Dangers Posed by IRS Secrecy

After decades of official secrecy, periods of serious corruption and instances of political abuse, the Internal Revenue Service in the mid-1970s turned a corner and began providing the American people with information that allowed them to better judge what the agency was doing. At first, even though Congress had passed the Freedom of Information Act, many agency officials continued to think of the IRS as a traditional enforcement agency where operational secrecy was essential and openness a threat.

But later, during the 1997-2002 period when Charles Rossotti headed the IRS, top executives appeared to have a genuine change of heart.

With Rossotti's encouragement they came to recognize that, because of the unusual nature of the nation's tax laws, opening the agency to public inspection was in fact key to achieving its work. In a system where a degree of voluntary compliance by millions of taxpayers is essential, a more transparent agency would make possible the goals set out in the IRS's mission statement:

"Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all."
In addition to helping the IRS collect the necessary taxes, there is a second equally important benefit involved in attacking the secrecy that had long shrouded its operations. The second benefit concerns the fact that while voluntary compliance is a significant factor in the U.S. tax system, traditional enforcement also is required. To ensure revenue for the government's operation the agency has been given powers that are not possessed by any other agency of government. Taken together, IRS activities impact more people's lives more directly than virtually any other government body. And only with accurate information about who it employs, what it spends, and how it enforces the law can the public, members of Congress, news organizations and others determine that the agency is functioning according to the law of the land.

Without the availability of tangible yardsticks by which the actual performance of the IRS and other agencies can be measured, representative democracy is certainly weakened, maybe even threatened. So it is essential that complete and accurate information about the audits performed by the agency, the taxes assessed by it, the moneys collected, and so forth become a routine part of the public record.

IRS Drops Commitment to Openness

Unfortunately, beginning about three years ago, while retaining the same high-sounding mission statement, the IRS under Commissioner Mark Everson has backed away from the agency's long and growing commitment to accountable government and slowly begun to eliminate the essential yardsticks.

Within the IRS, there have been literally scores of examples about how this real-world undermining of government accountability has gone forward in the last few years. Here is one.

On April 20, 2004 Treasury Secretary Snow complained in a letter to The Washington Post that the efforts of the IRS to audit businesses had been subject to a "misleading" editorial because the decline in these audits could be explained by agency's increased focus on tax shelters. Snow added that tax shelter audits require more time to complete than traditional business audits.

Congress, the public and reporters were not able to verify the Secretary's justification for the decline in IRS business audits because agency statistics about the reasons why individual and business taxpayers had been selected for audit was being withheld by the government. This information -- that would of course include actual counts of the audits for suspected tax shelter abuse and staffing resources expended on them -- had been made public by the IRS for many years in the past.

There are many other instances when the Bush Administration has withheld key information that is needed to determine whether the IRS is achieving the goals laid out in its impressive mission statement. At the present time, the agency is still publishing statistical tables showing the total number of various kinds of audits it performs and the additional taxes that the auditors have determined are owed the government. But, reversing the practice of several decades, the IRS now refuses to make public the actual hours devoted to these audits. It also withholds information allowing the public to compare the additional tax dollars and penalties requested by the IRS in its initial requests and its later assessments. In the past, such comparisons have shown that wealthy taxpayers are much more successful when it comes to reducing the agency's initial claims than poor ones.

In a democracy like ours, it is important that powerful officials like the Treasury Secretary and the Commissioner of the IRS inform the public and Congress about what they are doing. But pronouncements that misleadingly quote summary statistics that cannot be examined because the IRS at the same time is withholding underlying information in violation of the FOIA are a matter of genuine concern.

IRS Asserts FOIA Does Not Apply If Agency Stamps Document 'Internal Use'

During the last year, TRAC has submitted more than 85 requests and followup letters challenging various IRS withholding actions under the FOIA. Very recently, however, the agency's denials have gone one step further. IRS letters have included the nonsensical claim that it was "not denying release of the document" requested by TRAC, it was only withholding it. This vivid example of what George Orwell called "double think" centers around the agency claim that the requested information has now been declared an "Internal Use" document that cannot be released to the public. Maureen Sapero, a manager in the IRS' Disclosure Office, described the official position in a January 25 letter to TRAC:

"We are not denying release of the document; it is an agency policy not to release 'Internal Use' documents to the public."