U.S. law prohibits the federal government from targeting specific groups or individuals for tax enforcement without cause, but the Internal Revenue Service (IRS) has a long history of mounting intrusive, ideologically targeted federal investigations of political movements.
The agency has been accused of failing to meet its mission of neutrality, of bending to political pressure and of resisting internal reforms, getting caught up in multiple scandals.
Here are 10 things to know about how the I.R.S could be used for politically motivated attacks on American citizens.
During the 1940s, ’50s and ’60s the FBI had unlimited access to tax returns and other financial information about suspects, people deemed extremists and Communist Party sympathizers.
Dr. Martin Luther King, Jr. was subjected to repeated harassment by the IRS on made-up charges for speaking about inequality. In 1960, he became the first person ever criminally charged in Alabama for tax fraud. Dr. King was acquitted by an all-white jury in Montgomery on May 28, 1960.
Several of Dr. King’s lawyers and the Southern Christian Leadership Conference were also subjected to audits.
Some of the worst politically motivated attacks by the federal government were undertaken by the FBI against Black activists using the secret COINTELPRO domestic counterintelligence program. In May 1968, FBI director J. Edgar Hoover authorized the new program to “expose, disrupt and otherwise neutralize” groups and individuals on the left, including using the IRS as a weapon in the federal campaign, Time reported.
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Leaders of the Black Panther Party were targeted by COINTELPRO and “neutralized” by being assassinated, imprisoned, publicly humiliated or falsely charged with crimes. Within a year, the FBI had directed the IRS to open investigations on 35 activists suspected of not filing tax returns.
From 1966 to 1974, the FBI got about 200 tax returns from the IRS, mostly of Black nationalists and anti-Vietnam War activists. The IRS program of cooperating with the FBI without asking questions was deemed “illegal” by a senior IRS official in 1968, but the abuses continued despite the call for internal reforms.
By early 1969, the misuse of the IRS had White House approval. An aide to President Richard Nixon recommended using the IRS to examine left-wing tax-exempt organizations to make sure they were compliant with the law. Nixon agreed. Five years later, during his impeachment, he was accused of using the IRS improperly, among other things.
NAACP claimed it was a target of political bias, IRS abuse
Officials at the National Association for the Advancement of Colored People claimed the IRS unfairly targeted the group for an audit in the 2004 election cycle to discourage political activity.
In 2004, the IRS audited the NAACP, the oldest civil rights group in the U.S., after its chairman said President George W. Bush was the first sitting president since Herbert Hoover who declined to speak before the group, Salon reported.
“They are saying if you criticize the president we are going to take your tax exemption away from you,” then-NAACP chairman Julian Bond said. “It’s pretty obvious that the complainant was someone who doesn’t believe George Bush should be criticized, and it’s obvious of their response that the IRS believes this, too.”
In a letter to the IRS, Democratic Reps. Charles Rangel, John Conyers and Pete Stark wrote that the audit was an effort to intimidate the members of the NAACP, and the communities the organization represents.
The two highest-ranking F.B.I. officials, former FBI director James B. Comey and his deputy director Andrew G. McCabe were audited by the IRS during former President Donald Trump’s term. The odds of being subjected to this type of audit are small. In 2017 for example, the IRS targeted about 5,000 out of 153 million individual returns filed, according to the New York Times.
The Trump Justice Department was pursuing criminal investigations against both men, but neither was ever charged?
Comey’s audit, which lasted more than a year, revealed that he and his wife, Patrice Comey, had overpaid their 2017 federal income taxes by $347. They received a refund.
Former I.R.S. officials and tax lawyers said because Trump repeatedly tried to use the powers of the federal government against his rivals and to overturn the election, and because the I.R.S. conducted an extensive audit on two people whom he routinely pushed to have prosecuted, the tax inspector general or Congress should investigate, the New York Times reported.
During Obama’s first term, the IRS targeted conservative nonprofit groups for increased scrutiny. Obama responded to the May 2013 revelation with anger. “If you have the IRS operating in anything less than a neutral and nonpartisan way, then that is outrageous,” Obama said. “It is contrary to our traditions.”
U.S. stock broker, financial commentator, and radio personality Peter Schiff founded the U.S.-based Euro Pacific Bank in 2011 with subsidiaries in the Caribbean, building it to 15,000 accounts within two years. The bank moved to Puerto Rico in 2017. In 2020, a group of tax authorities called J5 — Joints Chief of Global Tax Enforcement — started investigating Schiff’s bank “to put a stop to the suspected facilitation of offshore tax evasion and money laundering by the bank.”
J5 was created by the governments of the U.S., U.K., Canada, Australia and the Netherlands in 2018 to combat international financial crimes involving tax evasion and money laundering. Deposits at the bank dwindled in the wake of the J5 investigation and customers left.
Puerto Rican regulators have issued a cease-and-desist order to the bank and Schiff said the regulator “seems to respond to pressure from the federal Internal Revenue Service (IRS).”
When the investigation showed no foul, regulators used a different approach, saying the bank has been operating in insolvency for at least three years, Schiff said, according to El Nuevo Dia.
“The IRS and J5 targeted my bank due to my outspoken criticism of excess government taxation and regulation. Their illegal efforts to punish free speech, deprive me of property without due process, and needlessly put thousands of customers at risk, actually justifies my criticism,” Schiff tweeted.
On social media an in an email to El Nuevo Dia, Schiff said “My bank is being shut down on capital issues alone.” He described the matter as “a technicality.”
“I think OCIF (the Puerto Rican regulator) agreed to do this … to gain favor with the IRS. Puerto Rico has been under pressure from the IRS for its tax incentives that result in wealthy people like me moving to the island to avoid paying taxes,” Schiff said.
“Instead of suspending the bank operations abruptly without notice, (the commissionera) could have given me 24 hours to bring the additional capital or face closure. I would have provided it (the capital),” he said.
Photo: A portion of the 1040 U.S. Individual Income Tax Return form, July 24, 2018 .(AP Photo/Mark Lennihan, File)