Talk about Déjà vu. Despite a court order to preserve documents, the IRS wiped the hard drive of an important IRS official, Mr. Samuel Maruca. Controversially, Mr. Maruca helped the IRS hire Quinn Emanuel, an outside law firm tasked with pursuing Microsoft. Hiring outsiders at over $1,000 an hour (!) angered Senate Finance Committee Chairman Orrin Hatch, who wrote a letter to the IRS complaining about strange deal and the $2.2 million fee.
Sen. Hatch pointed out that this was work the IRS and Justice Department should do. A federal judge was also troubled. And when the questions were too probing, oops, the hard drive was wiped. Sound familiar? Meanwhile, of course, you have to keep all your receipts and tax records! Imagine if the IRS found out that you deleted emails or destroyed records? The fact that the IRS--accidentally--wiped Mr. Maruca's hard drive reminds everyone of Lois Lerner, the key IRS official who refused to testify about targeting conservatives.
In March 2014, nine months after receiving a congressional subpoena to preserve and turn over the information, the IRS deleted approximately 24,000 Lerner emails and destroyed Lerner’s hard drive. Many emails were lost forever when 422 backup tapes were wiped clean despite a preservation order and subpoena. The House Oversight Committee report said the IRS failed to take even simple steps to ensure compliance with the order.
The IRS scandal broke in May 2013, but started in January 2010. That’s when the Supreme Court found it unconstitutional in Citizens United to ban free speech by corporations, unions and other organizations. In August 2010, the IRS distributed a list asking for extra scrutiny for Tea Party organizations applying for tax exempt status. Lerner even met with the DOJ about prosecuting conservative groups.
Amid reports of targeting, former IRS Commissioner Shulman testified there was “absolutely no targeting” of conservative or Tea Party organizations by the IRS. Mr. Shulman then stepped down as Commissioner, replaced by Steven Miller. On May 10, 2013, during a bar meeting, Ms. Lerner admitted targeting, calling it “absolutely incorrect, insensitive, and inappropriate.” Four days later, on May 14, 2013, the Inspector General issued a report confirming the targeting.
The next day, Acting IRS Commissioner Steven Miller resigned. Ms. Lerner professed her innocence, then took the Fifth. She was placed on administrative leave, and shortly thereafter retired with full pension. The House held Ms. Lerner in contempt of Congress. Only then–on June 13, 2014, Friday the 13th–did the IRS first say it lost Lerner’s emails from 2009 to 2011. The IRS said hard drives and backups were destroyed, spending millions to try to recover them. Republicans were repeatedly accused of wasting money on all of this, since the IRS was above reproach.
President Obama always fervently denied there was any IRS problem, not even a smidgen of corruption. Any missteps were innocent, entirely the fault of bonehead decisions in local IRS offices. There was no targeting. Emails show there was no directive about targeting. Sorry, it turns out some of our emails are missing? Well, hard drives crash. We recycle them–which helps the environment. Besides, liberals got targeted too. There’s no smidgen of corruption. Cash bonuses? Those are unrelated. And the latest in the long line of excuses: it was all the Republicans’ fault.
It was no surprise that the Justice Department wrote a letter to members of Congress announcing that Lois Lerner will face no criminal charges. What about emails sent from Ms. Lerner’s dog’s email account? The dog is safe too. The DOJ said there was no evidence that any IRS official acted based on political, discriminatory, corrupt, or other inappropriate motives.
Let's see, is the IRS likely to accept similar taxpayer arguments?
For alerts to future tax articles, email me at Wood@WoodLLP.com. This discussion is not legal advice.
