- While the entire population seems to have been blinded
by the glare of IRS hubris for over a half-century, it is the IRS that
appears to have an ongoing criminal record of law violations severely
impacting our rights and privacy. According to a 1995 summary written
by tax litigation consultant, Daniel Pilla, in 1993, "taxpayers were
overcharged $5 billion." In addition, he wrote, "a General
Accounting Office audit of the IRS in 1993 found widespread evidence of
financial malfeasance and gross negligence. The IRS could not account
for 64 percent of its congressional appropriation." (17)
-
- The Paperwork Reduction Act (PRA) (44 U.S. Code) was
passed by Congress and signed into law by the President in 1995. It added
additional restrictions to the PRA of 1980, regarding Federal agencies
and their ability to collect personal information from the public. The
purpose of this law is to have "Federal agencies become more responsible
and publicly accountable for reducing the burden of Federal paperwork
on the public, and for other purposes." It directs the Office of
Management and Budget (OMB) to regulate the Federal forms used to demand
or collect private information from the non-Federal public. Before each
form can be approved, the agency wishing to collect such information must
show the statute authorizing it to legally collect such information, and
it must comply with other laws and regulations. (1)(2)
-
- Obtaining information from the public on Federal forms
is specifically referred to as "information collections."
- According to the PRA of 1995, (Subsection 3507) no agency
shall collect non-Federal, public information unless in advance they have
submitted "copies of pertinent statutory authority" authorizing
them to collect such information. Upon approval, the information collection
form is then issued an eight-digit OMB code number to be displayed on
the form. Approval may not be for "a period in excess of 3 years."
All Federal agencies within the scope of the PRA must comply. Nearly
all do comply.
-
- A study identified as a Congressional Research Service
report gives a history of the PRA, stating that the Carter Administration
endorsed and helped bring about a PRA that brought the Treasury within
the scope of the PRA and its requirements. In November 1979, President
Carter issued Executive Order 12174 "with a view to minimizing further
the paperwork burden 'imposed on persons outside the Federal government.'"
The General Accounting Office (GAO) (since renamed the Government Accountability
Office), recommended more strict collection regulations and the result
was, the "OMB engendered the enmity of the Internal Revenue Service
(IRS) and the Treasury Department, which objected to OMB's attempts to
review IRS regulations containing reporting or recordkeeping requirements."
(3)
-
- The report goes on to state that in order to settle the
dispute, "OMB sought an interpretive opinion from the Office of Legal
Counsel (OLC), Department of Justice, that would be binding on the agencies.
Rendered on June 22, 1982, the OLC opinion concluded that reporting or
recordkeeping requirements set out in prior, existing regulations were
not subject to OMB review under the PRA. The opinion was largely viewed
as a substantial defeat for OMB for various reasons, not the least of
which was the fact that IRS regulations accounted for almost half of the
federal government's paperwork burden." This ruling, therefore,
sheltered the IRS from OMB review, but one must wonder why the IRS was
in need of such a shelter. Why were they unable to simply comply with
the PRA requirements?
-
- In a 2001 whitehouse.gov memorandum, 487 violations of
the PRA were documented by various agencies and compliance was again called
for. The memorandum further repeats, OMB approval for such forms "can
last for a maximum of three years," perhaps in part because a number
of violations appeared to stem from OMB numbers that had expired. In
addition, "The Act prohibits agencies from penalizing those who fail
to respond to Federal collections of information that do not display valid
OMB control numbers. The Act also prohibits agencies from penalizing those
who have not been informed that a response is not required unless the
collection of information displays a valid control number. Both of these
public protections 'may be raised in the form of a complete defense, bar,
or otherwise at any time during the agency administrative process or
judicial action applicable thereto.'" (44 U.S.C. 3512). (4)
-
- The full wording of Subsection 3512, "Public Protection,"
is as follows:
-
- "§ 3512. Public protection
-
- (a) Notwithstanding any other provision of law, no person
shall be subject to any penalty for failing to comply with a collection
of information that is subject to this subchapter if--
-
- (1) the collection of information does not display a
valid control number assigned by the Director in accordance with this
subchapter; or
-
- (2) the agency fails to inform the person who is to respond
to the collection of information that such person is not required to
respond to the collection of information unless it displays a valid control
number.
-
- (b) The protection provided by this section may be raised
in the form of a complete defense, bar, or otherwise at any time during
the agency administrative process or judicial action applicable thereto."
(5)
-
- According to 44 U.S. Code, Subsection 3506: "With
respect to general information resources management, each agency shall--
-
- (B) ensure that each information collection-
- (i) is inventoried, displays a control number and, if
appropriate, an expiration date;
- (ii) indicates the collection is in accordance with the
clearance requirements of section 3507; and
- (iii) informs the person receiving the collection of
information of-
- (I) the reasons the information is being collected;
- (II) the way such information is to be used;
- (III) an estimate, to the extent practicable, of the
burden of the collection;
- (IV) whether responses to the collection of information
are voluntary, required to obtain a benefit, or mandatory; and
- (V) the fact that an agency may not conduct or sponsor,
and a person is not required to respond to, a collection of information
unless it displays a valid control number;" (6)
-
- Subsection (D) of 3506 states that each form shall be:
"written using plain, coherent, and unambiguous terminology and
is understandable to those who are to respond."
-
- Violations of the PRA occur when forms expire but continue
to be used by agencies, or when forms are changed without first obtaining
OMB approval. The situation is usually corrected by requiring the agency
to comply and submit their form. According to a Fiscal Year 1997 Report
to Congress, for instance, the Treasury Department's Bureau of Alcohol,
Tobacco, and Firearms (ATF) violated the PRA by carrying out an "Unauthorized
Collection." This was discovered when a public individual noticed
that ATF had revised one of their forms without OMB approval, and notified
authorities. After the violation was noted, the stated response was:
"Treasury has assured OMB that ATF will reexamine its internal procedures
to ensure future compliance with the PRA." (7) (8) (9)
-
- Other brief examples of violations stemming from changing
an information collection form without first obtaining approval can be
seen in such cases as when the OMB noticed that substantial modifications
were made to the "Annual Report (5500 Form)" by the Department
of Labor. Another when the public notified OMB that the wording of an
Affirmative Action Plan Scheduling Letter had been changed without OMB
approval. Numerous other violations can be viewed online along with the
agency responses and their subsequent commitments to comply.
-
- Standing almost alone in its field, however, is the department
responsible for placing the largest Federal paperwork burden on the non-Federal
public. According to the government's own report, this agency is one
of the most persistent violators of Federal laws, thus resulting in a
government OMB compliance rating of "Poor." This is the Treasury
Department. The Treasury's IRS, alone, is now responsible for over 76
percent of the public's time- consuming, unregulated and confusing paperwork.
(10)
-
- One need not look very far to find an example of the
willful failure to file on the part of the IRS when it comes to compliance
with the PRA of 1980 and the PRA of 1995. One need only look at the
familiar IRS 1040 information collection form. In checking the OMB number
on this form, one can see that the IRS has been using the same OMB number,
1545-0074, on various altered forms since the early 1980s. According
to statements presented as factual evidence in an "unpublished disposition,"
the government complied with the PRA of 1980 in 1985, when information
pertaining to 1545-0074 was published in the Federal Register. What was
the cause of the five-year delay in complying with the law? (11).
-
- Almost a quarter-century beyond the "maximum of
three years" law, during which time modified forms have been used
without new OMB approval codes, this well-known OMB number continues to
be used, and in fact, is now being used on numerous additional forms
due to what is currently referred to as a "new methodology"
recently embraced by the IRS. According to this "new methodology,"
the IRS claims it has administrative discretion to put whatever it likes
under one single OMB control number, apparently creating a one-size-fits-all
OMB, forever and ever.
- This "new methodology," however, clearly violates
the PRA, and thus places the IRS in a position that is again above the
law and beyond the reach of reasonable and responsible Federal review
and accountability. (12) (13) (14) (15)
-
- In addition, it should be noted that unlike the other
Federal departments and agencies, the IRS apparently does not even recognize
the PRA of 1995 or recognizes it only with contempt as seen by their ongoing
refusals to comply, and ongoing violations.
- The IRS has instead elected to refer to, and to lead
the public to believe it is operating according to the lesser restrictive
PRA of 1980, as can be clearly seen in their current IRS instructions
for Form 1040, year 2007. There, they write again, "and the Paperwork
Reduction Act of 1980 require that when we ask you for information .
. . " (16)
-
- One must wonder why the IRS is publicly giving the appearance
of ignoring the PRA of 1995 and operating instead as they did back in
a bygone era, clinging to an old OMB number that appears to have been
obtained by a grandfather-clause shelter given to the IRS in the 1982
ruling by the Office of Legal Counsel. One must also wonder what the
real reason is that the IRS has no newer OMB numbers for the 1040 form
demanding information from the public.
- Is the answer that they have been unable to fully comply
with the PRA? Is the IRS unable to cite the actual statute giving them
the legal, lawful authority to demand from the non-Federal general public
the information collections, the monies, the personal wages and the horrific
penalties that it has been extracting from the non- Federal general public
for over a half-century?
-
- There are other questions to be asked, as well. If the
IRS is selective about the laws it recognizes and operates under, which
laws are we - - the non-Federal public who remain at its mercy - - expected
to abide by? Shall we ignore standing laws such as PRA 1995 when we deal
with the IRS? Shall we abide instead by older, more obsolete laws, or
shall we accept its "new methodology" moves that violate the
essence of the PRA?
-
- The PRA instructs us to use the PRA protection provisions
as our own legitimate defense in cases of OMB code violations. The courts,
however, have only infrequently dared to challenge and investigate the
IRS activities, choosing instead to sacrifice unknown numbers of innocent
non-Federal people for such vague and consistently unproven charges as
"willful failure to file a tax return." This charge is based
upon "IRC Sec. 6012. Persons Required to Make Returns of Income."
The word "returns," however, implies giving something back
to the source from which it was first obtained.
-
- While the entire population seems to have been blinded
by the glare of IRS hubris for over a half-century, it is the IRS that
appears to have an ongoing criminal record of law violations severely
impacting our rights and privacy. According to a 1995 summary written
by tax litigation consultant, Daniel Pilla, in 1993, "taxpayers were
overcharged $5 billion." In addition, he wrote, "a General Accounting
Office audit of the IRS in 1993 found widespread evidence of financial
malfeasance and gross negligence. The IRS could not account for 64 percent
of its congressional appropriation." (17)
-
- One might assume that after such a scathing review, the
IRS would have moved to correct its areas of weakness and noncompliance,
but as though it cannot conduct its business unless also simultaneously
violating the Constitution and other laws, it apparently has no intention
of changing. In a 2003 Opinion written on the case of "Dixon v.
Commissioner of Internal Revenue," in which the IRS was ruled to
have defrauded the court in order to win 1,300 tax shelter cases, Judge
Michael Hawkins used a quote from an earlier Opinion as his opening title:
"The truth needs no disguise."
-
- He further wrote, "We must decide whether the Tax
Court's finding of a pattern of government misconduct amounts to a fraud
on the court and, if so, whether such a fraud requires a showing of prejudice
to justify relief. We conclude that the misconduct, including its persistence
and concealment, did indeed amount to a fraud on the court."
-
- In his Opinion on this case, a case that would result
in two IRS lawyers having their law licenses suspended, Judge Hawkins
further wrote, "The IRS had an opportunity to present its case fairly
and properly. Instead its lawyers intentionally defrauded the Tax Court.
The Tax Court had two opportunities to equitably resolve this situation
and failed. Enormous amounts of time and judicial resources have been
wasted. In addition, the IRS has done little to punish the misconduct
and even less to dissuade future abuse." (18) (19)
-
- Indeed, according to the New York Times, each of the
two IRS lawyers had received $1000 bonuses for their efforts. When Michael
Louis Minns, a tax lawyer representing 124 of the tax shelter buyers,
asked the IRS in which states their two lawyers were licensed so that
he could seek their disbarment, the IRS refused to say, stating such disclosure
would violate their confidentiality.
-
- Now, as the 2008 tax season approaches its annual frenzy,
we see that various media are abuzz with the shocking news that due to
massive security flaws, the IRS computer system containing millions of
Americans' most private and confidential information can be easily hacked
and identities stolen, accessed, or routed off to third parties. While
the IRS has protected its own despite their having engaged in egregious
misconduct, it has done little to protect the innocent general public.
This, however, is not really news, nor should it be shocking. Daniel
Pilla warned us about this in 1995. While the truth needs no disguise,
for the agency that represents the exact opposite of the truth, no disguise
could ever suffice.
-
- * * * * * * * * *
- Mary Sparrowdancer is an independent, investigative journalist
and the author of a bestselling book, The Love Song.
- www.sparrowdancer.com She wishes to thank Congressional
Candidate Mark Yannone (AZ-3), for his comments and input in the creation
of this paper. http://www.yannone.org/
-
- * * * * * * * * *
- Cited References:
-
- 1. OMB-Watch. (4/9/08)
- http://www.ombwatch.org/article/articleview/2881/1/360?TopicID=7
-
- 2. Paperwork Reduction Act (4/9/08)
- http://www.archives.gov/federal-register/laws/paperwork-reduction/
-
- 3. Report to Congress. (4/9/08)
- http://ftp.fas.org/sgp/crs/secrecy/RL30590.pdf
-
- 4. Still not quite at goal. (4/9/2008)
- http://www.whitehouse.gov/omb/inforeg/pra_memo111401.pdf
-
- 5. The Little David and Goliath Law (4/9/08)
- http://www.law.cornell.edu/uscode/44/usc_sec_44_00003512----000-.html
-
- 6. More of Same. (4/9/08)
- http://www.law.cornell.edu/uscode/44/usc_sec_44_00003506----000-.html
-
- 7. Department of Labor Complies. (4/9/08).
- http://www.dol.gov/cio/programs/pra/pra.htm
-
- 8. FCC Complies. (4/9/08)
- http://www.fcc.gov/omd/pra/about.html
-
- 9. Not Everyone Complies. (4/9/08)
- http://www.whitehouse.gov/omb/inforeg/prarep2.html
-
- 10. PRA Compliance Rating. Treasury: "Poor."
(4/9/08)
- http://www.whitehouse.gov/omb/inforeg/icb/fy2006_icb_report.pdf
-
- 11. Unpublished Disposition (4/12/2008)
- http://bulk.resource.org/courts.gov/c/F2/923/923.F2d.862.36-3_10.html
-
- 12. 1545:0074 Finally Expires. (4/9/08)
- http://www.whitehouse.gov/omb/library/OMBINV.TREASURY.html
-
- 13. The New Methodology. (4//9/08)
- http://www.whitehouse.gov/omb/inforeg/icb/fy2006_icb_revised.pdf
-
- 14. PRA of 1980 (4/12/08)
- http://www.thecre.com/pdf/Carter_PaperworkRedAct1980.PDF
-
- 15. Federal Register, December 2006, New Methodology
- http://edocket.access.gpo.gov/2006/E6-21709.htm
-
- 16. 1545:0074 Revived. IRS follows 1980 Law.
(4/9/08)
- http://www.irs.gov/pub/irs-pdf/i1040.pdf
-
- 17. IRS Malfeasance (4/12/2008)
- http://www.cato.org/pubs/pas/pa222es.html
-
- 18. Dixon v. Commissioner of Internal Revenue
(4/12/2008)
- http://www.ca9.uscourts.gov/ca9/newopinions.nsf/ 294160FF1751D1B888256CB10004A899/$file/0070858.pdf?openelement
-
- 19. New York Times Two ex-IRS Lawyers' Licenses
Suspended
- (4/12/2008)
- http://www.nytimes.com/2004/08/21/business/21tax.html?
ex=1250827200&en=3e42f669e5580fae&ei=5090&partner=rssuserland
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