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April 24, 2014 / 24 Nisan, 5774
At a Glance

Posts Tagged ‘IRS’

‘The IRS Wants YOU’ and Israel Is Going to Help Them

Monday, March 10th, 2014

A mini “economic social” cabinet, headed by Prime Minister Binyamin Netanyahu, soon will approve an agreement to share information on accounts of U.S. citizens with the Internal Revenue Service, sources told the Globes business newspaper.

The newspaper said the proposal will allow the IRS full access on Americans’ accounts in Israeli banks and other financial institutions.

The U.S. government is preparing to sign agreements with other countries as well, but Israel is high on its “hit list,” partly because Swiss banks have accounts in three Israeli banks. Switzerland is no longer a safe place for foreigners to hide their money from the tax man, and so Israel has become a favorite home for money launderers and tax evaders.

The Israel Tax Authority is expecting increased revenues if the measure is approved. “The agreement will include an option under which, subject to certain conditions, information will be sent from the U.S. tax authorities to the Israeli tax authorities about the income of Israeli residents in the U.S.,” the document states.

However, while all information on American accounts in Israel will be sent to the IRS, Israel will receive data only in special cases.

The proposed agreement contained clauses aimed at protecting individuals from the IRS misusing personal information, but it is not clear if the IRS has learned its lessons from recent scandals, such as hunting down those nasty pro-Israel groups, as reported here.

Big Brother in Israel also is waiting on deck.

Attorney Yael Grossman, an expert in money laundering, told Globes, “The decision paves the way for further harm to the separation between the management of money by a bank and disclosure to Income Tax. Although at the moment, the measure helps the banks and saves them the need to work directly with the IRS, but experience shows that it will later expose all of the public’s banking activities to the Israel Tax Authority.

“This will be the final burial of banking confidentiality on one hand and a signal for the strengthening and prosperity of alternative institutions, which will rush to offer alternative instruments to the public.”

Americans living in Israel have an alternative to leaving their tax records and financial activities accessible by your closest friendly IRS clerk. They can simply void their American citizenship, a growing trend that was reported here in December.

Approximately 3,000 did so in 2013, three times the number in 2012. That means the IRS cannot snoop on them, but it also means they lose their right to vote in American elections, assuming it would be worth voting.

Israeli Tax Authority Kills the Next Great Startup

Tuesday, December 24th, 2013

An innovative Israeli start-up company came up with a great idea in 2010, which it dubbed GetTaxi. The idea is simple and convenient: the GetTaxi mobile app allows you to order a taxi, pay for the ride, rate the driver, and even leave a tip. For the drivers, it offer the convenience of automation, handling the billing, and notifying drivers of potential nearby clients.

This start-up has been so successful, it has reached a million users, making 20,000 orders a day to 6000 drivers, in 20 cities, not to mention, raising $42 million in funding.

But the Israeli tax authority may have just killed this enterprising young start-up.

Last week, the tax authority concluded its investigation of 89 businesses in various sectors. A team of 102 investigators managed to collect about $2.2 million from these businesses, which had under-reported their income.

One sector the team investigated were taxi drivers, traditionally a cash business. But the tax folks had a great idea. They subpoenaed GetTaxi’s internal files, obtaining the records of some three thousand Israeli taxi drivers who used the GetTaxi service. The team then targeted 50 of them, according to a report in Globes.

They compared the orders listed in GetTaxi, and the income the taxi drivers reported, and found that most of the drivers had not recorded all their journeys.

Most of the drivers ended up with a simple fine, some of the more serious cases are undergoing further investigation.

Tax Authority chief Moshe Asher told Globes, “The Tax Authority is keeping its finger on the trigger and uses all technological means to make certain that all citizens and companies pay the true amount of tax and do not put the tax burden on law-abiding citizens.”

In the process, the same tax authority possibly just destroyed a law-abiding start-up company, which had a promising future.

Its unlikely Israeli taxi drivers will continue to completely trust GetTaxi with their business, and that could affect not only GetTaxi’s revenue, but even a future exit or IPO, potentially killing the goose that could have laid the golden income tax egg GetTaxi would have brought in.

But Israelis are a resourceful people. We’ll have to see how each side responds to this challenge.

Not to worry though, in New York and other major cities, the company continues to do well, and the Israeli tax authority is not likely to have a chilling effect on its operation. The IRS is simply less fiercely dedicated than its Israeli counterpart.

True story: A few years ago, a falafel booth owner was approached by a man from a yeshiva, who inquired if Shlomi were willing to donate to the yeshiva the edges from the pita he cuts off when he makes each falafel sandwich? It would feed poor students, the man explained, and help cut back on the yeshiva’s costs.

Shlomi agreed. It’s a good deed, and he had nothing to do with all those pita edges other than dump them in the trash. How many garlic bread crisps could he possibly make anyway?

A few months later, Shlomi and other falafel and shawarma (meat gyro) vendors found themselves inside the offices of Mas Hachnasa, the Israeli income tax authority.

They were surprised to see, sitting opposite them, the man from the yeshiva to which they had all been donating their pita edges, supposedly.

They were even more surprised with the man pulled out all the pita edges the vendors had donated to him, and said the number of edges that he, a tax investigator collected, exceeded the number of individual portions they had reported.

Needless to say, falafel and shawarma stores in Israel today slit the pita open, rather than cut off the top. There’s no evidence left behind that way.

IRS Tax Regulations Prompt Olim to Revoke American Citizenship

Thursday, December 19th, 2013

A get-tough IRS policy on Americans living abroad has encouraged some Americans living abroad, including “olim” in Israel, to revoke their American citizenship, the Globes business newspaper reported.

The United States taxes its citizens’ income even if they have been living abroad for years, and agrees with most banks in the world now expose all of their financial accounts to the IRS and make them liable for heavy dual taxation.

One way to get avoid it is to renounce citizenship, which would preclude the IRS from chasing after people to pay taxes on income that does not come from the United States.

Changes in the Israeli tax code also have given big tax breaks to new immigrants as well as Israelis returning to the country.

“Although it is not clear how widespread this phenomenon is, and what relative importance U.S. citizens who immigrate to Israel place on this aspect among the array of considerations that they take into account in deciding to immigrate to Israel, tax residency is certainly a factor,” according to Israeli lawyers Eli Doron and Eyal Peled.

Report: At Least 18 Jewish Groups Reported ‘Diverted’ Funds

Tuesday, October 29th, 2013

At least 18 Jewish non-profit groups and non-profit groups that support Israeli institutions have notified tax authorities of likely illegal “diversions” of funds in the past five years.

The Washington Post on Sunday published its review of more than 1,000 non-profit organizations that have reported such anomalies since 2008, when the Internal Revenue Service began requiring the reporting of “diversions” of over $250,000 or 5 percent of a group’s gross receipts and assets.

Most such reporting is related to fraud, although a small number have to do with “financial restructurings, mergers and other types of financial losses” that are not illegal.

A JTA review of a handful of states with large Jewish populations turned up 18 Jewish non-profits and non-profits that support Israeli institutions recording diversions. The most widely-known losses were the widely-known fraudulent claims in the Conference on Jewish Material Claims Against Germany and the $95 million Yeshiva University’s loss from scams associated with Ponzi schemer Bernard Madoff,

Other cases include the  American Friends of the Tel Aviv Museum of Art reported, which reported in 2009 that “certain works of art were stolen or destroyed by fire”; The Jewish Community Center of Dutchess County, N.Y., which reported in 2010 that its bookkeeper had embezzled funds; and the Advancing Women Professionals and The Jewish Community Inc., which reported that an independent contractor in 2010 and 2011 had diverted $62,000 in funds.

Republicans and Democrats Ignore IRS Abuse of Pro-Israel Group

Wednesday, August 7th, 2013

Two Republican chairs of congressional committees which have been investigating for the past several months what some have called IRS-Gate, penned an opinion piece which appeared in the Washington Post on Tuesday, August 6.

Darrell Issa (R-Calif.) and Dave Camp (R-Mich.) are the chairmen of, respectively, the House committees on Oversight and Ways and Means. In their opinion piece, “The IRS Scandals Inconsistencies,” the members of congress criticize the Internal Revenue Service for targeting politically conservative groups for discriminatory treatment.

The Republican congressmen also criticize their colleagues from the Democratic party and this Democratic administration for changing their story repeatedly about what happened, who was responsible, and who then tried to convince the American people that this was “not much of a scandal,” and then they attempted “to smear the inspector general” by “falsely equating routine scrutiny of progressive groups to tea party applications.”

But the Democrats aren’t the only ones who repeatedly refuse to ignore admissible evidence produced by the IRS itself, that the tax agency clearly, unequivocally and blatantly engaged in viewpoint discrimination.

The Republicans have also been ignoring or hiding a group that was wronged, perhaps because that group – unlike the Tea Party organizations – does not have a set of political defenders.   Unlike every other entity involved in this entire scandal and its investigation, this other group is truly apolitical.  The ardently pro-Israel organization Z STREET (of which this reporter is the president) was demonstrably discriminated against by the IRS, yet every member of congress has thus far ignored the group’s plight.

Z STREET brought a lawsuit against the IRS in August, 2010, claiming that the IRS had engaged in viewpoint discrimination, thereby violating the group’s First Amendment right to free speech.  The basis for the lawsuit were the statements made by the IRS agent in charge of Z STREET’s application to Z STREET’s tax lawyer that one, “the IRS had to give special scrutiny to organizations connected to Israel” and that two, some organizations’ applications had to be “sent to a special unit in Washington, D.C. to determine whether the activities of the organization contradicted the public policies of this Administration.”

While the Justice Department, which represents the IRS in litigation, concocted several defenses to Z STREET’s claims, they ultimately came up with a justification they deemed so bulletproof they offered a set of sworn statements by IRS officials why the IRS applied special scrutiny to Z STREET’s application.  The justification?  It is because Z STREET supports “Israel, which is a country with a higher risk of terrorism,” and therefore Z STREET might be funding terrorists.

The IRS stuck to its guns on this “Israel as a terrorist state” defense.  However, they could not have predicted that the ranking member of the Democrats for Cong. Camp’s own committee – Rep. Sander Levin (D-Mich) of the House Ways and Means Committee – was going to blow its cover.

That happened on June 24, when Cong. Levin released a series of documents produced by the IRS which he thought proved the IRS had targeted groups that were politically liberal (the term on the chart was “progressives”), and therefore the admitted targeting of politically conservative groups could not have been politically motivated.

But, as the Treasury Department’s Inspector General for Tax Administration J. Russell George explained, and as becomes clear by merely reviewing the charts, the “progressives” were listed as an historical issue of concern, and the motivation for the interest was whether or not those organizations should have filed a 501(c)(4) application which is for politically active groups, rather than for a 501(c)(3) application which is for groups engaged in educating the public.

However, those same charts created and produced by the tax agency itself reveal that the IRS created a category called “Occupied Territory Advocacy,” which dealt with groups which discuss the “disputed territories in the Middle East.” This category did show up on the IRS BOLO (Be on the Look Out) tab of the charts, unlike the “progressives” category.

Whatever the heck the IRS is supposed to be doing when it examines applicants for tax exempt status, it should not be looking at the ideological positions the organization takes with respect to the Middle East conflict.  Especially when the organization is engaged solely in educating about the issues, and doesn’t use donors’ funds to give grants to anything, anywhere, for anything.

And, despite the sworn statements by IRS officials, the word “terrorism” is nowhere to be found on any of the charts created by the IRS to show what kinds of organizations received additional scrutiny of their applications for tax exemption.

But somehow that slam dunk example of blatant viewpoint discrimination, delivered with a ribbon and a bow from Cong. Levin, escaped the notice of everyone who claims to be “servants of the people.”

Nope, unless an organization has political juice, it appears neither the Democrats or the Republicans care when the constitutional rights of a group of Americans have been violated by a U.S. government agency.

A pox on both their houses.

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

IRS: We Targeted Supporters of Israel’s Disputed Territories

Tuesday, June 25th, 2013

Ever since the beginning of the scandal concerning the United States Internal Revenue Service and the claims that it had a policy of treating differently – as in worse – organizations seeking tax exemptions if those organizations held positions in conflict with this US administration, there have been doubters.

And, of course, the way the story has been spun fans the flames of doubt – yes, the IRS finally admitted, after years of denial, that it had targeted certain groups and subject some groups to extra scrutiny, but there was no political impetus for the inappropriate action, there was just poor oversight of overworked civil service employees who were just trying to streamline their jobs.  Heck, the claim went, that was wrong, but what we now recognize as inappropriate actions weren’t taken for political purposes. That was the claim.

The IRS is trying desperately to make glib admissions, have some heads roll, even parade some of those heads around to show how seriously the IRS takes its need to be punished.  But now, it’s time to move on.  The IRS is even providing a kind of amnesty for many of the politically conservative groups that complained – they are getting hand-delivered approval letters, and future applicants will be assured of an easier time going forward.

So, maybe it is time to move on?

Well, one little organization (the one this reporter founded and of which she is the president) refuses to go flying no matter how hard the IRS is shaking its leg to free itself.

Z STREET claimed when it filed its lawsuit for viewpoint discrimination against the IRS in August, 2010, that the IRS treated Z STREET differently subjecting it to additional scrutiny, because of its ideological views.

Two things happened on Monday, June 24, that proved, finally, that Z STREET – and others similarly situated – was correct.

First, the IRS released its 83 page document, “Charting a Path Forward at the IRS,” in response to the Treasury Department’s Inspector General who found that the IRS had engaged in inappropriate targeting of certain groups which had sought tax exempt status from the IRS.

The IRS Path Report begins:

The IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention.

Well, there you have it.  The IRS admitted that it made decisions based on policy positions, rather than on prohibited activity.  That is exactly what Z STREET claimed – that it had been discriminated against because it holds positions that “contradict the Administration’s public policies.”

The second revelation was one made by Bloomberg News.  That media agency obtained IRS documents revealing that, in addition to the terms Tea Party and 9/12, other terms were used in flagging organizations seeking tax exempt status for additional scrutiny.  While the headline of the article, and what was the object of most media attention, was that terms that suggested not just conservative groups, but also liberal or progressive groups were given the IRS evil eye – words such as “occupy” and “progressive” were allegedly triggers, as was the word “Israel.”

But far down in a long article the Bloomberg reporter explains that, “Disputed Territories” was considered problematic.  To wit:

‘Disputed Territories”

The November, 2010 [BOLO - Be On the Look Out] list also has terms that could be related to Israel, looking for applications that ‘deal with disputed territories in the Middle East’ and ‘may be inflammatory.’

Well, golly!  What kind of a group calls a particular area of land “disputed territories,” which the vast majority of people, either for ideological or simply conformity refer to as the “West Bank?”  Yes, that would be strong Zionist groups such as Z STREET.

That the IRS chose to handle Z STREET’s application in a particular way on the basis of our organization’s position on this issue, and the fact that someone within the IRS even took the time to think such a position might ‘be inflammatory,’ is about as close as can be to a smoking gun revealing the IRS engaged in naked viewpoint discrimination.

That foul activity cannot be waved away.  Its stench is one that will only dissipate after there is a thorough investigation into how the  decision was made to use this particular criterion for evaluating an application.  Who approved that decision?  How many people knew about it?  How many organizations were subjected to it?

IRS and Mas Hachnasa to Increase Cooperation

Tuesday, June 11th, 2013

According to the Mas Hachnasa (Israel Tax Authority) website, senior members of the IRS, met yesterday in Jerusalem with the Tax Authority director, Moshe Asher and other senior tax officials, to discuss strengthening cooperation between the authorities. The meeting placed an emphasis on the exchange of information between the two tax authorities and the authorities’ commitment to mutual assistance.

Printed from: http://www.jewishpress.com/news/breaking-news/irs-and-mas-hachnasa-to-increase-cooperation/2013/06/11/

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