TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Friday, February 19, 2016

IRS Fails To Follow Basic Web Security Procedures, Increases Risk Of Taxpayer Identity Theft

The IRS Scandal, Day 1016

IRS Logo 2Watchdog.org, EPA Cleared of Bias in Alaska Mine Controversy Despite Lost Emails:

Despite acknowledging it could not obtain more than two years of emails from a key employee, the Environmental Protection Agency’s Office of Inspector General on Wednesday effectively cleared the EPA of allegations of bias in its quest to preemptively kill a proposed mine in southwest Alaska.

The troubling details of the missing emails raise charges of an EPA whitewashing, a scenario and an allegation all-too-familiar in the Obama administration. ...

More than 20 different Obama administration officials have lost or destroyed email communications. Arguably the most egregious example was the lost emails of Lois Lerner, the former IRS agent who led the office accused of targeting nonprofit conservative groups.

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February 19, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Thursday, February 18, 2016

Treasury Department Releases New 2016 Model Income Tax Treaty

Treasury Department (2016)Treasury Department Press Release (Feb. 17, 2016), Treasury Announces Release of 2016 U.S. Model Income Tax Treaty:

Today, the Treasury Department issued a newly revised U.S. Model Income Tax Convention (the “2016 Model”), which is the baseline text the Treasury Department uses when it negotiates tax treaties.  The U.S. Model Income Tax Convention was last updated in 2006.

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February 18, 2016 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1015

IRS Logo 2Albuquerque Journal, Six Years and Counting: ABQ Tea Party Still Waiting on IRS:

Six years and still counting.

That’s how long the Albuquerque Tea Party has been waiting for a ruling from the IRS on its request for tax-exempt status.

“Most people, when they file a 501(c)(4), wait three to six months and then get approval or get denied, and if they get denied they can appeal,” said Rick Harbaugh, a past president and former secretary of the board of the Albuquerque Tea Party.

“The ATP filed their request in December 2009. Several months later the IRS demanded more documentation concerning the activities of the ATP since that application date. This was done. Then several months later, the IRS again asked for an update on all activity,” including board minutes, brochures, newsletters and correspondences, Harbaugh said. “All the information we sent them was well over 1,000 pages.”

The importance of getting tax-exempt status, he explained, is that the Albuquerque Tea Party, which has about 2,500 supporters, would then be able to transfer money to and receive money from other tax-exempt entities without paying taxes on those funds. “We have been prevented from getting (tax-free) money for six years,” Harbaugh said.

In 2012, the American Center for Law and Justice, on behalf of the Albuquerque Tea Party, as well as a host of other conservative groups, filed a lawsuit against the IRS, Harbaugh said. ...

Last year, New Mexico’s sole Republican congressman, Rep. Steve Pearce, made an inquiry on behalf of the Albuquerque Tea Party concerning the organization’s request for tax exempt status.

“He was told that because of our lawsuit, they would not release any information,” Harbaugh said.

Bill Brunson, who is responsible for IRS media inquiries from New Mexico, declined to comment on the status of the Albuquerque Tea Party application for tax-exempt status.

Jay Sekulow, chief counsel for the American Center for Law and Justice, on Monday told the Journal in a written statement that although the IRS scandal is no longer in the headlines, “the unlawful and unconstitutional treatment against conservative and Tea Party organizations continues.”

The ACLJ litigation against the IRS is ongoing in federal court, and of the 38 clients the organization represents, several, including the Albuquerque Tea Party, remain in a holding pattern while the IRS delays its response to their request for tax exempt status, he said.

Sekulow called that wait of more than six years “outrageous” and said it “underscores what we have contended from the very start – the IRS is arrogant, corrupt, and incapable of self-correction.”

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

Wednesday, February 17, 2016

The IRS Scandal, Day 1014

IRS Logo 2Bloomberg:  Hedge-Fund Magnate Mercer Backs Group Attacking IRS, by Zachary Mider:

The New York hedge-fund manager Robert Mercer, one of the biggest conservative donors in the country, has been funding a group that's paying for a Tea Party lawsuit against the Internal Revenue Service and seeking to sharply limit the role of the federal government.

Mercer's family foundation gave $500,000 in 2014 to a group called Citizens for Self Governance, according to a new filing obtained by Bloomberg this month. Mark Meckler, the group's president, said in an e-mail that the donation was in support of the group's Convention of States project, which seeks to amend the U.S. Constitution to restrict government reach. According to the website of an affiliated group, among the amendments it could consider are term limits for Congress and the Supreme Court; a balanced budget requirement; and "an upper limit on federal taxation."

Meckler said Mercer's donation was unrelated to Citizens for Self Governance's other big project, financing a federal lawsuit against the IRS over its targeting of Tea Party groups. Mercer's hedge fund, Renaissance Technologies, has been in a long-running dispute with the IRS over trades that may have cut its tax bill by as much as $6 billion.

Any attempt to link Mercer's donation with the Tea Party lawsuit would be "dishonest and untrue," Meckler said in an e-mail. Jonathan Gasthalter, a spokesman for Mercer, declined to comment.

Over the past few years, Mercer has emerged as one of the biggest patrons of conservative causes in the country. He's the top donor in the U.S. presidential race so far, having pumped $11 million into a super-PAC backing Senator Ted Cruz of Texas. He's also the co-chief executive officer of Renaissance, a Long Island-based hedge-fund management firm that has generated billions of dollars in profits with computer-driven trading strategies.

The IRS's scrutiny of Renaissance involves a series of trades known as "basket options" that the hedge fund made with banks between 1999 and 2013. According to a 2014 report by the Senate Permanent Subcommittee on Investigations, Renaissance used them to claim a lower tax rate on an estimated $34 billion in profits from the firm's flagship fund, cutting investors' taxes by more than $6 billion. The fund is open only to Renaissance employees. ...

In 2013, a Treasury Department inspector general disclosed that the IRS had been subjecting Tea Party and other conservative groups to enhanced scrutiny when they applied for nonprofit status. Although not a party to the case, Citizens for Self Governance is paying for a federal lawsuit on behalf of targeted conservative groups, paying the plaintiffs' lead law firm $969,000 in 2014 alone.

In January, a judge in Ohio allowed the plaintiffs to bring the suit as a class action. "CSG has nothing financial to gain in this case," Meckler said in a statement announcing the victory. "We fund it because it’s the right thing to do. Someone had to stand up for the patriots who had been targeted, abused and discriminated against by their own government."

(Hat Tip: Michael Graetz.)

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

Tuesday, February 16, 2016

The IRS Scandal, Day 1013

IRS Logo 2Kay Bell (Don't Mess With Taxes), Would a Cuddly Mascot Make the IRS Lovable? Not to GOP Representatives Still Looking to Impeach IRS Commissioner:

When you say "mascot" to an American, we immediately think of the characters and creatures associated with sports teams.

In Japan, however, mascots have more expansive, and official, roles. The Japanese are obsessed with mascots that range from happy animals to mutated foodstuffs to saucer-eyed humanoids that promote, according to a recent New York Times article, seemingly every town, business and arm of government in the island nation.

And yes, that includes Japanese tax offices. Osaka Prefecture, says the newspaper story, has two different dog mascots for separate tax departments. ...

Tax mascot for the IRS?  Maybe the IRS should consider getting a cute mascot to improve its image and endear it to taxpayers.

It would make all the agency's troubles go away, as people embraced the mascot and the tax efforts it represents. And IRS Commissioner John Koskinen and House Government Oversight Committee members could just hug it all out.

Or not. Some things truly are lost in translation.

Even though the IRS now faces new oversight rules under provisions in the omnibus fiscal 2016 government spending bill that became law on Dec. 18, 2015, some Republican House members of Congress say they will continue their efforts to kick Koskinen out of office. ... And while there's no official effort on the other side of Capitol Hill to remove Koskinen, some Senators seem to share the sentiment that action must be taken to curb IRS actions. ...

And that level of anger and animosity is not likely to be eased by an IRS mascot or, it appears, anything else.

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February 16, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, February 15, 2016

The IRS Scandal, Day 1012

IRS Logo 2Reason, Remember the Scandal Over the IRS Targeting Tea Party Groups? Glenn Reynolds Does:

It seems like so long ago, but really isn't. In 2013, President Barack Obama acknowledged that the IRS had in fact been directing extra scrutiny to broadly defined right-wing "Tea Party" groups as they applied for various forms of tax-code recognition. In fact, Obama forced out the acting commissioner of the agency and pledged publicly, "I will not tolerate this kind of behavior in any agency, but particularly the IRS given the power that it has and the reach that it has in all of our lives."

Paul Caron, a Pepperdine University academic who runs the always interesting TaxProf blog, recently celebrated the 1000th day of the scandal, which he argues (convincingly) has never really been covered or investigated fully. After Obama's first big statements, interest drifted away for the most part and even the president's bald acknowledgements that something was rotten at the IRS started to be walked back.

In a new USA Today column, Glenn Reynolds of Instapundit, who's been linking to TaxProf for the past 1,000-plus days, sums up the social implications of the IRS scandal. ...

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

Sunday, February 14, 2016

The IRS Scandal, Day 1011

IRS Logo 2Washington Times, Democratic Scandals, Benghazi, IRS, Obamacare Failures: Study Identifies Stories Media Ignored Most:

Two intrepid Media Research Center analysts went through 13,022 news stories that appeared on ABC, NBC and CBS evening news broadcasts during 2015 — that’s 18,549 minutes of coverage — to determine what the Big Three broadcasters deigned to cover. “The results show a network news agenda heavy on crime, terrorism and weather, but light on Democratic scandals, ObamaCare’s failings, the out-of-control national debt, sanctuary cities and Planned Parenthood’s grotesqueries,” report Mike Ciandella and Rich Noyes. ...

Here’s what the networks virtually ignored: Ongoing questions about Hillary Clinton’s “Benghazi scandal” got a whopping 46 minutes; shortcomings of Obamacare warranted 34 minutes; misconduct within the Clinton Foundation got 27 minutes; videos revealing Planned Parenthood trafficking fetal tissue 25 minutes; and negative outcomes in sanctuary cities 8 minutes. The $18 trillion national debt drew 4 minutes — and last but not least, IRS targeting of conservative groups got zero. None. No mention.

“The ABC, CBS and NBC evening newscasts failed to produce any coverage of the IRS scandal, even as the House committee investigating the matter introduced a resolution calling for the impeachment of IRS Commissioner John Koskinen for his alleged failure to comply with committee subpoenas and making false statements under oath,” the researchers say, adding that the networks did manage to produce 54 minutes of coverage about assault charges made against Bill Cosby, and 127 minutes on the “Deflate Gate” scandal surrounding New England Patriots’ quarterback Tom Brady.

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February 14, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, February 13, 2016

The IRS Scandal, Day 1010

IRS Logo 2Washington Free Beacon, Study: Taxpayers Targeted at Higher Rates Under Democratic Presidents:

The Internal Revenue Service targets individual taxpayers and corporations for audits at higher rates when Democrats are in control of the White House, according to a study highlighted by Harvard University’s Shorenstein Center for Media, Politics and Public Policy.

The study by Sutirtha Bagchi, an assistant professor of economics at Villanova University, examined IRS budget and personnel figures dating back to 1978 to determine “whether presidential administrations use executive power to affect IRS resources and priorities and thus influence the effective tax rate to support their larger policy goals,” according to the Shorenstein Center.

The study found a statistically significant correlation between the party of the president and the number of individual income tax returns audited by the IRS. On average, four percent more individual income tax audits were performed under Democratic administrations than under Republican administrations.

Corporate income tax audits were found to be five percent higher under Democratic administrations than under Republican administrations. ...

Harvard’s Shorenstein Center highlighted the study as the IRS faces criticism for targeting conservative groups that sought tax-exempt status before the 2012 presidential election. ...

On Monday, Citizens Against Government Waste, a nonpartisan government watchdog group, named IRS Commissioner John Koskinen its 2015 “Porker of the Year” due to a “long litany of incompetence and obstruction” as head of the agency.

“Over the course of several hearings investigating the IRS targeting of conservative groups, Commissioner Koskinen repeatedly stonewalled and mislead members of Congress during the search for Lois Lerner’s emails, while refusing to ensure that IRS targeting would never happen again,” the group said.

“His agency, in the face of a congressional subpoena, erased backup tapes containing as many as 24,000 emails from Lerner. Worse yet, a July 23, 2015 Government Accountability Office report found that more than two years after the scandal gained national attention, ‘the IRS has not taken sufficient steps to prevent targeting Americans based on their personal beliefs.’”

Investigators at the Government Accountability Office warned earlier this month that the IRS could still inappropriately target organizations due to deficiencies in how they are selected for audits.

“The control deficiencies increase the risk of selecting organizations for audit in an unfair manner—for example, based on an organization’s religious, educational, political, or other views,” a GAO investigator said.

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

Friday, February 12, 2016

IRS Whistleblower Awards Jump 98%

The IRS Scandal, Day 1009

IRS Logo 2The Hill, Tempers Flare at IRS Hearing:

A heated argument erupted Thursday at a hearing on the IRS, with Democrats and Republicans trading charges about the work of the Oversight Committee.

Two Democrats on the panel accused their GOP colleagues of repeatedly holding hearings on the IRS for political reasons.

In his opening statement, Oversight Committee ranking member Rep. Elijah Cummings (D-Md.) complained that the hearing was the 23rd held about the IRS in recent years.

“Unfortunately, Republicans have become obsessed with investigating any and every allegation relating to the IRS, no matter how small,” he said. 

He said Republicans are frustrated that they have never found proof that the White House conspired with the IRS to target conservative groups or shown that any IRS employee destroyed evidence during the investigation.

“The problem now is that our committee is in a mindset where we are just trying to get the IRS,” Cummings said.

Rep. Jim Jordan (R-Ohio.), chairman of the Oversight subcommittee on administrative rules, fired back.

“We’re not trying to get the IRS. The IRS was trying to get conservative Americans who were exercising their First Amendment, free speech right,” he said. “Twenty-three hearings is a pretty small price to pay when you’re trying to protect fundamental liberties in the Constitution, for goodness sake.” 

Jordan said the hearings are warranted because the IRS has engaged in a pattern of destroying records and documents.

 

A heated argument erupted Thursday at a hearing on the IRS, with Democrats and Republicans trading charges about the work of the Oversight Committee.

Two Democrats on the panel accused their GOP colleagues of repeatedly holding hearings on the IRS for political reasons.

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February 12, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, February 11, 2016

The IRS Scandal, Day 1008

IRS Logo 2National Review, The IRS Scandal: Never Forget:

Nearly three years ago America learned the IRS had maliciously targeted conservative groups seeking tax-exempt status – slow-walked their applications and demanded onerous and invasive details such as speech transcripts, donor lists and more.

Then, over the course of the following years, federal agents destroyed evidence and lied and obfuscated before Congress in a criminal cover-up as bad as the initial wrongdoing. However, the effects of the IRS’ actions had taken their toll, with some political observers suggesting the agency’s biased attack helped ensure Obama’s re-election by hindering his opposition.

This scandal has largely been forgotten as the excitement and drama of the 2016 presidential election unfolds. Yet we must never forgot – and indeed still demand justice – over the wrongs the IRS perpetrated on the American people.

Thankfully, there is a law professor out there keeping tabs on this mess.

Last week, Pepperdine University School of Law Professor Paul Caron reached a milestone of sorts as he marked his 1,000th consecutive day chronicling all the developments in the IRS scandal since Day One. Every single day – including weekends and holidays – Caron has posted news developments on his popular TaxProf Blog to track this scandal, and 1,000-plus days later he is still going strong.

His long list of blog entries is a sight to behold and illustrates the depth of IRS malfeasance. Here’s a thanks to Professor Caron and his persistence. Let’s hope members of Congress can apply the same aptitude to eventually hold someone accountable for IRS lawlessness.

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

Wednesday, February 10, 2016

The IRS Scandal, Day 1007

IRS Logo 2The IRS yesterday approved the tax-exempt 501(c)(4) status of Karl Rove's Crossroads GPS, more than five years after the group filed its application:

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

Tuesday, February 9, 2016

The IRS Scandal, Day 1006

IRS Logo 2USA Today op-ed:  Washington's Culture of Corruption Rots On, by Glenn Reynolds (Tennessee):

Last week saw the passage of a grim milestone in government corruption: Pepperdine University Law Professor Paul Caron’s TaxProf blog marked the 1000th day of the scandal involving the IRS’s deliberate political targeting of conservative “Tea Party” groups. There are some lessons in this, and they’re mostly bad news.

The first sad lesson is that the notion of an impartial, professional civil service is a fiction. The big government designs of Democrats and the federal bureaucracy are aligned, and the bureaucracy often deploys its powers in ways calculated to frustrate Republican presidents and to protect Democratic ones. ...

[W]hat happened in the IRS scandal wasn’t a case of bureaucrats slow-walking ideas they think are dumb. It was, instead, a case of bureaucrats targeting people because of their political views. ...

weaponized in an effort to neutralize Obama’s Tea Party opposition. It’s that ordinary Americans can look at this and conclude that there’s no reason to follow the law if they can get away with breaking it since the people in charge of enforcing the law clearly regard it with contempt.

In an influential essay several years back, Gonzalo Lira warned of the coming middle-class anarchy, when ordinary Americans decide to be no more lawful than they have to be.

There are plenty of nations that work that way — where both the ruling class and the ruled view the law with contempt and obey it only when forced to. Such places are, generally, not as nice as places where the rule of law pertains. But avoiding that kind of outcome requires principles and self-discipline on the part of the ruling class, something that contemporary America conspicuously lacks. Welcome to the era of hope and change.

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February 9, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Monday, February 8, 2016

Satterthwaite:  Random Tax Audits Cause Participants To Cheat More In The Future

Audit (2016)Emily Ann Satterthwaite (Toronto), The Dynamic Effects of Audits: An Experimental Assessment:

Governments and tax administrators around the world rely on the premise that random audits can be used to reduce tax evasion through two channels of deterrence: first, the ex ante indirect threat of audit will induce taxpayers to truthfully report their income and, second, that the lived experience of audit will deter audited taxpayers from cheating in the future (“direct deterrence,” Alm et al. 2009). This paper provides original experimental evidence of the failure of the direct deterrence channel. Contrary to the predictions of the standard economic model of tax compliance, I find that random audits are ineffective in fostering higher post-audit levels of compliance. Surprisingly, they induce experiment participants to cheat more in the tax periods after the audit (the “bomb crater” effect).

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

The IRS Scandal, Day 1005

IRS Logo 2The Hill, GOP Seeks to Block IRS From Rehiring Fired Workers:

A group of Republican senators on Tuesday introduced a bill that would bar the Internal Revenue Service commissioner from rehiring employees fired for misconduct [Ensuring Integrity in the IRS Workforce Act of 2016].

The legislation — rolled out by GOP Sens. Richard Burr (N.C.), Johnny Isakson (Ga.), Dean Heller (Nev.) and Mike Enzi (Wyo.) — comes after the Treasury Inspector General for Tax Administration found in late 2014 that the IRS had rehired hundreds of former employees with conduct or performance issues. ...

The senators' bill is a counterpart to a bill introduced in the House in October by GOP Reps. Kristi Noem (S.D.) and Peter Roskam (Ill.).

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

Sunday, February 7, 2016

The IRS Scandal, Day 1004

Segment on IRS Commissioner John Koskinen begins at 3:30

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

Saturday, February 6, 2016

The IRS Scandal, Day 1003

IRS Logo 2Joe  Kristan (Tax Update Blog), 1000 Days of TaxProf Scandal Coverage:

Thanks to Paul Caron for his persistence in paying attention to the past and continuing IRS abuse of power. 

Peter J. Reilly (Forbes), IRS And The Tea Party — Scandal Enters A New Millennium:

Big milestone over at the Tax Prof yesterday.  The IRS Scandal, a day by day chronicle, has hit 1,000.  The event is marked by a an article in The College Fix titled — “The IRS Scandal, Day 1000: Every single day for nearly three years prof chronicles IRS scandal”-. ...

My objections to the day by day scandal narrative is that the string has often been maintained by stories that barely have a tenuous relationship to what I call the “core scandal” – delays and excessive questioning in the handling of tax-exempt applications of Tea Party and similar groups.  ...

What the scandal true believers really yearn for is absolute proof of President Obama ordering his IRS hit squad to go after conservatives. ... Instead they are left with a tone at the top argument in which the President’s statements about Citizens United and untraced money flooding into politics was a kind of dog whistle signal to go after conservatives. ...

Two lines of litigation that keep churning out new material for the day by day IRS scandal are NorCal Tea Party Patriots v IRS, which seeks damages for the delays and abusive inquiries, and FOIA requests by Judicial Watch.  The NorCal litigation is being funded by Citizens for Self Governance, which appears to have Koch connections.  If you look at the 2014 Form 990 of the Sarah Scaife Foundation, to which Richard Scaife gave $364 million in 2014, you will find $225,000 being given to Judicial Watch for general operating support. ...

Much of the coverage of the Tea Party scandal is taking snippets from the vast document dumps and making a big deal out of them – things like Lois Lerner wondering if somebody should investigate Bristol Palin.  If you really dig into the stuff, you can understand how there is material there to construct a variety of narratives.

In one of the narratives. you could write Lois Lerner as a tragic flawed hero, who saw great wrong being done, but was unable to get anyone to act.  She tried to get Justice interested in prosecuting people for lying on their exempt applications and got nowhere.  The gift tax initiative went nowhere (although I’m not sure she was that involved in that one).  And then there is this batch of exempt applications.  She knows they are up to no good and here she has leverage.  She can slow them down by not doing something, which is a lot easier than doing something. Instead of accomplishing something in stemming the flow of dark money, Lois Lerner ends up crippling the IRS, which is fine with libertarian billionaires.  They don’t want the IRS to do its job at all.

The narrative that seems most plausible to me is Lois Lerner as the Agent From Hell.  AFH is my term for a certain type of IRS agent that I have thankfully only encountered a couple of times in my career.  AFH is not that technically astute, but AFH is dogged.  And AFH is certain that your client is up to no good.  AFH just hasn’t quite figured out what that no good is.  That was Lois Lerner and the Tea Party applications, only she had to do her work through minions.  Lois Lerner was passionate about the dark money issue and nobody else seemed to care. So she tortured her line agents to get them to torture bewildered applicants who were already pumped up on conspiracy theories. A perfect storm of bureaucratic bumbling coming across as brilliantly subtle conspiracy.

On To The Next Millenium

And of course the brilliantly subtle conspiracy is the narrative that works best for those still interested in the scandal, so that is what will tend to predominate in the day by day as we move along.

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

Friday, February 5, 2016

The IRS Scandal, Day 1002

IRS Logo 2Letter From John Koskinen to Orrin Hatch (Feb. 3, 2016)

Politico, The IRS’s No Good Day:

A once lost hard drive was suddenly found — sort of. In fact, the agency did junk former official Samuel Maruca’s hard drive, which it was supposed to preserve for the IRS’s court battle with Microsoft over an audit of the computer giant. But Koskinen told Senate Finance leaders on Wednesday that the agency actually copied the hard drive before it was wiped clean. "This event reflected a shortcoming in our document controls,” Koskinen wrote, adding that he’s ordered the agency to stop recycling employee devices while the IRS examines its preservation standards.

On those points at least, Senate Finance Chairman Orrin Hatch seemed to agree with Koskinen. Both Hatch and the committee’s top Democrat, Sen. Ron Wyden, had expressed concern about the IRS’s document retention efforts in the wake of the latest hard drive issue. "Through sheer coincidence, the IRS's mishandling of critical information caused less damage than initially stated by the Justice Department,” Hatch said, while insisting “these seemingly routine disappearing acts make clear that the agency's recordkeeping practices have fallen woefully short.”

Washington Times, IRS Admits to Mistake For Court Case, Promises to Stop Erasing Hard Drives:

The IRS has put an emergency stay on deleting its computer hard drives and devices such as BlackBerrys, with the commissioner saying in a letter to Congress on Wednesday that the agency goofed in deleting a key hard drive last year that was supposed to be preserved as part of a court case.

Commissioner John Koskinen also said the agency has discovered a backup for that hard drive and may be able to find records critical to the court case. But he said that was a “fortunate” occurrence and vowed to try to reform the tax agency’s practices.

“I have ordered a halt to the erasure and recycling of all employee devices, including hard drives and mobile devices, for all current and departing employees,” he said in a letter to Senate Finance Committee Chairman Orrin G. Hatch, Utah Republican.

He also said the IRS is changing its procedures for when it is required to hold documents for court cases: It will preserve the records not only of the person in question, but his or her supervisor’s records as well.

In the longer term, the IRS is trying to ditch computer hard drives for storage altogether and to require that records be saved on the agency’s main network.

“It has long been our view — validated, unfortunately, by the events of recent years — that the service’s reliance on employee hard drives as an archival records store is suboptimal, not least because they are vulnerable to equipment failure resulting in data loss,” he wrote.

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

Thursday, February 4, 2016

The IRS Scandal, Day 1001

IRS Logo 2U.S. Department of justice Status Report, Judicial Watch Inc. v. IRS, No. 1:13-cv-01559m (D.C. D.C. Feb. 1, 2016):

On February 1, 2016, the Internal Revenue Service (“Service”) released to Judicial Watch, Inc., a CD containing documents responsive to the portion of Judicial Watch’s final Freedom of Information Act (“FOIA”) request for documents regarding the preparation of development letters.

The Service has now released to Judicial Watch over 32,600 pages of documents responsive to the FOIA requests at issue in this case. Those pages have been redacted for exemptions in accordance with 5 U.S.C. § 552(b) as appropriate.

IRS Chief Counsel attorneys have represented to the undersigned attorneys that the Treasury Inspector General for Tax Administration (“TIGTA”) has not provided any forensically-recovered emails to the Service since the Service submitted its Status Report on January 22, 2016. On January 29, 2016, TIGTA turned over to Chief Counsel 13 Lois Lerner emails (without any associated attachments) and one handwritten note. TIGTA has communicated to Chief Counsel that it believes that these documents have not been previously produced to Congress in prior document productions. These 14 documents were found in papers that TIGTA retrieved from Lois Lerner’s office in August of 2013. The 14 documents are being loaded in Clearwell, Chief Counsel’s document review platform, and will be searched to determine if any of the documents are responsive to the FOIA requests at issue in this case. The Service has agreed to prioritize its review of the 14 documents and the Service will provide a date by which it will expect to turnover any non-exempt, responsive documents in its weekly status report due February 8, 2016.

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

Wednesday, February 3, 2016

Mitt Romney As IRS Commissioner?

RomneyPolitico, Kasich :Romney or Bloomberg Could Fix IRS:

Spit-balling about how to fix the IRS, Ohio Gov. John Kasich said an audience member’s suggestion to tap Mitt Romney to do it would be a “really interesting suggestion.”

“A Mitt Romney or a Michael Bloomberg would be great,” he said, musing about a one-year appointment to turn it around.

“He went out and took care of the Olympics and he did that for free,” Kasich added, recalling Romney’s highly praised effort to turn around the struggling Salt Lake City Winter Olympics in 1999. “I’m going to send him an email tonight.”

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February 3, 2016 in IRS News, Political News, Tax | Permalink | Comments (10)

The IRS Scandal, Day 1000

1000 Days

The College Fix, The IRS Scandal, Day 1,000: Every Single Day For Nearly Three Years Prof Chronicles IRS Scandal:

A Pepperdine University School of Law professor has chronicled all the developments in the IRS scandal since Day One through a blog he tirelessly updates every day.

Every. Single. Day.

And today — Wednesday, Feb. 3 — marks Day 1,000 in tax law Professor Paul Caron’s apparently never-ending quest to keep tabs on the latest in the IRS scandal on his “TaxProf Blog.”

The feat itself is impressive in its size and scope, and something Caron said he could have never predicted when revelations that the agency targeted conservative groups came to light in May 2013.

“My goal for TaxProf Blog is to comprehensively cover the major tax and legal education issues of the day,” Caron said in an email to The College Fix. “So when the IRS scandal broke, I naturally covered it on the blog. After a week, it was clear that this would be a major, long-running story, so I decided to do a daily roundup of news of the IRS Scandal each day. I never dreamt it would still be going strong 1,000 days later.”

Caron’s dedication to the effort is evidenced by the fact that he posts updates to his blog on the scandal every day, including weekends and holidays: “There has always been something new to cover,” he said.

Over the years, Caron said perhaps one of the most troublesome aspects of the scandal is “the arrogance of IRS Commissioner John Koskinen and President Obama, and … the ineptitude of the House Republicans.”

“I set out my views in a USA Today op-ed on Day 369 and still think I pretty much nailed it,” Caron said. In that op-ed, he details the scandal’s major developments and calls for better media scrutiny and Congressional oversight.

Today, as the IRS scandal wanes from the public eye — especially in light of the 2016 presidential elections — questions on whether anyone will ever be held accountable for the unlawful actions remain. But it’s clear Americans are still upset over what went down.

When Caron polled his regular readers last year on whether he should continue the IRS news round up, he said the answer was overwhelmingly in the affirmative.

“Almost 1,000 of my readers voted in the poll, and 90 percent asked me to continue the daily coverage,” he said. “Several academics and practitioners have praised my coverage and stated that it will provide an important permanent resource when historians write about the scandal.” ...

The effort has not been without controversy in and of itself.

“I will say that I have received more professional flak about this than anything I have done in my 25 years as a tax professor,” Caron said in his email to The College Fix. “My goal throughout the 1,000 days has been to link to every single press report about the scandal – from both the right and the left. Because the right covers the scandal much more than the left, I have linked to many more stories from the right than from the left. Check out Day 883.”

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

The IRS Scandal, Days 901-1000

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

Tuesday, February 2, 2016

The IRS Scandal, Day 999

IRS Logo 2Albuquerque Journal op-ed: IRS Continues to Target Conservative Groups, by Rick Harbaugh (Albuquerque Tea Party):

Lois Lerner, the former head of the IRS, was forced into early retirement because of this issue. Holly Paz also disappeared off the rolls of the IRS over this issue.

The current head of the IRS is under fire for lying that this issue has been resolved.

Why am I bringing up ancient history about the IRS targeting of conservative groups several years ago? After all, those issues have been resolved. Right?

Not hardly!

This month marks the sixth anniversary of the Albuquerque Tea Party’s application to the IRS for a 501c4 tax exempt status. To date, the IRS has still not responded to that application – even though the current head of the IRS has said that the issue has been resolved. Not so. ...

It is way past time for this issue to be addressed. The IRS needs to give a thumbs up or a thumbs down on our request.

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

Monday, February 1, 2016

The IRS Scandal, Day 998

IRS Logo 2Peter J. Reilly (Forbes), NorCal Tea Party Patriots V IRS - Grassroots Or Astroturf?:

The news about a preliminary victory against the IRS in a suit by not-for-profits broke last week making it Day 986 of the TaxProf’s IRS Scandal.  I didn’t make it into my inbox till last weekend, because the ruling required redaction. Judge Susan Dlott of the United States District for the Southern Division of Ohio ruled in NorCal Tea Party Patriots, et al v IRS that the various groups that believe they were targeted by the IRS will be recognized as a class.

Beginning in 2010, Plaintiffs applied to the IRS for exemption from federal taxation pursuant to the Internal Revenue Code, 26 U.S.C. §§ 501(c)(3) and/or 501(c)(4). Plaintiffs allege that the IRS targeted them and other dissenting groups by segregating their tax-exemption applications because their names included terms such as “Tea Party,” “Patriots,” or “9/12 Project” or because their focus included issues such as government spending. Plaintiffs allege that the IRS subjected the applications from these dissenting groups to delays and increased scrutiny. They further allege, with respect to a certain subset of dissenting groups, that the IRS requested and then inspected information not relevant to the tax-exemption application process. ...

The hundreds of Tea Party and the like groups that were harmed by the IRS slow walking their applications and aggravating them with unnecessary questions are not holding bake sales and spaghetti suppers to pay for lawyers to vindicate them.  Rather a group whose exempt status was not challenged is bankrolling the effort.

As noted the litigation is being funded by Citizens For Self-Governance.  The suit gets prominent play on CSG’s website. One of the things that flashes up is that CSG filed the only class action lawsuit against the federal government to defend the law-abiding citizens who were harassed by the IRS. ...

Sourcewatch working in the opposite direction (from disclosures of donors) has identified a few of the larger donors including $2.5 million from the Vanguard Charitable Endowment Program (a donor advised fund) and $691,916.16 from DonorsTrust. DonorsTrust is essentially a donor advised fund dedicated to supporting conservative causes “… to insure the intent of donors who are dedicated to the ideals of limited government, personal responsibility, and free enterprise.”

So CSG is starting to looking like part of the Kochtopus.  Board member, Eric O’Keefe is reputed to have Koch connections. ...

It seems that CSG is embarking on a program of extremely radical change.  The promoters of the IRS scandal narrative have been talking about the Obama administration, somehow through Bush era appointees, weaponizing the IRS.  A counter argument might be that groups like ALEC and CSG are part of an effort to weaponize philanthropy and they will brook no interference.

At least for the upcoming election cycle, they have pretty well defanged the IRS, but it may be that this litigation is meant to be part of stomping on it and grinding it into the dust.

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

Sunday, January 31, 2016

The IRS Scandal, Day 997

IRS Logo 2The Daily Caller News Foundation, IRS’s New Ethics Chief Once Ordered Records Be Illegally Destroyed:

The new head of the Internal Revenue Service’s (IRS) ethics office once oversaw the illegal shredding of documents sought by the federal tax agency’s inspector general (IG), and allegedly retaliated on the colleague he believed snitched on him about it.

Stephen Whitlock was named director of the IRS Office of Professional Responsibility (OPR) in August 2015. The OPR supports “effective tax administration by ensuring all tax practitioners, tax-preparers, and other third parties in the tax system adhere to professional standards and follow the law,” according to the agency’s web site.

Whitlock’s chief of operations was, until recently, a former tax enforcement agent who attempted to avoid government payments by declaring bankruptcy and who even lost his official sidearm in a bar fight.

Additionally, in this newly-appointed 7-person leadership team are two of Lois Lerner’s former top deputies, at least one of whom was involved in the targeting of conservative and Tea Party non-profit applicants. Records of those activities also mysteriously disappeared after Congress began investigations in 2013. ...

Currently under Whitlock are section manager Elizabeth Kastenberg and legal analysis chief Garrett Gluth, both of whom previously worked closely with Lois Lerner in the IRS’s nonprofit tax office. Congressional testimony shows that Kastenberg was in charge of reviewing the audits of conservative-leaning nonprofits and was in the room when major decisions on the political audits were made.

Lerner was subsequently held in contempt of Congress after refusing to answer questions from congressional investigators. The IRS said the records showing her actions in the case had mysteriously disappeared.

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

Saturday, January 30, 2016

The IRS Scandal, Day 996

Friday, January 29, 2016

The IRS Scandal, Day 995

IRS Logo 2The Daily Caller, California AG Threatens Non-Profit Donors' First Amendment Rights:

California Attorney General Kamala Harris is being deluged with requests from non-profit officials to withdraw her “unconstitutional” demand for public disclosure of donor names because it creates a “back door” around the U.S. Supreme Court’s decision in Citizens United.

Harris’ critics claim her demand violates the First Amendment and privacy laws, compromises donor privacy and security, and makes it easier for government officials and agencies to pressure dissenting groups challenging particular policies and programs. ...

“This is a back-door way these liberal Democrats to get around the Citizens United decision,” Mark Fitzgibbons, a Northern Virginia lawyer who represents individuals and businesses against government abuses, told The Daily Caller News Foundation.

Nonprofit groups with a 501(c)4 status already have to submit the names of people who donate more than $5,000 on Schedule B of their annual 990 filings with the Internal Revenue Service (IRS), Fitzgibbons said. When those groups submit tax paperwork at the state level, they redact those names. Harris wants to see those names.

A former FEC commissioner agreed with Fitzgibbons.

“It’s very clear that groups on the left, particularly the Democratic Party, they hated the Citizens United decision,” Hans von Spakovsky, a senior legal fellow with the conservative Heritage Foundation, told TheDCNF.

“Their way around it is to force donor disclosure, so they can scare off donors and dry up the resources these organizations use to get their messages out the way they are entitled to under Citizens United. So I think this is a backdoor way of getting around that case,” said von Spakowsky, who served on the FEC via a recess appointment by President George W. Bush in 2006. ...

“It has a big chilling effect,” von Spakovsky said. “You can pull up all kinds of articles about the Tea Party organizations who were subjected to the scrutiny by Lois Lerner and the IRS, and many of them talk about how their donors started drying up.”

Critics worry that if state officials obtain donor names, it could lead to another scandal like the IRS targeting violations.

“What happens is, you get what the IRS did with Lois Lerner, where they started targeting conservative organizations and conservative donors, and I bet that is what Harris is doing,” von Spakovsky said. “She is one of the most political attorneys general in the country.”

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January 29, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Thursday, January 28, 2016

The IRS Scandal, Day 994

IRS Logo 2The Fiscal Times, Here We Go Again … IRS Destroys Another Hard Drive:

The Internal Revenue Service appears to have violated a court order once again requiring the preservation of evidence needed by investigators looking into questionable practices at the agency. In a case sure to stir up memories of the Lois Lerner investigation, which saw IRS Commissioner John Koskinen dragged before Congress for multiple hearings, the agency destroyed a computer hard drive belonging to an IRS official connected to the subject of a Congressional query.

Earlier this year, the IRS was ordered by a federal judge to preserve documents – including electronic documents – that were possibly related to an ongoing dispute between the agency and Microsoft. ...

The computer hard drive the IRS destroyed belonged to Samuel Maruca, who oversaw the transfer pricing section at the agency’s Large Business and International division. ...

The revelation that the agency had destroyed a hard drive that Congressional investigators viewed as central to an ongoing inquiry infuriated House Oversight and Investigations Committee Chairman Jason Chaffetz (R-Utah).

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

Wednesday, January 27, 2016

The IRS Scandal, Day 993

IRS Logo 2Citizens Against Government Waste, CAGW Names IRS Commissioner John Koskinen 2015 Porker of the Year:

Today, Citizens Against Government Waste (CAGW) announced the results of its online poll for the 2015 Porker of the Year.  Last year produced a wealth of ludicrous moments in taxpayer gouging and government overreach, but in the end, the “winner” was never in doubt.  The dishonor went to Internal Revenue Service (IRS) Commissioner John Koskinen with 43 percent of the vote.

Commissioner Koskinen’s sins against taxpayers have been well-publicized, which makes his receiving this award all the more appropriate.  CAGW named Koskinen Porker of the Month in August 2015 for his long litany of incompetence and obstruction as head of the reviled agency.  Over the course of several hearings investigating the IRS targeting of conservative groups, Commissioner Koskinen repeatedly stonewalled and mislead members of Congress during the search for Lois Lerner’s emails, while refusing to ensure that IRS targeting would never happen again.  His agency, in the face of a congressional subpoena, erased backup tapes containing as many as 24,000 emails from Lerner.  Worse yet, a July 23, 2015 Government Accountability Office report found that more than two years after the scandal gained national attention, “the IRS has not taken sufficient steps to prevent targeting Americans based on their personal beliefs.”  On October 27, 2015, 19 members of the House Oversight and Government Reform Committee, led by Chairman Jason Chaffetz (R-Utah), introduced a resolution to impeach the commissioner for his conduct during the investigation.  ...

CAGW President Tom Schatz said, “While I did not envy the choice online voters had to make, I believe they picked the most deserving Porker.  Commissioner Koskinen’s extensive and dubious track record of evasive, incompetent, and hostile behavior to taxpayers and their representatives has been unmistakable and unacceptable.  It is long past time that Commissioner Koskinen be replaced with an individual who respects taxpayers and their interests.”

For his dreadful tenure as head of the IRS, CAGW names John Koskinen its 2015 Porker of the Year.

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January 27, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, January 26, 2016

The IRS Scandal, Day 992

IRS Logo 2Forbes:  IRS Lax Controls Enable Targeting Based On Religion + Politics, Claims Report, by Robert W. Wood:

Everyone seems to agree that you should not be audited based on your religion or political beliefs, nor based on which charities you support. Yet there are still questions about how our tax system measures up. Despite all the protestations that there was never any IRS targeting (even some that Republicans made it up), the weak response to the last two years remains disquieting. There seemed to be bonuses and rewards, not discipline or prosecution.

Now, a new government report says lax IRS controls of audit criteria mean the agency is still able to target based on religious and political views. This time, it is a U.S. Government Accountability Office (GAO) report, stating that: “The control deficiencies increase the risk of selecting organizations for audit in an unfair manner — for example, based on an organization’s religious, educational, political, or other views.” Precisely how much such inappropriate criteria are being used is being debated, as the IRS scandal reaches day 982Some Republicans have assumed the worst, while naysayers claim there is still no scandal and still no targeting. ...

The GAO identified what it calls control deficiencies within the IRS system. These flaws open the system to risk that the IRS uses political and religious beliefs as selection criteria for audit. There was already concern about tax exempt organizations, and it could extend to who gets audited too. The GAO concluded that the lack of strong control procedures increases the risk of targeting. The IRS, however, responded in a statement that ... The IRS stresses that audits of tax returns are based on the information contained on the taxpayer’s return and the underlying tax law – nothing else. Politics play no factor in audit selection. ...

This seems to echo The Daily Show appearance by President Obama when he denied any targeting. At the very least, some of the denials have been dissembling. If there was any targeting, we heard, it was rogue IRS employees in Cincinnati. Besides, emails showed there was no directive about targeting. The emails are missing? Hard drives crash and must be quickly recycled. There’s no smidgen of corruption. Cash bonuses? Unrelated.

And the top of the IRS has remained elusive, despite calls to impeach the IRS Chief from Republicans. ...

The IRS is one of most important agencies there is. Our tax system still runs primarily by self-assessment, and taxpayer faith in the system is key. The vast majority of its employees are fair and doing their best. But the agency needs real accountable leadership to get the government’s work done.

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January 26, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Monday, January 25, 2016

Ventry Named To IRS Advisory Council

VentryIR-2016-8 (Jan. 22, 2016), IRS Selects New Advisory Council Members:

The Internal Revenue Service today announced the selection of five new members to the Internal Revenue Service Advisory Council (IRSAC), which provides an organized public forum for IRS officials and representatives of the public to discuss key tax administration issues.

The IRSAC, established in 1953, selects members to represent the taxpaying public, tax professionals, small and large businesses, academia and the payroll community. The council provides the IRS Commissioner and division leadership with important feedback, observations and suggestions. ... IRSAC meets periodically and will submit a report to the agency in November 2016 at a public meeting. IRSAC members generally serve three-year terms. The new members will join 13 returning members in 2016.

The following persons were appointed to serve on the committee beginning in 2016: ...

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

The IRS Scandal, Day 991

IRS Logo 2House Ways & Means Committee Press Release, Brady, Roskam Demand Answers After IRS Admits to Destroying More Hard Drives:

After recent news that the Internal Revenue Service (IRS) has destroyed more protected documents, House Ways and Means Committee Chairman Kevin Brady (R-TX) and Oversight Subcommittee Chairman Peter Roskam (R-IL) sent a letter today to IRS Commissioner John Koskinen.

The Chairmen called for information regarding the IRS’s document retention policies and its troubling record of destroying protected records. They also requested documents about the IRS’s alarming admission that it erased a hard drive that contained information relevant to an ongoing lawsuit against the agency:

This is not the first time the IRS has lost key records that were subject to a document hold.  In the course of this Committee’s investigation into the IRS’s targeting of conservative organizations, the IRS disclosed that it had destroyed backup tapes containing thousands of Lois Lerner’s records.  Furthermore, the IRS did not inform Congress of the destruction for several months.  In the Microsoft case, the IRS discovered the loss of records in December 2015, but did not disclose the loss until January 19, 2016.

“In order for taxpayers to trust the IRS, they need to know that the IRS is dealing with them fairly and playing by the rules.  The IRS, however, has demonstrated now at least twice that it is either unwilling or unable to obey basic rules of discovery before federal courts and before Congress.”

Click here to view the letter.

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January 25, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Sunday, January 24, 2016

The IRS Scandal, Day 990

IRS Logo 2Power Line, Federal Bureaucracies: Incompetent, Corrupt, Or Both?:

The saga of Barack Obama’s Internal Revenue Service is almost unbelievable. After “joking” years ago that he would audit his enemies, it turned out that Obama’s minions were in fact delaying or blocking routine applications for 501(c) status by conservative organizations, in order to help the Democratic Party. When Congress tried to investigate, the Obama administration stonewalled at every turn. Evidence mysteriously disappeared and the key player in the scheme, Lois Lerner, pled the Fifth rather than answer Congress’s questions.

Obama’s stonewall strategy has generally worked well. Scandals fade from the front pages when there are no new developments, and if information finally emerges, Democratic Party reporters treat it as old news. So the IRS scandal has pretty much disappeared from public awareness. Nevertheless, via InstaPundit, we learn that yet another IRS computer hard drive has been destroyed. How many is that now? I’ve lost track. ...

Most people probably don’t realize how astonishing this is. I practiced law for 41 years before retiring at the end of last year, all of it doing litigation. Preserving evidence is a routine obligation in lawsuits; it doesn’t depend on a court order. But if a federal judge has ordered a party to preserve a hard drive, as happened here, you can be assured that the hard drive will be protected like the crown jewels. Every company in America understands this: if a court has ordered you to preserve evidence, you guard it with your lawyers’ lives.

And yet, time after time, the IRS has either inadvertently or intentionally destroyed hard drives that courts have ordered them to preserve. In the private sector, this is unthinkable. Private companies obey court orders. They know that if they don’t, millions of dollars in sanctions are likely to result, and executives will lose their jobs. Only in government agencies do we see this kind of irresponsible scofflaw behavior. This is because most bureaucrats have a deep loyalty to the left-wing cause, and there is no accountability. ...

Is this because federal agencies are corrupt, or because they are unusually inept? The familiar adage is that one should never presume malice when incompetence is a sufficient explanation. But here, I think we are going beyond ineptitude. Are federal agencies the only employers who can’t hire people who know how to follow court orders? No. Incompetence may play a part, but it is hard to avoid the conclusion that federal agencies led by left-wing bureaucrats, including but not limited to the IRS, view themselves as above the law and protected by the scofflaw Obama administration, and therefore entitled to thumb their noses at the federal courts.

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

Saturday, January 23, 2016

The IRS Scandal, Day 989

IRS Logo 2Washington Examiner editorial, The Dog Keeps Eating IRS Hard Drives:

In Oscar Wilde's comedy, "The Importance of Being Earnest," Lady Bracknell is indignant to hear that Jack Worthing is an orphan. "To lose one parent, Mr. Worthing, may be regarded as a misfortune; to lose both looks like carelessness."

If only one could enjoy a similar belly laugh over President Obama's IRS repeatedly losing hard drives loaded with data related to scandals at the agency. To lose one might be regarded as suspicious happenstance; to lose two looks like conspiracy.

The most famous case is that of Lois Lerner, whose division became notorious for targeting conservative groups applying for nonprofit status. Her computer hard drive malfunctioned before that scandal broke, around the same time Congress was looking for information on a separate IRS targeting scheme aimed at conservative donors.

One of Lerner's emails to colleagues, which was finally retrieved from data tapes after roughly two years of congressional demands, stated, "No one will ever believe that both your hard drive and mine crashed within a week of each other."

The newest case of IRS hard drive trouble happened last April, but came to light only this month. Law 360, a subscription-based trade publication, reported this week that the IRS has notified the Justice Department that it erased a hard drive after being ordered not to do so by a federal judge.

In this case, the missing communications are those of a former IRS official named Samuel Maruca in the Large Business and International division. He is believed to have been among the senior IRS employees who made the unusual and possibly illegal decision in May 2014 to hire the outside law firm Quinn Emanuel to help conduct an audit of Microsoft Corporation. ...

Another reason Congress is upset about this law firm's $2.2 million contract is that it came at the expense of IRS customer service. Ever since the Lerner scandal, IRS leadership has moaned incessantly about cuts to their budget. In an effort to gain public sympathy, they made a big deal of the fact that the cuts would diminish the agency's capacity to provide taxpayer assistance during spring 2015.

But at the same time, the IRS was using funds to pay executive bonuses and to hire this outside law firm, even though the agency has many qualified tax attorneys and auditors on staff capable of investigating Microsoft

House Oversight & Government Reform Committee Press Release, Chaffetz, Jordan Letter to IRS Commissioner Regarding Destroyed Documents:

Today, House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-UT) and Health Care, Benefits, and Administrative Rules Subcommittee Chairman Jim Jordan (R-OH) sent a letter to Internal Revenue Service (IRS) Commissioner John Koskinen after learning the IRS destroyed documents covered by a federal district court’s preservation order. The preservation order was issued in response to a Freedom of Information Act lawsuit filed by Microsoft relating to the potentially wasteful hiring of an outside law firm by the IRS to assist in auditing Microsoft.

Key excerpts from the letter:

“The destruction of evidence subject to preservation orders and subpoenas has been an ongoing problem under your leadership at the IRS. …

“It is stunning to see that the IRS still does not take reasonable care to preserve documents that it is legally required to protect. …

 “It is now apparent that the IRS has not solved the management problems that have led once again to the destruction of documents in contravention of its legal obligations.”

The letter requests documents from the IRS so that the Committee can better understand the IRS’s policies.

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January 23, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, January 22, 2016

The IRS Scandal, Day 988

IRS Logo 2Senate Finance Committee Press Release, Hatch, Wyden Press IRS on Record Keeping Practices; Tax Agency Erased Hard Drive Despite Litigation Hold:

Senate Finance Committee Chairman Orrin Hatch (R-Utah) and Ranking Member Ron Wyden (R-Ore.) today sent a letter to Internal Revenue Commissioner (IRS) John Koskinen asking for answers regarding the agency’s recordkeeping practices after it was revealed the agency erased a former employee’s hard drive and destroyed electronic records subject to a litigation hold and potentially responsive to a  Freedom of Information Act (FOIA) request.  The documents related to the agency’s use of outside law firms to conduct examinations of taxpayers.   
 
“This disclosure comes months after the IRS deleted electronic evidence related to a Finance Committee investigation,” Hatch and Wyden wrote. “During the Committee’s bipartisan investigation into the treatment of tax-exempt organizations, the IRS accidentally destroyed 422 back-up tapes and up to 24,000 emails subject to our document requests. The IRS’s missteps in preserving documents – whether they be the subject of a congressional investigation, court order, or FOIA request – are concerning, and necessitate further oversight into the agency’s document preservation practices."

The text of the letter is below. 

Robert W. Wood (Forbes), IRS Wipes Another Hard Drive Defying Court Order...But You Must Keep Tax Records:

Talk about Déjà vu. Despite a court order to preserve documents, the IRS wiped the hard drive of an important IRS official, Mr. Samuel Maruca. Controversially, Mr. Maruca helped the IRS hire Quinn Emanuel, an outside law firm tasked with pursuing Microsoft. Hiring outsiders at over $1,000 an hour (!) angered Senate Finance Committee Chairman Orrin Hatch, who wrote a letter to the IRS complaining about strange deal and the $2.2 million fee.

Sen. Hatch pointed out that this was work the IRS and Justice Department should do. A federal judge was also troubled. And when the questions were too probing, oops, the hard drive was wiped. Sound familiar? Meanwhile, of course, you have to keep all your receipts and tax records! Imagine if the IRS found out that you deleted emails or destroyed records? The fact that the IRS–accidentally–wiped Mr. Maruca’s hard drive reminds everyone of Lois Lerner, the key IRS official who refused to testify about targeting conservatives. ...

It was no surprise that the Justice Department wrote a letter to members of Congress announcing that Lois Lerner will face no criminal charges. What about emails sent from Ms. Lerner’s dog’s email account? The dog is safe too. The DOJ said there was no evidence that any IRS official acted based on political, discriminatory, corrupt, or other inappropriate motives.

Let’s see, is the IRS likely to accept similar taxpayer arguments? 

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January 22, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, January 21, 2016

The IRS Scandal, Day 987

IRS Logo 2Americans for Tax Reform, IRS Erases Hard Drive Despite Court Order:

The IRS erased a hard drive belonging to a former top employee involved in the agency’s controversial, taxpayer-funded hiring of elite trial law firm Quinn Emanuel.

Although there was a court preservation order on all documents related to the IRS hiring of the outside firm, the hard drive was erased anyway. The order was borne of a Freedom of Information Act (FOIA) request submitted by Microsoft.

Even though the white shoe law firm has zero experience handling sensitive tax data, taxpayers have been footing bills of over $1,000 per hour for its services.

The deleted hard drive belonged to the agency’s former director of transfer pricing operations at the IRS Large Business and International Division, likely a key employee involved in the controversy. It is not known if there is any way to recover documents belonging to the employee. ...

This is not the first time the agency has failed to preserve key information. The IRS also “accidentally” destroyed the hard drive belonging to Lois Lerner during investigations into the targeting of conservative groups. As many as 24,000 emails were lost forever when 422 backup tapes were wiped clean despite an agency-wide preservation order and congressional subpoena.

In the Lerner case, the IRS failed to take simple steps to ensure compliance with the order, according to a report by the House Oversight Committee.

Now, it appears that important information has once again disappeared because of IRS corruption, incompetence, or both.

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January 21, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Wednesday, January 20, 2016

The IRS Scandal, Day 986

IRS Logo 2Legal Insurrection, Tea Party Class Action Against IRS Abuse May Proceed:

Tea Party groups won a major victory last week, when Judge Susan J. Dlott of the United States District Court for the Southern District of Ohio certified a class of Tea Party organizations that allege the IRS intentionally delayed their applications for preferential tax treatment based on their political viewpoints. ...

Having survived the hazardous class certification step, the Plaintiffs will now get substantive discovery from the IRS and from third parties. ...

Ms. Lerner’s deposition, assuming Plaintiffs are able to take it, will be a blockbuster.  Ms. Lerner, of course, was the senior-most identified IRS official with knowledge and apparent participation in slow-rolling IRS applications.  She would be entitled to assert her 5th Amendment right against self-incrimination, but only for questions that could lead to criminal penalties against her.

A subpoena to appear for deposition can also include a request for documents.  This is called a subpoena duces tecum.  In a very limited set of circumstances, production of documents can raise Fifth Amendment issues, but it is rare and not obviously applicable here.  This means that any email correspondence to or from Ms. Lerner regarding Tea Party groups should be discoverable.

In addition, a jury is entitled to make a negative inference against a party asserting his or her Fifth Amendment rights in a civil suit.  That is, Ms. Lerner or anyone else appearing on behalf of the IRS could assert his or her Fifth Amendment rights, but the jury would be entitled to assume he or she is doing so because the answer would be incriminating.  If the IRS refused to answer the question “did you delay Tea Party applications?” the jury would be entitled to infer that the deponent or witness is refusing to answer the question because the IRS did in fact delay Tea Party applications.

In a criminal case, the jury is forbidden from drawing any negative inference from a witness’s assertion of his or her Fifth Amendment rights.

In short, Ms. Lerner can repeat her despicable performance before Congress, and continue to stonewall the search for what exactly happened at the IRS, why, and on who’s orders, but she may well suffer personal repercussions now that she was able to evade in Congress’s hearings (with the assistance of a complacent and complicit Department of Justice).

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

Tuesday, January 19, 2016

The IRS Scandal, Day 985

IRS Logo 2Investor's Business Daily editorial, IRS Scandal: It's The Tax Collector's Turn To Be A Defendant:

Justice:  It's not often that the victims of IRS abuse find satisfaction, but the Tea Party groups mistreated by the tax collector will get a shot. Maybe next will be an audit of the IRS — which apparently hasn't changed its ways.

On Tuesday, Day 978 of the unresolved IRS scandal, a federal judge granted class-action status to as many as 300 conservative groups that have been affected by the agency's practice of unduly scrutinizing small-government organizations that sought tax-exempt status but which the IRS saw as dangerous dissidents.

U.S. District Court Judge Susan Dlott's ruling also opens the door for other groups who believe they have been harmed by the IRS to join the suit. We hope the piling on is heavy.

Maybe legal trouble from the suit will teach the IRS, because it sure seems it hasn't learned so far. Americans for Tax Reform, citing Government Accountability Office reports, suggested Wednesday that the "IRS may still be targeting conservative groups."

Seems the culture that allowed the IRS to target right-of-center groups for political reasons — effectively rendering them inoperative — has never been fixed, despite promises from the president himself.

"The control deficiencies increase the risk of selecting organizations for audit in an unfair manner — for example, based on an organization's religious, educational, political or other views," says the GAO.

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

Monday, January 18, 2016

The IRS Scandal, Day 984

IRS Logo 2From reader Henry Schaffer:

I was going to suggest capping it at 1,000 days.

Until I read Day 983.

Regardless of how the suit turns out, covering it, and similar ones, provides relevant material I'm unlikely to get from other sources. Since legal procedures advance slowly — it certainly will be well over 1,000 days till there is nothing more to report. 10,000 days?

For more on my continuation of coverage of the IRS Scandal, see here, here, here, and here.

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January 18, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Sunday, January 17, 2016

The IRS Scandal, Day 983

IRS Logo 2Press Release, U.S. District Court Certifies Class Action Against the IRS by Tea Party Groups:

Graves Garrett LLC is pleased to announce that the U.S. District Court for the Southern District of Ohio has certified the class action brought by their clients against the Internal Revenue Service. The plaintiff Tea Party groups sued the IRS for violating their First Amendment rights by discriminating and retaliating against them during the tax-exempt application process. The groups also seek damages against the IRS for violating a taxpayer privacy statute. With certification of the class, the representative groups now assert claims on behalf of at least 200 other groups that the IRS targeted.

“This decision represents a significant step forward for obtaining relief for Tea Party groups that were identified, segregated, and harassed by the IRS solely because of their viewpoints,” said Edward Greim, who with Todd Graves and Dane Martin served as counsel. “It is also the culmination of nearly two years of class discovery into the scope and harm of the IRS’s conduct, including ten sworn depositions of the IRS and its agents in Washington, D.C. and Cincinnati, Ohio, and the IRS’s production of thousands of pages of documents.” In briefs, the Tea Party groups cited to evidence showing that the IRS’s conduct was not benign, but instead an orchestrated effort designed to hinder the effectiveness of Tea Party groups, prevent their access to the courts, and forcefully disclose their private donor information.

The lawsuit, NorCal Tea Party Patriots v. Internal Revenue Service, was the first lawsuit filed against the IRS relating to its handling of applications for tax-exemption by Tea Party groups. The case will now proceed to merits discovery and trial concerning liability and damages.

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January 17, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Saturday, January 16, 2016

IRS Releases Final 2015 Filing Season Statistics

The IRS has released final 2015 filing season statistics:

IRS

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

The IRS Scandal, Day 982

IRS Logo 2IRS Statement:

The IRS stresses that audits of tax returns are based on the information contained on the taxpayer’s return and the underlying tax law – nothing else. Politics play no factor in audit selection. There is nothing in the GAO reports that contradict that statement. GAO did not identify any instances where the selection of a case was considered inappropriate or unfair. The audit process is handled by career, non-partisan civil servants, and we have processes in place to safeguard the exam process.

We generally agree with the recommendations in the GAO report and will take a number of steps to further improve our processes. The IRS has procedures in place that adhere to internal control standards, which help ensure fairness and integrity in the return selection process. No individual can control which tax returns are selected for audit. As required by law, we have a number of safeguards in place to restrict access to our systems to only authorized users. We emphasize the importance of fairness and integrity to fulfilling our responsibilities as the nation’s revenue agency.

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

Friday, January 15, 2016

GAO:  Only 38% Of Taxpayers Who Called IRS Got Through In 2015 (Down From 74% In 2010); Wait Time Increased From 11 To 31 Minutes

GAO LogoGovernment Accountability Office, Deteriorating Taxpayer Service Underscores Need for a Comprehensive Strategy and Process Efficiencies (GAO-16-151) (Jan 14, 2016):

The Internal Revenue Service (IRS) provided the lowest level of telephone service during fiscal year 2015 compared to prior years, with only 38 percent of callers who wanted to speak with an IRS assistor able to reach one. This lower level of service occurred despite lower demand from callers seeking live assistance, which has fallen by 6 percent since 2010 to about 51 million callers in 2015. Over the same period, average wait times have almost tripled to over 30 minutes. IRS also struggled to answer correspondence in a timely manner and assistors increasingly either failed to send required correspondence to taxpayers or included inaccurate information in correspondence sent. IRS has taken steps to remind assistors to send correspondence, but does not have adequate controls to ensure that they send accurate correspondence before closing cases. GAO also found that the Department of the Treasury (Treasury) does not include correspondence performance goals in its performance plan, and therefore, does not have a complete set of measures to assess performance. The decline in service has coincided with a 10 percent reduction in IRS's annual appropriations, as well as resource allocation decisions by IRS to meet statutory responsibilities, such as implementing tax law changes and supporting information technology infrastructure.

GAO

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January 15, 2016 in Gov't Reports, IRS News, Tax | Permalink | Comments (2)

The IRS Scandal, Day 981

IRS Logo 2House Ways & Means Committee press release, Ways and Means Chairmen Call On IRS to Quickly Implement GAO Recommendations to Protect Taxpayers:

Today, the Government Accountability Office (GAO) released two new reports regarding serious flaws in the Internal Revenue Service’s (IRS) audit selection processes. GAO confirmed that these flaws mean the IRS could continue to unfairly target American taxpayers based on their political beliefs and other First Amendment protected views.

House Ways and Means Chairman Kevin Brady (R-TX) and Subcommittee on Oversight Chairman Peter Roskam (R-IL) expressed concerns about GAO’s findings and called on the IRS to immediately take action.

“In December, Congress passed into law regulations to ensure that the IRS can no longer target American taxpayers for their political beliefs,” said Chairman Brady. “GAO has now exposed serious weaknesses in the IRS’s auditing process and confirmed that Americans remain at risk of political targeting.  Ways and Means members will hold the IRS accountable for quickly implementing GAO’s recommendations and finally treating all American taxpayers fairly.”

“We already knew the IRS was targeting political opponents of the Administration when vetting groups applying for tax-exempt status. Now we have reports from GAO raising concerns about the audit selection process throughout IRS operations. The American people deserve better. We must do more to ensure the IRS treats all Americans fairly, holds employees responsible for these abuses accountable, and implements procedures to prevent this abuse from ever happening again,” said Subcommittee Chairman Roskam

BACKGROUND ON THE REPORTS

After Committee members learned that the IRS had targeted conservative groups applying for tax-exempt status, they were concerned that this could be happening in other divisions within the agency, particularly audit selection.

As a result, the Committee asked the GAO to review each business unit within the IRS to determine whether there were protections in place to ensure that audits are selected fairly and without bias.

On July 23, 2015, GAO released its first report on the Tax Exempt/Government Entities division and the Oversight Subcommittee held a hearing on this report.

Today’s GAO reports confirm serious problems at the Small Business/Self Employed unit and the Wage & Investment unit.

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

Thursday, January 14, 2016

The IRS Scandal, Day 980

IRS Logo 2Washington Free Beacon, Report: IRS May Still Be Targeting Conservative Organizations for Audit:

The Internal Revenue Service may still be unfairly targeting conservative organizations for audit due to flaws within their interior controls, Americans for Tax Reform reported Wednesday.

A Government Accountability Office audit found that because of control deficiencies within the IRS system, there is higher risk for the government agency to select organizations based on political and religious beliefs for audit:

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

Wednesday, January 13, 2016

The IRS Scandal, Day 979

IRS Logo 2Wall Street Journal editorial, An IRS Class Action: A Judge Certifies That a Suit For Some 200 Groups Can Proceed:

The case against the IRS for targeting conservatives isn’t over after all. On Tuesday a federal judge in Ohio certified a class-action lawsuit against the IRS by conservative groups whose applications for tax-exempt status were slow-rolled between 2010 and 2013.

The lawsuit by the  NorCal Tea Party Patriots was filed in May 2013, shortly after the targeting came to light. It will represent more than 200 groups. In July 2014 Judge Susan Dlott dismissed parts of the lawsuit but allowed key portions to go forward. Those include claims that the IRS engaged in retaliation and viewpoint discrimination in violation of the First Amendment, and that the tax agency violated Section 6103 of the U.S. Code, which protects confidential taxpayer return information.

A class action isn’t our favorite legal method, but it fits this case because it appears the IRS targeted groups based on common criteria and treated them similarly—putting them through unprecedented scrutiny and delay. Judge Dlott, a Bill Clinton appointee, has become frustrated by IRS and Justice Department stonewalling. ...

The law firm representing the tax-exempt groups, Kansas City-based Graves Garrett, will now move on to discovery on the merits, with the ability to ask IRS officials what they did and why. The Obama Administration can appeal the class certification and no doubt it will try. But there’s still plenty of time to find out what Justice and the IRS are so committed to hide.

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January 13, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, January 12, 2016

The IRS Scandal, Day 978

IRS Logo 2Rep. Jim Jordan Press Release, Jordan Questions Justice Department Assistant Attorney General About IRS Scandal:

Congressman Jim Jordan (R-Ohio) questioned Assistant Attorney General Peter Kadzik from the U.S. Department of Justice during a hearing today before the House Committee on Oversight and Government Reform about the rate and quality of document production by federal agencies, and about the IRS targeting scandal.

Rep. Jordan questioned Kadzik about Justice Department delays in delivering requested documents to the Oversight committee, and also about the Justice Department’s investigation of the IRS and its decision to not prosecute anyone for its targeting of conservative organizations.

During his questioning, Rep. Jordan expressed frustration over the Justice Department’s failure to provide documents to the Oversight committee, even though the department’s investigation of the IRS has concluded. The Justice Department refused to provide case files related to its investigation, instead pointing to a congressional briefing on the subject planned for next week.

Rep. Jordan: “We … sent you a letter on December 1, the Chairman and I, and we requested in that letter all documents that pertain to the [IRS] investigation and we have yet to receive a single document. Why is that?” 

Kadzik: “We also received your letter yesterday requesting the file.” 

Jordan: “That’s a follow-up letter. We sent the first letter over a month ago.”

Kadzik: I understand, but producing an entire investigation or prosecution file presents particular issues with respect to our law enforcement sensitivities and prosecutorial responsibilities.”

Jordan: “We’ve heard that for three-and-a-half years. I’ve had two different FBI directors, I’ve had Mr. Holder, assistant Attorney General Mr. Cole, give me that exact same answer for three-and-a-half years. And their answer added one other word: ‘ongoing’ investigation. And now the investigation is over. And it’s been over at least since October 23 according to what you just testified and according to the eight-page letter you sent us on October 23. And now you’re telling us you can’t give us any documents and you’re just giving us the same answer?”

Federal News Radio, Oversight Committee Critical of Agencies’ Effort to Fill Document Requests:

How many people with visas have overstayed their time in the United States? What information was included in more than 10,000 files related to the Office of Personnel Management data breach? Is there a paper trail leading to the decision not to pursue criminal charges against IRS officials for targeting conservative groups?

Those are questions members of the House Committee on Oversight and Government Reform have been asking — in some cases — for more than a year, but a lack of documentation from federal agencies have prevented complete answers from being given.

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

Monday, January 11, 2016

The IRS Scandal, Day 977

IRS Logo 2Government Executive, Lawmaker: Every Agency Could Easily Find at Least 5% of Fat to Trim:

The top oversight role for Congress in relation to federal agencies is rooting out the people doing dumb things, a House Republican said on Thursday.

Rep. Jason Chaffetz, R-Utah, chairman of the House Oversight and Government Reform Committee, said at an event hosted by the Brookings Institution the government tries to do too many things while rewarding its employees with too many bonuses. ...

He noted that several agency leaders have testified to his committee that they are struggling to fire their worst employees and would like more power to do so.

For one federal official, Chaffetz is attempting to take the firing into his own hands. The watchdog leader introduced articles of impeachment against Internal Revenue Service Commissioner John Koskinen in October, and has been working “behind the scenes” to move that process forward.

“Mr. Koskinen better lawyer up,” Chaffetz said. “It’s about to get ugly.”

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

Sunday, January 10, 2016

The IRS Scandal, Day 976

IRS Logo 2Boston Herald: Citizens Are No Longer Equal Under Obama, by Adriana Cohen:

Disgraced former IRS chief Lois Lerner is enjoying her “Get Out of Jail Free” card care of the Obama administration.

Who’s surprised she won’t face charges given the fact that most Americans believe the White House was in on allegations the IRS targeted Tea Party and conservative groups 
applying for nonprofit status?

It gets worse. During the “investigation,” IRS head John Koskinen stonewalled big time, refusing to provide Congress with information including Lerner’s “missing” emails. Sound 
familiar?

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