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Thursday, November 27, 2014

The IRS Scandal, Day 567

IRS Logo 2CP Politics:  IRS Scandal a Priority for New House Oversight Committee Chair:

Rep. Jason Chaffetz, R-Utah, will focus on the IRS scandal as the House's new head executive watchdog. He was appointed as the next chairman of the House Oversight and Government Reform Committee on Tuesday.

Replacing the term-limited Rep. Darrell Issa, R-Calif., the 47-year-old Chaffetz will now chair the committee that has been a leading force behind the House investigation into the scandal involving the Internal Revenue Service's targeting of conservative and Christian groups. ...

Chaffetz' appointment could spell continued trouble for the IRS. Fox News reported that Chaffetz "vowed" to make the probe into the IRS's practice of stalling 501(c) tax-exempt applications of conservative and religious political action groups the "centerpiece of his chairmanship."

Along with Issa's leadership, Chaffetz has been an influential part of the Committee's IRS investigation. In the Spring, Chaffetz called for an independent special prosecutor when the IRS announced that emails from IRS Director of Exempt Organizations Unit, Lois Lerner, had been lost in a 2011 hard drive and no backup copies were made to turn over for review.

Chaffetz said he sees a pattern in the coincidental loss of evidence when it comes to federal agencies turning over documents when pressed in investigations.

"This is a recurring theme, from Fast and Furious, right down to Benghazi and now this IRS. It's the same basic drumbeat," Chaffetz told Sean Hannity earlier this year. "I think they are trying to play out the clock."

Numerous conservative political groups have accused the IRS of stalling their tax-exempt applications for political reasons. When a political action group does not receive tax-exempt status, potential donors can not be guaranteed that their donations will be eligible for tax write-offs. The IRS' stalling of the applications has cost groups thousands in donations and grants, while other groups have have not been able to survive. A communications director for a Texas-based conservative group told the Christian Post in October that the IRS's stalling cost his group $80,000 in donations and grants.

"The IRS, more than anybody else, cannot be a political organization. But is what it looks like it is has been like lately," Chaffetz told Fox News' Sunday Morning Futures with Maria Bartiromo in June. ...

The House Ways and Means Committee, which is also involved in the IRS investigation, will also have a new chair as Rep. Paul Ryan, R-Wis., was appointed as the committee's chairman on Tuesday. In a statement, Ryan said his committee will work to "hold the IRS accountable."

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November 27, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Wednesday, November 26, 2014

The IRS Scandal, Day 566

IRS Logo 2Washington Examiner:  2,500 New Documents ID'd in White House-IRS Taxpayer Harassment Cases:

In a shocking revelation, the Treasury Inspector General has identified some 2,500 documents that “potentially” show taxpayer information held by the Internal Revenue Service being shared with President Obama’s White House.

The discovery was revealed to the group Cause of Action, which has sued for access to any of the documents. It charges that the IRS and White House have harassed taxpayers.

In an email from the Justice Department’s tax office, an official revealed the high number of documents, suggesting that the White House was hip deep in probes of taxpayers, likely including conservatives and Tea Party groups associated with the IRS scandal.

Power Line:  The IRS Scandal Rears Its Head:

The Obama Administration’s IRS scandal is multi-faceted. In addition to the persecution of conservative non-profits by Lois Lerner et al., the question has been percolating for some years whether Obama’s IRS has transferred confidential taxpayer information to Obama’s White House in violation of federal criminal laws. The issue first arose when Austin Goolsbee of the president’s Council of Economic Advisers told reporters that he had information about Koch Industries that could only have come, illegally, from confidential IRS files. When questions were asked, the administration immediately clammed up.

Years later, the judicial system may be poised to expose another layer of Obama corruption. A group called Cause of Action began a Freedom of Information Act lawsuit against the Department of the Treasury, and for several years, your taxpayer dollars have funded the administration’s cover-up.

But nothing lasts forever, and a federal court in Washington, D.C. has finally overruled the Treasury Department’s frivolous objections, and ordered Treasury to respond to Cause of Action’s request for documents. That request relates to the Department’s Inspector General’s investigation–which began a long time ago, and probably has long been concluded–and asks for “[a]ll documents pertaining to any investigation by [TIGTA] into the unauthorized disclosure of [26 U.S.C.] §6103 ‘return information’ to anyone in the Executive Office of the President.”

That is an extraordinarily narrow request for documents which, one would think, could have been responded to in a few hours. But the administration’s evasion has gone on for years. Now that the court has ordered the administration to respond, its lawyers have asked for more time

Cause of Action:  Press Release:

Monday the Treasury Inspector General for Tax Administration (TIGTA) informed Cause of Action that there exist nearly 2,500 potentially responsive documents relating to investigations of improper disclosures of confidential taxpayer information by the IRS to the White House. This disclosure, coming only after Cause of Action sued TIGTA over its refusal to acknowledge whether such investigations took place, and after the Court ordered TIGTA to reveal whether or not documents existed, signals that the White House may have made significant efforts to obtain taxpayers’ personal information. This disclosure, following on the heels of TIGTA’s admission that it recovered 30,000 “lost” Lois Lerner emails, renews Cause of Action’s concerns about the decaying professionalism of, and apparent slip into partisanship by, IRS’s senior leadership.

Cause of Action will continue to pursue the truth and to work for IRS accountability.

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November 26, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, November 25, 2014

TIGTA: IRS Still Has Not Taken Necessary Steps to Prevent Billion Dollar Prisoner Tax Fraud

TIGTA The Treasury Inspector General for Tax Administration today released Prisoner Tax Refund Fraud: Delays Continue in Completing Agreements to Share Information With Prisons, and Reports to Congress Are Not Timely or Complete (2014-40-091):

Refund fraud associated with prisoner Social Security Numbers remains a significant problem for tax administration. The number of fraudulent tax returns filed using a prisoner’s Social Security Number that were identified by the IRS increased from more than 37,000 tax returns in Calendar Year 2007 to more than 137,000 tax returns in Calendar Year 2012. The refunds claimed on these tax returns increased from $166 million to $1 billion. ...

TIGTA found that the IRS has not yet shared fraudulent prisoner tax return information with Federal or State prison officials. TIGTA also found that the required annual prisoner fraud reports to Congress are not timely and that the reports do not address the extent to which prisoners may be filing fraudulent tax returns using a different individual’s SSN. TIGTA also followed up on a condition identified in a past review and found that IRS processes still do not ensure that all tax returns filed using a prisoner Social Security Number are assigned a prisoner indicator.

Figure 1

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November 25, 2014 in IRS News, Tax | Permalink | Comments (0)

IRS Hires Outside Law Firm to Audit Microsoft

MicrosoftBloomberg, Microsoft Sues IRS Over Law Firm Contract Tied to Audits:

Microsoft sued the IRS seeking information about its contract with a law firm tied to audits of the software maker’s transactions with subsidiaries.

Microsoft wants the complete government contract between the IRS and Quinn Emanuel Urquhart & Sullivan LLP, the firm assisting the agency in examining federal income tax returns for 2004 through 2009, according to the complaint filed today under the Freedom of Information Act in federal court in Washington. The IRS “unlawfully withheld” the information, Microsoft said.

Microsoft submitted a public records request on Sept. 22 seeking information on the contract entered in May for $2.2 million, according to the filing. To date, the IRS hasn’t disclosed the records, Microsoft said. ...

The agency is examining Microsoft’s “transfer pricing,” transactions between the company and its offshore subsidiaries, according to the complaint.

November 25, 2014 in IRS News | Permalink | Comments (0)

The IRS Scandal, Day 565

IRS Logo 2Glenn Reynolds (Tennessee), More on Those 'Found' Emails From Lois Lerner:

I’m cynical enough to suspect that they’ve been found for a long time, and the delay was to (1) get past the midterms; and (2) allow someone to vacuum the archives of any truly incriminating material.

American Thinker:  The Zelig Presidency:

For those familiar with Woody Allen movies, one of his more unusual ones was Zelig, a movie done in a black & white, semi-documentary form about a man played by Woody Allen who has a rare chameleon-like disorder where he takes on the physical and personality traits of those who he is in close proximity. The movie stands out for its uniqueness but is also a commentary on personality, how a person gets one and how it is defined, and is it even possible to be original anymore, especially when it comes to political, artistic and intellectual greatness.

In the case of Obama, he seems to be the Zelig president. He's been taking on the characteristics and actions of past presidents while displaying no originality. He is Nixon using the IRS to target his political enemies. Here he succeeded where Nixon did not. Nixon's IRS director refused to carry out his orders when instructed to do his bidding but Lois Lerner perfected political targeting to an art. (Her problem was that she got caught.)

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November 25, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, November 24, 2014

TIGTA: 50% of IRS Employees With Outside Jobs Do Not Obtain Required Approval; 93% of Employee Computer Records Are Out of Date

TIGTA The Treasury Inspector General for Tax Administration has released Controls Over Outside Employment Are Not Sufficient to Prevent or Detect Conflicts of Interest (2014-10-073):

Generally, IRS employees are allowed to engage in outside employment or business activities after obtaining written approval. Effective controls over outside employment can reduce the risk of conflicts of interest that could result in decisions that are not in the best interest of American taxpayers. ...

IRS records indicate that, in Calendar Year 2011, nearly 3,000 of the more than 6,000 active, full-time IRS employees who held jobs or participated in business activities outside the IRS did not obtain documented approval, as required by Department of the Treasury regulations and IRS policies. IRS Human Capital Office management was generally not aware of the number of employees with unapproved outside employment because responsibility has not been assigned for overseeing the overall outside employment process. In addition, the IRS stated that it does not have authorization to use taxpayer information (e.g., Form W-2, Wage and Tax Statement) to identify employees with unapproved outside income because Internal Revenue Code Section 6103 does not clearly provide that tax data can be used for this purpose.

It will be difficult for the IRS to monitor outside employment because 93 percent of the existing records in the database used to compile outside employment requests are out of date. Moreover, approval of outside employment requests is not always documented on the database or in Official Personnel Folders, in part because of confusing and incomplete guidance.

Improving controls will be important because TIGTA identified current and former IRS employees with both actual and potential conflicts of interest. One employee pled guilty to engaging in a criminal conflict of interest for accessing taxpayer information for the purpose of conducting a private tax and accounting business, 44 IRS employees prepared tax returns for compensation (a prohibited practice), and TIGTA’s analysis identified 20 employees with a high risk of potential conflicts of interest who received outside income without documented approval. For example, four employees operated businesses with annual gross receipts ranging from more than $500,000 to more than $7 million, and six employees had wages of more than $50,000 from outside of the IRS. Significant outside income could impact the employee’s effectiveness on the job.

November 24, 2014 in IRS News, Tax | Permalink | Comments (2)

The IRS Scandal, Day 564

IRS Logo 2Daily Caller:  How to Ensure The IRS Never Abuses Its Powers Again:

It is not so much whether or when or why the IRS abused its authority by targeting Tea Party and conservative groups. We know by now the answers are: of course, over a period of year, and to aid the re-election of President Obama.

Going forward, the most important question is: How can we prevent it from happening again? The answer may be more complicated than we think. ...

The evidence proves the IRS was used as an abusive political tool to hobble or destroy as many organizations as possible that opposed President Obama’s agenda. The partisan media may continue to suppress this fact, but the denial that it happened at all is growing more absurd by the day. Journalists raised to never trust anyone over the age of 30 now seem to accept any excuse – no matter how implausible – to explain away the scandal.

Once the problem came to light, the director of the IRS Exempt Organizations Division claimed to have “lost” her emails. At the same time, the IRS was known to sanction individuals for not maintaining seven years of receipts. Would the New York Times have accepted this excuse from the Koch Brothers? ...

[W]hat the IRS did to Tea Party organizations is tyranny personified and it cannot be ignored or forgiven, because it can happen to anyone who opposes the policies of the powerful. ...

This controversy presents us with an opportunity to remove the Internal Revenue Service from political influence altogether. Anyone who respects the separation of powers, regardless of whether they are conservative, liberal, moderate, libertarian or anything else, ought to see the wisdom in separating IRS enforcement and presidential appointments.

Appointments by the president are, by and large, intended to mirror his political decisions. The IRS, however, is different. Because of its massive power and essentially unlimited authority, it must be more than fair – it must be 100 percent non-political. Even if this is unattainable, every attempt must be made.

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November 24, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Sunday, November 23, 2014

The IRS Scandal, Day 563

IRS Logo 2New York Post editorial:  Silence of the Schumer:

It wasn’t so long ago Chuck Schumer was obsessing over the idea that the tax code was being abused for partisan purposes.

Back in March 2012, he and six fellow Democratic senators wrote the IRS demanding more scrutiny for 501(c)4 groups who claimed they were involved in “social welfare” but were “devoted chiefly to political election activities who operate behind a facade of charity work.”

Later, the IRS started singling out conservative organizations for special treatment and delay.

But times have changed. Now we have a story in The New York Times about an individual deeply involved in politics who has a 501(c)4 that, as the Times puts it, appears to rank “among the most delinquent nonprofit organizations in the nation.”

The individual: the Rev. Al Sharpton. His organization: the National Action Network, which has failed to pay payroll taxes over the years. Sharpton says this wasn’t intentional but stemmed from a dispute on how to classify some independent contractors.

Nonetheless, Sharpton still flies first class and collects a nice salary from NAN as he zips between New York, Ferguson, Mo., and Washington, DC.

As the Times also reports, it’s the “kind of practice by nonprofit groups that the United States Treasury’s inspector general recently characterized as ‘abusive’ or ‘potentially criminal’ if the failure to turn over or collect taxes is willful.”

Considering how eager Sen. Schumer was to ensure 501(c)4’s weren’t gaming the tax system, we felt sure we would hear the senator thumping loudly for the IRS to take a hard look at the National Action Network.

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November 23, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, November 22, 2014

The IRS Scandal, Day 562

Wall Street Journal:  IRS Finds Missing Emails of Former Top Official Lerner in Targeting Probe:

The watchdog agency for the Internal Revenue Service said it has found as many as 30,000 missing emails that could be relevant to a long-running congressional inquiry into alleged IRS targeting of conservative groups.

Investigators for the Treasury Inspector General for Tax Administration recently recovered the emails from IRS backup tapes, according to a spokeswoman for the watchdog agency. The emails belong to a former top IRS official, Lois Lerner, who has been a focus of congressional inquiries. ...

Top IRS officials had told lawmakers that backup tapes were routinely recycled and therefore weren't useful in the effort to find the missing email records. The agency said it had used other employees’ hard drives to recover thousands of the missing emails.

But TIGTA investigators succeeded in locating thousands of Ms. Lerner’s emails on the backup tapes. ...

The IRS said in a statement: “As Commissioner Koskinen has stated, the IRS welcomes TIGTA’s independent review and expert forensic analysis. Commissioner Koskinen has said for some time he would be pleased if additional Lois Lerner emails from this time frame could be found.”

The revelations promise to draw new attention to the targeting controversy, just before lawmakers return to Washington for the new Congress next year. TIGTA officials told lawmakers on Friday about the discovery of the missing emails, but congressional aides said it could take some weeks before the emails are sorted and in shape to examine. The emails must be decrypted and in some cases must be redacted to remove taxpayer-identifying information, aides said.

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November 22, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Friday, November 21, 2014

The IRS Scandal, Day 561

IRS Logo 2Legal Insurrection:  IRS Fears Employees Being “Seized With Spontaneous Diarrhea”, by WIlliam Jacobson (Cornell):

Hey, remember the Reader Poll we did about whether it was okay to follow and try to interview Lois Lerner in her neighborhood? ... 

Someone noticed the comments to the blog post.  The IRS.  And it’s not happy.

In a federal FOIA lawsuit by Judicial Watch seeking records of Lerner emails and IRS efforts to retrieve the emails, the IRS used two of the comments to the Legal Insurrection Reader Poll post to justify the IRS no longer disclosing the identities of IRS personnel.

Think about that. The IRS is reading our comments. Don’t they have anything better to do, like hassle conservative groups seeking tax-exempt status? On second thought, keep reading our comments and leave conservative groups alone.It’s all set forth in the IRS’s opposition to Judicial Watch’s Motion to Compel Discovery. You can read the whole thing here.

The Legal Insurrection post is Exhibit D to the IRS affidavit. ...

Does the IRS really fear “public whipping with a buggy whip” and being in such fear its employees are “seized with spontaneous diarrhea”?

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November 21, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, November 20, 2014

GAO Report on 'Supersize' IRAs

Super Size MeFollowing up on my previous posts:

GAO, IRS Could Bolster Enforcement on Multimillion Dollar Accounts, but More Direction from Congress Is Needed (GAO-15-16):

For tax year 2011 (the most recent year available), an estimated 43 million taxpayers had individual retirement accounts (IRA) with a total reported fair market value (FMV) of $5.2 trillion. As shown in the table below, few taxpayers had aggregated balances exceeding $5 million as of 2011. Generally, taxpayers with IRA balances greater than $5 million tend to have adjusted gross incomes greater than $200,000, be joint filers, and are age 65 or older. Large individual and employer contributions sustained over decades and rolled over from an employer plan would be necessary to accumulate an IRA balance of more than $5 million. There is no total statutory limit on IRA accumulations or rollovers from employer defined contribution plans.

Estimated Taxpayers with Individual Retirement Accounts (IRA) by Size of IRA Balance, Tax Year 2011

Estimated Taxpayers with Individual Retirement Accounts (IRA) by Size of IRA Balance, Tax Year 2011

A small number of taxpayers has accumulated larger IRA balances, likely by investing in assets unavailable to most investors—initially valued very low and offering disproportionately high potential investment returns if successful. Individuals who invest in these assets using certain types of IRAs can escape taxation on investment gains. For example, founders of companies who use IRAs to invest in nonpublicly traded shares of their newly formed companies can realize many millions of dollars in tax-favored gains on their investment if the company is successful. With no total limit on IRA accumulations, the government forgoes millions in tax revenue. The accumulation of these large IRA balances by a small number of investors stands in contrast to Congress's aim to prevent the tax-favored accumulation of balances exceeding what is needed for retirement.

(Hat Tip: Greg McNeal.)

November 20, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 560

IRS Logo 2American Spectator:  The Lois Lerner Curve: How Anti-corruption Laws Cause Even More Corruption:

Corrupt countries, where the rule of law is weak and political pilfering is common, are poor countries. Entrepreneurs and investors cannot safely start or finance businesses in states that don’t respect property rights and honor contracts, or that use the levers of the government to go after political opponents. And it’s not as though America doesn’t have a corruption problem. On Transparency International’s Corruption Perceptions Index, the U.S. comes in at number 19, behind most of the rest of the First World.

For anyone following the Lois Lerner scandal, that’s not surprising. What should be surprising, perhaps, are her defenders. Lerner tampered with IRS nonprofit applications, and revealed them only when an Inspector General was about to report on them. Then the cover-up began. The IRS put out a story that blamed the shenanigans on low-level Cincinnati employees. We were told that the IRS hadn’t picked on conservative any more than liberal groups. All lies. Then Lerner pled the Fifth, and her emails mysteriously disappeared. ...

[T]here’s another reason why the Lois Lerner scandal was to be expected: we have an excess, not an insufficiency, of laws. Now, we do need laws to police corruption of the obvious sort, such as bribery and extortion. But anti-corruption laws can cause more corruption than they prevent when they rely on complicated five-point standards of the kind loved by Anthony Kennedy and law school professors, with balanced and nuanced rules that seek to apply a scalpel to tasks better suited to an earthmover. We end up giving politicized bureaucrats a weapon to use against their opponents. It’s like handing a match to a giddy pyromaniac.

I call this the Lois Lerner Curve. With few laws policing corruption, there’s a lot of it. Then, as law enforcement increases, corruption declines, down to point zero on the curve. Thereafter, however, additional laws result in more corruption, because citizens and bureaucrats alike become lost in the complexity and enforcement is unevenly applied. ...

Lerner

I think of this when I read about proposals for campaign finance reform. Sure, there’s room for cleaning up the pay-for-play politics of crony capitalism and the gerrymandering that makes most Congressional seats into fiefdoms for life. And there are well-meaning people, like Harvard’s Larry Lessig, who for honest motives want to limit campaign spending. Whatever their intentions, however, what they would do is take our election laws up the right-hand side of the Lois Lerner Curve, resulting in more corruption. Lurking behind them are Lois Lerner’s duplicitous partisans, the bare-knuckled street fighters who seek to end the scandal of Republican money in politics, and who would give us a country as free of corruption as Russia. They are scoundrels in the cause of honor, whores who clamor for morality, thieves in defense of property rights. 

Was that a little rough, just now? Then let me remind you about True the Vote, the conservative vote-monitoring organization led by Catherine Englebrecht. True the Vote trains volunteers to record and report on suspicious voter registrations. We’re not talking about the New Black Panthers with their baseball bats, but nevertheless Rep. Elijah Cummings opened up a congressional investigation into the group. His staffers wrote to Lois Lerner about it, and subsequently the IRS questioned its tax-exempt status. In in short order Engelbrecht’s business was visited by the FBI, ATF, and OSHA. She testified about this in February, and what’s interesting is how Democrats treated her. Cummings questioned her about her possible racist motives, and Gerry Connolly complained of McCarthyism and mocked her “paranoia” for thinking the audits might have been politically motivated.

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November 20, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Wednesday, November 19, 2014

The IRS Scandal, Day 559

Tuesday, November 18, 2014

The IRS Scandal, Day 558

IRS Logo 2Town Hall, The IRS Hatchetmen:

[W]hen the Joint Committee on Taxation was started, it was a temporary committee and that was founded because the IRS (then called the BIR) was engaged in the same type of political bullying and illegality that conservatives have used against the Tea Party since 2010.

Senator James Couzens of Michigan, who helped found the JTC, was the Larry Ellison of his day. Like Ellison, who co-founded Oracle, Couzens made his money as the number two guy and management genius behind Henry Ford and Ford Motors. ... As a Republican from Michigan he was considered a progressive and opposed tax cuts, supported the graduated income tax and–like another rich guy, Warren Buffet—acted as the self appointed popular voice against rich corporations, railing against favorable tax treatment for companies.

At the time Secretary of the Treasury, Andrew Mellon, himself one of the richest men in America was advocating a scientific basis for taxation, “the use of economic theory to identify the tax rates that would maximize revenue yet burden productive capital as little as possible,” according to George K. Yin at the University of Virginia Law School. In short he was proposing an infant Laffer curve.

Mellon noted that tax policy was distorting the distribution of capital with companies less willing to pay dividends to shareholders because of the hostile tax treatment dividends received. He also noted that wealthy people were more inclined to invest in tax-free municipal securities because of the different tax treatment that cities and states had versus corporations.

As a progressive Republican Couzens argued against Mellon, using his own status as a rich man to make his point. His argument—in a preview of Warren Buffet’s own stupidity—was that tax treatment made little difference in what types of investments rich people made. ...

By inviting scrutiny of his tax situation, however, Couzen challenged Mellon publicly and also admitted that the tax treatment of investments changed his behavior. The result eventually was an examination in 1925 of Couzen’s tax liability for the sale of his Ford Motor stock in 1913, according to Yin, which was supposed to amount to 73 percent of the gains from the stock, a tax that Couzen said he supported.

The affair became unseemly with both sides using private tax records as weapons against the other. And when Couzens made the affair public in the Senate, the Senate was outraged that a sitting Senator would be subject to retaliation by an adinistration.

Thus was born the Joint Committee on Taxation whose expressed aim was to "investigate and report upon the operation, effects, and administration of the Federal system of income and other internal revenue taxes and upon any proposals or measures which in the judgment of the Commission may be employed to simplify or improve the operation or administration of such systems of taxes,” according to the JTC’s website.

In reality however it was there to stop internal revenue from being used as a political weapon.

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November 18, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, November 17, 2014

The IRS Scandal, Day 557

Sunday, November 16, 2014

The IRS Scandal, Day 556

Saturday, November 15, 2014

The IRS Scandal, Day 555

IRS Logo 2Yahoo! Finance:  Politicization of the IRS: Full Disclosure Network Special Video Report:

Watch this 8 minute FDN Video where it is revealed that Obama Administration officials were directing the IRS campaign against political groups critical of the President's policies according to the documents obtained by Paul Orfanedes, Director of Litigation for the public interest law firm Judicial Watch. Orfanedes reveals the tactics used by IRS Director Lois Lerner that deceived the media by where public documents had been withheld from Freedom of Information Act Requests (FOIA) filed by Judicial Watch. He also explains why Judicial Watch is determined to find all the missing Lois Lerner emails and how the IRS was able to shut down Patriot and Tea Party organizations by denying them Tax Exempt Status. 

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November 15, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Friday, November 14, 2014

The IRS Scandal, Day 554

IRS Logo 2Breitbart, The IRS-Benghazi Congress:

Benghazi and the IRS dominated the news this year thanks to Judicial Watch’s work in exposing smoking gun documents in both scandals – work that left Congress and much of the other media looking feeble. JW’s work can change history. Our intent is to get the truth, and we spared neither party from criticism. But voters were outraged at our findings and the scandals were a major factor in the election. 

Almost half, 49 percent, said the results of the 2012 presidential election would have been different if the public knew the facts then that it knows now about the Obama administration’s initial, misleading story about what happened in Benghazi and the targeting of conservative groups through the IRS. 

In no small way, this new Congress is the Benghazi-IRS Congress. The expanded House majority, which has a historic number of Republican members, and the massive wave that led to the Republican takeover of the Senate were the result of voter concerns about Obama’s IRS abuse and the Benghazi deaths and cover-up. 48 percent of voters said the IRS scandal influenced their vote, and of those concerned Americans, 71 percent voted for Republicans to take over the Senate. The numbers are similar for Benghazi; 39 percent said the scandal influenced their vote and 64 percent who were concerned about the terrorist attack this president lied about to get reelected say they voted for Republicans in the Senate. ...

The new Congress has a strong mandate to pursue Obama’s abuse of power in the IRS scandal, hold him accountable for the Benghazi lies, protect our borders, close the door on amnesty, end Obamacare, confront government secrecy, and ensure the integrity of our elections. Judicial Watch has been happy to do the job of Congress, the establishment media, and the Justice Department for six years. Again, this election shows that Americans want Congress to follow our lead and get Washington back under the rule of law.

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November 14, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Thursday, November 13, 2014

GAO: IRS Lacks Adequate Internal Controls

GAOGovernment Accountability Office, IRS's Fiscal Years 2014 and 2013 Financial Statements (GAO-15-173):

In GAO's opinion, the Internal Revenue Service's (IRS) fiscal years 2014 and 2013 financial statements are fairly presented in all material respects. However, in GAO's opinion, IRS did not maintain effective internal control over financial reporting as of September 30, 2014, because of a continuing material weakness in internal control over unpaid tax assessments. ...

During fiscal year 2014, IRS continued to make important progress in addressing deficiencies in internal control over its financial reporting systems. However, GAO identified new and continuing deficiencies in internal control over information security, including missing security updates, insufficient monitoring of financial reporting systems and mainframe security, and ineffective maintenance of key application security, that constituted a significant deficiency in IRS's internal control over financial reporting systems. Until IRS fully addresses existing control deficiencies over its financial reporting systems, there is an increased risk that its financial and taxpayer data will remain vulnerable to inappropriate and undetected use, modification, or disclosure.

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November 13, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 553

(Click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate.)

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November 13, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, November 12, 2014

Death of Ginny Chung

Chung 2Ginny Chung, Acting Deputy International Tax Counsel at the Treasury Department, died of colon cancer last Saturday at the age of 43.  From her Washington Post obituary:

She earned her undergraduate degree from Wellesley College, her JD from Emory University, and a Master of Laws in Taxation from Georgetown University. Ginny spent all of her professional life working for the United States Government, first for the IRS and most recently serving as the Acting Deputy International Tax Counsel for the Department of the Treasury. ...

Ginny is survived by her husband Aaron King; two children [ages 5 and 10]; her parents George and Grace Chung of New Jersey; and sister Christine Chung of London.

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November 12, 2014 in IRS News, Obituaries, Tax | Permalink | Comments (1)

The IRS Scandal, Day 552

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November 12, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, November 11, 2014

The IRS Scandal, Day 551

IRS Logo 2Wall Street Journal:  At Last, a Chance to Get to the Bottom of the IRS Mess, by Cleta Mitchell (Foley & Lardner, Washington, D.C.):

The day after Republicans won solid majorities in the House and Senate, House Speaker John Boehner and Senate Majority Leader-to-be Mitch McConnell outlined priorities for the newly elected Congress. High on the list is fundamental tax reform. In addition to overhauling the federal tax code, however, Congress should rein in the Internal Revenue Service.

Much has already been learned about the arrogance of the IRS from the House investigations of the agency’s targeting of conservatives. The revelations emerged despite strenuous efforts by Democrats in Washington and by the IRS itself to block inquiries and deny the existence of political targeting—targeting that the former head of the IRS Exempt Organizations Unit, Lois Lerner, eventually acknowledged and apologized for in May 2013.

Bringing the IRS to heel can start with re-energizing and expanding congressional investigations and holding accountable those responsible for the targeting and other abuses. To serve notice that the IRS’s thumbing of its nose at Congress by ignoring multiple congressional subpoenas will no longer be tolerated, the House GOP Steering Committee should elect Rep. Jim Jordan as the new chairman of the House Oversight and Government Reform Committee (where current chairman Darrell Issa is term-limited). ...

Since 2012, House investigators have been subjected to an IRS rope-a-dope game by the refusal of the agency and various officials to respond to subpoenas or to answer questions fully and forthrightly. The House should now reissue the subpoenas that will expire at the end of this Congress and proceed to federal court to enforce all outstanding subpoenas previously issued to the IRS and its personnel during the course of the investigations.

More important, the House should ask the federal courts to enforce its May 2014 contempt resolution against Ms. Lerner for refusing to answer questions from Congress about her role in the targeting of conservatives. It is clear that the Obama Justice Department has willfully failed to file an enforcement proceeding in federal court. There also are strong separation-of-powers arguments against allowing the executive branch to unilaterally disregard congressional disciplinary actions taken against an executive-branch official like Ms. Lerner for refusing to testify before Congress.

Beyond all this, Republicans now have the opportunity to expand their inquiries into other areas of IRS misconduct. ... As Congress shines a light on these and other unacceptable IRS practices, public support for fundamental tax reform will only increase. The new Republican-controlled Congress will thus have a rare opportunity to overhaul a tax policy and a tax-collecting agency that both desperately need it.

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November 11, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (7)

Monday, November 10, 2014

Former IRS Agent Settles Religious Discrimination Claim Over Firing for Wearing Ceremonial Dagger to Work

Following up on my prior posts (links below):  Houston Chronicle, Former IRS Worker, U.S. Reach Agreement in Ritual Dagger Case:

TagoreIn what her lawyers called a "historic settlement," former Houston IRS worker Kawaljeet Tagore and the U.S. government this week reached an agreement in a lawsuit stemming from the Sikh woman's dismissal for insisting on wearing a 3-inch ceremonial dagger sacred to her faith to work.

The settlement announced Thursday expunges Tagore's firing from her record, allows her to enter federal buildings with the blade for a period of three years and awards her lawyers $400,000 for fees and expenses. Tagore, 41, will be barred from seeking re-employment with the IRS, but may seek work with other federal agencies.

Tagore, 41, who currently works as a self-employed tax consultant, filed the lawsuit in 2009.

Houston lawyer Scott Newar, who worked with attorneys from the Becket Fund for Religious Liberty, said the case prompted Federal Protective Services to acknowledge for the first time that wearing the blade, known as a "kirpan," is protected under the Religious Freedom Restoration Act.

Prior TaxProf Blog coverage:

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November 10, 2014 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 550

IRS Logo 2Washington Examiner:  Congress' To-do List: Major Unsolved Scandals Top the List for New U.S. Congress:

The pending 114th Congress needs to dig into some serioius issues without delay because they are concerns that the Democratic Senate led by Sen. Harry Reid refused to investigate during the most recent Senate. ...

The IRS scandal that still leaves many stones unturned. While persons in the Obama administration have been investigating to a small degree, there is obvious a need to conduct more of an investigation into this concern. The assertions of lost emails by persons involved, such as Lois Lerner, is still unsettled. ...

Needless to say, the IRS scandal remains and has not settled well with Americans who want to know the truth. After all, targeting conservative groups prior to the 2010 election when the Democrats fared well, wasn’t right. Naturally, the whole truth needs come out, and those who were involved need to be held accountable – and punished as need be.

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November 10, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Sunday, November 9, 2014

The IRS Scandal, Day 549

IRS Logo 2Wall Street Journal editorial:  Overseeing Obama:

Election Day is over. But if Americans ever hope to get to the bottom of the IRS scandal, they’ll be hoping for victory in a more obscure campaign. The House Republican leadership will soon select the next chairman of the Oversight and Government Reform Committee. In a crowded field, Rep. Jim Jordan (R., Ohio) is the candidate best equipped to conduct thorough and credible investigations of federal waste, fraud and abuse. ...

Current Oversight Chairman Darrell Issa is stepping down due to GOP term limits for committee heads. Mr. Jordan has done as much as anyone to shine a light on IRS abuse of the President’s philosophical opponents, both in hearings and behind the scenes.

More than a year before the public learned the name of Lois Lerner, Mr. Jordan was seeking answers from the IRS’s tax-exempt organizations chief on political targeting allegations. He then requested an inspector general’s audit at the Treasury Department. Cleta Mitchell, a lawyer representing various IRS targeting victims, tells us that if not for Mr. Jordan there would have been no Treasury investigation “and no public admission that, indeed, conservative groups were being subjected to unprecedented scrutiny and mistreatment.” ...

Speaker John Boehner and other members of the elected GOP House leadership should elevate Mr. Jordan and send a clear message of reform and accountability.

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November 9, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, November 8, 2014

The IRS Scandal, Day 548

IRS Logo 2Forbes:  What If Lois Lerner Was Right About The Tea Party?, by Peter J. Reilly:

The e-mails I have been getting from Jenny Beth Martin, Chairman of the Tea Party Patriots Citizens Fund, have me thinking about Lois Lerner and  Teapartygate.  I went back and took another look at a report prepared by the staff of Darrell Issa’s Committee on Oversight and Government.  The report is titled Lois Lerner’s Involvement in the IRS Targeting of Tax-Exempt Organizations.  It is well worth reading the whole report and I recommend it.  I still don’t think it adds up to some sort of crusade against conservatives, but that’s just me. You can read it yourself. It seems that Lerner was strongly against money in politics and sensitive to the criticism that IRS was letting 501(c)(4) organizations get away with too much political activity.  And along comes the Tea Party, which Lerner sees as “very dangerous”.

One GD thing after another and now we are on Day 542 of the IRS Scandal, by TaxProf count, with no end in sight. Here is the question that is troubling me right now thanks to the e-mails I have been getting from Jenny Beth Martin.  If there is a pretty compelling case that Tea Party Patriots Inc was intended from day 1 to be a political organization, rather than a social welfare organization, would that make any difference in how we view Lois Lerner? ...

The IRS has to collect over two trillion dollars, which is a pretty big job, so it would be better if it did not get caught up in side issues.  Still Lois Lerner was in charge of exempt organizations and there are rules that the IRS was accused of ignoring.  There is a lot of diversity in the grassroots Tea Party groups, but I have a hard time seeing the self proclaimed flagship as anything but a political organization based on how it has been behaving lately.  Does that make the scandal any more or less scandalous?  What do you think?

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November 8, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, November 7, 2014

The IRS Scandal, Day 547

IRS Logo 2Legal Insurrection:  Judicial Watch:  IRS “Did Not Undertake Any Significant Efforts to Obtain” Missing Lerner Emails:

Democrats who had hoped for at least a week to sleep off their election night hangovers are getting no rest after the latest disclosure of court documents by advocacy group Judicial Watch.

Judicial Watch has spent a great deal of time and resources seeking information about the IRS targeting of conservative groups.

In September, Judicial Watch asked the court for permission to conduct discovery into how “lost and/or destroyed” records might be recovered; the IRS is fighting transparency efforts, but their latest response to the discovery request contains inconsistencies that could pull the rug out from under IRS officials responsible for the cover up.

Via Judicial Watch:

Judicial Watch lawyers reviewed the IRS court filings and concluded that the agency “did not undertake any significant efforts to obtain the emails.”

IRS attorneys conceded that they had failed to search the agency’s servers for missing emails because they decided that “the servers would not result in the recovery of any information.” They admitted they had failed to search the agency’s disaster recovery tapes because they had “no reason to believe that the tapes are a potential source of recovering” the missing emails. And they conceded that they had not searched the government-wide back-up system because they had “no reason to believe such a system … even exists.”

But what’s this? The inconvenient truth, documented for all time courtesy of court filings? [Emphasis in bold mine:]

The IRS admitted to Judge Sullivan that the agency failed to “submit declarations about any of the foregoing items because it had no reason to believe that they were sources from which to recover information lost as a result of Lerner’s hard drive failure.” [Emphasis added] Department of Justice attorneys for the IRS had previously told Judicial Watch that Lois Lerner’s emails, indeed all government computer records, are backed up by the federal government in case of a government-wide catastrophe. The Obama administration attorneys said that this back-up system would be too onerous to search. In the October federal court filing, the IRS does not deny that the government-wide back-up system exists, and acknowledges to the court that 760 other email “servers” have been discovered but had not been searched.

The IRS also refuses to disclose the names of the IRS officials who may have information about the IRS scandal, citing unspecified threats. The IRS says it pulled documents about the scandal from various employees into a “Congressional database” and that it has only searched this one “database” for missing records. Incredibly, the IRS has not searched any of the IRS’s regular computer systems for any missing records and admits that it has only searched a “database” that it knows does not contain the missing records being sought by the court, Judicial Watch, and Congress.

After two years of fighting, it has become clear to the attorneys at Judicial Watch and to the public that this administration is not interested in transparency as to the IRS targeting of conservatives.

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November 7, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Thursday, November 6, 2014

TIGTA: Inadequate Inventory Controls Over Employee Mobile Devices Cost IRS Millions

TIGTA The Treasury Inspector General for Tax Administration yesterday released Wireless Telecommunication Device Inventory Control Weaknesses Resulted in Inaccurate Inventory Records and Unsupported Service Fees (2014-10-075):

In Fiscal Year 2013, the IRS spent more than $13.7 million on wireless telecommunication devices and maintained an inventory of more than 49,000 devices reported as being in use. Effective controls over the assignment of and inventory accounting for these devices is important to ensure proper stewardship of Government funds.

TIGTA’s previous work found that IRS processes for assigning and monitoring the use of devices were not adequate to ensure that employees have a business need for the devices. In addition, prior work found that the IRS paid for thousands of devices that were unused. The overall objective of this review was to assess the efficiency and effectiveness of the IRS’s inventory control for wireless aircards, cellular phones, and BlackBerry® smartphone devices.

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November 6, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 546

IRS Logo 2Forbes, IRS Memo Claims Forbes Story Influenced Tax Exempt Decision Involving Billionaire, by Janet Novack:

A newly uncovered Internal Revenue Service memo lends support to billionaire investor Peter R. Kellogg’s claim that the IRS tax exempt division may have improperly taken press coverage –and specifically a Forbes cover story–into account before making a decision that cost him a bundle.

Kellogg K +0.22% and IAT Reinsurance Co. Ltd, the Bermuda-based insurance company his family owns, are suing the IRS for refunds of $186 million in taxes and interest they paid after the IRS revoked IAT’s qualification as a tax exempt 501(c)(15) insurance company retroactively. The lead of a March 2001 Forbes cover story on the proliferation of edgy tax shelters exposed Kellogg’s use of IAT to shield hundreds of millions in capital gains from tax. At that time, promoters were pushing the 501(c)(15) ploy to small business owners, particularly car dealers, as a tax shelter. After the Forbes story appeared, the IRS listed the Producer Owned Reinsurance Company (PORC) as a potentially abusive tax shelter and began an enforcement project.

The surprising IRS memo is disclosed in filings in the U.S. Court of Federal Claims where Kellogg and the government are battling over whether internal IRS documents and IRS officials’ thought processes and motivations are subject to discovery and can be used as evidence in his refund suits. The memo, a January 2010 Appeals Case Memorandum (ACM) from three IRS appeals officers, argues the IRS should reconsider the Technical Advice Memoranda (TAMs) that retroactively revoked IAT’s tax exemption and that of another Kellogg owned insurance company.

The ACM asserts that originally the TAMs were favorable to Kellogg and that then Tax Exempt Commissioner Steven Miller was persuaded “to go adverse because of the ramifications” to the PORC project “to no-change the very taxpayer (Kellogg) that started this project because of the Forbes article.” The memo adds: “We believe a `fresh-look’ is needed as to the facts of these cases in applying the laws as is without regard to the outside publicity.’’

Miller went on to become Acting IRS Commissioner and resigned from the agency in May 2013 amid the ongoing controversy over IRS targeting of Tea Party and certain other groups for extra scrutiny in the tax exemption process. Internal IRS documents suggest that Tea Party groups were first flagged because of media attention to political groups’ use of the 501(c)(4) exemption. Lois Lerner, a central figure in the exempt scandal who has been held in contempt of Congress by the Republican controlled House, was particularly sensitive to criticism that the IRS was letting 501(c)(4) organizations get away with too much political activity.

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November 6, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, November 5, 2014

The IRS Scandal, Day 545

IRS Logo 2Breitbart:  Read: Jeanne Shaheen-IRS Memos on Conservative Group Targeting:

The IRS memos to and from incumbent Democratic Sen. Jeanne Shaheen (D-NH) indicate she was involved in the actual investigative activities targeting Tea Partiers.

The memos, obtained by Breitbart News and published here, show a series of letters Shaheen and other Democratic Senators exchanged with then IRS commissioner Doug Shulman and then IRS deputy commissioner for services and enforcement Steven Miller—not just the one memo published by The Daily Caller’s Patrick Howley late Monday evening right before the election.

The memos are responses to two different letters Shaheen and a whole group of Democrats such as Sen. Chuck Schumer (D-NY), Al Franken (D-MN), Michael Bennet (D-CO), and Tom Udall (D-NM), among others. The responses are directed specifically to Shaheen, seemingly indicating that she was the point person for the Senate Democrats’ efforts to leverage the IRS into targeting conservative and Tea Party groups. ...

The letters Shaheen and her Democratic colleagues sent to the IRS have long been public, but the detailed responses from the IRS to her are brand new—and came out just before the election. They seem to indicate that Shaheen was kept apprised of, and was involved in, the intricate layers of the IRS targeting of Tea Partiers—which has since been widely panned in the wake of several congressional investigations. Basically, the fact that Democratic senators – especially Shaheen – were deeply involved in the targeting scandal has always been suspected but never confirmed—until now.

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November 5, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Tuesday, November 4, 2014

Pittsburgh IRS Agent Tried to Bribe Police After Being Arrested at Steelers Game

CBS Pittsburgh,  Police: Man Arrested For Kicking Heinz Field Barriers, Trying To Bribe Officers:

A man was arrested after injuring a woman by kicking a steel barrier at Heinz Field Sunday evening. According to police, 29-year-old Stephen Sapp was intoxicated at the time of the incident. ...

Sapp sustained some cuts in the struggle [with police] and was transported to UPMC Mercy Hospital for treatment. While at the hospital, Sapp allegedly tried to bribe officers to let him go. According to the criminal complaint, Sapp stated, “Listen, I know how this works. How much money will it take to make this go away and to let me go home today?”

The officers informed Sapp that he could not attempt to bribe them, but Sapp continued. “Look, I am an IRS agent and I can help you in other ways if you let me go home and make this go away.”

WTAE, IRS Confirms Worker Arrested at Heinz Field; Police: Stephan Sapp Kicked Out of Steelers Game, Gets Violent, Offers Bribe

November 4, 2014 in IRS News, Tax | Permalink | Comments (3)

The IRS Scandal, Day 544

IRS Logo 2Recent filings in the U.S. District Court for the District of Columbia in Judicial Watch v. IRS, No. 13-1559-EGS:

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November 4, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, November 3, 2014

District Court Refuses to Dismiss Suspended Practitioner's Lawsuit Against IRS Office of Professional Responsibility

IRS Logo 2In press reports last month, Karen Hawkins, Director of the IRS Office of Professional Responsibility ("OPR"), was quoted as saying that although she first "laughed" at the argument in Sexton v. Hawkins that OPR lacked jurisdiction over a suspended practitioner (a tax lawyer with a tax LL.M.), after  Ridgely v. Lew (more here) "there are some judges out there that would buy that now."  Last Thursday, the Federal District Court in Nevada rejected the Government's motion to dismiss Sexton's complaint againt the OPR.   Sexton v. Hawkins, No. 2:13-cv-00893 (D NV Oct. 30, 2014).

November 3, 2014 in IRS News, New Cases, Tax | Permalink | Comments (0)

The IRS Scandal, Day 543

Sunday, November 2, 2014

The IRS Scandal, Day 542

IRS Logo 2Press Release:  Wetumpka TEA Party Continues Call for Accountability After Unacceptable IRS Court Ruling:

AL-Becky Gerritson, President of the Wetumpka TEA Party, called Thursday's US District Court’s ruling to dismiss two lawsuits against the IRS by dozens of TEA Parties and other conservative groups , “outrageous” .

The IRS’s targeting of conservatives first came to the public’s attention in May of 2013, when Lois Lerner, then head of the IRS’s Tax Exempt Office, tried to minimize the seriousness of their despicable action when she answered a planted question from the audience while speaking to the American Bar Association. The targeting of conservatives began in 2009 and reached its height during the 2012 election cycle. Some conservative groups have still not received their well-deserved tax exempt status even to this day. In 2013 the Wetumpka TEA Party along with 40 other conservative groups filed a law suit with the American Center for Law and Justice, (ACLJ) against the IRS for its illegal targeting of conservatives.

“When you look at the allegations in our lawsuit along with evidence uncovered by Congressional committees and Judicial Watch, it is undeniable that the IRS is guilty of wrongdoing. However, Judge Walton basically said that since we finally received our tax status (after almost 2 years of waiting) that we now have no case. That’s like a judge telling a burglary victim, that even though she was robbed 2 years ago; since she does not currently have the thieves in her house, she has no case. This ruling is unbelievable! It’s so much more than just a delay of a tax exempt status; it’s about the IRS, a government agency, being used as a weapon against its citizens, i.e. violating our constitutional rights, invading our privacy, bullying and intimidating us, mishandling and leaking our confidential taxpayer information etc., not to mention the ensuing cover-up; and we cannot fight back…we have no recourse.”

Gerritson continued, “The judge did not base his decision on the merits of the case. In fact, he did not deny wrong doing by the IRS but dismissed the case on procedural grounds. He wrote in a footnote: "The court's opinion should not be interpreted as an assessment of the propriety of the alleged conduct by the defendants." It’s unfathomable that the IRS, one of the most feared government agencies in America, was able to engage in a massive, years-long illegal targeting scheme against everyday American’s and get away with it scot-free. This is a huge blow to Americans’ liberty. If the IRS was allowed to target and harass Americans on such a large scale with no repercussions then what will stop them in the future?”

Gerritson concluded by saying, “This isn’t over for us. We will not be silent. We commend and support the ACLJ‘s plan to appeal the ruling. We will continue to do everything we can to stand up for citizens’ rights, expose government’s abuse of power and hold them accountable for their actions.”

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November 2, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, November 1, 2014

WSJ: How to Use a 401k to Pump Up a Roth IRA

Roth IRAWall Street Journal, How to Pump Up a Roth IRA: After-Tax Contributions to a 401(k) Plan Can Be Shifted Into a Tax-Free Roth, the IRS Says:

High-income earners have a new incentive to make after-tax contributions to a 401(k) plan: They can later shift those contributions into a Roth individual retirement account, tax-free.

Thanks to a recent Internal Revenue Service ruling [Notice 2014-54], eligible employees can now move after-tax contributions directly from their employer-sponsored retirement plan to a Roth account.

The potential tax savings are huge, depending on an investor’s tax rate in retirement. ... The latest decision gives people an easier way to distinguish pre- and after-tax contributions and maximize their potential tax savings. That could make it much easier for investors to move tens or hundreds of thousands of dollars they have had accumulating in their 401(k)s into a Roth IRA.

November 1, 2014 in IRS News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 541

IRS Logo 2Press Release:  ACLJ Files Suit Against IRS For Failing To Release Records Between IRS And U.S. Senator Jeanne Shaheen Of New Hampshire Who Demanded IRS Probe Conservative Organizations:

The American Center for Law & Justice (ACLJ) today filed a federal lawsuit in New Hampshire against the Internal Revenue Service (IRS) on behalf of the group, Citizens for a Strong New Hampshire, claiming the IRS is unlawfully delaying the release of records between the IRS and U.S. Senator Jeanne Shaheen (D-NH) who demanded the IRS investigate conservative organizations for engaging in "political activities."

Citizens for a Strong New Hampshire filed a request under the Freedom of Information Act (FOIA) demanding the IRS release the correspondence between the tax agency and Sen. Shaheen and Congresswoman Carol Shea-Porter (NH-01). The lawsuit was filed today in U.S. District Court for the District of New Hampshire, in Concord, NH. The lawsuit contends the IRS is unlawfully delaying the release of information until after next week's mid-term elections – a move that the complaint argues "has deprived Strong NH of the opportunity to obtain and effectively convey to the voting public vital information about those seeking re-election."

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November 1, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Friday, October 31, 2014

The IRS Scandal, Day 540

IRS Logo 2Legal Times:  IRS Official Fights Video Depo, Citing Fear of Harassment:

An Internal Revenue Service employee caught up in the controversy over tax-exempt groups wants a federal judge to block a subpoena for her videotaped testimony. The official, Holly Paz, cites privacy and safety fears.

A group that applied for tax-exempt status in 2012, Citizen Awareness Project Inc., sued the agency in Colorado federal district court, claiming officials wrongfully released its application to the media. Federal officials admitted there was an “unauthorized disclosure,” but they disagreed it was willful or that the group was entitled to damages.

In a 2013 report, the Treasury Inspector General for Tax Administration found that IRS officials had improperly flagged organizations perceived to have conservative or Tea Party ties for additional scrutiny when they applied for tax-exempt status. The Colorado lawsuit is focused on the disclosure issue, not the broader scandal. However, the plaintiff claimed that because of a media report about its application, the group may have been subjected to additional scrutiny by the IRS—an allegation the government denied.

Paz served as the agency’s director of exempt organizations rulings and agreements. She isn’t a defendant in the Colorado case, but lawyers for Citizen Awareness Project subpoenaed her to provide videotaped deposition testimony on Oct. 28.

In court papers filed on Oct. 23 in the U.S. District Court for the District of Columbia, Paz’s lawyers at Steptoe & Johnson LLP asked for an order barring the deposition from being videotaped. Alternatively, they've asked for an order that would keep any videotaped deposition confidential.

Steptoe partner Brigida Benitez wrote that after Paz’s name became publicly associated with the larger IRS scandal, she faced “continued harassment, oppression and intimidation, including threats of bodily harm to her and her family, including her young children.”

Paz didn’t object to testifying, Benitez wrote, but she feared that a video of her speaking, if publicly disclosed, could be used “as another means of harassment and intimidation.”

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October 31, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Thursday, October 30, 2014

IRS Releases 2015 Inflation Adjustments

IRS Logo 2The IRS has released various inflation-adjustments for 2015 (IR 2014-104 & Rev. Proc. 2014-61; IR 2014-99), including:

  • Gift Tax Exemption:  $14,000 (same as 2014)
  • Unified Credit:  $5,430,000 (up $90,000 from 2014)
  • Top 39.6% Income Tax Rate:  $413,200 single/$464,850 joint (up $6,450/$7,250 from 2014)
  • Standard Deduction:  $6,300 single/$12,600 joint (up $100/$200  from 2014)
  • Personal Exemption:  $4,000 (up $50 from 2014)
  • AMT Exemption:  $53,600 single/$83,400 joint (up $800/$1,300 from 2014)
  • Contribution Limit for 401(k)/403(b)/457 Plans:  $18,000 (up $500 from 2014)
  • Catch-Up Contribution Limit (Age 50+) for 401(k)/403(b)/457 Plans:  $6,000 (up $500 from 2014)
  • Income Limit for Full IRA Deduction:  $61,000 single/$98,000 joint (up $1,000/$2,000 from 2014)
  • Income Limit for Full Roth IRA Contribution:  $116,000 single/$183,000 joint (up $2,000 from 2014)
  • Defined Benefit Plan Annual Benefit Limit:  $215,000 (up $5,000 from 2014)

October 30, 2014 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 539

IRS Logo 2Investor's Business Daily editorial:  IRS Is A Unique Troublemaker Among Federal Agencies:

It's also been used as a political weapon. President Obama may owe his 2012 re-election to the IRS, which blocked the formation of groups that opposed him.

The IRS-Tea Party scandal entered Day 536 on Monday by the TaxProf blog's count, and it appears that the scandal will go on much longer without resolution.

Bob Woodward suggests that the media investigate it as it did Watergate. We laud his bravery. He's opened himself up to attacks from two vicious and unaccountable adversaries: the IRS and the mainstream media.

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October 30, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, October 29, 2014

IRS: Ebola Is a Qualified Disaster

EbolaIR-2014-102, IRS Announces Tax Guidance Related to Ebola Outbreak in Guinea, Liberia and Sierra Leone:

The Internal Revenue Service today issued two items of guidance in response to the need for charitable and other relief due to the Ebola outbreak in Guinea, Liberia and Sierra Leone. One provides special relief intended to support leave-based donation programs to aid victims who have suffered from the Ebola outbreak in those countries. The other designates the Ebola outbreak in those countries as a qualified disaster for federal tax purposes.

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October 29, 2014 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 538

IRS Logo 2National Review:  The Tea Party Isn’t Giving Up Against the IRS, by Mark Meckler (Founder, Sue the IRS):

Thursday, Judge Reggie Walton of the U.S. District Court of the District of Columbia dismissed almost all counts in two major lawsuits brought by conservative groups against the IRS.

So why would Judge Walton — a George W. Bush appointee — make this decision?

Believe it or not, he says that claims for injunctive relief are moot because there is “no reasonable expectation” that the IRS would continue to target conservative organizations based on their viewpoint.

But this defies what we know to be true. The IRS has repeatedly insisted its actions were for “tax-administration purposes” and were otherwise legitimate functions to determine the groups’ tax-exempt status. The IRS has concealed evidence, obscured facts, and — evidence shows — still harassed conservative groups after their scheme was revealed

Judge Walton also missed the mark by dismissing the claims against the IRS for its unauthorized inspection and disclosure of taxpayer information. In reaching his decision, Judge Walton embraced a flimsy dichotomy promoted by the IRS that distinguishes between an improper acquisition of taxpayer information and an improper inspection of the information. By focusing on how the information was obtained, Judge Walton failed to consider or appreciate the actual reasons IRS employees inspected the taxpayer information. Although inspecting an application for tax exemption may be lawful for some IRS employees, it certainly was not lawful for those employees whose inspections occurred because of unconstitutional viewpoint discrimination.

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October 29, 2014 in IRS News, IRS Scandal | Permalink | Comments (2)

Tuesday, October 28, 2014

District Court Dismisses AICPA's Challenge to IRS's Voluntary Tax Return Preparer Program for Lack of Standing

RTRPThe Washington, D.C. District Court yesterday dismissed the American Institute of CPAs' challenge to the IRS's Voluntary Tax Return Preparer Program on standing grounds.  American Institute of Certified Public Accountants v. IRS, No. 14-1190 (D.C. D.C. Oct. 27, 2014).  For more, see Accounting Today, Fuller Tax Blog and Law 360.

Prior TaxProf Blog coverage:

(Hat Tip: John Treu.)

October 28, 2014 in IRS News, Tax | Permalink | Comments (0)

Tax Revolving Door Enriches Former IRS Officials Who Cash in by Navigating Inversions Through Rules They Wrote

Bloomberg:  Tax Inversions Succeed When Government Lawyers Go Private, by Zachary R. Mider:

Revolving DoorHal Hicks cleared his throat and addressed a roomful of peers in a midtown Manhattan auditorium. The topic: the tax-avoidance technique called inversion, in which a U.S. company claims a foreign legal address.

Waving his hands back and forth as if tracing a pendulum’s swing, Hicks explained how four government attacks over three decades had failed to stop the practice. “There’s been lots of law thrown at these transactions,” he said at the January session.

Hicks ought to know. He was the one doing the throwing, during four years as a top government tax lawyer. Then, he returned to private practice and helped set in motion a spree of inversions that a congressional panel estimates will cost at least $19.5 billion in lost tax revenue over the next decade.

Hicks epitomizes the world of high-level Washington lawyers who have played a behind-the-scenes role in helping these tax-driven address changes proliferate. Top federal tax officials, many of them career corporate lawyers, have sometimes closed loopholes only after companies slipped through them. And former officials like Hicks use skills and contacts honed in office to help companies legally outmaneuver the government.  

Until this year, when address-shifting by more than a dozen companies worth $100 billion caught policy makers’ attention and President Barack Obama clamped down again, inversion rules had for a decade attracted little notice outside the small community of international tax lawyers in Washington.

At the Treasury Department and Internal Revenue Service, officials, many on hiatus from private practice, crafted the rules in dialogue with top corporate law and accounting firms.

While some European nations have historically relied on career civil servants, the top ranks of the U.S. tax administration have swapped staff with industry for decades.

It’s a low-cost way to provide government with the best legal talent, said Gregory Jenner, a former acting assistant Treasury secretary, who calls it an “incredibly beneficial tradition.”

“Putting rookies into these jobs -- they would be overwhelmed,” Jenner said. “It’s too high-level, too sophisticated, too complicated.”

The risk, critics say, is that some government lawyers may continue to sympathize with corporate interests, or be swayed by former colleagues. ...

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October 28, 2014 in IRS News, Tax | Permalink | Comments (1)

Monday, October 27, 2014

The IRS Scandal, Day 536

IRS Logo 2The Atlantic:  The House GOP's New War on Incompetence: The Republicans Want to Overhaul Scandal-Plagued Federal Agencies in 2015, the Majority Leader Says:

House Republicans haven't officially locked down their majority for next year, but they're already sketching out a legislative agenda for when they do.

In a memo to lawmakers on Wednesday, Majority Leader Kevin McCarthy said the party would target the federal bureaucracy with an eye toward restoring "competence" across a range of scandal-plagued departments and agencies. He cited the well-documented problems at the Veterans Administration, the Secret Service, the IRS, last year's launch of the federal health insurance exchanges, and the more recent response to Ebola, along with several other missteps that haven't garnered as much attention.

Real Time with Bill Maher Blog:  Tax the Charities:

Obama’s IRS "scandal” comes down to whether Tea Party groups should pay taxes or not, and the angels-dancing-on-the-head-of-a-pin distinction between an organization that raises money for politicians and one that “promotes social welfare.” (… by raising money for politicians.) One has to pay taxes and one doesn’t. ...

The simple solution is to stop asking the IRS to make value judgments about what’s a legitimate charity called “Patriots for the Violent Overthrow of the Negro Usurper” and what’s just a family sex party, like the kind the Palins would crash. Make them all pay taxes.

Washington Post:  Obama, The Bewildered Bystander, by Charles Krauthammer:

The president is upset. Very upset. Frustrated and angry. Seething about the government's handling of Ebola, said the front-page headline in The New York Times last Saturday.

There's only one problem with this pose, so obligingly transcribed for him by the Times. It's his government. He's president. Has been for six years. Yet Barack Obama reflexively insists on playing the shocked outsider when something goes wrong within his own administration.

IRS? “It's inexcusable, and Americans are right to be angry about it, and I am angry about it,” he thundered in May 2013 when the story broke of the agency targeting conservative groups. “I will not tolerate this kind of behavior in any agency, but especially in the IRS.”

Except that within nine months, Obama had grown far more tolerant, retroactively declaring this to be a phony scandal without “a smidgen of corruption.”

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October 27, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Sunday, October 26, 2014

The IRS Scandal, Day 535

IRS Logo 2The Hill:  GOP: Majority Would ‘Get to Truth’ on IRS:

Republicans vow to put the clamps on the IRS if they sweep to power in November.

GOP lawmakers and aides believe that House-passed legislation to limit the IRS’s reach would have a better shot at making it to President Obama’s desk if Republicans win control of the Senate on Nov. 4.

Full Republican control of Congress would give the GOP added leverage over the IRS, doubling the panel’s oversight of an agency that drew conservative ire by improperly scrutinizing Tea Party groups seeking tax-exempt status.

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October 26, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, October 25, 2014

The IRS Scandal, Day 534

IRS Logo 2Letter From Dave Camp (Chair, House Ways & Means Committee) to Jacob Lew (Secretary, U.S. Treasury Department) (Oct. 22, 2014):

Some of the key questions remaining in the investigation into the IRS' targeting of conservatives groups are: who at the White House knew what was going on; when did they know it; and, what action did they take upon learning about it? Your office is now refusing to make available until after the election the very person that could unlock that mystery. This is completely unacceptable , especially for an Administration that once pledged to be the most open and transparent ever.

On September 16, 20 14, five weeks ago, I first requested that you make available for an interview Hannah Stott-Bumstead, a Treasury Department counsel, who, based on transcribed interviews ofIRS perso1mel, appears to be the first person at Treasmy to be told by the IRS that it had lost Lois Lerner's emails. Notwithstanding President Obama 's pledge to "work with Congress as it performs its oversight role ...[a]nd...make sure that we are working hand in hand with Congress to get this thing fixed," to date your Department has refused to allow the Committee to directly question Ms. Stott-Bumstead. 1 In addition to reiterating my request to interview Ms. Stott-Bumstead without delay, I am requesting additional information about what Ms. Stott-Bumstead and others at Treasury did with this information, including how the White House was informed, and why the decision was made to not infonn Congress until months later.

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October 25, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, October 24, 2014

The IRS Scandal, Day 533

IRS Logo 2USA Today:  Tea Party Loses Court Battle Over Targeting to IRS:

A federal court dismissed two lawsuits against the Internal Revenue Service Thursday, ruling that the tax agency is no longer targeting conservative tax-exempt groups for greater scrutiny.

True the Vote v. IRS Ruling

Linchpins of Liberty v. IRS

"Unless an actual, ongoing controversy exists in this case, this court is without power to decide it," U.S. District Court Judge Reggie Walton ruled, dismissing one lawsuit brought by True the Vote, a conservative vote-monitoring organization.

True the Vote, an offshoot of the Tea Party-affiliated King Street Patriots, had its application as a social welfare group help up because the IRS suspected it was engaging in direct political election campaigning, which is forbidden under section 501(c)(4) of the tax code. IRS agents found that its web site contained "Democratic attacks and Republican/conservative response," according to confidential IRS documents obtained by USA TODAY. 

Walton said the IRS has assured the public that they're no longer screening applications for tax exemptions based on its political leanings, a practice that led to the dismissal of several top IRS officials when it was disclosed by Treasury inspectors last year.

"Thus, the allegedly unconstitutional governmental conduct, which had delayed the processing of the plaintiffs' tax-exempt applications and spawned this litigation, is no longer impacting the plaintiffs," Walton said in a second opinion dismissing a lawsuit brought by Linchpins of Liberty and 40 other groups in 22 states. ...

In a footnote, the judge did leave open the possibility that two groups -- Patriots Educating Concerned Americans Now of Redding, Calif. and the suburban Cincinnati Liberty Township Tea Party -- could still sue because the IRS failed to rule on their tax exemption application within 270 days. The judge gave the IRS 14 days to argue why that element of the lawsuit cannot go forward.

Because he dismissed the lawsuits on procedural grounds, Walton did not rule on the merits of the case. He wrote in a footnote: "The court's opinion should not be interpreted as an assessment of the propriety of the alleged conduct by the defendants."

True the Vote:  Press Release:

"The Court today correctly acknowledged that the IRS targeted True the Vote because of its perceived political beliefs," True the Vote President Catherine Engelbrecht said. “Such conduct is reprehensible and should never be acceptable in a free society. Despite this critical finding, we are stunned and disappointed in the court’s ruling which nevertheless dismisses our case. We will be evaluating our legal options and will announce our intent in that regard soon.”

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October 24, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Thursday, October 23, 2014

Whistleblowers: IRS Officials Behind ‘Fraudulent’ Multi-Billion Dollar Corporate Tax Giveaways

IRS Whistleblower (2014)Raw Story:  Whistleblowers: IRS Officials Behind ‘Fraudulent’ Multi-Billion Dollar Corporate Tax Giveaways:

A 10-year veteran IRS attorney has demanded a Congressional audit of the IRS to investigate the agency’s alleged role in allowing American corporations to illegally avoid paying billions of dollars in taxes at the same time the agency is cracking down on individuals and small businesses.

In a letter to Treasury Secretary Jacob Lew, IRS commissioner John A. Koskinen, and IRS chief counsel William Wilkins, Jane J. Kim, an attorney in the IRS Office of the Chief Counsel in New York, accused IRS executives of “deliberately” facilitating multi-billion dollar tax giveaways. The letter, dated October 19, will add further pressure on the agency, which is under fire for allegedly targeting conservative and Tea Party groups.

Kim, who has previously blown the whistle on “gross waste of government resources” in the IRS New York field offices [Senior IRS Lawyer Charges Chief Counsel's New York Office With Waste and Abuse], wrote in her new letter that senior IRS officials have “intentionally undermined the authority of the IRS Whistleblower Office” to avoid taking action “in cases involving billions in corporate taxes due.” The IRS also refuses to enforce laws for “large corporate taxpayers,” resulting in giveaways of further billions, despite applying the same laws with “draconian strictness to small business, the self-employed, and wage-earning individuals.”  ...

Following coverage of her earlier allegations by Pulitzer Prize winning tax journalist David Cay Johnston, Kim was approached by a private sector lawyer representing corporate whistleblowers to the IRS, who told her that numerous legitimate investigations into corporate tax fraud were being shut down. Her letter sent on Sunday to the US Treasury and IRS described three such cases. ...

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October 23, 2014 in IRS News, Tax | Permalink | Comments (7)