TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Monday, March 14, 2016

The IRS Scandal, Day 1040

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

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

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

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

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

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

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

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

Continue reading

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

Sunday, March 13, 2016

The IRS Scandal, Day 1039

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

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

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

According to the letter:

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

According to Democracy 21 President Fred Wertheimer:

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

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

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

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

The letter continued:

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

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

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

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

According to the letter:

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

The letter stated:

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

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

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

The letter concluded:

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

The country deserves better from the IRS.

Continue reading

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

Saturday, March 12, 2016

The IRS Scandal, Day 1038

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

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

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

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

Continue reading

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

Friday, March 11, 2016

The IRS Scandal, Day 1037

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

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

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

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

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

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

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

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

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

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

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

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

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

Continue reading

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

Thursday, March 10, 2016

The IRS Scandal, Day 1036

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

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

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

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

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

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

Continue reading

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

Wednesday, March 9, 2016

The IRS Scandal, Day 1035

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

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

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

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

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

Continue reading

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

Tuesday, March 8, 2016

The IRS Scandal, Day 1034

Impeach

The Resurgent, Impeach Obama’s IRS Commissioner:

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

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

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

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

Continue reading

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

Monday, March 7, 2016

The IRS Scandal, Day 1033

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

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

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

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

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

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

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

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

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

Continue reading

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

Sunday, March 6, 2016

The IRS Scandal, Day 1032

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Continue reading

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

Saturday, March 5, 2016

The Economist:  Border Babies v. The IRS

Economist Logo (2015)The Economist, Border Babies v the IRS:

Americans in Canada fight back against the taxman.

When Barack Obama vowed in 2009 to pursue tax cheats abroad, he probably was not thinking of people like Ginny Hillis. Born in Detroit to Canadian parents, the retired lawyer has lived in Canada since she was six. Like many transplanted Americans, she ignored an American law that since 1913 has obliged citizens to file tax returns regardless of where they live.

With the Foreign Account Tax Compliance Act (FATCA), enacted in 2010, that became harder. It demanded that foreign banks report to the Internal Revenue Service (IRS) details of accounts held by Americans abroad. Banks that fail to comply are subject to a 30% tax on payments they receive from the United States. Some 7m Americans outside the country (1m of them in Canada), along with an unknown number of “US persons”, are now caught in FATCA’s net.

Unlike most, Ms Hillis is fighting back through the courts.

Continue reading

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

The IRS Scandal, Day 1031

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

It’s time for The Speech. ...

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

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

Continue reading

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

Friday, March 4, 2016

The IRS Scandal, Day 1030

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

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

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

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

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

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

Continue reading

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

Thursday, March 3, 2016

The IRS Is Using A System That Was Hacked To Protect Victims Of A Hack—And It Was Just Hacked

ID TheftFollowing up on Saturday's post, IRS Says 114,000, 334,000, 724,000 Taxpayer Accounts Were Hacked:  Quartz, The IRS Is Using a System That Was Hacked to Protect Victims of a Hack—And It Was Just Hacked:

To protect the victims of the data breach from further harm, the IRS provided them with “Identity Protection PINs.” The PINs are secret codes those taxpayers now have to put on all of their tax returns, or the IRS won’t accept them. As long as they keep their PINs secret, they should be safe from fraud.

For this master plan to work, though, the IRS would also have to keep the PINs secret. Unfortunately, it seems the agency is having some trouble with that.

Continue reading

March 3, 2016 in IRS News, Tax | Permalink | Comments (2)

The IRS Scandal, Day 1029

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

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

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

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

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

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

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

Continue reading

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

Wednesday, March 2, 2016

The IRS Scandal, Day 1028

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

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

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

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

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

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

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

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

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

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

Continue reading

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

Tuesday, March 1, 2016

The IRS Scandal, Day 1027

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

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

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

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

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

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

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

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

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

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

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

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

Continue reading

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

Monday, February 29, 2016

Low Income Taxpayer Clinic Grant Recipients For 2016

LITC LogoThe IRS announced on Friday (IR-2016-32) that it has awarded $10.72 million in matching grants to 129 Low Income Taxpayer Clinics (LITCs) for the 2016 grant cycle (Jan. 1, 2016 through Dec. 31, 2016).  Through the LITC program, the IRS awards matching grants of up to $100,000 a year to qualifying organizations.  For the full list of grant recipients, see here.  For a list of the 39 law school tax clinic grant recipients, and the amount of their grants, see below the fold:

Continue reading

February 29, 2016 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1026

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

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

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

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

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

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

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

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

Continue reading

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

Sunday, February 28, 2016

IRS Releases Winter 2016 SOI Bulletin

The IRS Scandal, Day 1025

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

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

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

Continue reading

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

Saturday, February 27, 2016

IRS Says 114,000, 334,000, 724,000 Taxpayer Accounts Were Hacked

ID TheftWall Street Journal, IRS Says Cyberattacks on Taxpayer Accounts More Extensive Than Previously Reported:

The Internal Revenue Service said Friday that more than twice as many taxpayer accounts may have been hit by cybercriminals than the agency previously reported, with hackers gaining access to as many as 724,000 accounts and attempting to break into an additional 575,000.

The disclosure is the second revision by the IRS in the last six months and comes as Americans are preparing their tax returns for 2015.

Last August, the IRS said cybercrooks used stolen Social Security numbers and other data to gain access to taxpayer information for as many as 334,000 accounts, up from a number of 114,000 announced in May 2015.

Continue reading

February 27, 2016 in IRS News, Tax | Permalink | Comments (4)

IRS Releases Fall 2015 SOI Bulletin

IRS Logo 2The IRS Statistics of Income Division has released the Fall 2015 SOI Bulletin (Vol. 35, No. 1), with these articles:

Historical Tables and Appendix

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

The IRS Scandal, Day 1024

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

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

Continue reading

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

Friday, February 26, 2016

The IRS Scandal, Day 1023

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

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

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

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

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

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

Continue reading

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

Thursday, February 25, 2016

6 Of 13 IRS-Approved Tax Preparers Fail Cybersecurity Test, Put Confidential Taxpayer Information At Risk

E-fileWall Street Journal, Six of 13 IRS-Approved Tax Preparers Fail Cybersecurity Test; Firms Didn’t Protect Customers’ Information From Potential Tax Identity Theft, Audit Finds:

Nearly half the firms that have agreements with the Internal Revenue Service to provide online tax-preparation and filing services are failing to protect customers’ privacy and security, according to an audit scheduled to be released Wednesday.

The audit by the nonprofit Online Trust Alliance found that six out of 13 firms, including Jackson Hewitt and Free1040TaxReturn.com, don’t provide adequate security against cybercriminals. Seven firms, including TurboTax, H&R Block, TaxAct and TaxSlayer were praised for their practices and named to an “Honor Roll.” ...

Continue reading

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

IRS Accepting Applications For Part-Year Low Income Taxpayer Clinic Grants In Identified Underserved Areas Starting March 1

IR-2016-31, IRS Accepting Applications for Part-Year Low Income Taxpayer Clinic Grants in Identified Underserved Areas Starting March 1:

The Internal Revenue Service today announced it will accept applications for a part-year Low Income Taxpayer Clinic (LITC) matching grant from qualified organizations, in certain identified geographic areas, to provide representation to low income taxpayers and education about taxpayer rights and responsibilities to individuals who speak English as a second language. 

The supplemental application period will run from March 1, 2016, to April 1, 2016.

Continue reading

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

The IRS Scandal, Day 1022

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

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

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

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

American taxpayers are left with only one option: Impeachment.

Continue reading

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

Wednesday, February 24, 2016

The IRS Scandal, Day 1021

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

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

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

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

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

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

Continue reading

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

Tuesday, February 23, 2016

IRS Low Income Taxpayer Clinic Program Releases Annual Report

LITC CoverIR-2016-30, Low Income Taxpayer Clinic Program Reports on Activities (Feb. 23, 2016):

The Internal Revenue Service’s Low Income Taxpayer Clinic (LITC) Program Office has issued its fourth annual program report. The new report describes how LITCs across the nation have assisted low income taxpayers and individuals who speak English as a second language (ESL) with free or low-cost representation in disputes with the IRS.

Continue reading

February 23, 2016 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1020

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

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

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

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

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

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

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

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

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

Continue reading

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

Monday, February 22, 2016

The IRS Scandal, Day 1019

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

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

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

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

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

Continue reading

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

Sunday, February 21, 2016

The IRS Scandal, Day 1018

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

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

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

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

I think he is right.

Continue reading

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

Saturday, February 20, 2016

The IRS Scandal, Day 1017

IRS Logo 2Joe Kristan (Tax Update Blog), President’s Day. Bah. Humbug.:

Today is President’s Day. ... It seems as good a day as any to ponder a well-buried scandal of the current presidency, the Tea Party scandal. It came to light with a staged admission by Lois Lerner that Tea Party groups had been singled out for "special treatment” by the IRS. The admission was intended to get in front of an Inspector General report exposing the partisan mistreatment. ...

It was never realistic to think the scandal would bring down the administration, considering how carefully the media cheerleaders avoided the subject. But the lack of presidential involvement only leads to a more disturbing conclusion, one I discussed way back when the scandal was only in single digits:

I doubt the White House left fingerprints on IRS efforts to harass political opponents (though it didn’t lift a finger to stop it).   That leads to an even more depressing possibility: that the IRS went out its way to beat up on the President’s opponents on its own.  Nobody blew the whistle.  That means IRS management is so corrupt and political that it would go after the administration’s political opponents with only a wink and a nudge.  And anybody who doesn’t think this was politically-motivated is kidding themselves.

James Taranto puts it well:

And the IRS scandal was a subversion of democracy on a massive scale. The most fearsome and coercive arm of the administrative state embarked on a systematic effort to suppress citizen dissent against the party in power. Thomas Friedman is famous for musing that he wishes America could  be China for a day. It turns out we’ve been China for a while.

The self-weaponization of the bureaucracy against its political opponents is hugely depressing. The government workforce is overwhelmingly on the side of the political party that favors an ever-larger state. There are plenty of Lois Lerners in the IRS and throughout the Leviathan. The Tea Party scandal, and the complete lack of accountability for its perpetrators, gives no reason to hope those who don’t share that worldview can expect a fair shake. That’s especially true when the sitting president shows no interest in discouraging such behavior.

Continue reading

February 20, 2016 in IRS News, IRS Scandal | Permalink | Comments (1)

Friday, February 19, 2016

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

The IRS Scandal, Day 1016

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

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

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

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

Continue reading

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

Thursday, February 18, 2016

Treasury Department Releases New 2016 Model Income Tax Treaty

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

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

Continue reading

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

The IRS Scandal, Day 1015

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

Six years and still counting.

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

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

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

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

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

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

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

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

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

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

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

Continue reading

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

Wednesday, February 17, 2016

The IRS Scandal, Day 1014

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

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

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

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

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

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

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

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

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

(Hat Tip: Michael Graetz.)

Continue reading

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

Tuesday, February 16, 2016

The IRS Scandal, Day 1013

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

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

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

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

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

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

Or not. Some things truly are lost in translation.

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

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

Continue reading

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

Monday, February 15, 2016

The IRS Scandal, Day 1012

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

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

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

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

Continue reading

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

Sunday, February 14, 2016

The IRS Scandal, Day 1011

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

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

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

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

Continue reading

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

Saturday, February 13, 2016

The IRS Scandal, Day 1010

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

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

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

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

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

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

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

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

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

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

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

Continue reading

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

Friday, February 12, 2016

IRS Whistleblower Awards Jump 98%

The IRS Scandal, Day 1009

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

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

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

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

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

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

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

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

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

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

 

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

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

Continue reading

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

Thursday, February 11, 2016

The IRS Scandal, Day 1008

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

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

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

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

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

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

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

Continue reading

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

Wednesday, February 10, 2016

The IRS Scandal, Day 1007

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

Continue reading

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

Tuesday, February 9, 2016

The IRS Scandal, Day 1006

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

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

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

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

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

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

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

Continue reading

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

Monday, February 8, 2016

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

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

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

Continue reading

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

The IRS Scandal, Day 1005

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

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

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

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

Continue reading

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

Sunday, February 7, 2016

The IRS Scandal, Day 1004

Segment on IRS Commissioner John Koskinen begins at 3:30

Continue reading

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