April 15

IRS Confusion

Maybe the IRS is not confused (though it is out of control) but the public certainly is.  THC has become aware that many people are confused about the tax status of the non-profit organizations, referred to as 501(c)(4) groups, which the IRS targeted for political reasons if they believed them to be conservative (or if they taught people about the Constitution - I am not joking about that), and believe that those who contribute to them can deduct those contributions when they file tax returns.

In reality, 501(c)(4) social welfare organizations are different from 501(c)(3) charitable organizations.  Taxpayers contributing to (c)(4) groups must do so with after-tax dollars; their contributions ARE NOT tax deductible unlike (c)(3) contributions which are tax deductible.

For the (c)(4) organization itself, the contributions it receives are not treated as taxable income so for those purposes they are tax-exempt.  As a practical matter it means they do not pay taxes on funds left unspent at the end of a year.

This confusion about the applicable tax rules extends even to the House Oversight Committee charged with oversight of the IRS!  From a recent hearing, listen to Chairman Issa (R-CA) correct Rep Maloney (D-NY) when it becomes clear she does not understand the applicable law.  It is worth a listen to hear your government at work.A couple of other things to keep in mind as you read and think about about the IRS scandal.  First, when a taxpayer undergoes an IRS audit, they are presumptively considered to be in noncompliance with the tax laws except to the extent they can proved otherwise by documentation.

Second, in cases before the U.S. Tax Court between the IRS and a taxpayer, the Court presumes that the IRS's determination is correct and places the burden of proof upon the taxpayer to prove that the determination is in error. The taxpayer can only shift the burden of proof by introducing credible evidence with respect to the issue.

So, based upon what we already know THC thinks it appropriate for the public to presume the IRS is at fault until such time as it can shift the presumption by coming forth with documented evidence.

Good Guy IRS Commissioner Dies

No, not that guy.

This guy; former IRS Commissioner Johnnie Walters, 94 years old who died on Tuesday.  Walter, a South Carolina Republican was appointed to head the IRS by Richard Nixon in March 1971.  Nixon had fired the previous IRS Commissioner, Randolph Thrower, also a Republican (and who died earlier this year at the age of 100), when he resisted Nixon's plans to use the IRS to investigate his enemies.
(Walters)
According to the New York Times in one of the White House tapes, Nixon said of the new commissioner

“I want to be sure he is a ruthless son of a bitch, that he will do what he’s told, that every income-tax return I want to see I see, that he will go after our enemies and not go after our friends."

On September 11, 1972 the White House Counsel, John Dean, summoned Walters to his office and gave him a list of 200 "enemies" they wanted investigated.  Walters, with the concurrence of his boss, Treasury Secretary George Schultz, refused to do anything regarding the list.  When told of Walters' resistance, Nixon instructed Dean:

"You’ve got to kick Walters’s ass out first and get a man in there."

 Walters left office in April 1973.

USA Today reported that in an interview shortly before he died Walters said:

"I'm distressed at what's happening and particularly with IRS . . .  IRS must be run nonpolitical. Our tax system otherwise will fail and we can't afford that".

On a side note, THC is reliably informed that it is John Dean who, at the President's request, has been running the super-secret White House investigation that allowed the President to proclaim that "there is not a smidgen of corruption" at the IRS.  THC anxiously awaits the release of the detailed findings from the  investigation.

It's Special Prosecutor Time

At least that's what Ron Fournier of National Journal thinks and I agree.  Fournier is a journalist who's made no secret that he is favorably disposed toward the Democrats and has written articles critical of the Republican take on this matter but at this point he writes:

If the IRS can't find the emails, maybe a special prosecutor can . . .
The announcement came late Friday, a too-cute-by-half cliche of a PR strategy to mitigate backlash

The White House is stonewalling the IRS investigation. The most benign explanation is that Obama's team is politically expedient and arrogant, which makes them desperate to change the subject, and convinced of their institutional innocence. That's bad enough. But without a fiercely independent investigation, we shouldn't assume the explanation is benign.

It is difficult to believe that these emails were lost in a crash on Lois Lerner's computer, which is the government claim, since government agencies have multiple server backups and, in fact, are required to do so by government regulation. 

My only disagreement is that I think the special prosecutor needs to also investigate what, by all appearances, appears to be a phony investigation by Eric Holder's Justice Department which should be no surprise since, as Fournier notes, the President himself has said that there is "Not even a smidgen of corruption" (he must have come to this conclusion as a result of the findings of his parallel, independent investigation of the IRS).

And further to my comment in Friday's post about the media, the New York Times carried NO mention of the missing emails in either Saturday or Sunday's editions.  The paper's stenographers are, no doubt, awaiting word from the Administration on the proper Party Line to take before they publish anything.  This is standard operating procedure for the Times.  A great example is Fast and Furious, the Holder Justice Department scandal in which ATF agents facilitated the legal purchase of semi-automatic weapons from dealers in the American southwest and then arranged their transfer, in an untraceable manner, to Mexican drug cartels.  The result is that weapons purchased under this program were used to kill at least two American border agents and several hundred people in Mexico (perhaps the Administration's unofficial immigration policy was "kill 'em before they cross the border").  Fast and Furious caused a great outcry in Mexico but readers of the New York Times would not have known since the paper ignored the controversy completely for several years until the paper's Justice Department stenographer was summoned by Eric Holder who informed him that those raising the allegations were racists which the Times dutifully reported in a front page article.

Also in line with my prior comments, Powerline, a blog run by two Washington lawyers, which in my experience has good and pretty reliable sources within DOJ, printed an email from a lawyer in the department:

I’m a DOJ lawyer, so you obviously cannot use my name or any identifying information. But the idea that a “hard drive crash” somehow destroyed all of Ms. Lerner’s intra-government email correspondence during the period in question [2009-2011] is laughable. Government email servers are backed up every night. So if she actually had a hard drive fail, her emails would be recoverable from the backup. If the backup was somehow also compromised, then we are talking about a conspiracy.

He reiterates in a postscript:

I’m serious about your keeping any identifying information out of the media. Things are very, very bad.