Daily Tax Update - May 14, 2013: Tax-Writing Committees, FBI, and Justice Department to Examine IRS Review of Tax-Exempt Applicants

TAX-WRITING COMMITTEES, FBI, AND JUSTICE DEPARTMENT TO EXAMINE IRS REVIEW OF TAX-EXEMPT APPLICANTSCongressman Dave Camp (R-MI), Chairman of the Committee on Ways and Means, and Ranking Member Congressman Sander Levin (D-MI) have announced a hearing on the IRS’s alleged targeting of applicants for tax-exempt status based on political views.  On May 10, 2013, the IRS disclosed that it had selected applicants for section 501(c)(4) status with “Tea Party” or “Patriot” in their names for assignment to a centralized processing team.

It was also announced today that the FBI and Justice Department will launch a criminal inquiry.  Attorney General Eric Holder said, “The FBI is coordinating with the Justice Department to see if any laws were broken in connection with those matters related to the IRS.  We are examining facts to see if there are violations.”

Senate Finance Committee Chairman Max Baucus has called for an investigation as well. Baucus said, “These actions by the IRS are an outrageous abuse of power and a breach of the public’s trust.  Targeting groups based on their political views is not only inappropriate but it is intolerable.  Americans expect the IRS to do its job without passion or prejudice.  We need to get to the bottom of what happened here.  I want to see all the facts.  We need to know who knew what, and exactly what mistakes were made.  The American people have questions for the IRS and I intend to get answers.  I want to review the Inspector General’s report first, but the IRS should be prepared for a full investigation into this matter by the Senate Finance Committee.  The IRS will now be the ones put under additional scrutiny.”

Chairman Camp stated: “I am astounded and appalled that the IRS targeted organizations based on their political beliefs.  No American, regardless of political affiliation, should have their right to free speech threatened by the IRS.  The IRS’s repeated failure to be truthful is completely unethical and an embarrassment to this government.  The fact that top level officials in the IRS were aware of this behavior and did nothing to address it is absolutely unacceptable and raises serious questions about the competence of those running this agency.  The IRS must be accountable to taxpayers and Congress and that begins with providing an explanation for these egregious and unlawful practices.”

President Obama said, "This is pretty straightforward. ... If in fact IRS personnel engaged in the kind of practices that have been reported .... and were intentionally targeting conservative groups, then that's outrageous and there's no place for it." Those responsible, he said, will "be held fully accountable."  "I've got no patience with it and will not tolerate it," Obama added.

The Treasury Inspector General for Tax Administration is expected to release a report on its investigation of this issue later this week. 

Notice 2013-34 provides the inflation adjustment factor for the credit under § 45Q for calendar year 2013.