TaxProf Blog

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

Thursday, October 6, 2016

The IRS Scandal, Day 1246

IRS Logo 2Washington Times. IRS Subjects Tea Party Groups to New Round of Scrutiny, Publicizes Tax Return Data:

The IRS‘ battle against holdout tea party groups is heating up again, after the tax agency promised it would begin processing their long-delayed applications, but sent a new round of prodding questions demanding still more information.

More jarringly, the IRS then publicly released one of the sets of questions it sent to the Texas Patriots Tea Party — a move the group’s lawyer says puts secret taxpayer return information, supposed to be protected, out in the public.

Tax experts say the IRS may be on safe legal ground, since the filing was made as part of a court case, and that’s one of the few narrow exceptions to strict IRS privacy laws.

Still, the move to release the information has inflamed an already tense class action legal battle between the IRS and tea party groups who feel the agency is still targeting them more than three years after it promised to cease. “The IRS has taken the unprecedented step of publicly filing actual return information,” said Edward Greim, who is handling the case on behalf of more than 400 groups targeted by the IRS. He said the questions asked by the IRS show the agency has not ceased the intrusive questioning that landed it in trouble in the first place back in 2013. Mr. Greim said releasing the letter is proof that the IRS can’t be trusted to fairly handle the cases. ...

In addition to the TPTP, two other tea party groups that were targeted by the IRS are still awaiting approval. Unite in Action, a Michigan-based group, applied in 2010, and the Albuquerque Tea Party applied nearly seven years ago, in December 2009.

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Comments

“The IRS has taken the unprecedented step of publicly filing actual return information.” Where does this stuff come from? Apparently this is Mr. Greim’s first tax case and he has never read a report of any other tax cases. With rare exceptions, “returns” and “return information” are routinely filed in tax and tax-related cases. Such filings are obviously necessary in order to prosecute or defend tax cases and are specifically authorized by 26 U.S.C. § 6103(h)(4)(A). And the NorCal case is undeniably a tax case within the meaning of the statute (Ct. 3 of the 2d amended complaint alleges violations of the IRC.)

Posted by: Publius Novus | Oct 6, 2016 6:58:59 AM

Publius Novus,

I don't believe anyone is contesting that the IRS can reveal Tax information in a Tax-related cases. I believe that the issue arises from the public nature of the Tax disclosure despite this flying in the face of the rather large privilege of privacy that is typically placed upon Tax information.

While it may be the case that the IRS is acting legally, it would add to a pattern of the IRS interpreting laws such that they can maximize damage to the relevant Tea Party groups.

I'm fairly certain that if the Tax information had been provided to the court in a fashion similar to Trade Secrets that this would be a non-issue. Otherwise, you'd end up in a position where the IRS could legally publish your Tax Returns if you ever tried to file a suit against them, giving them a large legal club to beat potential future plaintiffs with. For instance, this means that the IRS could mistreat Trump and be immune to lawsuit because he doesn't want his Tax Return information to be made public.

The interpretation of the law in this fashion does, I think, cause a chilling effect w.r.t. seeking justice against the IRS.

Posted by: anon | Oct 6, 2016 11:41:37 AM

Once again Publius rushes in to defend the fascist actions of the Obama administration.

but sent a new round of prodding questions demanding still more information.

And their persecution continues unabated.

Posted by: wodun | Oct 6, 2016 3:48:20 PM

Mr. anon: Not sure I get your point. "Otherwise, you'd end up in a position where the IRS could legally publish your Tax Returns if you ever tried to file a suit against them. . .” When a tax case is filed in court–whether initiated by the taxpayer or the gubmint–26 U.S.C. § 6103(h)(4)(A) permits the disclosure of the taxpayer’s returns and return information in the case. Now it also depends what you mean by “publish.” The Ninth Circuit’s Lambert v. U.S. decision does not permit publishing in the sense of a press release or newspaper article in such circumstances (although there is also contrary precedent in other circuits). But if you mean “publish” in the evidentiary sense, as in “publish to the jury,” the law certainly permits that. Current limitations on electronic filing, however, would require that the taxpayer’s TIN and any medical information be redacted from tax returns and return information filed in the case.

Posted by: Publius Novus | Oct 7, 2016 8:33:11 AM

PN,

I was under the impression that evidence would be presented at trial and that there could be media in the room at that time. This effectively makes the information public in a "press release or newspaper article" sense.

The point is that, in order to find justice against the IRS, the plaintiff must be willing to have normally private information made public which would act as a chilling effect. This is, after all, a day and age when negotiating a tidy salary for yourself could get you death threats from those who didn't. It's a day when working for the wrong companies can get your good name trashed. Where not donating enough to the chosen set of charities could ruin your career. Where donating to the wrong political cause could get you a front-page hit piece in a few newspapers.

This information, even if slightly redacted to remove medical information, still would contain enough to be dangerous if made public. This is why I think there would be a chilling effect on lawsuits against the IRS if we were to interpret what the IRS did as legal or if we continued to not ensure that the Tax Return information is kept away from public trials.

Forgive me if I'm getting some of these details wrong, I'm not sure of the details of this particular case and am drawing from my understanding of other highly publicized cases.

Posted by: anon | Oct 7, 2016 10:02:23 AM