IRS abuses law in smearing Simon

Recently, the Internal Revenue Service and the Justice Department's Tax Division committed the most outrageous, politically motivated violation of taxpayer confidentiality in recent history, and no one in Congress or the mainstream media seems to care.

One of the victims of this IRS-Tax Division attack on taxpayer privacy was none other than California Republican gubernatorial candidate William E. Simon, Jr., who is in the midst of tight race with incumbent Democratic Gov. Gray Davis. (See cover-box story.)

The facts are these: On July 9, 2002, the government filed in United States District Court for the District of Columbia a petition to enforce IRS summonses against the accounting firm of KPMG LLP. The IRS was seeking evidence that KPMG was marketing certain tax shelters to clients, which the IRS questioned. Attached to the petition was a "privilege log" of client names and a limited description of the information KPMG sought to protect.

The purpose of the privilege log was to provide the IRS with an opportunity to challenge the privilege claim and to enable the court to make a final determination on the sufficiency of KPMG's claim. By attaching the log to its motion for enforcement, the Tax Division lawyers representing the IRS made public the identities of KPMG clients who had sought confidential tax advice from the firm.

Section 6103(b)(2),of the Internal Revenue code requires that tax return information, including the identity of taxpayers, "shall be confidential." Although Section 6103(h)(4) permits the disclosure of such information in judicial proceedings, the code is very specific about the circumstances in which the government may release the information.

In this case, there was no legitimate litigation purpose in releasing the identities of these taxpayers. None of the taxpayers were parties to the proceeding. Moreover, the proceeding does not involve a liability determination, but rather the appropriateness of KPMG's compliance with a summons.

Even if the government believed the identity of the taxpayers had some relevance to an issue before the court, it could have availed itself of the usual precautions when litigating these cases. The IRS, for example, could have redacted taxpayer identities from the privilege log, used aliases, or filed the petition under seal. Any of these litigation options would have protected the government's case as well as the identities of the taxpayers.

Thus far, neither the IRS nor the Tax Division has provided any explanation for the public release of the taxpayers' names. The fact is that there's only one rational conclusion that can be drawn: partisan politics. It was an attempt to hurt Bill Simon's gubernatorial campaign, which, for weeks prior to the IRS revelation, had been buffeted by questions about his tax returns, which had not yet been shown to the public.

Furthermore, the government's lead counsel in the District Court case is Stuart D. Gibson, who also happens to be a Democrat Party activist in Virginia. In fact, Gibson is an elected member of the Fairfax County School Board, a seat he won with the endorsement and support of the local Democrat Party.

Both the national media and the California press have ignored the government's egregious misconduct. Instead, they've used the information to demand that Simon provide more details about his tax filings. All the while, the Davis campaign continues to exploit the IRS-released information by raising questions and doubts about Simon's finances and ethics. In other words, the IRS, the Tax Division, and specifically Stuart Gibson, have succeeded in influencing the course of California's gubernatorial election by misusing confidential taxpayer information. And there's not a single investigative reporter examining this outrageous abuse of power.

And where are all those so-called civil liberties groups? Don't they support protecting privacy rights? The fact that Simon is a Republican businessman shouldn't play a role in a matter of principle.

On July 23, 2002, Landmark Legal Foundation filed a complaint with the Justice Department's Office of Professional Responsibility seeking an investigation into the conduct of all officials involved in the decision to disclose taxpayer identities in connection with the District Court case. Landmark has also asked OPR to probe the politicization of this case to ensure that in the future the confidentiality of tax return information will be respected.

Mr. Levin is president of Landmark Legal Foundation in Herndon, Va.

Copyright Human Events Publishing, Inc. Jul 29, 2002
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