IRS Scandal: Fact and Fiction

Since I deal with the IRS on a daily basis, I have been following the unfolding saga of the IRS scandal on a regular basis.  There has not been a lot of media coverage on this, and much of the coverage has been inaccurate or exaggerated so I thought I would point out some of the fact and fiction that I have heard on the topic.

This whole scandal got started when Lois Lerner apologized publicly in May of 2013 for unfairly targeting conservative groups for extra scrutiny prior to a release of a report by the Inspector General which confirmed that the targeting had occurred.  Many democrats and other sympathizers in the media have tried to convince people that this scandal only exists in the minds of angry right wing republicans.   On some occasions, President Obama has dismissed the scandal saying that there was no wrongdoing at the IRS.  He also once said the scandal was the result of a few poorly supervised low level employees at the Cincinnati office.  On the other hand, some on the right have exaggerated the evidence found and demanded that President Obama be imprisoned for his role in the matter.  Let’s review these three claims.

1. No wrongdoing at IRS – The improper extra scrutiny given to conservative leaning groups applying for tax exempt status has been well documented,  Lois Lerner acknowledged it, the Inspector General detailed it in his report, and various congressional investigations have also acknowledged that the targeting occurred.  A little later, I will detail some of the “wrongdoing” engaged in by the IRS.
2. Only low level employees involved – The parameters on who to target did not come from low level employees.  Emails and other recovered communications show that it was discussed by the top officials of the tax exempt unit in both Cincinnati and Washington DC.  It was also approved by top officials at the IRS commissioners office and was approved by William Wilkins, Chief Counsel for the IRS.  Those are not low level employees.  Also there are emails between top officials of the tax exempt unit saying that no action can be taken on the targeted list without their approval.
3. President Obama personally directed the illegal actions of the IRS – Although some have claimed this, I have found absolutely no evidence proving that the president knew anything about the illegal actions of the IRS when they occurred.  There were improper disclosures of  confidential tax information to white house staffers.  There were some meetings between white house staffers and top level IRS officials on key dates in the scandal.  But, there is no direct evidence that I am aware of which would prove any involvement or even knowledge of the scandal by the president.

There were three main areas of misconduct by the IRS that I will touch on.  First is the abuse of the power of the IRS to threaten and harass people for political purposes.  Lois Lerner made her disdain for the “tea party” very clear in her communications.  But, as I mentioned above, this scandal is about much more than Lois Lerner.  Numerous other top level IRS officials also participated in the effort to thwart the tea party groups.  The other major issue related to the targeting scandal is they showed complete disdain for congress and others trying to investigate the matter.  Congress issued a subpoena to the IRS for all of the emails and other communications to and from Lois Lerner and other officials involved in the targeting scheme.  They were initially told that her hard drive had crashed and the emails were not recoverable.  If that had been true, they would have clearly been in violation of the federal records retention act.  Eventually they admitted that there were over 420 backup tapes that had her emails but that they would be too difficult to search.  Then, in the summer of 2014, they admitted that over 400 of those tapes had been erased a few months earlier.  The backup tapes were destroyed 8 months after receiving the subpoena for the records from congress.  Imagine if you or I destroyed evidence that was subject to a congressional subpoena.  What serious consequences would we face?

The second area of illegal activity by the IRS is the release of confidential taxpayer data.  IRC§ 6103 prohibits the sharing of confidential tax return information and it was clearly violated multiple times in recent years by the IRS.  In June of 2014 after multiple requests from congress, information was received which showed 1.1 million pages of documents which included confidential tax information were illegally shared with the DOJ and FBI.  This particular incident does not appear to be directed solely at conservative groups as the records released pertained to nearly all applications for non-profit status that had been received by the IRS. In response to a lawsuit filed by a non-profit group, Cause of Action, it was revealed that the IRS had exchanged over 2,000 pages of confidential tax information with the white house in response to numerous requests received.  Another instance of illegally sharing confidential information occurred when donor lists from the tax return of National Organization for Marriage were illegally shared with a political opponent and used to harass individuals on the donor lists.

The third area of concern I wanted to mention is the “Secret Research Project” that the IRS carried out using donor lists improperly obtained from organizations applying for exempt status.  One tactic the IRS used routinely to delay applications for exempt status for organizations was to make numerous frivolous requests for additional information from the targeted entity.  They frequently asked for donor lists although they are not required to be provided and the IRS later admitted that they were not used in the evaluation of the applications for exempt status, but they were used in a secret research project.  There isn’t a lot of details on exactly what this secret research project entailed, but there are various emails referring to it and the need to keep all information about it from the Inspector General or any congressional investigators.  Let’s just say that somehow various people from the donor lists ended up with additional scrutiny from the IRS and in some cases other federal agencies.

My biggest concern with this scandal is that numerous people at the IRS have acted illegally and no one is being held accountable.  Lois Lerner is now retired and receiving her full pension.  As a matter of fact, during the time she was breaking the law she received over 100k in bonuses.  The only ones interested in holding the IRS accountable for their actions is the committee in the House of Representatives investigating the scandal.  The DOJ has announced it will not prosecute Lois Lerner or anyone else involved in the scandal.  The only thing congress has done which has impacted the IRS is that they cut their budget in frustration with the lack of cooperation.  There are many hard working employees at the IRS trying to do their jobs, but customer service is worse now than I have ever seen it in my 30+ years of assisting taxpayers.

One last thought: in case you were under the mistaken impression that this is the first time in history that the IRS has been used for political purposes,  Here’s an article which shows that the IRS was used by Roosevelt, Kennedy, Nixon, and Clinton.