Friday, October 27, 2006

IRS Commissioner accused of playing politics with collection actions

Front paged at Booman Tribune and ePluribus Media

It's not every day that four former IRS Commissioners blast the current Commissioner for playing politics before an election. But I guess it's not every IRS Commissioner that got to sit in on secret meetings six months after the 9/11 attacks to discuss White House policy regarding a response to the attacks and the creation of the Department of Homeland Security.

So when IRS Commissioner and former Deputy Director of Bush's Office of Management and Budget Mark W. Everson (appointed in 2003) makes the following comment, it makes you wonder if his priorities lie with the IRS or with his former boss:

The commissioner, Mark W. Everson, who has close ties to the White House, said in an interview that postponing collections until after the midterm elections, along with postponing notices to people who failed to file tax returns, was a routine effort to avoid casting the Internal Revenue Service in a bad light.

"We are very sensitive to political perceptions," Mr. Everson said Wednesday, adding that he regularly discussed with his senior staff members when to take actions and make announcements in light of whether they would annoy a powerful member of Congress or get lost in the flow of news.

It is wonderful that the IRS Commissioner regularly makes his decisions based on whether they would "annoy a powerful member of Congress". Especially since this Commissioner was tied closely to the Bush administration, and did such a wonderful job with the budgets in his tenure. Not only that, but I doubt that many IRS Commissioners have wives who has served as the chief ethics lawyer in the White House, as Everson's wife did until earlier this year.

I'll hold off on the obvious joke here about ethics in this White House, nepotism, cronyism and similar jokes, as it is too easy.

Generally speaking, when someone doesn't file their tax return or pay their taxes, they get a few "love notes" from the IRS. And in dealing with this pretty much full time, I can tell you that there are many occasions where the IRS uses a "take no prisoners" approach, threatening or imposing liens, assessing heavy penalties and fines as well as becoming much rougher regarding penalty abatement - even in cases of clear reasonable cause (which is the IRS standard).

Oftentimes, these notices or letters come even after the taxes are paid or the returns are filed, because "we can't stop the system from sending them out automatically" (I kid you not). But in this instance, there was a sudden decision to delay action with respect to the 1.2 million people whose lives were turned upside down by Hurricane Katrina with less than four weeks to go before the election, with the election cited as a reason to delay action.

"We just spoke with commissioner on the enforcement issue in the gulf," wrote Beth Tucker, the I.R.S. executive in charge of dealing with Hurricane Katrina victims, in an e-mail message to her team obtained by The New York Times. "He prefers that we do not resume any enforcement actions until after Dec. 31 due to the upcoming elections, holiday season, etc."


In the wake of Hurricane Katrina, when hundreds of thousands of people lost their homes, incomes and tax records, the I.R.S. delayed the filing deadline for 2005 taxes to Oct. 16, 2006, for those living in the counties most affected by the storm. Normally, those taxpayers who did not file returns or pay their taxes by that extended deadline would begin receiving notices and, eventually, collection demands from the I.R.S.

Mr. Everson's order delayed those collection efforts until early next year.

While I am certainly sensitive to the plight of those who were impacted by Hurricane Katrina (as any of you who have read my numerous diaries on the Gulf Coast can attest to), there has already been a six month extension to file 2005 taxes, in addition to all of the waivers, credits and other extensions that the IRS issued and allowed. And it isn't like the IRS is the kind of agency to suddenly have a soft spot for collecting monies that it feels it is due (unless you are ultra wealthy in which case the IRS will cut audits of estate tax returns).

To delay collection action for victims of Hurricane Katrina is noble. To do so for political purposes, right before an election is fishy, at best. Add in the fact that you admit to making political decisions with respect to collection actions, and your close ties to the White House (not to mention the stellar polls of republicans, the White House and Congress) and well, things start to smell more rotten.

And when you have not one, not two, not even three, but FOUR former IRS Commissioners - Commissioners who have served under Lyndon Johnson, Richard Nixon, Gerald Ford, Jimmy Carter, Poppa Bush and Bill Clinton ALL coming out against this, well, then there is a real problem.

And the words were generally not kind. Take Jerome Kurtz, who served as Commissioner under President Carter:

Former Commissioner Jerome Kurtz, who served under President Jimmy Carter, responded, "Never, never, never," when asked if he would have considered delaying broad-based enforcement actions like sending notices because of any election, national or local. "Oh my God, that is unthinkable," Mr. Kurtz said.

Former Commissioner Donald Alexander had the kindest words to say about this situation, and even that was more along the lines of "the other things Everson has done":

Donald C. Alexander, who was commissioner under Mr. Carter and Presidents Richard M. Nixon and Gerald R. Ford, said he would never have even thought about delaying enforcement because of an election, but added that he thought Mr. Everson was otherwise doing an excellent job.

Or former Commissioner Charles Rosetti, who served under both Poppa Bush and Clinton:

Charles O. Rossotti, the commissioner under President Bill Clinton and President Bush, said, "That's not appropriate." Mr. Rossotti added that "given the culture of the Treasury and the I.R.S., I just can't imagine anyone would even bring anything like that up."

And lastly, a former Commissioner that actually had some experience in this very area (regarding elections) when Spiro Agnew's actions were called into question before the 1968 election had the following to say:

Sheldon S. Cohen, the Johnson administration tax commissioner, said it was wrong to delay any broad-based enforcement actions because of a pending election. Mr. Cohen said, however, that delay might be appropriate in a matter involving a specific politician.

Three weeks before the 1968 presidential election, he said, he was told that Spiro T. Agnew, Richard Nixon's running mate, was being bribed with free groceries. "Just beginning an investigation, word of which might get into the news, would be unfair since we could not prove or disprove anything before the election," Mr. Cohen said, adding that before leaving office he arranged for an investigation, which ultimately resulted in Mr. Agnew's resignation and no-contest plea in 1973 to charges of income tax evasion.

Being a tax consultant that deals with these issues for a living, I can tell you that the only people that the IRS generally answer to are themselves. However, we have seen the IRS under Everson go after the exempt status of certain not-for-profit organizations like the NAACP while turning the other cheek to investigating exempt organizations that promote republican candidates or politics.

And now we are seeing the delay of collection action due to "negative press before the election", where the Commissioner not only admitted to the delay for political reasons, but also has a history of similar such behavior and close ties to the White House.

Which is inexcusable. Even to four former IRS Commissioners.

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