TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Wednesday, June 8, 2016

IRS Reopens Transcript Service With More Rigorous e-Authentication, But 70% Of Taxpayers Will Be Unable To Access Their Accounts; TIGTA Identifies Additional 600,000 Taxpayer Victims In Hack Of Prior System

ID TheftFollowing up on my previous posts on security problems with the IRS website (links below):

IR-2016-85, IRS Launches More Rigorous e-Authentication Process and Get Transcript Online (June 7, 2016):

With the assistance of top digital experts at U.S. Digital Service and other security authorities, the Internal Revenue Service today launched a more rigorous e-authentication process for taxpayers that will significantly increase protection against identity thieves impersonating taxpayers to access tax return information through the IRS Get Transcript online service.  This enhanced authentication process will also provide a foundation for additional IRS self-help services in the future.

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June 8, 2016 in IRS News | Permalink | Comments (0)

IRS Closes Door On REIT Spin-Offs

REITWall Street Journal, IRS Shuts Down Remaining Channels for REIT Spinoffs:

The Internal Revenue Service shut down an apparent gap in a tax law that otherwise could have allowed companies across industries to continue spinning off their property holdings into tax-advantaged real-estate investment trusts.

The December law was written in response to a wave of deals by retailers, hotels and others that sought the tax-beneficial status of being a real-estate investment trust, or REIT. The law banned companies created in tax-free spinoffs from electing REIT status for 10 years after the transaction. But the law didn’t prevent spun-off companies from merging into an existing REIT, among other possible workarounds.

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

The IRS Scandal, Day 1126

IRS Logo 2Wall Street Journal:  The IRS’s Ugly Business as Usual, by Kimberly A. Strassel:

‘How much has really changed?’ a judge asks. Answer: not much. The scandal goes on.

Amid the drama that is today’s presidential race, serious subjects are getting short shrift. No one is happier about this than Barack Obama. And no agency within that president’s administration is more ecstatic than the Internal Revenue Service.

That tax authority’s targeting of conservative nonprofits ranks as one of the worst federal scandals in modern history. It is topped only by the outrage that no one has been held to account. Or perhaps by the news that the targeting continues to this day.

That detail became clear in an extraordinary recent court hearing, in front of a panel of judges for the D.C. Circuit Court of Appeals. The paired cases in the hearing were Linchpins of Liberty, et al. v. United States of America, et al. and True the Vote Inc. v. Internal Revenue Service, et al. They involve several conservative nonprofits—there are 41 in Linchpin—that were, as they said, rounded up and “branded” by the IRS. The groups are still suffering harm, and they want justice. 

A lower-court judge had blithely accepted the IRS’s claim that the targeting had stopped, that applications for nonprofit status had been approved, and that the matter was therefore moot.

The federal judges hearing the appeal, among them David B. Sentelle and Douglas H. Ginsburg, weren’t so easily rolled. In a series of probing questions the judges ascertained that at least two of the groups that are party to the lawsuit have still not received their nonprofit approvals. The judges determined that those two groups are 501(c)(4) social-welfare groups, which are subject to far less scrutiny than 501(c)(3) charities, yet are still being harassed by the IRS five years later. The judges were told that not only are the groups still on ice, but that their actions are still being “monitored” by the federal government.

The hearing also showed the degree to which the IRS has doubled down on its outrageous revisionist history, and its excuses. IRS lawyers again claimed that the whole targeting affair came down to bad “training” and bad “guidance.” They blew off a Government Accountability Office report that last year found the IRS still had procedures that would allow it to unfairly select organizations for examinations based on religious or political viewpoint. The lawyers’ argument: We wouldn’t do such a thing. Again. Trust us.

More incredibly, the IRS team claimed that the fault for some of the scandal rests with the conservative groups, for not pushing back hard enough during the targeting. ...

At one point, an incredulous Judge Sentelle noted that the IRS might be more believable if it had ever shown “a bit more contrition.” He said: “The Court would have to be awfully ignorant not to recognize that there has likely been an egregious violation of the First Amendment rights of American citizens by the IRS, and the IRS to this day seems very resistant to acknowledgment of that.”

An IRS lawyer rolled out the defense used by former agency official Lois Lerner that the targeting was just the unfortunate use of “inappropriate” criteria, but Judge Sentelle reminded the lawyer of the IRS’s vindictiveness. He noted that on one occasion the IRS simply shelved the application of an organization that had sued it. The agency “came to Court not having done anything to eliminate” the problem, he said, so “It’s just hard to find the IRS to be an agency we can trust, isn’t it?”

Judge Sentelle said there is a “pretty good case” that “egregious violations of the Constitution” had been committed, and he dared an IRS lawyer to “stand there with a straight face” and say otherwise. Judge Ginsburg, who spent the hearing catching out the IRS’s conflicting statements, at one point simply asked: “How much has really changed?”

Answer: not much. It was good news, then, that the House Judiciary Committee recently announced it will hold two hearings to examine the conduct of IRS Commissioner John Koskinen in this matter. Donald Trump, as the presumptive GOP nominee, could do worse than to use his megaphone to draw attention to the hearings. The IRS scandal needs to remain a story.

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June 8, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Tuesday, June 7, 2016

IRS:  Fines Paid To FINRA Are Not Tax Deductible

FinraWall Street Journal, IRS Says Fines Paid to Finra Aren’t Tax-Deductible:

The Internal Revenue Service has ruled that fines and penalties paid to the securities industry’s self-regulatory organization shouldn’t be considered tax-deductible, a stance that could cost financial firms that settle matters with the regulator. [C.C.A. 2016-23-006 (May 2, 2016)]

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

The IRS Scandal, Day 1125

IRS Logo 2Wall Street Journal editorial, The IRS Hit List: The Agency Finally Discloses the Groups It Politically Targeted:

Three years on, the Internal Revenue Service has finally handed over its list of the organizations the agency’s tax-exempt division targeted for their political views. All it took to shake the disclosure from the agency were dozens of lawsuits and a federal appeals-court order.

In a court filing last month, the IRS produced a list of 426 groups that were singled out for special scrutiny and in some cases had approval of their application for tax-exempt status delayed. ... The list doesn’t include 40 groups that have already opted out of the suit, so the actual number targeted is 466. The lawsuit’s goal is to find out how the targeting occurred and to seek damages for “viewpoint discrimination,” among other legal violations.

The IRS hasn’t explained why its number is so much higher than the 298 groups that Treasury Inspector General Russell George identified in his 2013 audit that disclosed the targeting. The latest list also contains more liberal groups than Mr. George’s original report mentioned.

Mark Meckler, president of Citizens for Self Governance, which is financing the NorCal lawsuit, suspects this is more proof of IRS misbehavior: “I think what more discovery will show is that once the IRS came under fire, it started adding [liberal] names to obfuscate what it was doing.”

The agency wouldn’t have turned over even these names if not for the Sixth Circuit Court of Appeals, which in March excoriated the IRS for stonewalling on NorCal’s discovery request and ordered the list’s release. The Senate voted to confirm IRS Commissioner John Koskinen in 2013 only after he promised to clean up the agency, yet on his watch the bureaucracy has resisted efforts by Congress and the courts to investigate the scandal. In this case, and others, the tax agency has earned all of the public enmity that comes its way.

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

Monday, June 6, 2016

The IRS Scandal, Day 1124

IRS Logo 2Washington Times, IRS Finally Reveals List of Tea Party Groups Targeted for Extra Scrutiny:

More than three years after it admitted to targeting tea party groups for intrusive scrutiny, the IRS has finally released a near-complete list of the organizations it snagged in a political dragnet.

The tax agency filed the list last month as part of a court case after a series of federal judges, fed up with what they said was the agency’s stonewalling, ordered it to get a move on. The case is a class-action lawsuit, so the list of names is critical to knowing the scope of those who would have a claim against the IRS.

But even as it answers some questions, the list raises others, including exactly when the targeting stopped, and how broadly the tax agency drew its net when it went after nonprofits for unusual scrutiny.

The government released names of 426 organizations. Another 40 were not released as part of the list because they had already opted out of being part of the class-action suit. ...

Edward D. Greim, the lawyer who’s pursuing the case on behalf of NorCal Tea Party Patriots and other members of the class, said the list also could have ballooned toward the end of the targeting as the IRS, once it knew it was being investigated, snagged more liberal groups in its operations to try to soften perceptions of political bias.

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June 6, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Sunday, June 5, 2016

The IRS Scandal, Day 1123

IRS Logo 2Fox News op-ed:  The Case for Impeaching the IRS Commissioner, by Jim Jordan (R-OH) & Ron DeSantis (R-FL):

Civil servants like Mr. Koskinen have historically been held to a higher standard than private citizens because they have fiduciary obligations to the public. Under Mr. Koskinen’s leadership, the IRS has breached these basic fiduciary responsibilities.

Alexander Hamilton wrote in Federalist No. 65 that the power to impeach a civil servant would protect the public against “the abuse or violation of some public trust.” At nearly every turn, Koskinen both abused his power and violated the public’s trust in the IRS.

For years, the IRS abused its far-reaching power to systematically target groups based on their political views—a fundamental violation of American citizens’ First Amendment rights. 

In response to mass public outcry over this abuse of power, Congress called Lois Lerner, then-director of the IRS’s exempt-organizations unit, to explain her agency’s actions. Instead, she pled the Fifth Amendment.

Since the revelation that the IRS systematically targeted conservatives for years based on their beliefs, the agency—under Koskinen’s watch—has done virtually nothing to reform internal protocol to ensure that every Americans’ First Amendment rights are protected.

A Government Accountability Office report found that no significant measures have been implemented to ensure that civil servants at the IRS don’t unlawfully target Americans based on their political or religious views.

Congress has the duty to hold Commissioner Koskinen accountable for failing to live up to his obligations of service to the American people. As even President Obama has said, we must help restore confidence going forward.

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June 5, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, June 4, 2016

The IRS Scandal, Day 1122

IRS Logo 2Washington Examiner, IRS: White House Never Asked for Secret Information on Taxpayers:

The White House never requested any secret taxpayer information from the IRS, the tax agency said in a sworn statement filed with a federal court on Friday, hoping to put to rest lingering questions about whether political operatives tried to peek at confidential records.

IRS lawyer Sarah Tate said she searched all of the likely places where such requests would have been catalogued and concluded that the White House “has never requested or received return information of any taxpayer.” ...

[C]onservative groups had suspected a release had happened after a top White House economic official seemed to discuss the tax status of Koch Industries in 2010. They demanded the IRS disclose whether the White House had ever requested information about Koch or any other taxpayer.

The IRS’s inspector general conducted an investigation but refused to say what it found, so Cause of Action, a pressure group, filed an open-records request and eventually sued the IG and the IRS itself in 2012, demanding they release records.

A federal judge ruled that the IRS did have to search for any records, and the tax agency finally complied earlier this year, leading to Friday’s court filing.

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June 4, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Friday, June 3, 2016

The IRS Scandal, Day 1121

IRS Logo 2U.S. News & World Report:  The IRS Impeachment Farce: Republicans Are Just Scoring Political Points, Not Actually Trying to Improve the Tax Collecting Agency, by Pat Garofalo (Assistant Managing Editor, U.S. News & World Report):

For years now, House Republicans have been waging a seemingly endless crusade to bring the IRS to heel for, well, something or other.

Once upon a time, the foundation of the case against America's tax collecting agency was that it had allegedly singled out for undue scrutiny conservative groups that were applying for tax-exempt status. Any actual principles at stake, though, have long since been lost among a haze of accusations, subpoenas, faux hearings, contempt votes and, currently, an attempt to impeach IRS chief John Koskinen, who was not even an IRS employee at the time of the misdeeds Republicans are apparently so irate about.

There were assuredly some bad decisions made by the IRS back before the "targeting" issue broke, though the context at the time – a flood of applications from tea party-type organizations supposedly incensed at Obama-era policy, alongside more and more money pouring into the political system following the Supreme Court's Citizens United ruling – lends credence to the theory that the "targeting" was more about clunky attempts at efficiency than partisan politicking. If that episode had ended in something productive, though, then fair enough. The whole brouhaha might have done a bit of good.

But the GOP's current actions leave little doubt that, if there was ever an actual issue worth highlighting here, it has long since been eclipsed by electoral point-scoring at the expense of an arm of the government that's very easy to turn into a political punching bag.

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

Thursday, June 2, 2016

99-Year-Old Former IRS Commissioner Mortimer Caplin On Life And Taxes

CaplinWall Street Journal, Q&A: 99-Year-Old Former IRS Commissioner Mortimer Caplin on Life and Taxes:

Mortimer Caplin has been watching the drama around the Internal Revenue Service since 2013 with the perspective of someone who has seen it all before, because he has. Mr. Caplin, who will turn 100 years old in July, ran the U.S. tax agency from 1961 to 1964 before becoming a founding member of the Caplin & Drysdale law firm in Washington.

He spoke to Real Time Economics about the IRS and how tax law has changed over time. Here are excerpts from the conversation:

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June 2, 2016 in IRS News | Permalink | Comments (0)

IRS Releases Spring 2016 SOI Bulletin

The IRS Scandal, Day 1120

IRS Logo 2Politico, How the GOP Effort to Oust IRS Chief Could Backfire, by Rachel Bade & Katy O'Donnell:

For over a year, House conservatives have been clamoring to remove IRS Commissioner John Koskinen. But now that the impeachment process is moving forward, they face a delicate decision: Are they willing to toss 200-plus years of precedent to bring him down?

If House conservatives press ahead with an impeachment of the embattled tax chief, they’d be voting to remove a relatively low-level executive-branch leader for one of the most minor offenses in American history, several impeachment experts told Politico. That decision could, effectively, lower the threshold for congressional punishment of an executive-branch authority from here on out — and ensure a wave of new proceedings against government officials who have tangled with Congress in the past.

Impeachment has typically been used to punish treason, bribery and other “high crimes” in the top echelons of government. But Koskinen’s impeachment — based on an argument that he failed to comply with a congressional subpoena — would effectively expand that definition to include gross incompetence.

It’s never been done before.

“Nobody has ever been impeached for what we’ll call ‘gross negligence.’ … It has never, in our entire history, despite all the partisan difference, been the basis for impeachment in the past,” said North Carolina School of Law professor Michael Gerhardt, an impeachment expert who has testified before Congress on the matter.

And that, experts say, could touch off a rash of impeachment proceedings, as Hill investigators line up to take on other agency heads who have crossed them. ...

[A]n impeachment of Koskinen, even just in the House, would be rare. Almost all the officials the House has acted against were judges. And two — Andrew Johnson and Bill Clinton — were presidents. Only once, 140 years ago, in 1876, did the House move to impeach an agency chief, Secretary of War William Belknap, on charges of corruption.

Even then, Belknap was an official Cabinet member, unlike Koskinen, and Congress’ historical-research arm suggests that there’s still an open question about whether Congress can impeach someone below the Cabinet level.

“A question which precedent has not thus far addressed is whether Congress may impeach and remove subordinate, non-Cabinet level executive branch officials,” reads a Congressional Research Service study on impeachment from last October. “Historical precedent provides no examples of the impeachment power being used against lower-level executive officials.”

Experts think the House can easily get around that argument to make the case that Koskinen may be impeached, even though impeaching an executive below the presidential level is unusual.

But outside experts say the actual case against Koskinen is relatively weak — and troubling as a precedent. The House Judiciary Committee is slated to debate the case in the coming days.

Republicans have two key arguments against Koskinen: that he failed to comply with a subpoena and misled Congress. On Koskinen’s watch, lower-level IRS employees deleted backup tapes that were central to a congressional investigation about the way conservative groups were treated at the IRS — well after Congress asked for them.

While some conservatives suspect a coverup, the best case they can argue against him is that Koskinen did not do the responsible thing in ensuring all his people understood top-level instructions that they were supposed to preserve those files.

He also failed to notify Congress about the issue for more than four months, something Oversight Chairman Jason Chaffetz (R-Utah) has argued amounts to lying. ...

[E]xperts still aren’t sure that gross mismanagement constitutes a “high crime.” Gerhardt said it could, but only if the House can prove some sort of ill will or bad intent on Koskinen’s part.

“If someone were acting in good faith and made a mistake … we don’t use impeachment for that. But if someone was deliberately trying to obstruct justice like, say [President] Richard Nixon, then we say, OK, that’s bad intent and bad misconduct, providing the right level for impeachment,” he said.

The problem, he continued, is that Congress has to prove ill will, and he’s not sure it can do that in Koskinen’s case.

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

Wednesday, June 1, 2016

The IRS Scandal, Day 1119

IRS Logo 2Des Moines Register editorial, Facts Fail to Support IRS Impeachment Effort:

The aphorism known as Hanlon’s razor dictates that one should never attribute to malice that which is adequately explained by stupidity.

Where some people see evil intent and conspiracies behind every misdeed, the more likely explanation is good old-fashioned incompetence. That's particularly true in Washington, D.C., where, despite the political machinations that seem to drive every decision, bureaucratic bungling is responsible for most of the federal government's sins.

Even so, some Republican leaders in the House believe IRS Commissioner John Koskinen has engaged in a long-running effort to deceive Congress and the public. As they see it, Koskinen should be impeached for his response to claims that the agency targeted conservative organizations that sought tax-exempt status. ...

The Justice Department investigated the matter for two years and ultimately concluded that there was no evidence that IRS officials had acted out of political bias in focusing on any organizations, conservative or otherwise.

Given all of that, the effort to impeach Koskinen appears to be a face-saving move by Chaffetz to justify his fruitless, six-year campaign to demonize the IRS for political bias.

Even Fred Goldberg, who served as IRS commissioner under the first President George Bush, says Chaffetz’s allegations are “preposterous” and calls the impeachment effort “way over the line.”

When it comes to abuse of power, Chaffetz has more to answer for than Koskinen.

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June 1, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (9)

Tuesday, May 31, 2016

NY Times:  In Secret Meeting At White House, IRS Officials Pressed On ObamaCare Subsidies

New York Times, In a Secret Meeting, Revelations on the Battle Over Health Care:

On Jan. 13, 2014, a team of Internal Revenue Service financial managers piled into government vans and headed to the Old Executive Office Building for what would turn out to be a very unusual meeting.

Upon arrival, the I.R.S. officials, some of whom had expressed doubts that the Obama administration had the proper authority to spend billions of dollars on a crucial element of its health care law, were ushered into a conference room.

There, they were presented with an Office of Management and Budget memo laying out the administration’s justification for spending $3.9 billion on consumer health insurance subsidies. They were told they could read it but could not take notes or make copies. The O.M.B. officials left the room to allow their visitors a moment to absorb the document, and then returned to answer a few questions and note that Attorney General Eric H. Holder Jr. had been briefed and signed off on the legal rationale.

“It was not a common practice in my 10 years in government at the three agencies where I worked,” said David Fisher, a former I.R.S. financial risk officer, recounting the odd meeting during a deposition on May 11 conducted by investigators for the House Ways and Means Committee.

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May 31, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

NY Times:  IRS Ruling Is Obstacle To Health Care Networks Promoted By Obama

New York Times, I.R.S. Ruling Is Obstacle to Health Care Networks Promoted by Obama:

A ruling by the Internal Revenue Service creates a significant obstacle to a new type of health care network that the Obama administration has promoted as a way to provide better care at lower cost, industry lawyers and providers say.

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May 31, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

The IRS Scandal, Day 1118

IRS Logo 2Wall Street Journal op-ed:  Clinton Embodies Washington’s Decadence, by Peggy Noonan:

She breaks the rules and gets away with it every time. No wonder voters are fed up. ...

The lack of backlash against Mr. Trump’s attacks on Mrs. Clinton, though, I suspect is due to something else. It’s that the subject matter really comes down to one word: decadence. People right now will respect a political leader who will name and define what they themselves see as the utter decadence of Washington. ...

[T]he real decadence Americans see when they look at Washington is an utterly decadent system. Just one famous example from the past few years: 

A high official in the IRS named Lois Lerner targets those she finds politically hateful. IRS officials are in the White House a lot, which oddly enough finds the same people hateful. News of the IRS targeting is about to break because an inspector general is on the case, so Ms. Lerner plants a question at a conference, answers with a rehearsed lie, tries to pin the scandal on workers in a cubicle farm in Cincinnati, lies some more, gets called into Congress, takes the Fifth—and then retires with full pension and benefits, bonuses intact. Taxpayers will be footing the bill for years for the woman who in some cases targeted them, and blew up the reputation of the IRS.

Why wouldn’t Americans think the system is rigged?

This is Washington in our era: a place not so much of personal as of civic decadence, where the Lois Lerner always gets away with it.

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

Monday, May 30, 2016

The IRS Scandal, Day 1117

IRS Logo 2Congressional Research Service, Impeachment and Removal (R44260):

The impeachment process provides a mechanism for removal of the President, Vice President, and other “civil Officers of the United States” found to have engaged in “treason, bribery, or other high crimes and misdemeanors.” The Constitution places the responsibility and authority to determine whether to impeach an individual in the hands of the House of Representatives. Should a simple majority of the House approve articles of impeachment specifying the grounds upon which the impeachment is based, the matter is then presented to the Senate, to which the Constitution provides the sole power to try an impeachment. A conviction on any one of the articles of impeachment requires the support of a two-thirds majority of the Senators present.

Should a conviction occur, the Senate retains limited authority to determine the appropriate punishment. Under the Constitution, the penalty for conviction on an impeachable offense is limited to either removal from office, or removal and prohibition against holding any future offices of “honor, Trust or Profit under the United States.” Although removal from office would appear to flow automatically from conviction on an article of impeachment, a separate vote is necessary should the Senate deem it appropriate to disqualify the individual convicted from holding future federal offices of public trust. Approval of such a measure requires only the support of a simple majority.

Key Takeaways of This Report

  • The Constitution gives Congress the authority to impeach and remove the President, Vice President, and other federal “civil officers” upon a determination that such officers have engaged in treason, bribery, or other high crimes and misdemeanors.
  • A simple majority of the House is necessary to approve articles of impeachment.
  • If the Senate, by vote of a two-thirds majority, convicts the official on any article of impeachment, the result is removal from office and, at the Senate’s discretion, disqualification from holding future office.
  • The Constitution does not articulate who qualifies as a “civil officer.” Most impeachments have applied to federal judges. With regard to the executive branch, lesser functionaries—such as federal employees who belong to the civil service, do not exercise “significant authority,” and are not appointed by the President or an agency head—do not appear to be subject to impeachment. At the opposite end of the spectrum, it would appear that any official who qualifies as a principal officer, including a head of an agency such as a Secretary, Administrator, or Commissioner, is likely subject to impeachment.
  • Impeachable conduct does not appear to be limited to criminal behavior. Congress has identified three general types of conduct that constitute grounds for impeachment, although these categories should not be understood as exhaustive: (1) improperly exceeding or abusing the powers of the office; (2) behavior incompatible with the function and purpose of the office; and (3) misusing the office for an improper purpose or for personal gain.
  • The House has impeached 19 individuals: 15 federal judges, one Senator, one Cabinet member, and two Presidents. The Senate has conducted 16 full impeachment trials. Of these, eight individuals—all federal judges—were convicted by the Senate.

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

Sunday, May 29, 2016

The IRS Scandal, Day 1116

IRS Logo 2Bloomberg BNA, Conservative Group's IRS Targeting Claim Can Move Forward:

A conservative organization arguing the IRS targeted its application for tax-exempt status based on its political views demonstrated that its claim of unconstitutional targeting has merit, and can continue in federal district court.

The U.S. District Court for the Northern District of Texas on May 25 rejected the government's motion to dismiss Freedom Path Inc.'s First Amendment claim that the Internal Revenue Service subjected the group's applications for tax-exempt status to higher scrutiny, flagging groups that had “conservative sounding names.”

Freedom Path v. Lois Lerner, No. 3:14-CV-1537-D (N.D. TX May 25, 2016):

Freedom Path alleges that the federal defendants have denied its rights guaranteed by the First Amendment by targeting its application for tax-exemption and subjecting it to heightened scrutiny because of Freedom Path’s conservative viewpoint. Freedom Path points to the federal defendants’ “policy and practice of submitting [to Freedom Path] the unconstitutionally and overly intrusive requests for information” that caused an unreasonable delay in the determination of Freedom Path’s tax-exempt status.

The federal defendants contend that the conduct complained of in count IV has been remedied, and that Freedom Path’s claims are therefore moot. According to the federal defendants, the IRS no longer engages in heightened scrutiny nor issues improper requests for information. ...

Freedom Path complains that its application for tax-exemption has been unconstitutionally targeted and subjected to heightened scrutiny. Freedom Path also alleges that the IRS sent it inappropriate and unconstitutional requests for information.

Although the federal defendants have adduced some evidence that the IRS no longer uses BOLO lists and that the IRS has made efforts to train its employees on how to issue proper information requests, Freedom Path has demonstrated that its general complaints of unconstitutional targeting, heightened scrutiny, and improper requests for information still present a live controversy.

The cases on which the federal defendants rely—True the Vote and Linchpins of Liberty—were decided under distinguishable facts. In True the Vote the court held that the plaintiff’s allegations of unconstitutional targeting and heightened scrutiny were moot because the IRS had granted the plaintiff tax-exempt status.  Accordingly, the plaintiff’s injury claim was moot. ... In Linchpins of Liberty the plaintiff specifically complained of the use of BOLO lists, but it also alleged that the IRS was no longer using the lists. The termination of the complained-of conduct (the use of BOLO lists) therefore rendered the claim moot. In contrast, Freedom Path’s allegations in count IV are not limited to the use of BOLO lists, it has not pleaded that the BOLO lists are no longer in use, and its application for tax-exempt status has not been granted. The allegations of count IV are not moot. ...

The federal defendants contend that Freedom Path lacks constitutional standing, which requires that a litigant establish three elements: (1) an injury-in-fact that is concrete and actual or imminent, not hypothetical; (2) a fairly traceable causal link between the injury and the defendants’ actions; and (3) that the injury will likely be redressed by a favorable decision. ... The federal defendants maintain that Freedom Path lacks standing to bring the claims asserted in counts IV, VI, VII, and VIII because it has not alleged impending, future injury that is real and immediate rather than conjectural or hypothetical. ...

Freedom Path responds that it primarily complains of injury from the “multi-pronged offensive” and “larger pattern” of viewpoint discrimination in the application of Revenue Ruling 2004-6. It cites Z Street, Inc. v. Koskinen, 44 F.Supp.3d 48 (D.D.C. 2014), aff’d, 791 F.3d 24 (D.C. Cir. June 19, 2015), to demonstrate that it has no other recourse against defendants for their illegal scheme. ... Freedom Path alleges that while it awaits the determination of its tax-exempt status, it must “continue curtailing similar speech [to the Leader advertisement] in the future.” ...

Freedom Path has sufficiently pleaded future harm to establish injury in fact. ... It alleges that it will curtail its publication of advertisements similar to the Leader advertisement and that it has ceased raising funds and undertaking advocacy work because of uncertainty about how the IRS will apply Revenue Ruling 2004-6. The court denies the federal defendants’ motion to dismiss counts IV, VI, VII, and VIII based on alleged lack of standing.

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

Saturday, May 28, 2016

The IRS Scandal, Day 1115

IRS Logo 2Roll Call op-ed:  Impeachment of IRS Chief Is a Serious Misstep, by Stephen M. Ryan (McDermott Will & Emery, Washington, D.C.):

On November 9, 2017, well into the Clinton or Trump Administration, IRS Commissioner John Koskinen’s term will expire. Koskinen, like FBI Director James Comey, is a Senate-confirmed executive who has a term of office making him independent of the president’s term. Koskinen will be lauded at that time as a man of integrity who not only kept the IRS on life support while under constant attack but who provided the necessary leadership and integrity to drive the agency forward to better serve taxpayers.

Impeachment of federal office holders is reserved for those who commit high crimes or misdemeanors. Unfortunately, the House of Representatives seems determined to have a go at Koskinen for reasons that are political and unworthy of impeachment. ... Koskinen is an exemplary public official. He should be getting an award for his service, not this type of attention. He has not done anything wrong personally. Impeachment in the absence of crimes or unethical behavior, none of which has occurred here, is a dangerous precedent that has not been part of the U.S. experience and could dissuade experienced, competent executives like Koskinen from accepting appointment to senior management positions within government. ...

In essence, the claim is he failed to respond to lawfully issued congressional subpoenas and engaged in “a pattern of deception” in statements pertaining to the IRS production of emails, and failed to act with competence in overseeing the investigation into IRS’s treatment of conservative groups. The proponents’ case that Koskinen committed high crimes and misdemeanors depends upon issues he did not control. But Koskinen wasn’t even at the IRS when the scandal occurred, and he certainly was not leading the search for documents to respond to congressional requests. Republican members of Congress are rightfully upset that IRS employees in West Virginia magnetically erased hundreds of backup tapes in March 2014, destroying some of former IRS official Lois Lerner’s emails. While IRS recycling the backup tapes was dumb as a bag of hammers, Koskinen did not engage in that activity.

Can these alleged transgressions by the IRS be attributed to the new commissioner or rise to the level of an impeachable offense by him or contempt of Congress? Clearly, the answer is no. ...

Koskinen is what he appears to be — an exemplary public servant who heads an agency in disarray; while his 76-year-old peers are fishing or golfing. People with Koskinen’s skill-set are incredibly hard to find in public service. One can only hope that this impeachment resolution — and the personal nature of its assertions — won’t cause others to turn away from public service, depriving the government of the seasoned, competent executives that it desperately needs.

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May 28, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, May 27, 2016

GAO:  IRS's 1950s Computer System Is Federal Government's Oldest, Putting Taxpayer Information At Risk

GAO (2016)Government Accountability Office, Federal Agencies Need to Address Aging Legacy Systems (GAO- 16-696T):

Federal legacy IT investments are becoming increasingly obsolete: many use outdated software languages and hardware parts that are unsupported. Agencies reported using several systems that have components that are, in some cases, at least 50 years old. For example, ... the Department of the Treasury uses assembly language code—a computer language initially used in the 1950s and typically tied to the hardware for which it was developed.  ... The following table provides examples of legacy systems across the federal government that agencies report are 30 years or older and use obsolete software or hardware, and identifies those that do not have specific plans with time frames to modernize or replace these investments.

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May 27, 2016 in Gov't Reports, IRS News, Tax | Permalink | Comments (4)

The IRS Scandal, Day 1114

IRS Logo 2Wall Street Journal editorial, Instant Document Destruction at the IRS:

Has the Internal Revenue Service been systematically evading federal record-keeping laws? On Monday the Cause of Action Institute sued the IRS and commissioner John Koskinen for refusing to preserve electronic employee communications that concern official business.

Cause of Action says that in 2010 the IRS struck a little-noticed agreement with the National Treasury Employees Union not to record employees’ instant messages. The watchdog group also says that in response to its Freedom of Information Act requests for text messages sent by senior IRS officials, the agency replied that due to “routine system housekeeping” and “spacing constraints,” IRS text messages are retained for only 14 days before they are deleted.

Both actions appear to violate the Federal Records Act that requires agencies to preserve all relevant documents. The agency says it retains emails, at least those that don’t disappear in mysterious computer crashes. But if employees can send text messages and not save them, they can avoid records retention. “No agreement with a union or any other party can supersede Americans’ right to know how the IRS makes decisions,” says Cause of Action. “In addition, the IRS is violating the law by regularly deleting all employee text messages as a matter of convenience.”

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

Thursday, May 26, 2016

The IRS Scandal, Day 1113

IRS Logo 2New York Post editorial, The IRS Boss Is Just Begging To Be Impeached:

Four years after the IRS hobbled conservative groups by targeting them for extra scrutiny, the agency’s still playing politics.

No wonder Congress is looking to impeach its boss, John Koskinen.

At a House Judiciary Committee hearing Tuesday, Republican lawmakers gave specific reasons for their move: his lies under oath, his flouting of a congressional subpoena — and his repeated defiance.

Koskinen’s response? Ha! He didn’t even bother to show up.

Koskinen was supposed to “fix” the IRS after the scandal erupted over targeting conservatives. Yet his real purpose seemed to be running interference, covering up information and shielding the agency (and Team Obama) from consequences.

Shockingly, he and his agency are continuing that pattern to this day: A lawsuit filed Monday by the Cause of Action Institute accuses the IRS and its boss of refusing to preserve official business electronic communications, as required by law.

Bloomberg View editorial, Impeaching IRS Director A Sham:

Pity John Koskinen, who agreed to take one of the worst jobs in America and is now being punished for it.

In 2013, President Barack Obama asked Koskinen to take over at the Internal Revenue Service amid budgetary chaos, deteriorating morale and a simmering scandal. House Republicans, still angry about that scandal -- and about the concept of taxation generally -- are now trying to impeach him.

Their case is weak, and the ultimate loser in this sorry spectacle won't be Koskinen.

Start with the scandal. An inspector general report in 2013 found that IRS employees had been improperly scrutinizing conservative groups seeking tax-exempt status. This was wrong, and blame was duly apportioned. The agency's boss resigned, a top deputy retired, and the director of the offending unit was placed on leave and declared in contempt of Congress. Half a dozen congressional committees vowed to fumigate every pixel of offending detail. One managed to produce an 8,000-page report. The Justice Department investigated (and found no evidence of criminality).

But you have to get up pretty early in the morning to outfox the House Oversight and Government Reform Committee. Representative Jason Chaffetz of Utah, the committee's chairman, has made a professional specialty of berating civil servants. He appears to view Koskinen -- who, recall, joined the agency after this scandal -- as obstructing further investigation.

The specific allegations Chaffetz has adduced hardly add up to high crimes and misdemeanors. At worst, they portray mild bureaucratic ineptitude. And removing Koskinen from office stands no chance in legislative reality. Nothing's shaking on Shakedown Street, as they used to say.

Actually impeaching Koskinen -- a punishment not invoked against an executive-branch appointee since Ulysses S. Grant occupied the White House -- probably isn't the objective anyway. The point is to embarrass the IRS. And congressional Republicans have already done a fine job of that by slashing the agency's budget while helping to vastly expand its responsibilities, with predictably frustrating results.

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May 26, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Wednesday, May 25, 2016

House Holds Hearing Today On Protecting Small Businesses From IRS Abuse

Ways & Means (2016)The Oversight Subcommittee of the House Ways & Means Committee holds a hearing today on Protecting Small Businesses from IRS Abuse, Part II:

[T]he Subcommittee will hold a follow-up hearing to Protecting Small Businesses from IRS Abuse, where members examined how the Internal Revenue Service wrongly used its authority to seize taxpayer dollars and harm small businesses. Despite continued oversight, the Internal Revenue Service (IRS) and Department of Justice (DOJ) have failed to answer the Subcommittee’s questions about how they will help those who were hurt by the agencies’ former policies. At the hearing next week, Members will hear from people whose bank accounts were seized years ago and who are still trying to get their money back. Members will also hear from the IRS and DOJ about what the agencies are doing to address IRS abuse and help those who have been harmed by it.

Panel #1:

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May 25, 2016 in Congressional News, IRS News, Tax | Permalink | Comments (2)

The IRS Scandal, Day 1112

IRS Logo 2Washington Post, Republicans Detail Case Against IRS Chief in Hearing Democrats Call a Sham:

House Republicans on Tuesday reprised their probe into four-year-old missteps by the Internal Revenue Service, making a detailed case why Commissioner John Koskinen should be impeached in a colorful hearing that underscored conservatives’ suspicion of the agency.

The two-and-a-half hour hearing, on accusations that Koskinen lied under oath to lawmakers and flouted a congressional subpoena, also was a reminder of a bitterly divided Congress. Few Democrats showed up for the proceeding before the House Judiciary Committee, but those who did said Republicans were wasting taxpayers’ time and grandstanding on an old issue that would go nowhere.

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May 25, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, May 24, 2016

The IRS Scandal, Day 1111

IRS Logo 2The House Judiciary Committee holds a hearing today on Examining the Allegations of Misconduct Against IRS Commissioner John Koskinen, Part I:

At the hearing, members of the House Judiciary Committee will examine the findings of the House Oversight and Government Reform Committee’s investigation of IRS Commissioner Koskinen. The House Oversight and Government Reform Committee has investigated the targeting of conservative groups for several years and many of the Committee’s members have found that Commissioner Koskinen failed to comply with a congressional subpoena which resulted in destruction of key evidence, made false statements during his sworn congressional testimony, and did not notify Congress that Lois Lerner’s emails were missing.

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May 24, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Monday, May 23, 2016

The IRS Scandal, Day 1110

IRS Logo 2USA Today op-ed:  When Leaders Cheat, Followers ... Follow, by Glenn Reynolds (Tennessee):

The trust that underlies a law-abiding society is rotting away thanks to double-dealing in Washington.

The state is “a gang of thieves writ large,” economist Murray Rothbard is said to have remarked. I’ve always viewed that sort of comment with a bit of skepticism. But now I’m beginning to wonder.

I wonder more when I read things like this report from the Washington Examiner: “The CIA's inspector general is claiming it inadvertently destroyed its only copy of a classified, three-volume Senate report on torture, prompting a leading senator to ask for reassurance that it was in fact ‘an accident.’”

Here’s a hint: It very likely wasn’t.

Is that unfair? I mean, it could have been an accident, right? Yeah it could have been. But it wasn’t. Accidents like that just don’t happen — or, when they do, they’re generally not accidents. And it’s right for people who have custody of evidence to know that any convenient “accidents” will give rise to the presumption that they had something pretty awful to hide, and that they hid it.

But, of course, the CIA’s “accident” was only the latest in a long rash of “accidental” losses of incriminating information in this administration. The IRS — whose Tea Party-targeting scandal is now over 1,100 days old without anyone being charged or sent to jail — seems to have a habit of ”accidentally” destroying hard drives containing potentially incriminating evidence. It has done so in spite of court orders, in spite of Congressional inquiries and in spite of pretty much everyone’s belief that these “accidents” were actually the deliberate, illegal destruction of incriminating evidence to protect the guilty.

Then there’s Hillary’s email scandal, in which emails kept on a private unsecure server — presumably to avoid Freedom of Information Act disclosures — were deleted. Now emails from Hillary’s IT guy, who is believed to have set up the server, have gone poof.

“Destroy the evidence, and you’ve got it made,” said an old frozen dinner commercial. But now that appears to be the motto of the United States government.

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

Sunday, May 22, 2016

The IRS Scandal, Day 1109

IRS Logo 2The Maddow Blog:  Republicans Get Serious About Impeachment, But Not Obama’s, by Steve Benen:

Quick quiz: when was the last time the U.S. Congress actually impeached an appointed executive branch official? It was 1876 – 140 years ago – when the House impeached Ulysses S. Grant’s War Secretary, William Belknap, over corruption allegations.

Nearly a century and a half later, House Republicans appear eager to give Belknap some company. The Washington Post reported yesterday:

Rep. Jason Chaffetz (R-Utah) introduced a resolution on Wednesday to censure IRS Commissioner John Koskinen, raising the stakes in the GOP war against the tax collector days before a hearing on whether to impeach him.

The four-page resolution seeks Koskinen’s resignation or removal by President Obama and calls on the IRS chief to forfeit his federal pension.

Chaffetz, the far-right chairman of the House Oversight Committee, explained in a statement yesterday, “I view censure as a precursor to impeachment.” He added a few weeks ago, “My foremost goal is impeachment and I’m not letting go of it.”

No, of course not. That might be responsible.

By any sane metric, the idea of congressional impeachment against the IRS commissioner is bonkers. House Republicans are apparently still worked up about an IRS “scandal” that doesn’t exist, and though Koskinen wasn’t even at the agency at the time of the alleged wrongdoing, GOP lawmakers want to impeach him because they disapprove of his handling of the imaginary controversy. ...

[G]iven the fact that Koskinen hasn’t actually committed any impeachable offenses, it’s hard not to get the impression that many House Republicans want to impeach someone, anyone, just for the sake of being able to say they impeached someone. ...

I continue to believe much of this is borne of partisan frustration: Republican investigations into Benghazi and other manufactured “scandals,” including the IRS matter itself, have effectively evaporated into nothing. That’s deeply unsatisfying to GOP hardliners, who remain convinced there’s Obama administration wrongdoing lurking right around the corner, even if they can’t see it, find it, prove it, or substantiate it any way.

Unwilling to move on empty handed, impeaching the IRS chief will, if nothing else, make Republican lawmakers feel better about themselves.

But that doesn’t change the fact that this partisan tantrum is indefensible. Koskinen took on the job of improving the IRS out of a sense of duty – the president asked this veteran public official to tackle a thankless task, and Koskinen reluctantly agreed. For his trouble, Republicans want to impeach him, for reasons even they’ve struggled to explain.

It’s ridiculous, even by the low standards of this Congress.

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

Saturday, May 21, 2016

The IRS Scandal, Day 1108

IRS Logo 2Forbes:  IRS Commissioner's Smidgen Of Impeachment, by Robert W. Wood:

The House Judiciary Committee meets May 24, 2016 to consider IRS Commissioner John Koskinen. As Don Corleone said to the Heads of the Five Families, “How did things ever get so far?“ President Obama was less than convincing with his famous “not even a smidgen of corruption” remark about the IRS to Fox News in 2014. There were just some folks down at the IRS who were “confused” about how to implement the law governing tax-exempt groups. “Confused” sounded better than the one about the rogue IRS employees in Cincinnati. 

Now, House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-UT) introduced House Resolution 737 to censure IRS Commissioner Koskinen. The resolution offers Congressional condemnation and disapproval for what it claims is the IRS Commissioner’s pattern of conduct. It says that is inconsistent with the trust and confidence placed in him as an Officer of the United States. The resolution formally censures Mr. Koskinen, urges his resignation or removal, and even requires him to forfeit all rights to his government pension and other federal benefits. ...

This has been a long battle. Indeed, Chairman Chaffetz and 51 members of Congress sent a letter to President Obama in July of 2015 calling for the IRS Commissioner’s removal. On October 27, 2015, Chairman Chaffetz introduced H.J. Res. 494  to begin proceedings to impeach Koskinen. Referred to the House Judiciary Committee, it currently has 69 co-sponsors. The Committee even released a video with a timeline of key events in the IRS targeting scandal.

House Republicans still want action. Some of the anti-IRS movement is arguably due to the seething animosity some Republicans still have over the targeting, and the way the IRS chief handled it. A raft of scandals involving the IRS, poor and even evasive responses to Congress, bungled approaches to security, and a seeming diffidence to the public and concerned legislators have not won the IRS any friends. For Republicans, the IRS Commissioner has been a lightning rod. ...

Despite all the hoopla, Commissioner Koskinen is still probably safe. In the meantime, Republicans have pushed to pass laws slashing IRS power. President Obama has said he will veto bills that cut back on IRS budgets or power. Supporters say that the goal of such laws is to help improve customer service, prevent fraud, and ensure taxpayer dollars are being spent appropriately.

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

Friday, May 20, 2016

The IRS Scandal, Day 1107

IRS Logo 2Wall Street Journal:  The IRS’s Ugly Business as Usual: ‘How Much Has Really Changed?’ A Judge Asks. Answer: Not Much. The Scandal Goes On., by Kimberley A. Strassel:

Amid the drama that is today’s presidential race, serious subjects are getting short shrift. No one is happier about this than Barack Obama. And no agency within that president’s administration is more ecstatic than the Internal Revenue Service.

That tax authority’s targeting of conservative nonprofits ranks as one of the worst federal scandals in modern history. It is topped only by the outrage that no one has been held to account. Or perhaps by the news that the targeting continues to this day.

That detail became clear in an extraordinary recent court hearing, in front of a panel of judges for the D.C. Circuit Court of Appeals. The paired cases in the hearing were Linchpins of Liberty v. United States and True the Vote v. Internal Revenue Service. They involve several conservative nonprofits—there are 41 in Linchpin—that were, as they said, rounded up and “branded” by the IRS. The groups are still suffering harm, and they want justice.

A lower-court judge had blithely accepted the IRS’s claim that the targeting had stopped, that applications for nonprofit status had been approved, and that the matter was therefore moot.

The federal judges hearing the appeal, among them David B. Sentelle and Douglas H. Ginsburg, weren’t so easily rolled. In a series of probing questions the judges ascertained that at least two of the groups that are party to the lawsuit have still not received their nonprofit approvals. The judges determined that those two groups are 501(c)(4) social-welfare groups, which are subject to far less scrutiny than 501(c)(3) charities, yet are still being harassed by the IRS five years later. The judges were told that not only are the groups still on ice, but that their actions are still being “monitored” by the federal government.

As one lawyer for the plaintiffs noted, despite the IRS’s claim that it got rid of its infamous targeting lists, there is “absolutely no showing” that the agency has in fact stopped using the underlying “criteria” that originally “identified and targeted for mistreatment based on political views.”

The hearing also showed the degree to which the IRS has doubled down on its outrageous revisionist history, and its excuses. IRS lawyers again claimed that the whole targeting affair came down to bad “training” and bad “guidance.” They blew off a Government Accountability Office report that last year found the IRS still had procedures that would allow it to unfairly select organizations for examinations based on religious or political viewpoint. The lawyers’ argument: We wouldn’t do such a thing. Again. Trust us.

More incredibly, the IRS team claimed that the fault for some of the scandal rests with the conservative groups, for not pushing back hard enough during the targeting. In response to complaints that the groups had been forced to hand over confidential information (information the IRS now refuses to destroy), one agency lawyer retorted: “They didn’t have to give the information to the IRS if they thought it was inappropriate, they could have said so.” Really. ...

An IRS lawyer rolled out the defense used by former agency official Lois Lerner that the targeting was just the unfortunate use of “inappropriate” criteria, but Judge Sentelle reminded the lawyer of the IRS’s vindictiveness. He noted that on one occasion the IRS simply shelved the application of an organization that had sued it. The agency “came to Court not having done anything to eliminate” the problem, he said, so “It’s just hard to find the IRS to be an agency we can trust, isn’t it?”

Judge Sentelle said there is a “pretty good case” that “egregious violations of the Constitution” had been committed, and he dared an IRS lawyer to “stand there with a straight face” and say otherwise. Judge Ginsburg, who spent the hearing catching out the IRS’s conflicting statements, at one point simply asked: “How much has really changed?”

Answer: not much. It was good news, then, that the House Judiciary Committee recently announced it will hold two hearings to examine the conduct of IRS Commissioner John Koskinen in this matter. Donald Trump, as the presumptive GOP nominee, could do worse than to use his megaphone to draw attention to the hearings. The IRS scandal needs to remain a story.Answer: not much. It was good news, then, that the House Judiciary Committee recently announced it will hold two hearings to examine the conduct of IRS Commissioner John Koskinen in this matter. Donald Trump, as the presumptive GOP nominee, could do worse than to use his megaphone to draw attention to the hearings. The IRS scandal needs to remain a story.

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May 20, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Thursday, May 19, 2016

The IRS Scandal, Day 1106

IRS Logo 2H. Res. 737, 114th Cong., 2d Sess.:

RESOLUTION Condemning and censuring John A. Koskinen, the Commissioner of Internal Revenue. 

Whereas the Committee on Oversight and Government Reform issued a subpoena to John A. Koskinen, Commissioner, Internal Revenue Service, on February 14, 2014, which compelled him to produce, among other things, ‘‘all communications sent or received by Lois Lerner, from January 1, 2009, to August 2, 2013.’’;

Whereas on March 4, 2014, Internal Revenue Service employees in Martinsburg, West Virginia, magnetically erased 422 backup tapes, destroying as many as 24,000 of Lois Lerner’s emails responsive to the subpoena;

Whereas Commissioner Koskinen violated a congressional subpoena by failing to locate and preserve relevant records and by losing key pieces of evidence that were in the agency’s possession, and destroyed, on his watch;

Whereas Commissioner Koskinen betrayed the trust and confidence of the American people as an Officer of the United States;

Whereas Commissioner Koskinen failed to live up to the promise he made to the Senate Committee on Finance during his confirmation hearing to: ‘‘Be transparent about any problems we run into; and the public and certainly this committee will know about those problems as soon as we do.’’;

Whereas as early as February 2014, and no later than April 2014, Commissioner Koskinen was aware that a substantial portion of Lois Lerner’s emails were missing and could not be produced to Congress, but did not notify Congress of any problem until June 13, 2014, when he included the information on the fifth page of the third enclosure of a letter to the Senate Committee on Finance;

Whereas Commissioner Koskinen offered under oath a series of false and misleading statements utterly lacking in honesty and integrity;

Whereas on March 26, 2014, Commissioner Koskinen was asked during a hearing before the Committee on Oversight and Government Reform, ‘‘Sir, are you or are you not going to provide this committee all of Lois Lerner’s emails?’’ and he falsely answered, ‘‘Yes, we will do that.’’;

Whereas on June 20, 2014, Commissioner Koskinen testified falsely that ‘‘since the start of this investigation, every email has been preserved. Nothing has been lost. Nothing has been destroyed.’’;

Whereas on June 20, 2014, Commissioner Koskinen testified falsely that the Internal Revenue Service had ‘‘confirmed that backup tapes from 2011 no longer existed because they have been recycled, pursuant to the Internal Revenue Service normal policy’’ and that ‘‘confirmed means that somebody went back and looked and made sure that in fact any backup tapes that had existed had been recycled.’’;

Whereas on June 20, 2014, Commissioner Koskinen testified that the Internal Revenue Service had ‘‘gone to great lengths’’ to retrieve all of Lois Lerner’s emails, but in fact failed to search disaster backup tapes, Lois Lerner’s Blackberry, the email server, backup tapes for the email server, and Lois Lerner’s temporary replacement laptop, which the Treasury Inspector General for Tax Administration subsequently found to contain more than 1,000 of Lerner’s emails;

Whereas Commissioner Koskinen’s false statements delayed and otherwise interfered with congressional investigations into the Internal Revenue Service targeting of Americans based on their political affiliation; and

Whereas the aforementioned conduct of Commissioner Koskinen caused the House of Representatives to lose confidence in his ability to administer and supervise the execution and application of the internal revenue laws: Now, therefore, be it

Resolved, That—  (1) the House of Representatives does hereby 3 censure and condemn John A. Koskinen for a pat-tern of conduct while Commissioner of Internal Revenue that is incompatible with his duties and inconsistent with the trust and confidence placed in him as an officer of the United States; and

(2) it is the sense of the House of Representatives that John A. Koskinen, Commissioner of Internal Revenue, should— (A) immediately resign from office, and if he does not so resign, the President should remove him from office; and (B) be required to forfeit all rights to any annuity for which he is eligible under chapter 83 or chapter 84 of title 5, United States Code.

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May 19, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Wednesday, May 18, 2016

The IRS Scandal, Day 1105

IRS Logo 2Washington Post, Impeachment Hearings Are Latest Victory in Conservative War on IRS:

The House Judiciary Committee’s decision to hold hearings a week from today on whether to impeach IRS Commissioner John Koskinen is a victory for the chamber’s far-right caucus, still smarting over the agency’s treatment of conservative groups.

Over five years, House Republicans have slashed the IRS budget, passed bills banning employee bonuses and prohibiting employees fired for misconduct from getting rehired. The GOP has vowed to simplify the tax code, pounced on agency management failures and assailed customer service breakdowns caused by the budget cuts.

And last week, anti-IRS lawmakers persuaded previously hesitant House leaders to start the unusual process of removing the tax collector from office.

One of the biggest questions now is whether the 76-year-old tax commissioner will show up for the grilling. IRS officials said Monday they have made no decision on whether Koskinen will accept the Judiciary Committee’s invitation to appear May 24 and at a hearing in June.

Daily Kos, Republicans Move to Impeach Head of Government Agency for First Time Since 1876:

Suppose you hate taxes. And government. You could try to pass bills that cut taxes, scale back government … in short, do the things the extreme right Freedom Caucus says they want. Or you might simply make it impossible for the government to collect taxes by maneuvering to cripple the agency in charge, which is the approach conservatives radicals have actually taken.

The House Judiciary Committee’s decision to hold hearings a week from today on whether to impeach IRS Commissioner John Koskinen is a victory for the chamber’s far-right caucus, still smarting over the agency’s treatment of conservative groups.

The agency’s treatment of conservative groups. Which turned out to be pretty much the agency’s treatment of every sort of group. It was just that so many groups emerged from the tea party chaos, and so many of them blatantly did not know the difference between what was acceptable in a tax-exempt organization and what was not, that a high number of them became regulatory road kill.

But conservatives have never believed they have to play by the rules, and this scandal-that-wasn’t serves as sufficient pretext to carry on the teahad. ...

Oh, but do mark this down as a historic moment. It’s the first time anyone has tried to impeach the head of a government agency since the Grant administration. ... The real purpose of trying to impeach IRS Commissioner John Koskinen is to give the extremists in the GOP a distraction to talk about when they climb on the stage at rallies between now and November. The chances that they would actually remove Koskinen, who is set to leave in 2017 in any case, are somewhere between extremely slim and laughable. But he provides a demon to rail against. And his name isn’t Donald.

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May 18, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (8)

Tuesday, May 17, 2016

Papers From The 2015 IRS-TPC Research Conference: Improving Tax Administration Through Research-Driven Efficiencies

TPCIRSThe IRS has released the papers from the 2015 IRS-TPC Research Conference: Improving Tax Administration Through Research-Driven Efficiencies:

2015 IRS Research Bulletin

Foreword

1. Innovative Methods for Improving Resource Allocation

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May 17, 2016 in IRS News, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1104

IRS Logo 2Wall Street Journal editorial:  The IRS’s Donor Lists: Congress Should Keep the Names of Donors Out of Tax Returns:

Democratic Attorneys General in California and New York have been trying to get their hands on donor information in the tax returns of nonprofit groups. Their disclosure demands were recently shot down in a California federal court, but the better question may be why the IRS is even collecting the info.

Under the Tax Reform Act of 1969, 501(c) groups are required to file Form 990 Schedule B that lists the sources of donations of more than $5,000 in the previous calendar year. The lists are supposed to remain private, but this is the government we’re talking about. The National Organization for Marriage’s donor list leaked to the Human Rights Campaign in 2012, and the state of California recently posted some 1,400 Schedule Bs on Attorney General Kamala Harris’s public website, though they were quickly taken down.

Sloppy handling of data that includes home addresses threatens donors with potential harassment. In his April order in AFPF v. Harris, the case challenging Ms. Harris’s appeal to see unredacted donor information from nonprofits, federal Judge Manuel Real noted that the disclosures included donors for Planned Parenthood of California. “An investigator for the Attorney General,” Judge Real wrote, “admitted that ‘posting that kind of information publicly could be very damaging to Planned Parenthood.’”

That goes across the political spectrum, which may be why IRS head John Koskinen and Director of Exempt Organizations Tamera Ripperda have said even the IRS is debating whether the information is necessary for tax enforcement.

Meanwhile, Illinois Republican Peter Roskam’s bill to stop the IRS from collecting donor details of tax-exempt groups passed the Ways and Means Committee in late April. Progressive groups, such as Democracy 21 and Public Citizen, say Schedules Bs are important to protect against foreign donations to tax-exempt groups.

But dropping Schedule Bs wouldn’t change the law. There is no ban on foreign contributions to tax-exempt outfits—see the Clinton Foundation—but there is a blanket ban on foreign money being spent to influence U.S. elections. Audits can determine if foreign contributions are being channeled into politics. Lawbreakers trying to skirt election laws aren’t disclosing improper donations on tax returns in any case.

The real progressive interest in donor disclosure is to use the information as a political weapon. Leaked selectively, donor lists suppress the speech of political rivals. Mr. Roskam’s bill is worth moving to the House floor.

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

Monday, May 16, 2016

The IRS Scandal, Day 1103

IRS Logo 2Wall Street Journal: Donald Trump’s Amazon Adventure, by Holman W. Jenkins, Jr.:

You might get some argument about exactly how illegal it is for politicians to use their law-enforcement powers to punish their political opponents.

But at least when Nixon sought to, he felt obliged to do so by secret memorandum. As keeper of the enemies list John Dean wrote, “This memorandum addresses the matter of how we can maximize the fact of our incumbency in dealing with persons known to be active in their opposition to our Administration; stated a bit more bluntly—how we can use the available federal machinery to screw our political enemies.”

As it happened, however, the IRS commissioner at the time, Donald Alexander, refused orders to carry out tax audits of the Nixon White House’s political enemies.

Today, nobody, not even his worst critics, expects to find a memo from President Obama instructing Lois Lerner at IRS to stonewall applications from conservative political groups for tax-exempt status.

His critics probably don’t even expect Mr. Obama to have muttered under his breath that such a thing would be desirable. Rather, Ms. Lerner, all on her own, seemingly decided as a loyal Democratic and ideological warrior that it would be a good thing to use her agency to hamper the president’s partisan antagonists. ...

Donald Trump, an innovator in all things, is now in the process of changing the rules in America with his threat to bring legal action against Amazon on antitrust grounds and, if we hear him correctly, on tax grounds as well.

Mr. Trump couldn’t have been clearer about his motivation. He complained about Washington Post reporters calling up and “asking ridiculous questions,” “all false stuff,” apparently related to Mr. Trump’s tax returns, which in defiance of all tradition he has refused to release, as well as Mr. Trump’s real-estate dealings.

Mr. Trump says the Post was purchased as “a toy” by Amazon founder Jeff Bezos (who bought the paper with his personal funds in 2013). Mr. Trump says the paper now is being used to attack Mr. Trump in order to protect Amazon’s alleged tax-dodging practices even though Amazon, after long resistance, has begun in recent years to collect state sales tax.

All this seems to arise because the Post, the dominant newspaper in the nation’s capital, has assigned reporters to investigate the business career of the candidate who champions his credibility to be president by referring to his business career. ...

Mr. Trump knows U.S. political culture well enough to know that gleefully, uninhibitedly threatening to use government’s law-enforcement powers to attack news reporters and political opponents just isn’t done.

Maybe he thinks he can get away with it. Maybe he’s trying to figure out how to disqualify himself for the presidency in a way that wouldn’t embarrass his fans or blow back on the business career that he always imagined he’d be returning to after the Republican convention at the latest. After all, one way to throw an election is to scare off donors (he needs about a billion dollars) by flaunting his inner Nixon.

Or maybe he really does want to be the American caudillo who flings American democratic and legal norms out the window and ushers in a new age of populist authoritarianism.

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

Sunday, May 15, 2016

The IRS Scandal, Day 1102

IRS Logo 2Erick Erickson, House GOP to Consider Impeaching IRS Commissioner. Trump Complicates Things.:

House Republicans are going to consider impeaching the IRS Commissioner, Commissioner John Koskinen. The IRS is accused of targeting conservative groups for harassment. Likewise, the IRS is accused of dragging its feet on giving non-profit status to conservative groups. Based on an inspector general investigation into the IRS and subsequent congressional hearings, the accusations appear legitimate.

Koskinen, as head of the IRS, has not seemed interested in actually dealing with the IRS’s stalling and apparent cover up as the investigations continued. He deserves to be impeached.

Donald Trump, however, neutralizes the GOP’s talking point on the IRS. Just the other day he threatened Jeff Bezos and Amazon, suggesting Trump would support internet taxation to hurt Amazon, among other things, because of the Washington Post’s investigative reporters looking into Trump.

If the GOP has a candidate who implies or directly suggests he might use the government against his opponents, it will be really hard for them to distinguish what the IRS did from what their own Presidential nominee wants to do.

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

Saturday, May 14, 2016

The IRS Scandal, Day 1101

IRS Logo 2Press Release, House Judiciary Committee to Examine Misconduct by IRS Commissioner:

The House Judiciary Committee today announced that it will hold two full committee hearings to examine misconduct by the Internal Revenue Service (IRS) Commissioner John Koskinen.

At the first hearing, which will take place on Tuesday, May 24 at 10:00 a.m., members of the House Judiciary Committee will hear from a witness panel presenting the findings of the House Oversight and Government Reform Committee’s investigation of IRS Commissioner Koskinen. The House Judiciary Committee will also invite IRS Commissioner Koskinen to testify. The House Oversight and Government Reform Committee has investigated the targeting of conservative groups for several years and many of the Committee’s members have found that Commissioner Koskinen failed to comply with a congressional subpoena which resulted in destruction of key evidence, made false statements during his sworn congressional testimony, and did not notify Congress that Lois Lerner’s emails were missing.

At the second hearing, which will take place in June, members of the House Judiciary Committee will invite outside experts to comment on the findings presented in the first hearing and whether further congressional action is warranted. Witnesses for both hearings will be announced at a later date.

House Judiciary Committee Chairman Bob Goodlatte (R-Va.) issued the statement below on the Committee’s upcoming hearings:

The fact that officials at the IRS wielded their power to target certain Americans for their political views is both outrageous and contrary to our nation’s values. Our government is supposed to work for all Americans, not for a particular partisan agenda. As a result of the IRS’ targeting, conservative groups were singled out across the nation, resulting in lengthy paperwork requirements, overly burdensome information requests, and lengthy, unwarranted delays in their applications.

Despite repeated congressional efforts to get to the bottom of this matter, Obama Administration officials, including the IRS Commissioner, have consistently undermined the investigation. Over the coming weeks, the House Judiciary Committee will closely examine Commissioner Koskinen’s misconduct and the implications of his actions.

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

Friday, May 13, 2016

The IRS Scandal, Day 1100

IRS Logo 2National Review, Re: Trump’s Time Bomb:

John Fund’s column today is, no matter what comes in the next few days, the most important column of the week, as it explains why Donald Trump’s weasel-like refusal to release his tax returns is a mortal danger to Republicans and conservatives nationwide — and suggests what should be done about it. John is absolutely right: Republicans, especially delegates, have every right not just to ask for, but to demand, the release of the returns before the convention. With a crew of Lois Lerners running the IRS, those returns surely will leak right after the nomination is made formal.

Mother Jones:  Corrupt IRS Spells Doom For Donald Trump Later This Year, by Kevin Drum:

That's right. The IRS is such a beehive of Democratic Party corruption that Hillary Clinton will have no trouble getting one of her moles to hand over the entire Trump record. Hell, she's probably done it already and is just waiting for the right time to start dribbling out explosive revelations. It's just the kind of things she'd do. Amirite or amirite.

Between left and right, I feel like I'm almost entirely enveloped by bizarre paranoia these days. Can we all just settle down and return to planet Earth for a while?

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

Thursday, May 12, 2016

The 16% Of Americans Earning $100,000+ Pay 80% Of All Federal Income Taxes

Washington Free Beacon, Americans Earning Six Figures or More Pay Nearly 80% of Individual Income Taxes; These Earners Represent Only 16% of Individual Income Tax Filers:

Americans earning six figures or more paid 79.5 percent of the nation’s share in individual income taxes in 2014, according to the latest preliminary data from the Internal Revenue Service.

Americans paid a total of $1,358,093,169,000 to the IRS in individual income taxes in 2014. Americans earning $100,000 or more paid $1,079,392,180,000 to the IRS, or 79.5 percent of the total income tax paid.

While those top earners contributed almost four-fifths of the total amount of individual income taxes, they represented only 16 percent of the total number of individual income tax returns reported to the IRS. ...

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May 12, 2016 in IRS News, Tax | Permalink | Comments (6)

The IRS Scandal, Day 1099

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

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

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

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

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

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

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

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

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

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

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

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

Wednesday, May 11, 2016

IRS Employee Got Unemployment For 5 Years Before Anyone Noticed

IRS Logo 2The Daily Caller, IRS Employee Got Unemployment For 5 Years Before Anyone Noticed:

A former Internal Revenue Service (IRS) employee collected unemployment benefits for five years before anyone caught her, according to the Department of Justice (DOJ).

Yvonne E. Borders recently pleaded guilty to stealing government funds after collecting $18,550 in unemployment benefits from January 2009 through December 2013, while working for the U.S. Department of Treasury in New York.

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

The IRS Scandal, Day 1098

IRS Logo 2Politico, Morning Tax:

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

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

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

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

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

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

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

Tuesday, May 10, 2016

The IRS Scandal, Day 1097

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

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

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

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

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

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

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

Monday, May 9, 2016

IRS Seeks Grant Applications for Funding for Low Income Taxpayer Clinics, Volunteer Tax Assistance Programs

IRS Logo 2The IRS has announced that it is accepting grant applications for Low Income Taxpayer Clinics (IR-2016-70) and Volunteer Tax Assistance Programs (IR-2016-71) for the 2017 grant cycle (Jan. 1 - Dec. 31, 2017).

Low Income Taxpayer Clinics

Applications will be accepted through June 20, 2016. The LITC program awards matching grants of up to $100,000 per year to qualifying organizations to develop, expand, or maintain a low income taxpayer clinic. 

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

The IRS Scandal, Day 1096

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

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

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

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

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

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

Sunday, May 8, 2016

TIGTA:  IRS Mischaracterizes 88% Of Hobbies As For-Profit Businesses, Allowing Billions In Improper Loss Deductions

TIGTAThe Treasury Inspector General for Tax Administration has released Opportunities Exist to Identify and Examine Individual Taxpayers Who Deduct Potential Hobby Losses to Offset Other Income (2016-30-031):

The Treasury Inspector General for Tax Administration (TIGTA) today publicly released its audit report of the Internal Revenue Service’s (IRS) methods of addressing taxpayers who take business tax deductions for activities not engaged in for profit. TIGTA found that the IRS can improve its methods for identifying high-income taxpayers who may be offsetting their income with “hobby losses” from unprofitable business activity.

The tax code allows taxpayers to deduct all ordinary and necessary expenses paid or incurred in carrying on a trade or business. However, in the “hobby loss” provision in the tax code, the IRS generally disallows business tax deductions for activities not engaged in for profit.

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May 8, 2016 in Gov't Reports, IRS News, Tax | Permalink | Comments (10)

The IRS Scandal, Day 1095

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

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

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

None of this is any surprise.

None of it is good government.

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

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

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

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

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

Saturday, May 7, 2016

The IRS Scandal, Day 1094

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

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

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

Friday, May 6, 2016

Coke Bottler's Merger Might Run Afoul Of New Anti-Inversion Rules

CokeBloomberg, Coke Bottler's Merger Might Lose Tax Gain to Inversion Rules, by Lynnley Browning:

When Coca-Cola Enterprises Inc. announced a merger with two overseas counterparts last August, the Atlanta-based bottler of Coke drinks in Western Europe said the deal had nothing to do with cutting its corporate tax bills.

Now, after the U.S. Treasury Department proposed tougher-than-expected regulations designed to prevent firms’ shifting profits offshore last month, the company has a different message.

In an April 11 securities filing, Coca-Cola Enterprises warned that one Treasury proposal, unveiled seven days earlier, could reduce the merger’s anticipated annual savings of as much as $375 million -- though it didn’t specify a new amount. Since the rule targets a tax-cutting technique known as “earnings stripping,” the company’s disclosure shows that tax savings were an important benefit of the merger all along, said Robert Willens, a tax and accounting consultant in New York. ...

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

The IRS Scandal, Day 1093

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

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

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

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

Thursday, May 5, 2016

The IRS Scandal, Day 1092

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

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

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

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