It is likely the largest unauthorized disclosure of tax-return information in history: the transfer of some 1.25 million pages of confidential tax returns from the IRS to the Department of Justice in October of 2010. And it was almost certainly illegal.
The documents, which consisted chiefly of non-profit tax returns, were transferred to the DOJ’s criminal division from the IRS at the request of Lois Lerner, who wanted to get the information to the DOJ in advance of a meeting where she and several of the attorneys in the public integrity section of the department’s criminal division discussed their concerns about the increasing political activity of non-profit groups.
But we already knew that. The transfer of information at Lerner’s request came to light during a congressional investigation in 2014. What we know now, thanks to additional documents unearthed in years-long litigation by the good-government group Cause of Action, is that Lerner almost certainly broke the law when she transferred the documents. That casts a new light on the Justice Department’s decision last year not to prosecute Lerner, who had become the face of the IRS’s ham-handed effort to crack down on right-leaning groups, but against whom a criminal case might have been difficult to build.
“It took an organization over 50 months of investigation and multiple lawsuits to get clarity on the IRS’s own compliance with the rules it enforces against others,” says Dan Epstein, the executive director of the Cause of Action Institute and a former attorney for the House Committee on Oversight and Government Reform. “The IRS, in the midst of its political targeting of groups engaged in policy advocacy, was engaging in the disclosure of millions of records aimed at ginning up prosecutions of these groups without going through the legally required channels.”
‘The IRS has a special obligation to keep information confidential, that’s how our tax system works.’ — Eileen O’Connor
Documents suggest that Lerner’s massive document transfer to the DOJ didn’t meet any of those exceptions, including one that allows the agency to disclose returns for use in criminal investigations — if they’ve been requested in relation to “an actual investigation about a person to whom the investigation is related,” says O’Connor. Both Lerner and the DOJ were interested in figuring out how to prosecute non-profit groups they believed were engaging in improper political activity, and Lerner sent the documents over to the department days before an October 8 meeting with several of her IRS colleagues, an FBI agent, and attorneys from the DOJ’s public-integrity section. There they discussed their mounting “concern that certain 501(c) organizations are actually political committees ‘posing’ as if they are not subject to FEC law, and therefore may be subject to criminal liability,” according to a DOJ summary of the meeting.
A lawful transfer of the documents would have required a formal request from the DOJ to the IRS, but DOJ trial attorney Stephanie Sasarak told Cause of Action in a March 9, 2016, letter that the department did not make any requests to the IRS for the documents it received. Alternatively, the secretary of the Treasury could have turned the documents over to the DOJ. In either case, section 6103 requires the Treasury secretary to disclose the transfer to the bipartisan Joint Committee on Taxation, which releases publicly a list of disclosures each year. But the Joint Committee on Taxation’s 2010 disclosure report does not show a transfer to the Department of Justice that matches the one Lerner sent in October of that year.
According to Epstein, Cause of Action Institute’s executive director, the transfer wasn’t disclosed because there was “no legal justification for sharing the documents,” and because going through the proper channels would have brought it to public attention through the Joint Committee on Taxation. A spokesman for the committee declined to comment for this story.
“It is disappointing to be learning significant details in 2016 about how poorly taxpayers were treated in 2010,” says Peter Roskam, the oversight chair of the House Ways and Means Committee, which has jurisdiction over issues related to taxpayer privacy. Roskam, an Illinois Republican, spearheaded the passage of legislation through the House earlier this month that would prevent the IRS from requiring tax-exempt organizations to submit any information about their contributors.
Congress moved to protect taxpayer privacy in the Tax Reform Act of 1976. It was a direct response to the Watergate hearings, which revealed that the Nixon White House had both sought and received information on its “enemies” from the IRS, and that White House staffers routinely requested audits — and the IRS performed them. Section 6103 of the Internal Revenue Code, which was part of the tax-reform bill, made tax-return information confidential with extremely limited exceptions.
Lerner’s disclosure occurred against the backdrop of the Supreme Court’s January 2010 Citizens United decision, which allowed issue-oriented social-welfare groups to pour unlimited money into the political process and keep their donors anonymous. She shared the documents to aid the DOJ’s preliminary attempts to re-criminalize this activity. DOJ concern about the “misuse of non-profits for indirectly funding campaigns” prompted the meeting between IRS and DOJ officials.
It looks increasingly likely that the file sharing was part of a broader effort on the part of bureaucrats to push back against the Supreme Court’s ruling, an effort that not only almost certainly violated the law but undermined the spirit of the law and the purpose for which it was written in the first place.
— Eliana Johnson is the Washington editor of National Review.