Taxpayer Confidentiality Under Investigation

As we recently reported on HUMAN EVENTS, seven U.S. Senators are seeking a probe into the release of private tax information by the Obama administration.  Koch Industries, the private company whose information was released, is perceived by the administration as an “enemy” because they legally fund non-profit organizations whose goals are in conflict with the Obama agenda.

Sen. Chuck Grassley (R-Iowa), ranking member of the Senate Finance Committee, and six other committee members asked for an inspector general review of whether Obama administration officials illegally accessed and disclosed confidential taxpayer information. 

The Treasury Inspector General (IG) for Tax Administration has agreed to the request to conduct the investigation.  His confirmation letter can be found here

The senators raised questions in their letter to the IG asking how an Obama administration senior official had knowledge of Koch Industries’ non-disclosed private tax structure.  From the letter:

Thus, we are very concerned about a statement made by Administration officials in an August 27, 2010, press briefing regarding the President’s Economic Recovery Board’s (PERAB) report on corporate tax reform.  This statement, as reported by The Wall Street Journal, comments on the legal structure of Koch Industries, Inc. (Koch) and its impact on the group’s tax liability. While Koch’s website indicates some of the Koch companies are limited liability companies (LLC) or limited partnerships, there is no indication that Koch itself is a Subchapter S Corporation, which is one type of flow through entity, or a Subchapter C corporation.  In addition, an LLC can choose to be taxed as Subchapter C corporation.

Thus, the statement that Koch is a pass-through entity implies direct knowledge of Koch’s legal and tax status, which would appear to be a violation of section 6103.  Alternatively, if the statement was based on speculation, it raises the question of whether the Administration speculating about any specific taxpayer’s liability is appropriate.
The statement is also troubling because it was made shortly after the President highlighted the advocacy work of certain tax-exempt organizations funded by Koch Industries, Inc. and its owners.  The work of these tax-exempt organizations, while opposing the Administration’s policies, appears to be in compliance with the tax laws.  However, we are concerned that the PERAB’s statement singling out Koch Industries, Inc. so soon after the President’s statement was politically motivated.

The letter was prompted by a report in the Wall Street Journal included comments from a “senior administration official” representing he had intimate knowledge of Koch’s private tax structure.