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Texas CPAs Take IRS to Task for Its FOIA Procedures

OCT. 3, 2016

Texas CPAs Take IRS to Task for Its FOIA Procedures

DATED OCT. 3, 2016
DOCUMENT ATTRIBUTES

 

October 3, 2016

 

 

The Honorable John A. Koskinen

 

Commissioner

 

Internal Revenue Service

 

P.O. Box 7604; Ben Franklin Station

 

Washington, D.C. 20044

 

RE: Recommendations to Change and Improve Current Procedures under the Freedom of Information Act

 

Dear Commissioner Koskinen:

The Texas Society of Certified Public Accountants (TSCPA) is a nonprofit, voluntary professional organization representing almost 25,000 members. One of the expressed goals of the TSCPA is to speak on behalf of its members when such action is in the best interest of its constituency and serves the cause of CPAs in Texas, as well as the public interest. TSCPA has established a Federal Tax Policy Committee (FTP) to represent those interests on tax-related matters. The FTP has been authorized by the TSCPA's Board of Directors to submit comments on such matters of interest to committee membership. The views expressed herein have not been approved by the Board of Directors or Executive Board and, therefore, should not be construed as representing the views or policies of the TSCPA.

Our members have reported problems associated with requests for records and information under the Freedom of Information Act (FOIA). The Treasury Inspector General for Tax Administration (TIGTA) audited the FOIA Disclosure Office and reported some, but not all of the issues that reflect the experience of our members.1 The purpose of this letter is to address these and other problems identified by our members and provide recommendations to change and improve current FOIA procedures.

The IRS is not Producing all Non-Exempt FOIA Records

In response to broadly worded and comprehensive disclosure requests, some of our members report incidents where material they have requested that was not exempted or excluded under FOIA was not produced or redacted, including:

  • prior correspondence between the taxpayer and the IRS;

  • documents the taxpayer had provided to the IRS;

  • items that would normally be expected to be included in a taxpayer's administrative file maintained by a revenue agent or revenue officer (which should include any communications between the Disclosure Office and the revenue agent or revenue officer); and

  • items that were later produced by appeals officers or referred to by IRS field personnel.

 

One particularly egregious case involved a denial of the existence of any revenue agent file in response to a request for the entire administrative file. The FOIA Appeals Office promptly confirmed the denial upon appeal. When the appeals officer contacted the practitioner on the substantive appeal, the officer readily confirmed the revenue agent had forwarded an administrative file, the existence of which had incredibly been denied twice during the FOIA request process.

In yet another FOIA request, the disclosed documents were incomplete in various respects, including a failure to supply documents specifically noted on one of the revenue agent's disclosed workpapers. The practitioner cited that workpaper to the FOIA Appeals Office to no avail. When the taxpayer's representative subsequently complained upon receipt of the denial of the FOIA appeal regarding the failure to disclose these and other documents known to be in the administrative file, the FOIA appeals officer told him the taxpayer could file a lawsuit in the U.S. district court if the taxpayer wanted more information. This attitude does not seem consistent with the Disclosure Office's responsibilities, both because of the time and expense to litigate and the need to be responsive to the Office of Appeals on the substantive appeal. This, in essence, leaves the taxpayer without an adequate remedy for the violation of his or her rights.

We believe at least part of the problem may extend beyond the Disclosure Office into the field where IRS revenue officers or agents may be improperly retaining taxpayer information outside the files that are submitted to the Disclosure Office. We have no way to determine whether the problem lies in the manner in which the Disclosure Office makes the request or if it results from improper action by field personnel; however, we do know this is not an isolated issue.

The IRS is not Timely Producing Records and is not Effectively Identifying Redactions to the Non-Exempt Records Produced

The FOIA provisions require the IRS to provide status reports to requestors if their requests are not completed within 20 business days (i.e., days which do not include Saturdays, Sundays and legal public holidays). The 20 business-day deadline is extended another 10 business days if there are "unusual circumstances." Despite these statutorily prescribed deadlines, substantive responses to FOIA requests are rarely issued within that prescribed timeframe. See, for example, the copy of the attached letter from the FOIA Disclosure Office. It is not uncommon for practitioners to receive multiple delay letters in response to a single FOIA request. When the responses are eventually sent, the IRS frequently redacts large volumes of material-responsive documents and information without any indication of what was redacted or what exemption or exclusion allows the redaction. This makes it difficult to effectively appeal the failure to produce the items requested.

FOIA Disclosure Office Agents are Asking Representatives to Limit the Scope of FOIA Requests

Our members have also reported the frequent issue of oral unrecorded requests by the Disclosure Office agent asking representatives to limit their requests without written confirmation of the nature of the limitation. Even when the representative declines to revise the request, the Disclosure Office uses the unconfirmed and allegedly agreed-to modification to deny disclosure of material items. The alleged modification is relied upon in Disclosure Office appeals, rather than comparing the documents produced with the taxpayer's original request.

The FOIA Appeal Process is not Transparent and Anecdotal Evidence in Many Disclosure Cases Indicates Appeals Officers may be Routinely Engaging in Ex Parte Communications

The FOIA appeal process is flawed and non-transparent -- very different from appeals that result from a revenue agent's report or even a Collection Due Process (CDP) or Collection Appeals Program (CAP) appeal. No opportunity for even a telephone conference is offered in a FOIA appeal. It is not clear what procedures the FOIA Appeals Office follows, although reports by our members suggest that "ex parte" communication between FOIA appeals officers and disclosure agents appears to be a normal practice, notwithstanding the clear prohibition in the Internal Revenue Manual (IRM), Section 8.1.10. We are unable to locate any exception for FOIA appeals from the ex parte rules although we note IRM Section 8.7.14.14.2.1(1) sets forth the responsibility of the FOIA Appeals Office; that section does not specifically except the ex parte rules. Furthermore, communications between the Disclosure Office and the revenue agents, revenue officers, settlement officers and appeals officers are routinely omitted from the FOIA response.

Recommendations to Change and Improve Current FOIA Procedures

We request that you require agents to comply with FOIA and release all requested material, not just what they have chosen to place in files submitted to the Disclosure Office. The revenue officer or agent should release all material, regardless of the status of the proceedings, and not make judgments regarding what to disclose; that is the job of the Disclosure Office. The Disclosure Office should redact any material that is exempt or excluded under FOIA. There should be no "side" or "unofficial" files on a taxpayer retained by the agent or officer. Taxpayers are entitled to know what information is being kept on them -- this is the purpose of FOIA; it is a basic taxpayer right. The IRS should modify the administrative appeal procedure to address the lack of disclosure so taxpayers will have an adequate and transparent remedy consistent with the existing non-FOIA appeals process without having to file a lawsuit.

We appreciate this opportunity to present our comments. We would be happy to discuss this further with you. Please contact me at 972-419-8383 or kmh@gpm-law.com if you would like to discuss our comments.

Sincerely,

 

 

Kenneth M. Horwitz, JD, LLM, CPA

 

Chair, Federal Tax Policy Committee

 

Texas Society of Certified Public

 

Accountants

 

Dallas, TX

 

Principal responsibility for drafting these comments was exercised by Kenneth M. Horwitz, JD, LLM, CPA; Christina A. Mondrik, JD, CPA; David E. Colmenero, JD, CPA; and David P. Donnelly, CPA.

Attachment

cc:

The Honorable Orrin Hatch, Chairman, U.S. Senate Finance Committee

The Honorable Ron Wyden, Ranking Member, U.S. Senate Finance Committee

The Honorable John Cornyn, U.S. Senate Finance Committee

The Honorable Kevin Brady, Chairman, U.S. House Ways and Means Committee

The Honorable Sander M. Levin, Ranking Member, U.S. House Ways and Means Committee

The Honorable Peter J. Roskam, Chairman, U.S. Ways and Means Oversight Subcommittee

The Honorable John Lewis, Ranking Member, U.S. Ways and Means Oversight Subcommittee

Texas Members, U.S. House Ways and Means Committee

Members, U.S. Joint Committee on Taxation

Edward T. Killen, Director, IRS Privacy, Governmental Liaison and Disclosure

Kirsten B. Wielobob, IRS Chief of Appeals

Ryan Law, Director, FOIA & Transparency, Department of the Treasury

J. Russell George, Treasury Inspector General for Tax Administration

Matthew A. Weir, Assistant Inspector General, Compliance and Enforcement Operations, TIGTA

Michael E. McKenney, Deputy Inspector General for Audit, TIGTA

Nina E. Olson, National Taxpayer Advocate

AICPA Tax Practice & Procedures Committee

AICPA IRS Advocacy & Relations Committee

 

FOOTNOTES

 

 

1 TIGTA Fiscal Year 2015 and 2016 Statutory Reviews of Compliance with the Freedom of Information Act (Sep 2015, Sep 2016).

 

END OF FOOTNOTES

 

 

* * * * *

 

 

September 20, 2016

 

 

* * *

 

Attn: * * *

 

* * *

 

In Re: * * *

 

Dear Mr. * * *

I am responding to your Freedom of Information Act (FOIA) request dated August 19, 2016 that we received on August 22, 2016.

I am unable to send the information you requested by September 20, 2016, which is the 20 business-day period allowed by law. I apologize for any inconvenience this delay may cause.

STATUTORY EXTENSION OF TIME FOR RESPONSE

The FOIA allows an additional ten-day statutory extension in certain circumstance. To complete your request I need additional time to search for, collect, and review responsive records from other locations. We have extended the statutory response date to October 4, 2016, after which you can file suit. An administrative appeal is limited to a denial of records, so it does not apply in this situation.

REQUEST FOR ADDITIONAL EXTENSION OF TIME

Unfortunately, we will still be unable to locate and consider release of the requested records by October 4, 2016. We have extended the response date to November 4, 2016 when we believe we can provide a final response.

You do not need to reply to this letter if you agree to this extension. You may wish to consider limiting the scope of your request so that we can process it more quickly. If you want to limit your request, please contact the individual named below. If we subsequently deny your request, you still have the right to file an administrative appeal.

If you have any questions please call Disclosure Specialist * * * at * * * write to: Internal Revenue Service, Centralized Processing unit -- Stop 93A, PO Box 621506, Atlanta, GA 30362. Please refer to case number * * *

Sincerely,

 

 

Celeste Neal

 

Disclosure Manager

 

Disclosure Office 14
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