Published time: June 04, 2013 01:33
An internal watchdog claims the IRS spent $50 million on ‘inappropriate’ conference funds during a three-year period – news that serves to further embarrass the agency in wake of its targeting of conservative groups.
The Internal Revenue Service allegedly spent nearly $50 million on about 200 employee conferences between 2010 and 2012, during which it frequently provided its workers with presidential hotel suites and allowed them to take dance classes and attend baseball games, according to excerpts from an inspector general’s report slated to be released Tuesday.
An August 2010 conference in Anaheim, Calif., cost the IRS $4 million. About 2,600 managers attended the event and stayed in presidential hotel suites that usually cost $1,500 to $3,500 per night. About 15 outside speakers were paid $135,000 each, one of which was hired to discuss “leadership through art”, according to the House Oversight and Government Reform Committee, which released the excerpts.
The IRS also failed to negotiate lower room rates, which is a standard practice for federal government agencies. Employees who attended the conference also received a number of costly benefits, including baseball tickets at taxpayers’ expense.
“They ended up with free drinks, they ended up with tickets to games – basically kickbacks,” Rep. Darrell Issa (R-Calif.), chairman of the House oversight panel that released the excerpts, told NBC News.
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Report: Treasury finds IRS spent $50M on conferences in 3 years
A review by the Treasury Department’s inspector general found that the Internal Revenue Service (IRS) spent $50 million dollars on conferences for employees between 2010 to 2012, according to reports.
The audit, set to be released on Tuesday, says the agency spent the funds on more than 200 employee conferences, including an August 2010 meeting in Anaheim, Calif., which cost taxpayers $4 million.
According to a statement from the House Oversight Committee, 15 outside speakers at the event were paid a total of $135,000 and many attendees were given perks including baseball tickets and suites at the hotel, the AP reported.The new report comes as the tax agency already faces congressional anger over its targeting of conservative political groups and will likely bring further scrutiny on Capitol Hill.
Oversight Committee Chairman Darrell Issa (R-Calif.) is set to hold a hearing on IRS conference spending on Thursday.
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Danny Werfel, the acting IRS commissioner Photographer: Tom Williams/CQ Roll Call
IRS Gift Rule Turned on Politics as Crisis Prompts Reform
By Richard Rubin – Jun 2, 2013 11:00 PM CT
The last time the Internal Revenue Service waded into a fight on politically active nonprofit groups, the agency capitulated quickly and let people make undisclosed, untaxed payments to groups financing campaign ads.
In 2011, under pressure from Republicans, the IRS shut down an attempt to impose gift taxes on donations to so-called social welfare organizations. The move led to a “free-for-all” by donors while clearing up decades of ambiguity on how it would enforce the law, said Ofer Lion, an attorney at Hunton & Williams LLP (1130L) in Los Angeles.
The new controversy surrounding IRS scrutiny of small-government groups focuses attention again on how the agency handles politically sensitive issues. Lessons from the 2011 episode were obvious and yet recurred in 2013, as a lack of clear rules and management left the agency vulnerable to employee misconduct, open to charges of bias against Republicans and their allies and flat-footed when confronted with an outcry from lawmakers.
“It took a crisis to get reform, and I think that’s where we are now,” Greg Colvin, a partner at Adler & Colvin in San Francisco, said of the gift tax case. “It’s going to take a crisis like this to cause the IRS and Congress to realize that you can’t keep tolerating this kind of inadequate supervision and have the IRS refereeing what is and is not political.”
The IRS’s enforcement of tax laws on nonprofit groups re-enters the spotlight this week as Congress returns from a one-week recess, intent on searching for evidence of partisan motivations or senior executives’ involvement in targeting anti-tax Tea Party groups. The IRS revealed May 10 that some small-government groups got extra attention because of their names. Since then, six congressional committees have started inquiries, the Justice Department began a criminal probe, and three employees left their jobs early or were placed on leave.
First Appearance
Danny Werfel, the acting IRS commissioner, will make his first public appearance at a House hearing today since taking over May 22. Tomorrow, the House Ways and Means Committee is asking groups singled out for tougher scrutiny to testify about their experiences. The House Oversight and Government Reform Committee will meet June 6 to review an audit of spending on IRS conferences, including parody videos.
Congressional investigators are interviewing IRS employees and seeking past-due answers to lists of questions they sent the agency. The IRS says it is trying to be “exceedingly thorough” as it prepares responses.
The 2011 gift-tax flap and the new controversy over applications for tax-exempt status both stem from the same corner of the tax code.
Social Welfare
Groups organized under section 501(c)(4) are required to operate “exclusively” for the benefit of social welfare and don’t have to disclose their donors. Contributions aren’t tax-deductible and the groups don’t have to pay taxes on their investment income.
The IRS interprets that law to let 501(c)(4) groups engage in political activity, as long as that’s not their primary purpose. Many of those groups, including the Republican-allied Crossroads GPS and the Democratic-allied Priorities USA, spent heavily on campaign ads last year.
Such groups spent $256 million during the 2012 election cycle, according to the Washington-based Center for Responsive Politics, which tracks campaign finance issues.
The controversy for the past month has revolved around the scrutiny applied to groups applying for tax-exempt status.
Five Donors
The gift-tax issue is different because it involves donors to the groups. In 2011, the IRS sent letters to five donors, opening audits on whether their contributions to the groups should count as taxable gifts.
The Wall Street Journal reported May 31 that all five donors had given to Freedom’s Watch, which was formed to support President George W. Bush’s policies in Iraq. One of the group’s main backers was Sheldon Adelson, chairman and chief executive officer of Las Vegas Sands Corp.
The IRS was on solid legal ground, according to a 2012 analysis by the Congressional Research Service. The tax code specifically exempts contributions to charities under section 501(c)(3) and political groups under section 527 from the gift tax. The IRS hadn’t been enforcing the gift tax for contributions to 501(c)(4) groups although it had, in effect, said in a 1982 revenue ruling that the tax could be applied.
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