Whistleblowers: IRS officials behind ‘fraudulent’ multi-billion dollar corporate tax giveaways
A 10-year veteran Internal Revenue Service (IRS) attorney has demanded a Congressional audit of the IRS to investigate the agency’s alleged role in allowing American corporations to illegally avoid paying billions of dollars in taxes at the same time the agency is cracking down on individuals and small businesses.
In a letter to Treasury Secretary Jacob Lew, IRS commissioner John A. Koskinen, and IRS chief counsel William Wilkins, Jane J. Kim, an attorney in the IRS Office of the Chief Counsel in New York, accused IRS executives of “deliberately” facilitating multi-billion dollar tax giveaways. The letter, dated October 19, will add further pressure on the agency, which is under fire for allegedly targeting conservative and Tea Party groups.
Kim, who has previously blown the whistle on “gross waste of government resources” in the IRS New York field offices, wrote in her new letter that senior IRS officials have “intentionally undermined the authority of the IRS Whistleblower Office” to avoid taking action “in cases involving billions in corporate taxes due.” The IRS also refuses to enforce laws for “large corporate taxpayers,” resulting in giveaways of further billions, despite applying the same laws with “draconian strictness to small business, the self-employed, and wage-earning individuals.”
The IRS attorney’s letter was copied to Jason Foster, chief investigative counsel for the Senate Committee on the Judiciary, as well as several other senators and Congressional representatives, including Elizabeth Warren, Maxine Waters, Alan Grayson, Bernie Sanders, Charles Grassley, Mike Lee, Rand Paul, and Ted Cruz. They could not be reached for comment.
Whistleblowers shut down
Following coverage of her earlier allegations by Pulitzer Prize winning tax journalist David Cay Johnston, Kim was approached by a private sector lawyer representing corporate whistleblowers to the IRS, who told her that numerous legitimate investigations into corporate tax fraud were being shut down. Her letter sent on Sunday to the US Treasury and IRS described three such cases.
In one case, the IRS was auditing a US company that fraudulently under-reported its profits by nearly $3 billion annually. On behalf of the IRS, the whistleblower had drafted a detailed report proving the fraud, but the agency “closed its audit without ever asking a question or reviewing the documents submitted.” As much as $4 billion in taxes were lost.
In another instance, “a solid case” allegedly involving $6 billion of taxes due was “inexplicably shut down” according to IRS criminal investigation agents. Instead, detailed evidence of fraud and malfeasance “in hundreds to thousands of specific accounts” was ignored. The agent blamed links between senior IRS executives and outside corporations associated with the case.
In the third case, $3 billion of taxes were allegedly uncollected and now accumulate year after year. The American company claimed to the IRS that it earns all profits outside the US, which are then invested overseas, while informing foreign jurisdictions that it earns nothing outside the US. Although US laws tax Americans “on worldwide income,” the IRS simply closed the investigation despite clear evidence of a taxable income.
The private sector lawyer, a former IRS attorney in the Office of the Chief Counsel for over 15 years, said on condition of anonymity that Kim’s allegations are not isolated, but represent a deep-rooted trend: “The problem is the IRS upper management don’t want a big case going forward. They are purposely not working big cases. Employees are quietly encouraged not to expedite them, and to settle or dismiss them. I’ve seen the IRS sit on straightforward billion-dollar cases for years, and then decide not to pursue.”
The IRS Whistleblower Office (WO) was created by Congress in 2006 to encourage leaks of evidence concerning large-scale corporate tax fraud. Once a whistleblower case is proved, resulting in an individual or corporation getting taxed, whistleblowers are to be rewarded with 15 to 30 percent of the total tax paid to the IRS. In 2012, the most recent year with available data, the IRS paid $125 million in whistleblower awards.
“Since, 2006, the office has received anywhere from 1,500 to 1,900 tips per year, the vast bulk of which are not investigated,” said Kim.
According to the private sector lawyer, the Whistleblower Office is being hampered by the agency’s attorneys, who are making decisions not to work the bigger cases.