TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

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)

Wednesday, March 23, 2016

IRS Scandal, Day 1049:  6th Circuit Slams IRS Treatment Of Tea Party Group

IRS Logo 2United States v. NorCal Tea Party Patiots, No. 15-3793 (6th Cir. Mar. 22, 2016)

Among the most serious allegations a federal court can address are that an Executive agency has targeted

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.

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.” ...

In closing, we echo the district court’s observations about this case. The lawyers in the Department of Justice 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. And we order that the IRS comply with the district court’s discovery orders of April 1 and June 16, 2015—without redactions, and without further delay.  

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March 23, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Tuesday, March 22, 2016

The IRS Scandal, Day 1048

IRS Logo 2Politico, Garland's Tax Record:

REMEMBER Z STREET? Close followers of the controversy surrounding the IRS’s improper scrutiny of tea party groups certainly do. But you might not know about Merrick Garland’s role in the case.

Garland, President Barack Obama’s Supreme Court pick, took the IRS to task and ruled for the conservative pro-Israel group in what our Toby Eckert called “the most notable tax case” Garland saw during his tenure at the U.S. Court of Appeals for the District of Columbia. The appeals court found last year that Z Street could proceed with a suit asserting that its tax-exempt application received more scrutiny and faced delays because the group didn’t agree with the Obama administration about Israel, in what conservative activists called an opening act to the IRS’s tea party controversy.

For his part, Garland spared no scorn with the IRS’s argument that it had a 270-day cushion protecting it from the suit. "You don't really mean that, right? Because the next couple words would be the IRS is free to discriminate on the basis of viewpoint, religion, race [for 270 days]. You don't actually think that?" Garland said, according to The Wall Street Journal. "Imagine the IRS announces today a policy that says as follows: No application by a Jewish group or an African-American group will be considered until one day short of the period under the statute."

The Times of Israel, Garland Previously Blasted IRS Over Case Against Pro-Israel Group:

Merrick Garland may be best known for his work on the Oklahoma City Bombing case, but last year he was one of three judges who blasted the US Internal Revenue Service for trying to squelch information about the Obama administration possibly discriminating against a far right pro-Israel group that was seeking tax exemption status.

The case came to Garland’s court of appeals after a lower court found the IRS could not have a case by Z Street, which was suing and claiming the IRS had discriminated based on the group’s point of view, thrown out.

IRS lawyer Theresa McLaughlin came to court trying to argue that one can’t sue over collection of taxes, but the judges threw it back, citing it was not the point of Z Street’s suit.

When the lawyer tried to argue that Z Street could wait 270 days and then sue, Garland became angry.

“Imagine the IRS announces today a policy that says as follows: No application by a Jewish group or an African-American group will be considered until one day short of the period under the statute… Is it your view that that cannot be challenged,” he said, according to the Wall Street Journal.

The Z Street case is still going on. If it reaches the Supreme Court, Garland may have a chance to rule on it again.

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March 22, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, March 21, 2016

The IRS Scandal, Day 1047

IRS Logo 2USA Today op-ed:  How David Brooks Created Donald Trump, by Glenn Reynolds (Tennessee):

Last week, in assessing the rise of Donald Trump, New York Times columnist David Brooks engaged in an uncharacteristic bit of self-reflection. ... Brooks is, of course, horrified at Trump and his supporters, whom he finds childish, thuggish and contemptuous of the things that David Brooks likes about today’s America. It’s clear that he’d like a social/political revolution that was more refined, better-mannered, more focused on the Constitution and, well, more bourgeois as opposed to in-your-face and working class.

The thing is, we had that movement. It was the Tea Party movement. ... One of the most famous things about the Tea Partiers was that — as befits a relentlessly bourgeois protest movement — they left things cleaner than they found them. ...

Yet the tea party movement was smeared as racistdenounced as fascist, harassed with impunity by the IRS and generally treated with contempt by the political establishment — and by pundits like Brooks, who declared "I'm not a fan of this movement." After handing the GOP big legislative victories in 2010 and 2014, it was largely betrayed by the Republicans in Congress, who broke their promises to shrink government and block Obama’s initiatives.

So now we have Trump instead, who tells people to punch counterprotesters instead of picking up their trash.

When politeness and orderliness are met with contempt and betrayal, do not be surprised if the response is something less polite, and less orderly. Brooks closes his Trump column with Psalm 73, but a more appropriate verse is Hosea 8:7 "For they have sown the wind, and they shall reap the whirlwind.” Trump’s ascendance is a symptom of a colossal failure among America’s political leaders, of which Brooks’ mean-spirited insularity is only a tiny part. God help us all.

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

Sunday, March 20, 2016

The IRS Scandal, Day 1046

IRS Logo 2Forbes:  Obama Administration Learned From Lois, Dodging IRS Scandal, by Robert W. Wood:

Deny, stonewall, deny. For a time, the IRS scandal looked serious, enough for heads to roll. But with a dogmatic and unwavering narrative, the administration made it go away. It was aided by Lois Lerner’s refusal to testify, generous bonuses and pension. You have to hand it to the administration for pulling off a tour de force that could have brought a lesser administration down. Disagreeing with any of it can sound like being against recycling.

President Obama always fervently denied there was any IRS problem, not even a smidgen of corruption. Any missteps were innocent, entirely the fault of bonehead decisions in local IRS offices. On his final Daily Show appearance, the President capped his ‘no targeting’ mantra. There was no targeting. Emails show there was no directive about targeting. Sorry, it turns out some of our emails are missing? Well, hard drives crash. We recycle them–which helps the environment. Besides, liberals got targeted too. There’s no smidgen of corruption. Cash bonuses? Those are unrelated. And the latest in the long line of excuses: it was all the Republicans’ fault.

With all this unwavering devotion to mission, there could be no other conclusion. It was no surprise that the current Justice Department wrote a letter to members of Congress announcing that Lois Lerner will face no criminal charges. If you worried about the email’s sent from Ms. Lerner’s dog’s email account, don’t be, the dog is safe too. The most the DOJ would say was that there was mismanagement down at the IRS. Hey, perhaps some poor judgment, even institutional inertia, but that was it.

Stay on mission. It may have looked like targeting. But the DOJ said there was no evidence that any IRS official acted based on political, discriminatory, corrupt, or other inappropriate motives. Not even Ms. Lerner, despite her history, including at the Federal Election Commission, before she moved on to IRS targeting. Disparate impact on the tea party? That was just mishandling. 

Ms. Lerner was handsomely rewarded while she presided over alleged discrimination against conservative nonprofits. In fact, records revealed that she received $129,000 in bonuses between 2010 and 2013, averaging $43,000 a year—on top of her regular salary. Ms. Lerner came off as a kind of folk hero in the DOJ report, stepping forward to bring this whole issue up! The fact that Ms. Lerner planted and then answered her staged question made her a kind of whistleblower.

President Obama’s testy “not even a smidgen of corruption” remark to was convincing, despite the Government Accountability Office report that internal controls for exempt organization audit selection should be strengthened. The GAO said organizations can be picked for examination in an unfair manner, based on religious, educational, political, or other views. Inconveniently, IRS documents revealed Lois Lerner’s email warning IRS staffers of the pitfalls of revealing too much information to Congress. Forget email, use instant messaging system that automatically deletes. House Oversight Committee documentation suggests that IRS officials used it deliberately to evade public scrutiny. 

Ms. Lerner professed her innocence and then took the Fifth. When she broke her silence to Politico, she said she did nothing wrong, claiming she was the victim. Staying on mission was key, even though Ms. Lerner had met with the DOJ about prosecuting conservative groups. Former IRS Commissioner Shulman testified there was “absolutely no targeting” of conservative or Tea Party organizations. Ms. Lerner admitted targeting, calling it “absolutely incorrect, insensitive, and inappropriate.”

Four days later, on May 14, 2013, the Inspector General issued a report confirming the targeting. Ms. Lerner professed her innocence, then took the Fifth. She was placed on administrative leave, and shortly thereafter retired with full pension. The House held Ms. Lerner in contempt. Only then–on June 13, 2014, did the IRS first say it lost Lerner’s emails from 2009 to 2011, destroying hard drives and backups.

Eventually, the IRS said it spent millions to try to recover them. Republicans were repeatedly accused of wasting money on this, since the IRS was above reproach. The narrative saying the Republicans were just wasting money sure turned out to be right. There was no smidgen of corruption, after all.

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March 20, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Saturday, March 19, 2016

The IRS Scandal, Day 1045

IRS Logo 2Forbes:  IRS And Liquor By The Wink, by Peter J. Reilly:

Groucho Marx is supposed to have sent a telegram to a club stating – “Please accept my resignation. I don’t want to belong to any club that will accept people like me as a member.”  That sentiment is not exactly a tax principle, but it is very akin to one.  The idea is that for an organization to be recognized as a social club exempt under 501(c)(7) belonging to it has to mean something, maybe not much, but something. That was the essence of Private Letter Ruling 201605021.  Private letter rulings are redacted, so I’m going to call “the club” – How Dry I Am (HDIA).

HDIA has some high sounding purposes in its Articles of Incorporation.  It is intended to provide for the social, cultural and civic betterment of its member, support charitable endeavors, provide for recreation and the like and establish and maintain facilities where all this good stuff can go on. That’s the Articles of Incorporation.  It advertises itself a little differently.

HDIA advertises itself as a family restaurant and bar and grill.  The facility is leased from two of its members.  It seems like a pretty convoluted way to run a restaurant, but there is a reason from it.  HDIA is in a dry county where restaurants are not allowed to serve liquor.  Private clubs are another matter.  They can serve liquor to members.  Thus the proliferation of private clubs in dry counties where liquor is served "by the wink." ... The IRS broke HDIA the bad news that it did not qualify as an exempt organization. ...

This little comedy may seem far removed from the interminable IRS scandal now on Day 1043 by TaxProf Count. We privilege not for profit organizations in a variety of ways, not just through federal tax benefits but also by letting them sell liquor, where other cannot, run gambling, or make significant political expenditures without disclosing donors.  There is even an entirely unmerited dose of credibility that organizations get for having achieved exempt status.

Yet we lay the regulation of entities seeking exemption from a variety of rules at the doorstep of our tax collection agency, even when the status has little or no tax significance as was the case with the 501(c)(4) organizations that made up the core scandal and this particular attempt at 501(c)(7) that just wants to serve liquor. ...

In a recent article in Tax Analysts – The IRS’s Multi-Mission Mismatch Problem – Kristin Hickman makes a strong argument for moving Exempt Organization regulation out of the IRS as part of a larger effort to focus it on its core competency.

IRS personnel have tremendous capacity to process and evaluate hundreds of millions of taxpayer filings and collect the taxes owed. But they are not typically social workers, environmental scientists, health policy experts, or First Amendment scholars. Consequently, however talented IRS employees may be at pursuing the IRS’s traditional revenue-raising mission, they may not be as good at addressing the needs of socioeconomically disadvantaged persons, promoting new sources of energy, remaking the healthcare system, or recognizing when administrative decisions implicate politically sensitive values like freedom of speech or religion.

Perhaps Congress could spin off exempt organization determinations and monitoring wholesale and have the responsible agency just provide the IRS with a list of approved entities. If the IRS suspects a problem with a particular entity, it could refer the matter back to the responsible agency.

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March 19, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, March 18, 2016

The IRS Scandal, Day 1044

IRS Logo 2Christian Post, The Best Reason to Abolish the IRS:

Readers of the Christian Post are familiar with the IRS scandal directed against Tea Party related organizations. The misuse of the IRS as a political weapon did not begin with President Obama and suppression of the Tea Party however. A particularly notorious user of the IRS as a political weapon was President Nixon. If Nixon had not resigned the Presidency, he almost certainly would have been successfully impeached, in large measure due to his misuse of the IRS.

These two examples only begin to reveal the degree to which the IRS has been used against the American people and against American principles of liberty. More examples are provided in a blog by James Bovard, "The Sordid History of IRS Political Abuse."

According to David Burnham, author of A Law Unto Itself: Power, Politics, and the IRS, "the records show that Franklin Delano Roosevelt may have set the stage for the use of the tax agency for political purposes".

Roosevelt used the IRS to attack political opponents such at Sen. Huey Long, Rep. Hamilton Fish, and former Treasury Secretary Andrew Mellon, among others. (For Secretary Mellon, this was an example of when you live by the sword, you die by the sword.) Roosevelt also used the IRS to attack newspaper publishers Hearst and Annenberg, an indirect attack on freedom of the press which is a First Amendment freedom in the Bill of Rights.

Roosevelt did more than use the IRS to attack his opponents; he also abused his power to protect his allies. Roosevelt obstructed justice when he put a stop to an IRS investigation into the illegal massive campaign contributions from a federal contractor to then Rep. Lyndon Johnson. Perhaps Lyndon Johnson came to appreciate the power of the IRS from this episode.

Only a few years later Johnson used the IRS to prevent churches from the free exercise of religion. He put into legislation a restriction that churches could lose tax exempt status if they address certain "political" topics. The IRS continues to undermine religious freedom, the very first freedom listed in the Bill of Rights, since Johnson's blatantly unconstitutional legislation remains untested in the courts.

President Kennedy has a prominent place in this Presidential Hall of Shame. Kennedy aggressively pushed the IRS into forming the Ideological Organizations Audit Project to go after conservative groups that criticized his agenda. The IRS was thus used to suppress freedom of speech and freedom of assembly. Kennedy also went after private individuals who stood in his way, using the IRS to punish executives in the steel industry with audits when they pushed back against his heavy-handed industrial policies.

President Nixon however, remains the poster boy for Presidential abuse of the IRS to punish and harass one's opponents. ...

Anyone who thinks that politically based IRS attacks on basic American freedoms can be prevented by more legislation or electing "good" people is not paying attention. The corruption of power is inherent in a tax system as complex as our own which is controlled by politically motivated people. ...

The basic freedoms we love are endangered by the continued existence of an endlessly complex tax system enforced by a massive and politically controlled IRS. Religious liberty, freedom of speech, freedom of the press, academic freedom and freedom of assembly have already been attacked by the IRS.

Defend freedom and abolish the IRS.

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March 18, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (7)

Thursday, March 17, 2016

The IRS Scandal, Day 1043

IRS Logo 2Leandra Lederman (Indiana-Bloomington), IRS Reform: Politics as Usual?, 7 Colum. J. Tax L. ___ (2016):

The IRS is still reeling from accusations that it “targeted” Tea Party and other non-profit organizations for delays of their applications for tax-exempt status. Although multiple government investigations found no politically motivated behavior — only mismanagement — Congressional hearings were quite inflammatory. Congress recently followed up those hearings with a set of IRS reforms. Congress’s approach is reminiscent of the late 1990s, when highly publicized Congressional hearings regarding alleged abuses by the IRS resulted in a major IRS reform and restructuring, although the allegations subsequently were largely debunked. This Article argues that the recent allegations against the IRS also were overblown. It looks to the aftermath of the 1998 IRS reform, which included a major downturn in enforcement, for lessons for the present day. The Article concludes that Congress as a whole can do a better job of keeping politics from undermining tax administration.

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March 17, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, March 16, 2016

The IRS Scandal, Day 1042

IRS Logo 2Wall Street Journal:  Hillary’s Soft Despotism, by William McGurn:

Donald Trump is Hitler. Donald Trump is a fascist. Donald Trump is a dictator. Certainly Mr. Trump has a mouth, and he’s not afraid to use it. He also speaks to adoring crowds who cheer when he says to respond in kind to activists trying to disrupt his rallies. Even so, the over-the-top claims that Mr. Trump is the new Il Duce may be distracting attention from the soft despotism that Tocqueville deemed the far likelier menace to American liberties. This kind of authoritarianism doesn’t come with goose steps or brown shirts or large populist movements. It prefers bureaucracy to bombast. It presents itself as a solution to the complexities of modern government, and it’s called the administrative state.

Philip Hamburger—a Columbia law professor and author of the 2015 book “Is Administrative Law Unlawful?”—defines the administrative state as the substitution of regulatory edicts for laws passed by the people’s elected representatives. In the American iteration, at least, this often means the same federal agency that writes the rules also enforces and adjudicates them—a confluence of powers Madison once called the “very definition of tyranny.” ...

Now, it’s certainly possible that a President Trump would seed the federal agencies with men and women who would abuse their powers for Trumpian outcomes. In real life, however, the compulsion to decree to one’s neighbor what’s best for him (and use the federal government to enforce it) is an affliction of modern American liberalism. In other words, the kind of people Hillary Clinton, if elected, would rely on to fill the federal bureaucracies, every last one of them eager and willing to impose rules on the American people that would never fly in Congress.

What kind of rules and regulations? Here are a few instances from recent years:

  • In the run-up to the 2012 presidential election, the IRS targets groups regarded as enemies of the president—pro-Israel, pro-life, pro-tea-party, etc. When this became public, its officials, including the new IRS commissioner, John Koskinen, make clear their contempt for congressional panels trying to investigate.

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March 16, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Tuesday, March 15, 2016

The IRS Scandal, Day 1041

IRS Logo 2Capital Research Center, The IRS Attacks the Tea Party:

The great Daniel Webster famously remarked that the power to tax is the power to destroy. Webster’s words are as true today as they were 200 years ago. But the Obama administration, an endless source of innovation in political corruption, found a way to wield as a weapon against its political enemies the power to grant tax-exempt status. ...

In 2013 the American public learned that President Obama used the Internal Revenue Service to vex and harass his political opposition. That Obama’s IRS singled out conservative groups for special scrutiny ought to “send a chill” up Americans’ spines, then-House Intelligence Committee chairman Mike Rogers (R-Mich.) told Fox News. The tax-collection agency’s strong-arming of political organizations “is as dangerous a problem the government can have.”

“This is something that we cannot let stand. It needs to have a full investigation.” ...

Left-wing Democrat Lois G. Lerner, then the director of the Exempt Organizations Division at the IRS, did the Obama administration’s bidding, harassing conservative groups and funders. Lerner testified before Congress, and after protesting her innocence she suddenly invoked the Fifth Amendment and refused to continue testifying.

But earlier Lerner had confirmed the IRS abuses. IRS employees in the agency’s Cincinnati office targeted conservative 501(c)(4) groups, she said. Section 501(c)(4) of the Internal Revenue Code exempts nonprofit organizations “operated exclusively for the promotion of social welfare” from having to pay federal income tax. The IRS allows 501(c)(4) groups to engage in lobbying and political campaign activities if those activities are not the organization’s primary activity. Two of the most high-profile 501(c)(4) groups are the left-leaning Organizing for Action (which is simply a continuation of the Obama presidential campaign) and the right-leaning Crossroads GPS (which was founded by GOP political consultants, including Karl Rove).

Such 501(c)(4) groups are allowed to be more overtly political in their activities than the most common form of nonprofit, the 501(c)(3), which includes public charities like the Salvation Army and private foundations like Ford and Rockefeller. Consequently, donors to 501(c)(4) organizations are not allowed to deduct their donations from their income taxes, whereas donors to 501(c)(3) groups are allowed to make such adjustments.

Lerner admitted that groups that included the words “tea party” or “patriot” in their documents were singled out for heightened scrutiny. Yet she denied that orders to make conservative activists’ lives difficult had come from on high in Washington.

Nobody buys that line, especially given President Obama’s frequent promises to dole out punishment to his opponents. The very fact that Lois Lerner isn’t in prison right now is proof of political interference at the highest levels. Lerner lied to Congress, committed contempt, and engaged in obstruction of justice on a massive scale. Yet nothing happened to her.

At the same time, left-wing nonprofit groups went all-out to protect the Obama administration. Propaganda outlets Media Matters for America and ThinkProgress dutifully attacked those who demanded the truth be told, while investigative outfits like ProPublica worked hand-in-hand with the IRS in the effort to hurt conservative activist groups.

Before examining the role that those left-wing nonprofits played in the saga, some background is necessary. In the lead-up to the 2012 election, many conservative organizations and Tea Party groups that had sought tax-exempt status from the IRS were frozen in limbo, unable to participate fully during election season because they were wasting away on an IRS list specifically created to stymie right-leaning groups hostile to President Obama’s radical left-wing agenda.

In spring 2013, the IRS admitted to using keywords to target conservative organizations seeking tax exemption. The agency said it used the keywords as a way to quickly flag applications for closer scrutiny because, after the First Amendment-affirming Citizens United ruling in 2010, the IRS was overloaded with applications.

Some of the keywords used to target conservative groups included “Tea Party” and “patriots,” as well as the word “Israel.” Other key phrases and concepts used by the IRS to apply a heightened level of scrutiny included questioning government spending, government debt, government capability, or criticizing how the country was being run, advocating for education about the Constitution or the Bill of Rights, and any challenges to the Affordable Care Act (a.k.a. Obamacare).

There is no comprehensive list of the groups targeted because the IRS destroyed storage media containing information relevant to the scandal. But an NPR report summarizing findings by the House Ways and Means Committee eloquent testifies to the abuse conservative groups suffered. (See table 1, “IRS Targeting of Files Produced by IRS Through July 29, 2013.”)

IRS

The IRS claims in its defense that lower-level employees at its Cincinnati office took it upon themselves to use these keywords and key phrases to flag applications and that no upper management, such as Lerner, had instructed them to subject conservative groups to enhanced scrutiny.

But Lois Lerner’s unprecedented stonewalling of congressional committees underlined her guilt. It didn’t help her case that the IRS was unable to turn over most of her emails requested during the investigation, because the emails had been mysteriously destroyed. However, some of the few emails recovered and made public showed Lerner condemning and lambasting conservatives. She called the Tea Party “very dangerous” and used obscenities when referring to politically conservative radio hosts.

Even more suspiciously, Lerner’s hard drive had supposedly crashed and therefore could not be used in the investigation. Over 400 electronic backup tapes had also been destroyed and could not be used either.

On Oct. 23, 2015, the nearly two-and-a-half year investigation into the scandal by the U.S. Department of Justice found that Lerner and the IRS were not guilty and that no criminal charges would be filed. Justice’s official statement added the proviso that even though Lerner and the IRS undeniably botched the process, they committed no crimes.

“Our investigation uncovered substantial evidence of mismanagement, poor judgment and institutional inertia, leading to the belief by many tax-exempt applicants that the IRS targeted them based on their political viewpoints,” Assistant Attorney General Peter Kadzik said. “But poor management is not a crime.”

Kadzik said DoJ could not prove that IRS officials had “intentionally discriminated against an applicant based upon viewpoint” but instead came to the conclusion that low-level employees’ “ignorance” and “negligence” were the reason for the backlog of hundreds of conservative organizations’ applications for 501(c)(3) and 501(c)(4) status. However, emails made public between IRS officials seem to show that the employees were following instructions from Washington to continue to put on hold the conservative applications that had been flagged.

Former Justice Department staff attorney J. Christian Adams said Lerner was never in legal jeopardy with Obama in the White House. “She’s part of the elite, insider, left-wing, five-bedroom-house-in-Bethesda crowd,” he said of Lerner and the fancy Maryland suburb of Washington in which she lives. “And so nothing was going to happen to her because she goes to the right cocktail parties.” The decision not to proceed against Lerner shows that being prosecuted for crimes “is for little people.”
Robert Knight of the American Civil Rights Union said Lerner’s misdeeds helped President Obama secure a second term because Tea Party groups weren’t able to get organized while their tax-exempt status hung in limbo.

“What Lois Lerner did moves us that much closer to being an authoritarian third world-type country, where might makes right,” Knight said. “It’s un-American. She should have been indicted. It’s a disgrace.”

Not long after the DoJ ended the investigation, 19 members of the House Oversight and Government Reform Committee called for the impeachment of IRS Commissioner John Koskinen, a longtime Democrat apparatchik appointed by Obama in 2013. The lawmakers claimed that Koskinen lied under oath to Congress and that he allowed the destruction of evidence when thousands of Lerner’s e-mails were mysteriously erased, thus hindering the investigation.

The committee claimed that Koskinen “failed to comply with a congressionally issued subpoena, documents were destroyed on his watch, and the public was consistently misled. Impeachment is the appropriate tool to restore public confidence in the IRS and to protect the institutional interests of Congress.”

Meanwhile, President Obama said in a Super Bowl weekend interview that not even “a smidgen of corruption” existed or would be found during the investigation into IRS the scandal.

Lerner refused to resign after lawmakers repeatedly demanded she do so after the scandal first came to light. She instead was placed on administrative leave until Sept. 23, 2013 when she officially retired from her position as head of the IRS’s tax-exempt division. She received her full pension and benefits upon retiring.

The Speaker of the House of Representatives, Paul Ryan (R-Wis.), said that while the Department of Justice’s decision is “predictable coming from this administration,” it is still “deeply disappointing.”

“Serious and unprecedented actions taken by the most senior IRS official in charge of the non-profit unit, Lois Lerner, deprived conservative organizations of their constitutional rights,” Ryan said. “The American people deserve better than this.” ...

Republicans were not the only ones disappointed by the DoJ’s decision; some liberals were upset as well. For example, MSNBC talking head Rachel Maddow agreed that the targeting of conservative groups was “not fair,” and she added, “There is a reasonable fear by all of us, by any of us, that the kind of power the IRS has could be misused.”

Also from MSNBC, Joe Scarborough called the IRS scandal an example of “tyranny,” saying the IRS abuses were “real” and “unspeakable.”

Chuck Todd, a White House correspondent for NBC, observed that “It didn’t seem like [the White House] had a sense of urgency about it, a real sense of outrage.” Todd said the scandal was “outrageous no matter what political party you are.”

Terry Moran from ABC News called the scandal “A truly Nixonian abuse of power by the Obama administration.”

And the most liberal of them all, Comedy Central’s Jon Stewart, said the scandal creates doubt about President Obama’s “managerial competence” and takes away “the last arrow in your pro-governance quiver.”

Lori Lowenthal Marcus, president of Z Street, one of the conservative groups targeted by the IRS, believes that “The Obama administration is trying to punish any group with a different view point from theirs.”

Z Street, a pro-Israel group, is now suing the IRS for unconstitutional discrimination. Marcus believes that the IRS “gave differential treatment to tax exemption applications from organizations holding views about Israel inconsistent with those espoused by the Obama administration.”

Z Street filed its suit in fall 2010 after it learned of the discriminatory IRS “Israel Special Policy.” In Z Street v. Koskinen, Z Street claims that this “special policy” constitutes viewpoint discrimination and therefore violates the group’s First Amendment rights.

“The IRS didn’t come up with this idea on their own,” Marcus believes. “The Obama administration has particular views on Israel that Z Street does not share.” She adds that “Groups like Z Street believe that Jews are allowed to live in disputed territories [the West Bank] and Israel. The Obama administration does not agree.”

Marcus argues that her “constitutional rights were violated. The IRS has violated the constitution. The IRS is blocking Americans from being able to exercise their constitutional rights, they have blocked us from being able to educate about Israel.” ...

The Lois Lerner affair prompted some commentators to draw parallels with President Richard Nixon, noting he came dangerously close to impeachment for unleashing the IRS on his enemies. ...

The Obama administration continues to plot against conservative groups.

President Obama’s IRS is still holding nonprofit applications from conservative and Tea Party groups hostage even now, years after the IRS targeting scandal first made headlines. The IRS remains a powerful instrument of political repression in the hands of Obama. Always on the hunt for new ways to disadvantage his political adversaries, Obama is also now moving forward with a fresh campaign of political intimidation against nonprofit groups that strikes at the heart of the American democratic process.

Ominously, IRS boss John Koskinen has vowed “to have new rules to limit political activities of nonprofit organizations in place before the 2016 election, raising the specter of another major fight over the tax agency and political targeting,” the Washington Times paraphrased Koskinen saying. The IRS already tried to impose a rule preventing nonprofits from running voter registration drives (which is currently legal if done on a “nonpartisan” basis), but backed down in the face of a public backlash.

J. Christian Adams warns that the Obama administration is inventing new ways to stick it to nonprofit groups, forcing those organizations to reveal their donors, even though that is not required by federal law or IRS regulations. Coerced disclosure “has no purpose other than to try to open up the donors of such organizations to harassment and intimidation for their political and social beliefs in associating with particular membership organizations,” according to Adams. The Federal Election Commission “has no statutory authority to mandate such disclosure of organizations that are not political committees.” And the leading Supreme Court case on the issue, NAACP v. Alabama (1958), forbade such disclosures, which were then being sought from civil rights groups that were suffering harassment from state and local governments run by Democrats. (For more on current left-wing efforts to harass donors through “disclosure,” see Organization Trends, September 2015.)

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March 15, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, March 14, 2016

The IRS Scandal, Day 1040

IRS Logo 2Investor's Business Daily editorial, Would A President Hillary Use IRS To Punish Political Foes?:

Corruption:  Lois Lerner won’t be charged for the IRS’ harassment of conservatives, so the lesson is that it’s OK to use it as a political weapon. Would a President Hillary Clinton use the IRS to punish foes? Better believe it.

The Clintons are spiteful people. They have a history of crushing those who get in their way: ...

The infrastructure for IRS persecution is already in place for Clinton, as the tax agency’s targeting of conservative groups continues to this day, more than two years after the practice was exposed. ...

“If the Clintons get back into the White House, it will be retribution time, like the Corleone family consolidating power in ‘The Godfather,'” said Newsweek. “Just think of all the scores to settle, the grievances to indulge.”

Given Clinton’s record, there can be no doubt that she will use the IRS and any other federal agency to intimidate, harass and ruin her political opponents if she is elected president.

Indeed, the Clintons already know how to use the IRS for retribution. This was confirmed by former IRS official Paul Breslan.

And since the Clintons know that there will be no consequences for their actions, given that no one is going to be held accountable in the IRS scandal, there will be no holding back. The IRS will have to hire new agents just to keep up with the Clintons’ dirty work.

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

Sunday, March 13, 2016

The IRS Scandal, Day 1039

IRS Logo 2Democracy 21, Watchdog Groups Attack IRS Decision to Overrule Proposed Staff Denial of Crossroads GPS’ “Social Welfare” Tax Status:

In a letter sent today to the Internal Revenue Service Commissioner, Democracy 21 joined by the Campaign Legal Center criticized the IRS’ decision made without explanation to grant recognition to Crossroads GPS as a “social welfare” organization under section 501(c)(4) of the Internal Revenue Code.

The IRS Exempt Organizations staff decided in 2013 to deny social welfare status to Crossroads GPS because the staff found that the group spent 54 percent of its total expenditures on campaign activities in an earlier year. This amount of campaign-related spending exceeded the 49 percent rule that Commissioner Koskinen has stated sets the limit of campaign activities that a section 501(c)(4) organization is permitted to undertake.

According to the letter:

Without explanation, an IRS appeals officer reversed the staff ruling and has granted recognition to Crossroads GPS as an exempt social welfare organization. This decision, made without any explanation after the Exempt Organization staff had concluded that Crossroads GPS should not receive section 501(c)(4) tax status, is inexplicable and indefensible. It represents a fundamental failure by the IRS to rationally and properly administer the tax laws.

According to Democracy 21 President Fred Wertheimer:

It is irresponsible for the IRS to overturn a denial of tax-exempt status for Crossroads GPS by its Exempt Organizations staff without any explanation for this action.

It makes no sense for the IRS to grant without explanation tax-exempt status to Crossroads GPS as a social welfare group when the IRS staff found that Crossroads spent more money on campaign activities than IRS Commissioner Koskinen has said is permissible for a social-welfare group.

The IRS owes the American people a prompt explanation of precisely what happened here. The IRS needs to take steps immediately to make publicly clear that social welfare groups are limited in the amount of money they can spend on campaign activities and are not free to run wild and violate the tax laws with impunity.

The letter noted that, “Since its founding in 2010, Crossroads GPS itself has reported to the Federal Election Commission spending more than $100 million on campaign activities. But it has not disclosed the sources of the funds it has used for this spending.”

The letter continued:

Federal tax law does not require section 501(c)(4) social welfare organizations to publicly disclose their donors—unlike political organizations under section 527, which do have such disclosure obligations. The IRS recognition of Crossroads GPS as a social welfare organization means that the group can continue to hide from public scrutiny the identity of the donors who are financing their expenditures to influence federal campaigns.

More broadly, the grant of social welfare tax status to Crossroads GPS signals to the public that the IRS has abandoned any meaningful effort to enforce the provisions of the tax code that limit the amount of campaign activities that can be engaged in by social welfare groups.

As The Washington Post said in a recent editorial (February 19, 2016), the agency’s decision on Crossroads GPS sends the message that the IRS “has thrown in the towel” with regard to policing the misuse of social welfare organizations as vehicles for laundering undisclosed dark money into federal elections.

The IRS decision is very likely to have ramifications that will be severely detrimental to the interests of the American people.

According to the letter:

The use of social welfare organizations to spend undisclosed money in federal elections is now likely to proliferate in light of the agency’s unexplained decision to acquiesce to Crossroads GPS’s claim that it is entitled to tax status as a social welfare organization, notwithstanding its extensive campaign activities. The IRS’s abdication of its responsibility to enforce the law will be responsible for further erosion of the right of citizens to know the identity of the big donors providing money to influence their votes, thereby undermining a bedrock principle of our democracy.

The letter stated:

Given the high public stakes involved—whether purported social welfare organizations can misuse the tax laws to inject hundreds of millions of dollars of secret contributions into federal elections—the agency has an obligation to the American people to do its job responsibly.

This has not occurred in the Crossroads GPS case.  The agency owes the public an explanation for its otherwise inexplicable decision to treat Crossroads GPS as a social welfare organization, summarily reversing without explanation a staff opinion to the contrary.

Step by step over the years, the IRS has progressively eroded the congressional mandate that social welfare organizations must be operated “exclusively” for social welfare purposes, which do not include any activities to influence elections.

The letter concluded:

With this latest ruling, the IRS appears to have abandoned this statutory requirement altogether.  This has resulted in the IRS issuing what amounts to a blanket invitation to section 501(c)(4) groups to violate the tax laws with impunity, and thereby acquiescing to the unfettered spending of secret money in federal elections by social welfare organizations.

The country deserves better from the IRS.

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March 13, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Saturday, March 12, 2016

The IRS Scandal, Day 1038

IRS Logo 2Mediaite, Fox’s Bret Baier Mischaracterizes Potential Climate Probe as ‘Campaign Against Politically Incorrect Thinking’:

It’s being reported that the Justice Department may be investigating energy companies to see if they’ve been purposefully misleading the public about climate change. From this scant thread, Special Report with Bret Baier spun not one, but two, segments Thursday night cynically calibrated to stoke outrage by selling a specious premise that the Obama administration is waging a “campaign against politically incorrect thinking.” ...

Rosen argued that the federal government investigating corporations’ peddling false science on climate change had its closest point of comparison not in the tobacco companies — but in Tea Party groups targeted for their political beliefs. “Any federal action on opponents of the administration on change issues would evoke parallels with the IRS scandal of 2013,” Rosen said, before taking his segment on a broad detour to exhume the scandal, in which IRS agents in 2010 gave extra scrutiny to conservative non-profit groups specifically because they identified as “Tea Party,” “patriot,” or likewise.

The association with the Tea Party-IRS scandal insincerely suggests that the federal government would investigate energy corporations not because of an alleged concerted effort to deceive the public, but because it wished to punish political beliefs that run contrary to the administration’s. In this formulation, the target is not criminal conspiracy, but — as Baier framed it — political incorrectness.

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

Friday, March 11, 2016

The IRS Scandal, Day 1037

IRS Logo 2The Daily Signal op-ed:  Republicans Deal a Blow to the IRS, by Paul Ryan (Speaker, U.S. House of Representatives):

Millions of Americans are filing their taxes this month—and getting a good reminder of why they despise the IRS. But thanks to the Republican majority in Congress, the IRS is being forced to start cleaning up its act.

When the IRS scandal broke, Congress demanded answers from the agency’s top officials. Were they targeting groups for their religious and political beliefs?

No, they said, it was just a few rogue employees in Ohio—if anything at all. Well, what happened to Lois Lerner’s emails? Oh, they were lost in a tragic hard drive crash. Shouldn’t we update our laws to prevent future abuses? Don’t worry, the IRS responded with a cavalier attitude, weve got it covered.

By shining sunlight on the IRS, we demonstrated that conservative groups were being targeted for abuse based on their political beliefs. Many important—and perhaps, incriminating—emails were destroyed. And no safeguards were installed to stop any of it from happening again.

It’s not as if President Barack Obama was going to demand change at the IRS. His first reaction was to blame all this on “some boneheaded decisions.”

So we took action. We didn’t just prolong the investigation. We put into place reforms to shift the balance of power back to the taxpayer.

For example, in 2011, we learned that the IRS was threatening to impose the gift tax on donors to conservative non-profits, which would have forced many of these groups to close their doors. So Congress passed a law to make it clear that these donations are exempt.

There is now a codified Taxpayer Bill of Rights hanging at every IRS building across the country. Because of the actions we’ve taken, agency employees like Lois Lerner can no longer use their personal email addresses for official business. Organizations can self-declare their tax-exempt status, and if the IRS rescinds their status, they have the right to appeal.

As a result of our legislation, if the IRS compromises an organization’s confidential information, it can learn exactly what happened and who is responsible. And finally, political targeting is now a firing offense.

This is the difference a Republican majority has made, but we still have much more to do.

Just weeks ago, we learned that a cyber-attack may have breached the accounts of more than 700,000 taxpayers. That’s more than double the agency’s original estimate. All Americans deserve to have confidence that they will be treated fairly by the IRS—and our work won’t stop until this is a reality.

The single best thing we can do to rein in the IRS is to fix our tax code. Instead of a tax code all of us can live by, we have a code that none of us can understand. We need to simplify the code so that it helps create jobs and raise wages. And that’s why tax reform is at the top of our agenda to restore a confident America.

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March 11, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Thursday, March 10, 2016

The IRS Scandal, Day 1036

IRS Logo 2Press Release, California Violates Federal Donor Privacy Law; Kamala Harris Is the ‘Lois Lerner’ of State Attorneys General:

American Target Advertising, Inc., America’s largest and oldest conservative direct marketing and fundraising consulting agency, filed comments this week with California Attorney General Kamala Harris explaining that her dragnet demands for the names of donors to charities and other nonprofit organizations that ask Californians for donations violate post-Watergate reforms to the Internal Revenue Code. The tax code protects against unauthorized inspection of and intra-office access to confidential federal tax return information by government officials, and creates an exclusive and rigid regime for state charity regulators that Ms. Harris has bypassed in obtaining donor names on Schedule B of charities’ federal tax returns. The comments address a proposed confidentiality rule issued by Ms. Harris, and may be viewed here.

“We have seen the lawlessness directed at nonprofit organizations under ex-IRS official Lois Lerner, and her arrogance in acting ‘above the law.’ The very partisan Ms. Harris is carrying on that formula in her role as California’s top charity regulator,” said lawyer and fundraising executive Mark Fitzgibbons, who added, “The quantity of charities affected by California’s evasion of federal law far exceeds those affected by Lois Lerner’s lawlessness.”

Citing federal tax code section 6104(c) as “exclusively and rigidly” regulating the process for accessing and using confidential federal tax return information in administration of state charitable solicitation laws, interpretations by the IRS, and even a published article by the former head of California’s Registry of Charitable Trusts, the comments state: “[D]emands for Schedule B donor names and addresses are a bold, brash, and startling statement that the Attorney General believes she is not bound by or beholden to IRC 6104(c).”

Ms. Harris unilaterally decided to use the charitable solicitation registration process to acquire confidential donor names on Schedule B of charities’ federal tax returns. Those demands also violate the rights of association and privacy explained in the 1958 landmark case NAACP v. Alabama.

Another set of comments explaining the potential civil and criminal penalties for state officials who engage in unauthorized inspection of confidential federal tax return information, signed by five lawyers who specialize in tax and nonprofit law, were filed and may be viewed here. Both sets of comments were sent to Janet Kleinfelter, president of the National Association of State Charity Officials, which organization claimed Lois Lerner as its “partner in the regulation of charities.”

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March 10, 2016 in IRS News, IRS Scandal | Permalink | Comments (5)

Wednesday, March 9, 2016

The IRS Scandal, Day 1035

IRS Logo 2The Daily Caller News Foundation, IRS Failing To Properly Handle Data Nearly 2 Years After Lois Lerner:

Internal Revenue Service (IRS) officials don’t consistently report crucial information that ensures data backups are created and usable, a government watchdog reported Monday.

The IRS doesn’t know if its data backups are deleted or not created, and doesn’t test to ensure backups can be used if information is lost, even after a “significant” December 2014 incident, according to a Treasury Inspector General for Tax Administration (TIGTA) report.

“The IRS is not effectively managing its Tier II environment backup and restoration process,” the report said. “If the data is not backed up properly, a possibility exists that all taxpayer and management information could be lost and become unrecoverable.” ...

“IRS management does not have information to detect if a required backup is not created,” the report said. The IRS also doesn’t have consistent procedures to ensure backups are created routinely. Instead, officials rely on “professional judgement,” the report said. Advertisement Additionally, the IRS “does not routinely test restore of backups to ensure the integrity and reliability of the data by performing restores,” the report said. “Without forming a strategy for backup restore testing, the IRS cannot be assured it will have reliable backup data when needed.”

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March 9, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Tuesday, March 8, 2016

The IRS Scandal, Day 1034

Impeach

The Resurgent, Impeach Obama’s IRS Commissioner:

Our sponsor this week, FreedomWorks, needs your help pressuring congressmen to impeach the IRS Commissioner.

IRS Commissioner John Koskinen has ushered in an era of deception and lawlessness.

Since the time Obama appointed him, the IRS has been plagued by scandals and corruption. For years Obama and his IRS have denied the targeting of conservatives, but now the government admits that political targeting is possible.

This cannot go unpunished. Obama’s IRS Commissioner John Koskinen has got to go!

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March 8, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, March 7, 2016

The IRS Scandal, Day 1033

IRS Logo 2Right Side News, Obama IRS Scandal Continues:

Don’t think for a minute that we’ve forgotten the “scandal for the ages,” the Obama IRS suppression of conservatives and the Tea Party.  I have an update for you on the compromised Obama Justice Department, which did so much to cover up the scandal for Barack Obama.

We are now asking a federal appellate court to overturn a lower court’s ruling allowing the Obama Justice Department to withhold records detailing the number of hours that agency attorney Barbara Bosserman expended on the investigation of the IRS targeting of conservative groups seeking tax-exempt status during the 2010 and 2012 election cycles.  We filed the appellate brief in the U.S. Court of Appeals for the District of Columbia Circuit last month.

This is the lawsuit that forced the Obama Justice Department to confirm the existence of a criminal investigation into the IRS’ abuses and that Bosserman, a major donor to Obama’s political campaigns and the Democratic National Committee, was part of the team of lawyers criminally investigating the issue.  (On October 23, 2015, the Justice Department announced in a letter that it would not press any charges over the IRS abuse scandal.)

In 2014, Judicial Watch filed a 2014 Freedom of Information Act (FOIA) lawsuit seeking records detailing the number of hours Bosserman expended on the IRS matter.  In 2015, the U.S. District Court for the District of Columbia ruled that the agency had properly withheld the Bosserman records under the “attorney work product doctrine.” Judicial Watch argues to the appellate court:

[T]he Department presented no evidence whatsoever that the records requested by Judicial Watch were created in anticipation of litigation. The District Court also did not make such a finding. Instead the Department argued and the court ruled that some of the information contained in the responsive records was protected by the attorney work product doctrine. Because the requested records were created in the ordinary course of business – to assist senior officials in their management responsibilities – the records do not fall within the scope of the attorney work product doctrine. The records are being improperly withheld in their entirety.

In early January 2014, then-Attorney General Eric Holder reportedly appointed Bosserman to oversee the IRS investigation despite her substantial political activities.  According to Federal Election Commission records, Bosserman contributed $6,750 to Obama’s campaigns and the DNC from 2004 to 2012, including 12 separate contributions to Obama for America between 2008 and 2012.  Then-House Committee on Oversight and Government Reform Chairman Darryl Issa (R-CA) called the Bosserman appointment “a startling conflict of interest [that has] compromised the Administration’s investigation of the IRS.”

All Judicial Watch wants is the number of hours that the Obama donor/Justice Department lawyer spent investigating the worst IRS abuse in American history. The failure to bring charges in the IRS scandal only adds to the public interest in finding out more details about the involvement of the Obama/Democratic Party donor in the criminal investigation.

The media may yawn when two Republicans candidates for the presidency, Donald Trump and Ben Carson, complain of Obama IRS audits.  But it suggests Obama’s IRS corruption never ended.  As with the Clinton email scandal, Judicial Watch has a large number of active lawsuits and investigations into the Obama IRS matter.  Washington politicians from both political parties want to move on, but we are on the case.  In fact, we have more material in the hopper to release over the next few weeks.  So watch this space for additional developments.

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March 7, 2016 in IRS News, IRS Scandal | Permalink | Comments (6)

Sunday, March 6, 2016

The IRS Scandal, Day 1032

IRS Logo 2Canada Free Press, IRS Chief John Koskinen Honored With an Award For ‘Excellence in Public Service’. Yes, That Guy. Yes, Really.:

You know John Koskinen as the IRS chief who has, repeatedly, been forced to appear before Congress and defend his agency against claims that its agents targeted conservative groups. Koskinen has been caught, over and over again, lying, obfuscating, stalling, and generally stonewalling the investigation into the “service” he oversees. Out here in the real world, that lands you in jail or, at the very least, the unemployment line.  In Washington D.C…..

Well, in Washington D.C. you’re given a major award to honor you for your outstanding commitment to public service. ...

This is the sad, sad, reprehensibly sad, state of the country in which we live. Koskinen should be trotted out as an example of the worst that American government has to offer.  Instead, he’s being honored for allegedly offering the kind of earnest public service to which young people should dedicate their lives.

Hot Air, IRS and EPA Honchos Receive Public Service Awards. No … Seriously.:

You can keep clicking on this link as many times as you like and refreshing the page but it’s not going to redirect you to a story from The Onion. This is apparently a thing that actually happened. The current head of the Internal Revenue Service and the first chief of the Environmental Protection Agency were honored with prestigious public service awards this week. (Government Executive) ...

Koskinen is another matter entirely. I mean, there’s currently a motion on the floor of the Judiciary Committee to impeach the guy. He was at the helm for the entire Lois Lerner affair which saw the Department of Justice weighing the possibility of charges against some of his people. (They conveniently abandoned the case in October.) The agency has been highlighted by scandal, waste and abuse under Koskinen’s tenure and enjoys one of the lowest public approval ratings of the entire administration. This is the guy you choose to gift with an award and tens of thousands of dollars?

Government Executive, IRS Chief, First EPA Head Awarded Public Service Prize:

One is a living hero from the Watergate scandal who in 1970 became the first administrator of the Environmental Protection Agency. The other is a veteran of the 1990s Office of Management and Budget who is under constant political fire as the current commissioner of the Internal Revenue Service.

Both William Ruckelshaus and John Koskinen on Tuesday night were awarded the Elliot L. Richardson Prize for Excellence in Public Service by the National Academy of Public Administration, and both weighed in on the perils of public service in today’s hyperpartisan climate. ...

[Koskinen's] tenure heading the IRS since December 2013 has been marked by tensions with congressional Republicans over investigations into alleged political bias in the agency’s mishandling of nonprofits’ applications for tax-exempt status.

House Oversight and Government Reform Committee Chairman Jason Chaffetz, R-Utah, has approved a resolution calling for Koskinen’s impeachment by the Judiciary Committee. Asked for a comment on the Richardson award, Chaffetz told Government Executive by email that, “If obstructing a congressional investigation and misleading Congress merits an award, then it seems like they have the right guy. I guess I define excellent public service differently.” ...

Koskinen joked that his multi-entry resume in both public and private sector jobs has been interpreted as “I can’t hold a job, but until recently no one had suggested my early departure would be a net gain.” ...

The alleged political targeting took place “in one division, 900 people out of 90,000, but all felt under the gun,” he said, adding that he went on listening tours and personally spoke to 20,000 employees. Noting that IRS has since shrunk to 85,000, Koskinen said an “overwhelming” number of young people still seek employment at the agency. Unlike Ruckelshaus, who returned to EPA for a second tenure during the Reagan administration, Koskinen jokingly announced that he will not be returning for a second run at the IRS.

And when he deals with hostile lawmakers—an experience he likens to “fencing”—he sees much of it as “Kabuki theater, members trying to get their 30 seconds on YouTube or the TV networks.” The current Republican presidential candidates, he said, are competing over “who can give the biggest tax cuts, as if we’re here to give things away” rather than perform public service to make the country a better place.

Koskinen also confided that his desire to meet with his critics—an encounter with the always harsh Wall Street Journal editorial page staff is a possibility—“drives my press team crazy.”

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March 6, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Saturday, March 5, 2016

The IRS Scandal, Day 1031

IRS Logo 2Wall Street Journal: It’s Time for The Speech: Like JFK, Nixon and Obama, the Moment Is Now for a Big, Campaign-Saving Speech, by Daniel Henninger:

It’s time for The Speech. ...

Readers who have spent a lifetime absorbing the melodramas of America’s presidential election politics, such as this one, will recognize instantly what I am proposing here. It is time for Marco Rubio or Ted Cruz to deliver The Speech—or lose. Lose the campaign, the party, the Supreme Court and an already diminished country’s next four years. ...

The Trump tax returns do look like his Achilles’ heel but won’t emerge from the Lois Lernerized IRS until the Democratic nominee needs them to drop the scales from the eyes of Mr. Trump’s supporters. 

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March 5, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, March 4, 2016

The IRS Scandal, Day 1030

IRS Logo 2Alice G. Abreu (Temple) & Richard K. Greenstein (Temple), Tax as Everylaw: Interpretation, Enforcement, and the Legitimacy of the IRS, 69 Tax Law. ___ (2016):

Although legitimacy is vital to any legal institution, in the case of the IRS legitimacy has been discussed and analyzed only in the face of catastrophic assaults. These include attempts by a President to use the IRS to persecute political enemies; allegations of serious abuse of taxpayers by IRS agents; and most recently allegations that conservative organizations seeking section 501(c)(4) status were disproportionately singled out for intrusive scrutiny and delay.

While these instances have posed significant threats to the agency’s legitimacy, what we explore here is more subtle, more pervasive, and hence, more invidious and threatening. It is the way in which the unexamined assumption of tax exceptionalism – the idea that tax is different – has produced a situation in which the tax law and its administrators are viewed by tax professionals, and eventually by the taxpaying public, as interpreting and enforcing tax law in ways that are not understood, are therefore misperceived, and are ultimately judged illegitimate.

Tax exceptionalism is not a specific idea. Rather, it is a way of conceiving of tax or, still more loosely, an attitude toward tax. At its simplest, tax exceptionalism is “the notion that tax law is somehow deeply different from other law, with the result that many of the rules that apply trans-substantively across the rest of the legal landscape do not, or should not, apply to tax.” We believe that the stubborn persistence of tax exceptionalism is due to an important but previously unidentified and unexplored feature – namely, that tax exceptionalism has two distinct aspects: a visceral aspect and an objective aspect.

Taxpayers experience the tax law as different from other areas of law. No other field of law is thought to be so complex or to compel so many so regularly to bare their financial souls to the government just to be in compliance with the law. This is the visceral aspect of tax exceptionalism and we do not challenge the reality or the intensity of that experience. But we believe that the experience of difference has been reified, so that tax law is thought to be really different – objectively different in kind from other fields of law or perhaps not even law at all. It is this second aspect of tax exceptionalism – the objective aspect – which we want to challenge, for its powerful influence on tax scholarship, administration, and adjudication threatens the legitimacy of the tax law and of the agency that administers it.

Our central claim is that when tax is viewed as objectively exceptional – that is, when tax is thought to be fundamentally different in kind from other fields of law – it is deprived of the analytical tools and vocabulary commonplace in other fields of law. This, in turn, imposes unnatural and unrealistic constraints on the IRS’s interpretive authority and enforcement discretion. The consequence is that what would for ordinary agencies count as legitimate interpretations and enforcement decisions appear inscrutable when performed by the IRS, contributing to taxpayers’ visceral experience of tax as exceptional and thereby perpetuating the cycle. Unmasking and then abandoning that objective aspect of tax exceptionalism has significant implications for tax law, tax administration, and the legitimacy of the IRS.

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March 4, 2016 in IRS News, IRS Scandal, Scholarship, Tax | Permalink | Comments (1)

Thursday, March 3, 2016

The IRS Scandal, Day 1029

IRS Logo 2Press Release, Judicial Watch Continues Fight over IRS Criminal Investigation Facts:

Judicial Watch is asking a federal appellate court to overturn a lower court’s ruling allowing the Obama Justice Department to withhold records detailing the number of hours that agency attorney Barbara Bosserman expended on the investigation of the IRS targeting of conservative groups seeking tax exempt status during the 2010 and 2012 elections cycles.  The opening appellate brief was filed in the U.S. Court of Appeals for the District of Columbia Circuit on February 16, 2016 (Judicial Watch v. U.S. Department of Justice (No. 15-5271)).

This lawsuit forced the Obama Justice Department to confirm the existence of a criminal investigation into the IRS’ abuses and that Bosserman, a major donor to Obama’s political campaigns and the Democratic National Committee, was part of the team of lawyers criminally investigating the issue.  (On October 23, 2015, the Justice Department announced in a letter that it would not press any charges over the IRS abuse scandal.)

In 2014, Judicial Watch filed a 2014 Freedom of Information Act (FOIA) lawsuit seeking records detailing the number of hours Bosserman expended on the IRS matter.  In 2015, the U.S. District Court for the District of Columbia ruled that the agency had properly withheld the Bosserman records under the “attorney work product doctrine.”  Judicial Watch argues to the appellate court:

[T]he Department presented no evidence whatsoever that the records requested by Judicial Watch were created in anticipation of litigation. The District Court also did not make such a finding. Instead the Department argued and the court ruled that some of the information contained in the responsive records was protected by the attorney work product doctrine. Because the requested records were created in the ordinary course of business – to assist senior officials in their management responsibilities – the records do not fall within the scope of the attorney work product doctrine. The records are being improperly withheld in their entirety.

In early January 2014, then-Attorney General Eric Holder reportedly appointed Bosserman to oversee the IRS investigation despite her substantial political activities.  According to Federal Election Commission records, Bosserman contributed $6,750 to Obama’s campaigns and the DNC from 2004 to 2012, including 12 separate contributions to Obama for America between 2008 and 2012.  Then- House Committee on Oversight and Government Reform chairman Darryl Issa (R-CA) called the Bosserman appointment “a startling conflict of interest [that has] compromised the Administration’s investigation of the IRS.”

“All Judicial Watch wants is the number of hours that the Obama donor/Justice Department lawyer spent investigating the worst IRS abuse in American history,” said Judicial Watch President Tom Fitton. “The failure to bring charges in the IRS scandal only adds to the public interest in finding out more details about the involvement of the Obama/Democratic Party donor in the criminal investigation.”

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March 3, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Wednesday, March 2, 2016

The IRS Scandal, Day 1028

IRS Logo 2Law 360, IRS Pays GOP $20K In Dismissal Of Tax-Exempt Docs Suit:

The Internal Revenue Service and the Republican National Committee have agreed to dismiss a suit over a request for documents on the agency’s treatment of social welfare groups’ applications for tax-exempt status, and the IRS will pay the committee more than $20,000 in attorneys' fees.

The agreement was documented in a Tuesday filing in the District of Columbia federal court, where the RNC launched a lawsuit in 2014 alleging the agency had not complied with a Freedom of Information Act request sent to the agency that year.

The suit sought a declaratory judgment that the IRS' failure to disclose records requested by the RNC violated FOIA and an injunction that would have required the agency to turn over the requested documents. The RNC asked the agency for records relating to its criteria for assessing 501(c)(4) tax-exempt organizations and any agency correspondence from Jan. 1, 2010, through May 20, 2013, containing the words “tea party,” “patriot” and “9/12 project.” ...

Animosity over the IRS' handling of 501(c)(4) organizations stems from a 2013 government report that found the agency used inappropriate selection criteria for subjecting social welfare groups’ applications for tax-exempt status to extra scrutiny. It was revealed that IRS employees maintained a “be on the lookout” list and the tax-exempt status applications of groups with names that included words such as "tea party" or "patriot" were subjected to heightened scrutiny between 2010 and 2012.

The report led to the resignation of then-IRS acting head Steven Miller and prompted an investigation by the U.S. Department of Justice. Former IRS exempt organizations official Lois Lerner also left the agency shortly after the report was released.

A bipartisan report on the controversy released by the Senate Finance Committee last year revealed "gross mismanagement" at the agency's highest levels, though it did not conclude whether the targeting of certain social welfare groups was politically motivated.

Beginning in 2010, Lerner's Exempt Organizations Division undertook no less than seven poorly planned and badly executed initiatives aimed at bringing the growing number of applications from Tea Party and other groups to decision, the report said. Those initiatives ultimately failed, resulting in months and years of unnecessary delays in processing the groups' applications, the committee found.

Few, if any, of the managers in the Exempt Organizations Division were concerned about the delays resulting from the alleged mismanagement, even though they possibly harmed the organizations' ability to function, according to the report. ...

The case is Republican National Committee v. Internal Revenues Service, case number 1:14-cv-00612,  in the U.S. District Court for the District of Columbia.

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

Tuesday, March 1, 2016

The IRS Scandal, Day 1027

IRS Logo 2The Daily Caller op-ed:  Would Lois Lerner Make A Good Senator?, by Mark Fitzgibbons:

California Attorney General Kamala Harris had a full schedule last week. To quell heady rumors, she told the anxious press that she does not wish to be considered for nomination by her ideological twin President Obama to replace the late Justice Antonin Scalia on the Supreme Court. Then Ms. Harris officially filed papers to run for Senate after campaigning and raising millions for the race since January last year, and was endorsed Saturday by her state’s Democrat Party.

At a federal courthouse in Los Angeles, however, one of Ms. Harris’ deputy attorneys general was receiving far less exhilarating treatment from Judge Manuel Real in a case brought by American for Prosperity Foundation, a 501(c)(3) nonprofit organization founded by billionaires Charles and David Koch.

AFPF sued Harris after she started demanding that all organizations registering with her office to solicit contributions from Californians first provide her the names and addresses of donors listed on a federal tax return schedule filed confidentially with the IRS. Judge Real said the demands, which sidestep federal tax code protocols protecting donor names, appear to be “laziness.”

The problems with Harris’ demands appear to be more serious than a case of laziness. Ms. Harris may be exposing members of her staff to fines and even jail sentences under post-Watergate reforms to the Internal Revenue Code. Statements by one her top deputies even lead to a reasonable conclusion that the attorney general’s office opted for purposeful evasion of federal law.

By way of background, charities are required by law to make their tax returns available to the public. Key donors listed on Schedule B to those returns, however, are deemed confidential tax return information. In the years before the Lois Lerner scandal at the IRS, the California Registry of Charitable Trusts, which is part of the attorney general’s office, required charities to file their tax returns as part of the charitable solicitation registration process, but donor names and addresses on Schedule B were redacted by the filers.

Post-Watergate reforms to the tax code instituted protections for confidential tax return information, and provide civil and even criminal penalties for certain disclosures or inspections by government officials, including those in the states. Government officials are prohibited from willfully disclosing or inspecting tax return information unless expressly authorized under the Internal Revenue Code. ...

California’s violations, however, appear more like purposeful evasion of the law than laziness. One now-retired senior lawyer for Harris co-authored an article in 2013 describing how federal law “severely restricts the authority of the IRS to share information with state charity regulators.” This lawyer and her colleagues in the National Association of State Charity Officials (NASCO) worked with IRS officials to seek legislation to loosen the rules, but did not succeed. Disgraced former IRS official Lois Lerner was one of those collaborating with NASCO. Indeed, one NASCO official described Lerner as their “partner in the regulation of charities.” ...

AFPF argues in its litigation that Ms. Harris’ recent demands for donor names violate the First Amendment and the principles of the 1958 landmark case NAACP v. Alabama, in which the Democrat Alabama attorney general tried to shut down the civil rights movement in his state by obtaining member names though coercive government means. The Supreme Court blocked the Alabama AG’s attempts, acknowledging that the right to private association is harmed when the government knows an organization’s adherents and financial supporters.

Conservative organizations and their donors are terrified not just that uber-liberal Harris will leak this confidential information to their opponents and her allies, putting donors at risk of physical or other danger when highly charged issues are in play, but that Ms. Harris may use her position of government power to target them for investigations, audits or other unfair officious treatment.

Even Harris-supporting Democrats who are in-the-closet opponents to the liberal orthodoxy on any issue – abortion, guns, marriage, climate change . . . you name it – will also be intimidated, and their donations to those causes are quite likely to dry up. The point of the post-Watergate reforms keeping tax return information confidential was that government officials can be the problem.

Lois Lerner misused and abused the tax code as a political weapon. One of her comrades in lawlessness now wants to be in the United State Senate, leaving behind underlings who could face jail for her acts and ambitions.

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March 1, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, February 29, 2016

The IRS Scandal, Day 1026

IRS Logo 2Wall Street Journal editorial, Justice and Clinton’s Email Probe: A ‘Career’ Official Doesn’t Guarantee an Honest Investigation:

Attorney General Loretta Lynch this week tried to assure House Republicans about the impartiality of her department’s investigation into Hillary Clinton’s State Department emails by noting that it would be handled by career government officials. ...

That’s what they always say, and it is nice to think so. But there’s reason to doubt given the example of Justice’s investigation into the IRS targeting of conservative groups before the 2012 election. To lead that probe, then Attorney General Eric Holder appointed Barbara Bosserman, a trial attorney in the department’s Civil Rights Division.

Ms. Bosserman’s appointment was curious given that her area of expertise is civil rights, not tax law. She had also donated $6,100 to President Obama’s campaigns and the Obama Victory Fund in 2008 and 2012. That’s no small donation on a career employee’s salary and suggests some serious political loyalty.

Ms. Bosserman’s conflict of interest came to light only after Justice stonewalled congressional requests for information about the status of the IRS probe. The House Oversight Committee then began investigating Justice’s investigation. In September 2014 we wrote about the involvement of former department spokesman Brian Fallon, now a press secretary for the Clinton presidential campaign.

The House also discovered that Justice had assigned former IRS tax attorney Andrew Strelka to the case brought against the agency by Z Street, a pro-Israel group that claimed its tax-exempt status had been delayed because of its political leanings. Mr. Strelka had previously served as a presidential management fellow working in the IRS tax-exempt office managed by Lois Lerner, who by the way was also a career government official with clear anti-Republican political leanings. Mr. Strelka was removed from the case before being deposed as a witness.

Justice closed its investigation of the IRS last October with no criminal charges.

We’ll hope for the best from Ms. Lynch’s career prosecutors, and especially from the FBI. But whoever handles the case, at either the State or Justice Department, will presumably create a paper trail of evidence and legal analysis. If a Republican wins the presidential election, his appointees will be able to look at the files and judge the evidence independently.

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February 29, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Sunday, February 28, 2016

The IRS Scandal, Day 1025

GAO LogoThe GAO reports that the IRS's enforcement of the tax law is at high risk for fraud, waste, abuse, and mismanagement:

Government Accountability Office, U.S. Government's Fiscal Years 2015 and 2014 Consolidated Financial Statements (GAO-16-357R) (Feb 25, 2016):

Every 2 years, GAO provides Congress with an update on its High-Risk Series, which highlights federal entities and program areas that are at high risk due to their vulnerabilities to fraud, waste, abuse, and mismanagement or are most in need of broad reform. ... Another area included in the High-Risk Series that could affect the federal government’s financial condition in the future is the Internal Revenue Service’s (IRS) enforcement of tax laws, including reducing the net tax gap—the difference between taxes owed and taxes paid—which was last estimated to be $385 billion.

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

Saturday, February 27, 2016

The IRS Scandal, Day 1024

Donald Trump claimed after Thursday's GOP debate that he has been audited for the past 12 years because he is "a strong Christian":

During Thursday's GOP debate, Ben Carson repeated his claim that he was never audited by the IRS until after he spoke at the National Prayer Breakfast in 2013 and was critical of President Obama:

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February 27, 2016 in IRS News, IRS Scandal, Political News, Tax | Permalink | Comments (2)

Friday, February 26, 2016

The IRS Scandal, Day 1023

IRS Logo 2The Hill, Brady: IRS 'Lost Credibility' But Can Regain It:

House Ways and Means Committee Chairman Kevin Brady (R-Texas) said he thinks the Internal Revenue Service has “lost credibility” but can regain it.

When the IRS starts to address its issues in an objective way, Brady said Thursday at an event at the Brookings Institution, there will be more bipartisan support for providing the agency with more resources for customer service.

“I'm anxious frankly for an IRS commissioner who I don’t know whose party they’re in, who runs that agency differently than what we have today,” he said. ...

Brady also expressed concern about the IRS’s implementation of ObamaCare and recent Government Accountability Office reports that found there are areas where there is a risk that audits could be driven by political considerations.

“I long for the day when the IRS was truly an independent agency, where I frankly couldn’t tell you which party the commissioner was from when they were in our office twice a year talking about their challenges on customer service,” he said. “Those days seem like a quaint memory.”

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February 26, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Thursday, February 25, 2016

The IRS Scandal, Day 1022

IRS Logo 2Americans for Tax Reform, Impeach IRS Commissioner John Koskinen:

Years after it was revealed that the IRS targeted tea party and conservative organizations, no one has been held accountable.

Despite overwhelming evidence, the Department of Justice (DoJ) recently announced that no IRS employee including Lois Lerner would face criminal charges over targeting conservative groups.

The Obama DoJ dismissed the treatment of groups as mere “mismanagement, poor judgment and institutional inertia,” despite the fact that just one conservative group was granted non-profit status in a three-year period.

American taxpayers are left with only one option: Impeachment.

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

Wednesday, February 24, 2016

The IRS Scandal, Day 1021

IRS Logo 2Breitbart, Grassroots Activist, IRS Scandal Whistleblower Becky Gerritson Challenges Establishment Incumbent in Alabama Congressional Race:

Tea Party activist Becky Gerritson joined Breitbart News Executive Chairman Steven K. Bannon on Breitbart News Daily to discuss her upcoming primary contest against Alabama Rep. Martha Roby (R-AL) — a race which could be a bellwether for other down ticket races of grassroots insurgent candidates vs. establishment incumbents in 2016.

Gerritson, who is challenging Roby on Super Tuesday in Alabama’s 2nd Congressional District, was driven to run by Roby’s weak voting record.

“[Roby] is rated an F by every major conservative organization,” Gerritson reminds Bannon. “She has funded everything that Obama has wanted. This is a very conservative district and it is time for her to go.”

Gerritson said she became politically active after the bailouts of Wall Street firms following the financial crisis. She founded the Wetumpka Tea Party and became an active grass roots organizer throughout Alabama.

Gerritson’s organization was then targeted by the IRS as part of its alleged effort to single-out conservative organizations applying for non-profit status. As a result of the inappropriate actions by the IRS, Gerritson was invited to testify before Congress.

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February 24, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, February 23, 2016

The IRS Scandal, Day 1020

IRS Logo 2Albuquerque Journal editorial, IRS Forces Local Tea Party to Continue Limbo Dance:

It is an abuse-of-power dance nobody wants to get asked to. But in 2009 the Internal Revenue Service held out a bamboo pole and forced the Albuquerque Tea Party to limbo. Over the next six years that pole has continued dropping, forcing the group to limbo lower now as it continues to do without the tax-free money 501(c)(4) status conveys.

Meanwhile, when the supposedly nonpartisan IRS operates as it should, an application for tax-exempt status usually takes three to six months.

Sure, there are questions about the tea party’s qualifications as a “social welfare” organization that by law is required to spend less than half its time and money on political activity. Those same questions should be applied to its counterparts on the left that couch electioneering as “education” – yet they have not. The IRS has admitted it did not give the same scrutiny to groups with a liberal or progressive bent that it has given to groups with “tea party” or similar terms in their applications.

And of course, this is the same IRS that “lost” thousands of emails by Lois Lerner, the ex-division chief in the Obama Administration who oversaw tax-exempt applications. And Lerner, a feckless bureaucratic weasel, has repeatedly pleaded the Fifth when called before Congress.

So rather than deliver a ruling after the Albuquerque Tea Party applied in 2009, the IRS has instead requested additional documents, fought lawsuits by it and other targeted groups, refused to explain itself to members of Congress, including New Mexico Republican Steve Pearce, and declined to comment even on the status of the application. In other words, the more things change, the more they stay the same.

Six years after seeking tax-exempt status the Albuquerque Tea Party remains in limbo. Neither able to move forward after approval nor appeal a negative decision. Had an audited taxpayer kept the IRS waiting that long, he or she would have been hounded, assessed interest, even locked up.

Yet the IRS forces the Albuquerque Tea Party to dance to its tune year after year without accountability to anyone for its own inaction.

The Obama administration has allowed the IRS to play its partisan music for years. The next administration must put away the limbo poles and return the agency to its mission, which in part says the IRS will “enforce the law with integrity and fairness to all.”

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

Monday, February 22, 2016

The IRS Scandal, Day 1019

IRS Logo 2The Blaze, ‘Strong Legal Limits on the IRS’: Spending Bill Takes Aim at Targeting Scandal:

After a two-year investigation, there has been little accountability in the wake of the Internal Revenue Service scandal in which many conservative groups were targeted by the taxing agency. ...

“The IRS has failed the American people by targeting individuals and organizations based on their political beliefs,” House Majority Leader Kevin McCarthy (R-Calif.) said in a statement. “That is unacceptable. The House has succeeded in putting strong legal limits on the IRS so that our government is accountable to the people.” ...

The bill will prohibit the IRS from suppressing participation in nonprofit 501(c)4 organizations. Provisions in the spending bill further prohibit money for the IRS from targeting individuals exercising their First Amendment rights to political speech.

It further prohibits money for bonuses or hiring former employees without considering that person’s employee conduct or federal tax compliance, and requires extensive reporting on IRS spending and official time.

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February 22, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Sunday, February 21, 2016

The IRS Scandal, Day 1018

IRS Logo 2Peter J. Reilly (Forbes), IRS Rules Bingo Is For Charities Not A Charity In Itself:

[Y]ou cannot qualify an organization for exempt status if what it does is mostly run bingo games.  That was more or less the essence of Private Letter Ruling 201603039. ...

The portion of the IRS that concerns itself with exempt organizations is reeling from the fallout of the interminable scandal.  It has come in for criticism from the other side now for its granting of exempt status to Karl Rove’s Crossroads GPS, which was pretty explicitly started to avoid spending disclosure for poltical activity.  And here we have the IRS worrying about what organizations can run bingo.  Paul Streckfus has been following it in great detail in his EO Tax Journal and is advocating getting the IRS out of these matters entirely.

With its surrender to Crossroads GPS, I believe the argument for getting EO regulation out of the IRS has just been made stronger. The IRS as an institution has now demonstrated repeatedly that it is totally incapable of providing meaningful regulation of the EO sector. I recognize that Congress is partly responsible for these repeated IRS failures, but that excuse only goes so far.

I think he is right.

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February 21, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)