TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Thursday, May 12, 2016

The IRS Scandal, Day 1099

IRS Logo 2Paul C. Barton (Tax Notes), Should Political Nonprofits Disclose More Frequently?:

Not only do many politically active nonprofits operate with dark money from undisclosed donors, but they carry out their work behind another shield, some say: the time lag before having to report their spending to the IRS.

Long before the IRS receives a politically oriented nonprofit's Form 990, "Report of Organization Exempt From Income Tax," the election involved will have come and gone. With easily available extensions, a nonprofit exempt under section 501(c)(4) can have up to 10-1/2 months after the end of its fiscal year before filing its return.

In an ideal world, say advocates of campaign finance reform, there would be more frequent and thorough disclosure of nonprofits' political spending. But, they say, that would require a Republican Congress, one already hostile to policing these groups, to change either the tax code, federal election law, or both. Meanwhile, there are some reports they have to file in a more timely fashion. For instance, they must report to the Federal Election Commission, sometimes in as little as 24 hours, after they pay for an ad that advocates the election or defeat of a candidate for federal office. A 24-hour disclosure rule also applies to some television or radio ads purchased within 30 days of a primary election or 60 days of a general election that mention specific candidates in the context of an issue but don't expressly advocate their election or defeat. These are called "electioneering communications."

Within a two-year federal election cycle, however, there could be spending on issue ads that fall outside those time windows, or on other ads easily construed as political, that are not included under political spending on Form 990. John Pomeranz of Harmon, Curran, Spielberg & Eisenberg LLP gave the example of ads that might feature Republican senators up for reelection this fall and that mention their refusal to consider the nomination of D.C. Circuit Chief Judge Merrick B. Garland to the Supreme Court.

As a result, Form 990 totals can fall far short of telling the whole story, complicating the all-important evaluation of whether nonprofits are spending less than half their budget on politics, the requirement for keeping their exempt status."There are things that almost anyone would acknowledge as having a possible impact on an election that the IRS might well agree are not reportable as political activity on the [Form] 990," Pomeranz told Tax Analysts.

Added Notre Dame law professor Lloyd Hitoshi Mayer: "I agree that the annual tax filing system is a poor fit with the frantic pace of electoral activities. By the time the IRS or the public receives the information, the relevant election is long past."

But Cleta Mitchell of Foley & Lardner LLP, who represents several conservative 501(c)(4) organizations, says the reporting on issue ads is done even if the communications are not election related. "These morons on the left act like" that rule has never been implemented, she said. ...

Mayer said neither the IRS nor Treasury is going to stick its neck out to change the system. "Even if in theory Treasury has the necessary authority, it would be subject to withering criticism from Congress and elsewhere if it tried to unilaterally impose additional filing requirements on politically active exempt organizations," he said.

But it's clear that the current system "makes it very hard for the IRS to identify any improper spending until after the election," said Lawrence M. Noble, general counsel for the Campaign Legal Center. ...

But Ellen Aprill, professor at Loyola Law School, cautions in a new article for the Pittsburgh Tax Review that Congress has so intertwined sections 527 and 501(c)(4) that any stepped-up regulation of the latter is going to require looking at the former [The Section 527 Obstacle to Meaningful Section 501(c)(4) Regulation, 13 Pitt. Tax Rev. 43 (2015)]. Many activities that are tax exempt for section 527 groups are limited for noncharitable 501(c)s and forbidden for 501(c)(3)s, she writes, adding, "Reconciling political campaign intervention under current law is fraught and difficult."

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May 12, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Wednesday, May 11, 2016

The IRS Scandal, Day 1098

IRS Logo 2Politico, Morning Tax:

IT’S TUESDAY, and we’re marking the third anniversary of the IRS’s tea party controversy — or more specifically, the day that Lois Lerner answered a planted question at an American Bar Association conference. (That’s LLAPQABA, for short.). ...

THREE YEARS LATER: We don’t have the space to give a full recap of the full sordid tale since Lerner acknowledged the IRS improperly scrutinized conservative organizations seeking tax-exempt status. (The short version: People on the right believe it was intentional targeting, while those on the left see bureaucratic mistakes.) But Morning Tax did ask Rep. Peter Roskam (R-Ill.), the chairman of the House Ways and Means Oversight Subcommittee, where he thinks matters stand with the IRS three years later.

The takeaways: Roskam said Republicans believe the IRS is still dragging its feet on making key reforms, but made the case that the renewed focus on the agency led to a taxpayer bill of rights and even changes to civil forfeiture rules. “We’ve made significant progress, but nobody’s breathing a sigh of relief.”

The problems with cybersecurity and identity theft have gotten so pronounced, and are affecting so many taxpayers, that Republicans have had to call something of a détente with the IRS — see, for instance, that $290 million funding increase the agency got several months back. “The cyber issue is ripening very quickly, and you don’t get the sense the IRS is on top of it,” Roskam said. “When the IRS wants to do something well, they can.”

IRS Commissioner John Koskinen won’t be getting impeached. “By mid-July, the congressional year will essentially be done,” Roskam said. House Oversight Chairman Jason Chaffetz (R-Utah) has been leading the charge for impeachment but recently signaled that he could accept a censure of Koskinen.

FROM THE OTHER SIDE: Rep. Elijah Cummings of Maryland, the top Democrat at House Oversight, on the anniversary: “House Republican efforts to impeach or censure the IRS commissioner are exercises in partisanship and a total waste of time and money. Nobody who has examined this issue has identified any evidence of political targeting — not the Justice Department, not the Republican Inspector General of the IRS, and not even the Oversight Committee. Republicans have wasted tens of millions of taxpayer dollars chasing false political conspiracy theories.”

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

Tuesday, May 10, 2016

The IRS Scandal, Day 1097

IRS Logo 2New York Post editorial, Facebook’s Faked ‘Trending News’ Is a Warning Not to Trust Silicon Valley:

Well, so much for Facebook’s claims to be an honest information broker: Turns out its list of “trending” topics comes with a hefty political bias.

The site Gizmodo on Monday reported what it had heard from some of the “news curators” who actually create the “trending” feed — which only starts with topics flagged by a computer algorithm as to what users are actually posting about.

The exposé reveals one level of bias imposed by management — and another from the peons hired to do the work.

Several curators cited routine nixing of right-of-center topics — news about Mitt Romney, Wisconsin Gov. Scott Walker and even Lois Lerner, the face of the IRS scandal.

Ironic: IRS employees used their power to suppress righty speech, and Facebook then suppressed the fact its users cared about it . . .

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May 10, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, May 9, 2016

The IRS Scandal, Day 1096

IRS Logo 2Bloomberg BNA, Americans for Prosperity Shows That Rough and Tumble Issue Activism Could Serve as a Shield for Charities Against Donor Disclosures:

We all know the saying “politics ain’t beanbag” – and the ranks of candidates for high office seem to be living by that adage. But in the last several years we have seen a significantly more confrontational style filter down to the grassroots issue activists behind any number of organizations and causes – threats to boycott stores (see Hobby Lobby Stores) or even entire states (North Carolina and not too long ago Georgia) over laws or stances taken; calls for individuals to be fired from their jobs or otherwise “economically disciplined” for expressing opinions deemed “unacceptable” (such as Brendan Eich’s ouster from Mozilla for donating to the California Proposition 8 campaign after calls from activists or Atlanta Fire Chief Kelvin Cochran’s dismissal for expressing his disapproval of same-sex marriage in a religious book he published); and even instances of physical altercations or harassment (picketing the homes of politicians’ families, or attempting to physically disrupt events or attendees). Now we may see that style of politics become a tool by which charities and other exempt organizations challenge state-level disclosure requirements that would force them to disclose donor information. ...

Americans for Prosperity Foundation (AFP) won just such a challenge when Judge Manuel Real of the U.S. District Court for the Central District of California held California’s requirement for charities to file annually with the Attorney General (AG) their unredacted Form 990 Schedule B (Schedule of Contributors) to be unconstitutional as applied to AFP. Judge Real permanently enjoined the AG from requiring or demanding AFP’s Schedule B information.

The primary basis for the decision was extensive trial evidence of harassment and intimidation that supporters of AFP and those affiliated with it have experienced. Though Judge Real only recounted a few of the incidents established at trial, the details sound like much of the activism that is becoming more prevalent: An IT contractor took to social media to condemn AFP (and suggest that he could easily slit the throat of AFP’s CEO) and was later found in the garage photographing license plates; protestors at an event cut down the tent being used for the function while attendees were still inside; major donors have received numerous death threats and had their business boycotted once their affiliation has become known; the Koch brothers, long-time supporters have been threatened, along with their families, including their grandchildren (who are all still minors). As Judge Real put it in conclusion, “the Court finds that AFP supporters have been subjected to abuses that warrant relief….” ...

In the end, Judge Real’s opinion may work to open the floodgates for other organizations that have been targeted for various forms of harassment or abuse. Several states have either instituted, revived, or proposed requirements that charitable organizations file their Schedule B information with state officials. And while California has been the focal point of challenges, the U.S. District Court for the Southern District of New York has upheld a similar New York requirement against a facial challenge (see Citizens United v. Schneiderman). While the initial failure of those facial challenges may have dampened litigation at first, this new decision will certainly result in additional interest in litigating these disclosure requirements, even if it must be done on an organization-by-organization basis. For now, we can only wait and see what, if anything, the Ninth Circuit does on appeal.

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May 9, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Sunday, May 8, 2016

The IRS Scandal, Day 1095

IRS Logo 2Linda Beale (Wayne State), IRS Scrutiny of 501(c)(3)s:

As most everybody is aware by now, the IRS has been under considerable strain for a number of years from budget and staff reductions that have left it underfunded, understaffed, and under pressure.  This is part of the right's effort to "shrink the government to a bathtub and drown it."  If the main organization for helping Americans understand their tax obligations is understaffed, it is likely that many people will become irritated with the agency and blame it (and taxes) for all their problems.  If the main organization for enforcing the U.S. tax laws fairly has too few people to audit the most likely scoflaws and too little money to prepare guidance and rulings to make it harder for scofflaws to scoff at the law, then many people will become irritated with the agency and blame it (and taxes) for their problems while many other people (especially the privileged rich) will continue to scoff at the law by overstating their basis when they sell capital assets, hiding assets in tax havens, and just hiring lots of expensive tax attorneys and accountants to come up with schemes for wiggling through the loopholes in the Code to avoid more taxes.

And of course, if the main organization for ensuring that tax-exempt organizations are not abusing their tax exempt status by using "dark money" to allow the domestic elite and foreign powers to influence and control federal elections and legislation, then odds are the rich and elite and foreign powers will wield more and more influence and control over who gets elected and what kind of legislation they pass.  Odds are we will see even more of the kinds of absurd legislation disenfranchising the poor and minorities by making it harder to vote, harder to get a State-issued I.D. card, harder to wait in line for hours at the polls (if you will be fired for not reporting to work), etc.

None of this is any surprise.

None of it is good government.

All of it is supported by the current radicalized uber-right-wing Republican Party hacks that are running many state governments and hold the majority right now in the U.S. Senate and House of Representatives.

As the New York Times editorial board noted, "[c]laiming a 'social welfare' tax exemption has become a tool for powerful political operatives like Karl Rove, the Republican campaign guru.  His Crossroads GPS group, which has 501(c) status, has spent $330 million on ads and candidates since it was created in 2010."  See Editorial,  Dark Money and an I.R.S. Blindfold, New York Times (Apr. 28, 2016).  And of course, with all the ranting about it being a problem to pick a group with "Tea Party" or "Progressive" in their name for closer scrutiny (when any common sense analysis will tell you that such a group is quite likely to be engaged in forbidden lobbying activities), "the IRS has grown ever more gun-shy about enforcement."

So the latest bill wreaking havoc on democracy, put forward by Republican Peter Roskam in the House of Representatives, would eliminate the current law that requires those who donate more than $5000 to a nonprofit to be disclosed to the IRS (though redacted for public versions of organizations' tax forms)..  See, e.g., Richard Rubin, House Republicans Seek to Block IRS Collection of Non-profit Donor Data, Morningstar, Apr. 28, 2016. That means a foreign corporation or a foreign sovereign power could contribute enormous sums to shape the legislative and regulatory regimes in our country, and there would be NO WAY TO POLICE THE PROBLEM. 

Further, it is hard to understand why any donor to a tax-exempt organization should be entitled to anonymity.  The organization is able to avoid paying any taxes on the funds received, and--especially under the current malevolent eye from Congress towards the IRS--the IRS is hamstrung in enforcing the law against political campaigning with 501(c)(3) funds.  What we should do instead of allow complete anonymity and the power plays that encourages is the opposite:  the name of every donor who gives anything more than some de minimis threshold amount to any tax-exempt organization should be publicly available, and the amount given should be publicly available.  After all, if money is "speech", "speech" is supposed to be heard.  Remember the old saying about the tree that fell in the forest and whether there would even be any sound if there were no eardrum available to hear it.  That's certainly the case with speech.  If giving money is a form of speech, than the gift and giver shouldn't be hidden under a bushel but should be broadcast far and wide for anyone who wants to know.

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May 8, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Saturday, May 7, 2016

The IRS Scandal, Day 1094

IRS Logo 2The Daily Signal, Why Donors to Nonprofits Need to Be Protected From the IRS:

Congressional calls for the impeachment of IRS Commissioner John Koskinen are once again making headlines. In an interview with The Daily Signal, Cleta Mitchell, an attorney representing numerous conservative groups targeted by the IRS, explains why Koskinen should never have been appointed in the first place and why current laws need to be changed to protect donors to nonprofit groups from being targeted and audited by the agency.

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May 7, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, May 6, 2016

The IRS Scandal, Day 1093

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

Non-charitable nonprofit organizations are important political players, and they operate with little regulation and behind a veil of anonymity. The customary regulators of these organizations − the IRS and the FEC − are paralyzed by scandal and dysfunction, and have done nothing to address the problem of dark money in politics spawned by the Supreme Court’s 2010 decision in Citizens United v. FEC. This article considers whether state nonprofit law can fill the gap left by federal tax and election regulators. It describes the efforts taken by California and New York to limit the influence of out-of-state anonymous money in state elections, and considers the policies that states might pursue in regulating politicking by nonprofits under their jurisdiction.

This article argues that state nonprofit law regulation could be desirable if states are concerned with either (1) shielding charitable organizations from the taint of political nonprofits, or (2) protecting donors to social welfare organizations from unwittingly underwriting political activity. However, if states are primarily interested in equalizing political power, silencing out-of-state voices, or protecting voters from fraud, then state nonprofit law is a poor regulatory fit. While most demands for dark-money regulation focus on disclosing the identity of nonprofit donors, this article explains that the appropriate regulation depends on the policy that drives it. While it argues that states have legitimate nonprofit-law concerns and could experiment to pave the way for federal regulation, it ultimately concludes that state nonprofit law regulation is unlikely to have the scope or effectiveness necessary to address the problem created by Citizens United.

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May 6, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, May 5, 2016

The IRS Scandal, Day 1092

IRS Logo 2Kristin E. Hickman (Minnesota), Pursuing a Single Mission (or Something Closer to it) for the IRS, 7 Colum. J. Tax L. ___ (2016):

It is often said that taxes are the lifeblood of government. As the nation’s tax collector, the IRS serves a critical function without which the federal government would cease to function. Yet the IRS is an agency in crisis—mired in scandal, chronically underfunded, overreliant on automation, and failing to provide taxpayers with the support they need to comply with the tax laws and pay their taxes. This Essay argues that a major contributor to the IRS’s woes is Congress’s penchant in recent decades for utilizing the IRS to administer social welfare and regulatory programs that are only tangentially related to the IRS’s traditional revenue raising mission.

This Essay examines the consequences of that choice and calls for reforming the IRS’s organizational structure to segregate the revenue collection function from the biggest and most politically fraught social welfare and regulatory programs that currently fall within the IRS’s jurisdiction. To that end, this Essay suggests giving serious consideration either to spinning off several non-revenue raising programs from IRS oversight or to splitting up the IRS altogether and distributing its many functions among other new or existing agencies.

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May 5, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, May 4, 2016

The IRS Scandal, Day 1091

IRS Logo 2Forbes:  Members Of Congress Push To Shut Down IRS Forever, by Kelly Phillips Erb:

Shut down the Internal Revenue Service (IRS).

That’s the recommendation from the Republican Study Committee (RSC) to House Republicans. The proposal to shutter the IRS, together with other policy initiatives, were submitted by RSC Chairman Bill Flores (R-TX) to House Republican task forces for consideration.

As part of its proposal on tax reform, the RSC slammed the IRS, writing:

In its current form, the Internal Revenue Service (IRS) is at best an inefficient behemoth weighing down our economy. At its worst, the IRS has shown a capacity for outright corruption and political targeting.

The proposal went on to claim:

Under the Obama Administration, the IRS has illegally targeted conservatives. It has channeled millions of taxpayer dollars away from taxpayer assistance for employee bonuses. It has allowed taxpayer information to be compromised in a data breach. The IRS has even intentionally leaked confidential taxpayer information. Despite these facts, the president’s budget actually calls for increasing spending on the IRS by $1 billion.

The solution? “[T]he complete elimination of the IRS.” ...

That’s not to say that the news is all good. The IRS has been plagued by scandal. The tax exempt organization scandal, in particular, has left a bad taste in the mouths of many taxpayers. Concerns over security weaknesses and technology failures have made taxpayers understandably wary.

In response, Congress has hammered the federal agency by slashing the budget. In 2015, seven former IRS commissioners signed onto a joint letter to Congress speaking out against further reductions, noting “[o]ver the last fifty years, none of us has ever witnessed anything like what has happened to the IRS appropriations over the last five years and the impact these appropriations reductions are having on our tax system.” That same year, National Taxpayer Advocate Nina E. Olson noted that “the budget environment of the last five years has brought about a devastating erosion of taxpayer service, harming taxpayers individually and collectively.” ...

And interestingly, for all that Congress wants to complain that IRS is spending too much money and has too much power, Congress keeps handing over responsibilities to the agency. Obamacare? Up to IRS to administer. The Foreign Account Tax Compliance Act (called FATCA)? The IRS administers that, too. That new passport law? IRS. Even as Congress decries the agency, they’re the very ones guaranteeing the need for its existence.

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May 4, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, May 3, 2016

The IRS Scandal, Day 1090

IRS Logo 2Reuters, Conservatives in Congress Urge Shutdown of IRS:

It's a U.S. taxpayer's dream: make the Internal Revenue Service go away, and the largest conservative group in Congress is endorsing just that.

The Republican Study Committee, which counts over two-thirds of House of Representatives Republicans as its members, called recently for "the complete elimination of the IRS."

The committee's support for this idea, once confined to the fringes of conservative ideology, suggests it is more widely accepted on Capitol Hill than ever. But many in Washington, including some Republicans, have trouble taking it seriously. ...

It was unclear how House Speaker Paul Ryan would treat the study committee's proposal in drafting a party policy agenda ahead of the Republican convention in Cleveland in July. "The speaker welcomes input from the RSC and all members of our conference," said Ryan spokeswoman AshLee Strong. Ryan has sidestepped calls for abolishing the IRS in the past, while frequently criticizing the agency.

Washington Post editorial, Congress Should Let the IRS Do Its Job, Not Tie Its Hands:

“The beatings will continue until morale improves,” a famously ironic phrase of unknown origin, aptly describes the Republican House approach to the Internal Revenue Service.

The House has passed a series of sniping, counterproductive measures picking on the IRS. One would limit how it spends the user fees it collects. Another would freeze hiring at the understaffed agency until it obtains certification that no one there has major tax debt. The dumbest would mandate that no one at the IRS could get a bonus until customer service improves.

But who is responsible for the decline of customer service at the IRS? House Republicans. The IRS budget is $500 million below its level in 2010 , the year that Republicans won control of the House. It has been forced to shed 17,000 workers. Meanwhile, its responsibilities have increased. More people are filing taxes. The agency has to administer key parts of the Affordable Care Act. Cyberthreats have skyrocketed, including instances of identity theft.

Hollowing out the IRS has been one of the most foolish policies the GOP majority has pursued, as our columnist Catherine Rampell has illustrated. Tax cheats are encouraged and rewarded. Performing fewer audits cost the government $8 billion in 2015. ...

April is synonymous with taxes, so it is little surprise that Republicans chose last month to harry the IRS, among the least-loved parts of government. But the solution to the IRS’s problems is not more punishment, particularly of the sort that is likely to inhibit its ability to hire competent employees. The answer is for lawmakers to give the agency the money it needs to do its job. The country relies on a mostly voluntary system of tax compliance. If respect for and cooperation with that system decline, the government will lose the very revenue Congress expects the IRS to collect — and on which lawmakers’ budgets depend.

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May 3, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, May 2, 2016

The IRS Scandal, Day 1089

IRS Logo 2Breitbart, Judge Denies Kamala Harris Koch Brothers’ Donor List:

A conservative advocacy group backed by the Koch brothers won a First Amendment victory this week denying California Attorney General Kamala Harris access to the names of conservative nonprofit members and contributors.

Harris, the California Attorney General and a Democratic candidate for outgoing Senator Sen. Barbara Boxer’s Senate seat, Harris has been attempting to overturn post-Watergate reforms to the Internal Revenue Code designed to protect confidential federal tax return information by demanding access to the names of contributors to conservative nonprofits.

The Koch Brothers-backed Americans for Prosperity Foundation (AFPF) and two other nonprofits filed lawsuits in the Central District Court in Los Angeles alleging Harris had violated the First Amendment by requiring charities that wanting to solicit contributions from Californians to disclose to the State of California all donors anywhere in the United States listed on the nonprofit’s IRS tax return Schedule B. Ms. Harris was also alleged to have attempted coercion to acquire donors’ names by threatening denial of permits and demanding huge fines for failure to comply. ...

As a result of a long history of racist and political bias, Congress passed a number of laws to ensure all charity donor information on Schedule B is protected as confidential. The federal tax code currently includes a regime of control and monitoring over state attorneys general, when they are granted access to donors’ names for legitimate law enforcement purposes. Violation by state officials is subject to civil and felony penalties.

The conservative nonprofits claimed there was a substantial risk Ms. Harris and/or her staff would leak this confidential data to their ideological opponents and her allies. The nonprofits cited various acts of lawlessness and law-breaking exposed by congressional investigators regarding Lois Lerner’s IRS staff leaking the National Organization for Marriage’s Schedule B donor information of the to their opponents. ...

Despite Harris saying she plans to appeal the court’s ruling, the issue may become moot with the U.S. House of Representative’s Ways and Means Committee passing a bill on April 28 titled Preventing IRS Abuse and Protecting Free Speech Act on a party-line vote, which would eliminate what Republicans dubbed a “superfluous IRS form, known as the Schedule B, which the IRS has used to improperly target tax-exempt organizations.”

Democrats voted against the bill, claiming that the review by the IRS is critical to ensure foreign funds do not covertly enter U.S. election politics.

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May 2, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Sunday, May 1, 2016

The IRS Scandal, Day 1088

IRS Logo 2CBS News, Koch Brothers Push Forward Efforts To Hide Nonprofit Donors’ Identities:

The billionaire Koch brothers are pushing ahead in their efforts on both the state and federal level to hide the identity of donors to nonprofit groups.

A week after a conservative advocacy group, backed by the Koch brothers, convinced a federal judge in California that it shouldn’t have to reveal the identities of its donors to California officials, a U.S. House panel approved a bill on Thursday that would shield from the Internal Revenue Service from the names of donors to nonprofit organizations.

Critics say review by the IRS is key to ensuring that foreign funds don’t covertly enter U.S. election politics.

On April 21, Americans For Prosperity Foundation, a nonprofit group backed by billionaire brothers David and Charles Koch, claimed victory when a federal judge in California issued a ruling that California Attorney General Kamala Harris did not have a right to know the identities of that group’s donors.

Harris plans to appeal that ruling. ...

Then, on Thursday, a bill titled Preventing IRS Abuse and Protecting Free Speech Act, went to the U.S. House of Representative’s Ways and Means Committee where the committee approved the bill 23-15, with all members of the committee voting along party lines. All those in favor of the legislation were Republican.

The legislation aims to eliminate what the Republican-led Ways and Means Committee dubbed a “superfluous IRS form, known as the Schedule B, that the IRS has used to improperly target tax-exempt organizations.” The legislation would ban the IRS from collecting the identity of nonprofit organizations’ donors.

A letter from Koch Companies Public Sector president Phillip Ellender on Thursday argues in favor of the bill, saying:

The targeting of non-profit organizations by the Internal Revenue Service (IRS) to limit free speech under this Administration is well documented. From the IRS subjecting donors of nonprofit organizations to the gift tax, to the direct targeting of conservative non-profit organizations based solely on their beliefs, this legislation could not be more pertinent. Considering the pair of reports released earlier this year by the Government Accountability Office (GAO), it’s even more pressing. The GAO found serious internal control flaws within the IRS that could allow the agency to continue its targeting of certain Americans for audit ‘based on an organization’s religious, educational, political, or other views.'

Prior to the committee’s Thursday vote, groups critical of the legislation, including the nonprofit organizations Democracy 21, Brennan Center for Justice, Campaign Legal Center, Public Citizen, and the Sunlight Foundation, among others, penned a letter to the members of the House Ways and Means Committee warning that the bill “would open the door wide for secret, unaccountable money from foreign governments, foreign corporations and foreign individuals to be illegally laundered into federal elections through 501(c)(4) groups.”

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May 1, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Saturday, April 30, 2016

The IRS Scandal, Day 1087

IRS Logo 2Washington Post, Inside Republicans’ Backup Plan to Punish the IRS Chief:

Jason Chaffetz, chairman of the House Oversight and Government Reform Committee, has been on a campaign since last October to impeach — literally — the tax collector.

But the Utah Republican has found little appetite among House leaders to call for a hearing, much less a vote to remove John Koskinen as head of the beleaguered Internal Revenue Service. Instead, Chaffetz says he is in conversations with his GOP colleagues about a vote on the lesser but still harsh charge of a censure.

“My foremost goal is impeachment and I’m not letting go of it,” Chaffetz said in an interview. “But if censure is the right precursor while we go through the process of educating our members, I have a [censure] bill drafted and ready to go.”

Chaffetz and his fellow Republicans have a slew of grievances against Koskinen’s management of the tax agency he took over in 2013, and last week the House passed six anti-I.R.S. bills by party-line votes to mark Tax Day.

But the effort to remove Koskinen stems from a scandal that preceded him — the IRS’s treatment of conservative groups applying for tax-exempt status. And since his five-year term ends in November 2017, the GOP effort to oust him could drag on beyond the Obama presidency.

Chaffetz says Koskinen should be impeached for violating the public trust and lying to Congress as it investigated the IRS’s singling out of conservative groups for scrutiny. The congressman has accused the commissioner of erasing back-up computer files containing thousands of e-mails written by Lois Lerner, the central IRS official in the scandal. Koskinen has told lawmakers his staff turned over all e-mails that were relevant to the investigation, and when some were found to be missing, said they were unrecoverable. ...

A censure resolution, rare in Congress’s modern history and far more common against lawmakers than government officials, would be a formal rebuke that states the House’s lack of confidence in Koskinen and calls on President Obama to fire him. It would fall short of outright impeachment, with no real consequence other than the announcement of the vote itself and a good measure of humiliation.

Democrats dismissed both efforts as wasteful partisanship. “Nobody who has examined this issue has identified any evidence of political targeting — not the Justice Department, not the Republican Inspector General of the IRS, and not even the Oversight Committee,” Rep. Elijah Cummings (D-Md.) the panel’s ranking member, said in a statement. “Republicans have wasted tens of millions of taxpayer dollars chasing false political conspiracy theories.” ...

House Speaker Paul D. Ryan (R-Wis.), when asked about the impeachment effort earlier this month, said “the IRS is not being led well” and “misled Americans” but stopped well short of backing Koskinen’s ouster. “What I think we need to do is win an election … get better people in these agencies and reform the tax code so we’re not harassing the average taxpayer with a tax code they can’t even understand,” Ryan said.

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April 30, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, April 29, 2016

The IRS Scandal, Day 1086

IRS Logo 2Wall Street Journal, House Republicans Seek to Block IRS Collection of Nonprofit Donor Data:

House Republicans are expanding their assault on the Internal Revenue Service, this time trying to prevent the agency from collecting information about nonprofit groups’ donors.

The latest effort, led by Rep. Peter Roskam (R., Ill.), would change a requirement that nonprofits list all donors who give at least $5,000. That information is supposed to be redacted from the publicly available versions of the groups’ tax forms, but the IRS has inadvertently released donor information about the National Organization for Marriage and a group tied to the Republican Governors Association.

To Mr. Roskam and other Republicans, those failures are a reason to keep clamping down on the agency. “The IRS has demonstrated inability to hold confidential information close, and if it’s not necessary for tax administration, then let’s mitigate this problem and not require organizations to submit it,” he said. The House Ways and Means Committee approved his measure Thursday on a 23-15 party-line vote. ...

The IRS is never popular, but Republicans have been particularly agitated about the tax agency since 2013, when it said it had improperly given extra scrutiny to Tea Party groups seeking tax-exempt status. The agency’s leadership has since changed, but Republicans have maintained pressure and sought to limit its budget. ...

Under Mr. Roskam’s bill, nonprofits would only have to report information tied to certain tax shelters as well as donations from their directors, top employees and officers. The bill would also limit the information available to state charity regulators. A federal court last week ruled that California’s requirement to submit donor names to the state was unconstitutional.

Philip Hackney, a tax law professor at Louisiana State University, said the bill would make it harder for the IRS to police the line between charities and private foundations, the latter being subject to stricter rules. He said it might also be more difficult for the IRS to monitor self-dealing between a charity and its donors. “I think it’s problematic to not collect it, but I do respect the fact that there are some real disclosure issues that have been perennial,” Mr. Hackney said.

New York Times editorial, Dark Money and an I.R.S. Blindfold:

Under the proposal, the I.R.S. would no longer be told the identities of contributors to these nonprofits. Watchdog groups warn in a letter to the House that this would “open the door wide for secret, unaccountable money from foreign governments, foreign corporations and foreign individuals to be illegally laundered into federal elections.” The letter, signed by the Brennan Center for Justice, the Campaign Legal Center, Democracy 21 and five other groups, stressed that the disclosure requirement is one of the few ways of guarding against foreigners influencing American elections.

Representative Peter Roskam, the bill’s sponsor, dismissed the reform groups’ warning, saying the I.R.S. “has a miserable track record when it comes to safeguarding sensitive data” and a history of targeting conservative nonprofits that are critical of administration policies. His office insisted that ending the disclosure requirement would not affect the foreign-donation ban, but the reform groups sensibly ask who else could monitor what has become a runaway system of big-money stealth politicking. ...

Amid fierce Republican criticism, the I.R.S. has grown ever more gun-shy about enforcement, with Tea Party and other right-wing groups accusing tax officials of bias in daring to investigate conservative “social welfare” claims. As I.R.S. wariness grows, so does the attraction of 501(c)s for donors more interested in stealth politicking than charity work. Enabling foreigners to join this dark money debacle would be disastrous.

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April 29, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, April 28, 2016

The IRS Scandal, Day 1085

IRS Logo 2American Thinker:  IRS Dereliction Aids California AG's Donor Privacy Violations, by Mark J. Fitzgibbons:

California's Democrat attorney general, Kamala Harris, was recently slapped down by a federal judge for violating the First Amendment in a donor privacy case brought by conservative nonprofit Americans for Prosperity Foundation. The Internal Revenue Service needs to shoulder a substantial part of the blame for that case, because the IRS could and should have prevented Harris's lawlessness.

AFPF was granted an injunction against Ms. Harris on April 21 prohibiting her from demanding the nonprofit organization's donor names and addresses listed on confidential federal tax return "Schedule B." At trial, AFPF presented "ample evidence" that its donors received "threats, harassment, intimidation, and retaliation" for their private association with the organization. The right of private association is constitutionally guaranteed as expressed in the 1958 landmark civil rights case NAACP v. Alabama.

General Harris is acquiring confidential Schedule B donor names using a dragnet registration method for charities that communicate with fundraising appeals to Californians. The injunction order noted that Harris's claims for needing Schedule B donor information for law enforcement purposes was not credible, given the lack of an enforcement track record and the availability of such information from other sources on a case-by-case basis.

Judge Manuel Real's order was blunt, noting that "the amount of careless mistakes by the Attorney General's registry is shocking," and "[t]he pervasive, recurring pattern of uncontained Schedule B disclosures [is] irreconcilable with the Attorney General's assurances and contentions as to the confidentiality of Schedule Bs collected by the Registry." ...

What hasn't been reported is how the IRS could have prevented this mess. The federal tax code gives the IRS control over the flow of confidential federal tax return to state officials, who may actually need it to enforce laws. By its own interpretations of the law, the IRS requires states to enter into confidentiality agreements and establish protocols to prevent precisely what California did in accessing and publicly disclosing Schedule Bs.

The IRS's failure to act to protect confidential donor information on Schedule Bs means it may be treated as an "indispensable party" in litigation brought by other charities. Also, Congress should investigate why the IRS was derelict in protecting the confidentiality of donors, and whether Ms. Harris is acting as an Obama IRS surrogate in hampering First Amendment rights of conservative organizations such as AFPF and others.

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April 28, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, April 27, 2016

The IRS Scandal, Day 1084

IRS Logo 2Forbes:  Should IRS Pay Employee Bonuses? Recall Lois Lerner's $129,300 On Top Of Salary, by Robert W. Wood:

Should IRS employees receive bonuses, and based on what? The topic is controversial–again–although perhaps not as vitriolic as it was during the Lois Lerner targeting episode. Recall that the face of IRS targeting, Lois Lerner–who took the Fifth and refused to testify about it–received big cash bonuses. So did the fired Acting IRS Commissioner Miller who was also caught up in the targeting scandal. (Yes, it is tempting to ask, ‘bonuses for what?’)

These bonuses were not small pats on the back. In fact, Lois Lerner received $129,300 in bonuses between 2010 and 2013. As head of the IRS tax-exempt division at the  heart of the targeting scandal, she received a 25% bonus each year—averaging $43,000 a year—on top of her regular salary. As you read about bonuses, you might recall other reports saying that 61% of IRS employees caught willfully violating the tax law aren’t fired, but may get promoted. Many of the bonuses can be traced to IRS Commissioner Koskinen, who took the helm of the IRS in December 2013.

His tenure hasn’t been smooth. Most of the IRS bonuses were paid in February and March 2014, with 238 awards totaling $976,387. No further awards were recorded until November and January 2015, with 218 awards totaling $1,000,108. In all, the IRS paid 1,269 bonuses, totaling $5.97 million from January 1, 2010 to February 2, 2015. The average was $4,483, but totals ranged from $250 to $285,688. There is considerable detail on the bonuses here.

And with this kind of track record in the face of scandal, perhaps it is no wonder that there is a House Bill, H.R. 4890, called the IRS Bonuses Tied to Measurable Metrics Act. Sponsored by Rep. Pat Meehan, R-Pa., it would prohibit the IRS from paying bonuses to employees until the Treasury Secretary develops and implements a comprehensive customer service strategy that puts taxpayers first. The House Ways and Means Committee passed four IRS bills recently, and the House voted to approve several. Yet Rep. Sander Levin, D-Mich., the ranking Democrat on the House Ways and Means Committee, objected to tying IRS employee bonuses to the development of a customer service strategy. ...

There are plenty of hard-working and honest employees at the IRS. They do a terribly important job under tough circumstances, and it is usually a thankless job. Maybe they do deserve bonuses. Perhaps there might be agreement on this, especially if they could hang up a big ’Under New Management’ sign.

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April 27, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Tuesday, April 26, 2016

The IRS Scandal, Day 1083

IRS Logo 2National Review, A Victory for Free Speech — and Democracy:

The Americans for Prosperity Foundation, a conservative-oriented nonprofit, has won a victory in its lawsuit against California attorney general Kamala Harris, who is attempting to do with her investigatory powers what Lois Lerner did with the IRS’s: weaponize them for political purposes.

Wall Street Journal editorial, Free Speech 1, Kamala Harris 0: A Federal Judge Blocks an Attempt to Disclose Conservative Donors:

Kamala Harris has been a hero of the left’s campaign to use donor disclosure as a tool of political intimidation. Since 2013 the California Attorney General has been demanding that nonprofits provide unredacted donor names if they want to solicit donations in the state. On Thursday a federal court declared her disclosure requirement an unconstitutional burden on First Amendment rights.

Federal Judge Manuel Real granted a permanent injunction against Ms. Harris in a lawsuit brought by the Americans For Prosperity Foundation. The group, which is affiliated with free-market supporters Charles and David Koch, has argued that as a 501(c)(3) nonprofit, it should not be forced to supply the Attorney General with the organization’s IRS Form 990 Schedule B, which contains its donor names.

In his 12-page decision, Judge Real notes that while Attorney General Harris argued that she needed donor disclosure to identify lawbreaking like “self-dealing” or “improper loans,” that was a stretch. “[O]ver the course of trial, the Attorney General was hard pressed to find a single witness who could corroborate the necessity of Schedule B forms in conjunction with their office’s investigations,” the judge wrote.

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April 26, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Monday, April 25, 2016

The IRS Scandal, Day 1082

IRS Logo 2Linda Beale (Wayne State), Defending the IRS Against Right-Wing Attacks:

[T]he New York Times on Friday reported on the havoc that the right's attacks on the IRS's budget and its employees' morale has wrought. ...

As certain as death and taxes, tax season political attacks on the I.R.S. go back decades. But in recent years, the intensity has grown and the agency’s funding in turn shrank more than any other time in memory. The campaign gained strength in 2013, when Republicans seized on management failures to allege that I.R.S. employees had singled out conservative groups for greater scrutiny and delays in reviewing their applications for tax-exempt status as “social welfare” organizations, though liberal-leaning groups were examined as well, investigations showed. ...

Clearly, the IRS is a centrally important agency that cannot be eliminated.  We need to collect taxes, and we need an agency with the expertise to advise Congress about tax law and policy as well as to interpret the laws in a way that makes it possible to implement them.  (Congress has a tendency to leave anything really difficult to the IRS to figure out, by authorizing or ordering the Secretary of the Treasury to promulgate regulations carrying out the intent of specific provisions.)  We need to have sufficient IRS staffing to enforce the law through tough audits, especially of the wealthy and corporate enterprises.  We need to have sufficient funding to maintain updated technology--one of the problems with the cuts in funding to the IRS is that the computer systems are more easily hacked than they should be.  That fault lies with Congress, which expects managerial miracles from an agency with constant battering from the right-wing to try to demoralize its employees and constant resource cuts that make budget planning and regular maintenance of systems practically impossible.  When Congress adds additional functions to the agency (whether in the form of additional tax systems to oversee, such as the penalty provisions in the Affordable Care Act,  or additional tax expenditures operating as a subsidy to one or another of Congress's favored groups, such as the section 199 "manufacturing" deduction) but fails to add funding to cover the additional responsibility, it means that the IRS's ability to carry out its task well will be jeopardized, and service to taxpayers will decline. ...

The fact is, the IRS makes money when Congress gives it funding to ensure tax compliance:  as the article states (and many studies support), "the agency collects at least $4 for every $1 it spends for tax compliance."  Former IRS commissioners--during Republican and Democratic administrations--therefore joined together to urge Congress to undo the perverse results of underfunding the IRS.

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April 25, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Sunday, April 24, 2016

The IRS Scandal, Day 1081

IRS Logo 2Patheos:  President Obama Isn’t Interested in Improving the IRS and His Veto Threat Proves It, by Mark Meckler:

President Obama made it abundantly clear this week that he has no interest in improving the integrity of the IRS by promising to veto at least one of four Republican bills aimed at holding the tax giant to the highest standards.

Here is what the president is so opposed to:

  • Executive bonuses curbed until measurable improvements in taxpayer services are proven
  • Banning the hire of persons with tax debt or other tax-related delinquencies
  • Stopping the IRS from rehiring previous employees who were fired for misconduct
  • Curbing the use of fees to fund extra programs

These sensible components that could help revamp a severely broken and biased system are apparently contrary to the big government goals of this administration. The Office of Management issued a Statement of Administration Policy on Monday that outlined the objections to three of the bills they deem as “unnecessary.”

It seems as though the White House — the same one that promised to be the most transparent in history — is more interested in doing things behind closed doors and continue on targeting its political opposition through the IRS vehicle. President Obama continuously asks for sensible legislation from Republicans and when he gets it and sees that it undermines his agenda, he pulls out the veto threat. It’s not hard to see what he’s after and we must continue the fight to resist becoming his targets.

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

Saturday, April 23, 2016

The IRS Scandal, Day 1080

IRS Logo 2Variety, Hollywood Conservative Organization Friends of Abe to Wind Down Current Structure:

Friends of Abe, the organization launched a decade ago as a fellowship for Hollywood conservatives, told members on Thursday that it would abandon its IRS 501(c)3 status, stop collecting sustaining membership dues and operating its website.

Instead, the organization will become a looser affiliation, although some of its founders denied that they are dissolving completely.

“The situation is we were always designed to be a fellowship and not an activist organization,” said writer-producer Lionel Chetwynd, one of the founders of the group. “But now is the time where everyone wants to do something. The community is aware of us. The town is aware of us. Every trade paper and news outlet is aware of us. We really don’t need to exist as a centrally focused private discreet organization. It is time to open the birdcage and fly.” ...

He said that discussions have been ongoing since last fall over the future of the organization, and costs have been a concern. Its profile has risen as a parade of nationally known GOP and conservative figures have addressed the group, including Cruz and Trump, as well as Supreme Court Justice Antonin Scalia and Paul Ryan. Its members have included Kelsey Grammer, Patricia Heaton and Jon Voight, and Gary Sinise was its chief founder.

The group, which does not endorse or fundraise for candidates, had a high-profile dispute in 2014 with the IRS as it sought to obtain 501(c)3 non profit status, as the IRS expressed concerns over the political nature of its activities. The organization also refused to give the agency access to the portion of its website that included a membership roster, which it protects. The IRS eventually granted the status.

But retaining that status comes with costs, along with the cost of maintaining its website and other administrative expenses, as well as lawyers and accountants. According to IRS disclosure forms, the group took in $284,985 in revenue in 2013, compared with $241,680 in expenses. Sinise stepped away from the group’s leadership several years ago to concentrate on his foundation, which supports military veterans.

Newsmax, Hollywood's Lone Conservative Group Closing Down

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

Friday, April 22, 2016

The IRS Scandal, Day 1079

IRS Logo 2New York Times, I.R.S. Fights Back Against House Republicans’ Attacks:

For five years, congressional Republicans have taken out their anti-tax wrath on the Internal Revenue Service, cutting its budget by nearly $1 billion, reducing its staff by about 17,000, and even threatening to impeach its chief.

Now they say no one at the agency receives a bonus until customer service improves. And that measure, which the Republican-controlled House easily passed Thursday, was just one of six anti-I.R.S. measures that it approved this week, mostly by party-line votes, to mark the annual tax-filing deadline.

To supporters of the agency — and there are some — years of such attacks have yielded exactly what Republicans seemed to want: a depleted, defanged tax collector.

“I’m appalled, that’s all I can say,” said Lawrence B. Gibbs, a tax lawyer at Miller & Chevalier who joined the I.R.S. during the Nixon administration and was President Ronald Reagan’s choice for commissioner in 1986. “It’s fine to demonize the I.R.S. It has always been a target. Listen, that goes with the job.”

But, he added, given the nation’s challenges, “the one thing people ought to agree on is that we should have a revenue system that works and works well.”

“And if we’re going to create a disrespect for our tax revenue system,” he continued, “I look at it and say I just don’t think it’s in our country’s best interest.”

House Republicans even gave this week a name, “I.R.S. Week,” though the lines of attack began last week, and were many. In debate, multiple hearings (the I.R.S. commissioner, John Koskinen, testified four times over eight days), news conferences and commentary in the news media, the agency even got the blame for the hated tax code, which Congress writes and Republicans have promised for five years to rewrite and simplify.

“Right now, we have a tax code that no one can understand being enforced by an agency that no one trusts,” said Speaker Paul D. Ryan, Republican of Wisconsin, who was the chairman of the tax-writing Ways and Means Committee before taking the House’s top job last fall.

As certain as death and taxes, tax season political attacks on the I.R.S. go back decades. But in recent years, the intensity has grown and the agency’s funding in turn shrank more than any other time in memory. The campaign gained strength in 2013, when Republicans seized on management failures to allege that I.R.S. employees had singled out conservative groups for greater scrutiny and delays in reviewing their applications for tax-exempt status as “social welfare” organizations, though liberal-leaning groups were examined as well, investigations showed.

The assaults and especially the funding cuts have reached a point that the agency’s defenders are speaking out.

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April 22, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Thursday, April 21, 2016

The IRS Scandal, Day 1078

IRS Logo 2The Daily Signal, Jason Chaffetz Wants to Use ‘Atrophied’ Muscle of Impeachment Against IRS Commissioner:

The chairman of the House Oversight and Government Reform Committee wants Congress to impeach wayward government agents more often, and he’d like GOP leadership to start with Commissioner of Internal Revenue John Koskinen.

In an interview with The Daily Signal, Rep. Jason Chaffetz, R-Utah, likened impeachment “to a muscle that has atrophied over time,” and said he wants to “Get that muscle working again—this should be a common occurrence, this shouldn’t be once in a century.”

Chaffetz believes impeachment is within Congress’ Constitutional authority. “This was the safety valve,” he explained, “for somebody who’s not serving the best interest of the United States of America.”

Congress has only impeached

More recently Chaffetz has led the charge to impeach Koskinen, saying he obstructed the congressional investigation into the agency’s targeting of conservative groups. Chaffetz drew up impeachment articles for the taxman last October and directed his staff to hand deliver the papers to each member of Congress. Last year, the Treasury Department issued a statement backing Koskinen, saying that “Commissioner Koskinen is a man of the highest integrity with a steadfast commitment to public service during difficult times,” per the Associated Press.

But so far, House Speaker Paul Ryan, R-Wis., has hesitated to give Koskinen the boot. At a press conference last week, Ryan told reporters he’d rather wait until after the election to fire the top tax agent.

There’s always an election,” Chaffetz said, expressing frustration with Ryan’s decision to punt on the issue.

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April 21, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Wednesday, April 20, 2016

The IRS Scandal, Day 1077

IRS Logo 2Townhall op-ed:  Dealing with the IRS Doesn’t Have to Be Hell, by Reps. Kevin McCarthy, Jason Smith, Rick Allen, Kristi Noem, David Rouzer & Glenn Grothman:

[H]ow do we plan to make the IRS more accountable? We have six bills we plan to pass next week.

The first will require the IRS to crack down on their employees who are delinquent on their own taxes. ...

Next, we will consider legislation that creates something that should already exist—a statutory rule blocking the IRS from rehiring employees who were already fired from the IRS for misconduct. ...

Following that, the House plans to pass a proposal that addresses the IRS’s shoddy customer service record in responding to requests for help in preparing tax forms. During some tax-filing seasons, the IRS only answers one in ten calls from taxpayers. This bill will ban IRS employees from getting bonus payments until the agency implements a plan to bring customer service performance levels up to what we expect of customer service in the private sector.

We also have a bill to prevent the IRS from keeping user fees they charge in a slush fund that is neither transparent nor accountable. ...

Lastly, we will be passing two bills that we expect to have wide bipartisan support: the first to stop any IRS funding from being used to target citizens for exercising their First Amendment rights, and the next to provide printed copies whenever requested of the official IRS instructions book on how to file taxes, ensuring those with limited or no Internet access still have everything they need to deal with April 15th.

In the week following Tax Day, House Republicans will send a clear message to the IRS: clean up your act, because this is only the beginning. Accountability isn’t an option in government; it’s a necessity. Only with a thoroughly reformed IRS and eventually a simplified and fair tax code can taxpayers again trust that the government is not only working efficiently, but is working for them.

Then, while we can’t promise that paying taxes will be a good experience, at the very least it won’t feel like being stuck in hell.

Office of Management and Budget, Statement of Administration Policy (Apr. 18, 2016):

The Administration opposes H.R. 1206, the No Hires for the Delinquent IRS Act; H.R. 4890, the IRS Bonuses Tied to Measurable Metrics Act; and H.R. 3724, the Ensuring Integrity in the IRS Workforce Act of 2015. These bills would impose unnecessary constraints on the Internal Revenue Service's (IRS) operations without improving the agency's ability to administer the tax code and serve taxpayers.

H.R. 1206 would prohibit the IRS from hiring any new employees until the Secretary of the Treasury certifies that no IRS employee has a seriously delinquent debt, or provides a report to the Congress that includes an explanation of why certification is not possible and what would be required to provide such a certification. The bill could result in the IRS being prohibited from hiring any new employees for any purpose -- a drastic and counterproductive step that would compromise tax administration and taxpayer services. The bill is also unworkable in operation, as "seriously delinquent" debts could be as low as $1 and tax liens are recorded on a case-by-case basis. This legislation is unnecessary, as strong laws and procedures already exist to ensure that IRS employees comply with their tax obligations. Publicly-available data show that IRS employees are among the most tax compliant groups in the Nation with a delinquency rate of less than 1 percent.

H.R. 4890 would ban performance awards to IRS employees until the Secretary of the Treasury develops and implements a comprehensive customer service strategy. This bill is unnecessary, as the IRS has already developed and has begun to execute a strategy to improve taxpayer services. The real constraint on the IRS's ability to serve taxpayers effectively is severe underfunding, including for taxpayer services. IRS funding is more than $900 million below its 2010 level, before adjusting for inflation. These budget cuts have impeded the IRS's ability to serve taxpayers, including inadequate responses to taxpayer calls and correspondence. Filing season statistics show that taxpayer service has improved this year as a result of a small funding increase provided last year, but more resources are needed to serve all taxpayers effectively and efficiently. Legislation constraining the IRS's ability to retain and recruit highly qualified employees is not needed and could be counterproductive to the Service's mission.

H.R. 3724 would prohibit the IRS from rehiring any employee who was involuntarily separated due to misconduct. The bill as written could force the immediate termination of employees who had been terminated and rehired many years ago, even if their performance since rehiring has been blemish-free. The bill's prohibition is also unnecessary because current IRS processes already ensure the agency does not rehire former employees who had significant conduct or performance problems during prior employment with the agency.

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April 20, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, April 19, 2016

The IRS Scandal, Day 1076

IRS Logo 2The Blaze, White House Responds to House GOP Calls to Impeach IRS Commissioner:

President Barack Obama has full confidence in Internal Revenue Service Commissioner John Koskinen, even as House Republicans are calling for his impeachment over failing to comply with congressional subpoenas.

“Of course he does” have confidence in Koskinen, White House press secretary Josh Earnest told TheBlaze Monday.

Last week, a group of House Republicans went to the House floor to call for Koskinen’s impeachment. Last year, Republicans on the House Oversight and Government Reform Committee called for charges against the commissioner.

Republicans say Koskinen also failed to testify truthfully and failed to make congressional investigators aware evidence was missing as part of the probe into the IRS targeting of Tea Party and conservative groups — which first came to light in 2013.

Still, Earnest scoffed at the notion of impeachment: “It is ridiculous for Republicans in Congress who seek to gut funding for the IRS, in some cases they call for the outright abolition of the agency, to be a fair arbiter of the effectiveness of the IRS commissioner.”

“The fact is, Mr. Koskinen has an extraordinarily difficult job, and it’s made only more difficult because Republicans seek to cut the funding of the agency,” Earnest continued. “He is someone who undertakes that work with a lot of professionalism and seriousness of purpose, and he deserves our gratitude.”

Breitbart, White House: Republican Calls For IRS Commissioner To Resign ‘Ridiculous’

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April 19, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, April 18, 2016

The IRS Scandal, Day 1075

IRS Logo 2Utah Policy, Ryan, Chaffetz Part Ways over Impeachment of IRS Chief:

Reps. Paul Ryan and Jason Chaffetz both believe IRS Commissioner John Koskinen should be fired, but they disagree about the timing. Chaffetz wants to remove Koskinen now, while Ryan says the GOP must win the White House first.

Reports Roll Call:

Oversight Committee Chairman Jason Chaffetz, R-Utah, with support from a majority of Republicans on his panel, introduced a resolution in October to impeach Koskinen. “The framers [of the Constitution] gave us a safety valve to get rid of somebody who is not serving the best interest of the nation and clearly John Koskinen is not,” Chaffetz said in a brief interview Thursday. “His record is clear and he should be removed from office.”

The resolution argues that Koskinen failed to comply with a subpoena requesting certain IRS documents and that he provided false and misleading information to Congress about missing emails sent to and from former IRS official Lois Lerner, a lead figure in the targeting scandal. The Judiciary Committee, which has jurisdiction over impeachments, has not acted on the resolution.

Lerner, the former head of the IRS tax-exempt organizations division, retired from the agency in September 2013. She had been on administrative leave since May 2013 after she revealed during a tax conference that the agency had inappropriately used political terms like “Tea Party” to filter tax-exemption applications for extra scrutiny.

The IRS has said it disputes the resolution's allegations and that it has cooperated with congressional investigations.

Chaffetz said he is working to build broad support for his resolution, which currently has 62 Republican co-sponsors. “It hasn’t been done in 140 years to impeach a civil officer,” Chaffetz said when asked about resistance from colleagues to support the effort. “But we think we’re on firm ground. It is in the Constitution.”

As to Ryan’s idea of waiting for Republicans to win the White House, Chaffetz said, “That’s one path, but I want the bureaucracy to know that if they do something as reprehensible as destroying documents there is an action that Congress can take.”

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April 18, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Sunday, April 17, 2016

The IRS Scandal, Day 1074

IRS Logo 2Investor's Business Daily editorial, Storming The IRS Gates: An Occupy Movement Worth Supporting:

A federal judge says the IRS can’t be trusted. Well, he’s right. So when will people in this country finally rise up and force Washington to get rid of this awful agency?

Because a holiday called Emancipation Day was celebrated Friday in the capital district, Americans have a few extra days to file their taxes this year. But the IRS remains, as does its institutionalized abuse of taxpayers. There is no emancipation from the torment of taxation, nor the agents of its collection, on the horizon.

Americans need relief, however. Taxes eat away at our substance, and the IRS makes this all the more intolerable because it decided long ago to be a wedge of enmity between a growing federal government and an ostensibly free people. This strained relationship has deteriorated to the point that the IRS targeted for persecution groups and individuals that it doesn’t like. Organizations that identified as Tea Party and conservative were harassed to the point that some of the victims decided to sue.

It’s hard to be upbeat on April 15, even when tax filing day is delayed. Yet there is a scintilla of hope to be found when a federal official rightly characterizes the IRS as an institution whose word is of little value.

“It’s hard to find the IRS to be an agency we can trust,” Judge David B. Sentelle of the U.S. Court of Appeals for the D.C. Circuit, said Thursday during oral arguments in one of the lawsuits filed against the tax collector in the targeting scandal.

The Washington Times reported that during the hearing Sentelle “said there is strong evidence that the IRS violated the constitutional rights of the groups when it delayed their nonprofit status applications and asked inappropriate questions about their political beliefs.”

What’s more, there’s good reason to think that the mistreatment of Tea Party and right-of-center groups has never stopped.

This should deeply concern us all, even those who aren’t Tea Party supporters. The IRS is not a political arm of the government that’s free to be used to suppress to dissenters. It is merely a tax collector.

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April 17, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Saturday, April 16, 2016

The IRS Scandal, Day 1073

IRS Logo 2The Daily Signal, Conservatives Renew Campaign to Impeach IRS Commissioner:

In time for tax season, members of the Freedom Caucus are calling on House Speaker Paul Ryan, R-Wis., and Judiciary Committee Chairman Bob Goodlatte, R-Va., to deliver the head of IRS Commissioner John Koskinen on a political platter.

As most of Congress heads out of town for the weekend, a handful of members filed onto the House floor Thursday evening and renewed an effort to impeach the nation’s top taxman.

They argued that the IRS infringed on free speech when they unfairly targeted conservative groups and they blamed Koskinen for obstructing a congressional investigation into the agency’s conduct. ..

The move comes just four days before the April 18 deadline to file individual tax returns. That timing was intentional, Jordan said. His group designed the move to spotlight issue during a week when “American are dealing with the IRS in an up close and personal way.”

Already written up, the impeachment articles remain mired in committee. And while conservatives can exert political pressure by rallying public opinion, they can’t technically advance the process.

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April 16, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, April 15, 2016

The IRS Scandal, Day 1072

IRS Logo 2Washington Times, Federal Judge Calls IRS Untrustworthy in Tea Party Case:

A federal judge said the IRS isn’t to be trusted as he and his colleagues tried Thursday to figure out whether the tax agency is still targeting tea party groups for intrusive and illegal scrutiny.

Judge David B. Sentelle of the U.S. Court of Appeals for the D.C. Circuit said there is strong evidence that the IRS violated the constitutional rights of the groups when it delayed their nonprofit status applications and asked inappropriate questions about their political beliefs.

The agency’s insistence that it has retrained employees and instructed managers to behave better did not mollify the judges, who said past IRS behavior doesn’t lend itself to the benefit of the doubt.

“It’s hard to find the IRS to be an agency we can trust,” Judge Sentelle said.

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April 15, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, April 14, 2016

The IRS Scandal, Day 1071

IRS Logo 2Washington Times, IRS Must Publicize Sensitive Tea Party Data Obtained in Targeting, Obama Administration Says:

The IRS says it has stopped targeting the tea party — but three years later, the tax agency is still holding on to the sensitive information it pried from the conservative groups through invasive questions, and officials are even vowing to make the answers public.

Groups caught up in the scandal say that is proof the targeting is continuing, and they want the IRS to expunge the information or, at the very least, to make sure it is never released.

Obama administration officials insist they have stopped targeting but say the groups are at fault for following the misguided IRS requests for information. Now, the administration says, there is nothing the tax agency can do but make the information public as the law requires.

On Thursday, a federal appeals court in Washington will be asked to referee the dispute, just one of the legal problems still plaguing the IRS after its 2013 admission that it inappropriately singled out conservative and tea party groups for intrusive scrutiny.

“They asked for things to which they were not entitled,” said Cleta Mitchell, an attorney for True the Vote, one of the tea party nonprofits that got caught up in the targeting scandal. “This is the fruit of the poisonous tree.”

The IRS acknowledged that the questions it asked were inappropriate and weren’t needed to decide on tea party groups’ applications for nonprofit status.

Questions included such sensitive information as the names of all financial contributors; lists of family members, details of their political affiliations and speculation about their plans to run for office; and details of organization members’ outside jobs.

Groups were even told that they must detail members’ private communications with their local legislators or any contact with reporters.

Tea party groups said the questions trampled on their First Amendment rights to freedom of speech and association.

Some tea party organizations, advised by their attorneys, refused to comply. Others figured that the IRS had the upper hand, so they turned over the information despite misgivings.

The IRS has apologized for the intrusive questions but still holds on to the information it gleaned from dozens of tea party groups from 2010 through 2013.

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April 14, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, April 13, 2016

The IRS Scandal, Day 1070

IRS Logo 2American Center for Law and Justice, Free Speech Appellate Court’s Blistering Takedown of IRS, DOJ over Targeting Conservatives is Awe-Inspiring:

It’s one of the most stunning judicial opinions I’ve ever read.  It is as clear in its scathing retort of the Obama Administration’s IRS and DOJ as it is precise in its legal acumen.

In what can only be described as a judicial takedown, the Sixth Circuit Court of Appeals unanimously delivers a scorching rejoinder to the IRS and DOJ’s brazen refusal to comply with a federal judge (even calling into question whether the Department of Justice is even seeking to provide “justice”) in one of the ongoing federal lawsuits over the IRS targeting scandal.

What you are about to read (and if you have the time, the entire opinion is well worth reading) is the opening salvo – a line drawn in the sand – by the federal judiciary against the out-of-control, politically corrupt IRS and DOJ:

Among the most serious allegations a federal court can address are that an Executive agency has targeted citizens for mistreatment based on their political views. No citizen—Republican or Democrat, socialist or libertarian—should be targeted or even have to fear being targeted on those grounds. Yet those are the grounds on which the plaintiffs allege they were mistreated by the IRS here. The allegations are substantial: most are drawn from findings made by the Treasury Department’s own Inspector General for Tax Administration. Those findings include that the IRS used political criteria to round up applications for tax-exempt status filed by so-called tea-party groups; that the IRS often took four times as long to process tea-party applications as other applications; and that the IRS served tea-party applicants with crushing demands for what the Inspector General called “unnecessary information.”

Yet in this lawsuit the IRS has only compounded the conduct that gave rise to it. The plaintiffs seek damages on behalf of themselves and other groups whose applications the IRS treated in the manner described by the Inspector General. The lawsuit has progressed as slowly as the underlying applications themselves: at every turn the IRS has resisted the plaintiffs’ requests for information regarding the IRS’s treatment of the plaintiff class, eventually to the open frustration of the district court. At issue here are IRS “Be On the Lookout” lists of organizations allegedly targeted for unfavorable treatment because of their political beliefs. Those organizations in turn make up the plaintiff class. The district court ordered production of those lists, and did so again over an IRS motion to reconsider. Yet, almost a year later, the IRS still has not complied with the court’s orders. Instead the IRS now seeks from this court a writ of mandamus, an extraordinary remedy reserved to correct only the clearest abuses of power by a district court. We deny the petition.

The entire opinion is a blistering exposition of the IRS’s intractable refusal to comply with not only the law but the federal courts as well.

The Sixth Circuit highlights this mind-blowing statement from the federal district judge in this case (and yes what you are about to read is extraordinarily rare from a federal judge):

My impression is the government probably did something wrong in this case. Whether there’s liability or not is a legal question. However, I feel like the government is doing everything it possibly can to make this as complicated as it possibly can, to last as long as it possibly can, so that by the time there is a result, nobody is going to care except the plaintiffs. . . . I question whether or not the Department of Justice is doing justice.

That statement, from a federal judge no less, cuts directly to the core of the IRS targeting scandal itself.  The Obama Administration’s IRS attempted to shutdown and silence conservative groups.  When it was caught, it attempted to stonewall and drag its heels with Congress.  Now it is trying to evade the reach of the federal courts.  It’s astonishing

But what the IRS did next was even more brazenly astounding.  It filed a writ of mandamus, which is reserved for “‘exceptional circumstances’ involving a ‘judicial usurpation of power’ or a ‘clear abuse of discretion.’”

That’s right, the IRS accused a federal district judge of usurping its power, merely by requiring the IRS to provide simple information about the names of the IRS officials involved in the IRS targeting and a list of the groups targeted – a simple, legally required step in a class action lawsuit.

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April 13, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Tuesday, April 12, 2016

The IRS Scandal, Day 1069

IRS Logo 2Politico, The Ghost of Lois Lerner:

Probably the biggest news to come out Sunday was President Barack Obama’s defense of Democratic frontrunner Hillary Clinton’s handling of classified information while secretary of State on “Fox News Sunday” — and his assertion that Clinton won’t get any special treatment from a Justice Department investigation. Well, you probably have a decent idea of how conservative commentators Karl Rove and George Will responded to that notion.

“In the midst of what was supposed to be a Justice Department investigation of Lois Lerner and the IRS, and the president said prejudging the whole process, there is not a smidgeon of evidence of a scandal at the IRS,” Will said. “Now, we know that the Justice Department investigation was a sham. It was part of the cover-up. They gave the investigation to an Obama contributor working in the Justice Department.” (Both Democrats and the Justice Department found that the IRS handled tea party applications incompetently, but without “criminal intent,” as Justice put it.)

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April 12, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, April 11, 2016

The IRS Scandal, Day 1068

IRS Logo 2Patriot Post, IRS Meets Some Justice:

The Internal Revenue Service long has been exposed in its overtly political and sleazy maneuvering, but little has been done thus far to hold rogue bureaucrats to account. Fortunately, the Sixth Circuit Court of Appeals took a step toward halting the deny-delay-and-destroy tactics of this government agency. ...

For just shy of three years, Barack Obama’s weaponized tax-collecting agency has fought to hide data being sought by conservative groups the IRS targeted in the 2012 election cycle. Specifically, the IRS petitioned for a writ of mandamus to block the discovery efforts of the plaintiffs.

But the Sixth Circuit has ordered that the taxpayer-funded agency immediately turn over requested information about its activity. Writing for the unanimous three-judge appellate panel, Judge Raymond Kethledge noted that mandamus is “an extraordinary remedy reserved to correct only the clearest abuses of power by a district court.” In other words, the offense was greeted with a flat denial of the IRS’s petition.

The Court’s response begins: “Among the most serious allegations a federal court can address are that an executive agency has targeted citizens for mistreatment based on their political views. No citizen — Republican or Democrat, socialist or libertarian — should be targeted or even have to fear being targeted on those grounds. Yet those are the grounds on which the plaintiffs allege they were mistreated by the IRS here. The allegations are substantial: most are drawn from findings made by the Treasury Department’s own Inspector General for Tax Administration.”

The Cincinnati-based three-judge appeals panel charged with this matter has lost patience with the legal representation of the IRS. And who represents the IRS in this lawsuit that’s clearly being avoided only through the lack of cooperation? None other than the Obama Justice Department.

Judge Kethledge authored the decision and wrote that the Justice Dept. lawyers “have a long and storied tradition of defending the nation’s interests and enforcing its laws — all of them, not just selective ones — in a manner worthy of the Department’s name. The conduct of the IRS’s attorneys in the district court falls outside that tradition. We expect that the IRS will do better going forward.”

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April 11, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Sunday, April 10, 2016

The IRS Scandal, Day 1067

Hackney Philip Hackney (LSU), Incorrect Claims About IRS Given Bullhorn on TaxProf:

Just a heads up that a story you posted on April 9, 2016 on the "IRS Scandal, Day 1066" entitled Renew America, Most Dangerous Year for Free Speech in U.S. History, by Bryan Fischer, contains incorrect information that appears to me to be a deliberate falsehood. It claims that the IRS denied the applications for tax-exempt status of 67 organizations last year. That is true. But it also claims that of those 67 denials, 57 were denials of "religious groups." I see a lot of bad information in the stories you post regarding the "IRS scandal," but this one jumped out at me as clearly wrong and likely to cause harm. 

Fischer based his claims on the Free Beacon story entitled IRS Denied Tax-Exempt Status to 57 Religious Groups in 2015. The IRS report from which the reporter derived her information is here. In Table 24 of that document the IRS states that it denied 57 501(c)(3) "religious, charitable and similar organizations" during the particular taxable period. In other words the denials the reporter claims were for strictly "religious groups" were denials for 501(c)(3) organizations generally. She just conveniently left off the other qualifiers from that report and that failure still shows up on TaxProf blog, in Fischer’s story, and in the headline to the reporter’s story.  

While from the information the reporter used, it might have been theoretically possible that all 57 were in fact "religious groups," a little bit of work would have shown that claim to be false. I located 42 of the 57 denials issued during the taxable period (technically 10/1/14 - 9/30/15) and listed them below. Only two of 42 denials I located were denials as to "religious groups." The reporter failed to do any work to track that down. Fischer repeated that falsehood and TaxProf Blog magnified that falsehood.

The author plays fast and loose with the facts in order to presumably inflame tensions on this issue. There are other issues with the article, but that one is the most egregious. Many of the stories you post from right wing or religious press contain such significant problems. Such lies have real world consequences on real people who work for the IRS. Such lies have deep implications for the administration of the tax system. I wish you would reconsider the publication of reporting that contains such deliberate falsehoods. Please consider posting corrections as other media outlets do when the facts are found to be incorrect. This one deserves a correction.

Thanks for hearing me out.

UPDATE: In what appears to be a modest modification of the story after I first sent you this letter, the reporter in the Free Beacon now claims: “The IRS rejected a total of 67 applications for tax-exempt status in 2015, and religious groups comprised the majority of denials.” This claim is still wrong for same reasons discussed above.

Denials in the relevant period that were on mundane EO matters such as helping kids, working with open source software, fundraising and stock racing cars: Denial 201452017, 201502017, 201503016, 201504017, 201505039, 201505042, 201507023, 201507026, 201505040, 201505041, 201507025, 201509039, 201510059, 201511024, 201514011, 201514013, 201516066, 201515037, 201517019, 201517008, 201519035, 201523021, 201525011, 201525012, 201525014, 201527043, 201529012, 201529013, 201533014, 201534020, 201535019, 201540016, 201540019, 201545030, 201545031, 201545028, 201545029, 201548021, 201548025, 20155004

RELIGIOUS GROUP Denial 201523022, 201526020 

Editor's note:  As I have repeatedly said:

“My goal [in covering the IRS Scandal is] to link to every single press report about the scandal – from both the right and the left. Because the right covers the scandal much more than the left, I have linked to many more stories from the right than from the left. Check out Day 883.”

I do not need to "consider posting corrections as other media outlets do when the facts are found to be incorrect" — my policy since Day 1 of my coverage has been to post all corrections and opposing views on TaxProf Blog.  Indeed, when Professor Hackney contacted me yesterday, I encouraged him (as I have done with others who have objected to particular posts) to write the response that appears above.

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April 10, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (7)

Saturday, April 9, 2016

The IRS Scandal, Day 1066

IRS Logo 2 Renew America, Most Dangerous Year for Free Speech in U.S. History:

President Obama loses his bully pulpit and billy club on January 20, 1017. That means he has less than nine months to destroy as much of the Constitution as he can, and "fundamentally transform" the United States into something the Founders would not recognize.

We've already seen what his IRS has done to squash the free speech of Tea Party groups, which probably gave him the 2012 election. Despite all the negative publicity and Lois Lerner's wretched invocation of the Fifth Amendment before Congress, the IRS continues to deny conservative groups at a prodigious clip and to leave other conservative groups twisting in the wind.

The IRS rejected a total of 67 tax-exempt status applications last year, and 57 of them were from religious groups. Another 5,681 applications were left in legal no-man's land, which has exactly the same effect as a flat-out denial.

Update:  See the response by Professor Philip Hackney (LSU) in The IRS Scandal, Day 1067 that the Renew America article linked to above "contains incorrect information that appears to me to be a deliberate falsehood."

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April 9, 2016 in IRS News, IRS Scandal | Permalink | Comments (7)

Friday, April 8, 2016

The IRS Scandal, Day 1065

IRS Logo 2 American Thinker, Should California AG Harris Be Investigated for Tax Code Violations?:

Following revelations that Richard Nixon used the IRS to target his “enemies” for tax audits, Congress amended the Internal Revenue Code to restrict access by federal and state government officials to federal tax return information. The post-Watergate reforms include civil and criminal penalties for inspection and disclosure of federal tax returns not expressly authorized for legitimate and expressly identified law enforcement purposes.

The tax code requires that an annual tax return be filed by charities and other nonprofit organizations -- IRS Form 990. Under Section 6104 of the tax code, those returns of charities and other nonprofits must be made available for public inspection. Now, many Forms 990 are even made available on public websites such as Guidestar.org. The tax code, however, treats the names and addresses of donors listed on those Form 990 Schedule B’s quite differently than any of the other information on that form. Information about donors remain subject to the Code’s strict confidentially provisions.

California attorney general Kamala Harris is the state’s top charity regulator, overseeing California’s Registry of Charitable Trusts. Ms. Harris has decided to bypass federal law expressly requiring her to obtain Schedule B information directly from the IRS on a case-by-case basis if she has a legitimate need for donor information to enforce her state’s charitable solicitation laws. Instead of abiding by federal law, she’s employing a dragnet method, demanding that all charities registering with her office submit their Schedule B donor lists to the Registry in order to solicit contributions from Californians.

Charities even outside the state that wish to communicate with potential supporters in California are first required to register with Harris’ office before they may ask Californians for contributions, giving Ms. Harris tremendous power over “national” nonprofit organizations. By demanding the donor lists of not only California-based charities, but all charities seeking support from Californians, she has extended her reach to violate the right of private association of donors and charities throughout the entire country.

People may wonder why federal confidentiality laws should apply to names and addresses of donors filed with the IRS on Schedule B of charities’ tax returns. In the 1950s, the Alabama attorney general wanted to disrupt the civil rights movement in his state by obtaining the names of financial supporters of the NAACP. The Supreme Court shut down his demands in the landmark case NAACP v. Alabama. The court said that forced disclosure to government officials of the NAACP’s financial backers and members would seriously harm the right of private association protected by the First Amendment.

These principles were the law of the land when Congress enacted the donor confidentiality provisions, and are reflected in the federal confidentiality laws helping to protect charities and their donors from abuse and intimidation by government officials.

Lois Lerner’s IRS was caught violating the tax code confidentiality laws when it disclosed donor names and addresses of the National Organization for Marriage to opponents of that nonprofit organization. In addition, IRS emails obtained under the Freedom of Information Act show Lerner’s IRS gave the Federal Election Commission “detailed, confidential information concerning the tax exempt application status and returns of conservative groups” in violation of the tax code’s confidentiality laws. The tax code’s penalties applicable to acquisition, inspection, and disclosure of charities’ confidential federal tax return information applies to state officials.

Ms. Harris’ actions make a statement that she believes she is above the rule of law, and she’s willing to use the heavy hand of her office to abuse Americans’ right to private association. The Obama Justice Department has given many passes to lawbreaking by government officials who are political allies, and the ambitious candidate for U.S. Senate Kamala Harris could also escape investigation by this administration for violating federal law. However, Congress and the next administration do appear to have grounds to question Ms. Harris about these matters, and take a hard look into whether she and her office are engaged in criminal violations of the federal tax code.

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April 8, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Thursday, April 7, 2016

The IRS Scandal, Day 1064

IRS Logo 2 Washington Free Beacon, IRS Denied Tax-Exempt Status to 57 Religious Groups in 2015; 5,681 Applications Left in Limbo:

The IRS denied tax-exempt status to 57 religious or charitable groups in 2015, according to recent data from agency.

The IRS rejected a total of 67 applications for tax-exempt status in 2015, and religious groups comprised the majority of denials. There were 92,653 total applications by religious and charitable groups in 2015. Of those applications, 86,915 were approved, 57 were denied, and 5,681 were left in limbo.

Attorney Jordan Sekulow, executive director of the American Center for Law and Justice, represents a number of conservative and pro-life non-profit organizations that have faced long battles to have their tax-exempt status approved by the IRS. Among his clients, two are still awaiting determination by the IRS—one group has been waiting for more than six years, and another for nearly six years. “The process is supposed to be a fairly quick process,” says Sekulow. “If the IRS needs more information, they’re supposed to ask you for that.” ...

Sekulow isn’t persuaded that the IRS is being open about the process. “The IRS was wrong then and while the agency says it has stopped such discriminatory action, there’s really nothing that leads us to believe that this administration has really changed,” he continued.

Sekulow is taking his clients’ cases to the D.C. Circuit Court of Appeals next week to challenge the IRS’ targeting of conservative groups. Many of the groups he represents that have gotten approval have had to put up with demands by the IRS for Internet passwords and usernames, donor lists, and charitable activities of family members.

Sekulow also stressed that the waiting period these groups have to go through can be as destructive as being denied tax-exempt status. “The IRS is playing the ‘delay game’—keeping these organizations guessing about the status of their applications and ultimately whether their applications will be approved,” said Sekulow. “I think that keeping people hanging in the balance can be as destructive as an outright denial because lengthy delays can stop the momentum that many of these start-up groups experienced. Lengthy delays may not only sap the momentum of a group, it produces a chilling effect on the constitutionally protected speech,” he said.

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April 7, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Wednesday, April 6, 2016

The IRS Scandal, Day 1063

IRS Logo 2 Wall Street Journal, What Does the Stonewall Cost Anyone at the IRS?:

Regarding your editorial “Chipping Away at the IRS Stonewall” (March 24): Why wouldn’t the IRS continue to stonewall? What recourse is there for the plaintiffs—or the rest of us? Can anyone at the IRS be held personally liable? If not, how does a citizenry directly punish a misbehaving federal agency? It seems to me that the IRS has nothing to lose by doing nothing, and that’s a profoundly helpless feeling.

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April 6, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Tuesday, April 5, 2016

The IRS Scandal, Day 1062

IRS Logo 2 One News Now, Media on IRS Scandal: 'We Know Nothing!':

There have been new developments in the IRS targeting scandal but if you watch the news on ABC, CBS or NBC, good luck hearing about it.

That's because it's been more than 500 days since the broadcast news networks covered the scandal.

According to a new study by Geoff Dickens, deputy research director at the Media Research Center, CBS and NBC last reported on the targeting of conservative groups by the IRS in October of 2014. ABC lagged way behind last covering it in May of that year, nearly 700 days ago.

"This is clearly abuse of power and they've stopped covering it," Dickens says of the networks.

Dickens points out that just last week a federal appeals court scolded the agency and ordered it to turn over a secret list of conservative groups they targeted so a class action suit could move forward. ... [T]here was no mention on the so-called "Big Three" networks.

Also unreported in recent months, Dickens notes, is the Justice Department ending its investigation without any criminal charges filed against Lois Lerner, whose emails show she called Republicans "evil and dishonest."

There was not even a news story – slanted or otherwise – when the U.S. House began procedures to impeach IRS Commissioner John Koskinen.

"It's really stunning," observes Dickens, who says the IRS scandal is worse than the Watergate scandal under Richard Nixon.

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April 5, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, April 4, 2016

The IRS Scandal, Day 1061

IRS Logo 2 Nevada Las Vegas Review-Journal editorial,  IRS Foot-Dragging:

As Pepperdine University law professor and TaxProf Blog editor Paul Caron has been dutifully documenting, it has now been more than 1,050 days since word of a scandal broke involving the IRS’s systematic delaying and denying of nonprofit status to conservative political groups, in order to diminish their influence on the 2012 election.

In 2013, a conservative group called the NorCal Tea Party Patriots filed a class action lawsuit against the agency, requesting access to files the IRS kept on the targeted groups. The agency refused to hand them over and the Justice Department stonewalled on its investigation, arguing that the files are protected by Section 6103 of the U.S. code, which was intended to assure taxpayers that their returns would remain confidential.

But as the Wall Street Journal reported, while the IRS has repeatedly dragged its feet in responding to the request — and the media has pretty much buried the story — the Sixth Circuit Court of Appeals thankfully tore into the agency’s obstructionist conduct last week, ruling that the IRS must turn over spreadsheets it created on the targeted groups. Judge Raymond Kethledge, writing on behalf of a unanimous three-judge panel, called the allegations against the IRS “substantial” and “among the most serious allegations a federal court can address.”

“The district court ordered production of those lists, and did so again over an IRS motion to reconsider,” he wrote. “Yet, almost a year later, the IRS still has not complied with the court’s orders.” ...

The IRS hiding behind taxpayer privacy concerns is ridiculous, and the Sixth Circuit should be applauded for its ruling. These conservative groups in question don’t mind if their information becomes public, and, in fact, the spreadsheets could be the linchpin to their case, proving the IRS was intentionally and illegally targeting groups based on their political beliefs.

As we’ve mentioned before, it’s important to remember why this scandal matters so much in the first place. This isn’t just executive branch employees running roughshod over Americans’ rights, which already happens too often to begin with. No, this is about our nation’s federal tax collection agency using taxpayer resources and its considerable powers to actively influence the outcome of national elections.

The IRS needs to meet that seven-day deadline — that’s this week — with no excuses, and with every piece of documentation the Sixth Circuit mandated. The Department of Justice also needs to move its investigation forward and hold the IRS accountable for its actions.

Furthermore, this issue is one among many proving that the IRS’s reach is far too extensive, to the point of being partisan, and that the tax code is far too onerous for American citizens. The Republican-led Congress needs to pass a massive tax reform bill and put it on the president’s desk.

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April 4, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Sunday, April 3, 2016

The IRS Scandal, Day 1060

IRS Logo 2Stuart Bassin (Bassin Law Firm, Washington, D.C.; former Senior Litigation Counsel, U.S. Department of Justice Tax Division), Sixth Circuit Requires IRS to Disclose Return Information of Non-Parties in Tea Party Exempt Organization Litigation:

Last week, the Sixth Circuit rejected a government mandamus petition seeking to overturn a trial court discovery order requiring the Service to disclose the names of non-party organizations whose applications for tax exempt status were allegedly treated improperly because of the organization’s political views. In re United States; United States v. NorCal Tea Party Patriots, Case No. 15-3793 (March 22, 2016).

The underlying case arose out of allegations that the Service discriminated against conservative organizations in reviewing applications for tax-exempt status.  According to the plaintiffs, the Service gave increased scrutiny to some organizations in reviewing their applications and, in some cases, requested additional and unnecessary information from the applicants to delay review of their applications.  Substantively, the plaintiffs’ legal claims assert violations of the First Amendment and the Section 6103 prohibition against disclosure of taxpayer return information.  Earlier this year, the trial court certified the case as a class action, a development I discussed in an earlier post in Procedurally Taxing.

The dispute before the Court of Appeals involved a discovery order issued by the trial court requiring the Service to identify other taxpayers whose applications for exempt status received comparable scrutiny–information the taxpayers sought in hopes of identifying additional class action plaintiffs. The Service resisted, contending that the disclosure was barred by Section 6103. The district court, expressing exasperation with the Service’s interference with the case’s development, ordered production of the information, ruling that disclosure was authorized under Section 6103(h)(4)(B) because the information was reflected in a return “directly related to the resolution of an issue” in litigation. The Government then filed its petition for writ of mandamus.

The Court of Appeals ultimately affirmed the order allowing the discovery, taking several opportunities to criticize the Service’s actions and the Justice Department’s advocacy. ... [T]he tone of the opinion should be of great concern to the Government. Both the appellate panel and the trial court have made clear their impatience with, and distaste for, the Government’s procedural challenges to the taxpayer’s claims. Every indication is that the courts are willing to rule against the Government if the taxpayers’ assertions of disparate treatment are proven at trial, although it will be interesting to see what remedy will be allowed. The Government can continue fighting, but that seems to be an uphill battle and a battle which may produce further precedent that the Service will not like.

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

Saturday, April 2, 2016

The IRS Scandal, Day 1059

IRS Logo 2Politico, IRS v. House Republicans, Cont'd

There are several interesting nuggets in this WSJ piece about the continuing challenges the IRS faces, from the increasingly prevalent cybercrimes to the more mundane — like an aging workforce and an only temporary uptick in phone calls answered.

First, there’s no letup in the showdown between GOP lawmakers and the IRS commissioner they want to impeach, John Koskinen. House Oversight Chairman Jason Chaffetz (R-Utah): “He’s earned no friends up here on Capitol Hill, because they haven’t solved the problems of targeting conservatives based on their political beliefs.” Koskinen: “I would challenge anybody to find any targeting of conservatives going on at this point.”

Wall Street Journal, Wait Times Are Down, But IRS Still Faces Serious Challenges:

[I]n 2013, the IRS disclosed it had given extra scrutiny to Tea Party groups seeking tax-exempt status. That revelation started a purge at the top levels of the agency and years of investigations.

A Senate report in 2015 found that IRS officials were “delinquent” in their treatment of Tea Party and other groups, resulting in heightened and inappropriate scrutiny, but Republicans and Democrats disagreed on whether IRS officials were motivated by their own political views.

House Republicans remain unsatisfied. They have turned their ire toward Mr. Koskinen because of the agency’s travails and contradictory statements as it tried to retrieve records for the investigations, such as the emails of Lois Lerner, former director of tax-exempt organizations at the IRS.

Rep. Jason Chaffetz (R., Utah), who sponsored an impeachment resolution against Mr. Koskinen that has more than 60 co-sponsors, said the IRS has bloated management and has failed to update aging technology.

“John Koskinen was hired to come clean up the mess and he made it worse, not better,” said Mr. Chaffetz, who is chairman of the House Oversight and Government Reform Committee. “And he’s earned no friends up here on Capitol Hill, because they haven’t solved the problems of targeting conservatives based on their political beliefs.”

Mr. Koskinen on Thursday said the agency has implemented recommendations from its inspector general and the Senate Finance Committee, and that he has tried to build an ethos in the IRS that encourages employees to report problems and get them addressed quickly.

“I would challenge anybody to find any targeting of conservatives going on at this point,” he said, without saying “targeting” had happened before he started. “There have been significant changes and improvements, and I’m confident that that kind of situation isn’t going to happen again.”

So far, the impeachment effort hasn’t advanced and Republicans and Mr. Koskinen seem stuck with each other. His term expires in November 2017, and the next president will choose his successor.

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April 2, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Friday, April 1, 2016

The IRS Scandal, Day 1058

IRS Logo 2WisconsinWatchdog.com, John Doe Freedom Fighter Wins Big Victory Against the IRS:

The conservative activist who took on Wisconsin’s abusive John Doe investigation and won has been engaged in a similar epic struggle against the IRS.

Eric O’Keefe, director of Wisconsin Club for Growth, also serves as chairman of the board for Citizens for Self-Governance, the limited-government organization that is financially backing a class-action lawsuit by hundreds of tea party groups against the Internal Revenue Service.

The litigation alleges the Obama administration’s IRS targeted conservative groups for additional scrutiny, mainly under the regime of Lois Lerner, director of the IRS’s Exempt Organizations Unit.

Last week, more than 1,000 days after the lawsuit was filed, a three-judge panel of the Cincinnati-based 6th U.S. Circuit Court of Appeals, having lost patience with the government’s foot-dragging, ordered the IRS to turn over details on tax-exempt applicants. The IRS was given seven days to comply.

An attorney for the plaintiffs tells Wisconsin Watchdog that the IRS on Tuesday delivered a “large production” of documents and the law firm is now reviewing the materials. “We’re very pleased to have it. There is a lot of information in native file format,” said Eddie Greim, attorney for Graves Garrett LLC. “We hope to piece it all together and understand how the targeting scheme unfolded over time.” ...

[T]here were some eerie connections between the Wisconsin John Doe and the IRS initiative uncovered along the way.

“It was much like the John Doe spying operation,” O’Keefe said. “The department was overseen by Lois Lerner, a radical left-winger who met (GAB director) Kevin Kennedy when she worked at the FEC, the national speech regulator.”

As Wisconsin Watchdog’s investigation, Wisconsin’s Secret War, detailed, Lerner and Kennedy were close friends. Kennedy consulted with Lerner about the John Doe probe and asked how the IRS might get involved, according to emails obtained by Wisconsin Watchdog.

“This is a part of the national left attack using state power to stifle the political activities of patriotic Americans,” O’Keefe said of the IRS’ initiative. “It’s a horrendous abuse and they are using tactics with us similar to the ones that got them in trouble in the first place. They’re stonewalling, they’re not following the rules, and it leads us to believe that what they have is worse than what I suspect.”

A trial date is set for August 2017. “Believe it or not, that’s actually pretty fast for a federal court,” Greim said.

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April 1, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Thursday, March 31, 2016

The IRS Scandal, Day 1057

IRS Logo 2Waterbury Republican-American editorial, Barack H. Nixon:

Infamously, President Obama‘s Internal Revenue Service harassed conservative groups that applied for tax-exempt status between 2010 and 2012. As we noted in a number of editorials, most news-media organizations – aside from those with conservative leanings – demonstrated little interest in what some have dubbed “IRSgate.” We deemed this an outrageous dereliction of duty. It is clear the harassment was systemic, and American democracy cannot exist under a partisan and/or ideological tax agency.

The vindictiveness of the Obama IRS reminds one of Richard Nixon‘s notorious administration. Of course, Mr. Nixon largely was unsuccessful in siccing the tax agency on his political opponents. Three IRS commissioners – Randolph W. Thrower, Johnnie Mac Walters and Donald C. Alexander – resisted his dark plans.

To our pleasant surprise, the most recent “IRSgate” development has received some coverage from non-conservative news agencies. A three-judge panel from the Cincinnati-based U.S. Court of Appeals for the Sixth Circuit has unanimously ruled that the IRS must release a list of targeted conservative groups. This will allow a cadre of groups, led by NorCal Patriots, to proceed with a lawsuit against the IRS. Judges Raymond Kethledge, David McKeague and Damon Keith upheld a ruling issued nearly a year ago by U.S. District Court Judge Susan J. Dlott. ...

Hopefully, the coverage afforded thus far simply is the tip of the iceberg. Americans of all political persuasions deserve to know the full story of the IRS’ sleaziness and the victims’ efforts to seek justice. If mere scheming to politicize the IRS was enough for the House Judiciary Committee to approve an article of impeachment against Mr. Nixon in 1974, the actual weaponization of the tax agency at least warrants a substantial amount of news-media coverage.

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March 31, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Wednesday, March 30, 2016

The IRS Scandal, Day 1056

Microsoft IRSFollowing up on my previous posts on the IRS's claim that it had erased the hard drive of its director of transfer pricing operations despite a court order to preserve all documents concerning the IRS's hiring of an elite law firm to assist its audit of Microsoft (The IRS Scandal, Days 987, 989, 994, 1002):

Statement of U.S. Department of Justice Trial Attorneys, Microsoft v. IRS, Nos. 2:15-cv-00369, 00850 (D.C. W.D. Wa. Mar. 25, 2016) (record citations omitted):

On January 15, 2016, the Department of Justice, Tax Division, notified the Court that the Internal Revenue Service (“IRS”) had reported that it inadvertently had not captured a computer hard drive used by one agreed-upon custodian, Samuel Maruca, and that the hard drive had been sanitized. Since then, there have been two developments regarding Mr. Maruca’s hard drive. First, the IRS continued to look for responsive records, and in doing so 19 it located potentially responsive user-generated content that had been previously on Mr. Maruca’s hard drive and saved elsewhere in July, 2014, only several weeks before Mr. Maruca separated from the IRS. The Department of Justice disclosed this source of potentially responsive  documents to Microsoft’s counsel on February 11, 2016.

Second, during discussions on and from March 14 through March 23, 2016, IRS Chief Counsel attorneys notified the undersigned Department of Justice counsel that the IRS located a hard drive that appears to be Mr. Maruca’s hard drive. The IRS Chief Counsel attorneys believe that the hard drive has not been sanitized, the hard drive is in working condition, and the hard drive contains user-generated content. The IRS Chief Counsel attorneys informed Department of Justice counsel that they are presently processing the content for review and then will review the content for potentially responsive records. Non-exempt responsive records not already produced 10 to plaintiff will be produced as part of the on-going production by the IRS.

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March 30, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Tuesday, March 29, 2016

The IRS Scandal, Day 1055

IRS Logo 2National Review, Consequences Are for Schmucks:

People like Hillary Rodham Clinton do not go to jail without first becoming governor of Illinois or mayor of Detroit, and Herself always has her sights set on a higher office than those. But even relatively lowly players in her world escape jail time. Lois Lerner turned the Internal Revenue Service into a branch of the Obama campaign, using the agency’s fearsome investigatory powers to harass tea-party groups and conservative organizations. She’s enjoying a fat pension right now rather than the federal hospitality she so richly deserves. Kamala Harris, who is trying to do much the same thing with the office of the attorney general in California, probably is headed to the Senate. The Texas prosecutors who harassed Kay Bailey Hutchison, Tom DeLay, and Rick Perry for wholly imaginary crimes are in no danger of facing real recriminations.

(Hat Tip: Mark Fitzgibbons.)

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

Monday, March 28, 2016

The IRS Scandal, Day 1054

IRS Logo 2Investor's Business Daily editorial, It’s Past Time To End The IRS’ Reign Of Terror:

Corruption: A federal court has harshly judged the IRS for harassing conservative groups seeking tax-exempt status. We hope this brings far more trouble for the agency than it gave those groups.

Don’t think we’re downplaying what happened to these organizations. The IRS committed a serious offense. Its conduct was beyond outrageous. It held up nonprofit-status applications from Tea Party and conservative groups for political reasons, singled out the groups for unforgiving scrutiny and was actively looking for right-of-center organizations to grind in its 21st century inquisition.

On Tuesday, the 6th U.S. Circuit Court of Appeals censured the IRS, ordering it to turn over the list of groups it had targeted so that a class-action lawsuit filed by the NorCal Tea Party Patriots against the tax collector can move forward with those groups as plaintiffs. An agency that has long acted above the law has now been told it is accountable. This is significant.

The three-judge panel was not sparing in its judgment. It noted that “among the most serious allegations a federal court can address are that an executive agency has targeted citizens for mistreatment based on their political views.” It also told the IRS lawyers that they had conducted themselves in a manner unworthy of the government’s tradition of impartiality and decency as they fought the lawsuit. ...

How can such an agency exist in a free society? But then, we’re not truly free if the IRS or any other agent of the government has the latitude to carry on as the IRS has for decades. Free people don’t live in constant fear of a government inquiry and are not perpetually afraid that the tax collector’s boot will suddenly land on their neck. Nor are they ever anxious that an innocent slip-up will wreck their lives.

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

Sunday, March 27, 2016

The IRS Scandal, Day 1053

IRS Logo 2News Busters, It’s Been 513 Days Since Any Big 3 Network Has Touched the IRS Scandal:

The latest stunning development in the IRS targeting scandal, that a federal appeals court on Tuesday scolded the IRS for failing to turn over its full list of groups it targeted, has yet to be reported on any of the Big Three (ABC, CBS, NBC) network evening or morning shows.

However, as NewsBusters’ Scott Whitlock reported, all three networks on Thursday found time to gush over Barack Obama’s “fancy footwork” and “dancing diplomacy” in Argentina.

In fact, it’s been 513 days since any network has touched the IRS scandal. The last mention arrived on the October 28, 2014 edition of CBS This Morning when John Dickerson noted voters in states that would decide control of the Senate in the 2014 midterms were skeptical of the government due to a “series of different things from the Secret Service to Ebola to the IRS scandal.”

The last time NBC noted the IRS scandal was 540 days ago on the October 5, 2014 Today show, when NBC’s Meet the Press host Chuck Todd briefly noted that public skepticism about the government’s handling of the Ebola crisis was well-earned due to “Secret Service blunders, IRS losing e-mails, the Veteran Affairs Administration botching all these wait times.” 

But that’s nothing compared to the IRS scandal news drought on ABC. The last time the IRS targeting imbroglio got any airtime on ABC was 686 days ago in a 16 second brief by Amy Robach on the May 8, 2014 edition of Good Morning America, when Robach reported that “six Democrats have joined Republicans in the House” to hold Lerner in contempt of Congress. ...

Since then there have been multiple revelations gone unreported by the networks ...

Of course, Fox News did the reporting the networks refuse to do on the latest IRS scandal development.

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March 27, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Saturday, March 26, 2016

The IRS Scandal, Day 1052

IRS Logo 2Peter J. Reilly (Forbes), Sixth Circuit Looking To Protect Taxpayers From IRS Not IRS From Taxpayers:

Day 1049 of the IRS Scandal is the first day in a while with a real development. In the NorCal Tea Party Patriots litigation the IRS has really gotten slapped around by the Sixth Circuit for its dilatory conduct in long running litigation. The decision starts out by reiterating the preferred right wing narrative of the interminable never ending scandal. ...

At issue in this particular decision are lists of organizations flagged of special attention using “Be On the Lookout” criteria and two spreadsheets that the IRS provided to the Inspector General.  The reason the plaintiffs want the lists is to identify the members of their “class” in the putative class action suit.  The IRS has been refusing to turn over the lists arguing that they are “return information.” ...

As with any decision against the IRS in the interminable scandal, there is a good bit of coverage of the decision. I won’t try to duplicate the TaxProf and instead will refer you to Day 1049, Day 1050 and Day 1051.

The best discussion I have seen is on Paul Streckfus’s EO Tax Journal, which is not free. There are two main narratives of the scandal.  The one embraced by those who continue to pay attention is that there was a deliberately orchestrated conspiracy to impede the work of conservative groups.  The other is that the IRS has certain bureaucratic limitations in its ability to handle competing priorities and that the Tea Party applications created a perfect storm to bring out the worst in the Service .  Fundamentally the IRS can do some discreet things very well, but when you want it to walk and chew gum at the same time, things are less good.  Throw in people outside with political agendas pushing in opposite directions and the chance of paralysis is high.

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March 26, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Friday, March 25, 2016

The IRS Scandal, Day 1051

IRS Logo 2Wall Street Journal, Appeals Court in Tea Party Case Puts Nick in Taxpayer Privacy Law:

Attempts to extract information out of the IRS usually run into a solid wall: Section 6103, the part of the tax code setting taxpayer privacy rules. It keeps Donald Trump’s tax returns—and everyone else’s—outside the scope of the federal Freedom of Information Act.

The Sixth U.S. Circuit Court of Appeals in Cincinnati just put a tiny but important dent in that wall, at least in the states covered by that appeals circuit. The IRS office that handles tax-exempt applications is in Cincinnati.

In an appeals court ruling noticed mostly for its rhetorical blasts at the Internal Revenue Service, Judge Raymond Kethledge, writing for a three-judge panel, said the privacy rules that protect “return information” don’t apply to the names and addresses of groups seeking tax-exempt status.

The law “does not entitle the IRS to keep secret (in the name of ‘taxpayer privacy,’ no less) every internal IRS document that reveals IRS mistreatment of a taxpayer or applicant organization—in this case or future ones,” Judge Kethledge wrote Tuesday. “Section 6103 was enacted to protect taxpayers from the IRS, not the IRS from taxpayers.”

Until the ruling, the government, Congress and tax lawyers all operated under the assumption that tax-exempt groups’ names only become public if approved by the IRS. The IRS releases redacted letters denying tax-exempt status, while the names of groups that apply and withdraw–often after questions from the IRS–never become public.

“6103 is usually interpreted pretty broadly by the courts, with a lot of deference from the courts to the IRS,” said Lloyd Hitoshi Mayer, a tax law professor at the University of Notre Dame. “This is a significant change.” ...

George Yin, former chief of staff of the congressional Joint Committee on Taxation, said he was sympathetic to the policy view encapsulated in the court’s ruling. But Mr. Yin, now a law professor at the University of Virginia, said internal IRS processing of applications is covered by the privacy law. “The other Circuits that have looked at this issue are correct,” Mr. Yin wrote in an e-mail, “but the 6th Circuit was not.”

The Hill, IRS Commissioner: Court Ruling Raises Privacy Concerns for Taxpayers:

IRS Commissioner John Koskinen is warning that an appeals court ruling in the agency’s political-targeting scandal could put taxpayers’ privacy at risk.

"If suddenly, your name on an application and your address is available to the public, I think it’s going to … raise a concern by a lot of taxpayers who may not want anyone else to know what they’re applying for,” Koskinen told reporters Thursday, after delivering a speech at the National Press Club.

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March 25, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (8)

Thursday, March 24, 2016

The IRS Scandal, Day 1050

IRS Logo 2Wall Street Journal editorial, Chipping Away at the IRS Stonewall: A Federal Court Scores the Agency For its ‘Continuous Resistance’;

The media have ignored the IRS targeting of conservative groups, but the courts haven’t. On Tuesday the Sixth Circuit Court of Appeals tore into the agency’s obstructionist conduct and ruled that the IRS must turn over the spreadsheets it created on the targeted groups. ...

Writing for a unanimous three-judge panel, Judge Raymond Kethledge ... and excoriated the IRS for stonewalling during discovery. Charges that an executive agency targeted citizens for their political views are “among the most serious allegations a federal court can address,” he writes. In this case, he added, they are “substantial” and based on a report by the Treasury Inspector General for Tax Administration.

Equally appalling is the agency’s effort to obstruct the legal process. “[I]n this lawsuit the IRS has only compounded the conduct that gave rise to it,” Judge Kethledge wrote, calling the IRS response “one of continuous resistance.” He added: “The district court ordered production of those lists, and did so again over an IRS motion to reconsider. Yet, almost a year later, the IRS still has not complied with the court’s orders.”

Readers may remember that last autumn District Court Judge Susan Dlott said her “impression is the government probably did something wrong in this case.” Determining liability is a legal question, she continued, but “the government is doing everything it possibly can to make this as complicated as it possibly can, to last as long as it possibly can, so that by the time there is a result, nobody is going to care except the plaintiffs.” ...

Unless it appeals to the Supreme Court, the IRS now has seven days to turn over the lists to the law firm representing the tax-exempt groups, Graves Garrett in Kansas City. Perhaps we’ll now see what the IRS and Justice Department have worked so hard to hide.

Wall Street Journal, IRS Chutzpah: Taxpayer-Protection Laws Won’t Shield Abuse of Power:

Will federal employees who support President Obama ever be held accountable for hijacking the Internal Revenue Service and using it to assist Obama’s re-election bid? Thanks to a ruling yesterday from the Sixth U.S. Circuit Court of appeals, it’s possible the answer is yes.

The Washington Times’s Stephen Dinan sums up the finding: “A federal appeals court spanked the IRS Tuesday, saying it has taken laws designed to protect taxpayers from the government and turned them on their head, using them to try to protect the tax agency from the very tea party groups it targeted.” ...

“The IRS’s response has been one of continuous resistance,” Judge Kethledge observes. “For example, the IRS asserted that the names of IRS employees who worked on the groups’ applications were taxpayer ‘return information’ protected from disclosure by § 6103.” That is, the IRS attempted to invoke a law designed to protect taxpayers’ privacy to shield the identities of agency employees, who are supposed to work for the taxpayer. ...

In 1972 the IRS itself had more integrity than the White House. As we noted in 2014, then-Commissioner Johnnie Walters ignored an order from White House aide John Dean to target 200 of Nixon’s political enemies. “If I did what you asked, it’d make Watergate look like a Sunday school picnic,” Walters told Dean.

Under Obama, the IRS itself appears to have taken the initiative to target political opponents of the president—and not just powerful enemies, but ordinary Americans seeking to organize lawfully to further their views.

Washington Post, Obama Administration’s ‘Continuous Resistance’ in IRS Targeting Case Slammed by Federal Appeals Court:

A federal appeals court Tuesday slammed the Internal Revenue Service for what it called three years of “continuous resistance” to turning over documents in connection with a class-action suit brought by tea party groups singled out for months of delays, excessive paperwork and scrutiny as they sought tax-exempt status in 2010.

A unanimous ruling by a three-judge panel of the Cincinnati-based U.S. Court of Appeals for the 6th Circuit found that the IRS, in its unresponsiveness to the charges, “has only compounded the conduct that gave rise” to them. ...

The unusually severe tongue-lashing by the appellate judges followed a similar rebuke of the government in the unrelated but even more sensitive case involving a Freedom of Information Act request by Judicial Watch, a conservative group, involving former secretary of state Hillary Clinton’s personal email system.

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