The IRS Scandal, Day 546

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

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

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

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

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

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

• The IRS Scandal, Day 545 (Nov. 5, 2014)
• The IRS Scandal, Day 544 (Nov. 4, 2014)
• The IRS Scandal, Day 543 (Nov. 3, 2014)
• The IRS Scandal, Day 542 (Nov. 2, 2014)
• The IRS Scandal, Day 541 (Nov. 1, 2014)
• The IRS Scandal, Day 540 (Oct. 31, 2014)
• The IRS Scandal, Day 539 (Oct. 30, 2014)
• The IRS Scandal, Day 538 (Oct. 29, 2014)
• The IRS Scandal, Day 537 (Oct. 28, 2014)
• The IRS Scandal, Day 536 (Oct. 27, 2014)
• The IRS Scandal, Day 535 (Oct. 26, 2014)
• The IRS Scandal, Day 534 (Oct. 25, 2014)
• The IRS Scandal, Day 533 (Oct. 24, 2014)
• The IRS Scandal, Day 532 (Oct. 23, 2014)
• The IRS Scandal, Day 531 (Oct. 22, 2014)
• The IRS Scandal, Day 530 (Oct. 21, 2014)
• The IRS Scandal, Day 529 (Oct. 20, 2014)
• The IRS Scandal, Day 528 (Oct. 19, 2014)
• The IRS Scandal, Day 527 (Oct. 18, 2014)
• The IRS Scandal, Day 526 (Oct. 17, 2014)
• The IRS Scandal, Day 525 (Oct. 16, 2014)
• The IRS Scandal, Day 524 (Oct. 15, 2014)
• The IRS Scandal, Day 523 (Oct. 14, 2014)
• The IRS Scandal, Day 522 (Oct. 13, 2014)
• The IRS Scandal, Day 521 (Oct. 12, 2014)
• The IRS Scandal, Day 520 (Oct. 11, 2014)
• The IRS Scandal, Day 519 (Oct. 10, 2014)
• The IRS Scandal, Day 518 (Oct. 9, 2014)
• The IRS Scandal, Day 517 (Oct. 8, 2014)
• The IRS Scandal, Day 516 (Oct. 7, 2014)
• The IRS Scandal, Day 515 (Oct. 6, 2014)
• The IRS Scandal, Day 514 (Oct. 5, 2014)
• The IRS Scandal, Day 513 (Oct. 4, 2014)
• The IRS Scandal, Day 512 (Oct. 3, 2014)
• The IRS Scandal, Day 511 (Oct. 2, 2014)
• The IRS Scandal, Day 510 (Oct. 1, 2014)
• The IRS Scandal, Day 509 (Sept. 30, 2014)
• The IRS Scandal, Day 508 (Sept. 29, 2014)
• The IRS Scandal, Day 507 (Sept. 28, 2014)
• The IRS Scandal, Day 506 (Sept. 27, 2014)
• The IRS Scandal, Day 505 (Sept. 26, 2014)
• The IRS Scandal, Day 504 (Sept. 25, 2014)
• The IRS Scandal, Day 503 (Sept. 24, 2014)
• The IRS Scandal, Day 502 (Sept. 23, 2014)
• The IRS Scandal, Day 501 (Sept. 22, 2014)
• The IRS Scandal, Days 401-500 (June 14, 2014 - Sept. 21,2014)
• The IRS Scandal, Days 301-400 (Mar. 6, 2014 - June 13, 2014)
• The IRS Scandal, Days 201-300 (Nov. 26, 2013 - Mar. 5, 2014)
• The IRS Scandal, Days 101-200 (Aug. 18, 2013 - Nov. 25, 2013)
• The IRS Scandal, Days 1-100 (May 10, 2013 - Aug. 17, 2013)