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May 1, 2016 / 23 Nisan, 5776

Posts Tagged ‘internal revenue service’

US Senator Plans Lawsuit Over IRS Overseas Account Double Standard

Thursday, June 25th, 2015

A U.S. senator is challenging a double-standard regulation by the Internal Revenue Service and Treasury under which thousands of Americans living in Israel and elsewhere overseas are being forced to report their local Israeli finances in detail to the IRS.

It is information that would not be required by the government if the same U.S. citizens were living and working Stateside, Senator Rand Paul (R-KY) contends.

Paul plans to file a lawsuit against the U.S. Treasury and the IRS for denying his constitutional right to vote on the treaties that were unilaterally negotiated by the Obama administration with foreign governments over the regulations, The Washington Times reported Wednesday.

The treaties are referred to by the administration as “intergovernmental agreements.” The “U.S. Foreign Account Tax Compliance Act (FATCA) for improving global tax enforcement” requires banks in “dozens” of foreign countries to gather and share private financial information about millions of Americans living and working outside the U.S. – including those in Israel.

Tens of thousands who came on aliyah fall into this category, and have been warned by their banks they must fill out an annual IRS W-9 and “FBAR” (Foreign Bank Account Report.)

In an agreement reached between Israel’s Finance Ministry and the United States a year ago, the Israel Tax Authority will report the accounts of U.S. citizens in Israel to the IRS.

In exchange for the Israel Tax Authority’s obtaining information from local financial entities and sending it to the U.S. tax authorities, the IRS also agreed it “may” report on income in the accounts of Israelis in the United States.

“The U.S. sent a delegation here, which examined our systems and information security and was very impressed,” said Israel Tax Authority head Moshe Asher in a speech this week to the Society of Trust and Estate Practitioners (STEP.)

“We’ll soon be able to get information about Israelis with overseas accounts. In addition, the OECD has copied the U.S. by setting a standard called CRS, to which Israel is also committed. These standards are very similar to FATCA and we’ll join them by 2018.”

Hana Levi Julian

IRS Hacked, Info Stolen on 100,000 Taxpayers

Wednesday, May 27th, 2015

Chalk up another one for the IRS. In addition to refund delays, unnecessary audits and reams of ridiculous red tape, the government agency has just scored another consumer nightmare: its computer system was hacked, and the agency does not exactly know when.

Personal data belonging to tens of thousands of American taxpapers was stolen by the hackers, believed to part of an organized crime syndicate.

Congress was notified last week, ahead of releasing the information to the media, but stayed mum in order to allow investigators to open and pursue a criminal case.

Nevertheless — perhaps even unbelievably — Federal Tax Commissioner John Koskinen told reporters in a conference call on Tuesday, “This is not a security breach. Our basic information is secure.”

Legislators do not agree.

“That the IRS – home to highly sensitive information on every single American and every single company doing business here at home – was vulnerable to this attack is simply unacceptable,” said U.S. Senator Orrin G. Hatch (R-UT). Chairman of the Senate Finance Committee which oversees the IRS, Hatch told reporters the agency has been warned repeatedly to do more to protect taxpayers, but “fell short.”

According to the commissioner, the hackers exploited the recently developed ’Get Transcript’ application to access tax returns of taxpayers going back five years or more.

The app was praised in 2014 as part of President Barack Obama’s initiative to streamline the government. At the time, the IRS insisted it was taking strong security steps to backup the app, which used the kind of information requested and stored by credit ratings bureaus.

Out of some 200,000 attempts to access individual records, said Koskinen, the hackers succeeded 104,000 times.

In order to cover their tracks, they filed fraudulent returns, although it appears they only managed to submit some 15,000 or so.

But the breach wasn’t even noticed until mid-May; it was only picked up when IRS workers picked up odd Internet activity from the tax filing season.

Hana Levi Julian

US Orchestrated Anti-Bibi Bomb May Bite its Backers

Monday, March 16th, 2015

Remember Al Capone?

He was the notorious American gangster who met his downfall by the inelegant and unexciting – but sometimes deadly – U.S. tax code. So, too, may be the ultimate fate of the ubiquitous and well-funded Obama-style campaign machine gunning for Netanyahu, known as V15.

That entity and its creators are barred under US tax law from attempting to achieve its two stated goals: defeating Israeli Prime Minister Netanyahu and changing Israeli law in order to create a Palestinian State.

For some reason the fact that V15 is an avowed effort to oust Netanyahu did not raise enough eyebrows when it was first announced.

The lack of sustained attention back in January caused some to scratch their heads. That V15 was run by the same folks, and in the same style, as U.S. President Barack Obama’s notorious street theater, in your face, take no prisoners-style campaign director, Jeremy Bird; that its financial, emotional and political source received hundreds of thousands of dollars from the U.S. State Department; and even though that same source is an entity which has tax exempt status in the U.S. – which means it cannot fund projects to either support or defeat a political candidate in the U.S. or anywhere else, did not lead to a long media shelf life.

The first two issues should have drawn attention to V15 not because political operatives are barred from selling their strategic skills – that is, after all, the nature of their job – but because it was so odd for someone like Bird to come all the way to Israel to sell his skills. Bird is not Jewish, and his only apparent connection to Israel was working for an anti-Israel American radical activist back in his graduate days.

But who was paying for Bird? Campaign funding is very strictly regulated in Israel. The strategist who managed Obama’s two U.S. presidential campaigns – in which billions of dollars were spent – was likely to have a very high price tag.

Then there was the matter of the U.S. State Department grants to OneVoice, V15’s “creator.” The airy dismissal that all State Department funding ended at the end of November, so there was no U.S. government money being used for the election — which was publicly announced in early December — was, incredibly, accepted without any further interrogation by the American (and most of the Israeli) press corps. Former Naval Intelligence officer J.E. Dyer  pursues that angle with the kind of tenacity one should be able to expect from the seasoned press corps members who show up nearly every day at State Dept. briefings.

But the least interesting angle, at least to most, is the one that involves the Internal Revenue Service. Before your eyes glaze over, recall that the U.S. actually had what could almost be called a juicy scandal beginning nearly two years ago, that involved the IRS.

Quite a few politically conservative (and one pro-Israel) organizations claimed that the IRS was treating their applications for tax-exempt status in a discriminatory fashion. The initial response from the IRS was that many of those groups were not really entitled to tax-exempt status, because they were engaged in political, not educational or charitable, work.

That seemed to many like a reasonable response. The Internal Revenue Code states that even a non-profit organization cannot be exempt from paying taxes, and its donors will not be entitled to tax deductions, if the organization is involved in politics or lobbying.

But while much of the IRSGate attention has since focused on where are Lois Lerner’s emails and whether they are really gone forever or just deleted, hidden or irrelevant, the fact that tax-exempt organizations cannot engage in raw politics seemed to be one tiny aspect of American government that many people learned.

Lori Lowenthal Marcus

IRS fears Disclosure Above All Else, Offer Made in Court Confirms

Monday, July 22nd, 2013

On Friday, July 19, in federal district court in Washington, D.C., Department of Justice lawyers who have the misfortune of having to represent the Internal Revenue Service were forced to reveal exactly how desperate the IRS is to keep its deep, dark secrets buried.

The hearing was held to determine whether the IRS would succeed in convincing the court to dismiss Z STREET’s lawsuit for viewpoint discrimination, before any of the claims alleged by Z STREET can be examined.

It is critical for the IRS to succeed at this stage of litigation, because if it does, Z STREET will be barred from finding out whether the IRS acted in an unconstitutional manner in setting aside its application for tax exempt status.  If the IRS succeeds at this stage, no questions will be permitted into how it is that, according to documents produced by the IRS, the application for tax exempt status of an organization with a viewpoint about Israel which differs from this administration’s was pulled aside for extra scrutiny.

Over the course of more than an hour, and despite federal Judge Ketanji Brown Jackson’s  increasingly apparent frustration with the shifting legal positions of the IRS, the DoJ lawyer said two things that should make everyone who is following the IRS scandals raise their eyebrows right through their hairlines.

ONLY YES OR NO TO EXEMPTION, NOT HOW OR WHY

The IRS has repeatedly sought to characterize Z STREET’s claim as one brought under Section 7824 of the Internal Revenue Code, which requires applicants to wait 270 days after filing their tax exemption application before going to court and asking it to make a determination where the IRS had thus far failed to do so.  And each time the IRS set up what it insisted was Z STREET’s claim, it then pointed out that Z STREET did not wait long enough to bring such a claim, and therefore Z STREET’s suit had to be dismissed.

Z STREET filed its lawsuit against the IRS 239 days after filing for its tax exempt status.  Had Z STREET’s lawsuit  been brought in order to obtain a determination about its tax exemption status – an approval or a denial – the IRS would have been correct in seeking to have the pro-Israel organization’s lawsuit dismissed.  But the IRS is the only litigant who ever raised Section 7824 in the course of the litigation, not Z STREET, the party which filed suit.

Despite that track record, in court on Friday, the IRS offered to waive this statutory requirement – if only Z STREET would abandon its effort to find out what the IRS’s policy about such applications has actually been.

How nice.  Except Z STREET did not bring this lawsuit as a way to find out if its application for tax exempt status was accepted or denied.

As Alana Goodman of the Washington Free Beacon observed from her seat in the court room on July 19, the judge finally lost her temper in response to the repeated insistence by the IRS that Z STREET already had a remedy, the Section 7824 proceeding, to determine whether it was entitled to tax exempt status.  As Goodman wrote:  “”That’s not what they want,’ Judge Jackson snapped.”

This insistence by the IRS that Z STREET had a remedy for its legal claim: it could be assured that the court would provide it with a constitutionally valid process and given an up or down decision pursuant to a Section 7824 ruling, ultimately brought the judge to ask the Justice Department lawyer a critical question.  She asked whether, in the opinion of the IRS, there is any way for Z STREET to obtain the relief that it – not the IRS’s mischaracterization of its claim –  has repeatedly stated in every court filing it wants. In other words, can Z STREET find out whether the IRS violated its constitutional rights by treating its application differently on the basis of its viewpoint.

No, according to the IRS, it can’t.

In other words, the IRS says you can get the little ticket that comes out of the black box called “IRS Tax Exempt Determinations,” which will say either “approved” or “denied,” but you cannot, no way, no how, lift the lid off that black box and look inside.

But looking inside that black box is precisely what Z STREET wants.  It is the only way to determine whether the IRS violated the constitutional rights of Z STREET and of any other organization which complains, at any time, of a discriminatory process employed by the IRS in making its determinations.

Judge Brown asked Z STREET’s lawyer, Jerome M. Marcus, whether the organization could use the Freedom of Information Act to get at the information it is seeking in its lawsuit.

Marcus pointed out that route would not be productive. There are numerous FOIA exceptions which the IRS would certainly use as a shield to prevent the black box from being opened. FOIA is not an option.

Nope, it’s either a court which will allow citizens who believe their constitutional rights have been violated by the IRS to provide the mechanism to find out, or the IRS will be, as so many Americans already believe it to be, a rogue agency able to act with impunity, and able to invoke immunity from prying eyes.

So it comes down to this: Z STREET has alleged that the IRS employed a constitutionally tainted process to evaluate certain applicants for tax exempt status, while the IRS’s position is that there is no way for any complainant to inquire about that process.

IRS INSISTS A “GOOD ENOUGH” REMEDY IS ADEQUATE EVEN FOR UNCONSTITUTIONAL GOVERNTMENT ACTS

The second thing the IRS did, through its DOJ lawyers, was insist that Z STREET should not be and will not be able to get the relief they want. An organization – in this case, Z STREET, but it would apply to any organization – claiming the IRS violated its Constitutional rights should be satisfied with a “good enough” remedy – “not perfect,” but good enough.

That this is the IRS position came through in the gentle – mostly – probing from Judge Jackson, who understood that the IRS desperately wants to prevent Z STREET from looking inside its black box.

Judge Jackson understood that what Z STREET wants, and the reason it filed its lawsuit in August, 2010, is to find out whether, as it believes, the IRS discriminated against the pro-Israel organization because of its political position.  And the only way to find out whether that is the case is not to merely wait and see whether it is approved or denied the opportunity to be a tax exempt non-profit corporation.  The only way to make that determination is to open up the black box of the IRS Exempt Organizations Determinations unit and look inside, and see whether the process the IRS used was a constitutionally valid one or an invalid one.

Marcus explained: “if the IRS was sending applicants with blue eyes to wait behind Door Number One, through which they will pass without any delay, but the IRS was sending applicants with green eyes to wait behind Door Number Two, where what awaits them is a different, and more lengthy examination, then the minute Green Eyes are sent to wait behind Door Number Two is the moment a constitutional violation occurs.”

“And the moment that constitutional violation occurs and the Green Eyes become aware that they were sent someplace different, and were subject to a process more onerous than were the Blue Eyes, is the moment they have been discriminated against and, therefore, the time to raise that constitutional claim in court.”

The position of the IRS is one that means no one can ever find out if the IRS acted in an unconstitutional manner, all they can do is find out whether they can get, or be denied, tax exempt status.  That would put the IRS above the Constitution.  That cannot be right.

Judge Jackson will take the court filings and the arguments raised in court on July 19, under advisement.  There is no timetable for when she will rule.

Full Disclosure: This reporter is the president of Z STREET

Lori Lowenthal Marcus

IRS in Court Friday, its Documents Prove Z STREET’s Claims

Friday, July 19th, 2013

The more evidence is revealed regarding the Internal Revenue Service’s treatment of organizations whose ideological views conflict with those of this Administration’s, the more it becomes apparent that the claims made against the IRS by a small pro-Israel non-profit back in August, 2010 were not only probably true, but are demonstrably true.  Incredibly, the proof that Z STREET’s claims are true was found in documents created by the IRS itself, in submissions to investigators looking into IRS misbehavior regarding other non-profits.

And on Friday, July 19, as the IRS makes its first court hearing in any case regarding claims that it mistreated many non-profits because of the ideological positions of those organizations, the proof of its ideological motivations are now public.

This Friday, July 19, at 10:00 a.m., Judge Ketanji Brown Jackson will hear the government’s motion to dismiss Z STREET’s claims against it in courtroom 17 in the Federal district court in Washington, D.C.

In a federal lawsuit filed in August, 2010, Z STREET claimed that the IRS had engaged in viewpoint discrimination while processing Z STREET’s application for status as non-profit.  The basis for its claim was that the IRS agent assigned to Z TREET’s file told Z STREET’s corporate counsel that the review of Z STREET’s application for tax exempt status would take a long time because the IRS had to “give special scrutiny to organizations connected to Israel,” and that the files of some of those organizations “were sent to a special unit in Washington, D.C. to determine whether the organization’s activity’s contradict the public policy of the Administration.”

This Wednesday, July 17, Z STREET (this reporter is the president of the organization) filed a supplemental memorandum with the court, submitting newly-discovered evidence that the IRS employees created a purely political category “Occupied Territory Advocacy” as the basis for additional review of an organization’s application for tax exempt status.

All of the information about this IRS categorization is contained in documents which the IRS had been required to submit during an investigation conducted by the Treasury Department’s Inspector General for Tax Affairs.  But these documents had not been made public earlier, because the IG’s mandate had been to look at organization’s whose applications were delayed on the basis of political orientation, the largest example being the Tea Party organizations.

However, on June 24, Rep. Sander Levin, (D-MICH), released a series of documents produced by the Internal Revenue Service.  Rep. Levin said he believed these materials proved the IRS had not only targeted conservative groups, but that it had also gone after “progressive” groups, i.e. liberal ones. Presumably, his goal was to prove that the IRS was not selective in its misbehavior, but had been an equal opportunity offender.  Levin believed that the 14 IRS documents which he released on June 24, 2013, made this point, and he then went on the offensive, lambasting the Treasury’s Inspector General, J. Russell George, for failing to raise this “fact” in his report.

Sympathetic media outlets immediately ran top-of-the fold headlines proclaiming, based upon statements made in a conference call given by Danny Werfel, the new Acting IRS Commissioner, with select members of the media, that the IRS had not only used the words “Tea Party” as a search term to target organizations for additional scrutiny, but that it had also targeted “progressives,” “Israel” and “Occupy.” Outlets which ran with this story, and used the claim in its headlines, included the Associated Press, Bloomberg News, and the Huffington Post.

But a detailed review of the IRS documents released by Levin, as well as a lengthy response by the Inspector General to Levin’s scathing letter, revealed that those documents did not prove what Levin and others hoped was being proved. In fact they proved something very different.

Although the term “progressives” was found as a category on several of the documents, just a few minutes’ perusal of that line item reveals that nothing was done with the organizations with that term in their title.  In fact, the Tab under which that term appears is “Potential Abusive Historical,” and the category had been moribund.  A note in one of the columns revealed that because those organizations were clearly engaged in political activity, IRS employees noted that they should have requested a 501(c)(4) and not the 501(c)(3) designation they sought.

Lori Lowenthal Marcus

Is Daniel Werfel Jewish?

Friday, May 24th, 2013

President Obama will be appointing senior White House budget officer Daniel Werfel (42) to be the acting commissioner of the IRS.

But the question our readers are asking us is, is Daniel Werfel a member of the Tribe? And is there another Jew in charge (after Jack Lew) of the U.S. finances?

Werfel certainly is a (German) Jewish sounding name.

The anti-Semites certainly think he’s Jewish.

But no one around here recalls going to his Bar Mitzvah or seeing him at any of the secret Elder meetings.

The door is still open on this one.

We’ll let you know as soon as we find out for sure.

Jewish Press News Briefs

IRS Chief Under the Congressional Spotlight on Friday

Tuesday, May 14th, 2013

A concerted effort by a mid-level Internal Revenue Service official last Friday, May 10, to confess to some minor irregularities in how the IRS has dealt with conservative organizations seeking tax exempt status has unraveled.  Lois Lerner, who oversees tax exempt organizations for the IRS, attempted to get out the word under the radar.  She failed miserably.

Lerner attempted to present the issue as having affected a small number of organizations, targeted by using a few key words, and acted out by only a few low level IRS employees in a remote office, for a limited period of time, which took place without the consent or even knowledge of higher level IRS officials.  By Monday morning that cover had been entirely blown.

In the center of a scandal that continues to grow wider, deeper and longer by the day, the Acting Internal Revenue Service Commissioner will be sitting in the hot seat before the House Ways and Means Committee this Friday morning, May 17, starting at 9:00 a.m.

The hearing is to discuss the practice of targeting applicants for tax-exempt status based on political leanings.  There will only be two people called to testify at this hearing: Acting Commissioner of the Internal Revenue Service, Steve Miller, and the Treasury Inspector General for Tax Administration, J. Russell George.  Miller was the assistant to the former IRS commissioner, Douglas Shulman, under whose watch many of the complaining organizations experienced allegedly excessive and inappropriate probing by the IRS.

The first admission, last Friday afternoon, was that the IRS had been subjecting certain conservative groups to increased scrutiny but insisting that only “low level IRS employees” in a remote Ohio office were using inappropriate ways in which to flag certain groups, and that the practice was short-lived.  The excuse was that in 2012 there were so many new groups seeking tax exempt status that the Agency had to figure out ways in which to more quickly help determine which groups were legitimate and which weren’t.

But as revelations continue to leak out of Washington, D.C., it appears the practice was much broader, it took place in multiple IRS offices in cities across the country, it went on for a much longer period of time than was originally admitted, and high level IRS officials were aware of some aspects of the progress for far longer than had earlier been admitted.

In addition to inappropriate questioning by IRS agents in Cincinnati, Ohio, the original site mentioned by Lerner, documents have revealed that agents in Washington, D.C. and at least one other IRS office were involved in providing increased levels of scrutiny to certain conservative organizations.

And it wasn’t only groups with the words “tea party” and “patriot” in their organization’s names that were pulled out of line for additional scrutiny.  The IRS net included groups that opposed Obamacare, those that focused on vote fraud, ones that sought to educate about the Constitution and the Bill of Rights, and ones that sought to limit the role of government.

Although Lerner claimed only low-level agents in the Cincinnati office engaged in and knew about the practice, it is now known that IRS employees in Washington were aware of the practice. The Inspector General’s report states that officials at the Internal Revenue Service knew in June 2011 that their agents were targeting conservative groups for additional scrutiny on tax documents, CNN reported Monday.

The original revelation of IRS inappropriate activity suggested that the practice only began in 2012, but the Inspector General’s report revealed that the practice began as far back as 2010.

IRC 501(c)(3) versus 501 (c)(4)

Thus far it appears that almost all of the groups complaining about the inappropriate, politically-oriented targeting are organizations seeking tax exempt status as “social welfare” organizations, which come under the Internal Revenue Code section 501(c)(4).  These groups, as distinct from 501(c)(3) organizations, are given more leeway in terms of engaging in political activity. There was a huge increase in the number of such organizations following a 2010 Supreme Court decision which gave a hecksher to political campaign spending by corporations, in Citizens United v. Federal Election Commission.

Both (c)(3) organizations and (c)(4) organizations are exempt from paying taxes, but only donations made to (c)(3) organizations are tax deductible.  Organizations that are (c)(3)s can engage in only very limited lobbying activity and cannot engage in political activity at all, whereas (c)(4)s can engage in unlimited lobbying and can engage in political activity to the extent it is consistent with the organization’s mission and so long as it is not the organization’s primary activity.

The pro-Israel and Jewish organizations that have complained about inappropriate IRS activity by the IRS are 501(c)(3)s.

It may be that the next wave of congressional inquiry will focus on what other kinds of organizations have been targeted for special scrutiny by the IRS.

In addition to Friday’s House Ways and Means Committee hearing, the IRS can look forward to hearings before at least one more, if not two more, congressional committees.

On Monday, Senate Finance Committee Chairman Max Baucus (D-MONTANA) called for a full investigation into the IRS targeting of conservative groups. Senator John McCain (R-AZ) also announced on Monday that the Senate Permanent Subcommittee on Investigations plans to investigate the new IRS revelations.

President Barack Obama issued a statement on Monday calling the alleged misdoing by the IRS “outrageous, if true.”  White House spokesperson Jay Carney said that Obama only found out about the matter last Friday.

Lori Lowenthal Marcus

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