TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

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.

https://taxprof.typepad.com/taxprof_blog/2016/06/the-irs-scandal-day-1148.html

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Comments

The transfer was "almost certainly illegal?" Let's take a closer look. The relevant statute is 26 U.S.C. § 6103(h)(2)(A), which provides that “[i]n a matter involving tax administration, a return or return information shall be open to inspection by or disclosure to officers and employees of the Department of Justice (including United States attorneys) personally and directly engaged in, and solely for their use in, any proceeding before a Federal grand jury or preparation for any proceeding (or investigation which may result in such a proceeding) before a Federal grand jury or any Federal or State court, but only if–the taxpayer is or may b a party to the proceeding . . .” Now let’s see. The returns and return information were disclosed to DOJ. The purpose of the disclosure was to investigate whether the taxpayers had broken the criminal tax laws (and other laws). The taxpayers whose returns were disclosed were the potential targets of the investigation. So what part of section 6103 was violated by the transfer of the records?

Posted by: Publius Novus | Jun 30, 2016 9:15:11 AM

I'd be remiss if I didn't point out that Publius failed to even read the entire article before regurgitating his usual defense of bureaucratic abuse of power. Otherwise, he would've answered his own question:

"A lawful transfer of the documents would have required a formal request from the DOJ to the IRS, but... the department did not make any requests to the IRS for the documents it received. Alternatively, the secretary of the Treasury could have turned the documents over to the DOJ. In either case, section 6103 requires the Treasury secretary to disclose the transfer to the bipartisan Joint Committee on Taxation, which releases publicly a list of disclosures each year. But the Joint Committee on Taxation’s 2010 disclosure report does not show a transfer to the DOJ that matches the one Lerner sent in October of that year... The transfer wasn’t disclosed because there was 'no legal justification for sharing the documents,' and because going through the proper channels would have brought it to public attention through the Joint Committee on Taxation."

Surprise, surprise. This may be one reason why Lerner plead the 5th before Congress, right after she claimed she did "nothing wrong", which in and of itself turns out to be a very untrue statement.

Never trust a career bureaucrat or politician who also happens to be a lawyer. Words to live by...

Posted by: MM | Jun 30, 2016 7:40:20 PM

The illegal part is that Justice has to actually ask for the records through channels first rather than what Lois did in proactively providing a wide swath of records in her own initiative. Such requests by Justice are to be limited to actual cases and cannot be fishing expeditions. The Service isn't supposed to proactively offer records but wait for valid requests.

Posted by: Lieutenant Blantyre | Jul 1, 2016 3:38:53 AM

Messrs. MM & Blantyre: Wrong and wrong. 26 U.S.C. § 6103(h)(3) specifies the preconditions for disclosures of returns and return information to DOJ. The IRS may initiate the disclosure if a case has been referred to DOJ. Sec. 6103(h)(3)(A). This is the more usual type of IRS-DOJ disclosure, and occurs thousands of time each year in connection with every tax case that is handled by DOJ in the federal and state courts. Normally, the disclosures are made simultaneously with the referral of the case. If no referral has been made, DOJ may make a request. Sec. 6103(h)(3)(B). These referrals are less common, and are usually the result of a U.S. Attorney’s request to expand or bolster a non-tax prosecution with tax counts.

The fact pattern on which the issue of whether wrongful disclosures occurred should turn is whether, before LLerner made the disclosures: 1) there was an IRS-DOJ referral in effect or 2) DOJ made a written request for the records. In other words, the question presented–to those who, unlike Mr. Epstein have not prejudged the case–is whether the IRS went “through the legally required channels” before making the disclosures.

BTW Mr. MM, is it ALWAYS necessary to make an ad hominem attack before you attempt to make your point?

Posted by: Publius Novus | Jul 1, 2016 6:29:46 AM

Pubs,

You're one to complain about ad hominems. Your whole tenure on this site seems to be one long ad hominem directed at Congressional oversight. That's a personal problem, not an argument.

Since you're quite certain no laws regarding confidentiality were broken, would you please share with everyone the evidence that any formal requests or referrals were made by the DOJ for the aforementioned *1.25 million pages* of tax returns?

Posted by: MM | Jul 1, 2016 7:27:11 PM

Mr. MM: Perhaps you do not understand the meaning of ad hominem. On the other hand, if I have made any ad hominem attacks on anyone except Mr. wodun, I apologize. I have no information as to whether DOJ made a formal written request for the purported 1.25 million pages of tax returns; but then neither do any of the posters or news organizations or plaintiffs. That is the point of my posts above.

BTW, the IRS is NOT required to report IRC 6103(h)(3)(A) disclosures. Check the statute.

Posted by: Publius Novus | Jul 2, 2016 8:18:30 AM

Pubs,

I asked about evidence of any requests from or referrals to the DOJ. This information would've been sent to the Joint Committee on Taxation as required in USC 6103(p)(3)(C).

So, in the absense of this evidence, which is required by the statute, you conclude that USC 6103 has not been violated and there was no unauthorized release of confidential tax return information? Wow, I suppose lawyers in government ARE the best qualified to circumvent the laws and regulations they swear to uphold...

Posted by: MM | Jul 2, 2016 10:49:35 AM