TaxProf Blog

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

Saturday, January 19, 2019

IRS Releases Final Regs On New 20% Business Tax Deduction

IR-2019-04 (Jan. 18, 2019), Treasury, IRS Issue Final Regulations, Other Guidance on New Qualified Business Income Deduction; Safe Harbor Enables Many Rental Real Estate Owners to Claim Deduction:

Today the Treasury Department and the Internal Revenue Service issued final regulations and three related pieces of guidance, implementing the new qualified business income (QBI) deduction (section 199A deduction).

The new QBI deduction, created by the 2017 Tax Cuts and Jobs Act (TCJA) allows many owners of sole proprietorships, partnerships, S corporations, trusts, or estates to deduct up to 20 percent of their qualified business income.  Eligible taxpayers can also deduct up to 20 percent of their qualified real estate investment trust (REIT) dividends and publicly traded partnership income.

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January 19, 2019 in IRS News, Tax | Permalink | Comments (0)

Friday, January 18, 2019

Conservative Groups Targeted In Lois Lerner’s IRS Scandal Receive Settlement Checks

IRS Logo 2The Daily Signal, Conservative Groups Targeted in Lois Lerner’s IRS Scandal Receive Settlement Checks:

Dozens of conservative organizations are receiving late Christmas presents years after the IRS handed them a lump of coal.

The federal government in recent days has been issuing settlement checks to 100 right-of-center groups wrongfully targeted for their political beliefs under the Obama administration’s Internal Revenue Service, according to an attorney for the firm that represented plaintiffs in NorCal v. United States.

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January 18, 2019 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Wednesday, January 16, 2019

IRS Recalls 46,000 Workers To Handle Tax Returns And Process Refunds During Government Shutdown

IRS Logo 2The IRS yesterday released a plan to have 46,000 of its 80,000 employees on the job for tax-filing season, up from 10,000 employees.

January 16, 2019 in IRS News, Tax | Permalink | Comments (4)

Thursday, January 10, 2019

GAO: The IRS Has 4,500 Guns, 5,000,000 Rounds of Ammunition

Government Accountability Office, Purchases and Inventory Controls of Firearms, Ammunition, and Tactical Equipment (GAO-19-175) (Dec 13, 2018):

GAO 1

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January 10, 2019 in IRS News, Tax | Permalink | Comments (9)

Sunday, January 6, 2019

The IRS Wants To Use Social Media To Catch Tax Cheats

IRS Big DataQuartz, The IRS Wants to Use Social Media to Catch Tax Cheats:

The Internal Revenue Service is looking for ways to scour social media platforms like Facebook, Instagram, and Twitter in its ongoing quest to catch tax cheats.

That’s according to a request for information issued December 18 by the IRS’s National Office of Procurement. The mining of social media data by the agency has been suspected in the past, but the IRS has never before confirmed the practice.

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January 6, 2019 in IRS News, Tax | Permalink | Comments (4)

Sunday, December 16, 2018

IRS Releases New Shorter Form 1040 For 2018, With Six New Schedules

IRS, About Form 1040, U.S. Individual Income Tax Return:

For Tax Year 2018, you will no longer use Form 1040A or Form 1040EZ, but instead will use the redesigned Form 1040. Many people will only need to file Form 1040 and no schedules.

Page 1:
1040

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December 16, 2018 in IRS News, Tax | Permalink | Comments (4)

Wednesday, November 28, 2018

Call For Proposals: IRS Statistics of Income Research Program

IRS Logo 2Call for Proposals:

Through its Joint Statistical Research Program (JSRP), the Statistics of Income (SOI) seeks to enable the use of tax microdata by qualified researchers outside the Federal government. Such research can provide new insights and advance the understanding of the ways that existing tax policies affect individuals, businesses, and the economy. It can also provide a new understanding of taxpayer behavior that can aid in the administration of the U.S. tax system. Finally, such research can lead to the development of new datasets useful for future tax administration research, as well as new tabulations that can be released to the public. SOI is a division of the IRS’s Research, Applied Analytics, and Statistics (RAAS) office.

The following subjects are of particular interest to the IRS and the tax research community:

  • Tax administration in a global economy
  • Taxpayer needs and behavior, particularly the roles of information, complexity, salience, engagement, and compliance costs
  • Filing, payment, and reporting compliance measures, behaviors, and drivers
  • Taxpayer response to policy changes, particularly taxpayer responses to changes in incentives
  • Role of complex business structures in tax planning
  • Application of new research methods for tax administration, particularly data science, behavioral insights, or other interdisciplinary approaches

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November 28, 2018 in IRS News, Tax | Permalink | Comments (1)

Tuesday, November 27, 2018

The IRS Hired Private Debt Collectors Who Are Failing To Meet Goals While Squeezing Poor People And Hurricane Victims

IRS Logo 2Quartz, The IRS Hired Private Debt Collectors Who Are Squeezing Poor People and Hurricane Victims:

An IRS program using private debt collectors to handle delinquent tax bills is improperly demanding payment from hurricane victims and squeezing some of the poorest Americans—all the while turning a profit far below industry standards.

Since April 2017, four debt collection companies have been assigned half a million delinquent taxpayers to contact. So far, they’ve brought in less than 1% of what Congress hopes the program will ultimately generate. Meanwhile, tax experts and the IRS’ own oversight board fear that the targeted taxpayers are being pressured to empty out their savings and take on unnecessary financial risk. The National Taxpayer Advocate, an independent office within the IRS that ensures “every taxpayer is treated fairly,” calls the program ”a serious threat to taxpayer rights.”

Two US senators pushed the IRS to outsource its debt collection to private companies through this program: Chuck Grassley, a Republican from Iowa, and Chuck Schumer, a Democrat from New York who has hailed the initiative for bringing jobs to one of the poorest parts of his state. As if by coincidence, three of the four debt-collecting companies contracted by the IRS are based in Iowa and New York. They declined to comment on the program.

The IRS normally brings in $4 for every $1 put into its budget. But the private collectors don’t appear to be as effective as their government counterparts. From Oct. 2017 to Sept. 2018, the program’s most profitable 12 months, collection companies Pioneer Credit Recovery, ConServe Debt Recovery, Performant Recovery, and CBE Group collected just $2.64 for every $1 the government spent on the program.

The program hasn’t even met the private debt-collection industry’s own financial standards. By June 2018, the companies had recovered just 1% of the of the $4.1 billion in receivables assigned to them, according to a recent report by the Treasury Inspector General for Tax Administration (TIGTA). The industry average collection rate is 9.9%.

And of the total $88.8 million in revenue that the companies did manage to collect, the IRS only received $22.3 million. That’s because the scheme has cost the US government $66.5 million, between startup costs and commission fees of up to 25%. To reach the Congressional Joint Committee on Taxation’s target of $2.4 billion in total additional revenue by 2025, annual collections need to rise to around 15 times what’s been collected so far, for the next seven years.

The odds are against the hired collectors. After three years, a debt is considered statistically uncollectible—and the accounts the IRS assigned to the private collectors were an average of 3.97 years old, TIGTA reports.

Congress, which forced the scheme upon the IRS, doesn’t seem to have learned much from past failures with private debt collectors. A 1996 pilot program resulted in a net loss of $17 million and was canceled after a year. Another attempt in 2006 led to a net loss of almost $30 million. The most recent available IRS data says the agency is owed more than $131 billion in delinquent payments on 14 million accounts.

Many, though not all, of the accounts the IRS has assigned to private debt collectors involve America’s most vulnerable taxpayers: poor people, and survivors of natural disasters. ...

Tax experts say it would be safer and more efficient to direct the entire program budget to the IRS itself. Unlike private collectors, the agency has to abide by stringent checks on taxpayer financial well-being, and it has consistently driven an excellent return on its budget.

“The IRS wouldn’t be hiring collection personnel using scraps salvaged from private profiteering businesses if Congress would do its job and properly fund our most essential government functions, including that of tax collection,” said Mandi Matlock, a tax attorney who does work for the National Consumer Law Center. “Congress created this problem so its friends in private industry could come along and fix it, at a high price to taxpayers.”

November 27, 2018 in IRS News, Tax | Permalink | Comments (1)

Saturday, November 24, 2018

Another IRS Free Speech Scandal

IRS Logo 2Wall Street Journal op-ed:  Another IRS Free-Speech Scandal, by David B. Rivkin (Baker & Hostetler, Washington, D.C.) & Randal John Meyer (Cato Institute Center for Constitutional Studies):

The Internal Revenue Service infamously targeted dissenters during President Obama’s re-election campaign. Now the IRS is at it again. Earlier this year it issued a rule suppressing huge swaths of First Amendment protected speech. The regulation appears designed to hamper the marijuana industry, which is still illegal under federal law although many states have enacted decriminalization measures. But it goes far beyond that.

The innocuously named Revenue Procedure 2018-5 contains a well-hidden provision enabling the Service to withhold tax-exempt status from organizations seeking to improve “business conditions . . . relating to an activity involving controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act) which is prohibited by federal law.” That means that to obtain tax-exempt status under any provision of the Internal Revenue Code’s Section 501—whether as a charity, social-welfare advocacy group or other type of nonprofit—an organization may not advocate for altering the legal regime applicable to any Schedule I or II substance.

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November 24, 2018 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, November 21, 2018

IRS Won't Clawback Gifts When Exclusion Reverts Back To $5 Million In 2026

IRS Logo 2IR-2018-229 (Nov. 20, 2018), Making Large Gifts Now Won’t Harm Estates After 2025:

Today the IRS announced that individuals taking advantage of the increased gift and estate tax exclusion amounts in effect from 2018 to 2025 will not be adversely impacted after 2025 when the exclusion amount is scheduled to drop to pre-2018 levels.

The Treasury Department and the IRS issued proposed regulations which  implement changes made by the 2017 Tax Cuts and Jobs Act (TCJA). As a result, individuals planning to make large gifts between 2018 and 2025 can do so without concern that they will lose the tax benefit of the higher exclusion level once it decreases after 2025.

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November 21, 2018 in IRS News, Tax | Permalink | Comments (1)

Sunday, November 18, 2018

WSJ: Switch To Chained CPI Will Erode Trump Tax Cut Next Year

Wall Street Journal, Trump Tax Cut to Be Eroded Next Year by Inflation Switch:

Last year’s big tax cut is about to start shrinking.

The Internal Revenue Service on Thursday announced the tax code’s parameters for 2019, implementing a new method for making inflation adjustments that will result in higher tax payments—and government revenue—over time.

The shift will cost Americans $133.5 billion over a decade, according to Congress’s Joint Committee on Taxation.

The tax law enacted last year lowered tax rates and reduced tax burdens for most households in 2018. It also required the IRS to switch to a different, slower-moving measure of inflation to adjust a variety of tax-code features for rising prices. ...

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November 18, 2018 in IRS News, Tax | Permalink | Comments (0)

Wednesday, November 14, 2018

Amazon Could Win Big Under Trump's New Opportunity Zone Tax Break

Amazon logo (2018)Bloomberg Tax, Amazon NY Could Win Big Under Tax Break Meant for Distressed Zones:

Amazon could benefit from federal tax breaks designed to revitalize struggling communities if it builds all or part of its second headquarters in Long Island City.

The company’s eligibility comes down to whether the IRS would view a new headquarters as a new entity or as a part of Amazon’s larger umbrella. ...

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November 14, 2018 in IRS News, Tax | Permalink | Comments (0)

Monday, November 5, 2018

NY Times: Democrats Eye Trump’s Tax Returns, With Mnuchin In The Middle

Trump Tax ReturnsNew York Times, Democrats Eye Trump’s Tax Returns, With Mnuchin in the Middle:

Democrats are preparing to use an obscure law to try to obtain a copy of President Trump’s tax returns if they win control of the House or Senate — a scenario that could force one of the president’s most trusted aides to reveal his most closely guarded secret.

Steven Mnuchin, the Treasury secretary, said in an interview that he would honor any legal requests from Congress to release the president’s tax returns, which are stored in a vault at the Internal Revenue Service. But the demand would undoubtedly thrust Mr. Mnuchin into the fraught position of balancing his loyalty to Mr. Trump with a legal requirement to deliver the returns.

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November 5, 2018 in IRS News, Tax | Permalink | Comments (2)

Friday, November 2, 2018

The Proposed Opportunity Zone Regulations

David S. Miller, Jean Bertrand & Sejin Park (Proskauer), The Proposed Opportunity Zone Regulations:

On October 19, 2018, the Internal Revenue Service and the U.S. Department of the Treasury issued proposed regulations under section 1400Z-2 of the Internal Revenue Code regarding the qualified opportunity zone program. This paper summarizes some of the most important aspects of the proposed regulations.

November 2, 2018 in IRS News, Scholarship, Tax | Permalink | Comments (0)

Monday, October 22, 2018

Call For Tax Papers And Presentations: 4th International Conference On Taxpayer Rights

ICTR

Call For Conference Papers and Presentations: 4th International Conference on Taxpayer Rights: Taxpayer Rights in the Digital Age: Implications for Transparency, Certainty, and Privacy:

The National Taxpayer Advocate will convene the 4th International Conference on Taxpayer Rights on May 23 and 24, 2019, in Minneapolis, Minnesota. The conference is hosted by the University of Minnesota School of Law and sponsored by Tax Analysts, with technical assistance from IBFD. The 2019 conference will explore the role of taxpayer rights in the digital age, and the implications of the expanding digital environment for transparency, certainty, and privacy in tax administration.

We are currently seeking presentation and paper proposals on a range of topics. In developing proposals, the conference encourages proposals from multiple disciplines (e.g., from the fields of law, economics, psychology, anthropology, sociology, computer science as well as from government officials and ombuds and taxpayer advocates) that address the following topics:

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October 22, 2018 in Conferences, IRS News, Scholarship, Tax | Permalink | Comments (0)

IRS Issues Proposed Regs On New Opportunity Zone Tax Incentive

IRS Logo 2R-2018-206 (Oct. 19, 2018), Treasury, IRS Issue Proposed Regulations on New Opportunity Zone Tax Incentive:

The Treasury Department and the Internal Revenue Service today issued proposed regulations and other published guidance for the new Opportunity Zone tax incentive.

Opportunity Zones, created by the 2017 Tax Cuts and Jobs Act, were designed to spur investment in distressed communities throughout the country through tax benefits. Under a nomination process completed in June, 8,761 communities in all 50 states, the District of Columbia and five U.S. territories were designated as qualified Opportunity Zones. Opportunity Zones retain their designation for 10 years. Investors may defer tax on almost any capital gain up to Dec. 31, 2026 by making an appropriate investment in a zone, making an election after December 21, 2017, and meeting other requirements.

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October 22, 2018 in IRS News, Tax | Permalink | Comments (0)

Thursday, October 18, 2018

WSJ: What’s A Service Business? That’s Now A Multibillion-Dollar Tax Question

Wall Street Journal, What’s a Service Business? That’s Now a Multibillion-Dollar Tax Question:

For Extraco Banks of central Texas, the 2017 tax law that promised a 20% deduction is turning into something of a headache.

S-corporation banks such as Extraco technically qualify for the break. But under proposed IRS regulations, Extraco might lose out, because it gets too much revenue from managing trusts and selling mortgages into the secondary market. Those activities may be ineligible and taint the ability of the whole business to qualify.

Situations like Extraco’s were a crucial part of an IRS public hearing Tuesday, as the agency prepares to finish the rules for the new 20% deduction for pass-through businesses such as partnerships and S corporations, closely held companies that don’t pay standard corporate taxes.

Companies and the government are struggling over who is eligible for the tax break, and representatives of veterinarians, escrow agents, automobile dealers and franchised businesses pleaded their case at the hearing. Major League Baseball sent in a new detailed letter explaining why teams think they should get the tax break.

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October 18, 2018 in IRS News, Tax | Permalink | Comments (0)

Tuesday, October 16, 2018

Johnston: We Need A Tax Police To Go After The Likes Of Donald Trump

David Cay Johnston, We Need Tax Police – And They Should Go After the Likes of Donald Trump:

When the New York Times exposed decades of tax cheating and “outright fraud” by the sitting president, it prompted people to ask important questions about the corrupt practices of the Trump family. The answers are central to the future of America.

Where was the Internal Revenue Service? How did the Trumps get away with decades of schemes the Times said allowed them to evade close to a half-billion dollars of income and gift taxes? Is Donald Trump continuing these practices? Is that why he refuses to make his own tax returns public? Can anything be done about it?

I’m in a unique position to answer those questions. I am the Times’ former tax reporter, the journalist who has covered Trump longer than anyone else, more than 30 years. ...

Congress, which makes tax law, has never properly supported the IRS, which I like calling the Tax Police Department.

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October 16, 2018 in IRS News, Tax | Permalink | Comments (8)

Wednesday, October 10, 2018

IRS Internal Watchdog Faults Vigilance On Nonprofits' Political Activities

TIGTAWall Street Journal, IRS Internal Watchdog Faults Vigilance on Nonprofits' Political Activities:

The IRS is still struggling with its role policing nonprofit groups’ political activities, the tax agency's inspector general said in a new report [Review of the Processing of Referrals Alleging Impermissible Political Activity by Tax-Exempt Organizations (2019-10-006) (Oct. 4, 2018)].

The report included no allegations of political bias inside the Internal Revenue Service, but the inspector general found IRS officials aren't sending enough allegations of impermissible political activity—such as involvement in a partisan campaign—to the Political Activities Referral Committee of managers responsible for deciding whether to pursue enforcement.

Based on the inspector general's sample, more than 1,000 cases in 2015 and 2016 could have gone to the the three-person committee, the report said. The committee reviewed 19 high-profile cases.

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October 10, 2018 in IRS News, Tax | Permalink | Comments (0)

Friday, October 5, 2018

NY Times: Hobbled by Budget Cuts, The IRS Brings Fewer Tax Fraud Cases; Provided You’re Not An Associate Of President Trump, There May Never Be A Better Time To Be A Tax Cheat

New York Times, Hobbled by Budget Cuts, the I.R.S. Brings Fewer Tax Fraud Cases:

Tax evasion is at the center of the criminal cases against two associates of the president, Paul Manafort and Michael D. Cohen. The sheer scale of their efforts to avoid paying the government has given rise to a head-scratching question: How were they able to cheat the Internal Revenue Service for so many years?

The answer, researchers and former government auditors say, is simple. The I.R.S. pursues fewer cases of tax evasion than it did less than 10 years ago. Provided you’re not a close associate of President Trump, there may never be a better time to be a tax cheat.

Last year, the I.R.S.’s criminal division brought 795 cases in which tax fraud was the primary crime, a decline of almost a quarter since 2010. “That is a startling number,” Don Fort, the chief of criminal investigations for the I.R.S., acknowledged at a New York University tax conference in June.

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October 5, 2018 in IRS News, Tax | Permalink | Comments (5)

Sunday, September 30, 2018

Democrats Plan To Examine Trump’s Tax Returns After Midterm Election; Strategy Could Be Applied To Anyone's Tax Return

Trump Tax ReturnsPolitico, Democrats Planning To Examine Trump’s Tax Returns After the Midterms:

The years-old mystery of what’s in President Donald Trump’s tax returns will likely quickly unravel if Democrats win control of at least one chamber of Congress.

Democrats, especially in the House, are quietly planning on using an obscure law that will enable them to examine the president’s tax filings without his permission.

The nearly 100-year-old statute allows the chairmen of Congress’ tax committees to look at anyone’s returns, and Democrats say they intend to use that power to help answer a long list of questions about Trump’s finances. Many also want to use it to make public confidential information about Trump’s taxes that he’s steadfastly refused to release.

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September 30, 2018 in Congressional News, IRS News, Tax | Permalink | Comments (9)

Wednesday, September 26, 2018

IRS Weighs Easing Tax-Free Spinoff Rules In Boon to Tech, Pharma

Bloomberg, IRS Weighs Easing Tax-Free Spinoff Rules in Boon to Tech, Pharma:

The Internal Revenue Service is considering relaxing the rules for companies to qualify for tax-free spinoffs — a shift that could benefit drugmakers and tech firms with promising early-stage products.

The agency said Tuesday it’s looking into whether units should still be required to generate revenue before a spinoff from a larger company can be deemed tax-free. Current rules generally require units to have been engaged in a trade or business involving income collection and payment of expenses for at least five years. The change could be a way for the U.S. government to promote research and development within the country by giving companies a tax break on the spinoff transaction.

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September 26, 2018 in IRS News, Tax | Permalink | Comments (0)

Thursday, September 20, 2018

Grewal: When IRS Guidance Backfires

Andy Grewal (Iowa), When IRS Guidance Backfires, 36 Yale J. on Reg.: Notice & Comment (Sept. 7, 2018):

This week, the IRS tried to clarify how proposed regulations on state tax credit programs apply to Section 162(a) business deductions. But its attempted clarification has created only more problems.

Under the proposed regulations, a taxpayer who makes a transfer to a Section 170(c) organization must reduce her charitable contribution deduction by the amount of any state tax credits received. See Prop. Reg. § 1.170A-1(h)(3)(i). Some businesses contacted the IRS and presumably expressed concerns that transferred amounts might not be deductible at all. That is, if Section 170 deductions were denied for creditable transfers, then Section 162 deductions might be denied too.

In IR-2018-178 (Sept. 5, 2018), the IRS cryptically announced that “taxpayers who make business-related payments to charities or government entities for which the taxpayers receive state or local tax credits can generally deduct the payments as business expenses.” See also IRS State and Local Income Tax FAQ. The IRS did not provide any further guidance on when a transfer to a state tax credit program will qualify as “business related.”

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September 20, 2018 in IRS News, Scholarship, Tax | Permalink | Comments (0)

Wednesday, September 19, 2018

Zelenak: Comments On The New SALT Proposed Regulations

Lawrence Zelenak (Duke), Comments on Proposed Regulations, "Contributions in Exchange for State or Local Tax Credits" (Reg-112176-18):

These comments offer three recommendations, of which only the first involves a change in the proposed regulations themselves. First, rather than treating state tax credits as an exception to the general rule that a charitable deduction is not reduced by benefits a donor receives from third parties, the final regulations should set forth a general rule that the amount of a charitable deduction is reduced by benefits a donor receives from any source on account of the donation.

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September 19, 2018 in IRS News, Tax | Permalink | Comments (1)

Tuesday, September 18, 2018

WSJ: The IRS Is Still Going After Offshore Tax Cheats

Wall Street Journal Tax Report, The IRS Is Still Coming for You, Offshore Tax Cheats:

On Sept. 28, the Internal Revenue Service will end its program allowing American tax cheats with secret offshore accounts to confess them and avoid prison. In a statement, the IRS said it’s closing the program because of declining demand.

But the agency vowed to keep pursuing people hiding money offshore and said it will offer them another route to compliance.

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September 18, 2018 in IRS News, Tax | Permalink | Comments (0)

Monday, September 17, 2018

NY Governor Cuomo Calls For Inspector General To Investigate Politicization Of The U.S. Tax System

Governor Cuomo Calls for Inspector General to Investigate Politicization of the U.S. Tax System:

Call for Investigation Comes After Last Week's Egregious IRS Regulation "Clarification" Aimed at Benefitting Red States

Governor Andrew M. Cuomo today sent a letter to the Treasury Department's Office of Inspector General, calling for an investigation into the politicization of the U.S. tax system after the federal government's continued attempts to block New York's efforts to provide relief to middle class taxpayers while continuing to support programs in states that voted for President Trump. 

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September 17, 2018 in IRS News, Tax | Permalink | Comments (5)

Thursday, September 6, 2018

Death Of Former IRS Commissioner Sheldon Cohen

CohenWashington Post, Sheldon S. Cohen Dies at 91:

Sheldon S. Cohen, a tax lawyer and certified public accountant who helped set up the first presidential blind trust, for Lyndon B. Johnson, and then helped fully computerize the IRS as Johnson’s commissioner of internal revenue, died Sept. 4 at a nursing home in Chevy Chase, Md. He was 91. The cause was complications from congestive heart failure, said a grandson, Reuben C. Goetzl.

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September 6, 2018 in IRS News, Obituaries, Tax | Permalink | Comments (0)

Grewal: The New SALT Regulations Need A Few More Sprinkles

Yale Notice & CommentAndy Grewal (Iowa), The New SALT Regulations Need a Few More Sprinkles, 36 Yale J. on Reg.: Notice & Comment (Aug. 24, 2018):

My article, The Charitable Contribution Strategy: An Ineffective SALT Substitute, 38 Virginia Tax. Rev. — (2018), argues that the charitable contribution strategy fails under existing law. The article acknowledges several different argumentative paths, but the best analysis characterizes the strategy in two parts. First, the taxpayer’s transfer to the state-controlled fund should be treated as an arm’s length exchange for state tax credits. And second, the state tax credits acquired on that exchange, when applied against the taxpayer’s tax liability, should give rise to tax payments that face the Section 164 deduction limits. See id. at Part II.C.b. The Article argues that the IRS should issue regulations adopting that two-part approach.

The IRS just issued proposed regulations on the charitable contribution strategy, and I was pleased to see that they are consistent with the first part of my analysis. That is, they treat a donation to a state-controlled fund as a quid pro quo transaction for state tax credits. See Prop. Reg. § 1.170A-1(h)(3), REG-112176-18. However, the regulations do not discuss the consequences associated with the later use of state tax credits. ...

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September 6, 2018 in IRS News, Scholarship, Tax | Permalink | Comments (0)

Wednesday, August 29, 2018

IRS Clears Path For Student Loan Repayment Tied To 401(k)

Bloomberg Law, IRS Clears Path for Student Loan Repayment Tied to 401(k):

An IRS decision allowing an employer to offer a student loan repayment benefit as an element of its retirement plan could open the door to other employers interested in offering similar benefits.

The Internal Revenue Service Aug. 17 gave the go-ahead to an unnamed employer’s plan to tie 401(k) contributions to student loan repayment contributions. The private letter ruling [2018-33-012], while not precedential, likely will quell concerns from employers interested in offering a student loan benefit through their 401(k) programs, but worried about complying with the law.

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August 29, 2018 in IRS News, Tax | Permalink | Comments (0)

Friday, August 24, 2018

IRS Blocks States From Bypassing State & Local Tax Deduction Cap

Friday, August 17, 2018

Whistleblower Accuses IRS Of Tipping Off Members Of Congress In Insider Trading Ring

New York Post, Whistleblower Makes Shocking IRS, Insider Trading Allegations:

A whistleblower made this shocking allegation to me last week: the IRS was tipping off members of Congress to corporate takeovers so the elected officials could profit from insider trading.

My snitch also charged that higher-level employees of the IRS also used that information to enrich themselves.

This may sound crazy but remember: Up until a few years ago members of Congress were allowed to trade stock based on information they got while performing their public duties.

It wasn’t until 2012, during President Obama’s tenure, that the practice was banned.

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August 17, 2018 in IRS News | Permalink | Comments (10)

Wednesday, August 15, 2018

How Many Nonprofits Are There?

Nonprofit Quarterly:  How Many Nonprofits Are There?: What the IRS’s Nonprofit Automatic Revocation and 1023-EZ Processes Left Behind, by Michael Wyland:

From the middle of 2010 to the end of 2017, the IRS revoked the tax-exempt recognition of more than 760,000 nonprofit organizations for failing to file Form 990 returns. More recently, it has implemented the 1023-EZ process, which makes applying for federal tax-exempt status easier. What effect have these changes had on the numbers of nonprofits in our sector? Are there marked differences in trends vis-à-vis 501(c)(3)s and 501(c)(4)s?

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August 15, 2018 in IRS News, Tax | Permalink | Comments (0)

Tuesday, August 14, 2018

The IRS Scandal, Day 1921: Federal Judge Approves $3.5 Million Payout From IRS To >100 Tea Party Groups To Settle Targeting Claims

IRS Logo 2Washington Times, Tea Party Groups Get Revenge Against IRS as Judge Approves $3.5 Million Payout:

A judge late Wednesday signed off on the settlement between the IRS and hundreds of tea party groups, closing out the last major legal battle over what all sides now agree was unwarranted and illegal targeting for political purposes.

The IRS agreed to pay $3.5 million to groups that were wronged by the intrusive inspections, and insists it’s made changes so that political targeting can’t occur in the future.

A few issues are still being fought over in the courts — including whether former IRS senior executive Lois G. Lerner will be allowed to forever shield her deposition explaining her behavior from public view, and whether the IRS should pay attorney fees — but this week’s decision closes out five years of litigation over the targeting itself. ...

The $3.5 million closely approximates the fines the IRS would have had to pay in damages for each intrusive scrutiny of tea party groups, had the agency been found in violation of the law. The money will be split with half going to the lawyers who argued the case and the other half to more than 100 tea party groups, which will get a cut of about $17,000 each.

Judge Michael R. Barrett called the settlement “fair, reasonable and adequate.”

The settlement doesn’t actually include an admission of wrongdoing by the IRS.

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August 14, 2018 in IRS News, IRS Scandal, Tax | Permalink | Comments (8)

Thursday, August 9, 2018

 The IRS Has Rehired Hundreds of Fired Employees. Congress Should Step In.

Daily Signal, The IRS Has Rehired Hundreds of Fired Employees. Congress Should Step In.:

For one of the most punitive agencies in the federal government, the IRS sure is forgiving with its own employees.

Rep. Kristi Noem, R-S.D., has proposed a bill that would prevent the IRS from rehiring employees fired for misconduct or poor performance. The bill, titled the Ensuring Integrity in the IRS Workforce Act, follows a recent Treasury inspector general report that shows the IRS rehired more than 200 fired workers in a little over a year. A previous inspector general report proves this problem dates back to at least 2009.

According to the Treasury Department’s inspector general, the IRS did not provide officials responsible for hiring decisions with information about employment history, though that information is readily available.  ...

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August 9, 2018 in IRS News, Tax | Permalink | Comments (1)

Tuesday, August 7, 2018

ProPublica: The IRS’ Dark Money Decision May Be Less Dire Than It Seems

Pro PublicaProPublica, Why the IRS’ Recent Dark Money Decision May Be Less Dire Than It Seems:

Starting next year, the Internal Revenue Service will no longer collect the names of major donors to thousands of nonprofit organizations, from the National Rifle Association to the American Civil Liberties Union to the AARP. Democratic members of Congress and critics of money in politics blasted the move, announced last week by the Treasury Department, the IRS’ parent agency. The Democrats claim the new policy will expand the flow of so-called dark money — contributions from undisclosed donors used to fund election activities — in American politics. For their part, Republicans and conservative groups praised the decision as a much-needed step to avoid chilling the First Amendment rights of private citizens.

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August 7, 2018 in IRS News, Tax | Permalink | Comments (2)

Wednesday, August 1, 2018

Low Income Taxpayer Clinics Celebrate 20 Years Of Taxpayer Service

LITC 20th AnniversaryTaxpayer Advocate Service Blog, Low Income Taxpayer Clinics Celebrate 20 Years of Taxpayer Service:

July 22, 2018 mark[ed] the 20th anniversary of Low Income Taxpayer Clinics (LITC). Low Income Taxpayer Clinics were enacted by Congress on July 22, 1998, as part of the IRS Restructuring and Reform Act of 1998. The LITC program today consists of 134 clinics in 48 states and the District of Columbia. From 2013 to 2016, LITCs:

  • represented more than 100,000 low income taxpayers with IRS controversies; and
  • educated more than 450,000 low income taxpayers along with those for whom English is a second language about their rights and responsibilities under the tax code. ...

Pepperdine Law School is proud to offer a Low Income Taxpayer Clinic at our location on Skid Row in downtown Los Angeles at the Union Rescue Mission, led by Isai Cortez.

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August 1, 2018 in IRS News, Tax | Permalink | Comments (0)

Wednesday, July 25, 2018

IRS Chief Counsel Nominee Advised Trump On Taxes

DesmondBloomberg, IRS Counsel Nominee Briefly Advised Trump Organization on Taxes:

President Donald Trump’s nominee for chief counsel of the Internal Revenue Service briefly advised the future president’s real estate company on a tax question several years ago.

Michael Desmond counseled the Trump Organization on “a discrete reporting matter for a subsidiary company that was resolved with no tax impact,” James Wilkinson, a spokesman for Desmond, said in a written statement to Bloomberg News. Wilkinson said Desmond didn’t interact with anyone at the Trump Organization, which was a longtime client of two other partners at his law firm.

Democrats on the Senate Finance Committee have given no sign they plan to scrutinize Desmond’s Trump work at his confirmation hearing Thursday. Still, potential conflicts of interest have drawn attention under Trump, who broke with presidential tradition by refusing to release his tax returns and has mused publicly about using government agencies to punish enemies.

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July 25, 2018 in IRS News, Tax | Permalink | Comments (0)

NY Times: Montana Governor Sues IRS, Warning Of ‘Foreign Money’ In Elections:

New York Times, Montana Governor Sues I.R.S., Warning of ‘Foreign Money’ in Elections:

Gov. Steve Bullock of Montana, a Democrat who has crusaded against the loosening of campaign finance rules, is suing the Trump administration to block it from eliminating a mandate that politically active nonprofit groups disclose the identities of their major donors to the government.

The Treasury Department announced last week that the Internal Revenue Service would no longer require a range of nonprofit organizations to identify any contributors giving more than $5,000, in a move it described as bolstering privacy and easing administrative burdens for those groups. Previously, certain nonprofits had to name their large donors to the government even though they were not supposed to be disclosed to the public.

The change in rules stirred immediate political controversy because of its effect on so-called “dark money” groups, which spend money in elections but are not required to reveal the sources of their funding except to the I.R.S. Under the new reporting regime, groups associated with organizations like the National Rifle Association, Planned Parenthood and Americans for Prosperity, the conservative advocacy network backed by the billionaire Koch brothers, would no longer have to list their donors, even to the government.

But in a lawsuit filed on Tuesday in Federal District Court in Montana, Mr. Bullock and his administration alleged that the Trump administration had flouted proper government process in eliminating the disclosure requirements. The suit asked the court to issue a judgment voiding the new I.R.S. policy. ...

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July 25, 2018 in IRS News, New Cases, Tax | Permalink | Comments (0)

Friday, July 20, 2018

The IRS Scandal, Days 1801-1900

Wednesday, July 18, 2018

Treasury Department Restricts Donor Disclosure Requirement To § 501(c)(3) Groups

Treasury Department Logo (2017)Press Release, Treasury Department and IRS Announce Significant Reform to Protect Personal Donor Information to Certain Tax-Exempt Organizations:

The Treasury Department and IRS announced today that the IRS will no longer require certain tax-exempt organizations to file personally-identifiable information about their donors as part of their annual return.  The revenue procedure released today does not affect the statutory reporting requirements that apply to tax-exempt groups organized under section 501(c)(3) or section 527, but it relieves other tax-exempt organizations of an unnecessary reporting requirement that was previously added by the IRS.  

Nearly fifty years ago, Congress directed the IRS to collect donor information from charities that accept tax-deductible contributions.  That statutory requirement applies to the majority of tax-exempt organizations, known as section 501(c)(3) organizations, receiving contributions that can be claimed by donors as charitable deductions.  This policy provided the IRS information that could be used to confirm contributions to those organizations.

By regulation, however, the IRS extended the donor reporting requirement to all other tax-exempt organizations—labor unions and volunteer fire departments, issue-advocacy groups and local chambers of commerce, veterans groups and community service clubs.  These groups do not generally receive tax deductible contributions, yet they have been required to list the names and addresses of their donors on Schedule B of their annual returns (Form 990).

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July 18, 2018 in IRS News, Tax | Permalink | Comments (2)

Monday, July 9, 2018

Australia, Canada, England, Netherlands & U.S. Launch The J5: Joint Chiefs Of Global Tax Enforcement

J5Joint Chiefs of Global Tax Enforcement:

About Us
The Joint Chiefs of Global Tax Enforcement (known as the J5) are committed to combatting transnational tax crime through increased enforcement collaboration. We will work together to gather information, share intelligence, conduct operations and build the capacity of tax crime enforcement officials.

The J5 comprises the Australian Criminal Intelligence Commission (ACIC) and Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), the Fiscale Inlichtingen- en Opsporingsdienst (FIOD), HM Revenue & Customs (HMRC), and Internal Revenue Service Criminal Investigation (IRS-CI).

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July 9, 2018 in IRS News, Tax | Permalink | Comments (0)

NY Times: Government Work Done, Tax Policy Writers Decamp To Lobbying Jobs

New York Times, Government Work Done, Tax Policy Writers Decamp to Lobbying Jobs:

Six months after Republicans pushed a $1.5 trillion tax overhaul through Congress, many of the most influential players who worked behind the scenes on the legislation are no longer on Capitol Hill or in the Trump administration.

They are now lobbyists.

The two-way street between lobbying and lawmaking is well worn in Washington. But after President Trump’s campaign pledge to “drain the swamp,” there was some speculation that the so-called special interests might be sidelined. And while the frenetic two-month sprint last year to pass the tax legislation left some lobbyists marginalized, the businesses now scrambling to navigate the changes are increasingly recruiting the people who wrote it.

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July 9, 2018 in Congressional News, IRS News, Tax | Permalink | Comments (0)

Private Tax Collection Agencies Lose Money While Going After the Poor

Washington Post, Private Tax Collection Agencies Lose Money While Going After the Poor:

In its zeal to privatize important parts of the government, the Republican-controlled Congress directed the Internal Revenue Service to use private debt collectors for certain tax delinquencies, a program that began last year.

The Obama administration cautioned against the use of bill collectors before legislation authorizing the program passed in 2015. Those warnings went unheeded.

Now, the program is losing money and unfairly hitting the poor.

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July 9, 2018 in IRS News, Tax | Permalink | Comments (1)

Sunday, July 8, 2018

362,000 Americans Will Be Denied Passports Due To Unpaid Taxes

Passport IRSWall Street Journal, Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes:

At least 362,000 Americans with overdue tax debts will be denied new or renewed passports if they don’t settle these debts, the Internal Revenue Service says.

Recently IRS officials have provided new details on the enforcement of a law Congress passed in late 2015. It requires the IRS and State Department to deny passports or revoke them for taxpayers who have more than $51,000 of overdue tax debt. Enforcement began in February.

An IRS spokesman says the 362,000 people are current tax debtors who are affected by the law. The IRS is sending their names in batches to the State Department, a process the tax agency aims to finish by year’s end. A State Department spokesman confirmed that it has already denied passports to some debtors.

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July 8, 2018 in IRS News | Permalink | Comments (1)

Saturday, July 7, 2018

Ventry: Free File Providers Scam Taxpayers; Congress Shouldn't Be Fooled

IRS Free File (2018)The Hill op-ed:  Free File Providers Scam Taxpayers; Congress Shouldn't Be Fooled, by Dennis J. Ventry, Jr. (UC-Davis):

In April, the House unanimously passed the Taxpayer First Act, including a provision to codify the IRS Free File Program.

Making Free File a permanent part of the tax law would mean that the IRS and its private-sector Free File partners — organized as the Free File Alliance (FFA) and including Intuit and H&R Block — would no longer periodically renegotiate the terms and conditions of the program. 

For that reason alone — i.e., preventing the IRS from verifying that FFA companies deliver free tax filing services as promised — codifying Free File is a terrible idea. 

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July 7, 2018 in IRS News, Tax | Permalink | Comments (3)

Saturday, June 30, 2018

The IRS Releases New Postcard Form 1040

Following up on Tuesday's  post, NY Times: The New Tax Form Is Postcard-Size, But More Complicated Than Ever:  the IRS yesterday released a draft version of the new Form 1040:

1040

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June 30, 2018 in IRS News, Tax | Permalink | Comments (4)

Friday, June 29, 2018

A 'Most Serious Problem' At The IRS: Private Debt Collectors

Taxpayer Advocate (2016)National Taxpayer Advocate Blog, One Year Later, The IRS Has Not Adjusted Its Private Debt Collection Initiative To Minimize Harm To Vulnerable Taxpayers:

Since the IRS implemented the private debt collection (PDC) initiative last year, I have been concerned that taxpayers whose debts are assigned to private collection agencies (PCAs) will make payments even when they are likely in economic hardship – that is, they are unable to pay their basic living expenses. As discussed in my 2017 Annual Report to Congress, this is exactly what has been happening. The recent returns of approximately 4,100 taxpayers who made payments to the IRS after their debts were assigned to PCAs through September 28, 2017 show:

  • 28 percent had incomes below $20,000;
  • 19 percent had incomes below the federal poverty level; and
  • 44 percent had incomes below 250 percent of the federal poverty level. ...

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June 29, 2018 in IRS News, Tax | Permalink | Comments (0)

Thursday, June 28, 2018

Senate Holds Hearing Today On Charles Rettig's Nomination To Be IRS Commissioner

RettigThe Senate Finance Committee holds a hearing today on the nomination of Pepperdine Law School graduate Charles Rettig's nomination to be the Commissioner of the IRS.

Bloomberg, Trump's IRS Nominee to Face Questions on Management Experience:

President Donald Trump’s nominee to lead the Internal Revenue Service, Charles Rettig, has spent decades helping wealthy and famous people fight the agency’s efforts to collect taxes.

At a Thursday confirmation hearing, the criminal tax lawyer from Beverly Hills, California, will face questions from lawmakers about whether he’s qualified to run the IRS. Democrats will question whether he has the management skills to run an agency struggling to implement the biggest tax overhaul in a generation. ...

Rettig, 61, who has represented the estate of Michael Jackson and the creator of the "Girls Gone Wild" video franchise, probably will win the 51 votes needed for confirmation in the Republican-controlled Senate.

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June 28, 2018 in Congressional News, IRS News, Tax | Permalink | Comments (2)

Wednesday, June 27, 2018

National Taxpayer Advocate Releases Mid-Year Report To Congress

TASIR-2018-143 (June 27, 2018), National Taxpayer Advocate Identifies Priority Areas in Mid-Year Report to Congress:

National Taxpayer Advocate Nina E. Olson today released her statutorily mandated mid-year report to Congress that presents a review of the 2018 filing season, identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year and contains the IRS’s responses to each of the 100 administrative recommendations the Advocate made in her 2017 Annual Report to Congress.

The most significant challenge the IRS faces in the upcoming year is implementing the Tax Cuts and Jobs Act of 2017 (TCJA), which among other things requires programming an estimated 140 systems, writing or revising some 450 forms and publications and issuing guidance on dozens of TCJA provisions. Ms. Olson expresses confidence that the IRS will implement the law successfully. “Make no mistake about it. I have no doubt the IRS will deliver what it has been asked to do,” she writes in the preface to the report.

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June 27, 2018 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

Saturday, June 23, 2018

The IRS Scandal, Day 1869: In Meeting With Lois Lerner, McCain Staffer Requested 'Financially Ruinous' Audits Of Advocacy Groups

IRS Logo 2Washington Times, McCain's Office Urged IRS to Use Audits as Weapons to Destroy Political Advocacy Groups:

A new report from Judicial Watch reveals a concerted effort from Sen. John McCain’s office to urge the IRS under Lois Lerner to strike out against political advocacy groups, including tea party organizations.

Thanks to the results of an extensive Freedom of Information Act (FOIA) request that has been delayed for many years, Judicial Watch has obtained several key emails from 2013 that chronicle McCain’s and Democrat Sen. Carl Levin’s efforts to reign in the advocacy groups that sprouted immediately following the Citizens United decision from the Supreme Court.

The documents uncovered by Judicial Watch include notes from a high-level meeting on April 30, 2013 between powerful members of McCain’s and Levin’s staffs and Lerner, then-director of tax exempt organizations at the IRS under Barack Obama. The notes reveal the suggestions from McCain’s former staff director and chief counsel on the Senate Homeland Security Permanent Subcommittee, Henry Kerner who urges Lerner to use IRS audits on the advocacy groups to financially ruin them:

In the full notes of an April 30 meeting, McCain’s high-ranking staffer Kerner recommends harassing non-profit groups until they are unable to continue operating. Kerner tells Lerner, Steve Miller, then chief of staff to IRS commissioner, Nikole Flax, and other IRS officials, “Maybe the solution is to audit so many that it is financially ruinous.” In response, Lerner responded that “it is her job to oversee it all:”

Henry Kerner asked how to get to the abuse of organizations claiming section 501 (c)(4) but designed to be primarily political. Lois Lerner said the system works, but not in real time. Henry Kerner noted that these organizations don’t disclose donors. Lois Lerner said that if they don’t meet the requirements, we can come in and revoke, but it doesn’t happen timely. Nan Marks said if the concern is that organizations engaging in this activity don’t disclose donors, then the system doesn’t work. Henry Kerner said that maybe the solution is to audit so many that it is financially ruinous. Nikole noted that we have budget constraints. Elise Bean suggested using the list of organizations that made independent expenditures. Lois Lerner said that it is her job to oversee it all, not just political campaign activity.

Judicial Watch previously reported on the 2013 meeting.  Senator McCain then issued a statement decrying “false reports claiming that his office was somehow involved in IRS targeting of conservative groups.”   The IRS previously blacked out the notes of the meeting but Judicial Watch found the notes among subsequent documents released by the agency.

Julie Tarallo, Senator McCain's communications director, calls Judicial Watch's allegations  "outlandish conspiracy theories that are totally contradicted by the facts":

McCain

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June 23, 2018 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)