harms it has caused.

Previous TaxProf Blog posts:

 

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December 22, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, December 21, 2016

The IRS Scandal, Day 1322: Government Denies That It Continues To Harass Tea Party Group

IRS Logo 2Following up on my previous posts on NorCal Tea Party Patriots v. IRS, No 1:13-cv-00341 (S.D. Ohio):

United States' Response to Plaintiff's Motion to Clarify Preliminary Injunction (Dec. 14, 2016) (citations & footnotes omitted):

In its Motion, Plaintiff Texas Patriots Tea Party states that the relief it seeks is for the IRS to “finish developing TPTP as it was prepared to do in 2013 with any additional inquiry limited to (1) what the IRS had then identified as new issues raised in, or still to be clarified from, TPTP’s response to the second development letter; and (2) facts regarding TPTP’s activities on or before March 2013.” Prior to the filing of this Motion, TPTP did not inform the United States of the relief sought. Had TPTP done so, the United States would have been amenable to that relief and the parties likely would have been able to resolve the issue extra-judicially. In fact, on November 14, 2016, during a meet-and-confer telephone call regarding the TPTP development questions, counsel for the United States inquired whether TPTP’s concerns may be addressed by limiting the time frame of the questions to lessen the burden on TPTP. TPTP’s counsel dismissed the suggestion and, prior to the filing of the Motion, did not indicate any renewed interest in pursuing that avenue of resolution. However, the United States is still amenable to resolving this issue by limiting the requested information to the time period prior to March 2013. The United States is also amenable to resolving this matter by agreeing to allow TPTP to submit the additional information it believes would be relevant to establish whether it is entitled to tax exempt status. While the IRS issued the development letter in the ordinary course, TPTP can decide whether to respond fully, incompletely, or with different information. However, the United States requests that any Court order along those lines clarify that it is not in the ordinary course but is an accommodation for TPTP and require that any additional information be submitted within 30 days.

In the event TPTP is not amenable to the accommodations the United States is willing to make to resolve this Motion, the IRS is justified in pursuing answers to the questions it has posed to TPTP. TPTP argues that, by seeking additional information, the IRS is not processing its application in the “ordinary course,” but this argument rests on two faulty assumptions: (1) that TPTP’s application was complete and “on the path to approval” in August 2013 and (2) that the IRS does not ordinarily ask applicants to provide information about their activities covering a time frame of more than six to nine months. Neither of these assumptions is correct. Prior to the stay requested by TPTP, the IRS was processing its application in the ordinary course, and contrary to TPTP’s assertions, TPTP now seeks extraordinary treatment.

TPTP also seeks to poison the well by misrepresenting the facts of its case and falsely implying, without any basis, that Department of Justice (DOJ) counsel and IRS Chief Counsel (IRS Counsel) attorneys improperly influenced the processing of TPTP’s application. Plaintiff’s allegations break down under the weight of false assumptions and misleading recitations. Specifically, whether by design or mistake, TPTP makes two fundamentally incorrect factual assertions in telling its story. First, TPTP erroneously claims that it was “on the path to approval” in August 2013. This claim is based on a mischaracterization of the roles of Tax Law Specialist Emily Mangrum and IRS Counsel Preston Quesenberry in processing TPTP’s application and ignores the then-current process used to review applications. Second, and more disturbingly, TPTP makes false assumptions regarding material withheld under the attorney-client and work product privileges, incorrectly filling in the gaps to infer that the IRS Office of Chief Counsel and the Department of Justice inappropriately attempted to influence the processing of TPTP’s application. These inferences are demonstrably false. As a result of the severity of these accusations, the United States is compelled to release the unredacted documents, as the actual redacted text is both banal and consistent with the government’s position throughout this litigation. Reviewing these materials in their entirety establishes that TPTP’s interpretation of the timeline is without any basis in fact. Furthermore, TPTP’s argument that it was “on the path to approval” does not withstand scrutiny in light of the merits of TPTP’s application under 26 U.S.C. § 501(c)(4). Simply put, TPTP has not met its burden of showing that its campaign intervention activity falls within permissible limits, and that it qualifies for tax exempt status under § 501(c)(4). As a result, the IRS is within its rights to seek additional information to determine whether TPTP qualifies for tax exempt status. Finally, both the scope of the development questions and the nature of the timeframe are adapted from the template questions that the IRS uses for all organizations that raise issues similar to those raised by TPTP’s application. The IRS is processing TPTP’s application in the ordinary course and in compliance with this Court’s Order on TPTP’s Motion for Preliminary Injunction. No further “clarification” is needed. ...

TPTP bases its arguments on false assumptions bolstered by improper and demonstrably false insinuations of inappropriate involvement by DOJ and IRS counsel attorneys. However, the facts show that the IRS’s development questions are in the ordinary course. Accordingly, the IRS is in the process of complying with this Court’s Order to process TPTP’s application in the ordinary course. The United States is amenable to resolving this issue by limiting the time period of the information requested. The United States is also amenable to resolving this matter by agreeing to allow TPTP to submit the additional information it believes would be relevant to establish whether it is entitled to tax exempt status. While the IRS issued the development letter in the ordinary course, TPTP can decide whether to respond fully, incompletely, or with different information. However, the United States requests that any Court order along those lines clarify that this is an accommodation for TPTP, not the ordinary course, and require that TPTP submit any additional information within 30 days.

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December 21, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Tuesday, December 20, 2016

The IRS Scandal, Day 1321: Maureen Dowd, Donald Trump, And The IRS Scandal

IRS Logo 2New York Times:  Election Therapy From My Basket of Deplorables, by Maureen Dowd:

My little basket of deplorables, as I call my conservative family, gloated with Trump toasts galore, and [my brother] Kevin presented me with his annual holiday column with an extra flourish. ... [H]ere is what Kevin, an affluent, educated suburbanite, has to say in his column, titled an “Election Therapy Guide for Liberals”:

Donald Trump pulled off one of the greatest political feats in modern history by defeating Hillary Clinton and the vaunted Clinton machine.

The election was a complete repudiation of Barack Obama: his fantasy world of political correctness, the politicization of the Justice Department and the I.R.S., an out-of-control E.P.A., his neutering of the military, his nonsupport of the police and his fixation on things like transgender bathrooms. Since he became president, his party has lost 63 House seats, 10 Senate seats and 14 governorships. ...

As Eddie Murphy so eloquently stated in the movie “48 Hrs.”: “There’s a new sheriff in town.” And he is going to be here for 1,461 days. Merry Christmas.

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December 20, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (10)

Monday, December 19, 2016

The IRS Scandal, Day 1320:  How The GOP Establishment Teamed With Nancy Pelosi To Table Impeachment Vote On IRS Commissioner

IRS Logo 2Conservative Review, How the GOP Establishment Teamed With Nancy Pelosi to Save the Corrupt IRS Chief:

The last nail in the coffin went in handily.

After Rep. Jim Jordan R-Ohio, Freedom Caucus’ outgoing chairman, invoked a privileged resolution on Tuesday to force an impeachment vote on IRS Commissioner John Koskinen, the House voted 342-72 to refer the measure back to the Judiciary Committee, where it will gather dust for the indefinite future.

It was the last maneuver available to the House Freedom Caucus’s hopes of impeaching Koskinen, who they say has lied to Congress about the targeting of conservative groups.

Wednesday afternoon, Rep. Tim Huelskamp posted an instructive timeline of events on Facebook, outlining just how GOP leaders worked with Democratic Minority Leader Rep. Nancy Pelosi, D-Ca.  to kill the impeachment effort:

After learning of conservatives [sic] plans to force the House to take a recorded vote on the impeachment resolution, GOP leaders responded by making a deal with Nancy Pelosi to use a procedural gimmick to effectively kill the effort. The little-used ‘motion to refer’ sent the impeachment resolution back to committee where it is unlikely to ever see the light of day again.” Instead of waiting for a vote on the privileged resolution on Thursday —when lawmakers intended to vote on it — Pelosi led the House Democrats in a move to table the motion. The move failed 180 to 235.

Rep. Bob Goodlatte R-Va. then offered a motion to refer the resolution back to the Judiciary Committee, which has jurisdiction over impeachment hearings. Privileged resolutions must be voted on within two days of being offered, but Pelosi’s move to table the motion on Tuesday ensured an even swifter end to the impeachment measure. ...

This week’s defeat of the effort to impeach John Koskinen is the end of the line for the many Freedom Caucus members who’ve slaved away trying to do right by their constituents, for justice.

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December 19, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Sunday, December 18, 2016

The IRS Scandal, Day 1319:  How Will The Koskinen Saga End?

IRS Logo 2Going Concern, Accounting News Roundup:

One of the more colossal wastes of time this past year has been the effort by some House Republicans to impeach IRS commissioner John Koskinen. They were dealt a blow earlier this week when the full House voted overwhelmingly to send the matter to the Judiciary Committee.

From here it could a couple of ways: Koskinen ends up serving the rest of his term which ends in 2017 or he could be forced out after ugh Donald Trump becomes president. In a fun twist, however, Trump and Koskinen have a bit of a history. Politico's Morning Tax pointed to a New York Times article from 1975 where the two were on opposite sides of a couple real estate deals. This leaves the door open to...maybe Trump reappointing Koskinen? It's probably a longshot, but it would almost make all this worth it.

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December 18, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, December 17, 2016

The IRS Scandal, Day 1318:  More On Koskinen And Trump

IRS Logo 2Politico Morning Tax, Koskinen Gets Expansive:

IRS Commissioner John Koskinen sat down with Tax Analysts recently, and dropped some pretty interesting tidbits — his meeting with the Trump transition team, for instance, didn’t touch on whether he’d finish his term. (He added that he’d step aside if Trump asked him to, but that he thinks it’s best for the agency if he serves until his term expires in November.)

Koskinen also said it could be a real pain for the agency if Congress does repeal Obamacare, given all the resources the IRS allocated to implement the health care law. And he said he’s concerned that the sort of treatment he received from congressional Republicans might make talented people in the private sector think twice about hopping over to the government. (Though to be fair, Trump’s Cabinet choices suggest there are still people from the business world willing to make the jump.)

Morning Tax’s favorite part of the interview was Koskinen’s discussion of how he worked with Trump on a Manhattan hotel deal four decades ago. Koskinen, who called Trump “irrepressible,” said the real estate magnate didn’t coast like other children of wealth. “It was clear that Donald was going to make a career for himself,” Koskinen said. “I mean, he didn't have a hobby. He worked all day and all night.” (Bonus content: Trump called Koskinen to congratulate him after the IRS chief was nominated in 2013, and has since then sent him a note to say that he’d been criticized for defending the commissioner in a television interview.)

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December 17, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, December 16, 2016

The IRS Scandal, Day 1317:  Koskinen Says He Is Willing To Serve Another Term As IRS Commissioner If Trump Wants To Reappoint Him

IRS Logo 2Bloomberg BNA, IRS Chief Would Continue to Lead Agency If Trump Were to Ask:

Internal Revenue Service Commissioner John Koskinen said he would be willing to remain in the agency’s top job if President-elect Donald Trump were to re-appoint him.

“I’ve never said no. That’s part of my problem,” he told reporters at an event sponsored by George Washington University Law School and the IRS. “It’s an honor to be the commissioner.”

President Barack Obama appointed Koskinen, 77, to the job in 2013. His term ends next November. Members of the conservative House Freedom Caucus tried to impeach Koskinen during his term, saying he improperly withheld evidence during investigations into the agency’s handling of organizations applying for tax-exempt status. Moderate Republicans and Democrats said the effort was unwarranted.

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December 16, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, December 15, 2016

The IRS Scandal, Day 1316:  IRS Commissioner Koskinen Says Resignation Did Not Come Up In Meeting With Trump Transition Team

IRS Logo 2The Hill, IRS Chief: Resignation Didn't Come Up in Meeting With Trump Team:

IRS Commissioner John Koskinen says he met with members of President-elect Donald Trump's transition team last week, but the subject of whether Trump would ask him to resign was not discussed.

"In none of that conversation did anything come up about my tenure," Koskinen said in an interview with Tax Analysts published Wednesday. "It was really focused on the agency, its challenges and what it would take to allow it to improve its operations, its outreach to taxpayers."

Many Republican lawmakers have been critical of Koskinen and have accused him of engaging in misconduct during congressional investigations into IRS handling of Tea Party groups' tax-exempt status. Earlier this month, the House Freedom Caucus tried to force a floor vote on impeaching Koskinen, but the effort failed and the House voted to refer the impeachment resolution to the Judiciary Committee.

Koskinen's term ends in November 2017. He reiterated to Tax Analysts that he plans to finish his term but would step aside if the incoming president requested him to do so. "I have not considered resigning," he said. "I've made it clear, particularly to the employees who care a lot about this, that I am committed to finishing out my term, which, as you know, ends next November. Although as I also made it clear, I serve at the pleasure of the president. And the president-elect will make whatever decisions he thinks are best going forward."

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December 15, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, December 14, 2016

The IRS Scandal, Day 1315:  Bureaucratic Bumbling Or Targeting Of Conservatives?

IRS Logo 2Forbes: IRS Says Fixing Up Your Own House Is Not Charity, by Peter J. Reilly:

Got a run down old house that needs some spiffing up? Here is an idea. Get it designated an historic landmark. Then you can form a not-for-profit and get grants to do some renovations. Since it is an historic landmark, you'll have to let people see it sometimes. ...

[I]t did not end well for the organization (Let's call it This Really Old House (TROH))) that was the subject of Private Letter Ruling 201648020. ...

[T]he gatekeeper sorting the wheat from the chaff is the IRS Tax Exempt and Government Entities Division, sometimes referred to as EO. There are also state agencies of greater or less ferocity, usually the Attorney General rooting out phony charities, but mainly we seem to rely on IRS EO to prevent the charitable sector from being overrun by the less than charitable. The reliance was probably never that reasonable, but the developments over the last few years have made things much worse.

At its very heart the interminable IRS scandal, now on Day 1312 by TaxProf count was about exempt status applications.  Applications from Tea Party and similar organizations were held up and applicants were asked intrusive question.  Here is the thing. I am the last agnostic on the IRS scandal.  Was it bureaucratic bumbling or targeting of conservatives? I never found the targeting argument persuasive, but both Joe Kristan and George Will did, which gives me pause.

Regardless of whether it was bumbling or targeting, the end result has not been good for the integrity of the charitable sector. The IRS has streamlined the process and now many, possibly most applications are receiving no scrutiny thanks to the new Form 1023-EZ. You can find commentary to the effect that the corrupt IRS is still persecuting the Tea Party. I really think the only way out of the mess is to turn the vetting of exempt status over to a different agency. In the states supervision of not for profits generally falls under the Attorney General, not the revenue department. Maybe they are on to something.

The targeting believers will never accept that the IRS has been punished enough or that enough will be done to protect against future targeting, so taking the job away from the IRS might be the only way out of a downward spiral.

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December 14, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Tuesday, December 13, 2016

The IRS Scandal, Day 1314: How The Trump Administration Can Stop IRS Abuse of Political Groups

IRS Logo 2Jewish Press:  How the Trump Administration Can Stop IRS Abuse of Political Groups, by Jerome M. Marcus:

For more than six years, the Internal Revenue Service has been trying to fend off accusations that its process for granting tax-exempt status discriminated against applicants expressing political views at odds with those of the Obama administration. This discrimination against political viewpoints the Democrats disapprove of is a clear, even astonishing, violation of the First Amendment. For that reason, the IRS has lost many more of these battles than it has won. It’s lost battles not only in court against the victimized non-profits; it’s even lost against the Treasury Department’s own inspector general, which conducted a detailed study and concluded that many of the most serious accusations of discrimination were true.

In its court battles the IRS has been represented by the Justice Department, whose job it is to represent federal agencies when they are sued. No one will be shocked to learn that under the Obama administration, and Attorneys General Eric Holder and Loretta Lynch, DOJ lawyers have used every tool at their disposal to defeat the IRS’s accusers even when those accusers are agreeing with Treasury’s inspector general. That means that, according to the Obama administration’s own inspector general report, those victimized non-profits are right in claiming that they were discriminated against because of their political views.

That litigation strategy needs to change.

Upon President Trump’s inauguration, the Justice Department will get a new boss: Jeff Sessions, President Trump’s nominee for Attorney General. The moment he takes office, General Sessions should direct the Justice Department lawyers—all of whom report to him—to change their litigation stance to reflect an important adage about how government lawyers should do business: “the government wins when justice is done.”

It’s time to see that justice is done in these cases.

Up until now, the government’s strategy has been to make the IRS cases take as long as possible and to resist every demand for discovery—the process by which litigants can request that their adversaries produce documents, or provide testimony, revealing what was really going on inside the IRS.

I represent the plaintiff in one of these cases—Z STREET v. Koskinen—which challenges the IRS’s six year delay in processing the application for tax-exempt status by an organization whose views on the Middle East were at odds with President Obama’s. In discovery, we’ve asked for information about how the IRS went about deciding what to do with (and to) our organization. But the IRS has produced virtually nothing that sheds light on its decision-making process. Other organizations in court against the IRS have been given the same treatment by the Justice Department’s litigation teams.

All of the members of those government lawyer teams report to the U.S. Attorney General. That means that when the new sheriff arrives in town he can give new orders on how these cases ought to be handled.

Attorney General Sessions should direct these lawyers to stop resisting discovery, and to stop trying to prevent the litigants—and the public—from finding out what the IRS was really doing to all of these organizations for all these years. This is not a matter of political payback, like the question whether Hillary Clinton ought to be prosecuted for what many think are her misdeeds, at the State Department and with the Clinton Foundation. It’s just a matter of letting the truth be told. Z STREET, like many of the plaintiffs in the other cases against the IRS, is not seeking money damages. We just want to know the truth about what the IRS was doing to us, and why, and at whose direction.

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December 13, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Monday, December 12, 2016

The IRS Scandal, Day 1313: The Koskinen-Trump Connection

IRS Logo 2Politico Morning Tax, Now That's Going Way Back:

Trump and Koskinen might decide that it’s best for the IRS chief to move along — but apparently they’ll do so after more than four decades worth of history. A New York Times article from May 1975 discusses the efforts of the president-elect, then a 28-year-old developer, to buy a hotel. The assets management company representing the bankrupt company that owned the hotel was represented by a 35-year-old executive — yup, John Koskinen.

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December 12, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Sunday, December 11, 2016

The IRS Scandal, Day 1312: Impeachment Averted, But Will Koskinen Resign Or Be Fired By President Trump?

IRS Logo 2Politico Morning Tax, Impeachment Averted:

There’s not a ton of bipartisanship in the House these days, but lawmakers apparently made an exception for quashing a Freedom Caucus effort to impeach IRS Commissioner John Koskinen.

In the end, only 72 House Republicans voted to essentially bring the impeachment resolution to the floor. ... But while almost 350 House members decided to refer the resolution to a Judiciary Committee that hasn’t been gung ho on impeachment so far, that shouldn’t necessarily be viewed as an endorsement of Koskinen — who avoids becoming the first executive branch official since Reconstruction to be impeached. Top Republicans like House Ways and Means Chairman Kevin Brady made it clear they were no fans of Koskinen’s work, but that using time for impeachment proceedings might be unnecessary because they don’t expect the IRS chief to stay on under President-elect Donald Trump. (Koskinen's term ends next November, no matter what.)

 

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December 11, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Saturday, December 10, 2016

The IRS Scandal, Day 1311:  The IRS 'Scandal' Was Part Of GOP's Strategy To Bog Down Obama Administration

IRS Logo 2Salon, Tom Cotton and Trey Gowdy Vow Vigilance Over the Trump Administration — No, Seriously, Stop Laughing:

Considering how the Republican Party has fallen in line behind Donald Trump over the last few months, does anyone seriously think that this will ever amount to anything? The Chicago Tribune recently reported on Thursday:

Sen. Tom Cotton, R-Ark., and Rep. Trey Gowdy, R-S.C. . . . agreed that House and Senate committees must keep close tabs on Donald Trump’s new government starting next year — not because they want to stick it to a man that neither originally endorsed for president, but because doing so would help rebalance power between the three branches of government.

Sure thing. And I’ve got a bridge over the Potomac to sell you. ...

[A]fter the partisanship of the last eight years, why would anyone give Gowdy or Cotton the benefit of the doubt? Gowdy can complain all he wants about the deeply unfair perception, as he put it in remarks on Tuesday to a room full of Cotton’s fundraisers, that any subpoenas sent to Hillary Clinton or contempt-of-Congress votes held on former IRS bureaucrat Lois Lerner were “politicized.” But that perception existed because the investigations that Congress conducted into the Benghazi tragedy and the IRS “scandal” were in fact part of the GOP strategy to bog down the Obama administration and harm Clinton’s presidential ambitions.

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December 10, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)