Bill Henck: Inside the IRS, part 7

William Henck has worked inside the IRS Office of the Chief Counsel as an attorney for over 26 years. We posted his personal account, including his testimony to a retaliatory audit conducted by the IRS against him, this past February in “Inside the IRS.” We followed up with subsequent posts including “Inside the IRS, part 5” and, most recently, “Inside the IRS, part 6,” both regarding the promotion of Fred Schindler to a senior position within the Office of Chief Counsel. Bill now writes to suggest how a competent investigation of politically targeted IRS audits could be conducted:

According to a recent column by Jay Sekulow on the FOX News website and a statement by House Ways and Means Committee member Charles Boustany, 10 percent of the conservative donors whose names were improperly obtained by the IRS in the section 501(c)(4) scandal were subjected to individual audits. This is an extraordinarily high individual audit rate for any random subset of the population.

Mr. Sekulow discussed in his article the possibility that this high audit rate may be connected to the “special research project” initiated by Lois Lerner and others in the IRS. This is disturbing news, but it also presents an opportunity for Congress to break free from the current trench warfare involving missing hard drives and BlackBerries; a situation recently described by a congressman as “Ground Hog Day.”

Congressional investigators presumably know or could obtain the names of the specific conservative donors who were among the 10 percent audited by the IRS. If these taxpayers provided privacy waivers, congressional investigators could then trace back each individual audit and ascertain who and what triggered each audit.

Audits do not arise out of thin air; any given IRS audit is initiated by a Service employee in one manner or another. It would be relatively easy to trace back each audit to its ultimate source. It may be that the source in many, if not all, of the audits in question was the “special research project.” If so, that would explain much of the Service’s behavior toward the congressional investigations and would also explain Lois Lerner’s decision to take the Fifth.

To state the obvious, the Service is a labyrinth. In addition, the Service has “lawyered up” and is only forthcoming with relevant information if the congressional investigators ask the exact right questions. In this environment, congressional investigators would be better off reversing field from a focus on the IRS bureaucracy and focus their attention on the specific audits that may have been retaliatory.

I know for a fact that the Service conducts retaliatory audits; Leigh and I experienced one up close and personal. The issue now is whether the Service did it to a whole bunch of people for political purposes. We know that these people were audited and we know that there is nothing in the IRS organizational culture to prevent audits from being retaliatory in nature. The only question is why these individuals were audited. If they sign waivers, Congress has a golden opportunity to get to the heart of the IRS scandal. Furthermore, if the 10 percent audit rate is a statistical quirk, the Service has every reason to fully cooperate with such an investigation.

Based on a link in Mr. Sekulow’s article, the House Ways and Means Committee is only looking at the general audit selection procedures used by the Service, as opposed to investigating the specific audits themselves. I contacted the House Ways and Means Committee with the idea of looking at specific audits, but I never heard back from them. I have written this post because people on Capitol Hill are a lot more likely to read this website than my e-mail. I hope this helps them.

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