- Federally run consumer complaint database at CPSC has been unfair and unreliable mess, so naturally CFPB wants one of its own [Kevin Funnell]
- Los Angeles, Miami, Providence, and Cook County among municipalities piling on lenders with mortgage and disparate-impact suits [same]
- “Just one way to stop corporate tax inversions: cut taxes” [Chris Edwards, NYT/Cato; more]
- “The IPO is dying. Marc Andreessen explains why.” [Timothy Lee, Vox via Tyler Cowen]
- No mercy for the Swiss: feds’ “fierce campaign” on overseas tax compliance “doing more harm than good” [The Economist; Doreen Carvajal, New York Times]
- “Pretty much everything George Dvorsky says at io9 about corporate personhood is wrong” [Bainbridge] Dodd-Frank turns four, alas [same]
- “There was no evidence, period.” Preet Bharara loses one as jury acquits in insider trading case [Ira Stoll, Future of Capitalism]
A panel of the D.C. Circuit ruled today that the IRS is not free to rewrite the ObamaCare statute to extend tax credits from users of state-run health exchanges, as per the law’s language, to users of the federal exchange as well, because the federal government is not a “State.” [Halbig v. Burwell; Ilya Shapiro, Cato] Later today, a panel of the Fourth Circuit ruled that yes, it’s free to do so. [King v. Burwell] Given the instant one-day circuit split and the importance of the issue, further court consideration is inevitable, and the Obama administration has already indicated that it will seek en banc consideration by the full D.C. Circuit, packed with its own recent appointees. More: The work of my Cato colleague Michael Cannon and Case Western lawprof Jonathan Adler helped undergird the suit; Cannon has commentary here and here and Adler here and here.
Some figures on the left have aggressively sought to dismiss the seriousness of the renewed IRS scandal. Rep. Lloyd Doggett (D-Tex.) captured this mood at one recent Capitol Hill hearing when he suggested that after voicing suspicions that the loss of emails might not be accidental, his GOP colleagues might go on next to quiz the Service’s leadership about the president’s birth certificate and space aliens in Roswell, N.M. It’s not a “serious inquiry,” Rep. Doggett said: “I believe it’s an endless conspiracy theory here.”
And yet many Americans who do not believe in space aliens do question the IRS’s account of what has happened. While we covered the story a year ago as well as more recently, this might make a good time to recapitulate why.
The IRS grants 501 (c)(4) nonprofit status (less favorable than (c)(3) status, which affords charitable tax deductibility to donors) to a wide array of “social welfare” organizations, many, like the ACLU, with a definite ideological valence. In recent years the status has been sought and obtained by groups whose missions are closely related to campaign and electoral politics, most notably Organizing for America, whose role on the national scene is to support President Obama’s messaging. Not surprisingly this has excited controversy about whether the eligibility rules for (c)(4) status are being drawn in the right place. Most advocates however profess to believe that whatever the right set of rules, they should apply alike to both sides in our political life.
By March 2012 the Associated Press was reporting on a flurry of bizarre and seemingly unprecedented IRS demands that some (c)(4) applicants of a right-of-center valence provide extraordinarily burdensome and intrusive documentation of their activities — things like copies of all books and literature distributed to participants, transcripts of leaders’ radio appearances and live speeches, printouts of all Facebook and Twitter output, and so forth, along with donor lists and names of family members. The Service was also delaying groups’ approval for long periods, in fact seemingly indefinitely, without explanation or a firm denial that could be appealed to a court. Defenders of the agency subsequently put out a search for left-of-center groups that might have run into similar treatment, and although they did manage to turn up a few tales of bureaucratic red tape and rigmarole, they were unable to come up with anything remotely comparable.
IRS nonprofit chief Lois Lerner at first denied any targeting, then sought to blame rogue employees at the IRS Cincinnati office for it. But emails soon emerged clearly indicating guidance by high-level IRS managers in Washington. Lerner then declined to testify, asserting her Fifth Amendment privilege against admissions exposing herself to criminal liability.
Through the ensuing scandal, there was little hard proof that Lerner and other IRS insiders had coordinated the targeting with political actors outside the agency — on Capitol Hill, say, or in party organizations, or the White House — although a number of details on the record, such as frequent White House visits by agency insiders and coordination with outside figures on press messaging, made for suggestive circumstantial evidence. To establish that political operatives or officials outside the agency were aware of targeting at the time, or even perhaps instigated or directed it, would be to blow the scandal wide-open, perhaps threatening the careers of well-known public figures. If any email documentation of such coordination is to be found, it would most likely be in the “external” (outside the agency) emails of Lois Lerner and other key players in the IRS targeting effort.
Those are the same emails that have now mysteriously vanished due to a reported crash of Lerner’s computer, a crash that happened ten days after the House Ways & Means Committee wrote her to inquire about (c)(4) tax exemption denials*. Emails of six other key IRS employees are also said to have vanished in a series of coincidental crashes.
This week, as if to confirm that shabby treatment of politically disliked adversaries was not unheard-of at the Lerner-era IRS, the agency agreed to pay $50,000 to the National Organization for Marriage over an episode in which persons unknown leaked its confidential return and donor list to its ideological adversary, the Human Rights Campaign, which proceeded to have it published. And the Ways & Means Committee has just released an email indicating that when an invitation intended for a Congressional opponent wound up by mistake in the hands of Lois Lerner, her immediate reaction was to wonder whether it might be used to generate an IRS investigation embarrassing to him.
After all these revelations, is it really those who distrust the agency’s leadership whose gullibility should be compared to that of flying saucer cultists? Or is are the credulous true believers the ones who insist that the latest jaw-dropping revelations from the Service are sure to have an innocent explanation, though the earlier ones did not? (cross-posted, with minor changes, at Cato at Liberty)
*An earlier version of this post described the letter to Lerner as being about targeting; Glenn Kessler at the Washington Post has disputed whether that is an accurate way to describe the contents of the letter, which concerned a plan to audit conservative (c)(4) donors. Ian Tuttle responds to Kessler here.
Too close to the regulation of speech content, too chancy in its impact on the rule of law [Jonathan Turley, Washington Post]:
Many of us recoil at the reference to skin color as a team identity. The problem is that the Redskins case is just the latest example of a federal agency going beyond its brief to inappropriately insert itself in social or political debates. …
The Supreme Court affirmed in 1983 that the IRS could yank tax exemption whenever it decided that an organization is behaving “contrary to established public policy” — whatever that public policy may be. … There is an obvious problem when the sanctioning of free exercise of religion or speech becomes a matter of discretionary agency action. And it goes beyond trademarks and taxes.
I’ve got an update on the fast-developing scandal of evidence destruction at the IRS in my new Cato post (earlier). If not for reading Kim Strassel and her colleagues at the Wall Street Journal, I might not have learned that Lois Lerner’s emails got wiped from her hard drive by forces unknown about 10 days after the letter arrived from House Ways & Means inquiring into targeting of political opponents.
Since the new round of disclosures in the IRS scandal broke a week ago, the WSJ has shown itself willing to dig in a way that many other prestige press institutions have not. “People used to ask how Watergate might have turned out if the press had sided with Nixon instead of against him. Thanks to the work of Strassel and her WSJ colleagues, let’s hope we never find out.”
The Economist covers the story in this commentary. Our tag on evidence spoliation and document retention — lawyers among our readers will be familiar with how very seriously these concepts are taken in the world of litigation — is here.
Welcome readers: Glenn Reynolds/Instapundit.
- Heeding union and legacy air carriers, Congress nixes cheap flights to Europe [W.R. Mead/American Interest, Marc Scribner/CEI]
- Kneecapping the opposition: lawprof wants to yank trade associations’ tax exemption [CL&P]
- “Connecticut Supreme Court rules against man who got drunk and fell in bonfire” [Legal NewsLine]
- Making reform of big-city government a conservative cause [Scott Beyer]
- Judge: Pipe maker can sue qui tam law firm over press release calling products defective [Daniel Fisher, Forbes]
- British insurer group calls for action, says fraudulent accident claims up 18% in year [Insurance Journal]
- Long, detailed look at forces behind the madness that is the San Francisco housing market [Kim-Mai Cutler, TechCrunch in April]
Paul Caron at the justly admired TaxProf blog has been patiently documenting the IRS scandal since the start and his daily link roundups are now as relevant as they have ever been. More: CNN, John Hinderaker/PowerLine, A. Barton Hinkle (finger of responsibility points at Congress), Peter Suderman. Earlier here, etc.
Update: IRS said on Tuesday that computer crashes swallowed without a trace the emails of several other employees central to the nonprofit-targeting probe, and admitted it waited months to tell congressional investigators that it did not expect to produce Lois Lerner’s emails.
Obama urged to raise taxes unilaterally on disfavored groups by regulation if Congress won’t act:
Out of deference to Congress, the Treasury Department has traditionally avoided making policy in areas where the legislative branch may act. “But when the legislative process is as broken as it has become today,” said Daniel N. Shaviro, a law professor at New York University, “it’s simply inevitable that administrations will care less about such comity, and be more willing to advance their policy views in controversial areas through the unilateral exercise of regulatory authority.”
- Payday lenders sue federal agencies over Operation Choke Point [Bloomberg News, Business Journals, earlier; more, Funnell]
- Speaking of those lenders: “California Supreme Court to review ‘rent-a-tribe’ arrangement for payday lenders” [CL&P, more]
- “If someone starts trying to blame the Global Financial Crisis on ‘de-regulation’, you can stop reading…” [Lorenzo via Arnold Kling]
- Can we just admit that the feds’ real target in the Credit Suisse case was the bank’s customers? [ABA Journal]
- Maryland does not approve of Bitcoin [my Free State Notes via Kevin Funnell]
- Behind Halliburton v. Erica P. John Fund, SCOTUS’s big case on securities class actions, two lawprofs are jousting [Alison Frankel, Reuters, and there’s a Cato connection; earlier]
- For expats, FATCA raises “prospect of being discriminated against as an American for all things financial” [Peter Spiro/OJ; Sophia Yan, Money] More renounce U.S. citizenship [Yahoo] A Canada-based FATCA resource [Isaac Brock Society] Earlier here, etc.
Law enforcement for profit to take another big leap forward? [Washington Post]:
The Internal Revenue Service would be required to turn over millions of unpaid tax bills to private debt collectors under a measure before the Senate, reviving a program that has previously led to complaints of harassment and has not saved taxpayers money.
The provision was tucked into a larger bill, aimed at renewing an array of expired tax breaks, at the request of Sen. Charles E. Schumer (D-N.Y.), whose state is home to two of the four private collection agencies that stand to benefit from the proposal.
It requires all “inactive tax receivables” to be assigned to private debt collectors if the IRS cannot locate the person who owes the money or if IRS agents are unable to make contact within a year.
The idea has been tried twice before, but was discontinued both times after poor results including net losses on the program. Nina Olson, who holds the position of Taxpayer Advocate in the U.S. government (and is no relation), strongly opposes the program, noting that some of the money would be recouped by the Treasury anyway through means such as future withheld refunds without the need for paying 25 percent contingency fees to the middlemen. Bounty-hunting freelancers are more likely to resort to tactics such as day-and-night harassing calls, and have less flexibility to work out payment plans for those getting back on their feet after reverses or, in the case of estate taxes, heirs who may have not yet received the inheritances from which they need to pay the tax due.
Compare many state governments’ practice of putting out plaintiff’s-side litigation opportunities to private lawyers at contingency fee, which has created a durable lobby for hardball extractive lawsuits of dubious social benefit as well as showering large sums on law firms that already are or soon become influential political players in their states.