The most dreaded news a person or company can receive is that they are being audited by the Internal Revenue Service (IRS). Audits are a powerful tool at the government’s disposal that can be a frightening experience. Individual taxpayers and businesses are subject to audits every year and while there may very well be good reasons as to why the IRS chooses to audit someone, there are still rules that must be followed by the agency when conducting such an action.
The Taxpayers Protection Alliance (TPA) has been working to shed light on the information and circumstances regarding an audit that the IRS conducted on Microsoft. The issue of concern is that the agency retained the services of outside counsel in order to conduct work on said audit. In short: the IRS contracted private firms to assist with an agency audit of a private corporation. Taxpayers fund the agency and that means taxpayer money was used to retain the services of outside counsel on the audit. There is a question of legality that is still being adjudicated in the courts. What is not in dispute is that the agency did hire multiple firms to do work related to the audit.
According to a complaint filed by Microsoft:
The firm of Boies Schiller was awarded a $350,000 contract in 2013 to provide legal services to the IRS in connection with its audit of Microsoft. David Boies, the firm’s chairman, who’s known for his role as the lead prosecutor in the U.S. Justice Department’s antitrust suit against Microsoft, was named as lead counsel in the contract. But it’s not clear what his role was or if he’s still on the case.
The firm of Quinn Emanuel was awarded a contract worth almost $2.2 million to provide the IRS with legal services connected to the Microsoft audit. The IRS also issued a temporary regulation on June 18, 2014, to allow contractors like Boies Schiller and Quinn Emanuel to question witnesses under oath.
Late last year, TPA, filed multiple Freedom of Information Act (FOIA) requests in relation to the contracting of both firms for their work on the Microsoft audit. The FOIAs ask very specific questions to the IRS regarding services rendered from the firms as well as communications between the firms and the agency.
The IRS responded to TPA’s FOIA requests by first stating that they needed more time to process the requests. After a month or so, the IRS then decided it needed to collect fees to process the requests. The amount they requested was $17,000 for 1,000 hours of search time at $17 per hour of processing time, according to an email received in February from an IRS employee in their Disclosure office.
TPA requested a waiver of the fee because TPA is an IRS-recognized 501 (c) (4) non-profit organization and providing this information is in the public interest. There is no reason why the agency should be hiding information about how taxpayer money is being spent. Even more so, if there is no illegality in what the agency did, there should be no reason why they can’t provide the information TPA requested. Taxpayers have a right to know.
The IRS also admitted in the same correspondence asking for $17,000 that they may not have the records requested. The employee from the disclosure office said, “Even then, I can’t guarantee that our search efforts will yield a single responsive document.” The agency wants to charge $17,000 for information that would benefit the public good, and they won’t guarantee that they will have the information.
TPA has filed an appeal on the denial of a waiver fee and will continue to work with the agency on the FOIA requests because it is important that the information be brought out for the public to disseminate for themselves.
The IRS has had major credibility problems with past actions. Now, with the case of the Microsoft audit, the credibility gap is getting even worse. Just recently it was revealed that the agency defied direct instructions from the court when it deleted the hard drive belonging to a key official involved in the hiring of outside counsel for the Microsoft audit. This may explain the runaround TPA has been getting from the IRS.
With the excessive fees requested and refusal to help, there isn’t much reason to believe the answers will be provided. The IRS is a powerful agency and that power must be used responsibly and when there are concerns those concerns need to be addressed, both fully and honestly.