IRS 2 Internal Reven

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see main (some bad format)

merri ok

SEE THREE 4 23

see intuit turbo scam

bak 422

cleta on patriot slapback?

long linked to gubmint

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an 12 24

At least 27 House Republicans are urging President-elect Donald Trump to end the Internal Revenue Service's Direct File program as soon as he returns to the White House and begins his second term. But Direct File also has plenty of supporters, including MSNBC's Hayes Brown.

In an opinion column published on December 15, Brown argues that House Republicans have a motivation for wanting to abolish Direct File: making it more "painful" for Americans to file their taxes.

"In the fall of 2023, the Internal Revenue Service announced a pilot program that would allow some Americans to file their taxes directly to the agency — for free," Brown explains. "The Direct File service managed to go against at least a half-dozen federal government stereotypes: it was new and novel in a system that loathes change, it allowed people to be more efficient with their time, and the people who used it this past tax season had plenty of good things to say about their experience."

READ MORE:[New Kristi Noem proposal would fund Christian ‘segregation academies’

Brown adds, "In May, the IRS said the program would be expanded and made permanent. But of course, there are Republicans who would like nothing more than to strangle a popular government initiative in its cradle."

According to Brown, House Republicans who oppose Direct File believe that abolishing the program will make it easier for their party to carry out tax cuts for wealthy Americans.

"The more friction in the system, the more visible of a target the IRS becomes for average Americans," Brown explains. "The more people who are frustrated with the IRS, the better their case for cutting even more taxes for the wealthy. It also doesn't hurt to be in the good graces of massive tax preparation companies like Intuit, which have spent years and millions of dollars to ensure that filing taxes is as painful a process as possible. Among the reforms they blocked was a plan to go further than Direct File, letting many taxpayers file pre-populated forms for free."

Brown continues, "The net effect is that there's no upside to murdering Direct File ahead of tax season beyond making the federal government less responsive and useful in the eyes of Americans. Republicans can falsely claim that they're trying to save taxpayers' money from the clutches of the IRS. It's clear what they're really trying to claw back is a massive refund of Americans’ time and energy in the name of making everything a little bit worse."

READ MORE:['Trump ’28': Bannon calls for third term

*Hayes Brown's full MSNBC opinion column is available at this link.

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an 12 24

U.S. President-elect Donald Trump's nominee to run the Internal Revenue Service, former Rep. Billy Long, didn't serve on the House committee tasked with writing tax policy during his six terms in office, and his lack of relevant experience is likely "exactly what Trump was looking for," according to one economic justice advocate.

Progressive lawmakers joined advocates on Wednesday in denouncing Trump's selection of Long, who since leaving office in 2023 has promoted a tax credit that's been riddled with fraud and who spent his time in the House pushing to abolish the very agency he's been chosen to run.

As a Republican congressman from Missouri, Long repeatedly sponsored legislation to dismantle the IRS, which under President Joe Biden has recovered at least $1 billion from wealthy people who previously evaded taxes.

He also co-sponsored legislation to repeal all estate taxes, which are overwhelmingly paid by the wealthiest households, but "said almost nothing on the floor regarding taxes, the IRS, and taxation during his 12 years in Congress," said John Bresnahan of Punchbowl News.

Long's limited experience with tax policy "ought to set off alarm bells," saidSen. Ron Wyden (D-Ore.), who pointed to "vastly improved taxpayer service" under the leadership of IRS Commissioner Danny Werfel, who Biden chose to replace Trump's nominee from his first term, Charles Rettig, after Rettig served his full term.

Werfel has "set up a tremendous direct-file system, and begun badly needed crackdowns on ultra-wealthy tax cheats who rip off law-abiding Americans," said Wyden. "If Trump fires Mr. Werfel, it won't be to improve on his work; it'll be to install somebody Trump can control as he meddles with the IRS."

The appointment is likely to commence an "open season for tax cheats," said Lindsay Owens, executive director of Groundwork Collaborative.

Since leaving office, Long haspromoted the Employee Retention Tax Credit (ERTC), a pandemic-era credit that was intended to incentivize employers to continue paying workers during the economic shutdown when the coronavirus pandemic hit the United States.

He has worked to help businesses claim the credit from the IRS, but fraudulent and improper claims have so permeated the program that the IRS stopped processing new claims temporarily. The U.S. House passed a bill to entirely halt ERTC claims, but it has been stalled in the Senate.

"These ERTC mills that have popped up over the last few years are essentially fraud on an industrial scale, conning small businesses and ripping off American taxpayers to the tune of billions of dollars," said Wyden. "I'm going to have a lot of questions about Mr. Long's role in this business, first and foremost why the American people ought to trust somebody involved with a fraud-ridden industry to run an agency that's tasked with rooting out fraud."

Wyden also pointed out that Long has not been named in a "typical nomination like you'd see after every presidential election." Werfel's term was set to go until November 2027, and the IRS typically operates as a nonpartisan agency.

"Replacing Commissioner Werfel with over three years remaining in his term is a terrible mistake," said Rep. Don Beyer (D-Va.). "He has done an excellent job rebuilding the IRS, boosting customer service, and enhancing enforcement aimed at wealthy tax evaders. Removing him will clearly signal Trump's intention to make the agency less responsive to the American people, while giving a green light to wealthy tax cheats to evade their fair share of the tax burden."

"Trump's nominee has clearly stated that he wants to abolish the IRS," added Beyer. "The change Trump proposes in IRS leadership would be a gift to tax cheats and a blow to anyone who believes it is important to rein in deficits."

Sen. Elizabeth Warren (D-Mass.) added that Trump's nomination of Long signals "the weaponization of the tax agency."

"If he's confirmed," she said, "taxpayers can expect longer wait times for customer service, a more complicated process to file taxes, and free rein for the rich and powerful to continue rigging the system at the expense of everyone else."

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an 5 24

Internal Revenue Service (IRS) got an appropriation of much-needed funds to address its backlog and ramp up enforcement. And this week, the agency made it clear who it intended to target with its new resources.

CBS reported Thursday that the IRS is rolling out plans for a "new wave of audits" focused on three specific groups of federal tax filers. Thanks to the Inflation Reduction Act's $80 billion in additional IRS funding over the next 10 years, agents will now have the ability to zero in on large corporations and the super-rich. The agency is emphasizing that filers who make less than $400,000 per year — the vast bulk of ordinary Americans — will not see any increased enforcement action.

"It sets an important tone and message for complex filers, high-wealth filers, that this is our focus area," IRS commissioner Danny Werfel said.

Werfel identified three primary categories of federal tax filers who will be subjected to increased enforcement activity in the coming years: Large corporations with assets greater than $250 million, large partnerships with assets in excess of $10 million and wealthy individuals who have more than $10 million in total positive income per year.

Audit rates for large corporations, for example, will nearly from 8.8% of returns audited in 2019 to almost 23% by 2026. Over that same time period, Werfel said IRS audits will increase on wealthy partnerships from 0.1% to 1% — a tenfold increase. Its audit rate of super-rich individual tax filers is due to see a 50% increase, from 11% five years ago to 16.5% in the next two tax years.

"There is no new wave of audits coming from middle- and low-income [individuals], coming from mom and pops," Werfel emphasized. "That's not in our plans."

The IRS commissioner also insisted that fears over a supposed armed force of 87,000 new IRS agents over the next decade were overblown and mischaracterized. Werfel told CBS that "any lingering myths about a supersized IRS" were untrue, as the new hires were meant to account for attrition. In recent years, the agency has been experiencing an exodus of agents due to retirement, and has not had the funding to replace them until recently. He added that even with the new agents joining the IRS, its staff numbers were still far lower than they were in the 1980s and 1990s.

Earlier this year, funding woes within the IRS were highlighted in a Washington Post report about the agency being unable to catch up with wealthy individuals who had gone for several years without filing any tax returns. According to the Post, there were roughly 25,000 taxpayers who made more than $1 million in income who hadn't filed a federal tax return in at least one year between 2017 and 2022. An estimated 100,000 other filers making at least $400,000 also didn't file a return over that five-year window.

In those instances, the IRS sends a notice of a missed return, prompting a taxpayer to either file one voluntarily or have the agency file one on their behalf. In the latter instance, the agency has the ability to assess a federal tax payment and levy the payment directly from an individual's bank account if they still refuse to send a payment.

"When people don’t file their taxes, they need to know there’s a consequence," Werfel said.

*Read CBS' full report by clicking here

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MMA 4 23

Fox News pundits warned its viewers that expanded funding for the Internal Revenue Service passed by Democrats last year would create a dystopian armed force that would be “at war” with Republicans. In reality, the funding enables the agency to hire workers to man its tax preparation hotline phones, dramatically reducing wait times this tax season – but House Speaker Kevin McCarthy still made pulling the funding a priority in the hostage demands he issued on Wednesday for raising the debt ceiling.

Fox retains its audience by keeping them alternately terrified and enraged about the state of U.S. politics. Its propagandists regularly catastrophize over Democratic politicians and the purported impact of their policies, real or imagined. But even by those standards, Fox’s commentary last year about the roughly $80 billion in funding for the IRS that was included in the Inflation Reduction Act was uniquely deranged and irresponsible.

Fox’s star host Tucker Carlson, for example, posited in August that Democrats were “hiring another 87,000armed IRS agents” with the funds “just to make sure that you obey,” a demagogic mash-up of a pair of right-wing falsehoods. Carlson depicted the move as part of President Joe Biden’s “war on his own population” which targets “Trump voters” with “acts of aggression and hostility.”

Carlson’s conspiracy theories were part of a Fox campaign of toxic rhetoric against the IRS, as I noted at the time:

Fox pundits have described the potential wave of IRS hiring as an “economic, financial militiaagainst regular people” deployed by those who “want to control you”; a“new army” that will “hunt down and kill middle class taxpayers”; a “new Gestapo” Biden will use in an “abusive, corrupt manner”; “a Praetorian Guard that will be unleashed again” to “grab all the cash they can by any means necessary”; and “part of an orchestrated campaign to target Americans and have the federal government be at war with those Americans.”

Overheated commentary from right-wing pundits and politicians triggered concerns of potential violence against IRS employees. But the dire predictions of the Fox crew never materialized. In reality, the increased funding led to an 85% reduction in the time taxpayers waited to speak to a representative this tax season, The Wall Street Journal reported Tuesday:

The agency answered 2.4 million more taxpayer phone calls with live assistance this year through April 7, compared with the same period last year. And wait times fell to four minutes, down from a sitcom-length 27 minutes a year ago.

“We made a quantum leap this year,” IRS Commissioner Danny Werfel said Monday, on the eve of tax day, citing the $80 billion funding Congress provided last year. One of the first moves to transform the tax agency was hiring thousands of customer-service representatives to answer the phones.

How much has customer service improved? The IRS says its representatives answered nearly nine out of 10 calls, compared with less than two out of 10 calls last year.

The IRS also revealed earlier this month a 150-page plan for using the rest of the funds, which includes additional improvements in customer service and technology as well as additional enforcement targeted at large corporations and taxpayers who make more than $400,000 annually.

Fox’s paranoid IRS conspiracy theories provide the GOP with cover for its bog-standard policy preferences. Republican politicians want to ensure that rich people are able to get away with cheating on their taxes and that everyone else goes through a filing process that is as excruciating as possible to reduce public support for higher taxes and tax enforcement.

After Republicans won control of the House, the first bill they passed repealed the IRS funding boost.That legislation was dead on arrival in the Senate, which Democrats retain, and would be vetoed by Biden. But the GOP hasn’t given up hope on helping tax cheats and hurting normal taxpayers – when McCarthy put forward his demands for what House Republicans required as their price for raising the debt ceiling and avoiding a global financial catastrophe, a sizable IRS funding cut was included.

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an 2 23

United States Congressman Jamie Raskin (D-Maryland) on Wednesday blasted House Republicans over their opposition to improving the Internal Revenue Service, which has been plagued by staff shortages and antiquated technology.

"Thank you, Mr. Speaker. They complain about delay at the IRS, and then they oppose funding to assist the overwhelmed workforce at the IRS, which is staggering under the weight of all of these obligations," Raskin said.

GOP lawmakers have proposed legislation aimed at ending President Joe Biden's COVID-19 emergency powers and vaccine mandates for federal employees. Representative James Comer (R-Kentucky), the House Oversight Committee chair, argued that "Biden's unnecessary expansion of telework has crippled the ability of agencies to get their jobs done." Comer further stated that telework has "created massive backlogs," adding that "seniors have experienced delays with the Social Security Administration, American taxpayers have struggled to get help from the IRS during tax filing season and veterans have been unable to access the records."

Raskin noted in his floor speech that Comer has not provided any evidence to support his assertions.

"So, you know, this is the first time I've heard that telework was the source of the problem,but apparently that's what it is this week. Of course, we haven't had a real hearing, so we've had no witnesses on it. So somebody has apparently just dreamed that up. It's just been linked to the debt ceiling," he said. Raskin also knocked Republicans for their hypocrisy regarding that very issue.

"Interesting that my colleagues on the other side of the aisle voted to lift the debt ceiling three different times under Donald Trump, who increased the debt of the United States by single-handedly by more than 20 percent," he recalled. "All of the debt of the United States under one president – more than 20 percent."

Watch below or at this link.

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see BBB--> IRA ~ 118th; 30% tax on all?!

an 1 23

it's only been two weeks since Rep. Kevin McCarthy (R-Calif.) was elected House Speaker and already, CNN is taking swift action to correct inaccurate claims he's shared.

On Tuesday, January 24, CNN's Don Lemon aired a brief clip of the top-ranking Republican lawmaker's remarks about the debt ceiling.

In the clip, McCarthy could be heard saying, "Listen, when Trump was president and Nancy Pelosi was speaker, they became a debt ceiling agreement. And it was a cap agreement for two years to cap the spending and make those decisions."

Lemon turned the segment over toCNN Daniel Dalewho broke down the claims and pushed back against McCarthy's arguments.

"John McCarthy is wrong in two ways here. First of all, House Republicans didn't actually repeal anything they did vote to repeal. They passed a bill to repeal more than 70 billion in new IRS funding," Dale explained. "But that bill is not going to get through the Senate or President Biden. So they have not changed the law. Second of all, this frequent Republican talking point you hear about how Democrats are hiring 87,000 new IRS agents is just not true. It's an exaggeration.

He went on to discuss President Joe Biden's legislation to combat inflation.

"The inflation reduction act that Biden signed into law last year includes 80 billion in additional funding for the IRS that will very possibly allow the IRS to hire tens of thousands of additional employees," he said. "But not even close to all these employees, Don, will be agents. The people who conduct audits and investigations sometimes frighten people. Non-agents make up the vast majority of the IRS workforce."

He continued, "And many of the newly hired employees we know will be in things like customer service and operations in it. And experts tell us that many of the new hires will be making up for attrition filling posts left by tens of thousands of retirements departures, not taking newly created jobs."

Dale added, "So the image McCarthy and other Republicans are trying to conjure, Don, of this army of 87,000 new agents coming to get you is not based on the facts."

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https://www.mediamatters.org/fox-news/fox-news-pushed-falsehood-inflation-reduction-act-hires-87000-new-irs-employees-more-200 times

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8 22

https://www.alternet.org/2022/08/gop-rumors-irs/

An official from the U.S. Treasury Department confirmed Friday that, contrary to the unrelenting barrage of lies repeated by GOP operatives for over a week, the Internal Revenue Service is not going to hire 87,000 new agents to harass working people at their homes.

Not a single Republican in the House or Senate voted for the Inflation Reduction Act (IRA) that was passed through the filibuster-proof budget reconciliation process last week and signed into law by President Joe Biden on Tuesday, choosing instead to condemn the package's relatively modest but popular tax reforms.

Despite analysts' predictions that the 98.2% of U.S. households with annual incomes of $400,000 or less will receive the same tax bill or a slight cut as a result of the IRA, [plus study for free file] far-right lawmakers have sown disinformation about how the law's provision of roughly $80 billion in new IRS funding over 10 years—money intended to help the agency crack down on rich tax cheats—poses a threat to every American.

Last week, Rep. Lauren Boebert (R-Colo.) went so far as to claim that Democrats are "using the power of the federal government for armed robbery!" Rep. Marjorie Taylor Greene (R-Ga.) has made similar allegation:(style="background-color:#ff9900ff"):}::{s.

It's not just fringe members of the GOP who are spreading such falsehoods. One day before Boebert's tirade, House Minority Leader Kevin McCarthy (Calif.), the highest-ranking Republican in the lower chamber, tweeted, "Democrats in Washington plan to hire an army of 87,000 IRS agents so they can audit more Americans like you."

On Wednesday, Florida Gov. Ron DeSantis—currently a top contender, along with former President Donald Trump, to be the Republican Party's 2024 nominee for the White House—called hiring 87,000 IRS agents "a middle finger to the American public," making clear that he would prefer more "might at the border."

Where does this oft-repeated number of IRS agents come from?

"The 87,000 figure does exist, buried within a May 2021 Treasury Department report when the Biden administration was pushing a bigger spending bill with the same $80 billion IRS funding," Reuters noted Friday. "The report estimated the money could fund 86,852 full-time hires through 2031."

But the actual net increase in staff would be much lower, as the IRS expects more than 50,000 aging Baby Boomer employees to retire over the next half-decade.

In addition to an unspecified number of new revenue agents—there were 8,321 in fiscal year 2021—the agency is looking to hire tens of thousands of new information technology specialists and customer service personnel who can create a user experience more akin to online banking, Natasha Sarin, Treasury counselor for tax policy and administration, told Reuters.

There are 2,100 special agents in the IRS Criminal Investigation branch who are authorized to carry firearms, but right-wing assertions that all 87,000 new hires would be auditors, criminal enforcement agents, or armed are "deeply dangerous nonsense—and false," said Sarin.

"The speed and voracity with which [Republicans] are coming at this is really a testament to how important these resources are going to be—because there are many wealthy tax evaders that stand to lose a lot," Sarin continued.

The GOP's intentionally misleading attacks come after a decade of budget cuts approved by congressional Republicans left the IRS with 16,000 fewer employees in 2021 than it had in 2010.

As ProPublica has documented, the IRS now audits low-income taxpayers at the same rate as the top 1%, but that is a direct result of years of austerity, which have undermined the agency's ability to audit the rich.

The IRA's boost in IRS funding aims to rectify this injustice and to begin closing an estimated $600 billion annual "tax gap"—the difference between taxes paid and owed—by strengthening enforcement against the complex avoidance strategies used by the wealthy, especially those with murky sources of income.

New information technology hires will develop "tools to identify more high-end audit targets," Reuters reported. "To target wealthy taxpayers and handle sophisticated audits, Sarin said the IRS needs mid-career individuals with accounting and often tax law experience."

The Congressional Budget Office estimates that the increase in IRS funding will raise $204 billion in additional revenue over 10 years, while the Treasury projects that the real revenue impact will likely be $400 billion over a decade—a substantial portion of the IRA's climate and healthcare spending.

Earlier this week, Treasury Secretary Janet Yellen instructed IRS Commissioner Charles Rettig—a scandal-plagued Trump appointee who spent decades battling the agency—to submit an $80 billion spending and hiring plan within six months. Yellen previously directed the agency not to use any new resources to increase audits of people making less than $400,000 per year.

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Following the Federal Bureau of Investigation (FBI) search of former President Donald Trump's Mar-a-Lago estate, Republican lawmakers are reportedly looking to shift the focus from the relentless Trump-centric news cycle.

According to HuffPost, Republicans are responding to the search on Trump's property by criticizing an unrelated topic: The Internal Revenue Service (IRS). Per the news outlet, Republican lawmakers are "desperate to change the subject to something else ― anything else" and are now focused on "pushing an extremely weird and false talking point: Tens of thousands of tax collectors are coming for you."

On Monday, August 8, Sen. Ted Cruz (R-Texas) shared his reaction via Twitter as he pivoted to concerns about the IRS. “The FBI raiding Donald Trump is unprecedented,” he tweeted. “The Biden Admin has fully weaponized DOJ & FBI to target their political enemies. And with 87K new IRS agents, they’re coming for YOU too.”

Sen. Ron Johnson (R-Wisc.) also tweeted his complaints about the United States justice system as he shared his disapproval of the IRS. “One more example of our two-tiered system of justice,” tweeted Johnson. “Who do you think they’ll weaponize the 87,000 IRS agents against? The answer is obvious. Their political enemies.”

On Tuesday, Rep. Kat Cammack (R-Fla.) tweeted to criticize Democrats' passing of new legislation to provide funding for more than 80,000 agents.

“Senate Democrats just passed their insane tax-and-spend package, which includes funding for more than 87,000 new IRS agents — more than State, DoD, and CBP combined,” Cammack tweeted. “This nonsense +wild weaponization of the FBI + Democrats’ inflation, crime, border crises = @HouseGOP landslide.”

Rep. Jim Banks (R-Ind.) also warned American citizens about the IRS and Rep. Lauren Boebert (R-Colo.) echoed a similar sentiment. "If the FBI can raid the home of a former US President, imagine what 87,000 more IRS agents will do to you,” tweeted Banks.

“The same Democrats cheering on the FBI raiding President Trump’s house are trying to give the IRS 87,000 new agents and an additional $80 billion,” tweeted Boebert. “And we’re supposed to believe they won’t alsoweaponize the IRS?”

Sen. Rand Paul (R-Ky.) and Sen. Marco Rubio (R-Fla.) also expressed frustration as news about the FBI's search continued to circulate online.

“The @FBI raid on President Trump was approved by Director Wray, who also claimed that the illegal FISA warrants used to spy on Trump were constitutional,” said Sen. Rand Paul (R-Ky.), who voted in favor of confirming FBI Director Christopher Wray. “Today’s raid is outrageous and unjust, but predictable.”

“Using government power to persecute political opponents is something we have seen many times from 3rd world Marxist dictatorships. But never before in America,” tweeted Rubio.

Rep. Diana Harshbarger (R-Tenn.) also argued that the FBI's actions were an example of "inconsistent and partisan" action. “The inconsistent and partisan application of the law by the FBI has gone too far,” argued Harshbarger. “The Democrats, for too long, have used our government agencies from the FBI to the IRS to target their political opponents.”

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https://www.alternet.org/2022/08/jamie-raskin/

pro pub

Forty members of Congress on Monday asked the IRS and the Treasury to investigate what the lawmakers termed an “alarming pattern” of right-wing advocacy groups registering with the tax agency as churches, a move that allows the organizations to shield themselves from some financial reporting requirements and makes it easier to avoid audits.

Reps. Jared Huffman, D-Calif., and Suzan DelBene, D-Wash., raised transparency concerns in a letter to the heads of both agencies following a ProPublica story about the Family Research Council, a right-wing Christian think tank based in Washington, D.C., getting reclassified as a church. Thirty-eight other lawmakers, including Reps. Adam Schiff, D-Calif., Debbie Wasserman Schultz, D-Fla., Rashida Tlaib, D-Mich., and Jamie Raskin, D-Md., signed onto the letter.

“FRC is one example of an alarming pattern in the last decade — right-wing advocacy groups self-identifying as ‘churches’ and applying for and receiving church status,” the representatives wrote, noting the organization’s policy work supporting the overturning of Roe v. Wade and its advocacy for legislation seeking to ban gender-affirming surgery.

“Tax-exempt organizations should not be exploiting tax laws applicable to churches to avoid public accountability and the IRS’s examination of their activities,” they wrote.

The Family Research Council did not respond to requests for comment. The IRS told ProPublica that it does not comment on congressional correspondence.

The FRC’s website describes the organization as “a nonprofit research and educational organizationdedicated to articulating and advancing a family-centered philosophy of public life,” noting that it provides “policy research and analysis for the legislative, executive, and judicial branches of the federal government.”

The FRC sought and received reclassification from a standard tax-exempt charity to an “association of churches” in 2020.

In its application for church status, the organization said it met 11 of the 14 characteristics that the IRS uses to determine whether an organization is a church, including an established place of worship — a chapel in the organization’s Washington office building, at which it said it holds services attended by more than 65 people. (Someone who answered the phone at the office said the group doesn’t offer church services.)The organization said its association comprises nearly 40,000 “partner churches” that must affirm a statement of faith to join; it did not offer the names of those partners on its form to the IRS or provide them to ProPublica.

The representatives’ letter asks the IRS to review the FRC’s status change and to examine its review process for organizations similarly seeking to switch their status to become a church or association of churches.

“It’s disturbing that a letter like this is even necessary,” Huffman said. “Unfortunately our IRS has been so worn down and beaten up by the right wing that they have essentially ceased all scrutiny of organizations that self-report as churches.”

The IRS classifies churches and associations of churches as tax-exempt charitable organizations, meaning that they do not have to pay federal taxes and that donors can deduct contributions from their own taxes.However, churches are exempt from submitting Form 990, the annual financial disclosure that nonprofit organizations use to list board members, key staffer salaries, large payments to independent contractors and grants given by the organization.

And unlike for other tax-exempt organizations, a high-level Treasury official must sign off on any audit of a church.

“We understand the importance of religious institutions to their congregants and believe that religious freedom is a cherished American value and constitutional right. We also believe that our tax code must be applied fairly and judiciously,” Huffman and DelBene wrote.

In their letter, the representatives asked for feedback from the IRS on whether it needs additional direction from Congress to enforce rules surrounding tax-exempt organizations and churches. Huffman said that he hopes to pursue legislative action if the IRS isn’t able to address these concerns, but that the letter is a first step.

“You need to start here — give the agency a chance to clean up its mess,” he said.

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holy trickydick Batman!

In a column for MSNBC, the former assistant director for counterintelligence at the FBI claims something stinks about reports that former FBI directorJames Comey and former FBI deputy director Andrew McCabe were each subjected to a rare and intrusive IRS audits after falling out of favor with Donald Trump.

According to New York Times report, the two high-ranking officials who were ousted by the former president were on the receiving end of rarest of all tax audits jokingly known as "an autopsy without the benefit of death,” and the fact that Trump loathed both men for not buckling to his demands should set off red flags about political manipulation.

In his column Frank Figliuzzi pointed out: "There were almost 153 million individual returns filed for 2017, and the IRS selected only 5,000 for this most comprehensive of audits — that’s about one return out of every 30,600. If that’s not 'random' enough for you: McCabe’s attorney was audited, too."

According to the former FBI man, Trump has often made mention of rogue federal employees doing political dirty work and that should be taken as a clue that something is rotten in the IRS.

"During Trump’s administration, we heard him endlessly rant about a so-called 'deep state' of federal employees buried deep within government agencies and intent on using their positions to do him harm. What we really need to know is the extent to which Trump appointees and loyalists who abused their positions may still be in government and still working on behalf of a former president instead of working for the American people," he wrote before focusing on current IRS commissioner Charles Rettig -- h who happens to be a Trump appointee.

Lauding the IRS announcing an inspector general investigation, Figliuzzi suggested Rettig should be taken off-duty until the inquiry is completed.

"Rettig should be walked out of his office — now. At a minimum, he should be suspended pending the Inspector General inquiry.If the IG determines anyone at IRS violated the law, there should be a criminal referral and a swift prosecution," he wrote. "Congress too must open an investigation into what transpired with these highly invasive audits and plug any gaps identified in a program that may well have been misused to target Americans."

Conceding it might all be an extraordinary coincidence, he added, "...a potential abuse of a system that touches every American’s life is a matter that goes beyond Trump and his own penchant for vengeance. Americans need to trust that their government will not turn its full punitive powers against them simply because they incurred the wrath of a president. If not, this will someday happen again – and we’ll all be wondering how we ignored the lightning strikes that set our democracy ablaze."

You can read more here.

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several have noted IRS hamstrung to go after pluto but

2x audits of poor

https://www.alternet.org/2022/04/irs-audits-of-poor-americans/

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https://www.alternet.org/2022/04/propublica-nobody-actually-knows-rich/

eries: The Secret IRS Files

Inside the Tax Records of the .001%

Periodically, we get a glimpse into the financial lives of the ultrarich. A pro athlete signs a huge contract, a tech CEO sells a boatload of shares in their company, or a billionaire heir unloads a Manhattan penthouse. Based on these nuggets of information, the media speculates as to how much income the rich might bring in every year. But nobody actually knows.

Thanks to an analysis of its unprecedented trove of IRS data, ProPublica is revealing the 15 people who reported the most U.S. income on their taxes from 2013 to 2018, along with data for the rest of the top 400.

The analysis also shows how much they paid in federal income taxes — and it demonstrates how the American tax system, which theoretically makes the highest earners pay the highest income tax rates, fails to do so for the people at the very top of the income pyramid. The top 400 earners pay noticeably lower tax rates than the merely rich; and, if you include payroll taxes, a married couple making $200,000 a year could end up paying higher tax rates than a person making $200 million a year. (The full analysis is here; it includes selected names beyond the top 15.)

Names That Won’t Surprise You

Scan the names on the list of the top 15 income earners and you’re certain to recognize several names — or at least the names of the companies they founded. Bill Gates hasn’t been involved in the day-to-day operations of Microsoft for over a decade, yet he still earned the most during the years we studied, reporting an average yearly income of $2.85 billion — and an effective federal income tax rate of 18.4%. Steve Ballmer, his former colleague, is also a well-known public figure, both for his time as Microsoft CEO and his current ownership of the Los Angeles Clippers NBA team. Ballmer’s average annual reported income of $1.05 billion landed him in the 10th spot on the list, and his effective federal income tax rate was 14.1%. The other side of the PC/Mac wars is represented here by Laurene Powell Jobs, widow of Apple founder Steve Jobs. Her average reported income of $1.57 billion ranked fifth-highest; she paid an effective tax rate of 14.8%. (ProPublica sought comment from everyone mentioned in this article. Nobody disputed the numbers cited here. Unless otherwise noted, representatives for people named in this article either declined to comment, declined to comment on the record or did not respond to requests for comment.)

Another well-known billionaire sits just below Gates on the list: Media and tech mogul and former New York City mayor Michael Bloomberg, with an average reported income of just over $2 billion, paid an effective income tax rate of 4.1%, by far the lowest rate among the top 15. (A spokesperson told ProPublica for an earlier article that Bloomberg “pays the maximum tax rate on all federal, state, local and international taxable income as prescribed by law,” and cited Bloomberg’s philanthropic giving.)

The presence of Amazon founder Jeff Bezos — either the first- or second-wealthiest person in America, depending on the day — won’t shock most people, but Bezos’s annual reported income during these years of $832 million put him only at number 15. He paid an effective tax rate of 23.2%; as we’ve previously reported, Bezos had so little income in a couple of recent years that he was able to pay $0 in federal income taxes in those periods.

Who Are These Others and Why Are They Paying Higher Tax Rates?

Tech billionaires dominate the top 15, but hedge fund managers account for a full third of the names on this list, and some of their incomes were just as huge. Most of them paid relatively high effective tax rates, especially compared to most of the tech sector representatives. Hedge fund managers often make their money through short-term trades, which are taxed at a much higher rate than when tech titans cash in on long-term investments.

The highest-earning hedge funder is Ken Griffin, founder of the Chicago-based firm Citadel. From 2013 to 2018, he reported an average income of nearly $1.7 billion, putting him fourth on the list. Griffin paid a tax rate of 29.2% during these years. (A spokesperson for Griffin said the tax rates in the IRS data “significantly understate” what Griffin pays, because they were lowered by charitable contributions and do not reflect local and state taxes. He also said Griffin pays foreign taxes, which aren’t included in IRS calculations of effective tax rate.)

Israel Englander, co-founder of Millennium Management, paid at a 30.8% rate, while the co-founders of Two Sigma Investments, David Siegel and John Overdeck, paid tax rates of 31.6% and 34.2%, respectively.

Some of this variation in rates reflects how people structure their businesses under tax law. Income earned by publicly traded corporations is taxed at the company level. When it’s passed on to big shareholders, such as tech billionaires, it can come in the form of dividends, which are taxed at lower rates than ordinary income. By contrast, the income from some manufacturing companies and hedge funds flows directly to company owners, who pay taxes on it, resulting in higher effective tax rates on average.

Where Are the Heirs?

Lists of the world’s wealthiest individuals are always heavily populated by heirs, ranging from descendents of old money to scions of more recently minted fortunes. Dozens of heirs made ProPublica’s list of 400 biggest income earners. Descendents and relatives of Sam Walton, founder of Walmart, claim 11 spots.

The DeVos family, heirs to the Amway fortune, also have multiple members in the top 400. Perhaps the best known is Betsy DeVos, who served as U.S. secretary of education during the Donald Trump administration. With a reported annual income of $112 million, she was the 389th-highest earner in this period.

Much like the tech titans who top the list, most of these heirs get their income from dividends or long-term investments, which are taxed at a lower rate. Their effective tax rates ranged from as low as 10.6% for Betsy DeVos to a high of 23% paid by Walmart heir Tom Walton.

Don’t Forget the Deductions

Another key way that some top earners reduced their tax liability was to claim significant deductions, often in the form of large charitable contributions. This is particularly true for wealthy investors who are able to make their donations with shares of stock. Thanks to a generous provision of the tax code, they can then deduct the full value of the stock at its current price — without having to first sell it and pay capital gains tax.

Michael Bloomberg achieved a tax rate of 4.1% from 2013 to 2018 by taking annual deductions of more than $1 billion,mostly through charitable contributions. From 2013 to 2017, he also wrote off an average of $400 million each year from what he’d paid in state and local taxes. The 2018 tax overhaul limited that deduction to $10,000 — but also introduced a huge new deduction for pass-through companies that Bloomberg benefited from.

Wait — What About the Celebrities?

The earnings of actors, musicians and sports stars are a subject of nonstop scrutiny in the media, yet few celebrities cracked the list of the top 400 earners, which would have required them to report annual incomes of at least $110 million.

ProPublica’s trove has data on many celebrities. One who came close to the top 400 is basketball superstar LeBron James, who averaged $96 million a year in reported income. Grammy-winning singer Taylor Swift also came within reach of the top 400, averaging $82 million in reported income during these years. Actor George Clooney would have had to double his average income of $55 million to crack the top 400.

THE TOP 15

Here are the details on the top 15 income earners. Read the full analysis of the top 400 here.

For the full list of America’s top 400 income earners and their tax rates, along with our methodology, click here.

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https://www.alternet.org/2021/05/gop-slammed-for-gutting-the-irs-and-using-it-for-their-own-agenda/

The Republican Party is responsible for gutting the U.S. (IRS) and shaping it into a government entity that works in favor of the wealthy, according to a new op-ed.

Mother Jones senior editor Michael Mechanic highlighted the history of Republican lawmakers' subtle and persistent attacks on the IRS over the last three decades. He noted that the most blatant attacks began in 1994 when Republican lawmakers began "chipping away at its resources and enforcement abilities even as mainstream Republican lawmakers and candidates called for the agency's abolition."

Since Republicans' war against the IRS has been decades in the making, the federal agency has been stripped of many of its resources needed to conduct thorough investigations of the ultrarich. Now, Biden administration officials are moving to restore the agency with a massive $80 billion investment over the next 10 years. While the investment will be costly, it could ultimately yield more than $700 billion for the U.S. Department of the Treasury.

The IRS overhaul comes several years after the number of high-end audits increased under former President Barack Obama's administration. Around that time, Republican lawmakers were angered by the passing of the Affordable Care Act and the taxation it imposed on the ultra-rich. In fact, opposing lawmakers fired back with scathing reactions to the bill.

During a 2015 hearing, Rep. Mike Kelly (R-Pa.) sounded off on John Koskinen who served as IRS commissioner under the Obama administration. When Republican lawmakers worked to cut the IRS budget even more, Koskinen hit back in defense of his employees who would be required to "do less with less," as he described the strict budget cuts as "a tax cut for tax cheats."

Kelly insisted that his complaints would only make the situation far worse in the long run. Unfortunately, his words were ultimately true. From 2010 to 2018, the IRS faced nearly $3 billion in additional cuts even as it received a 9% increase in tax returns.

Subsequently, the publication notes: "Investigations of non-filers plummeted and the amount of outstanding tax debt the IRS formally wrote off (based on the 10-year statute of limitations for collections) more than doubled—from less than $15 billion in 2010 to more than $34 billion in 2019."

The deep financial cuts have also led to a domino effect of other issues. According to the Treasury Department's Inspector General for Tax Administration's 2020 report, "nearly 880,000 'high income' non-filers from 2014 through 2016 still owed $46 billion, and the IRS was in no condition, resource-wise, to collect. The 300 biggest delinquents owed about $33 million per head, on average."

FROM YOUR SITE ARTICLES

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https://www.alternet.org/2020/12/jerry-falwell-jr-2649629904/

with the inauguration of President-elect Joe Biden less than a month away, the Christian right is in mourning. A major ally of far-right white evangelicals, President Donald Trump, is leaving the White House — and even though Biden is known for being a devout Catholic, he isn't nearly as friendly to the Christian Right's theocratic agenda. Journalist Maggie Severns, in an article published by Politico on December 22, discusses Trump's alliance with former Liberty University President Jerry Falwell Jr. — who, according to Severns, was free to spend millions of dollars on his political activity thanks to an executive order from Trump.

"Former Liberty University President Jerry Falwell Jr.'s decision to spend millions of university dollars on Republican political causes followed an executive order by President Donald Trump directing the Internal Revenue Service to avoid, whenever possible, investigating religious organizations veering into politics," Severns explains. "Trump issued the order in 2017. The following year, under Falwell's leadership, the university directed more than $3 million to conservative organizations."

Severns' December 22 article follows a December 14 article for Politico in which she discussed the millions of dollars that Falwell Jr. spent promoting Trump and his causes at Liberty University.

Falwell Jr. is the son of the late Jerry Falwell Sr., founder of Liberty University and co-founder of the Moral Majority. The elder Falwell, who died in 2007, was an outspoken segregationist during the 1950s and 1960s and vigorously defended Jim Crow laws from the pulpit — and during the 1980s, he played a major role in the prominence that far-right white evangelicals and the Christian right movement achieved in the Republican Party.

New: Trump discouraged the IRS from investigating religious organizations. Then Jerry Falwell Jr. and Liberty Unive… https://t.co/rO3MQbPucH

— Maggie Severns (@Maggie Severns)1608734488.0

Trump went out of his way to pander to the Christian right when he ran for president in 2016 — and it worked. Trump is wildly popular among Christian right evangelicals, and Falwell Jr. has been among his closest allies.

Severns, in her December 22 article, notes that Falwell, Jr.'s pro-Republican activities "appear to push the boundaries of the university's non-profit status, particularly given that the law explicitly bans nonprofits from assisting political candidates under a provision called the Johnson Amendment, named after former President Lyndon Johnson, who sponsored it in the Senate."

The Politico reporter notes that "under Falwell's leadership, the university directed more than $3 million to conservative organizations" in 2018 — and "in 2019, it created a think tank that purchased Facebook ads featuring Trump's image and the slogan 'Pray For Our President,' produced a podcast that amplified Trump's claims of a stolen election, and recently staged a strategy session for the 2021 elections that featured only Republican politicians."

According to Severns, "Trump's administration furthered the IRS' already hands-off approach to monitoring churches and other religious nonprofits to the point that enforcement now appears to be nearly nonexistent, giving Liberty and other groups new opportunity to test boundaries they couldn't have in the past."

Brendan Fisher, director of the Watchdog group the Campaign Legal Center, told Politico, "For someone like Falwell, who was eager to use tax-exempt resources to engage in politics, it may have given the green light. It's a correlation, but it certainly seems like you can draw a line between the executive order and Liberty ramping up its political activity in the years following it."

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Friday, December 4, 2020

Contact: David Armiak, david@prwatch.org

MADISON, WI – The Center for Media and Democracy (CMD) filed a lawsuit against the Internal Revenue Service (IRS) in federal court on Thursday, December 4, 2020, for illegally withholding tax documents for five right-wing funders.

CMD filed the complaint after exhausting every option to obtain grant lists from tax filings from the IRS, and argues that the agency’s actions have violated the Administrative Procedure Act and the Freedom of Information Act (FOIA).

In June 2020, CMD submitted a FOIA request seeking missing Part XV, “Grants and Contributions Paid During the Year or Approved for Future Payment,” from 23 tax returns from the nine right-wing funders. In October 2020, the IRS produced some of the attachments without explanation in a response to CMD, but not all. A few days later, CMD received another letter from the IRS stating that, “the Disclosure Specialist properly denied your requests.”

CMD is filing suit to obtain the Part XV section for the following:

Asness Family Foundation (2016 990 Form, 2017 990 Form, 2018 990 Form)
Barbara and Barre Seid Foundation (2016 990-PF Form, 2018 990-PF Form)
Dunn Foundation (2014-PF Form)
Fidelity Charitable Gift Fund (2013 990 Form, 2014 990 Form, 2015 990 Form)
The Randolph Foundation (2018 990-PF Form)

CMD’s December 3 lawsuit follows an April 20 lawsuit against the IRS for failing to produce 2018 tax records for 18 right-wing groups that it claimed did not exist. In May, the IRS informed CMD’s counsel, Courtney T. DeThomas from Davis Wright Tremaine LLP, that it would not contest CMD’s request for records and provided all but one of the filings. “The IRS’s response to CMD’s FOIA requests points to a pattern of arbitrary and capricious procedural dodges that undermines the core principles of government transparency that are enshrined in the law,” said Ms. DeThomas.

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https://theintercept.com/2020/02/15/dark-money-irs-reporting-501c

DARK MONEY GROUPS backed by foreign corporate donors are supporting the Trump administration’s decision to roll back one of the last remaining ways for authorities to monitor the flow of unlawful campaign cash in American elections.

In recent years, 501(c) nonprofits have become the entities of choice for secret campaign spending.These nonprofit groups, which do not have to report any donor information to the public, can receive unlimited contributions from any source and, thanks to the Supreme Court’s 2010 Citizens United decision, spend unlimited amounts on elections.

Foreign spending, whether by a foreign national or a foreign-owned corporation, is still illegal under federal law. But the law has been poorly enforced, and the few instances in which penalties have been applied in recent years have come in reaction to publicly reported foreign corporate spending to Super PACs, such as The Intercept’s reporting on Chinese corporate donations in 2016 and the recent federal indictment over a shell company owned by a Russian national that gave to President Donald Trump’s Super PAC in 2018.

The one check on foreign contributions to dark-money groups has been the Schedule B form, which reports 501(c) donor information confidentially to the Internal Revenue Service. Under a new rule proposed last September by the Treasury Department and the IRS, nonprofits will no longer be required to report donor information, even to the government, allowing an unprecedented level of secrecy.

Lobbyists for foreign-funded groups have pushed the administration to move forward with the rule, which is close to being finalized. The U.S. Chamber of Commerce, the largest business lobby organization in the world, spent over $10 million to influence the last 2018 midterm election cycle using its general fund. The group, which has foreign corporate donors, has lobbied in support of the IRS rule to repeal the Schedule B requirement, claiming in a letter to officials that the accidental leak of donors could reduce corporate free speech rights.

“Identifying, harassing, and intimidating the organization’s supporters is a chief means of silencing that organization’s speech,” wrote Caroline L. Harris, the Chambers’ chief tax policy counsel, and Ryan P. Meyers, the deputy general counsel of the group, in a regulatory letter to officials overseeing the rule change. “The Chamber applauds the work of Treasury and the Internal Revenue Service (IRS) in eliminating onerous reporting requirements.”

The National Association of Manufacturers, which counts several corporations based in foreign countries as members, in a letter to IRS officials, similarly called the Schedule B requirement an “unnecessary administrative filings that raise the potential for misuse in a way that chills protected speech.”

Both NAM and the Chamber of Commerce, which spends more than $160 million a year, are organized as 501(c)(6) trade associationsand under no obligation to disclose donor money to the public — only to the government through the annual Schedule B form to its 990 annual filing. After the Citizens United decision, the two groups led an effort to defeat the DISCLOSE Act, legislation that would have forced groups engaged high-dollar election advocacy to reveal donor information. The Chamber also lobbied successfully to stop President Barack Obama from issuing an executive order to force government contractors to disclose grants to 501(c) groups.

Foreign-based firms such as Brazilian petrochemical firm Braskem, Al Zayani Investments in Bahrain, and Turkish conglomerate Tekfen are listed on the Chamber’s website as dues-paying members. Faced with criticism in the past that its foreign funding might bleed into the Chamber’s vast domestic lobbying and campaign spending budget, the group has claimed that any foreign donations are walled off from domestic funds, and that foreign donors make up a small percentage of its overall budget.

But the removal of the Schedule B requirement could make those claims impossible to verify. A large foreign national firm could provide multimillion-dollar donations for use in U.S. elections to the Chamber under the new rule and such giving would never be reported to government officials.

That’s precisely the danger of removing Schedule B forms, campaign finance experts warn. The Campaign Legal Center, a campaign finance watchdog that has filed the ethics complaints that led to enforcement action on foreign money in the past, cautioned the IRS that the rule would simply open the door to more foreign spending.

“Congress has failed to pass new transparency legislation, and the FEC has failed to enforce the transparency laws that are on the books,” said Brendan Fischer, director of Campaign Legal Center’s federal reform program. “As a result, the only donor disclosure reports that dark-money groups file with any federal agency are the confidential Schedule B reports filed with the IRS. These confidential donor reports are one of the few ways that federal agencies could detect and deter foreign money in U.S. elections.”

It’s not hard to comprehend the many ways in which completely secret legal entities could incentivize illegal election behavior. In 2016, reporters from the Telegraph conducted a sting operation on a Republican campaign operative working in support of Trump. The operative was offered a $2 million check from a Chinese businessman by the reporters. He responded by offering a plan for how to conceal the money, suggesting that it be routed through his consulting firm to a pair of 501(c)4 groups and then to a pro-Trump Ssuper PAC.

The FBI is also investigating the National Rifle Association over allegations that the group, which is organized as a 501(c)4, may have received financial support from Russian sources. McClatchy reported that counterintelligence officials believe that Russian interests may have contributed to the NRA’s $30 million election advertising campaign in 2016.

Foreign firms increasingly finance major American business associations. As The Intercept has previously reported, a major Chinese chemical company joined the American Chemistry Council, a 501(c)6 that routinely lobbies lawmakers and spends money in elections.

The Trump administration had originally tried to remove the Schedule B form last summer in a surprise decision. A federal judge in Montana, however, ruled that the IRS had failed to follow proper regulatory procedure and ordered the agency to conduct a formal rule-making to allow the public and stakeholders to weigh in on the change.

“The rise of ‘dark money’ in U.S. elections has made it easy for foreign entities to contravene these laws by funneling money into U.S. elections through groups that that [sic] do not publicly disclose their donors, such as 501(c)(4) social welfare organizations and 501(c)(6) trade associations,” wrote the Campaign Legal Center in a letter to the IRS.“This change would further enable foreign entities to donate millions of dollars to such organizations for the purpose of influencing U.S. elections without any risk of scrutiny by federal regulators.”

Republican-aligned think tanks have joined the business-backed push to eliminate the Schedule B.Several nonprofits backed by billionaire Charles Koch, including his marquee group Americans for Prosperity, testified on February 7 in support of the rule change. FreedomWorks, a conservative grassroots group backed by business interests, has also mobilized hundreds of letters to the agency.

Hans von Spakovsky, a former Federal Election Commission member now with the Heritage Foundation, appeared at the hearing alongside other conservative activists in support of the rule change.

Von Spakosvsky, an avowed critic of campaign finance regulations and voting rights laws, testified that “their claim that this will somehow allow foreign money to suddenly flood into American elections is absurd,” according to a transcript of his remarks. Von Spakovsky said the FEC had plenty of authority and expertise in combating foreign money during his tenure, despite the fact that the agency has historically only intervened to investigate foreign money through disclosed political action committees on a few occasions in its 45-year history. He did not cite any examples of the FEC investigating 501(c) groups.

120 an

IRS decided to get tough against Microsoft — and then Microsoft got tougher

Eight years ago, the IRS, tired of seeing the country’s…

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IRS Reforms Free File Program, Drops Agreement Not to Compete With TurboTax

The changes come after ProPublica’s reporting showed how TurboTax maker Intuit tricked customers into paying for tax prep they could have gotten for free.

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https://www.alternet.org/2019/10/inside-turbotaxs-20-year-fight-to-stop-americans-from-filing-their-taxes-for-free/

no lnx

Inside TurboTax’s 20-year fight to stop Americans from filing their taxes for free

Written by Justin Elliott / ProPublica October 17, 2019

Last fall, Intuit’s longtime CEO Brad Smith embarked on a farewell tour of the company’s offices around the world. Smith had presided over 11 years of explosive growth, a period when Intuit had secured its place in the Silicon Valley pantheon, and the tour was like a long party.

In Ontario, employees wore T-shirts with Smith’s quasi-spiritual sayings: “Do whatever makes your heart beat fastest” and “Repetition doesn’t ruin the prayer.” In Bangalore, India, workers put on Smith face masks as they posed for selfies with the man himself. Fittingly, the tour culminated in San Diego, the home of TurboTax, the software that transformed the company’s fortunes. There, Smith arrived at his party in a DeLorean, and as he walked a red carpet, cheering employees waved “Brad is Rad” signs. To Smith’s delight, his favorite rock star, Gene Simmons of Kiss, emerged. The two posed for pictures, Simmons clad in black and the beaming CEO flashing the “rock on” hand sign.

Intuit began in the 1980s as an accounting software company focused on helping people with their bookkeeping. Over time, the company, like the other giants of Big Tech, cultivated an image of being not just good at what it did, but good, period. In a recent Super Bowl ad, Intuit portrayed itself as a gentle robot that liberates small-business owners from paperwork. The company stresses values above all, urging employees to “deliver awesome” and pursue “integrity without compromise.”

Intuit’s QuickBooks accounting product remains a steady moneymaker, but in the past two decades TurboTax, its tax preparation product, has driven the company’s steadily growing profits and made it a Wall Street phenom. When Smith took over in 2008, TurboTax was a market leader, but only a small portion of Americans filed their taxes online. By 2019, nearly 40% of U.S. taxpayers filed online and some 40 million of them did so with TurboTax, far more than with any other product.

But the success of TurboTax rests on a shaky foundation, one that could collapse overnight if the U.S. government did what most wealthy countries did long ago and made tax filing simple and free for most citizens.

For more than 20 years, Intuit has waged a sophisticated, sometimes covert war to prevent the government from doing just that, according to internal company and IRS documents and interviews with insiders. The company unleashed a battalion of lobbyists and hired top officials from the agency that regulates it. From the beginning, Intuit recognized that its success depended on two parallel missions: stoking innovation in Silicon Valley while stifling it in Washington. Indeed, employees ruefully joke that the company’s motto should actually be “compromise without integrity.”

Internal presentations lay out company tactics for fighting “encroachment,” Intuit’s catchall term for any government initiative to make filing taxes easier— such as creating a free government filing system or pre-filling people’s returns with payroll or other data the IRS already has. “For a decade proposals have sought to create IRS tax software or a ReturnFree Tax System; All were stopped,” reads a confidential 2007 PowerPoint presentation from an Intuit board of directors meeting. The company’s 2014-15 plan included manufacturing “3rd-party grass roots” support. “Buy ads for op-eds/editorials/stories in African American and Latino media,” one internal PowerPoint slide states.

The centerpiece of Intuit’s anti-encroachment strategy has been the Free File program, hatched 17 years ago in a moment of crisis for the company. Under the terms of an agreement with the federal government, Intuit and other commercial tax prep companies promised to provide free online filing to tens of millions of lower-income taxpayers. In exchange, the IRS pledged not to create a government-run system.

Since Free File’s launch, Intuit has done everything it could to limit the program’s reach while making sure the government stuck to its end of the deal. As ProPublica has reported, Intuit added code to the Free File landing page of TurboTax that hid it from search engines like Google, making it harder for would-be users to find.

Twelve years ago, Intuit launched its own “free” product: the similarly named “Free Edition” of TurboTax. But unlike the government program, this one comes with traps that can push customers lured with the promise of “free” into paying, some more than $200. Free Edition was a smash hit for Intuit and its pitch for “free” prep remains core to the company’s growth. Recently, it launched a “free, free free free” ad campaign for the Free Edition, including a crossword puzzle in The New York Times in which the answer to every clue was “f-r-e-e.”

Intuit knows it’s deceiving its customers, internal company documents obtained by ProPublica show. “The website lists Free, Free, Free and the customers are assuming their return will be free,” said a company PowerPoint presentation that reported the results of an analysis of customer calls this year. “Customers are getting upset.”

Intuit also continues to use “dark patterns” — design tricks to get users of its website to do things they don’t necessarily mean to do — to ensure that as many customers as possible pay, former employees say. A marketing concept frequently invoked at Intuit, which goes by the acronym “FUD,” seeks to tap into Americans’ fear, uncertainty and doubt about the tax filing process.

An Intuit spokesman declined to answer ProPublica’s detailed questions about its efforts to fend off a government filing system, but he provided a statement.

“We empower our customers to take control of their financial lives, which includes being in charge of their own tax preparation,” he said, adding that a “government-run pre-filled tax preparation system that makes the tax collector (who is also the investigator, auditor and enforcer) the tax preparer is fraught with conflicts of interest.”

The IRS is seemingly the biggest threat to Intuit and other commercial tax prep businesses, but it has more frequently acted as the industry’s ally, defending the Free File program even in the face of critical internal reviews. The IRS declined to comment for this article.

The consequences of Intuit’s efforts affect a huge proportion of the taxpaying public. Americans spend an estimated 1.7 billion hours and $31 billion doing their taxes each year. Just 2.8 million participated in the Free File program this year, down from 5.1 million at the program’s peak in 2005.

Intuit’s success has made the men who run the company rich. Smith, the CEO who stepped down last year and is now executive board chair, had a stake worth $20 million when he became chief executive. It ballooned to $220 million by last year. Co-founder Scott Cook is now among the country’s wealthiest people, his fortune soaring to $3.3 billion.

This year, Intuit was close to realizing a long-held goal: enshrining the Free File program in law, effectively closing the door on the IRS ever creating a free tax filing system. But an outcry followed ProPublica’s reporting on the matter and Intuit’s treatment of its customers, prompting the provision to be dropped and state and federalinvestigations into Intuit’s practices.

Yet even after this setback, the company remained steadfastly confident that its clout in Washington would win the day.

“What we’re not gonna do is fight this publicly because that is exactly what they want us to do,” said Sasan Goodarzi, the new CEO, in a video released to staff this May and obtained by ProPublica. “We are actually working with the IRS and members of the Congress to ensure that the facts are very clear.”

Intuit has dominated the tax software market since 1993, when for $225 million, it bought Chipsoft, the San Diego-based company that had created TurboTax. Even then, TurboTax was the most popular option, but Intuit pursued a plan of aggressive growth. The product necessarily came on a disk, and by the end of the 1990s TurboTax boxes were nearly ubiquitous, on shelves in office supply stores across America.

As internet speeds increased and dot-com mania took hold, it became apparent that Intuit’s future was not in a box on a shelf. It was online.

The prospect of TurboTax’s growth was vast for another reason. As late as 2001, around 45 million Americans still filled out their tax forms on paper. For Intuit, those were all potential customers.

But Intuit wasn’t alone in seeing possibilities in the spread of high-speed internet. In Washington, lawmakers began pushing the IRS to modernize and get more taxpayers to file electronically. It was a no-brainer: Filing taxes online would be easier, and the IRS would save staff costs on processing paper returns.

The danger to Intuit’s growing business was obvious. If the government succeeded in creating a system that allowed the vast majority of taxpayers to file online for free, TurboTax profits would plummet. Intuit recognized that the notion of “return-free filing” was not going away on its own.

And so in 1998, the company hired Bernie McKay, a onetime Carter administration aide and a senior lobbyist at AT&T, to be its vice president for corporate affairs. Intuit executives like to talk about having a “customer obsession” in developing their products. McKay’s obsession is stopping government encroachment. Known to physically bang the table to drive home a point, McKay’s style is “aggressive to the point of offense,” said one fellow tax prep lobbyist. An Intuit spokesman said, “This mischaracterization of Mr. McKay is pure fiction.”

McKay, for his part, when asked at a recent tax industry conference which Star Wars character he is, responded, “Darth Vader.”

The year McKay was hired, Congress passed a major overhaul of the IRS. The bill, reflecting Intuit’s lobbying, said that the IRS “should cooperate with and encourage the private sector” to increase electronic filing.

While McKay came through in his first big test, in 2002, the company found itself up against an unexpected foe, the George W. Bush administration. The threat came from a broad administration initiative to upgrade government technology. One of the proposals called for the IRS to develop “an easy, no-cost option for taxpayers to file their tax return online.”

Without such an option, taxpayers were stuck either filing on paper or, to file electronically, paying a tax professional or software company like TurboTax. Providing an alternative would be an obvious improvement, said Mark Forman, an official at the Office of Management and Budget who led the “e-government” program. The technology wasn’t all that complicated, and creating a free, automated filing system would help tens of millions of Americans. “This was seen as a low-cost, high-payoff initiative,” Forman recalled in a recent interview with ProPublica. Standing in the way, he said, was an industry “that lives off the complexity of the tax code.”

Intuit revved its new lobbying machine. Even before the OMB report was publicly released, a group of Republican lawmakers, led by TurboTax’s hometown congressman, wrote to the agency arguing that there was no reason for the government to “compete” with the “well-established” private tax prep companies. Intuit’s lobbyists also went above the OMB and pressed their case directly to the White House, Forman recalled.

At the IRS, “all hell broke loose,” remembered Terry Lutes, who was then the head of electronic filing at the agency. Intuit’s clout on the Hill meant that lawmakers were soon accusing the IRS of making “secret plans to undercut the industry,” Lutes said. The agency ran the risk of seeing its funding cut if it were to pursue the Bush plan.

The IRS commissioner at the time, Charles Rossotti, also opposed the idea. The IRS’ customer service staff, already too thin to respond adequately to Americans’ questions about the tax code, would have to grow substantially to handle millions of software queries. Congress “will never give you sufficient funding,” Rossotti told ProPublica.

So the IRS felt caught in the middle. The question became, Lutes said, “Is there some way to come out of this with something for taxpayers that addresses the administration’s objective and at the same time is acceptable to industry?”

Intuit, it turned out, did have a way. Since 1999, as part of the company’s strategy to head off encroachment, TurboTax had been offering free tax prep to the poorest filers.It was a program that served to bolster the company’s arguments that government intervention was unnecessary.

This became the basis for a deal. The industry would offer free tax prep to a larger portion of taxpayers. In exchange, the IRS would promise not to develop its own system.

Intuit organized a coalition of tax prep companies under the name the Free File Alliance, and after negotiations with the IRS, the group agreed to provide free federal filing to 60% of taxpayers, or about 78 million people at the time. Government officials touted the solution as a marvel of public and private cooperation. Americans would get free tax prep, and it would cost the government almost nothing.

For Intuit, it was the culmination of years of lobbying. The IRS had signed a contract that said it “will not compete with the [Free File Alliance] in providing free, online tax return preparation and filing services to taxpayers.”

What’s more, “free” wasn’t as unprofitable as it sounded. The alliance, guided by a lawyer who was also an Intuit lobbyist, won a series of concessions that made the program palatable to industry. Free File only required the companies to offer free federal returns. They could charge for other products. The state return was the most common, but they could also pitch loans, “audit defense” or even products that had nothing to do with taxes.

Free File had another bright side: The companies could tailor their Free File offers so that they didn’t cut into their base of paying customers. The agreement said the industry had to offer free federal services to at least 60% of taxpayers, but each company individually only had to cover 10% of taxpayers. Intuit and the others were free to limit their offers of free tax prep by age, income or state.

There was little incentive for the companies to publicize a free alternative to their paid products, and the IRS agreed that the Free File offers need only be listed on a special page of the agency’s website.

For Intuit, it was a major victory in the war against encroachment. The company could now focus on turning whatever new customers it acquired through the program into paying users, both that year and in the future.

The first year of Free File was 2003, and for Intuit, things went well. On paper, the Free File Alliance was a collection of 17 companies, all of them vying to serve the American taxpayer. But in reality, it was a group made up of two giants and a bunch of gnats. Intuit’s only significant competitor was H&R Block, and even it was a distant second. The rest of the alliance consisted mostly of tiny companies with names like Free1040TaxReturns.com. As a result, Intuit could tailor its Free File offer just the way it wanted.

But the next year, Intuit began to lose control of its creation. A scrappy competitor, TaxAct, decided to use Free File to stand out. The company decided it would try to pick up as many new customers as possible and then charge them for ancillary services. Instead of following Intuit’s lead and constraining its offer to a subset of low-income taxpayers, TaxAct went the opposite direction.

“Why not go for an offer that’s much simpler to understand?”is how Lance Dunn, the president of the maker of TaxAct, described the strategy in a later court hearing. It began advertising a pitch for “free federal online tax preparation and e-filing for all taxpayers. No restrictions. Everyone qualifies.”

TurboTax’s offer on the Free File page, meanwhile, was more difficult to parse: “if you are eligible for EIC, are age 22 or younger, age 62 or older, or active Military with a W2.” (EIC stood for the Earned Income Tax Credit.)

TaxAct’s ploy was a smashing success. The company’s volume exploded.

Alarmed, Intuit tried to get the other companies not to offer their products for free to too many potential customers, according to Dunn. Such a request could be collusion, a violation of antitrust law, Dunn said. “Intuit asked the Free File Alliance members that we should restrict offers, which I believe is probably not legal for that group to restrain trade,” he said.

ProPublica asked Intuit about Dunn’s accusation, but the company did not respond.

Dunn, who declined to speak with ProPublica, made these remarks during sworn testimony in 2011. The hearing was part of an antitrust case by the Justice Department against H&R Block after it tried to buy TaxAct. The U.S. argued that, by eliminating a competitor, the merger would create a duopoly of Intuit and H&R Block. Although the Justice Department ultimately blocked that takeover, the market has grown even more consolidated in recent years. In 2019, according to a ProPublica analysis of IRS data, the two giants accounted for 81% of all individual returns filed using tax prep software.

On the defensive, Intuit and H&R Block matched TaxAct’s “no restrictions” offer on Free File. Americans rushed to file for free, and in 2005, 5 million people filed their taxes through the program. Free File had become the most popular way to file taxes online.

Intuit viewed the popularity of Free File as a serious threat and took its case to Congress. That year, Brad Smith, then a senior vice president at the company and head of TurboTax, told a House committee that “the current Free File Alliance program has drifted very far from its original public service purpose and objective,” as he put it. The program wasn’t supposed to be for everyone, he said: It was for the “disadvantaged, underprivileged and underserved taxpayer populations.”

Intuit’s arguments quickly gained traction at the IRS. Already, in March 2005, the IRS had written to the Justice Department for legal advice on modifying the Free File program. The agency wanted to know: Would it run afoul of antitrust laws if the IRS barred companies in the Free File Alliance from offering a free product to everyone?

The Justice Department responded in a May 2005 letter. Clearly, wrote Renata Hesse, an antitrust section chief at the department, “any agreement among Alliance members to restrict such free service is likely a form of price fixing” and thus illegal. But there was still a way for Intuit to get what it wanted. She wrote that if the IRS itself were to impose such a restriction, it would be legal.

The IRS swooped in to beat back Intuit’s competition, doing for Intuit what the company could not on its own. Despite just 5 million Americans using a program that was purportedly available to 80 million, the IRS agreed that Free File needed to be reined in.

The agency made its reasoning clear in a previously unreported letter sent to the Free File Alliance the following year. Bert DuMars, then head of electronic filing at the IRS, wrote that there’d been a huge jump in people using Free File in 2005, but no corresponding boom in people paying for tax prep. “If this trend continued, the IRS was concerned that it could cause many vendors to go out of business,” he wrote. Stock market analysts, he pointed out, had said Free File “represented a threat to future revenues and profits of the publicly traded company participants.” The IRS decided to remove this threat.

The new agreement, struck between the IRS and the alliance in 2005, gave Intuit what it had sought. Companies were now expressly barred from offering free tax prep to everyone through the program. Instead, only taxpayers under an income cap, then $50,000 a year, would be eligible.

On paper, the program’s eligibility had actually increased to 70% of taxpayers, or about 93 million households, up from the previous 78 million. But in practice, because broad, easy-to-understand offers were now barred, it was clear the program’s use would decline.

Intuit had again bent the power of the federal government in its favor. After 2005, the Free File program was never again as popular, eventually falling to about half that year’s level.

With the threat of government encroachment on ice and high-speed internet access proliferating in the mid-2000s, Intuit looked forward to steady growth and big profits. The upside of the online software business was huge, with the cost of producing each additional unit approaching zero. And TurboTax was hardly a niche product: Intuit executives still excitedly talk about the TAM, total available market, of TurboTax as every single tax filer in the country, now over 150 million households.

But TaxAct’s Free File gambit had forever transformed the industry. Advertising “free” was a great lure, so TaxAct took the battle to a different venue. Barred from making a free offer to everyone through Free File on the IRS’ website, TaxAct decided to make the offer on its own website in 2006. Intuit recognized a credible challenge from the upstart and countered the next year, launching TurboTax Free Edition on its website.

Confusingly, there were now two distinct options: the government-sponsored Free File and the commercial free editions.

For customers who managed to qualify, the new commercial options offered by these companies were similar to what they could get on the IRS’ Free File website: The underlying software was the same, only the federal return was free, and the companies expected to make money on each customer through charging for a state tax return or other services.

But for the companies, there was a clear benefit to winning customers directly, rather than through the IRS program. The companies had complete control over how they handled customers from start to finish.

Intuit poured ad dollars into its Free Edition. Not only did the new product effectively meet TaxAct’s challenge, it quickly became the major driver of TurboTax’s customer growth.

That growth posed a challenge: how to, as internal company documents put it, “monetize free.” Over successive tax seasons, Intuit unleashed teams of designers, engineers, marketers and data scientists on that problem, working at its headquarters in Mountain View and TurboTax’s main offices in San Diego.

Part of the solution was to pitch users side products like loans or “Audit Defense.” But it also meant misleading customers. Frequently “free” didn’t mean free at all. Many who started in TurboTax Free Edition found that if their return required certain commonplace tax forms, they would have to upgrade to a paid edition in order to file.

The company came to a key insight: Americans’ anxiety around tax filing is so powerful that it usually trumps any frustration with the TurboTax product, according to three former Intuit staffers. So even if customers click on “free” and are ultimately asked to pay, they will usually do it rather than start the entire process anew. Intuit capitalized on this tendency by making sure the paywall popped up only when the taxpayer was deep into the filing process.

“There’s a lot of desperation — people will agree, will click, will do anything to file,” said a former longtime software developer.

Every fall before tax season, the company puts every aspect of the TurboTax homepage and filing process through rigorous user testing. Design decisions down to color, word choice and other features are picked to maximize how many customers pay, regardless if they are eligible for the free product. “Dark patterns are something that are spoken of with pride and encouraged in design all hands” meetings, said one former designer. In the design world, “dark patterns” are tactics to get users to do something they don’t necessarily mean to do. (ProPublica previously documented dark patterns encountered by people trying to file their taxes for free.)

On TurboTax’s homepage, for example, the company carefully chooses how it describes the different editions. Prominently featured next to Deluxe Edition, which costs around $100, is the phrase “maximize your deductions.”

If users initially click on the Deluxe software, they are never offered the choice to go to the Free Edition even if the no-cost option would produce the same return. “Maximize your deductions” was legendary at Intuit for its effectiveness in steering customers eligible for free filing to buy the paid product, according to a former marketing staffer.

Another celebrated feature, former staffers said, were the animations that appear as TurboTax users prepare their returns. One shows icons representing different tax deductions scrolling by, while another, at the end of the process, shows paper tax forms being scanned line-by-line and the phrase “Let’s comb through your returns.” What users are not told is that these cartoons reflect no actual processing or calculations; rather, Intuit’s designers deliberately added these delays to both reinforce and ease users’ “Fear, Uncertainty, and Doubt.” The animations emphasize that taxes are complicated but also reassure users that the technological wizardry of TurboTax will protect them from mistakes.

In a statement, the Intuit spokesman said, “The process of completing a tax return often has at least some level of stress and anxiety associated with it. … To offset these feelings, we use a variety of design elements — content, animation, movement, etc. — to ensure our customers’ peace of mind.”

The 2007 launch of Free Edition started a period of rapid growth for TurboTax. Within two years, use of its web products had almost doubled, and over the past decade, its website has grown each year by an average of 2 million more customers. The company reported this year that TurboTax online had handled 32 million returns. In a statement, it said around a third of that number used Free Edition.

The government’s Free File program, meanwhile, has mostly faded into the background, drowned out by Intuit’s and other companies’ “free” offers. The IRS did try advertising campaigns, spending around $2 million some years to spread the word. But compared with the reach of Intuit, this was a pittance: The company reported this year that it spent $800 million on advertising. With its budget slashed by Congress, the IRS has spent no money at all to advertise the program in recent years.

Amid its success, Intuit has sometimes had to put down insurgents bent on reforming the tax filing system. In 2007, the same year Intuit launched its Free Edition, Barack Obama, then a candidate for president, took aim at the tax prep industry. In a speech to an audience of tax wonks in Washington, he promised that the IRS would establish a simple return system. “This means no more worry, no more waste of time, no more extra expense for a tax preparer,” he declared.

But the Obama administration, as Bush’s had before, found that it was no match for Intuit.

Again, Bernie McKay, the lobbyist who had joined Intuit in the late 1990s and outlasted multiple CEOs, led the company’s campaign. In response to the Obama threat, McKay and Intuit’s small army of outside lobbyists turned to Congress, where lawmakers friendly to the company introduced a series of bills that would elevate Free File from a temporary deal with the IRS to the law of the land.

Republicans have historically been the company’s most reliable supporters, but some Democrats joined them. Rep. Zoe Lofgren, the California Democrat whose district includes part of Silicon Valley, has introduced or co-sponsored five bills over the years that would codify the Free File program, with names like the Free File Permanence Act. Lofgren’s spokesperson told ProPublica that the congresswoman believes the IRS, because of its role as tax collector, should not also be the tax preparer.

Hedging its bets, the company also sought to make sure the IRS could not spend a single dollar creating a public filing system. One internal document says Intuit would “advance legislative language in House Appropriations for ‘No Funds’ restriction on IRS spending” on such a system. It worked. Within a few years, Congress passed a 3,000-page appropriations bill that included a single sentence crucial to Intuit’s financial future: “No funds,” the law decreed, could be used “to provide to any person a proposed final return or statement.”

Another important aspect of Intuit’s influence strategy during the Obama years was covertly enlisting minority and women’s groups to press its case.

The internal 2014-15 “encroachment strategy” document discloses plans to “leverage trade groups to support House/Senate Free File bills.” It goes on to list the groups Women Impacting Public Policy, The Latino Coalition and the National Black Chamber of Commerce.

Intuit has given money to all of those groups over the years. All have signed letters urging Congress to make the Free File deal permanent. “The Free File program has been a clear success,” said one letter signed by The Latino Coalition and the Hispanic Leadership Fund.

A spokesperson for Women Impacting Public Policy said it has received $70,000 from Intuit. The amounts given to the other groups are unknown, and they did not respond to requests for comment.

Company documents also outline plans to “mobilize” a “coalition” that included think tanks and academics, who published op-eds.

Will Marshall, president of the pro-business Progressive Policy Institute, opposed return-free filing in an op-ed in The Hill because doing one’s taxes is “a teachable moment [that] prompts us to review our financial circumstances.”

Anti-tax activist Grover Norquist, the most consistent champion of Intuit’s policy positions, warned that “big spenders in Washington, D.C. want to socialize all tax preparation in America.”

It is unclear whether they were paid by Intuit or the Free File Alliance.Norquist didn’t respond to a request for comment, and a Progressive Policy Institute spokesman declined to say whether Intuit gave the group money.

Whatever external challenges to the status quo Intuit has faced, the company has been able to rely on the IRS’ continuing enthusiastic support of the Free File program. Every few years, the IRS and the industry got together to renew the deal....[long]

IRS-funded review confirms TurboTax hid free filing from search engines — but says there’s no need for major changes

Justin Elliott / ProPublica

An outside firm echoed ProPublica’s reporting but defended the oversight of the tax-prep program meant to help millions of Americans file their taxes for nothing.

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aha: regulations are moderation, and so is any enforcement of them eg Russian sanctions. see rick perlstein on slow burn; bureaucrat --> jack booted thugs goes from fringe to mainstream (newt lang memo helped? liddy head shot AFT].

OMG evil sorta, the tool to equalize is going after poor and ignoring rich and corps

https://www.propublica.org/article/bernie-sanders-elizabeth-warren-urge-irs-financial-crimes

In a letter on Friday , a group of prominent senators — including Minority Whip Dick Durbin, D-Ill., 2020 presidential candidates Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., as well as Sheldon Whitehouse, D-R.I., and Richard Blumenthal, D-Conn. —urged IRS Commissioner Charles Rettig to increase the agency’s focus on large tax and financial crimes.

As ProPublica has documented with a series of articles, the IRS is a shadow of its former self, the result of a near-decadelong campaign by Republicans in Congress to starve the agency of funds. The agency’s enforcement staff has dropped by more than a third. That has been a boon to the rich and to tax cheats in particular, who have benefited from a collapse in audits, collections and criminal tax prosecutions.

As we reported, and as the senators noted in their letter, the story has been different for the poor, as the IRS has devoted a disproportionate number of its audits to taxpayers who receive the earned income tax credit, one of the government’s largest antipoverty programs

The senators acknowledged that the budget cuts have badly weakened the agency, but they argued that

ProPublica’s stories, together with government watchdog reports, show the IRS could use its limited resources more effectively.

The widening circle of investigations surrounding President Donald Trump has highlighted the weakness of tax enforcement, as we explained last October. Paul Manafort hid income overseas for years, and Michael Cohen dodged taxes through the simplest means imaginable (by lying to his accountant and the IRS) without consequence. It was only after the Robert Mueller’s team and other federal prosecutors began scrutinizing Trump’s circle that their crimes were discovered. The senators say that such examples of “exposure of criminal activity only resulting from investigations pursued for other matters” prove that the IRS can do more. “We urge you to strengthen enforcement efforts at the IRS, including focusing on tax code violations and financial crimes that may be linked to money laundering,” they wrote.

The IRS will not get a budget increase anytime soon. After a 34-day government shutdown, Congress and Trump struck a deal to fund the government for the next seven months. For the IRS, the deal included a cut from last year’s budget. In real terms, the enforcement portion of the agency’s budget is down by 23 percent since 2010.

Will things change next year? That’s in part up to Rettig. Last year, Republican congressional staffers told us that lawmakers might respond favorably if Rettig asked for more funds. So far, Rettig has not made any clear statements about whether he believes the IRS needs more money to do its job.

Read the Series

Gutting the IRS

Who Wins When a Crucial Agency Is Defunded

ref

Industries Turn Freedom of Information Requests on Their Critics

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By Elizabeth Williamson

Nov. 5, 2018
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WASHINGTON — Dennis J. Ventry Jr., a law professor at the University of California, Davis, drew the ire of tax preparation companies like Intuit and H&R Block this summer by criticizing a deal they have to provide a free tax filing service through the Internal Revenue Service.

The companies promptly hit back with a tactic that corporations, lobbyists and interest groups are increasingly using against academic researchers: Their trade coalition filed a public records request with the university in July seeking everything Mr. Ventry had written or said about the companies this year, including emails, text messages, voice mail messages and hand-jotted notes.

Theuniversity estimated that it spent 80 to 100 hours complying with the request, filed under the California Public Records Act, which requires employees of any state agency or institution to produce, upon request from any member of the public, any record that relates to “the conduct of the public’s business” that is “prepared, owned, used or retained” by the university.

The request generated 1,189 pages of documents, university officials said. And it was just one example of how both state-level public records laws and the federal Freedom of Information Act, written to ensure transparency and accountability in government, have morphed into potent weapons in legal and business disputes, raising questions about the chilling effects — and costs — they impose on targets who are doing research in controversial or sensitive fields.

A 2017 analysis of requests filed under the Freedom of Information Act found that “public-oriented inquiries by concerned citizens and their advocates” account for “only a small fraction of the 700,000-plus FOIA requests submitted each year,” wrote David Pozen, a law professor at Columbia University, whose paper reviewed studies on the issue. “The bulk of requests come from businesses seeking to further their own commercial interests by learning about competitors, litigation opponents or the regulatory environment.”

Public records requests have long been an important tool for a wide variety of groups, like journalists, political opposition researchers, climate-science skeptics, animal rights advocates and anti-abortion activists keen to dig into research and the work of people in the government.

But the sheer scale of the requests in recent years, and their growing use by advocacy groups and business interests to challenge academic work at public universities, has alarmed some experts, who say the commitment to openness embodied by freedom of information laws could be tested.

The weaponization of such requests poses “a real danger that we’ll hit a tipping point, where the cost and burden of open records laws will overcome the benefits and we’ll have a retrenchment of transparency rights,” said Margaret Kwoka, a University of Denver professor with expertise in government transparency litigation. “This kind of abuse fuels the political will to do that.”

The University of California system, with nearly 45,000 faculty and academic appointees on its campuses and in its laboratories and medical centers, sits at the center of this trend.

In 2009, the system received a total of 3,266 public records requests. In 2017, it received 16,921, an increase of 418 percent.

A significant portion of the requests are from activists and industry groups “using public records requests as one part of a strategy to undermine the work of researchers in controversial fields,” Maria Shanle, managing counsel for education affairs and governance at the University of California, said in an interview.

These have included a 2011 request for every document a visiting scholar produced related to “chemical substances, includingflame retardants”; a 2012 demand by an anti-abortiongroup for the names of researchers working on an abortion safety study; and a 2015 request for every email to and from a journalism professor that contained words like “biotech” and “Monsanto.”

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“What we need is a dividing line between financial and ministerial accountability, and the university’s function as an intellectual and teaching institution,” Claudia Polsky, an assistant law professor who directs the Environmental Law Clinic at the University of California in Berkeley, said in an interview.

In a paper titled “Open Records, Shuttered Labs: Ending Political Harassment of Public University Researchers,” Ms. Polsky argued for legislative protections, already offered in some states, for unpublished emails and other personal records that can be used to stymie research.

“Digging into professors’ email inboxes has nothing to do with democratic accountability or fiscal transparency,” she said, “and everything to do with creating ideologically based mischief.”

In Mr. Ventry’s case, he said he did not have anything to hide — he has been a critic of the tax preparation program, Free File, and an outspoken advocate for no-cost, simplified, government-provided tax preparation for years. But he said that the request had made collaborators in his research wary of communicating with him and amounted to intimidation by the industry.

“They are trying to bully me,” Mr. Ventry said of the industry group. “More importantly, they are trying to chill my research and scholarship, whether it has to do with tax law reform or not.”

The industry group, the Free File Alliance, whose legal name is Free File Inc., defended the request as a proper use of public records law.

Mr. Ventry, the group said, had a conflict of interest because he also serves as the chairman of an outside advisory group to the I.R.S. and was intent on promoting an alternative plan under which the government would offer its own tax preparation service through the I.R.S. The alliance defends its program as benefiting low- and middle-income Americans who would otherwise have to pay for tax preparation services.

Freedom of information requests “are a legitimate, legal method to determine what public officials are doing and saying in their official capacity,” the alliance said in an emailed statement. “Professor Ventry holds a strong preconceived bias against the I.R.S. Free File program.”

Mr. Ventry is not employed by the I.R.S. He is the chairman of the Internal Revenue Service Advisory Council, a public forum on tax administration issues that advises the I.R.S. commissioner and is composed of outside experts who volunteer their time. He was a published critic of Free File for years before joining the council.

Mr. Ventry; Joseph Bankman, a tax law professor at Stanford University; and others have worked over the years to create a model for free tax-filing programs administered by a half-dozen states, while advocating a free, streamlined federal e-filing system.

In July, Mr. Ventry, Mr. Bankman and other colleagues wrote op-eds taking aim at Free File, which the I.R.S. offers to many taxpayers through an agreement with the Free File Alliance, which includes Intuit, makers of TurboTax and other software; H&R Block; and 10 additional commercial tax preparation companies.

After the House passed a bill that included a provision making the Free File agreement permanent, the academics raised alarms. Citing research, I.R.S. statistics and investigations by ProPublica, The Wall Street Journal and others, Mr. Ventry wrote that Free File is a “failed program” that “inflicts substantial harm on taxpayers” by confusing them, pushing them toward paid products and failing to fully protect their personal data.

The companies in the Free File program are not compensated by the I.R.S. for providing their services. But ending the program and replacing it with a government-run electronic filing service for all taxpayers would threaten the industry.

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In a July opinion piece in The Hill titled “Free File Providers Scam Taxpayers; Congress Shouldn’t Be Fooled,” Mr. Ventry originally included his affiliation as chairman of the tax agency’s advisory council as well as his academic post. (After a complaint from the industry group, he removed the affiliation to the council.)

In a subsequent commentary, the academics criticized the I.R.S. for poor oversight of the industry agreement, saying that Free File “puts tax preparation companies first and taxpayers last.” Some of the criticism echoed the I.R.S.’s independent taxpayer advocate, Nina E. Olson, who said in an interview that Free File was a “poorly designed” program that only 3 percent of eligible taxpayers used after 15 years in existence.

Days later, the University of California received the request for all of Mr. Ventry’s communications about the op-eds, including his contacts with the I.R.S. taxpayer advocate’s office.

In addition to its public records requests, the alliance wrote directly to the I.R.S. about Mr. Ventry in July, saying he “improperly used his I.R.S. affiliation to lend credibility to this attack.” The alliance questioned whether Mr. Ventry should be able to speak out publicly on the issue given his role on the I.R.S. advisory council.

Mr. Ventry said that role was strictly advisory and that he received no compensation aside from his university salary. After the industry alliance leveled the complaint, he says he voluntarily recused himself from the council’s analysis of the Free File program, due out in November.

Responding to the academics’ criticism in a letter to the editor published in the policy journal Tax Notes, Tim Hugo, a Republican member of the Virginia House of Delegates who serves as the alliance’s executive director, wrote that the partnership between the I.R.S. and Free File had saved taxpayers “an estimated $1.6 billion in tax preparation and filing fees” since its inception in 2003.

The program was under attack, he wrote, “by a handful of ideologues” who “want a centralized system of direct government tax preparation.”

Representatives for Intuit and H&R Block said the companies did not participate in the records requests by the industry group, but the alliance confirmed that the member companies received the documents produced by the university.

Stanford is a private institution not subject to public records requests under the California law, but the alliance’s lawyers used the University of California request to obtain Mr. Ventry’s communications with Mr. Bankman, too.

“There’s nothing really that interesting in my emails,” Mr. Bankman said in an interview. But worries about such requests, he said, stifle the peer review process, a freewheeling exchange of views, often by email, in which academics around the world evaluate one another’s work.

Companies often request such emails “to intimidate people like us, because it really raises the ante and makes it very scary just to email stuff,” he added. For the industry, “it’s a freebie,” he said. “But imagine you’re some young professor somewhere — you don’t know what hit you.”

Mr. Ventry said he was more worried that Mr. Bankman and other colleagues would shy away from collaborating with him.

“We went from emailing multiple times a day over the course of a couple months to not emailing at all,” he said. The request “stifled not just academic freedom but the deliberative and beneficial process of thinking through problems with others.”

If that constitutes winning for the tax industry, he said, “they won.”

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https://www.alternet.org/2019/05/its-getting-worse-the-irs-now-audits-poor-americans-at-about-the-same-rate-as-the-top-1/

https://www.alternet.org/2019/05/you-cant-tax-the-rich-without-salvaging-the-irs/

The hot policy in Democratic circles these days is raising taxes on the rich. Sen. Elizabeth Warren has a plan to tax “ultramillionaires,” as she calls them. Sen. Bernie Sanders wants to expand the estate tax. Rep. Alexandria Ocasio-Cortez has floated raising the top income tax rate to 70% for those making over $10 million a year.

But before this country raises taxes, it should grapple with something much more prosaic but equally important for tackling inequality: saving the Internal Revenue Service.

Already, wealthy people and corporations easily get around today’s rules. However tough any new laws might seem, they’d soon be undercut.

Slowly and quietly over the past eight years, the IRS has been eviscerated. It’s lost tens of thousands of employees. It has fewer auditors now than at any time since 1953. In real dollars, the agency’s budget has dropped by almost $3 billion since 2010.

Businesses and the wealthy benefit the most from this state of affairs. The largest corporations in America used to be audited every year. That started to change when the cuts began, and today, the audit rate has fallen by half. It’s a similar story for individuals making $10 million or more a year: With twice the chance of escaping IRS scrutiny, the ultrarich are much less likely to lose at the game of audit roulette.

Fixing the problem will require more than increasing the IRS’ budget (though that would certainly help). It’s about having the right personnel with the right skills. Today, the wealthy and corporations have the IRS outgunned. The ultra-affluent — with the help of legions of tax professionals — make domestic income disappear overseas or hide it in a pyramid of partnerships. It’s like trying to take on a modern army while armed with spears and clubs.

The IRS has difficulty tracing the income of the superwealthy or countering their sophisticated arguments about why what appears to be one type of income is actually something else. The agency has also trouble valuing their assets (a problem that, as The New York Times revealed, dates back at least to when Fred Trump was misleading the IRS about how much his buildings were worth). By the public admission of numerous IRS officials, it has long done a poor job of scrutinizing complicated partnerships to understand who owns what portion of what stock.

The top 0.5% of highest-earning Americans account for about a fifth of the income that’s hidden from the IRS, according to one University of Michigan study, or more than $50 billion a year in today’s dollars.

It’s much easier to enforce the tax laws for the bottom 90% of earners. Wages are reported straight to the IRS, and computers can easily check that tax returns accurately report that income. This means that inadequate enforcement of the tax laws necessarily has a regressive effect, liberating those at the top from scrutiny while the masses continue to be tracked by machines.

With its budget slashed, the IRS has pulled back across the board — except for one area where it’s been easier to keep the numbers from falling so much: audits of the poor. More than one-third of all audit targets are recipients of the earned income tax credit, one of the nation’s largest anti-poverty programs. By the hundreds of thousands, IRS computers spit out letters that require low-income taxpayers to prove their eligibility. The counties with the highest audit rates aren’t found in the hedge fund precincts of Connecticut or the lobbyist enclaves of Northern Virginia. No, they’re rural, mostly African American counties in the Deep South.

There’s nothing easy about auditing the rich. Even when the IRS has evidence of flat-out cheating, such as when it discovers a hidden Swiss bank account, it can take years of work to prove its case. Taking such time clashes with one of the core ways the IRS evaluates its managers and agents: how efficiently they open and close audits. As one senior manager put it to us, “If you’re not churning out the exams, you have to explain why you’re not.”

But more often, the affairs of the superwealthy are infernally complicated and the IRS doesn’t have black-and-white proof of evasion. Instead, the agency runs up against what’s called “aggressive” planning in the tax world. To the rich, a tax return is just an opening offer to the government. If they don’t get audited, that’s great. If they do, well, they’re ready for a fight.

In 2009, the IRS decided to take a bold, new approach to auditing the superwealthy. The agency’s idea was to bring specialists together and form a kind of green-eyeshade-wearing Delta Force. It would finally do something it — surprisingly — hadn’t been doing before: look at the entirety of a taxpayer’s empire. That meant examining how his partnerships, limited liability companies, foundations, gifts and overseas operations interact with one another. The ultrarich weave all these together so they end up with an ultralow effective tax rate. “We hadn’t really been looking at it all together, and shame on us,” Steven Miller, a former acting commissioner of the IRS, told us.

Because of budget cuts and lobbying, this elite force never came together. The agency hoped to have a staff of about 240 expert auditors by 2012. But by 2014 it had 96, and by last year the number had fallen to 58. Initially spooked by the group’s ambition, tax professionals who counsel the wealthy now speak of the effort with a kind of pity.

Criminal tax enforcement has also faltered. More than 150 million income tax returns were filed in 2017, but the IRS brought fewer than 800 cases in which someone was charged with making legal income but criminally evading taxes. That’s one reason tax cheats can get away with brazen behavior for so long — until they attract the attention of federal investigators for other reasons. That’s what happened to the former Trump campaign chairman Paul Manafort and the former Trump lawyer Michael Cohen, who pleaded guilty to tax evasion, and the celebrity lawyer Michael Avenatti, who was charged with failing to file taxes at all for several years. (Avenatti denies the charges.)

So, what to do? One 2020 candidate already has a bold proposal to resuscitate the IRS. It’s a plan to pump tens of billions into the agency, enough to fund a second army of agents. That candidate’s name is Donald Trump.

Of course, it was Trump’s party that gutted the agency, costing the country, we estimate, more than $100 billion in lost revenue. The president’s 2020 budget, however, did propose adding $15 billion over 10 years to the IRS enforcement budget, a move that would more than double the agency’s overall budget. The administration estimated this would produce revenue of at least $47 billion. The question arises: Has the administration genuinely had a change of heart? Or is this merely a neat trick to make deficit projections appear smaller?

So far, this is all just talk. It is, though, one of the few areas where Trump and Democrats are in substantive agreement. Democrats in the House recently proposed a $400 million IRS budget increase next year.

Among the Democratic presidential candidates, Warren does mention the IRS in her wealth tax proposal. She calls for an unspecified but “significant increase in the IRS enforcement budget” and a minimum audit rate for taxpayers subject to her “ultramillionaire” tax.

Raising taxes on the rich is a more compelling cause than increasing the operating budget of a bureaucracy most American voters probably hate thinking about. But the boldest tax plan of all starts with salvaging the IRS.

ProPublica is a Pulitzer Prize-winning investigative newsroom.

IRS punish blue, also will send migrant prisoners to sanct city/state, we say yes pls

https://www.alternet.org/2019/04/trump-and-republicans-weaponized-the-tax-code-to-punish-blue-states-cnn-analyst/

On Monday’s edition of CNN’s “New Day,” political analyst John Avlon laid bare the way that President Donald Trump and the GOP have politicized the federal tax code.

“Whether you see your taxes go up or down will depend on whether you live in a red state or blue state, and that’s by design,” said Avlon. “First, a little history. December 22nd, 2017, that’s when President Trump’s tax plan was signed into law. Kind of a Christmas gift to corporations and red state residents. Passed entirely along party lines … it slashed the amount of state and local taxes you could deduct to $10,000, it limited the mortgage interest deduction and that’s where the representation of the tax code became evident.”

“According to data from H&R block, among states where refunds went up this year the top ten are all red states,” said Avlon. “Among states where tax refunds went down, you guessed it, the top ten are all blue states. Notice a pattern?”

“It’s no surprise in areas where most Americans live, it costs more to buy a house, and guess who is more likely to need a mortgage, again, red states deduct while new states are stuck,” Avlon continued. “This has become known as the blue state triple whammie because Trump’s tax code has made it more expensive to buy a home, more expensive to own a home and harder to sell your home.”

“But guess who does even better under Trump’s tax code, Trump’s own commercial real estate industry, the same industry which Jared Kushner’s company bought a white elephant of a building at a record price right before the market crashed and is still worth around $3 million and paid little or no federal income taxes or at least seven years,” Avlon added.

“President Nixon said never make taxation popular, but we can make it fair,” said Avlon. “With the politically weaponized tax code that punishes blue states, President Trump seems to have failed at both and that’s your reality check.”

Watch below:

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https://www.alternet.org/2019/04/the-irs-tried-to-go-after-the-ultra-rich-with-audits-from-hell-until-congress-stepped-in-to-protect-the-wealthy/

very long

On June 30, 2016, an auto-parts magnate received the kind of news anyone would dread: The Internal Revenue Service had determined he had engaged in abusive tax maneuvers. He stood accused of masking about $5 billion in income. The IRS wanted over $1.2 billion in back taxes and penalties.

The magnate, Georg Schaeffler, was the billionaire scion of a family-owned German manufacturer and was quietly working as a corporate lawyer in Dallas. Schaeffler had extra reason to fear the IRS, it seemed. He wasn’t in the sights of just any division of the agency but the equivalent of its SEAL Team 6.

In 2009, the IRS had formed a crack team of specialists to unravel the tax dodges of the ultrawealthy. In an age of widening inequality, with a concentration of wealth not seen since the Gilded Age, the rich were evading taxes through ever more sophisticated maneuvers. The IRS commissioner aimed to stanch the country’s losses with what he proclaimed would be “a game-changing strategy.” In short order, Charles Rettig, then a high-powered tax lawyer and today President Donald Trump’s IRS commissioner, warned that the squad was conducting “the audits from hell.” If Trump were being audited, Rettig wrote during the presidential campaign, this is the elite team that would do it.

The wealth team embarked on a contentious audit of Schaeffler in 2012, eventually determining that he owed about $1.2 billion in unpaid taxes and penalties. But after seven years of grinding bureaucratic combat, the IRS abandoned its campaign. The agency informed Schaeffler’s lawyers it was willing to accept just tens of millions, according to a person familiar with the audit.

How did a case that consumed so many years of effort, with a team of its finest experts working on a signature mission, produce such a piddling result for the IRS? The Schaeffler case offers a rare window into just how challenging it is to take on the ultrawealthy. For starters, they can devote seemingly limitless resources to hiring the best legal and accounting talent. Such taxpayers tend not to steamroll tax laws; they employ complex, highly refined strategies that seek to stretch the tax code to their advantage. It can take years for IRS investigators just to understand a transaction and deem it to be a violation.

Once that happens, the IRS team has to contend with battalions of high-priced lawyers and accountants that often outnumber and outgun even the agency’s elite SWAT team. “We are nowhere near a circumstance where the IRS could launch the types of audits we need to tackle sophisticated taxpayers in a complicated world,” said Steven Rosenthal, who used to represent wealthy taxpayers and is now a senior fellow at the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution.

Because the audits are private — IRS officials can go to prison if they divulge taxpayer information — details of the often epic paper battles between the rich and the tax collectors are sparse, with little in the public record. Attorneys are also loath to talk about their clients’ taxes, and most wealthy people strive to keep their financial affairs under wraps. Such disputes almost always settle out of court.

But ProPublica was able to reconstruct the key points in the Schaeffler case. The billionaire’s lawyers and accountants first crafted a transaction of unusual complexity, one so novel that they acknowledged, even as they planned it, that it was likely to be challenged by the IRS. Then Schaeffler deployed teams of professionals to battle the IRS on multiple fronts. They denied that he owed any money, arguing the agency fundamentally misunderstood the tax issues. Schaeffler’s representatives complained to top officials at the agency; they challenged document requests in court. At various times, IRS auditors felt Schaeffler’s side was purposely stalling. But in the end, Schaeffler’s team emerged almost completely victorious.

His experience was telling. The IRS’ new approach to taking on the superwealthy has been stymied. The wealthy’s lobbyists immediately pushed to defang the new team. And soon after the group was formed, Republicans in Congress began slashing the agency’s budget. As a result, the team didn’t receive the resources it was promised. Thousands of IRS employees left from every corner of the agency, especially ones with expertise in complex audits, the kinds of specialists the agency hoped would staff the new elite unit. The agency had planned to assign 242 examiners to the group by 2012, according to a report by the IRS’ inspector general. But by 2014, it had only 96 auditors. By last year, the number had fallen to 58.

The wealth squad never came close to having the impact its proponents envisaged. As Robert Gardner, a 39-year veteran of the IRS who often interacted with the team as a top official at the agency’s tax whistleblower office, put it, “From the minute it went live, it was dead on arrival.”

Most people picture IRS officials as all-knowing and fearsome. But when it comes to understanding how the superwealthy move their money around, IRS auditors historically have been more like high school physics teachers trying to operate the Large Hadron Collider.

That began to change in the early 2000s, after Congress and the agency uncovered widespread use of abusive tax shelters by the rich. The discovery led to criminal charges, and settlements by major accounting firms. By the end of the decade, the IRS had determined that millions of Americans had secret bank accounts abroad. The agency managed to crack open Switzerland’s banking secrecy, and it recouped billions in lost tax revenue.

The IRS came to realize it was not properly auditing the ultrawealthy. Multimillionaires frequently don’t have easily visible income. They often have trusts, foundations, limited liability companies, complex partnerships and overseas operations, all woven together to lower their tax bills. When IRS auditors examined their finances, they typically looked narrowly. They might scrutinize just one return for one entity and examine, say, a year’s gifts or income.

Belatedly attempting to confront improper tax avoidance, the IRS formed what was officially called the Global High Wealth Industry Group in 2009. “The genesis was: If you think of an incredibly wealthy family, their web of entities somehow gives them a remarkably low effective tax rate,” said former IRS Commissioner Steven Miller, who was one of those responsible for creating the wealth squad. “We hadn’t really been looking at it all together, and shame on us.”

The IRS located the group within the division that audits the biggest companies in recognition of the fact that the finances of the 1 percent resemble those of multinational corporations more than those of the average rich person.

The vision was clear, as Doug Shulman, a George W. Bush appointee who remained to helm the agency under the Obama administration, explained in a 2009 speech: “We want to better understand the entire economic picture of the enterprise controlled by the wealthy individual.”

It’s particularly important to audit the wealthy well, and not simply because that’s where the money is. That’s where the cheating is, too. Studies show that the wealthiest are more likely to avoid paying taxes. The top 0.5 percent in income account for fully a fifth of all the underreported income, according to a 2010 study by the IRS’ Andrew Johns and the University of Michigan’s Joel Slemrod. Adjusted for inflation, that’s more than $50 billion each year in unpaid taxes.

The plans for the wealth squad seemed like a step forward. In a few years, the group would be staffed with several hundred auditors. A team of examiners would tackle each audit, not just one or two agents, as was more typical in the past. The new group would draw from the IRS’ best of the best.

That was crucial because IRS auditors have a long-standing reputation, at least among the practitioners who represent deep-pocketed taxpayers, as hapless and overmatched. The agents can fritter away years, tax lawyers say, auditing transactions they don’t grasp. “In private practice, we played whack-a-mole,” said Rosenthal, of the Tax Policy Center. “The IRS felt a transaction was suspect but couldn’t figure out why, so it would raise an issue and we’d whack it and they would raise another and we’d whack it. The IRS was ill-equipped.”

The Global High Wealth Group was supposed to change that. Indeed, with all the fanfare at the outset, tax practitioners began to worry on behalf of their clientele. “The impression was it was all going to be specialists in fields, highly trained. The IRS would assemble teams with the exact right expertise to target these issues,” Chicago-based tax attorney Jenny Johnson said.

The new group’s first moves spurred resistance. The team sent wide-ranging requests for information seeking details about their targets’ entire empires. Taxpayers with more than $10 million in income or assets received a dozen pages of initial requests, with the promise of many more to follow. The agency sought years of details on every entity it could tie to the subject of the audits.

In past audits, that initial overture had been limited to one or two pages, with narrowly tailored requests. Here, a typical request sought information on a vast array of issues. One example: a list of any U.S. or foreign entity in which the taxpayer held an “at least a 20 percent” interest, including any “hybrid instruments” that could be turned into a 20 percent or more ownership share. The taxpayer would then have to identify “each and every current and former officer, trustee, and manager” from the entity’s inception.

Taxpayers who received such requests recoiled. Attacking the core idea that Shulman had said would animate the audits, their attorneys and accountants argued the examinations sought too much information, creating an onerous burden. The audits “proceeded into a proctology exam, unearthing every aspect of their lives,” said Mark Allison, a prominent tax attorney for Caplin & Drysdale who has represented taxpayers undergoing Global High Wealth audits. “It was extraordinarily intrusive. Not surprisingly, these people tend to be private and are not used to sharing.”

Tax practitioners took their concerns directly to the agency, at American Bar Association conferences and during the ABA’s regular private meetings with top IRS officials. “Part of our approach was to have private sit-downs to raise issues and concerns,” said Allison, who has served in top roles in the ABA’s tax division for years. We were “telling them this was too much, unwieldy and therefore unfair.” Allison said he told high-ranking IRS officials, “You need to rein in these audit teams.”

For years, politicians have hammered the IRS for its supposed abuse of taxpayers. Congress created a “Taxpayer Bill of Rights” in the mid-1990s. Today, the IRS often refers to its work as “customer service.” One result of constant congressional scrutiny is that senior IRS officials are willing to meet with top tax lawyers and address their concerns. “There was help there. They stuck their necks out for me,” Allison said.

The IRS publicly retreated. Speaking at a Washington, D.C., Bar Association event in February 2013, a top IRS official, James Fee, conceded the demands were too detailed and long, telling the gathering that the agency has “taken strides to make sure it doesn’t happen again.” The Global High Wealth group began to limit its initial document requests.

The lobbying campaign, combined with the lack of funding for the group, took its toll. One report estimated that the wealth team had audited only around a dozen wealthy taxpayers in its first two and a half years. In a September 2015 report, the IRS’ inspector general said the agency had failed to establish the team as a “standalone” group “capable of conducting all of its own examinations.” The group didn’t have steady leadership, with three directors in its first five years. When it did audit the ultrawealthy, more than 40 percent the reviews resulted in no additional taxes.

The inspector general also criticized the IRS broadly — not just its high-wealth team — for not focusing enough on the richest taxpayers. In 2010, the IRS as a whole audited over 32,000 millionaires. By 2018, that number had fallen to just over 16,000, according to data compiled by Syracuse University. Audits of the wealthiest Americans have collapsed 52 percent since 2011, falling more substantially than audits of the middle class and the poor. Almost half of audits of the wealthy were of taxpayers making $200,000 to $399,000. Those audits brought in $605 per audit hour worked. Exams of those making over $5 million, by contrast, brought in more than $4,500 an hour.

The IRS didn’t even have the resources to pursue millionaires who had been hit with a hefty tax bill and simply stiffed Uncle Sam. It “appeared to no longer emphasize the collection of delinquent accounts of global high wealth taxpayers,” a 2017 inspector general report said.

In recent years, the number of Global High Wealth audits has been higher — it closed 149 audits in the last year — but tax lawyers and former IRS officials say even that improvement is deceptive. A major reason is that the audits are much less ambitious. “They were longer at the beginning and shorter as the process moved on,” Johnson, the tax attorney, said...

o the IRS, that had significant tax implications. In the wealth team’s view, Georg Schaeffler had received billions of dollars of income — on which he owed taxes.

The auditors’ view reflects a core aspect of the U.S. tax system. Under American law, companies and individuals are liable for taxes on the forgiven portion of any loan.

This frequently comes up in the housing market. A homeowner borrows $100,000 from a bank to buy a house. Prices fall and the homeowner, under financial duress, unloads it for $80,000. If the bank forgives the $20,000 still owed on the original mortgage, the owner pays taxes on that amount as if it were ordinary income.

This levy can seem unfair since it often hits borrowers who have run into trouble paying back their debts. The problem was particularly acute during the housing crisis, so in late 2007, Congress passed a bill that protected most homeowners from being hit with a tax bill after foreclosureor otherwise getting a principal reduction from their lender.

Tax experts say the principle of taxing forgiven loans is crucial to preventing chicanery. Without it, people could arrange with their employers to borrow their salaries through the entire year interest-free and then have the employer forgive the loan at the very end. Voila, no taxable income.

The notion that forgiven debt is taxable applies to corporate transactions, too. That means concern about such a tax bill is rarely far from a distressed corporate debtor’s mind. “Any time you have a troubled situation, it’s a typical tax issue you have to address and the banks certainly understand it, too,” said Les Samuels, an attorney who spent decades advising corporations and wealthy individuals on tax matters.

But the efforts to avoid tax, in the case of Schaeffler and his lenders, took a particularly convoluted form. It involved several different instruments, each with multiple moving parts. The refinancing was “complicated and unusual,” said Samuels, who was not involved in the transaction. “If you were sitting in the government’s chair and reading press reports on the situation, your reaction might be that the company was on the verge of being insolvent. And when the refinancing was completed, the government might think that banks didn’t know whether they would be repaid.”

This account of the audit was drawn from conversations with people familiar with it, who were not authorized to speak on the record, as well as court and German securities filings. The IRS declined to comment for this story. Doerr did not respond to repeated calls and emails.

A spokesman for Schaeffler declined to make him available for an interview. “Mr. Schaeffler always strives to comply with the complex U.S. tax code,” the spokesman wrote in a statement, saying “the fact that the refinancing was with six independent, international banks in itself demonstrates that these were arm’s length, commercially driven transactions. The IRS professionally concluded the audit in 2018 without making adjustments to those transactions, and there is no continuing dispute — either administratively or in litigation — related to these matters.”

Schaeffler’s lenders never explicitly canceled the loan. The banks and Schaeffler maintained to the IRS that the loan was real and no debt had been forgiven.

The IRS came not to buy that. After years of trying to unravel the refinancing, the IRS homed in on what the agency contended was a disguise. The banks and Schaeffler “had a mutual interest in maintaining the appearance that the debt hadn’t gone away,” a person familiar with the transaction said. But the IRS believed the debt had, in fact, been canceled...much more

5/19

Senior IRS leaders launch review of agency’s partnership with TurboTax and H&R Block amid claims they deliberately steer users away from using free filing

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https://www.propublica.org/article/congress-is-about-to-ban-the-government-from-offering-free-online-tax-filing-thank-turbotax

GUTTING THE IRS

Congress Is About to Ban the Government From Offering Free Online Tax Filing. Thank TurboTax.

A bill supported by Democrats and Republicans would make permanent a program that bars the IRS from ever developing its own online tax filing service.

ust in time for Tax Day, the for-profit tax preparation industry is about to realize one of its long-sought goals. Congressional Democrats and Republicans are moving to permanently bar the IRS from creating a free electronic tax filing system.

Last week, the House Ways and Means Committee, led by Rep. Richard Neal, D-Mass., passed the Taxpayer First Act, a wide-ranging bill making several administrative changes to the IRS that is sponsored by Reps. John Lewis, D-Ga., and Mike Kelly, R-Pa.

In one of its provisions, the bill makes it illegal for the IRS to create its own online system of tax filing. Companies like Intuit, the maker of TurboTax, and H&R Block have lobbied for years to block the IRS from creating such a system. If the tax agency created its own program, which would be similar to programs other developed countries have, it would threaten the industry’s profits.

“This could be a disaster. It could be the final nail in the coffin of the idea of the IRS ever being able to create its own program,” said Mandi Matlock, a tax attorney who does work for the National Consumer Law Center.

The Free File Alliance, a private industry group, says 70% of American taxpayers are eligible to file for free. Those taxpayers, who must make less than $66,000, have accessto free tax software provided by the companies. But just 3% of eligible U.S. taxpayers actually use the free program each year. Critics of the program say that companies use it as a cross-marketing tool to upsell paid products, that they have deliberately underpromoted the free option and that it leaves consumer data open to privacy breaches.

The congressional move would codify the status quo. Under an existing memorandum of understanding with the industry group, the IRS pledges not to create its own online filing system and, in exchange, the companies offer their free filing services to those below the income threshold.

Experts have long argued that the IRS has failed to make filing taxes as easy and cheap as it could be. In addition to a free system of online tax preparation and filing, the agency could provide people with pre-filled tax forms containing the salary data the agency already has, as ProPublica first reported on in 2013.

One member of the Free File Alliance explicitly told shareholders that the IRS “developing software or other systems to facilitate tax return preparation … may present a continued competitive threat to our business for the foreseeable future.”

The IRS’ deal with the Free File Alliance is regularly renegotiated and there have been repeated, bipartisan efforts in Congress to put the deal into law.

Those efforts have been fueled by hefty lobbying spending and campaign contributions by the industry. Intuit and H&R Block last year poured a combined $6.6 million into lobbying related to the IRS filing deal and other issues.Neal, who became Ways and Means chair this year after Democrats took control of the House, received $16,000 in contributions from Intuit and H&R Block in the last two election cycles.

Neal, who describes himself as a longtime champion of the existing Free File program, has argued that it would “would help low- and moderate-income taxpayers.”

Free File Alliance Executive Director Tim Hugo called it “a great idea when you can provide a great product — free tax returns — to Americans at no cost to the federal government.” An H&R Block spokesperson said the company believes “Free File should be the subject of ongoing improvement, and we are committed to working with all parties to strengthen and improve Free File on behalf of the American taxpayer.”

Spokespeople for Neal, Lewis and Kelly did not immediately respond to requests for comment about the provision. A companion Senate bill with the same provision has been introduced by Sens. Chuck Grassley, R-Iowa, and Ron Wyden, D-Ore.

While efforts to make the IRS’ deal with the tax preparation industry permanent have fizzled in the past, critics are particularly worried this year. The Taxpayer First Act also includes a provision that would restrict the IRS’ use of private debt collectors to those above a certain income. A Wyden spokesperson said the current bill is a “bipartisan, bicameral compromise so it includes priorities of both chairmen and ranking members.” Wyden “supports giving the IRS the resources it needs to offer more services to taxpayers,” the spokesperson added

https://www.alternet.org/2019/04/trump-privately-asked-mcconnell-to-prioritize-confirmation-of-irs-counsel-over-attorney-general-and-now-we-know-why/

The New York Times is out with another bombshell report, this time describing how – and why – President Donald Trump privately asked Senate Majority Leader Mitch McConnell to make his top priority the confirmation of a new IRS Chief Counsel, even over confirming a new Attorney General.

It was February, one month after the new Democratic-majority House of Representatives had been sworn in. This is a very aggressive goal-oriented group of progressive lawmakers, and they had promised to get a copy of Trump’s tax returns.

The Times’ Maggie Haberman and Nicholas Fandos report that “the request by Mr. Trump, made to Mr. McConnell on Feb. 5,” to prioritize the confirmation of the IRS Chief Counsel, “raised questions about whether the president had other motivations,” for pushing to get his nominee confirmed.

“For months, the president has seethed over vows by congressional Democrats that they would move to obtain his tax returns from the I.R.S. And this week, the House Ways and Means Committee chairman, Representative Richard E. Neal, Democrat of Massachusetts, formally asked the I.R.S. for six years of the returns, using an obscure provision in the tax code to do so.”

The Times also notes that “Mr. Trump and his team have been warily anticipating the probing demands of House investigators since Democrats won control in November. The message to Mr. McConnell came around the time that Mr. Trump, eyeing a torrent of new House investigations led by Democrats, told reporters that he was unfairly under fire.”

The IRS Chief Counsel presumably would be able to provide the Secretary of the Treasury with “reasons” to not allow Congress to obtain Trump’s tax returns.

Also of great concern is that the Senate did, in fact, confirm Michael Desmond, a tax lawyer from Santa Barbara, California, as IRS Chief Counsel, despite, as the Times notes, Desmond “had briefly advised the Trump Organization on tax issues before Mr. Trump took office.”

There’s more.

“In private practice, Mr. Desmond worked for a time alongside William Nelson and Sheri Dillon, who currently serve as tax counsels to the Trump Organization.”

It’s almost as if President Trump installed William Barr at the DOJ to protect him from the Mueller investigation and installed Michael Desmond at the IRS to protect him from Democrats trying to obtain his tax returns.

https://www.democracynow.org/2019/1/14/as_govt_shutdown_drags_on_irs

EIC audits up (1/3) because automated, but rich ppl have complex taxes that take human power, so rates dropping

also large corps not audited much anymore

Paul Kiel

reporter for ProPublica and contributor to the series “Gutting the IRS.”

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LINKS

As 800,000 federal workers remain furloughed or working without pay in the longest government shutdown in U.S. history, we look at how the Trump administration has restarted a division of the Internal Revenue Service to help corporate lenders. The Washington Post reports that an appeal from the mortgage industry has resulted in hundreds of IRSstaffers returning to the agency to carry out income verifications for lenders. This process earns the $1.3 trillion mortgage banking industry millions of dollars in fees. We speak with Paul Kiel, a reporter for ProPublica and contributor to the series “Gutting the IRS.” His recent piece for the series is titled “Who’s More Likely to Be Audited: A Person Making $20,000—or $400,000?”

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https://www.propublica.org/article/how-the-irs-was-gutted

12/18

no lnx many grafs

In the summer of 2008, William Pfeil made a startling discovery: Hundreds of foreign companies that operated in the U.S. weren’t paying U.S. taxes, and his employer, the Internal Revenue Service, had no idea. Under U.S. law, companies that do business in the Gulf of Mexico owe the American government a piece of what they make drilling for oil there or helping those that do. But the vast majority of the foreign companies weren’t paying anything, and taxpaying American companies were upset, arguing that it unfairly allowed the foreign rivals to underbid for contracts.

Pfeil and the IRS started pursuing the non-U.S. entities. Ultimately, he figures he brought in more than $50 million in previously unpaid taxes over the course of about five years. It was an example of how the tax-collecting agency is supposed to work.

But then Congress began regularly reducing the IRS budget.After 43 years with the agency, Pfeil — who had hoped to reach his 50th anniversary — was angry about the “steady decrease in budget and resources” the agency had seen. He retired in 2013 at 68.

After Pfeil left, he heard that his program was being shut down. “I don’t blame the IRS,” Pfeil said. “I blame the Congress for not giving us the budget to do the job.”

The IRS Budget Has Declined

2010

2017

$14B

$12B

Note: 2018 dollars.

Source: IRS and Congress.gov

Had the billions in budget reductions occurred all at once, with tens of thousands of auditors, collectors and customer service representatives streaming out of government buildings in a single day, the collapse of the IRS might have gotten more attention. But there have been no mass layoffs or dramatic announcements. Instead, it’s taken eight years to bring the agency that funds the government this low. Over time, the IRS has slowly transformed, one employee departure at a time.

The result is a bureaucracy on life support and tens of billions in lost government revenue. ProPublica estimates a toll of at least $18 billion every year, but the true cost could easily run tens of billions of dollars higher.

The cuts are depleting the staff members who help ensure that taxpayers pay what they owe. As of last year, the IRS had 9,510 auditors. That’s down a third from 2010. The last time the IRS had fewer than 10,000 revenue agents was 1953, when the economy was a seventh of its current size. And the IRS is still shrinking. Almost a third of its remaining employees will be eligible to retire in the next year, and with morale plummeting, many of them will.

The IRS conducted 675,000 fewer audits in 2017 than it did in 2010, a drop in the audit rate of 42 percent. But even those stark numbers don’t tell the whole story, say current and former IRS employees: Auditors are stretched thin, and they’re often forced to limit their investigations and move on to the next audit as quickly as they can.

Without enough staff, the IRS has slashed even basic functions. It has drastically pulled back from pursuing people who don’t bother filing their tax returns. New investigations of “nonfilers,” as they’re called, dropped from 2.4 million in 2011 to 362,000 last year. According to the inspector general for the IRS, the reduction results in at least $3 billion in lost revenue each year. Meanwhile, collections from people who do file but don’t pay have plummeted. Tax obligations expire after 10 years if the IRS doesn’t pursue them. Such expirations were relatively infrequent before the budget cuts began. In 2010, $482 million in tax debts lapsed. By 2017, according to internal IRS collection reports, that figure had risen to $8.3 billion, 17 times as much as in 2010. The IRS’ ability to investigate criminals has atrophied as well.

Investigations of People Who Don’t File a Return Have Plunged

2010

2017

2.3M

360k

Note: Reflects new taxpayer delinquency investigations opened each fiscal year.

Source: IRS

Corporations and the wealthy are the biggest beneficiaries of the IRS’ decay. Most Americans’ interaction with the IRS is largely automated. But it takes specialized, well-trained personnel to audit a business or a billionaire or to unravel a tax scheme — and those employees are leaving in droves and taking their expertise with them. For the country’s largest corporations, the danger of being hit with a billion-dollar tax bill has greatly diminished. For the rich, who research shows evade taxes the most, the IRS has become less and less of a force to be feared.

[OMG]

The story has been different for poor taxpayers. The IRS oversees one of the government’s largest anti-poverty programs, the earned income tax credit, which provides cash to the working poor. Under continued pressure from Republicans, the IRS has long made a priority of auditing people who receive that money, and as the IRS has shrunk, those audits have consumed even more resources, accounting for 36 percent of audits last year. The credit’s recipients — whose annual income is typically less than $20,000 — are now examined at rates similar to those who make $500,000 to $1 million a year. Only people with incomes above $1 million are examined much more frequently.

Audits of the Rich Have Dropped Much Faster Than Audits of the Poor

2011

2017

1.2%

0.7%: Under 25K (bottom 36%)

2.7%

0.7%: 200K-500K

2.5%: 500K+ (top 1%)

Note: The audit rate for taxpayers with income between $25,000 and $200,000 (the only group not included above) dropped from 0.81 percent in 2011 to 0.48 percent in 2017.

Source: ProPublica analysis of IRS data

We submitted a detailed list of questions to the IRS and asked about the budget cuts’ effects on the agency’s enforcement efforts. The agency replied with a brief statement. “The IRS has substantial resources to identify and audit noncompliant taxpayers and continues to deter those attempting to evade their legal obligations,” it said.

In ProPublica’s interviews with dozens of tax professionals and more than 50 former and current IRS employees — part of an ongoing series on the state of tax enforcement — many agency veterans wondered whether the damage of the past several years will ever be undone. And they had a greater worry: that the American public will inevitably realize how weak the IRS has become.

The effects of an explosion in tax cheating would be dire. The nation’s already soaring budget deficit would surge by hundreds of billions of dollars more, pushing it well past $1 trillion. Commissioners of the IRS, starting with President George W. Bush’s appointee, Douglas Shulman, have warned Congress about a crisis like this since the budget cuts began, in 2011. But after eight years, Republican lawmakers, who are chiefly responsible for the reductions, show no signs that they think the danger is urgent. By the time the danger becomes indisputable, immense harm will already have been done.

“In the last few years, it was really frustrating,” said Pam Reicks, a former manager at the IRS who, until she retired at the end of last year, oversaw a program to audit wealthy taxpayers with undeclared offshore bank accounts. “It’s like in the fall when you bob for apples,” she told us. “You’ve got a tub of apples and can’t use your hands to grab them. You can see all this abuse and fraud, and people not paying their taxes, but can’t use your hands to get it.”

The IRS has never been a popular cause on Capitol Hill. But Democrats and Republicans long shared a grudging consensus that the agency’s basic work of tax collection deserved protection.

That changed when the Republican Party came into power in 1994 and Newt Gingrich became the speaker of the House. The new majority’s main priority was tax cuts, and vilifying the IRS helped its case. Some conservatives favored a “fair tax,” a consumption tax based on purchases. Proponents said that this simplified approach to taxation would allow them to “abolish” the IRS.

The notion wasn’t a fringe position within the party. Former Sen. Richard Lugar of Indiana, a respected mainstream Republican, ran for president in 1996 on a platform of abolishing the IRS. A Republican congressman in 1998 introduced a bill to repeal the Internal Revenue Code by 2002. “Abolish the IRS” remains a potent talking point. Ted Cruz, the Republican senator from Texas, campaigned on the slogan when he ran for president in 2016.

Newt Gingrich, then speaker of the House, prepares to sign a petition in 1997 to abolish the current U.S. tax code. (Stephen Jaffe/AFP/Getty Images)]

In 1997 and 1998, the Republican-controlled Senate held a series of dramatic hearings on alleged abuses by the IRS. Agency employees testified behind black curtains with their voices disguised, like Mafia snitches, to protect their identity. The testimony depicted an organization run amok, with claims of biased examiners and lurid tales of agents in flak jackets storming establishments. One restaurant owner told of a raid to seize business records at the home of an employee, during which agents forced a teenage boy to the floor at gunpoint and made a group of teenage girls at a slumber party get dressed “under the watchful eyes of male agents.” A USA Today headline read: “Witnesses Accuse IRS Investigators of ‘Gestapo-like’ Raids.”

Congress followed the hearings with a sweeping overhaul of the agency, limiting the IRS’ collection powers and independence and giving taxpayers new protections. In the Senate, the reform bill passed 97–0, and President Bill Clinton signed it.

It was only afterward that the Government Accountability Office debunked the allegations of IRS abuses.“Generally, we found no corroborating evidence that the criminal investigations described at the hearing were retaliatory against the specific taxpayer,” the report stated. “In addition, we could not independently substantiate that IRS employees had vendettas against these taxpayers.”

By then it was too late. Reeling from the new law and the public attacks, IRS audits and collections tumbled to historic lows.

Recovery took years, but because the IRS wasn’t a locus of partisan warfare during the presidency of George W. Bush, it did happen. By 2010, under the administration of Barack Obama, the IRS’ budget hit its high point: $14 billion in today’s dollars, about $2.5 billion above where it is today. Collections rebounded.

But that spring, over unified Republican opposition, Democrats passed the Affordable Care Act. The sprawling health care bill was also, indirectly, a sprawling tax bill, since it relied on the IRS to help administer many of its provisions.

Now Is a Good Time to Cheat on Your Taxes

Budget cuts have crippled the IRS, allowing tax cheats to run rampant. Listen to Jesse Eisinger on the “What Next” podcast from Slate.

In the midterm elections that followed, Republicans took the House of Representatives in a wave similar to that of 1994. The first bill introduced by House Republicans in 2011 was a budget that slashed funding across the government and took special aim at the IRS. In addition to calling for a cut to its budget of $600 million, the bill prohibited the IRS from using any of its funding to carry out key parts of the Affordable Care Act. It didn’t pass.

Since then, Republicans have cited the ACA as a reason to withhold funding from the IRS. In 2013, in response to an IRS request for a budget increase, former Rep. Ander Crenshaw, a Florida Republican who then sat on the House Appropriations Committee, said: “Any kind of increase of this magnitude was going to be a challenge for some very basic reasons. There are a lot of objections to the Affordable Health Care Act, a lot of objections to Obamacare.”

The agency faces a structural political problem. On one side are anti-tax Republicans, while on the other are Democrats who fear publicly supporting the taxman. “This is an agency that doesn’t have any friends,” said James Dyer, a Republican who worked for years on the House Appropriations Committee staff. “There’s no advocacy on the Hill for them except what they do for themselves.”

In 2013, the IRS’ bulwarks collapsed. First, as part of a budget deal with Obama’s administration, Republicans got what they had previously sought: a $600 million cut, which came on top of cuts in the previous two years. Then things got even worse. In May, an IRS inspector general reported that the agency had targeted right-leaning nonprofits for scrutiny, igniting what came to be known as the Lois Lerner scandal, named for the manager who had overseen the effort. Shortly thereafter, another report criticized the IRS for loose spending on its conferences. Republicans seized on both scandals, calling hearings and launching investigations.

To head an agency that was now devastated by budget cuts and scandal, Obama appointed John Koskinen. He was a turnaround specialist, a Mr. Fix-It who, at 74, emerged from retirement for one last job. Most recently, he’d led Freddie Mac after the mortgage giant was taken over by the government during the 2008 financial crisis. Fifteen years before, the Clinton White House tapped him to oversee preparations to avert the Y2K crisis. He was a Washington version of Winston Wolfe from “Pulp Fiction,” if Wolfe were unfailingly polite and liked working with large bureaucracies.

Former IRS Commissioner John Koskinen (J. Scott Applewhite/AP Photo)

A pragmatist, Koskinen is someone who, by his own description, almost never gets angry. To deal with the crisis, he embarked on a morale-boosting cross-country tour, starting in Cincinnati, the center of the nonprofit scandal. He toured two cities a week for three and a half months. Ultimately, he spoke with more than 22,000 IRS employees. They didn’t gripe, he told us; they were focused on getting the resources to do their job. “This was as good a workforce as I have ever worked with.”

Cutting the IRS budget didn’t make sense to him. It was one of the few areas of government that had a positive return on investment. Koskinen told the Senate, “I don’t know any organization in my 20 years of experience in the private sector that has said, ‘I think I’ll take my revenue operation and starve it for funds.’”

When that argument failed, Koskinen tried to ease the vitriol through a personal connection. In 2014, he contacted Hal Rogers, who was then the Republican chairman of the House Appropriations Committee. Koskinen had grown up in Ashland, Kentucky, not far from Rogers’ district. He requested a meeting, couldn’t get in and kept at it. After a few calls, he threatened Rogers’ staff that he would come and sit in their offices until Rogers met with him. They capitulated. When Koskinen and Rogers finally sat down together, sure enough, they knew folks in common. One of Koskinen’s good friends had gone to college with Rogers. The two had a friendly meeting.

The next time Koskinen went to the Hill to testify, Rogers welcomed him warmly: “It is always good to see someone with strong Kentucky roots in the hearing room, particularly during basketball season.” He added, “I think much of you personally, Mr. Commissioner.” Then Rogers launched into a litany of criticisms: The IRS was trying to implement the Affordable Care Act against Congress’ wishes; it was spending too much, wasting too much, resisting reforms and letting the poor commit too much fraud. By that time, the Republican narrative had taken hold: The IRS had to be “held accountable” for wasting millions on lavish conferences and persecuting conservative nonprofits for their political beliefs.

These charges ignored inconvenient facts. The IRS conference spending had already plummeted, from $38 million in 2010 to $5 million in 2012 — before the Republicans first criticized the agency for overspending. And inspector general reports later pointed out that the IRS division that oversaw tax-exempt organizations had also targeted progressive groups and concluded that the IRS had taken prompt action to address the previously identified problems in the nonprofit unit.

Nevertheless, the scandals provided the rationale for ongoing budget cuts.The IRS lacked the “moral authority” to appeal for a budget increase, said Republican Rep. Paul Ryan, then the chair of the House Budget Committee, in 2013.

The cuts also forced discipline, Republicans argued. “We deliberately lowered the IRS funding to a level that would make the IRS think twice about what you are doing and why you are doing it,” Crenshaw told Koskinen in a hearing, “because you don’t have a single dime to spare on anything frivolous or foolhardy or even mediocre.”

Neither Crenshaw nor any other current or former Republican member of Congress agreed to speak with ProPublica about the IRS. Some staffers talked on the condition of anonymity because they were not authorized to speak to the press on the record and acknowledged that the budget cuts were a mistake. Asked about the cuts, a Hill Republican staffer said, “It was punishment,” adding that the IRS clearly “needs more money and needs more people.”

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The lowest point for Koskinen — and for the IRS — came when, a few weeks before Christmas in 2014, after four years of consistent cuts, Congress slashed an additional $350 million from the agency’s budget. Because the cut came three months into the fiscal year, and only a few months before filing season began, it sent the agency scrambling. Desperate, Koskinen even considered briefly shutting down the IRS. Koskinen’s deputy said that this was the only time he saw his boss angry. “That night, I had trouble getting to sleep,” Koskinen said. “Normally I go to sleep in about 22 seconds. It drives my wife crazy.”

The sudden cut meant that the IRS couldn’t hire enough seasonal employees to answer taxpayer questions. As a result, almost two-thirds of the tens of millions of taxpayer calls would go unanswered that year.

Koskinen was outspoken about the cause of the poor service. He liked to counter the constant urging to do “more with less” with a dose of realism. In fact, he said, the IRS would do “less with less”: answer fewer calls and do fewer audits.

That upset Republicans, who charged in a contentious 2015 hearing that IRS mismanagement, not the budget cuts, was causing the decline in service. Mike Kelly, a Republican representative from Pennsylvania, attacked Koskinen, the ever-optimistic turnaround specialist, for being too negative. “I would encourage you to be a little more upbeat,” Kelly told Koskinen. “It is spring! Let’s talk about the good side of it.” The congressman also didn’t like Koskinen’s frequent quip that the budget cuts were really a “tax cut for tax cheats.”

“I don’t think that I would want to be a cheerleader, telling those people that don’t want to pay their taxes: ‘Hey, you know what? We are not going to be able to come after you,’” said Kelly, adding that “those comments are better kept internally.”

Koskinen replied with a speech he’d given many times before and would give again. A collapse in tax compliance was really possible, he said. People will catch on. He worried about the U.S. becoming Italy or Greece. “What I don’t want to do is have somebody later on say, ‘You never warned us,’” he told Congress. “This is your warning.”

It’s a decision that everyone who works at the IRS has to make: How will you respond when someone asks, “So what do you do?” Answer forthrightly, and you’re bound to be met with either iciness or open hostility. Over her 30-year career, Pam Reicks, the former IRS manager, adopted a solution that’s common for IRS lifers. “I work for the government,” she’d say.

Not that she was the least bit embarrassed by what she did. She was proud to play a role in making sure that the tax system was fair and that the rich paid their share. The walls of her home office are covered with family pictures, awards from the IRS and an American flag. Get her started on the topic of auditing, and her large eyes will grow wide as she excitedly tells you why it’s such tricky, interesting detective work.

Pam Reicks, who had a 30-year career at the IRS, in her home office. “You can see all this abuse and fraud, and people not paying their taxes, but can’t use your hands to get it,” she said. (Kathryn Gamble for ProPublica)

When Reicks joined the IRS in 1987, she saw it as an exciting way to expand her world. Born and raised in Red Cloud, Nebraska (population 1,000), she was curious and eager to learn. She began her career in Waterloo, Iowa, first auditing individuals and then working her way up to businesses. She preferred auditing businesses, because poring over the books of companies taught her how they really worked.

Reicks moved to Des Moines and climbed her way to management. She tried to inspire agents with her enthusiasm. “I’m, Go, IRS!, you know?” she said with a laugh. “Go team!”

By 2011, she had shifted to a new job, one that offered plenty to satisfy her curiosity. At the time, the IRS was cracking down on Americans hiding money in tax havens. The Justice Department, with the help of whistleblowers, had pierced the veil of secrecy that shielded Switzerland’s bank accounts. Banks sent lists showing thousands of account holders — many of them probable tax cheats — to U.S. authorities. But the scope of the problem was too big. The IRS simply couldn’t audit everybody who had an offshore account.

In Reicks’ home office, an award for her career at the IRS, family pictures and her kindergarten diploma. (Kathryn Gamble for ProPublica)

One solution was to allow people to turn themselves in. The IRS launched programs that offered reduced penalties to those who came forward voluntarily, before an audit was opened. Tens of thousands did. But, of course, an unknown number of tax dodgers did not. Reicks’ new job, as a senior manager in the offshore program, was to help the IRS figure out how many of those people it could audit.

Auditing taxpayers with accounts in tax havens is hard. Revenue agents have to investigate the scope of any cheating and figure out whether it was intentional. Tracking down the necessary documents from foreign countries can add frustrating delays. The average time to complete an offshore audit, Reicks remembered, was close to three years.

Part of her task was to make sure that managers and revenue agents, who feel pressure to show productivity, did not cut these audits short. Some of the cases involved huge amounts of money. But IRS employees aren’t supposed to think about that. Since the IRS-reform bill in 1998, the agency is prohibited from evaluating agents based on how much money they bring in. Instead, they are evaluated on how efficiently they open and close audits. “You have to account for your time,” Reicks said, “and if you’re not churning out the exams, you have to explain why you’re not.”

The budget cuts meant agents had to trudge through these jungles without a map. Not only were there fewer agents every year to do these audits, but many of the ones who remained were less experienced. Training and travel budgets had been slashed along with everything else. The agents conducting these audits were scattered across the country, as was Reicks’ team of 11 experts, who were supposed to guide them. In-person training became a rare luxury. Instead, most instruction was done online: PowerPoint slides appeared on a screen while someone talked. “But this stuff is so complicated that without somebody sitting in front of you, you don’t know if they’re getting what you’re saying,” Reicks said.

The entire IRS has seen a similar shift. As a result, training has become less effective, IRS employees told ProPublica, and the thoroughness of audits has diminished. It’s also made the IRS a worse place to work.

“The last time I was aware of hiring,” said Marie Allen, who retired in 2016 after a 32-year career at the IRS that included time auditing wealthy taxpayers, “I saw the young, angel, baby-faced agents coming in. They were told to sit down in a cubicle, given a computer and told, ‘This is your training.’” A couple of trainees decided to quit rather than suffer through weeks more of this, she said. “So we lost young talent by basically boring them to death.”

Even established employees can feel themselves falling behind, making it harder to match up against sophisticated opponents. “We’re staying stagnant in what we know,” said an IRS employee who works on audits of corporations. Add to that the pressure to close audits as quickly as possible, and auditors often feel like they are rushing past signs of suspicious activity. “All I have time for is low-hanging fruit, basically,” the employee said. “It’s not only not fair to American taxpayers, it’s not very satisfying for me, either.”

As time went on, Reicks said, the IRS was able to undertake fewer and fewer audits of offshore accounts. Given a list of American accounts in a tax haven, the IRS would often be able to audit only 10 to 15 percent of them, she remembered. That meant the agency was not able to adequately pursue tens of thousands of people who had kept their bank accounts secret from the U.S. government.

In 2015, shortly after congressional Republicans forced the sudden $350 million cut that so upset Koskinen, Reicks began a new stage of her career. To prepare its managers for possible elevation to the executive level, the IRS puts them in temporary assignments. Over the course of a couple years, Reicks would get a different job every three to six months. But while the type of work changed at each assignment, the basic problem she faced did not: There weren’t enough people to do the work.

Her final assignment put her in charge of exam activities at two of the IRS’ “campuses” in the Northeast. At the campuses, in row upon row of cubicles, thousands of tax examiners and customer service reps review correspondence and answer phone calls from taxpayers.

Employees, Reicks said, constantly asked whether the IRS was going to hire more workers. With no good news to report, the best Reicks could do was assure them that they were responsible only for the work assigned to them, not for the work the IRS should be doing. “I get that the four desks around you are all empty,” she remembered saying. “This is what we have. We will adjust the workload accordingly.”

Lacking staff, the IRS has shrunk programs — even those that brought in billions. One such casualty: pursuing taxpayers who do not bother to file tax returns. Tracking those people and businesses down, determining what they owe and then reviewing what they submit in response is time-consuming. “Why generate new work when we don’t have the resources to do the work we have right now?” asked Shantelle Kitchen-Nelson, who managed a collections campus in Philadelphia in 2017 and recently retired.

The Amount of Tax Debt Expiring Because of Age Has Risen Dramatically

2010

2017

$540M

$8.3B

Note: Counts the annual sum of debts each year that exceed the statutory limit for IRS collection (adjusted for inflation).

Source: IRS collection reports

As the IRS has fallen further and further behind on collecting the debts of those who filed a return but didn’t pay their taxes, many of those obligations have been allowed to surpass the 10-year statute of limitations. “For our customers,” said Jay Freeborne, a tax professional in Seattle who advises clients with tax debts, “those are touchdowns. When debts expire, we high-five them.”

“This is a great time for not being compliant with paying taxes,” said Richard Schickel, a former IRS collection agent who now counsels taxpayers. “I have 11 clients who owe more than $1 million who are not being worked at all.”

As Reicks toured different parts of the IRS, she was impressed by her colleagues. But she was working 80-hour weeks, often advising on offshore issues in addition to her current assignment, and living for chunks of time in hotels. On top of all that, her mother and brother had died in the same month.

She decided not to put herself up for promotion and moved back to Nebraska, to live in Omaha, near her sister. She returned to her old job of supervising offshore audits full time. But by then, in 2017, things had grown noticeably worse.

Reicks looked forward to the end of the year, when she’d reach 30 years of service and be eligible to retire with full retirement benefits. She’d always thought she’d stay longer than that. But she realized that she couldn’t.

“I got tired,” she said.

After retiring from chasing offshore tax cheats, Reicks has had more time for one of her favorite hobbies, golf. (Kathryn Gamble)

It’s unclear when — or whether — Congress might begin to reinvest in the IRS. The best that can be said is that it’s been a few years since the last deep cut.

In 2015, when the IRS ability to answer taxpayer phone calls hit a low point, the budget discussions on Capitol Hill took a turn. Republicans agreed to boost the agency’s funding — but only part of it. The “taxpayer services” portion, which goes toward hiring seasonal employees to answer the phones, got bumped up. The “enforcement” portion of the budget continued to be pared: Today, adjusting for inflation, it’s $1.5 billion lower than it was in 2010, a decrease of 23 percent.

This year, Republicans again selectively increased IRS funding. The massive new tax cut law has dumped loads of extra work on the IRS, which now has to write rules interpreting the legislation, reprogram aged computer systems and retrain its employees. Republicans understand that if the IRS fails to roll out their tax overhaul well, they might feel the political consequences. To help the agency cope, Congress handed it an extra $320 million, with the instruction that the money be used solely to implement the new law.

The budget for 2019 is likely to be more of the same. When asked whether lawmakers might eventually provide increased funds to hire auditors and collectors, Republican Hill staffers told ProPublica that the members of Congress they work for will follow the lead of the new IRS commissioner, Charles Rettig. If Rettig, who was confirmed in September, asks for more money for the 2020 budget, Congress might support it, they said.

Congress has Targeted the IRS’ Enforcement Budget for Cuts

Percent Change Since 2010 Budget

2010

2018

IRS Customer Service Budget

-4%

IRS Enforcement Budget

-23%

Note: 2018 Dollars.

Source: ProPublica analysis of data from the IRS and Congress.gov

Rettig, a tax lawyer with decades of experience defending wealthy clients against the IRS, has been publicly noncommittal so far. Pressed by Democratic senators at his confirmation hearing, all he would say was that “one of [his] top priorities would be to analyze the budget.” This was a stark contrast to Koskinen’s outspoken advocacy.

In the meantime, the IRS continues to shrink. Annual revenue from audits is down by about $10 billion, adjusted for inflation, since 2010, and billions more have been lost by not pursuing nonfilers and other sources of unpaid tax debts. If the IRS had maintained a level of enforcement similar to that of the years from 2004 to 2010, it would have collected about $18 billion more than it did last year, ProPublica estimates. The total shortfall since 2011 has been about $95 billion.

The IRS Is Collecting Far Less Revenue From Audits

Average Revenue

$23B

$14B

2008-2010

2015-2017

Note: Includes enforcement revenue from both examinations and appeals. 2017 dollars.

Source: IRS

The true cost is likely much larger, since IRS enforcement has a magnifying effect. People who undergo audits are less likely to evade taxes in the future, just as nonfilers who are caught are more likely to file voluntarily, studies have shown. Take away enforcement, and evaders are emboldened and grow in number.

One factor that has helped obscure this deterioration is the growth of the U.S. economy, which has pushed up tax receipts since the Great Recession. The IRS took in $3 trillion in 2017, up from $2 trillion in 2011. Republicans have pointed to this as proof that nothing is amiss: “You could argue,” Crenshaw said to Koskinen in a 2016 hearing, “if you collect more revenue with less money, then maybe if you had even less money you would collect even more revenue.”

Federal Tax Receipts as a Percentage of GDP Have Dipped

1997

2018

18%

15%

Source: IRS and Bureau of Economic Analysis, ProPublica analysis

But the increase in receipts is misleading. During that period, for example, the top marginal tax rate went up, so the richest taxpayers were paying more. More important, in 2011, Americans had deep losses from the 2008 financial crisis that were still depressing tax obligations. In the following years, receipts outpaced economic growth, a typical phenomenon during recoveries. Still, that increase was weaker than government analysts expected. Even before last year’s tax cuts, tax receipts as a percentage of GDP never reached the levels of the late 1990s or mid-2000s.

It will be years before we know whether tax cheating has in fact increased. The last IRS report to assess what it calls the “tax gap,” issued in 2016, analyzed the period from 2008 to 2010. It found that taxpayers had paid about 82 percent of the taxes they truly owed. If the rate of compliance in 2017 was the same, that would translate to $667 billion in missing taxes.

Even the tiniest drop in compliance would cost billions more. But no one we spoke with who has worked at the IRS thinks the drop is likely to have been small. “One day it will be clear,” Koskinen said, “but by that time, you’re in deep yogurt.”

After Budget Cuts, the IRS’ Work Against Tax Cheats Is Facing “Collapse”

Audits and criminal referrals are down sharply since Congress cut the tax agency’s budget and management changed priorities.

After Budget Cuts, the IRS’ Work Against Tax Cheats is Facing “Collapse”

by Jesse Eisinger and Paul Kiel

Audits and criminal referrals are down sharply since Congress cut the tax agency’s budget and management changed priorities.

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"whistleblower?" parley ideol entr?

freedom farce int'l pending prosperity gospel?

https://web.archive.org/web/20170719084252/http://www.sherrypeeljackson.org/

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https://www.propublica.org/article/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.

The Supreme Court’s decision in Citizens United unleashed these groups, typically organized as 501(c)(4)nonprofits, to spend unlimited amounts of money on campaign ads. Their role in American politics has grown increasingly central. In theory, the new IRS policy could have a significant impact on the tax agency’s ability to detect improper contributions — and thereby curb illegal campaign spending.

But in practice, even critics acknowledge that the IRS very rarely audits nonprofits. In other words, the IRS will no longer receive information that it was seemingly making little use of. And the information in question was already shielded from the public’s view.

Up to now, IRS regulations have required all types of nonprofits to report the names and addresses of each major donor, as well as the dollar amount the donor contributed that year, on their tax returns. But the IRS can override this reporting requirement in certain cases when it finds that the information is “not necessary for the efficient administration of the internal revenue laws.”

That’s what the IRS did last week — relieving most nonprofits, excluding 501(c)(3) charities and]

The Treasury Department pointed to 2015 changes to the tax code that exempted from taxation many gifts or contributions to nonprofits. Without the need to ensure that donors were paying taxes on their contributions, the department reasoned, there was no need for the identities of the donors. foundations, of the need to report the names and addresses of major donors. “The IRS simply does not need tax returns with donor names and addresses to do its job in this area,” Treasury Secretary Steven Mnuchin said in a press release.

Critics of the move, however, question the sincerity of that rationale. They note that a number of largely conservative organizations, like those affiliated with billionaire brothers Charles and David Koch, have lobbied Congress and the Trump administration to eliminate this reporting requirement since 2017. Treasury’s “narrow argument that the gift tax has been eliminated so they don’t need this for the specific purpose of enforcing tax law — given the timing, that’s problematic,” said Brendan Fischer of the watchdog group Campaign Legal Center.

The Treasury also cited a more partisan reason for the decision: “Conservative tax-exempt groups were disproportionately impacted by improper screening in the previous Administration.” Allegations during the Obama administration that IRS officials had subjected Tea Party groups seeking tax-exempt status to improper scrutiny touched off a political firestorm that led several senior IRS officials to resign.

But a Treasury Department inspector general report ultimately found that both conservative and liberal groups had been subject to such IRS scrutiny and that it had occurred during both the Bush and Obama administrations.

It remains unclear the extent to which the IRS’ decision will reduce oversight of election spending. As ProPublica and others have documented, nonprofits have become a common vehicle for election spending while shielding their donors from public view.

Research Tax-Exempt Organizations

Updated: Nonprofit Explorer

We have added raw data from more than 1.9 million electronically filed Form 990 documents dating back to 2010.

What the IRS makes public about donors to nonprofits, including those involved in political activities, however, has always been fairly limited. The public sees only the number of major contributors and how much each gave in a year. The identities of the donors are redacted. Still, journalists and groups like the Center for Responsive Politics have used the specific quantities contributed by individual donors — even without knowing who the donor is — to guide research on money in politics.

Under the new IRS policy, the public will still have access to this information, according to the Treasury Department. “The same information about tax-exempt organizations that was previously available to the public will continue to be available,” Mnuchin said.

Critics of the new policy have also argued that the IRS decision will limit the agency’s ability to detect illegal political contributions by foreign nationals. It’s legal for foreign nationals to donate to nonprofits, though federal election law bars them from spending money to influence American elections. Press reports suggest federal investigators are probing whether Russian nationals funneled campaign contributions through the NRA. (The NRA has denied the allegation.)

These critics note that, even though staffing and budget shortfalls have led the IRS to do little policing of nonprofit contributions, that doesn’t excuse further hampering its potential to do so. “The IRS was already a toothless watchdog,” said Robert Maguire, who investigates politically active nonprofit groups at the Center for Responsive Politics. “Now it will also become a deaf and blind watchdog.”

Supporters of the new policy counter that it’s not the IRS’ job to enforce campaign finance laws and that there are limits on sharing tax information with government agencies responsible for enforcing those laws, the Federal Election Commission and the Justice Department. Where there is suspicion of an improper donation, they say, the IRS still has the ability to investigate by requesting information from the nonprofit.

“Even if there was a possible improper donation, a more appropriate data request (that honors First Amendment associational rights) would be for the IRS to only ask for donation information from suspect sources, not everyone,” David Keating, the president of the Institute for Free Speech, wrote in an email.

Still, the change means it’s one step more difficult for the IRS to take action, in those rare cases when it’s inclined to do so.

---

https://www.exposedbycmd.org/2018/07/11/democrats-reintroduce-disclose-act-combat-dark-money-poison/

On June 27, Democrats in both chambers of Congress reintroduced the DISCLOSE Act to provide what the lead Senate sponsor, Sheldon Whitehouse (RI-D), calls “a commonsense solution to restore transparency and accountability in our political system.”

The DISCLOSE Act of 2018 is the most recent iteration of a bill that Democrats have pushed since the Supreme Court’s ruling in Citizens United v. FEC, which eliminated a century-old federal ban on political spending by corporations.

The “Democracy Is Strengthened by Casting Light On Spending in Elections Act” (DISCLOSE) was first introduced in 2010 by Representative Chris Van Hollen and Senator Chuck Schumer. DISCLOSE passed in the House that year but a Republican filibuster threat doomed it in the Senate, despite support from 59 senators.

DISCLOSE ACT WOULD SHINE A LIGHT ON DARK MONEY

The 2018 Senate bill comes out of the gate with all Senate Democrats and both Independents supporting it. The companion legislation in the House, introduced by Congressman David Cicilline (D-RI), already has 159 cosponsors.

As things stand today, corporations and wealthy donors can make unlimited expenditures to support or oppose political candidates through super PACs, independent expenditures, and dark money groups, with much of it hidden from the public. The result is a system where billionaires and large corporations dominate the political landscape with little or no accountability. As two Princeton political scientists put it in a recent study of influence in American politics, “economic elites and organized interest groups play a substantial part in affecting public policy, but the general public has little or no independent influence.”

The Brennan Center for Justice released a report in 2016 that found that “dark money sources often hold direct economic interests in the election outcome.” In the absence of effective disclosure laws, special interests are able to launch campaigns on policy issues and influence how people vote while hiding their stake in the outcome. “When viewers learn more about an ad’s sponsor — for instance, that it’s an out-of-state group or a group that does not report its donors — they may become not only more skeptical about the ad’s message but also more critical of the ad’s intended beneficiary,” the report concluded.

In a recent interview, Rep. Cicilline and Sen. Whitehouse spoke about the importance of the DISCLOSE Act in restoring the integrity of our democracy. “Eight out of ten” Americans do not have faith in our democratic institutions due to the influence of money-in-politics, Whitehouse said. He emphasized that Americans want to have a government that “works for the benefit of the many.”

According to Sen. Whitehouse, dark money “has been poisonous to the American democracy we cherish.” Whitehouse believes that increased transparency would encourage congressional debate about the “merits of clearing dark money out of our political system.”

“The cockroaches are everywhere. I say let’s turn on the lights,” Whitehouse said.

Common Cause, a leading nonpartisan group fighting for campaign reform, praised the proposed law as “grounded in the principle expressed by the late Supreme Court Justice Louis Brandeis that ‘sunshine is the best disinfectant.'”

The DISCLOSE Act of 2018 would mandate that organizations spending money in elections —including super PACs and tax-exempt 501(c)(4) groups — must promptly disclose their donors who have given $10,000 or more during an election cycle, and report expenditures of $10,000 or more on election ads within 24 hours. In addition, the bill includes provisions to prevent complex money webs from shielding the identities of donors.

Like the 2017 version of the bill, the 2018 DISCLOSE Act would also “ban campaign contributions and expenditures by corporations that are controlled, influenced, or owned by foreign nationals.”

In a new provision, the bill would repeal controversial riders the Republicans forced through on spending bills that prevent the Security and Exchange Commission (SEC) from requiring public companies to disclose their political spending to shareholders, bar the IRS from developing post-Citizens United regulations on political spending by 501(c)(4) organizations,and block the government from requiring federal contractors to disclose their political donations.

Lastly, the bill contains a “Stand by Your Ad” provision, authored by Sen. Wyden (D-OR), requiring corporations, unions, and other organizations paying for political ads to disclose their top five funders. A similar proposal earned the support of 59 senators in 2010 but was filibustered by the Republicans.

The 2018 DISCLOSE Act is supported by numerous reform groups, including Americans for Campaign Reform, Brennan Center for Justice, Campaign Legal Center, Citizens for Responsibility and Ethics in Washington, Common Cause, Democracy 21, Demos, League of Women Voters, People For the American Way, Public Citizen, and the Sunlight Foundation.

VIGOROUS OPPOSITION FROM THE RIGHT

Opponents of the DISCLOSE Act include the Institute for Free Speech (formerly known as the Center for Competitive Politics), The Heritage Foundation, Americans for Tax Reform, The American Conservative Union, CatholicVote.org, and Citizens Against Government Waste.

These groups argue that the act violates the First Amendment, but a Brennan Center analysis found that “there can be no credible doubt” that a similar 2012 version of the DISCLOSE Act was fully constitutional. As Common Cause points out, “the Supreme Court has repeatedly rejected any arguments that disclosure requirements silence speech” and has continually upheld their constitutionality on the grounds that the public has a right to know who is influencing an election. Even the late Justice Antonin Scalia supported disclosure, writing in Doe v. Reed that “[r]equiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed.”

Senator Elizabeth Warren said in an April speech that the DISCLOSE Act would expose the “billionaires [who] have been pouring unlimited, secret money into the hands of carefully picked candidates who will do their bidding.”

Those billionaires fund many of the organizations that oppose the DISCLOSE Act. The Institute for Free Speech (IFS), for example, is funded by conservative donors — such as Richard Uihlein and the Koch brothers — who support Republican candidates and may not want their donations made public.

In 2016, The Bradley Foundation gave IFS $125,000 to fight those calling for greater disclosure rules, something the Bradley Foundation claims will “chill speech,”according to documents acquired by the Center for Media and Democracy.

Rep. Cicilline argues that the lack of disclosure after Citizens United has led to more business-friendly legislation and that dark money in politics leads to “bad public policy.” “The DISCLOSE Act will bring a new level of transparency to our elections. It will ensure the American people know who is really fighting for them. It will restore public faith in our government. It will mark a major step towards fixing what’s broken in Washington,” Cicilline said.

The DISCLOSE Act is part of the Democrats’ broader plan, called “A Better Deal for Our Democracy,” aimed at fixing the federal campaign finance system, improving elections, and strengthening ethics laws.

---

https://en.wikipedia.org/wiki/501(c)_organization

501(c) organization is a nonprofit organization in the federal law of the United States according to 26 U.S.C. § 501 and is one of 29 types of nonprofit organizations exempt from some federal income taxes. Sections 503 through 505 set out the requirements for attaining such exemptions. Many states refer to Section 501(c) for definitions of organizations exempt from state taxation as well. 501(c) organizations can receive unlimited contributions from individuals, corporations, and unions.

For example, a nonprofit organization may be tax-exempt under section 501(c)(3) if its primary activities are charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition, preventing cruelty to children, or preventing cruelty to animals.

Types

According to the IRS Publication 557, in the Organization Reference Chart section, the following is an exact list of 501(c) organization types and their corresponding descriptions.^[1][a]

501(c)(1) – Corporations Organized Under Act of Congress (including Federal Credit Unions)
501(c)(2) – Title-holding Corporations for Exempt Organizations^[3]
501(c)(3) – Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations
501(c)(4) – Civic Leagues, Social Welfare Organizations, and Local Associations of Employees
501(c)(5) – Labor, Agricultural and Horticultural Organizations
501(c)(6) – Business Leagues, Chambers of Commerce, Real Estate Boards, etc.
501(c)(7) – Social and Recreational Clubs
501(c)(8) – Fraternal Beneficiary Societies and Associations
501(c)(9) – Voluntary Employee Beneficiary Associations
501(c)(10) – Domestic Fraternal Societies and Associations
...
....

...

501(c)(3)[edit]

Main article: 501(c)(3) organization

501(c)(3) tax-exemptions apply to entities that are organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for testing for public safety, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals. The 501(c)(3) exemption also applies for any unincorporated community chest, fund, cooperating association, or foundation that is organized and operated exclusively for those purposes.^[34][35] There are also supporting organizations—often referred to in shorthand form as "Friends of" organizations.^{[36][37][38][39][40]} 26 U.S.C. § 170, provides a deduction, for federal income tax purposes, for some donors who make charitable contributions to most types of 501(c)(3) organizations, among others.

Organizations described in section 501(c)(3) are prohibited from conducting political campaign activities to intervene in elections to public office.^[41] On the other hand, public charities (but not private foundations) may conduct a limited amount of lobbying to influence legislation. Although the law states that "No substantial part..." of a public charity's activities can go to lobbying, charities may register for a 501(h) election allowing them to lawfully conduct lobbying activities as long as their financial expenditure does not exceed a specified amount.^[42] 501(c)(3) organizations risk loss of tax exempt status if any of these rules are violated.^[43][44]

A 501(c)(3) organization is allowed to conduct some or all of its charitable activities outside the United States.^[45][46] Donors' contributions to a 501(c)(3) organization are tax-deductible only if the contribution is for the use of the 501(c)(3) organization, and that the 501(c)(3) organization is not merely serving as an agent or conduit of a foreign charitable organization.^[47] Additional procedures are required of 501(c)(3) organizations that are private foundations.^[46][48]

501(c)(4)[edit]

A 501(c)(4) organization is a social welfare organization, such as a civic organization or a neighborhood association. An organization is considered by the IRS to be operated exclusively for the promotion of social welfare if it is primarily engaged in promoting the common good and general welfare of the people of the community.^[49][50] Net earnings must be exclusively used for charitable, educational, or recreational purposes.^[51]

According to The Washington Post:^[52]

These groups are allowed to participate in politics, so long as politics do not become their primary focus. What that means in practice is that they must spend less than 50 percent of their money on politics. So long as they don't run afoul of that threshold, the groups can influence elections, which they typically do through advertising.

Allowed activities[edit]

501(c)(4) are similar to 501(c)(5) and 501(c)(6) in that the organizations may inform the public on controversial subjects and attempt to influence legislation relevant to its program^[53] and, unlike 501(c)(3) organizations, they may also participate in political campaigns and elections, as long as their primary activity is the promotion of social welfare and related to the organization's purpose.^[54][55]

The income tax exemption for 501(c)(4) organizations applies to most of their operations, but income spent on political activities—generally the advocacy of a particular candidate in an election—is taxable.^[56] An "action" organization generally qualifies as a 501(c)(4) organization.^[57] An "action" organization is one whose activities substantially include, or are exclusively,^[58] direct or grassroots lobbying related to advocacy for or against legislation or proposing, supporting, or opposing legislation that is related to its purpose.^[59]

A 501(c)(4) organization may directly or indirectly support or oppose a candidate for public office as long as such activities are not a substantial amount of its activities.^[49][60]

A 501(c)(4) organization that lobbies must register with the Clerk of the House if it lobbies members of the House or their staff.^[55] Likewise, a 501(c)(4) organization must register with the Secretary of the Senate if it lobbies members of the Senate or their staff.^[55] In addition, the 501(c)(4) organization must either inform its members the amount it spends on lobbying or pay a proxy tax to the Internal Revenue Service.^[55] Lobbying expenses and political expenses are not deductible as business expenses.^[55]

Electioneering communications[edit]

The use of 501(c)(4), 501(c)(5), and 501(c)(6) organizations has been affected by the 2007 FEC v. Wisconsin Right to Life, Inc., in which the Supreme Court struck the part of the McCain-Feingold Act that prohibited 501(c)(4), 501(c)(5), and 501(c)(6) from broadcasting electioneering communications. The Act defined an electioneering communication as a communication that mentions a candidate's name 60 days before a primary or 30 days before a general election.

Contributions[edit]

Contributions to 501(c)(4) organizations are not tax-deductible as charitable donations unless the organization is either a volunteer fire department or a veterans organization.^[61][62] Dues or contributions to 501(c)(4) organizations may be deductible as a business expense under IRC 162, although amounts paid for intervention or participation in any political campaign, direct lobbying, grass roots lobbying, and contact with certain federal officials are not deductible.^[63] If a 501(c)(4) engages in a substantial number of these activities, then only the amount of dues or contributions that can be attributed to other activities may be deductible as a business expense.^[64]

The organization must provide a notice to its members containing a reasonable estimate of the amount related to lobbying and political campaign expenditures, or else it is subject to a proxy tax on its lobbying and political campaign expenditures. It must also state that contributions to the organization are not deductible as charitable contributions during fundraising.^[63]

501(c)(4) organizations are not required to disclose their donors publicly.^[65] The lack of disclosure has led to extensive use of the 501(c)(4) provisions for organizations that are actively involved in lobbying, and has become controversial.^[66][67] Criticized as "dark money", spending from these organizations on political TV ads has exceeded spending from Super PACs.^[68][69] Spending by organizations that do not disclose their donors has increased from less than $5.2 million in 2006 to well over $300 million in the 2012 election.^[70]

History[edit]

The origins of 501(c)(4) organizations date back to the Revenue Act of 1913, which created a new group of tax-exempt organizations dedicated to social welfare in a precursor to what is now Internal Revenue Code Section 501(c)(4).^[71]

The Protecting Americans from Tax Hikes Act of 2015 introduced a new requirement on 501(c)(4) organizations.^[72] Within 60 days of the organization's formation, a 501(c)(4) organization is required to file Form 8976 with the Internal Revenue Service as notification that it is operating as a section 501(c)(4) organization.^[73][74] The Internal Revenue Service will acknowledge receipt of the notification, but the acknowledgment is not a determination that the organization qualifies for section 501(c)(4) tax-exempt status.^[74] A 501(c)(4) organization is not required to send the notification if the organization was formed on or before July 8, 2016, and it either applied for a determination letter using Form 1024 or filed a Form 990 between December 19, 2015 and July 8, 2016.^[74]

501(c)(5)[edit]

A 501(c)(5) organization is a labor organization, an agricultural organization, or a horticultural organization. Labor unions, county fairs, and flower societies are examples of these types of groups. Labor union organizations were a primary benefactor of this organization type, dating to the 19th century. According to the Internal Revenue Service, a 501(c)(5) organization has a duty of providing service to its members first. The organization's benefits may not inure to a specific member, but the rules for inurement vary among the three different types of organizations under this segment. A 501(c)(5) organization can make unlimited corporate, individual, or union contributions.^[75]

A labor organization may pay benefits to its members because paying benefits improves all members' shared working conditions. An agricultural organization can provide financial assistance to its members in order to improve the conditions of those engaged in agricultural pursuits generally. Members can benefit in incidental ways from the organization's exempt activities as long as the benefits are available to all persons.^[75]

History[edit]

The first exemption for labor organizations from corporate income tax was enacted as part of the Payne–Aldrich Tariff Act of 1909.^[76][77]

The Revenue Act of 1913 excluded "labor, agricultural, or horticultural organizations" from income tax liability.^[77][78]

Contributions and activities[edit]

Much like 501(c)(4) and 501(c)(6) organizations, 501(c)(5) organizations may also perform some political activities.^[79] 501(c)(5) organizations are allowed to attempt to influence legislation that is related to the common union interests of its members.^[80]

501(c)(5) organizations can receive unlimited contributions from corporations, individuals, and labor unions. The names and addresses of contributors are not required to be made available for public inspection.^[81] All other information, including the amount of contributions, the description of noncash contributions, and any other information, is required to be made available for public inspection unless it clearly identifies the contributor.

A union membership dues paid to a 501(c)(5) organization are generally an ordinary and necessary business expense.^[82] The membership dues are tax-deductible in full unless a substantial part of the 501(c)(5) organization's activities consists of political activity, in which case a tax deduction is allowed only for the portion of membership dues that are for other activities.^[82]

Because associations involved in fishing and seafood harvesting were having difficulties qualifying for reduced postal rates,^[83] in 1976 Congress established Internal Revenue Code Section 501(5) to define "agriculture" as the art or science of cultivating land, harvesting crops or aquatic resources, or raising livestock.^[77]

501(c)(6)

A 501(c)(6) organization is a business league, chambers of commerce like the U.S. Chamber of Commerce, a real estate board, a board of trade, a professional football league or an organization like the Edison Electric Institute and the Security Industry Association, that are not organized for profit and no part of the net earnings goes to the benefit of any private shareholder or individual.^[84]

Qualifications for exemption[edit]

A business league may qualify if it is an association of persons having a common business interest, whose purpose is to promote the common business interest and whose activities improve business conditions rather than actually conduct the business itself.^[85] Members of the organization must be of the same trade, business, occupation, or profession in order to qualify.^[86] A chamber of commerce or board of trade could qualify for similar reasons except that they may promote the common economic interests of all the commercial enterprises in a given trade or community.^[87]

An association would not qualify if its principal activities consist of securing benefits and performing particular services for members.^[88]

An association that promotes the common interests of certain hobbyists would not qualify because the Internal Revenue Service does not consider hobbies to be activities conducted as businesses.^[89]

An organization whose primary activity is advertising the products or services of its members does not qualify because the organization is performing a service for its members rather than promoting common interests.^[90][91] If an organization's primary activity is advertising the products or services of its members' industry as a whole, however, the organization will generally qualify if it also performs other services for its members.^[92]

Contributions and activities[edit]

Much like 501(c)(4) and 501(c)(5) organizations, 501(c)(6) organizations may also perform some political activities.^[79] 501(c)(6) organizations are allowed to attempt to influence legislation that is related to the common business interests of its members.^[80]

501(c)(6) organizations can receive unlimited contributions from corporations, individuals, and labor unions. The names and addresses of contributors are not required to be made available for public inspection.^[81] All other information, including the amount of contributions, the description of noncash contributions, and any other information, is required to be made available for public inspection unless it clearly identifies the contributor. The U.S. Chamber of Commerce is a large political spender, and Freedom Partners used its status as a 501(c)(6) organization to raise and distribute over $250 million during the 2012 election campaigns without disclosing its donors.^[93] The group's existence was not publicly known until nearly a year after the election.

A business' membership dues paid to a 501(c)(6) organization are generally an ordinary and necessary business expense.^[82] The membership dues are tax-deductible in full unless a substantial part of the 501(c)(6) organization's activities consists of political activity, in which case a tax deduction is allowed only for the portion of membership dues that are for other activities.^[82]

History

The predecessor of IRC 501(c)(6) was enacted as part of the Revenue Act of 1913^[94] likely due to a U.S. Chamber of Commerce request for an exemption for nonprofit "civic" and "commercial" organizations, which resulted in IRC 501(c)(4) for nonprofit "civic" organizations and IRC 501(c)(6) for nonprofit "commercially-oriented" organizations.^[84] The Revenue Act of 1928 amended the statute to include real estate boards.^[95] In 1966, professional football leagues were added to the described organizations.^[96]

The Revenue Act of 1913 related to professional football leagues had both antitrust and tax provisions: The antitrust provision was enacted to permit the merger of the National and American Football Leagues to go forward without fear of an antitrust challenge under either the 1914 Clayton Antitrust Act or the 1914 Federal Trade Commission Act.^[97] IRC 501(c)(6) amendment was enacted in 1966 to ensure that a professional football league's exemption would not be jeopardized because it administered a players' pension fund.^[98] Additionally, a professional sports league's exemption is not to be jeopardized because its primary source of revenue is the sale of television broadcasting rights to its games because the broadcasting of games increases public awareness of the sport.^[99][100]

In 2013, Senator Tom Coburn introduced legislation to disallow a tax exemption for the National Football League, the Professional Golfers' Association, and other professional sports organizations.^[101][102] Coburn estimated the tax exemption cost $100 million, but he said he could not get other members of Congress to support the legislation.^[101][102]

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wapo

Here's the key difference: Super PACs must disclose their donors while 501(c)(4)s do not. If you are a donor looking to influence election but do not want to reveal your identity, the 501(c)(4) is an attractive option through which to send your cash.

Why has the IRS gotten so many 501(c)(4) applications in recent years?

In 2010, the Supreme Court's landmark "Citizens United" decision cleared the way for corporations and labor unions to raise and spend unlimited sums of money, and register for tax-exempt status under section 501(c)(4). So what happened next is not surprising. The IRS was flooded with applications from groups seeking the special 501(c)(4) designation. Applications more than doubled following the High Court's ruling.

So which groups did the IRS single out?

In short, conservative ones. The IRS says it flagged groups with "tea party" and "patriot" in their names for extra scrutiny. The agency apologized and said partisanship did not motivate the tactics; rather, it was a misguided effort to come up with an efficient way to deal with the influx of applications. In addition, an inspector general's report set to be released this week says the agency also gave extra scrutiny to groups that criticized the government and sought to educate Americans about the U.S. Constitution.

http://www.washingtonpost.com/blogs/the-fix/wp/2013/05/13/benghazi-irs-immigration-and-repealing-obamacare-again-the-week-to-come-in-congress/

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june 1 2016

https://www.nytimes.com/2014/07/02/us/irs-commissioner-john-koskinen-on-hot-seat-has-history-of-bureaucratic-rescue-jobs.html

I.R.S. Commissioner John Koskinen, on Hot Seat, Has History of Bureaucratic Rescue Jobs

Image

John Koskinen, the new I.R.S. commissioner, is at the center of the worst firestorm in the agency’s recent history and Washington’s most prominent punching bag.CreditGabriella Demczuk/The New York Times

By Alan Rappeport

July 1, 2014

WASHINGTON — It was clear from the start that John Koskinen, the new commissioner of the Internal Revenue Service, was in for a long night.

At a Capitol Hill hearing, Republican members of Congress pressed him about emails missing from the hard drive of Lois Lerner, a former agency official at the center of a scandal over the scrutiny of applications for tax-exempt status. They wanted to know if he had any evidence that a crime was committed in the destruction of the messages.

Mr. Koskinen seemed fed up. “I have no evidence whether she beat her dog, whether she beat children,” he told them, his voice rising. “I have no evidence of a whole series of things.”

For nearly four hours at the June 23 hearing, Mr. Koskinen, a Yale-trained lawyer who says he gave up practicing law for Lent one year and never looked back, absorbed cascades of verbal salvos and tossed back several of his own. Hired to rehabilitate an agency that went awry targeting political groups, Mr. Koskinen’s style — quick-witted to the point of being flip and sometimes impolitic — has left some wondering if he is the right person to restore the I.R.S.’s battered credibility.

He was two years into retirement in May 2013, filling his days with tennis, theater and grandchildren, when he received a series of urgent telephone calls. The White House and Treasury Department wanted to know if the then 73-year-old with a history as a Washington fixer would be willing to come back to work for one last rescue mission. The I.R.S. was in trouble, and they wanted him to run it.

After a moment of contemplation, Mr. Koskinen, who as a child dreamed of being president, agreed. The decision sent him into the center of the worst firestorm in the agency’s recent history and made him Washington’s most prominent punching bag.

“I think I need counseling,” Mr. Koskinen said, sitting at the head of the long wooden conference table in his beige and brown third-floor office at the I.R.S. headquarters. “I’m a recidivist, going from one kind of crisis to another.”

Mr. Koskinen’s résumé reads like a list of America’s biggest bureaucratic nightmares. Filling a top role in the Office of Management and Budget during the 1990s shutdown; steering the team tasked with averting the Y2K digital apocalypse at the turn of the century; leading Freddie Mac as the financial crisis unfolded.

The I.R.S. crisis has been inflamed by the recent revelations that two years’ worth of emails sent and received by Ms. Lerner disappeared. Although the computer malfunction occurred before Mr. Koskinen’s time at the agency, he has been accused of being slow to alert Congress of the lost evidence; he knew about the lost emails two months before he shared the information. Some critics, claiming he has a bad attitude, have said it is already time for him to go.

In one testy exchange last week with the House Oversight Committee chairman, Representative Darrell Issa, Mr. Koskinen said: “I did not say I would provide you emails that disappeared. If you have a magical way to do that, I would be happy to hear about it.”

Questioned later on Ms. Lerner’s intentions, he replied: “I cannot enter into Lois Lerner’s mind. I have never met her.”

Such responses have not won Mr. Koskinen sympathy from Republicans. Representative Thomas Massie, a Republican from the Kentucky district where Mr. Koskinen grew up, said he has not been pleased with how the commissioner has handled himself at the hearings, pointing to what he called evasive answers.

“I’d say he’s exercised poor judgment,” said Mr. Massie, who once worked at the same oil refinery in Catlettsburg, Ky., where Mr. Koskinen spent summers digging foundations with a jackhammer.

At the latest hearing, Mr. Koskinen sat alone at the witness table in a dark gray suit, powder blue shirt and patterned tie. He tapped his fingers gently on a leather folder and grinned serenely, responding to questions with flurries of facts and occasional dashes of sarcasm, all with a clipped monotone.

Despite the hole the I.R.S. finds itself in at the moment, Mr. Koskinen seems to relish the experience in his own way, verbally jousting with skills honed on the debate team at Duke while bringing his management acumen to bear to improve communication within the agency.

Mr. Koskinen has apologized to those whose applications for tax-exempt status were delayed because of a targeting of political labels. The agency came under fire after revelations last year that it brought additional scrutiny to applications submitted by groups with the terms “Tea Party” or “Patriots” in their names. But Mr. Koskinen maintains that he has seen no other wrongdoing or cover-up.

Treasury Secretary Jacob J. Lew continues to express confidence in Mr. Koskinen and said the commissioner was the administration’s top choice for the job because of his experience turning around large organizations.

“That was the set of skills very much needed at the I.R.S. at the point when he was nominated,” Mr. Lew said in an interview. “It’s almost the definition of a thankless job.”

Mr. Koskinen’s “Mr. Fix-It” reputation and experience in both the Bill Clinton and George W. Bush administrations made him a sensible choice for the role, but some have wondered about his lack of tax experience and have questioned his motivations.

Competitive by nature, Mr. Koskinen learned to take hits and dish them out playing high school football in Ashland, Ky., during the 1950s. A linebacker and center, he kept spirits high despite losing seasons and did his best to counsel younger players, said Herbert Conley, at former teammate of Mr. Koskinen who went on to become a coach.

“He led by example a lot; he was aggressive and he would get after people,” Mr. Conley said. “He was a good tackler.”

Mr. Koskinen went on to study physics at Duke before attending law school at Yale. Eager to enter politics, he took a job as an assistant to Senator Abraham A. Ribicoff, a Democrat from Connecticut. But after Richard M. Nixon was elected president in 1968, Mr. Koskinen became disillusioned and turned to the private sector, joining the Palmieri Company, a corporate restructuring firm. He worked there for more than 20 years, eventually becoming chief executive.

A bit of a risk taker, Mr. Koskinen has said that chaos excites him and that once order is restored to an organization he often feels ready to move on. The strategy has reaped financial rewards over the years, as Mr. Koskinen has amassed a net worth that ranges between $7.1 million and $27.4 million, according to federal disclosure filings. The commissioner claims to be cautious with money, having never had run-ins with the I.R.S. before joining the agency and offering the fact that he has driven the same Toyota Celica to work every day for the last 16 years.

Since taking the top job at the I.R.S., Mr. Koskinen has tried to put a friendlier face on the agency, introducing a taxpayer “bill of rights,” embarking on a listening tour of its national offices and expressing a willingness to work with people who have trouble paying their tax bills for financial reasons.

“It’s a challenge, especially in a hostile environment,” he said of his latest turnaround project.

Meanwhile, the job is not expected to get any easier. An inspector general is scheduled to weigh in on the lost emails within weeks, and Mr. Issa made clear that his committee’s inquiry was not adjourned but in recess.

“This is probably one of the worst jobs in Washington,” said Bruce McConnell, who worked with Mr. Koskinen at the Office of Management and Budget and the Y2K Council. “People really don’t like the I.R.S.”

Sometimes on airplanes, Mr. Koskinen says, strangers shy away when he explains what he does for work. However, he still sees the I.R.S. as a crucial pillar of the economy, and he vows that despite what he calls intimidation tactics, he will serve the duration of his five-year term before retiring for good.

“I’m going to have to go into the witness protection program,” he said with a laugh. “So they can’t find me.”

Jun 22, 2016

show trial norm o

...American public-policy wonks have an informal honor roll of model public servants—people who may have gone in and out of government service, but who put country ahead of personal ambition or gain, who care about making government function well, and who are known for their decency and commitment to those goals. I have been privileged to know many of those on the honor roll, including well-known figures like Paul Volcker and Elliott Richardson, and less well-known ones like Chuck Bowsher, Elmer Staats, and Dwight Ink. At a recent celebration of Ink’s career, the 93-year old, who served seven presidents from Eisenhower to Reagan, was asked by a participant to name his model public servant. His answer: John Koskinen.

i don’t know Koskinen well. I met him when he was the deputy director for management at the Office of Management and Budget, one of the key posts filled by those most knowledgeable about how government works and how to make it work better; he took on the role of managing the government’s response to the looming Y2K crisis—a mention of which these days brings quizzical looks, because America did not have a crisis, thanks to Koskinen. But the threat of a massive breakdown in computers across the economy because they were not programmed to handle the transition to a new millennium was real, and could have precipitated disruption in arenas from banking to air travel, and cost many billions.

...Koskinen served in the federal government and as deputy mayor of Washington, D.C.; his last post in the federal government, one he assumed at the request of the George W. Bush administration, was as interim CEO and non-executive chairman of Freddie Mac at the time of the housing crisis. Happy in retirement, he was then called by the Obama Administration to serve as commissioner of the Internal Revenue Service—a thankless task at the best of times, but the request came at anything but the best of times.

The IRS had gone for several years with a commissioner held over from the Bush years, had been embattled by allegations of scandal over how the agency had handled classification of non-profits under the 501(c)4 rubric, had seen a brain drain of key tax professionals as its budget got slashed. It has labored with antiquated computers and information systems. No one in their right mind would have wanted the job.Koskinen took it for the reasons that Dwight Ink (and the wonk community) prized when he singled out Koskinen for praise. He did it to make government work better for the American people. And, like most other executive-branch nominees, he had to endure delays and a filibuster before being confirmed in December 2013.

His reward: an irresponsible, unprecedented, and politically motivated attack from Republicans in the House. Under Chairman Jason Chaffetz, the members of the House Oversight and Government Reform Committee just voted on a party-line basis to censure Koskinen, and are moving to impeach him. The censure move includes an attempt to block Koskinen’s government pension from his decades of public service—so add mean-spirited to the adjectives above.

The charges against Koskinen flow from Republican outrage over the way the IRS handled the applications for 501(c)4 status, with a particular animus toward Lois Lerner, the IRS official in charge of non-profit classifications. All of this happened well before Koskinen took the helm of the agency. The committee issued a subpoena in February 2014 for emails to and from Lerner and others in Cincinnati and Washington who made decisions about which groups to scrutinize, barely 8 weeks after Koskinen was sworn in. It was subsequently discovered that career officials in West Virginia erased backup tapes containing many of Lerner’s emails—the IRS inspector general, the same man who hit the agency for politically targeting groups applying for the 501(c)4 designation, found no evidence of nefarious intent, attributing the actions to a misunderstanding about the IRS order to preserve backup tapes. Chaffetz and the committee claim Koskinen learned about the erasure months before he notified the committee; Koskinen says he learned about the problem in April, 2014, and immediately undertook a massive effort to find the emails through other means—locating 24,000 of them by June, and notifying the committee to respond to their subpoena.

The censure resolution claims Koskinen “offered under oath a series of false and misleading statements utterly lacking in honesty and integrity”; the same nonpartisan IG said that Koskinen had been “extraordinarily cooperative” about the investigation. The resolution condemns statements he made to the Senate Finance Committee; its chair, Orrin Hatch said of Koskinen, “We can have our disagreements with him, but that doesn’t mean there’s an impeachable offense, [and] for the most part, he’s been very cooperative with us.”

It is true that in many respects the IRS’s response to the 501(c)4 controversy has been a comedy of errors, from the ham-handed way career employees in Cincinnati tried to cope with the deluge of requests for the status of groups in 2010 to the crash of Lerner’s hard drive and the erasure of the backup tapes. Koskinen appropriately criticized the way the IRS singled out political groups and delayed their applications, and as head of the agency, is appropriately subject to criticism for how the agency performs. It was a major embarrassment to him that he was assured the agency had records it did not in fact have, but as soon as he discovered the reality, he dealt with it swiftly and effectively. But criticism of his and the agency’s performance is one thing—censure and impeachment are very much another.

Congress, or at least the majority in Congress, often has deep disagreements with top executive officials over their official conduct. Sometimes that has resulted in a sense of Congress resolution, or a preamble to a measure, calling for the official’s resignation, a symbolic expression of frustration or disapproval. But it is exceedingly rare for public officials to face censure, much less impeachment. The latter has been reserved for judges or, historically, presidents (two) or Cabinet officers (one, 140 years ago.) The causes—the “high crimes and misdemeanors”—usually involve corruption or treason. The charges against Koskinen, that he delayed for weeks a response to a congressional subpoena, fall galaxies away from any previous, or any reasonable, definition of high crimes and misdemeanors, and represent an unprecedented overreach.

A little history is in order here, starting with the overheated and distorted criticism of the IRS and 501(c)4s. The IRS has under the law 29 separate categories classifying non-profit organizations, from religious and educational institutions and charities through business organizations and chambers of commerce, to cemeteries, credit unions, black-lung trusts, and veterans organizations. 501(c)3 is the category for charities, religious, and educational institutions, which can engage in no political or lobbying activities. 501(c)4 allows some lobbying and political work, but the category is for organizations that operate “exclusively as social welfare organizations” engaged in promoting the public good, with their net monies used for charitable, educational, or recreational purposes.

So how can groups like Crossroads GPS, the Karl Rove-crafted 501(c)4 that has poured millions upon millions into campaign ads in the past several election cycles, qualify? The answer, given the plain language of the law, is that they should not. The appropriate ISR classification for groups like Crossroads GPS is under section 527 of the IRS Code, for political organizations. So why opt instead for 501(c)4 status? Because 527s have to disclose their donors—and 501(c)4s do not. Bingo!

To be sure, the ability of sham social-welfare organizations like Crossroads GPS to apply for 501(c)4 status stemmed from a bureaucratic decision by the IRS decades ago to redefine “exclusively” as “primarily,” a step taken to give a tiny bit of flexibility and discretion to the agency. But as dark money proliferated in the aftermath of Citizens United, campaign-finance lawyers pushing the envelope of the law decided that they could use a standard of 50 percent of the organizations’ funds going for social welfare to meet the standard of “primarily,” knowing that an understaffed and beleaguered agency would probably not intervene.

In 2010, the IRS was hit with a veritable flood of applications for 501(c)4 status, overwhelming its resources. Career employees, seeking to separate real social-welfare organizations from those that were political ones, developed a set of keywords and terms, including many conservative and some (but fewer) liberal ones, in part because the lion’s share of the applications came from conservative groups. The terms included “Tea Party.” Why? A Tea Party organization—built around the term “party”—was openly political in nature, a clear 527 group, not exclusively or even primarily a social-welfare organization.

No question, the IRS officials handling this application process were naïve and ham-handed, and they inappropriately left many organizations, whether they should have qualified or not, twisting in the wind for months or years. But the problem itself stemmed from an illegitimate effort by many political consultants and their consiglieres to evade disclosure.

The Republican reaction to the IRS bungling was a clever and sustained effort to use the hated agency as a way to mobilize an angry constituency on the right, to enhance turnout in subsequent elections, and to raise money. The effort already succeeded at intimidating the agency—including Koskinen—from developing a new clear and appropriate standard, a bright line test, for achieving 501(c)4 designation, and even got the IRS, in a move that defies the law and common sense, to accept Crossroads GPS as a social-welfare organization.

There is a broader motive here, coming from radical forces that want to blow up all of government as we know it. Intimidating, undermining, and destroying the IRS’s capacity to carry out its role, to collect all the tax money that’s owed, to starve government, makes all agencies perform more poorly, and leads to a backlash against government. The poor service that results from cutting personnel also alienates taxpayers, frustrates their efforts to keep up with tax law, and makes it easier to evade the law.

As the veteran journalist Ted Gup pointed out in The Nation, the IRS budget has been cut by about $1 billion from its 2010 level, in inflation-adjusted terms, forcing the agency to eliminate some 13,000 people, and meaning that, at the height of last year’s tax-filing season, 90 percent of calls to the helpline went unanswered. An agency that used to have high morale and one of the best bureaucratic cultures, stressing excellence, is now embattled and demoralized. The budget cuts mean much less ability to conduct audits or find fraud, and reduce the government’s revenues by many billions each year, adding to deficits and debt.

In the McCarthy era, a prime symbol of witch hunts was the House Un-American Activities Committee (HUAC,) which used and misused congressional power to intimidate and punish witnesses and smear many individuals. It was abolished in 1975. Last week, former Speaker Newt Gingrich called for a new HUAC. If it were created, it would start with a contemporary role model.

NORM ORNSTEIN is a contributing writer for The Atlantic, a contributing editor and columnist for National Journal, and a resident scholar at the American Enterprise Institute for Public Policy Research.