TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Wednesday, July 6, 2016

The IRS Scandal, Day 1154

IRS Logo 2Daily Caller, IRS Allegedly ‘Determined’ To Hide Records Revealing White House Collusion:

IRS officials barely searched for records that would reveal the agency disclosed taxpayer information to the White House without authorization, a court filing alleges.

IRS employees claimed they couldn’t find any documents responsive to a Freedom of Information Act (FOIA) request that would reveal the unauthorized disclosures, but Cause of Action (CoA) Institute’s Friday court filing argues the agency didn’t search email correspondence and only looked through formal disclosure requests.

“In short, the IRS appears determined not to perform an adequate search for records that may demonstrate serious wrongdoing by federal officials — the same officials who are tasked with the duty to protect the confidentiality of taxpayer information,” the filing said.

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

Tuesday, July 5, 2016

The IRS Scandal, Day 1153

IntimidationNews Busters, From Cincinnati to Washington: How Lois Lerner's IRS Ruthlessly Targeted the Tea Party, by Kimberly Strassel:

Here is just a taste of what's inside The Intimidation Game: How the Left Is Silencing Free Speech

... Lerner shocked Washington with her May 2013 admission that her agency had harassed Americans. The shocking thing was that anyone was shocked.

Lerner to this day won’t cooperate with any real investigation; the nation has been denied the opportunity to hear her story. But e-mail is a wondrous thing. Between her records and the recollections of her colleagues, we have a vivid portrait of the former head of the IRS’s Exempt Organizations unit. She was a brassy, self-assured bureaucrat with Democratic leanings and a near-messianic belief in the need for more speech regulations.

And she had a long history. Before landing at the IRS, Lerner spent twenty years at the FEC, rising to become its acting general counsel. Never in all that time did she hide her views that money was a problem in politics and needed more restrictions. She was seen even then as a highly biased FEC enforcer—one who harassed conservative groups that wanted more freedoms in politics.

While head of FEC enforcement, Lerner played a role in the 1990s in going after former Mississippi governor Haley Barbour over a nonprofit group he established called the National Policy Forum, which had been accused of taking illegal foreign contributions. (The Justice Department would later find no evidence of a crime.) She was part of an effort to take down a dozen Republican state party chairmen and the Republican National Committee, over accusations that they had broken finance laws during George H. W. Bush’s 1988 presidential bid. That case stayed open for seven years. 

She’d most famously help wage a small war against the Christian Coalition, in one of the largest enforcement actions in FEC history. The coalition was accused (with no proof) of illegally coordinating its advocacy with Republican candidates. Mark Hemingway of the Weekly Standard documented that the harassment cost the conservative group “hundreds of thousands of dollars, and countless hours of lost work.” James Bopp (of later Citizens United fame) handled that case, and he revealed in testimony that the FEC team deposed 48 different people, conducted 81 depositions, put in 127 separate document requests, and sent the group 32 different interrogatories containing hundreds upon hundreds of questions. The agency demanded donor lists, and even inquired into whether people in the group were “praying” for each other. Each of the coalition’s 49 affiliates got document demands; it would ultimately hand over 100,000 pages of information.

So Lerner had a lot of practice in harassment even before she geared up at the IRS. Her e-mails show that she was at home in Democratic politics, with biases against conservatives. There’s a 2004 e-mail with a former colleague in which she’s hopeful she’ll be able to get together to “celebrate” a John Kerry presidential victory. In 2012, a friend would muse to her about the “scary” Romney/Ryan ticket and ask how a “creep like Romney” was ever elected in Massachusetts. She’d later that year decline an invitation to a party to celebrate Obama’s expected victory, noting that she was nonetheless keeping her “fingers crossed. And, I did vote!”

When told that Democrats had kept control of the Senate in 2012, she responded, “WooHoo! [I]t was important to keep the Senate. If it had switched, it would be the same as a Rep president.” Her husband, Michael Miles, comes off as a passionate liberal who egged his wife on. On election day in 2012, he told his wife that he hadn’t been able to find the “socialist-labor candidates on the ballot, so I wrote them in.” Three days after the 2012 election, he complained to her about the losers, “Well, you should hear the whacko wing of the GOP. The US is through; too many foreigners sucking the teat; time to hunker down, buy ammo and food, and prepare for the end. The right wing radio shows are scary to listen to.” Lerner replied, “Great. Maybe we are through if there are that many assholes.” Conservatives, she explained, were “crazy” and worse than “alien terrorists.”

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July 5, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, July 4, 2016

The IRS Scandal, Day 1152

IntimidationABC News, Book Excerpt: Kimberley Strassel's 'The Intimidation Game':

Excerpted from The Intimidation Game: How the Left Is Silencing Free Speech, by Kimberley Strassel by arrangement with Twelve, an imprint of Grand Central Publishing, Copyright © Kimberley Strassel 2016.

Cleta Mitchell was sitting in front of her computer in Pinehurst, North Carolina. Mitchell is one of Washington’s most hard-working conservative lawyers, so she spirits off to her home there any chance she gets, for a change of scenery. It was a Friday, May 10, 2013, and she was clearing off the last to-do items, looking forward to a quiet weekend. Instead, her laptop started pinging like mad, notes flooding in from Republican and Democratic colleagues alike. “They all said the same thing: ‘Cleta, did you see? Did you? Lerner admitted it! She admitted the targeting. She apologized. You weren’t nuts after all!’” recalls the lawyer in an amused voice.

The e-mails came within minutes of Lois Lerner's confession. And that was much to the IRS's chagrin. The agency had carefully strategized the moment, choosing an obscure tax meeting as the place where Lerner would let slip the news that her IRS unit had spent three years harassing and silencing conservative groups. Lerner had hoped the little-noticed forum, and the Friday timing, would help skate the moment past the press. Instead, Washington exploded. “I don’t go to those ABA events—they are all communists,” says Mitchell (only half kidding). “But a lot of my Washington colleagues and lawyers were present, and they’d been following this, and they knew exactly what a bomb this was. The IRS was idiotic to think this wouldn’t blow up.”

Mitchell certainly wasn’t surprised. She’d been ferrying—or rather attempting to ferry—several of her clients through the IRS’s tax-exempt program for three years. She’d known there was something rotten on Constitution Avenue since at least 2010, as her applications sat on hold.

What did surprise her was Lerner’s description of events. The head of the IRS’s Exempt Organizations unit assured the ABA audience that this was just a little low-level slipup. Some “line people in Cincinnati” had “centralized” and delayed tax-exempt applications in a way that was “wrong.” They also sent out some letters that “were far too broad,” asking questions that “weren’t really necessary.” Luckily, crowed Lerner, the Washington IRS office was on hand to make it better. All better.

Mitchell couldn’t believe what she was reading. “When I heard her blaming this all on Cincinnati—when I’d been dealing with the Washington office from day one—well...I was rips---.” ...

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

Sunday, July 3, 2016

The IRS Scandal, Day 1151

IntimidationThe Daily Signal, How the Left Is Using Intimidation to Silence Free Speech:

Most Americans are familiar with the scandal at the IRS targeting conservative groups, but how widespread is the attempt to silence free speech and political activity? Wall Street Journal columnist Kimberley Strassel says it’s one of the biggest threats to our democracy. She sat down with The Daily Signal to talk about her new book, The Intimidation Game, and the left’s orchestrated campaign to silence those it can’t defeat at the ballot box.

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

Saturday, July 2, 2016

The IRS Scandal, Day 1150

IRS Logo 2The Daily Signal, Conservative Leaders Rally Behind Stopping IRS Abuse of Donor Disclosures for Nonprofits:

Legislation that would prevent the Internal Revenue Service from requiring tax-exempt organizations to include the names, addresses, or identifying information of donors in yearly returns could end up on President Barack Obama’s desk.

The House passed the bill, introduced by Rep. Peter Roskam, R-Ill., by a vote of 240-182 earlier this month.

The White House Office of Management and Budget said the Obama administration opposes the Hosue legislation. The bill “would constrain the Internal Revenue Service’s ability to enforce tax laws and reduce transparency,” it said. ...

The Conservative Action Project, comprised of leaders at over 100 organizations working toward common goals within the conservative movement, recently issued a memo calling for a curtailment of IRS power. ...

Sen. Tim Scott, R-S.C., introduced on June 15 a companion bill to the legislation passed in the House. Scott’s legislation was referred to the Senate Committee on Finance. “The IRS’ targeting of groups based on their political beliefs is totally unacceptable, and we must take concrete steps to ensure it never happens again,” Scott said in a prepared statement.

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

Friday, July 1, 2016

The IRS Scandal, Day 1149

IRS Logo 2Investor's Business Daily editorial, IRS Scandal: No End To Lois Lerner's Lawlessness:

Justice:  IRS official Lois Lerner didn't merely target conservative groups to take away their tax-free status, as first suspected, but also handed over more than a million pages of tax returns to the Justice Department. That's a crime.

It's now apparent, if it wasn't before, that the Internal Revenue Service -- which was created solely to collect revenues due the government, not to persecute the administration's political enemies -- has become a kind of rogue agency.

Its chief, John Koskinen, is being threatened with impeachment for not telling the truth in testimony before Congress. But Lerner, more than even Koskinen, has become a symbol of IRS arrogance and illegality.

As Eliana Johnson of the National Review reported this week, Lerner transmitted some 1.25 million pages of tax returns of mostly Tea Party and conservative groups to the Justice Department in October 2010. In Johnson's words, this was "likely the largest unauthorized disclosure of tax-return information in history."

For some perspective, this took place at the start of a three-year period during which the same groups found their applications for tax-free status inexplicably held up, while those for liberal groups were more or less routinely rubber-stamped.

But the actual transmission of their tax returns as part of a fishing expedition by Lerner is the big problem here -- because she also transmitted IRS Schedule B data, which includes the names and addresses of contributors to those conservative groups. That's a big no-no.

Unfortunately for Lerner, tax returns are nearly sacrosanct under the law. Only an active investigation into criminal acts would allow the IRS to give the tax returns to the Justice Department. And then, by law, Justice would have to specifically request them. They didn't in this case.

By the way, a good-government group called the Cause of Action Institute has been dredging all this information up as part of its ongoing litigation in the case. We wish them luck.

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

Thursday, June 30, 2016

The IRS Scandal, Day 1148

IRS Logo 2National Review:  New Documents Suggest IRS’s Lerner Likely Broke the Law, by Eliana Johnson:

Recently obtained documents raise new questions about Lois Lerner’s role in sending confidential tax returns to the Justice Department.

It is likely the largest unauthorized disclosure of tax-return information in history: the transfer of some 1.25 million pages of confidential tax returns from the IRS to the Department of Justice in October of 2010. And it was almost certainly illegal.

The documents, which consisted chiefly of non-profit tax returns, were transferred to the DOJ’s criminal division from the IRS at the request of Lois Lerner, who wanted to get the information to the DOJ in advance of a meeting where she and several of the attorneys in the public integrity section of the department’s criminal division discussed their concerns about the increasing political activity of non-profit groups. ...

“It took an organization over 50 months of investigation and multiple lawsuits to get clarity on the IRS’s own compliance with the rules it enforces against others,” says Dan Epstein, the executive director of the Cause of Action Institute and a former attorney for the House Committee on Oversight and Government Reform. “The IRS, in the midst of its political targeting of groups engaged in policy advocacy, was engaging in the disclosure of millions of records aimed at ginning up prosecutions of these groups without going through the legally required channels.”

Federal law prohibits the IRS from sharing tax returns filed with the agency, with very limited exceptions. “The IRS has a special obligation to keep information confidential, that’s how our tax system works,” says Eileen O’Connor, who served as assistant attorney general for the tax division of the DOJ in the George W. Bush administration.

Documents suggest that Lerner’s massive document transfer to the DOJ didn’t meet any of those exceptions, including one that allows the agency to disclose returns for use in criminal investigations — if they’ve been requested in relation to “an actual investigation about a person to whom the investigation is related,” says O’Connor. Both Lerner and the DOJ were interested in figuring out how to prosecute non-profit groups they believed were engaging in improper political activity, and Lerner sent the documents over to the department days before an October 8 meeting with several of her IRS colleagues, an FBI agent, and attorneys from the DOJ’s public-integrity section. There they discussed their mounting “concern that certain 501(c) organizations are actually political committees ‘posing’ as if they are not subject to FEC law, and therefore may be subject to criminal liability,” according to a DOJ summary of the meeting. ...

It looks increasingly likely that the file sharing was part of a broader effort on the part of bureaucrats to push back against the Supreme Court’s ruling, an effort that not only almost certainly violated the law but undermined the spirit of the law and the purpose for which it was written in the first place.

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June 30, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (7)

Wednesday, June 29, 2016

The IRS Scandal, Day 1147

IRS Logo 2Politico Morning Tax: What's Next For John Koskinen?, by Bernie Becker:

The good news for Republicans seeking to remove the IRS commissioner: A group of legal scholars all agreed that providing false testimony to Congress rises to the level of impeachable offense. But as our Katy O’Donnell noted, there wasn’t a groundswell of support for the case that Republicans like House Oversight Chairman Jason Chaffetz and Rep. Jim Jordan were pushing — that Koskinen only needed to commit a bad act, not have bad intent, to borrow the phrasing of one of the witnesses. “The House has never impeached anyone for gross negligence or I think anything akin to it, and I think opening the door to that is going to present all sorts of serious problems,” said Michael Gerhardt, a law professor at the University of North Carolina.

In any event, the House Freedom Caucus wants a floor vote on Koskinen’s impeachment for his handling of the investigation into the IRS’s improper scrutiny of tea party groups, as The Hill’s Naomi Jagoda reports.

At the same time, Chaffetz’s measure to censure Koskinen has already passed the Oversight Committee. The last time Congress censured a sub-Cabinet official was back during the Teapot Dome scandal of the Roaring '20s, according to the Congressional Research Service. (Apparently, Teapot Dome was once a plot point on “Downton Abbey.”)

Speaking of the IRS (and the Constitution):  Those GOP efforts to strip Koskinen of his salary via the appropriations process might not be standing on the most solid constitutional footing, according to Richard Rubin of The Wall Street Journal. In fact, it could be a bill of attainder — just like the GOP efforts to take away Koskinen’s pension through the censure process. “This does sound a lot like imposing a punishment without a trial,” said Richard Briffault of Columbia Law School.

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

Tuesday, June 28, 2016

The IRS Scandal, Day 1146

IRS Logo 2Politico Morning Tax: How Strong Is That Koskinen Case?, by Bernie Becker:

Koskinen, Round Two: The House Judiciary Committee’s exploration of the potential impeachment of IRS Commissioner John Koskinen plods forward today, with a hearing examining the standards for impeachment.

From the looks of things, the proceedings will turn on the question of bad faith. Michael Gerhardt, a law professor at UNC, is expected to testify that ill intent has always been a prerequisite for impeachment in the United States. But some of Koskinen’s biggest detractors have argued that “gross incompetence” is more than sufficient. Rep. Jim Jordan (R-Ohio), chairman of the House Freedom Caucus — which forced the Judiciary hearings on impeachment — said last month that impeachment should follow “gross negligence, dereliction of duty and breach of public trust.”

Jordan told POLITICO on Tuesday that he “was very pleased to see that the Judiciary Committee asked Andrew McCarthy to serve as a witness" and is looking forward to the hearing. No wonder — McCarthy’s written testimony suggests the 2013 nonprofit scandal is worse than former President Richard Nixon’s “largely unsuccessful” “endeavor” to abuse IRS powers. But even McCarthy, a former assistant U.S. attorney and a contributor at the conservative magazine National Review, notes the framers of the Constitution rejected “maladministration” as an impeachable offense. So it may fall to Republicans to prove Koskinen intended to obstruct Congress’ investigation of the targeting controversy — something they’ve failed to do so far. ...

Rep. Elijah Cummings of Maryland, the top Democrat on the House Oversight Committee, called out GOP efforts to impeach and/or censure Koskinen as “either pointless or unconstitutional.” Cummings cites several legal experts who said that House Oversight Chairman Jason Chaffetz (R-Utah) overstepped his bounds in saying that his censure resolution required that Koskinen forfeit his pension — because that would be an unconstitutional bill of attainder. Katy made a similar point last week and even Chaffetz acknowledged to reporters that the censure resolution can’t actually force Koskinen to lose his pension.

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June 28, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Monday, June 27, 2016

The IRS Scandal, Day 1145

IRS Logo 2Forbes:  IRS Targeting Scandal: Citizens United, Lois Lerner And The $20M Tax Saga That Won't Go Away, by Kelly Phillips Erb:

It was the question heard round the tax world. But it was the answer that made waves. In 2013, then Acting Director of Exempt Organizations at IRS, Lois Lerner, apologized to a room of tax lawyers for the IRS’s inappropriate targeting of conservative political groups. Her comments set off a chain of events that would slash IRS funds, fire officials and consider impeachment proceedings for IRS Commissioner Koskinen’s actions. But the scandal didn’t begin or end there.

July 2008:  In the run-up to the presidential election, Citizens United, a conservative lobbying group, wants to air a series of commercials promoting a film targeting Hillary Clinton, who was seeking the 2008 Democratic presidential nomination. The United States District Court for the District of Columbia ruled that they couldn’t, finding that it was a violation of the Bipartisan Campaign Reform Act of 2002 (also known as the McCain–Feingold Act). The group appealed. ...

June 22, 2016: ”We’re moving into uncharted waters,” Michael J. Gerhardt, a UNC Chapel Hall constitutional law professor, tells the Judiciary House Committee. Testifing about potential impeachment charges against IRS Commissioner Koskinen, Gerhardt said, “The House has never impeached a sub-Cabinet official. I would urge everyone here to look at alternatives.” He testified “the Founders did not want high-ranking officials in the executive or judicial branches to be subject to impeachment for their mistakes in office,” suggesting impeachment be reserved for more serious offenses.

Koskinen did not attend the hearing, and the IRS did not release an official comment on the proceedings.

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

Sunday, June 26, 2016

The IRS Scandal, Day 1144

IRS Logo 2Huffington Post:  The IRS And The Self-Minimization Of Congressman Jason Chaffetz, by Ralph Nader:

Politicians who limit the effectiveness of government agencies for short-term political advantages cheat taxpayers and short-change the government. ...

[Jason] Chaffetz chairs the House Oversight and Government Reform Committee - a body with powerful tools to investigate government waste, corruption and defiance of the laws. And he has vaulting ambitions, almost running for Speaker of the House last year with only seven years of seniority. ...

[W]hat is self-minimizing Congressman Chaffetz’s principal passion? Trying to impeach, censure or cause the resignation of the head of the IRS, the renowned turnaround specialist John Koskinen. The Utah Roman candle has accused Koskinen of interfering with a congressional investigation, not preserving pertinent records and lying to a congressional committee.

Koskinen repeatedly provided the committee with documentation for his denial of the charges that he was engaged in a cover-up of alleged IRS harassment of Tea Party and other conservative 501(c)(4) organizations applying for tax-exempt status. Ranking minority member Elijah Cummings (D-MD) laid out his own rebuttals, citing the Department of Justice investigation finding that “no evidence that any IRS official acted in a way that would support criminal prosecution” or that any official, including Mr. Koskinen, an Obama appointee, attempted to obstruct justice.

More telling was the exhaustive, multi-year, $2 million investigation by the Republican Inspector General of the IRS, Russell George, who cleared the IRS Commissioner of the Chaffetz Committee’s charges. Mr. George, a Bush appointee, found no politically motivated targeting of these conservative 501(c)(4) applications, no obstruction of justice and no concealing of information from Congress. Some bureaucratic sloppiness, sure, but that was all.

A more cutting judgement came from Law Professor Richard Painter, former Chief Ethics Lawyer for President George W. Bush, who said “this is essentially a dispute between the IRS and Members of Congress about the 501(c)(4) organizations that further the objectives of political campaigns, including campaigns for Members of Congress.”

Legal observers say Chaffetz’s resolution is not legally binding and is going nowhere. So what’s going on here is the Chaffetz caper is part of an overwhelming attack on the IRS by the Congressional Republicans-an attack that has turned them into major aiders and abettors of those who are sitting on $300 billion in annual uncollected taxes.

Washington Post:  Why the GOP Is Targeting the IRS, by Sen. Sheldon Whitehouse (D-WA):

If, as the editorial board suggested in its June 20 editorial, Unfairly Targeting the IRS, the GOP is unfairly targeting the Internal Revenue Service commissioner, what could be its reason for doing so? Follow the money. The IRS controls the “dark money” spigot that fills GOP coffers. If the IRS enforced its rules, or fixed its rules where they could not be enforced, or referred what appear to be self-evident false statements by dark-money groups to the Justice Department for investigation, the river of dark money flowing to the GOP might dry up. Keeping the IRS battered, cowed and on its heels makes strategic sense for the GOP.

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

Saturday, June 25, 2016

The IRS Scandal, Day 1143

IRS Logo 2Kay Bell (Don't Mess With Taxes), IRS Commissioner Impeachment Effort Inches Along at Second, Largely Ignored Judiciary Committee Hearing:

Internal Revenue Service Commissioner John Koskinen probably was the happiest person in Washington, D.C., today. On a day when the House Judiciary Committee's second hearing on his possible impeachment might otherwise have garnered much attention, the Capitol Hill session was upstaged by two other events. ...

[W]hat did all normal, nontax nerds who took a pass miss on the Koskinen front? Not much.

Same old, same old: The wagons were circled along party lines, with Judiciary Committee Chairman Rep. Bob Goodlatte spelling out the "serious allegations of misconduct" against Koskinen in his opening statement. ...

Giving false testimony to Congress about how the Internal Revenue Service [mis]handled intra-agency emails is an impeachable offense, but House [Republican] action sans Senate support would be a mistake. That was the assessment of Andrew McCarthy, a former assistant U.S. attorney for the Southern District of New York, at part 2 of the House Judiciary Committee's hearing to consider the impeachment of IRS Commissioner John Koskinen. ...

Michael Gerhardt, however, told Judiciary members that, "In my opinion, I think gross negligence doesn't qualify" as one of the constitutional requirements -- treason, bribery or other high crimes and misdemeanors -- for impeachment. Gerhardt, a constitutional law professor at the University of North Carolina Law School, said in his view, impeachable conduct would have to involve "bad intent."

The conflicting opinions of legal experts, which also included George Washington University law professor Jonathan Turley and Todd Garvey, legislative attorney with the Library of Congress, mirrored the disputes among the committee members themselves. ...

So far, Chaffetz has been able to get his GOP colleagues on Government Reform to agree to censure Koskinen. But his chances of impeachment the IRS chief are smaller. Neither House nor Senate Republican leaders have expressed support for the effort.

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

Friday, June 24, 2016

The IRS Scandal, Day 1142

IRS Logo 2PJ Media, Impeachment and the IRS Scandal: Should John Koskinen Face the Music?:

[T]he instant matter involving Internal Revenue Service Commissioner John Koskinen, pertains to an investigation into not a mere “endeavor” (largely unsuccessful in the Nixon case) to abuse IRS powers but actual, concrete abuse, of those powers, including “income tax audits or other income tax investigations to be initiated or conducted in a discriminatory manner.” I further understand that the instant matter involves the provision of false statements and withholding of evidence from Congress.

I do not purport to have knowledge of the facts of Congress’s investigation. I note however that misconduct that was merely potential and coupled with blatantly obstructive actions was deemed sufficient to impeach (and would clearly have been sufficient to remove) a twice-elected president of the United States who had recently been reelected in one of the largest landslides in American history. It seems patent, then, that if established, actual misconduct in conjunction with blatantly obstructive actions would be sufficient to justify impeaching an unelected subordinate executive official responsible for administering the Internal Revenue Service.

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June 24, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, June 23, 2016

The IRS Scandal, Day 1141

IRS Logo 2Wall Street Journal, House Republicans Seek to Eliminate IRS Chief’s Paycheck:

Republicans have a new idea for attacking IRS Commissioner John Koskinen: Stop paying him.

Mr. Koskinen’s salary of about $165,000 a year would be cut to zero until the next president takes office Jan. 20, under an amendment the House of Representatives is considering this week. ...

The idea is to prevent Mr. Koskinen from coming to work, as federal law generally bars people from working for free, said Kyle Huwa, a spokesman for Mr. Buck. ...

[L]osing a few months of pay near the end of his career wouldn’t permanently damage Mr. Koskinen. According to his most recent financial disclosure, he is a multimillionaire.

Bloomberg, Push to Impeach IRS Chief Koskinen Stirs Scholars’ Disagreement:

Internal Revenue Service Commissioner John A. Koskinen committed an impeachable offense by giving false testimony to Congress about his agency’s preservation of e-mails, a conservative lawyer told the House Judiciary Committee.

Nonetheless, it would be “a mistake” for House Republicans to move forward with a drive to impeach Koskinen unless the Senate is also on board, said Andrew McCarthy, a former assistant U.S. attorney for the Southern District of New York who has written extensively on impeachment. Although the judiciary panel has conducted two hearings related to a possible impeachment of Koskinen, neither House nor Senate leaders have said they support it.

If it succeeded, it would be the first impeachment of an appointed executive-branch official in 140 years.

Koskinen, who took office in December 2013, was almost immediately mired in the agency’s response to a scandal that predated his tenure; IRS officials acknowledged that they had given extra scrutiny to conservative groups that sought tax-exempt status beginning in 2010. He didn’t attend Wednesday’s hearing, but he has said the allegations against him -- that he misled Congress and failed to ensure that the agency preserved all relevant e-mails -- are meritless.

“Every time I testified, I testified truthfully on what I knew,” Koskinen told reporters last month.

During the hearing, which was marked by partisan exchanges from both Republicans and Democrats, legal scholars disagreed on whether Koskinen’s conduct would constitute grounds for impeachment under constitutional language that specifies “treason, bribery or other high crimes and misdemeanors.”

“In my opinion, I think gross negligence doesn’t qualify,” said Michael Gerhardt, a professor of constitutional law at the University of North Carolina Law School. In his view, impeachable conduct would have to involve “bad intent,” he said.

Yet other witnesses, including Jonathan Turley, a law professor at George Washington University, said the standard is broader. “It doesn’t have to be an indictable offense,” he said. The constitution’s framers also discussed citing “maladministration” as grounds for impeachment, he said. “This is a standard that has room at the elbows,” he said.

Despite pending congressional subpoenas for “all communications sent or received by Lois Lerner,” in March 2014, IRS employees in West Virginia magnetically erased 422 backup tapes, which eliminated as many as 24,000 of her e-mails. Subsequent investigations by the Justice Department and the Treasury Department’s inspector general found that the destruction was accidental.

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

Wednesday, June 22, 2016

The IRS Scandal, Day 1140

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

  • Todd Garvey (Legislative Attorney, Library of Congress) (testimony)
  • Michael Gerhardt (Professor, North Carolina) (testimony)
  • Andrew McCarthy (Former Assistant U.S. Attorney, Southern District of New York) (testimony)
  • Jonathan Turley (Professor, George Washington) (testimony)

Bloomberg, IRS Chief Koskinen Fights First Appointee Impeachment Since 1876, by Lynnley Browning:

Impeachment is “the wrong symbol, the wrong act,” said Fred Goldberg, who served as IRS commissioner under Republican President George H.W. Bush. “‘It is both destructive and counterproductive.”

On Wednesday, the House Judiciary Committee is scheduled to hear from legal scholars and a former prosecutor on whether impeachment-drive leaders can meet legal standards for impeaching Koskinen. The panel is not expected to vote on an actual impeachment resolution, and neither House nor Senate leaders have endorsed the impeachment push. ...

If it succeeded, Koskinen would be the first appointed executive-branch official impeached since 1876, the year Alexander Graham Bell patented the telephone. And he’d be the only such official below the level of cabinet secretary to receive that dubious distinction. ...

The U.S. constitution says the president, vice president “and all civil officers of the United States shall be removed from office on impeachment for, and conviction of, treason, bribery or other high crimes and misdemeanors.” Witnesses set to testify at Wednesday’s hearing disagree on how that might apply to Koskinen’s case.

Jonathan Turley, a professor at George Washington University Law School, said impeachment is possible even without a finding of criminal conduct -- though he said he takes “a broader view on impeachment than some of my colleagues.”

Michael Gerhardt, a constitutional law professor at the University of North Carolina School of Law, said he doesn’t believe “gross negligence” constitutes grounds for impeachment. “My concern is that the impeachment resolution would be lowering the constitutional standard,” Gerhardt said. “It’s lower than what the framers of the constitution had in mind.”

A series of federal investigations into the IRS scandal faulted the agency for ineptness, but cleared it of criminal wrongdoing. In January 2014, the Federal Bureau of Investigation said it had found no evidence of bias that would warrant criminal charges. The Justice Department in October ended its own probe, which found “substantial evidence of mismanagement, poor judgment and institutional inertia,” but resulted in no charges.

“There wasn’t control of the document retention process,” said Mark Everson, who served as IRS commissioner from 2003 to 2007 under President George W. Bush. Complying with the congressional subpoenas “wasn’t handled correctly, and you can’t get out of that,” said Everson, who said he does not think impeachment is warranted.

IRS commissioners weren’t always the most disliked bureaucrats at the most-hated agency. There used to be “greater mutual respect between the IRS and congressional committees,” said Mortimer Caplin, 99, who headed the agency during President John F. Kennedy’s administration.

Now, the rancor evident in the impeachment push makes it difficult for the administration and Congress to work together on important legislation -- including efforts to overhaul and streamline the federal tax code, said Sheldon Cohen, a former IRS commissioner under President Lyndon Johnson. “The adversarial relationship makes tax reform almost impossible,” he said.

USA Today editorial, IRS Impeachment Overkill:

Commissioner Koskinen doesn't deserve this.

With their customary lack of subtlety, House Republicans are trying to unleash a nuclear bomb to swat the proverbial fly. The fly is IRS Commissioner John Koskinen. The bomb is impeachment, which has been used against an executive-branch official only three times in the nation’s history.

The allegations against Koskinen, while serious, do not rise anywhere near the level of becoming a fourth historic case. An impeachment resolution — which the House Judiciary Committee is scheduled to hear testimony on Wednesday — would diminish what's supposed to be a last-resort option for removing a corrupt official for alleged “high crimes and misdemeanors.” The IRS scandal does not qualify; for one thing, Koskinen, 76, wasn't even at the IRS when the underlying scandal occurred.

By overplaying their hand, the Republicans are obscuring serious questions about IRS misuse of its immense power. Koskinen was brought in to clean up the agency after revelations in 2013 that its tax-exempt division had targeted conservative organizations, including Tea Party groups, because of their political beliefs. The IRS sent the groups burdensome inquiries and delayed their applications for tax exemption, stopped some from participating in the 2012 presidential election.

While the IRS has a legitimate role in preventing blatantly political groups from exploiting tax-exempt status, targeting groups based on their politics is reminiscent of Richard Nixon using the IRS to harass his "enemies." Even President Obama acknowledged that such actions were “intolerable and inexcusable.” The scandal spurred congressional hearings, high-level resignations from the IRS and an FBI investigation, which found no criminal wrongdoing.

When Koskinen took over the agency, there was a need for openness and disclosure to get to the bottom of what happened. Instead, Koskinen presided over a “clean-up” marked by disappearing emails, bungled searches for backups, and a penchant for secrecy so strong that the IRS has resisted federal court orders to disclose documents to the groups targeted. ...

Republicans have good reason to press for release of relevant IRS documents, such as lists of the 426 targeted groups and emails by retired IRS official Lois Lerner, who was at the center of the controversy. But an official censure of Koskinen last week on a party-line vote of the House Oversight and Government Reform Committee, and the looming impeachment threat, are as misplaced as Republicans’ draconian cuts to the IRS budget. As the agency has struggled to do more with less, customer service has withered, identity theft has run rampant and reduced enforcement has allowed tax cheats to get away with more cheating.

If Congress wants to be helpful, it should simplify the absurdly complex tax code and give the IRS enough money to do its job, not waste time on overblown impeachment threats.

Fox News op-ed: Congress, Impeach IRS Chief and Hold Him Accountable for Targeting Scandal Coverup, by Jenny Beth Martin (Co-founder, Tea Party Patriots):

Three years after President Obama said wrongdoers involved in the IRS political persecution scandal should be held "fully accountable," no one has been held accountable.  Aside from Lois Lerner -- whom Obama's Department of Justice refuses to prosecute -- no one exemplifies the wrongdoing at the IRS more than its current commissioner, John Koskinen.

The House Judiciary Committee will vote this week on whether or not to impeach Koskinen; they should do so and the full House should follow and then the Senate should convict him, if there's any rule of law left in America. ...

Far from being chastened after getting caught red-handed in the first targeting scandal, the IRS seems almost emboldened to continue the targeting after getting away with flouting the law. During the initial phase of targeting, the IRS went to great lengths to cover its tracks. Records were purged, files were deleted, emails were mysteriously lost, and, incredibly, computer servers allegedly vanished into thin air. ...

Impeachment is, of course, an extraordinary measure and should be reserved only for the most egregious misconduct. In Federalist No. 65, Alexander Hamilton explained that impeachment is appropriate to address “those offenses which proceed from the misconduct of public men, or, in other words, from the abuse or violation of some public trust.”

Mr. Koskinen’s disregard for the rule of law meets Hamilton’s exacting requirements for impeachment. In fact, Koskinen’s misconduct demandsimpeachment if we are to restore the public trust and move past the IRS’s wholesale disregard for the Constitution.

The Hill, Bush Lawyer Rips GOP for Trying to 'Intimidate' IRS:

George W. Bush's former chief ethics lawyer is slamming congressional Republicans for trying to “intimidate” the Internal Revenue Service (IRS).

Richard Painter, who is now a professor at the University of Minnesota Law School, said the House should not pass a resolution to censure IRS Commissioner John Koskinen. The House Oversight and Government Reform Committee approved the measure last week on a party-line vote.

“This is essentially a dispute between the IRS and Members of Congress about the 501c4 organizations that further the objectives of political campaigns, including campaigns of Members of Congress,” Painter said in a letter to Oversight Committee members.

“The IRS is charged with determining whether the activities of these organizations comply with the Internal Revenue Code and it is not proper for Congress to seek to intimidate the IRS in the discharge of its duties,” he added.

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June 22, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, June 21, 2016

The IRS Scandal, Day 1139

IRS Logo 2The Surly Subgroup:  IRS Scrutinized Mostly Conservative Nonprofits: Evidence of Targeting?, by Philip Hackney (LSU):

Documents recently released in a court case demonstrate that 282 of 426 organizations caught in the IRS political advocacy, “Tea Party,” nonprofit organization net that caused such a hullabaloo three years ago, were in fact conservative. This comes three years after Lois Lerner apologized to Tea Party groups on behalf of the the IRS because, she said, it “inappropriate(ly)” selected these conservative groups’ applications for tax exemption for scrutiny based on name alone rather than legal cause.

An NPR report by Peter Overby concludes about the new information: “Whatever the IRS meant to do, this hodgepodge of a list illustrates how the agency bollixed the nonprofit application process.” In this post, I examine this seemingly “common-sense” claim and find it wanting. Additionally, because I have written publicly about this matter both at the time and more recently. I re-examine my conclusions in those writings in light of this new information.

Early on, I assumed that only about 1/3rd of the organizations caught in the IRS net were conservative. I made this assumption based on the TIGTA report because it noted that 96 of 298 applications, or 1/3rd of the organizations, were Tea Party, Patriot or 9/11 groups. I left wiggle room in my writing, but in the back of my mind, this was my assumption. I assumed TIGTA would have reported every conservative group that was in the lot. But, it turns out that about 2/3rds of the organizations  were conservative. Thus, my assumption was wrong. The vast majority of the organizations caught in the net were conservative. Nevertheless, I don’t think this new information demonstrates some additional level of bungling by the IRS that was hitherto unknown. And, frankly, a list like this with little context does nothing to tell us about whether the IRS was fair or not.

The most significant indictment of the IRS in this Tea Party matter has always been that the IRS “targeted” conservative organizations. No one has ever quite given any content to what this exactly means. Presumably it means that the IRS intentionally scrutinized conservative organizations in the application process in order to harm those conservative organizations and did not do the same to liberal organizations. The Inspector General reviewed whether the IRS “targeted” conservative organizations and found that the IRS used “inappropriate criteria” in selecting the Tea Party cases and that this could lead to impartial results. He found no evidence of some animus on the part of the IRS to support a targeting claim.

The targeting assertion, and the Inspector General’s assessment, give us a couple claims that new information could go towards proving: 1) the IRS scrutinized conservative nonprofits more than liberal nonprofits in its application process, and (2) either (a) the IRS did this intentionally, or (b) the IRS did this negligently.  ...

What does this information say about my prior conclusions? In my first quick analysis after the TIGTA report came out I argued that the IRS failed to adopt a careful selection process, asked too many intrusive questions, and subjected them to too great of delays. However, I suggested the IRS was set up for this failure because it had too many complex applications and not enough staff to review all applications with care.

It has to pick and choose organizations to focus upon and it is likely to miss applying appropriate scrutiny to many applications that should have received greater scrutiny while applying that scrutiny to a few organizations in a similar position, and to apply too much scrutiny to applications that should have received little or none. I argued that because of application volume and IRS staffing, the IRS was set up for the type of failure identified in the Tea Party affair.  I still think this is about right, and the new information says nothing new about that conclusion.

Later in Should the IRS Never Target Taxpayers I argued that  TIGTA wrongly took a position that the IRS is prohibited from using names as a means for selecting organizations for audit or for scrutiny of particular applications. It had no firm legal basis for making this claim. TIGTA based it on the principal that the IRS should be unbiased in its work. While certainly true, it seemed to be asserting that there was a duty of consistency as to every application that comes before the IRS. With the quantity of applications and staff, this is not even close to possible. And yet, TIGTA’s claim of “no using names” has become the measuring stick with which the public and commentators review this matter. ...

In the Tea Party cases the IRS had many reasons to believe these organizations might be violating the law by engaging in too much political activity for a section 501(c)(4) social welfare organization. In fact their names alone were evidence of such a potential intent. Additionally, given the substantial numbers of these cookie-cutter-like organizations, the IRS had good reasons to review all of the Tea Party and Patriot groups to ensure uniformity of treatment and a proper understanding of all of the relevant facts. However, because the IRS was enforcing a legal provision that impacted political speech it should have exercised greater care in its selection process. This new information tells us nothing about these basic conclusions.

Overby seems to suggest that this new information further damns the IRS’s behavior in the Tea Party matter. I find the evidence does not support this conclusion.

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June 21, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, June 20, 2016

How Art Can Blow Apart Your Estate

ArtBarron's, How Art Can Blow Apart Your Estate:

Your Jeff Koons could destroy your estate plan and leave your heirs shell-shocked and scrambling to pay bills. That’s because the Internal Revenue Service is rigorously scrutinizing appraisals of artworks above $50,000 and often demanding value adjustments that trigger unexpected and large tax bills, with penalties and interest added on.

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

The IRS Scandal, Day 1138

IRS Logo 2Washington Post editorial, The GOP Congress Is Unfairly Targeting the IRS:

Most of the country has moved on from the Internal Revenue Service targeting controversy, which turned out to be not much of a scandal. Although initial reports seemed highly suspicious, it’s been clear for some time that administrative incompetence was the likely culprit, not the Obama administration vindictively singling out conservative groups for IRS scrutiny. But Rep. Jason Chaffetz (R-Utah) and the other Republicans on the House Oversight and Government Reform Committee are still outraged. Having turned what could have been a wholly reasonable investigation of IRS carelessness into a partisan scandal hunt, the most concrete result from their inquiries may end up being a gratuitous attack on a longtime public servant.

The committee voted on party lines Wednesday to censure IRS Commissioner John Koskinen, the man President Obama tapped to lead the agency after reports that IRS employees had disproportionately scrutinized conservative nonprofits. Nonprofits that may engage in political activity deserve IRS attention, because the government should not be subsidizing political groups through the tax code. The problem was the thoughtless way IRS employees went about determining which groups to examine. Mr. Koskinen, an old bureaucratic hand, was not at the IRS when this happened. He was just supposed to clean things up afterward.

As their inquiry failed to turn up evidence of malign political motives, House Republican investigators turned their sights on Mr. Koskinen personally, claiming that he badly — perhaps purposely — bungled his assignment. IRS employees destroyed a trove of emails the committee wanted to see — after the agency was supposed to be saving them. The IRS’s inspector general found that the erasure was an honest, if frustrating, mistake. Still, Mr. Koskinen’s congressional inquisitors charge, he did not confess to Congress when he should have. Some statements he made to Congress turned out to be untrue. The IRS director has a reasonable response to that, too: He did not immediately know the nature or extent of the gap in emails, and once he did, he ordered his staff to attempt to recover what they could.

The GOP Congress has already harassed and weakened the IRS through counterproductive budget cuts. Now Republican lawmakers appear to be doing their best to deter anyone of competence from ever agreeing to lead the agency. The result of a congressional investigation into IRS dysfunction would end up being more IRS dysfunction.

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June 20, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (8)

Sunday, June 19, 2016

The IRS Scandal, Day 1137

IRS Logo 2Real Clear Politics, Strassel Nails the Left's "Intimidation" Crusade, by Peter Berkowitz (Hoover Institution, Stanford University):

The most notorious instance of the left’s efforts to use government power to intimidate political opponents during Obama’s presidency was the Internal Revenue Service’s targeting, beginning in 2010, of some 300 small, often Tea Party-affiliated conservative organizations that had applied for tax-exempt status. The IRS’s job was to ensure that applications had been filled out correctly. But at the behest of longtime Democratic Party partisan and then-director of the IRS’ Exempt Organizations Unit Lois Lerner, the agency delayed action on applications for months, which in many cases stretched into years.

Sometimes the IRS directed targeted organizations to answer extensive questionnaires that were “a mix of boring officialdom and sinister intrusiveness.” In the case of the San Fernando Valley Patriots—a small organization established to oppose what they deemed an arrogant, overspending, out-of-touch Washington establishment—the IRS requested, Strassel reveals, “the names and Social Security numbers of every person who had ever donated their money or time to SFVP.”

The IRS conspiracy to drive conservatives from the political arena, the impact of which on the 2012 presidential election may have been decisive, was part of a multi-front offensive. Strassel recounts harrowing tale after tale of private citizens, nonprofits, corporations, and elected officials caught in the maws of a “vast and orchestrated” campaign to close down speech.

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June 19, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (12)

Saturday, June 18, 2016

The IRS Scandal, Day 1136

IRS Logo 2NPR, Court Documents Show The IRS Focused Scrutiny On Conservative Groups:

Three-year-old allegations of political influence at the Internal Revenue Service are being revived as two House committees move toward punishing the IRS commissioner, John Koskinen.

The House Oversight Committee this week voted on party lines to censure Koskinen. The House Judiciary Committee holds its second hearing next week on whether to impeach him.

"This all started with the IRS using its authorities to target certain conservative groups for their beliefs," Oversight Committee Chairman Jason Chaffetz, R-Utah, said in prepared testimony to the Judiciary panel.

This has been the accusation against the IRS since 2013, when Lois Lerner — head of the office that reviewed applications for tax-exempt status — admitted that the agency put additional scrutiny into the applications for nonprofit tax status of conservative and Tea Party groups.

Since the Supreme Court's 2010 Citizens United decision, politically active nonprofit groups have proliferated. The nonprofit tax status shields such groups from having to disclose donors, but it also requires that at least half of the group's activities focus on nonpolitical, "social welfare" causes.

Republicans allege an organized effort, possibly run by the White House, to aggressively probe and then stall the applications in order to handicap its political opposition. The Treasury Department's inspector general overseeing the IRS found that progressive groups were treated the same way. Democrats blame it all on bureaucratic mistakes, misjudgments and understaffing and say the GOP is on a witch hunt.

Until now, what's been missing is a list of the nonprofit groups that got special scrutiny — a list that presumably would show whether the agency had a political agenda or not.

Now, thanks to filings in a federal lawsuit in Ohio, there is such a list, with 426 names on it. And yes, it's top-heavy with conservative groups. ...

In all, 282 conservative groups were on the IRS list, about two-thirds of the total number of groups that got additional scrutiny. ... Whatever the IRS meant to do, this hodgepodge of a list illustrates how the agency bollixed the nonprofit application process. Now the partisan controversy seems to have knocked the agency out of its enforcer's role as nonprofit groups move deeper into politics.

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

Friday, June 17, 2016

Donald Trump Accused Of Using His Charity As A Political Slush Fund In Violation Of § 501(c)(3)

TrumpDaily Beast, Donald Trump Accused of Using His Charity as a Political Slush Fund:

The Trump Foundation, Donald Trump’s nonprofit organization, is under fire for allegedly operating as more of a political slush fund than a charity. The foundation is accused of violating rules prohibiting it from engaging in politics—prompting ethics watchdogs to call for public investigations.

On numerous occasions this year, Trump’s campaign work and his foundation work have overlapped—putting himself at risk for penalties and his charity at risk of being shut down.

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June 17, 2016 in IRS News, Political News, Tax | Permalink | Comments (1)

Why Does The IRS Need So Many Guns?

IRS GunsWall Street Journal op-ed: Why Does the IRS Need Guns?, by Tom Coburn (former U.S. Senator) & Adam Andrzejewski (Founder, OpenTheBooks.com):

Special agents at the IRS equipped with AR-15 military-style rifles? Health and Human Services “Special Office of Inspector General Agents” being trained by the Army’s Special Forces contractors? The Department of Veterans Affairs arming 3,700 employees?

The number of non-Defense Department federal officers authorized to make arrests and carry firearms (200,000) now exceeds the number of U.S. Marines (182,000). In its escalating arms and ammo stockpiling, this federal arms race is unlike anything in history. Over the last 20 years, the number of these federal officers with arrest-and-firearm authority has nearly tripled to over 200,000 today, from 74,500 in 1996.

What exactly is the Obama administration up to?

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June 17, 2016 in IRS News, Tax | Permalink | Comments (18)

IRS Makes Electronically Filed Form 990 Data Available In Machine-Readable Format

Form 990

IR-2016-87, IRS Makes Electronically Filed Form 990 Data Available in New Format:

The Internal Revenue Service announced that the publicly available data on electronically filed Forms 990 will now be available for the first time in a machine-readable format through Amazon Web Services (AWS). The publicly available data does not include donor information or other personally identifiable information. Today’s launch of this effort marks an important step forward in access to this important public data.

Previously, this Form 990 data was only available in image files.  This data, which includes filings from 2011 to the present, will now be available as an XML file that is downloadable from the web via AWS.

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

IRS FAQ On Wrongful Incarceration Tax Exclusion

InnocenceIR-2016-88, IRS Provides Guidelines on How to Claim New Wrongful-Incarceration Exclusion:

The Internal Revenue Service today released guidelines on how wrongfully-incarcerated taxpayers can take advantage of the new retroactive exclusion from income for any civil damages, restitution or other monetary award received in connection with their incarceration [I.R.C. § 139F].

The guidelines are contained in a set of frequently-asked questions, posted today on IRS.gov. According to the FAQs, taxpayers who in the past received payments related to their wrongful incarceration and included those payments in taxable income can now file a refund claim for any income tax paid.

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

The IRS Scandal, Day 1135

IRS Logo 2Politico Morning Tax, What’s Next for Koskinen:

The House Oversight Committee cleared its measure to censure IRS Commissioner John Koskinen on Wednesday in a predictably partisan vote. But that action also raised a couple of questions: What’s next? And what’s going on with Koskinen’s pension?

The House Judiciary Committee will hold its hearing next week on standards for impeachment, Oversight Chairman Jason Chaffetz’s preferred avenue for punishing Koskinen over the loss of documents from Lois Lerner — the central figure in the IRS’s improper scrutiny of tea party groups. But Chaffetz also told Morning Tax that he’s not sure whether GOP leaders, who haven’t exactly embraced his efforts to remove Koskinen, will bring up the censure resolution. “I hope they do it sooner rather than later,” Chaffetz said. “Nothing negative, but nothing certain either on dates.”

On the other issue, our Katy O’Donnell notes that the censure resolution says Koskinen “should” lose his pension, while an Oversight release said the vote “requires” that step. And as Katy also notes, the Congressional Research Service has been skeptical that Congress can use a censure to impose a financial penalty on officials outside the legislative branch without it being an unconstitutional bill of attainder. For his part, Chaffetz acknowledged the censure couldn’t on its own claw back Koskinen’s pension. “We’re stating what we believe is the right course of action, that there ought to be some repercussions for losing the trust of the American people,” he told Morning Tax.

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June 17, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Thursday, June 16, 2016

NY Times:  Why The IRS Can't Close The $125 Billion Small Business Tax Gap

IRS Logo 2New York Times, Why the I.R.S. Fails to Crack the Small-Business Tax Nut:

Sizing up the honesty of small-business owners is one of the Internal Revenue Service’s most vexing problems.

The agency estimates that it collects $458 billion a year less in taxes from all Americans than the government is actually due. Most of that “tax gap” is income that goes unreported, and the biggest chunk of it, by far — $125 billion — is individual business income.

Taxpayers in this category, primarily sole proprietors, pay taxes on the money their operations make through their personal returns. Thus, their cash flows can be particularly opaque. ...

The dreaded audit is the main way the I.R.S. catches scofflaws and ferrets out unreported income, but it is a time-consuming and imperfect tool. Short on resources, the agency collected just $7.3 billion from audits last year, its lowest total in 13 years.

What the I.R.S. really wants is for business owners to voluntarily pay more of what they owe. But 63 percent of “low visibility” income, the kind that isn’t captured by outside parties on tax information documents, is not disclosed on tax forms, the agency says.

So for the last four years, the Taxpayer Advocate Service, an independent office within the I.R.S., has been running studies to help it figure out how more small-business owners who pay their taxes can be persuaded to report their earnings more accurately.

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

The IRS Scandal, Day 1134

IRS Logo 2New York Times, House Panel Recommends Censure of I.R.S. Commissioner:

A polarized House committee on Wednesday recommended that the House censure the commissioner of the Internal Revenue Service, John A. Koskinen, and seek to strip him of his office and his federal pension for “a pattern of conduct” that betrayed the trust of Congress and the public.

Following the House Republicans’ vote in 2012 to hold the attorney general at the time, Eric H. Holder Jr., in contempt of Congress, the action against Mr. Koskinen appeared to show the lengths they would go to pursue Obama administration officials they oppose. Separately they are considering the more severe action of impeaching Mr. Koskinen, a move that has not been taken against a federal executive other than two presidents in 140 years.

Censure by the House would be the first step, supporters say, yet its impact will probably be limited to political symbolism. The Senate, also run by Republicans, is not expected to follow suit, or to support impeachment. It is unclear when the full House might act on the censure resolution, said aides to House Republican leaders, who are unenthusiastic about the effort against the commissioner.

The House Oversight and Government Reform Committee voted 23 to 15 for his censure, with Republicans in support and Democrats opposed, after hours of exchanging condemnation and praise for Mr. Koskinen.

New York Times, Head of I.R.S., Facing Censure, Relishes a Job Few Could Love:

By John A. Koskinen’s reckoning, at nearly 77 years of age he might finally have his best job ever: commissioner of the Internal Revenue Service.

“If it’s a job where the first thing people say is, ‘Why would you do that?’ then it’s got to be a good job,” he said in an interview.

Little could Mr. Koskinen have imagined how “good” the job would get.

[S]ome Republicans say [censure] will just be a prelude to his impeachment. Besides two presidents, no federal executive has been impeached since William W. Belknap, the secretary of war, in 1876.

Meantime, though, thank you for your service. ...

Mr. Koskinen became the nation’s top tax collector in December 2013 to steady an agency rattled by political upheaval, the latest in a string of knotty assignments he has gotten from presidents of both parties. Since then, things have not gone so smoothly. Critics say Mr. Koskinen obstructed justice and misled Congress as House Republicans continued their inquiries into allegations that I.R.S. employees discriminated against conservative groups seeking tax-exempt status in 2010 and beyond — scrutiny that began before Mr. Koskinen’s arrival.

He has denied the allegations and said his testimony about missing agency emails that turned out to be wrong was based on what he believed to be true at the time. Other investigators — including the Treasury’s inspector general, a Republican, and a bipartisan Senate Finance Committee — criticized Mr. Koskinen’s lapses but found no evidence politics played a role. ...

The genial septuagenarian has long enjoyed a sort of behind-the-scenes prominence, well known to Washington insiders and business leaders. He is also well known to fans of soccer and Duke University — his dual passions — and the soccer stadium there, Koskinen Stadium, is named after him. Mr. Koskinen won the prestigious Elliot L. Richardson Prize this year “for excellence and integrity in government service,” timing that suggested the selection panel’s indifference to the well-publicized complaints of congressional Republicans. ...

In Mr. Koskinen’s telling, he does not get hired; he is “dragooned” — he used the word more than once during an interview in a spacious, if drab, office with few personal touches besides family photos and mementos from previous jobs.

“I never apply for jobs — I just keep getting them,” Mr. Koskinen said. “I say I’m going to go into the witness protection program, and they’ll never find me again.”

He has a physics degree from Duke and a law degree from Yale.

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

Wednesday, June 15, 2016

The IRS Scandal, Day 1133

IRS Logo 2Nonprofit Quarterly: After a 3-Year Wait, IRS Releases List of Groups Targeted in Scandal, by Michael Wyland:

In response to a class action lawsuit, the IRS released a list of 426 organizations it says were singled out for special scrutiny beginning in 2010 in what became known as the IRS scandal. The list is larger than the 298 overwhelmingly conservative groups identified by U.S. Treasury Inspector J. Russell George in his May 2013 report that first brought the scandal to public attention. ...

Most people have lost track of the IRS scandal, and some even deny to this day that there ever was a scandal. Paul Caron, a law Professor at Pepperdine University, is continuing to keep count of the days. (June 7, 2016 is Day 1125.) The House Judiciary Committee is considering the impeachment of IRS Commissioner John Koskinen, but this is widely seen as a partisan exercise by Republicans—even by those who believe others, especially former Exempt Organizations Director Lois Lerner, should be held accountable for their actions in the IRS targeting scandal.

One observation NPQ has made in the past bears restating as the political and judicial processes continue: The public disclosure of much of what we have learned over the past year or more has come as the result of nonprofit advocacy and the access of nonprofit advocates to support from federal courts. Groups such as Judicial Watch and Cause of Action have peppered executive agencies with Freedom of Information Act (FOIA) requests and sued in court when their requests were refused or ignored.  The class action lawsuit is led by the NorCal Tea Party Patriots, a 501(c)(4) social welfare nonprofit and one of the groups targeted by the IRS. Judicial Watch and Cause of Action are also aggressively pursuing other issues associated with political conservatives, including Hillary Clinton’s State Department emails and the Obama administration’s enforcement of immigration laws. There is a developing appearance that nonprofit advocacy groups, with judicial support, are having better success than Congress in investigating the executive branch of the federal government and securing the release of documentary evidence.

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June 15, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, June 14, 2016

The IRS Scandal, Day 1132

IRS Logo 2The Hill, Oversight Panel to Vote on Resolution to Censure IRS Chief:

The House Oversight and Government Reform Committee is set to vote Wednesday on a resolution to censure Internal Revenue Service Commissioner John Koskinen.

The vote is part of a larger effort by House Republicans against Koskinen. Many GOP lawmakers have accused him of engaging in misconduct while Congress was investigating findings that the IRS subjected conservative groups' applications for tax-exempt status to extra scrutiny. 

The House Judiciary Committee is also weighing whether Koskinen should be impeached and is holding its second hearing on the matter next week.

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

Monday, June 13, 2016

The IRS Scandal, Day 1131

House LogoH.R. Rep. No. 612, 114th Cong., 2d Sess.:

I. SUMMARY AND BACKGROUND

A. PURPOSE AND SUMMARY

H.R. 5053, as reported by the Committee on Ways and Means, would prohibit the Internal Revenue Service (IRS) from collecting the identity of donors who contribute to tax-exempt organizations. Under this legislation, a tax-exempt organization would be required to report only information on donors who contribute $5,000 or more during a single tax year and who are either an officer or director of the organization or one of its five highest paid employees. This information would be excluded from public disclosure.

B. BACKGROUND AND NEED FOR LEGISLATION

Current law requires section 501(c)(3) tax-exempt organizations to report information on substantial donors. The IRS defines a substantial donor as a contributor who gives $5,000 or more to an organization in a calendar year. This information is reported on the Schedule B of the Form 990. The requirement to file a Form 990 applies to tax-exempt organizations generally, not just to section 501(c)(3) tax-exempt organizations. Thus, the IRS has expanded the substantial donor reporting requirements to more than section 501(c)(3) tax-exempt organizations. While the IRS does not make this information public, there have been instances where IRS employees have improperly accessed and released the Schedule B donor list. A notable example is the National Organization for Marriage, which had information from its Schedule B leaked in 2012 and the IRS subsequently paid $50,000 to settle a lawsuit with the organization claiming that the IRS improperly accessed the information. Certain states, including California, have moved to make Schedule B information public. The move to publicize Schedule B information was the subject of a recent lawsuit, Americans for Prosperity Foundation v. Kamala Harris, Attorney General for California. The Attorney General of California wanted to require that the Americans for Prosperity Foundation disclose its Schedule B to the California State Registry. In April 2016, the U.S. District Court ruled that requiring the organization to disclose its Schedule B was unconstitutional.

In recent years it was also revealed that the IRS used inappropriate criteria to target organizations applying for tax-exempt status. Additionally, the IRS is considering eliminating Schedule B entirely. H.R. 5053 would protect taxpayers from improper disclosure of Schedule B information, as well as limit the IRS’s ability to target organizations improperly. The legislation also eliminates a burdensome reporting requirement for tax-exempt organizations. ...

II. EXPLANATION OF THE BILL

A. PROHIBITION ON REQUIRING THAT IDENTITY OF CERTAIN CONTRIBUTORS TO SECTION 501(c) ORGANIZATIONS BE INCLUDED ON ANNUAL RETURNS (SEC. 32 OF THE BILL AND SEC. 6033 OF THE CODE)

PRESENT LAW

In general, organizations exempt from taxation under section 501(a) are required to file an annual return (Form 990 series), stating specifically the items of gross income, receipts, disbursements, and such other information as the Secretary may prescribe. An organization that is required to file an information return, but that has gross receipts of less than $200,000 during its taxable year, and total assets of less than $500,000 at the end of its taxable year, may file Form 990–EZ. Section 501(c)(3) private foundations are required to file Form 990–PF rather than Form 990. An organization that has not received a determination of its tax-exempt status, but that claims tax-exempt status under section 501(a), is subject to the same annual reporting requirements and exceptions as organizations that have received a tax-exemption determination.

On the applicable annual information return, organizations are required to report their gross income, information on their finances, functional expenses, compensation, activities, and other information required by the IRS in order to review the organization’s activities and operations during the previous taxable year and to review whether the organization continues to meet the statutory requirements for exemption. Examples of the information required by Form 990 include: (1) a statement of program accomplishments; (2) a description of the relationship of the organization’s activities to the accomplishment of the organization’s exempt purposes; (3) a description of payments to individuals, including compensation to officers and directors, highly paid employees and contractors, grants, and certain insider transactions and loans; and (4) disclosure of certain activities, such as expenses of conferences and conventions, political expenditures, compliance with public inspection requirements, and lobbying activities.

Form 990–PF requires, among other things, reporting of: the foundation’s gross income for the year; expenses attributable to such income; disbursements for exempt purposes; total contributions and gifts received and the names of all substantial contributors; names, addresses, and compensation of officers and directors; an itemized statement of securities and other assets held at the close of the year; an itemized statement of all grants made or approved; and information about whether the organization has complied with the restrictions applicable to private foundations (secs. 4941 through 4945).

An organization that files Form 990, Form 990–EZ, or Form 990– PF and receives during the year $5,000 or more (in money or property) from any one contributor generally must report such contributions on Schedule B (‘‘Schedule of Contributors’’). The Schedule B is open to public inspection for an organization that files Form 990–PF (private foundations) or a section 527 political organization that files Form 990 or Form 990–EZ. For all other Form 990 and Form 990–EZ filers, the names and addresses of contributors are not required to be made available for public inspection. All other information, including the amount of contributions, the description of noncash contributions, and any other information, is required to be made available for public inspection unless it clearly identifies the contributor. As a matter of practice, the IRS does not include Schedule B on the CD sets or any other form of media made available to the public. Instead, on a case-by-case basis, when an individual makes a request for a specific organization’s Schedule B, the IRS reviews and redacts the schedule in an effort to avoid divulging information that would identify any contributor. 

The requirement that an exempt organization file an annual information return (Form 990 or Form 990–EZ) does not apply to certain exempt organizations, including organizations (other than private foundations) the gross receipts of which in each taxable year normally are not more than $50,000. Organizations that are excused from filing an information return by reason of normally having gross receipts below such amount must furnish to the Secretary an annual notice (Form 990–N), in electronic form, containing certain basic information about the organization.

Other organizations exempt from the annual information return requirement include: churches, their integrated auxiliaries, and conventions or associations of churches; the exclusively religious activities of any religious order; certain State institutions whose income is excluded from gross income under section 115; an interchurch organization of local units of a church; certain mission societies; certain church-affiliated elementary and high schools; and certain other organizations, including some that the IRS has relieved from the filing requirement pursuant to its statutory discretionary authority.6

REASONS FOR CHANGE

The Committee is concerned that the IRS is collecting sensitive information about donors who contribute to tax-exempt organizations. Although the IRS is required by law to maintain the confidentiality this information, the Committee is aware of instances in which the information was released to third parties. Furthermore, the Committee is concerned that the IRS might use donor information to penalize tax-exempt organizations or donors based on their political beliefs. By limiting the contribution information taxexempt organizations report to the IRS, the provision will protect taxpayers’ identities and help prevent inappropriate political targeting by the IRS. In addition, the Committee believes the Schedule B provides little administrative benefit to the IRS. In fact, senior leadership of the IRS’s Exempt Organizations Division has stated recently that the IRS is considering eliminating the Schedule B filing requirement.

EXPLANATION OF PROVISION

The provision limits the contributor information that must be reported by an organization described in section 501(c) on its annual information return. Under the provision, except as described below, the Secretary may not require an organization to report the name, address, or other identifying information of any contributor to the organization with respect to any contribution, grant, bequest, devise, or gift of money or property, regardless of amount.

The provision provides two exceptions to this prohibition. First, the Secretary is not prohibited from requiring the information described in section 6033(a)(2) relating to prohibited tax shelter transactions. Second, the Secretary is not prohibited from continuing to require reporting of contributions, grants, bequests, devises, or gifts of money or property in excess of $5,000 made by an officer or director of the organization (or an individual having powers to responsibilities similar to those of officers or directors) or by a covered employee. Covered employee means any employee (including any former employee) of the organization if the employee is one of the five highest compensated employees of the organization for the taxable year. For this purpose, an employee’s compensation includes compensation from the organization as well as any compensation paid with respect to the employment of such employee by any related person or governmental entity. A person or governmental entity is treated as related to the organization if it: (1) controls or is controlled by the organization; (2) is controlled by one or more persons that control the organization; (3) is a supported organization (as defined in section 509(f)(3)) during the taxable year with respect to the organization; (4) is a supporting organization described in section 509(a)(3) with respect to the organization; or (5) in the case of an organization that is a voluntary employees’ beneficiary association described in section 501(c)(9), establishes, maintains, or makes contributions to such voluntary employees’ beneficiary association.

The provision makes a conforming amendment to section 6033(b), which describes certain information that a section 501(c)(3) organization must include on its annual information return. ...

VII. DISSENTING VIEWS

We oppose H.R. 5053, which would prohibit the Secretary of the Treasury from collecting the name, address, or other identifying information of contributors to any tax-exempt, 501(c) organization except in limited circumstances. This bill would open the floodgates for unlimited, anonymous, unaccountable money to pour into U.S. elections—including possibly from foreign sources.

Under present law, certain 501(c) organizations must attach to their annual information returns (IRS Forms 990) a list (Schedule B) of donors who contribute $5,000 or more during the year (‘‘substantial contributors’’). The Schedule B is kept confidential by the Internal Revenue Service (IRS) and is not made public.

Certain 501(c) organizations, such as social welfare organizations, are permitted to engage in political activity. These politically active 501(c)(4) organizations are required to disclose their substantial contributors to the IRS but are not required to disclose them to the public.

There has been a sharp rise in undisclosed money being spent by tax-exempt groups in federal elections since the Supreme Court issued its 2010 Citizens United decision. This bill would make it even easier for donors to anonymously funnel money in support of political candidates. Already in this election cycle, according to the Center for Responsive Politics, political spending by tax-exempt groups is five times the amount spent at this point during the 2012 election cycle.

It is no secret as to why Republicans are working to keep donors a secret: the three largest spenders from 2012—representing fully 51% of the total—include Karl Rove’s Crossroads GPS (that spent $71 million); the Koch Brothers’ Americans for Prosperity (that spent $36 million); and the Koch Brothers’ American Future Fund (that spent $25 million). It is no surprise the Koch Companies Public Sector, LLC sent a letter to Republican Members on the day of the markup urging them to support the bill. Simply put, H.R. 5053 does nothing more than solidify the secrecy around the Republicans’ big campaign efforts.

The bill also potentially opens the door for unlimited, secret money from foreign governments or individuals to be funneled into our elections. Currently, foreign money cannot be given or spent in our elections. The only real protection we have against the use of foreign money by politically active social welfare organizations is that they must disclose their substantial contributors to the IRS. This requirement means that tax-exempt, 501(c)(4) groups know they can be held accountable if they illegally spend foreign money in federal elections. Campaign finance reform groups opposing this bill warned that, if donor disclosure to the IRS is eliminated, no one will know whether a social welfare organization has received foreign funds and is illegally spending them in our elections.

We should not support efforts to reduce transparency and make it easier for donors to pour unlimited funds into political campaigns. For these reasons, we oppose this bill.

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June 13, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Sunday, June 12, 2016

The IRS Scandal, Day 1130

IRS ChurchThe Surly Subgroup:  Tying the IRS’s Hands. Even Tighter, by Sam Brunson (Loyola-Chicago):

Yesterday, the House Committee on Appropriations reported H.R. 2995 to the House of Representatives. H.R. 2995, the Financial Services and General Government Oversight Appropriations Bill  for FY 2017, if passed, would continue the trend of reducing the IRS’s budget, this time by $236 million. ...

I’m interested in an amendment added yesterday by Rep. John Culberson (R-TX). Section 135 of the bill would make it even harder than it already is for the IRS to audit churches. 

The IRS already faces significant limitations on its ability to audit churches. ... The result? Churches are rarely audited, and even more rarely lose their exemptions. While the IRS doesn’t disclose the number of church audits it performs, the ECFA suggests that there may be 100 church audits a year. And how many churches are there in the U.S.? Again, hard to say, but the U.S. Religion Census finds about 345,000 congregations in the U.S. That would be a 0.03% audit rate; even assuming the number of churches is off by a factor of 10, we’re talking a 0.3% audit rate. And I can only find one report of a church losing its exemption for violating the campaigning prohibition (even though thousands of churches have deliberately and explicitly violated it).

That, though, is apparently insufficient for Rep. Culberson, who claims he added his amendment to “protect churches from being bullied by the Internal Revenue Service (IRS) and left-wing activists whenever a church engages in educational political activity.”

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

Saturday, June 11, 2016

The IRS Scandal, Day 1129

IRS Logo 2Omaha World-Herald editorial, IRS Stonewalling:

The Internal Revenue Service has, at long last, made public a list of 426 politically conservative organizations targeted by its tax-exempt division.

It took a lawsuit and three long years to pry all of the information into public view. That’s outrageous. But then, foot-dragging and obfuscation have been the agency’s tactics from the start of this sorry affair.

The official at its center, Lois Lerner, took refuge behind the Fifth Amendment when called to answer questions from Congress. Then the IRS claimed that a crash of Lerner’s computer made it “impossible” to produce her emails — until 30,000 were recovered by a Treasury Department inspector general.

All of this does nothing to reassure taxpayers of the agency’s needed fairness. ...

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

Friday, June 10, 2016

IRS Announces Winners Of Tax Design Crowdsourcing Challenge

IRSThe IRS today announced (IR-2016-86) announced the winners of its first Tax Design Crowdsourcing Challenge:

The Internal Revenue Service today announced the winners of its first crowdsourcing competition, called the Tax Design Challenge, that encouraged innovative ideas for the taxpayer experience of the future.

Out of 48 submissions, winners from California, Minnesota and Washington, D.C., were among those selected in categories covering overall design, taxpayer usefulness and best financial capability.

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June 10, 2016 in IRS News, Tax | Permalink | Comments (2)

The IRS Scandal, Day 1128

IRS Logo 2The Hill, House Panel Votes to Cut IRS Funding:

The House Appropriations Committee on Thursday approved a spending bill that would reduce funding for the Internal Revenue Service (IRS).

The bill would give the IRS $10.9 billion for fiscal 2017, which is $236 million less than the enacted level for this year.

The IRS budget under the bill would be lower than its 2008 level and $1.3 billion less than President Obama requested in his budget. The bill also includes provisions to stop the IRS from further implementing ObamaCare and to increase oversight of the IRS in the wake of its political-targeting scandal.

Republicans supported the bill’s treatment of the IRS.

Rep. Ander Crenshaw (R-Fla.), chairman of the subcommittee with jurisdiction over the bill, said that instead of turning over a new leaf after the targeting scandal came to light, “the IRS made a series of embarrassing management mistakes at the expense of customer service.”

But Democrats expressed concerns about the cuts to the IRS. Rep. José Serrano (D-N.Y.), the top Democrat on the subcommittee, said that “by continually cutting the IRS, we are simply empowering tax cheats and confusing honest taxpayers.”

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June 10, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, June 9, 2016

The IRS Scandal, Day 1127

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)