Report finds no evidence for claims of IRS misconduct

Internal Revenue Service managers aren't the bullies they've been portrayed to be in congressional oversight hearings, according to a restricted report from the General Accounting Office that has been made public.

Much-publicized 1997-98 Senate Finance Committee hearings featured whistleblowers who accused IRS managers of forgiving tax debts for personal gain, of mistreating taxpayers and of using audits as retaliation. The allegations of IRS employee and management misconduct raised at the hearings helped hasten the passage of IRS reform legislation in 1998.

But GAO investigators found no evidence to support the whistleblowers' claims. "Our investigation established that the allegations themselves had been based on an incomplete awareness of the total circumstances surrounding the matters," GAO said.

The report was commissioned by the Senate Finance Committee in 1998, following several committee oversight hearings on allegations of abuse, misconduct and retaliation at the IRS. Although the report was completed in May 1999, it wasn't released because it contained confidential taxpayer information. Under the Freedom of Information Act, the IRS released an edited version to the publication Tax Notes, and has since released copies to other media organizations.

GAO investigated a series of charges levied by four IRS employees. The first accusation was that managers sometimes canceled tax debts owed by large corporations in order to improve statistics, gain personal awards or pursue careers outside the agency. On that charge, GAO said managers' decisions were properly approved and documented and blamed the complexity and vagueness of the tax code for any perceived impropriety.

A second charge was that IRS employees used criminal investigations to retaliate against specific taxpayers. "Our investigation [found] that decisions to initiate the investigations were reasonably based on the information available to the IRS at the time and were documented in agency files," the report said. GAO also exonerated IRS employees for their methods of obtaining search warrants, saying employees followed the rules in the cases they were able to investigate.

In a June 1999 report (GGD-99-82), GAO said it could neither prove nor disprove IRS whistleblower allegations due to a lack of documentation. A separate investigation held by an independent commission made up of federal law enforcement personnel with financial management expertise, reviewed the IRS's Criminal Investigation Division (CID), including its caseload, investigative methods, organizational structure and personnel policies and practices in 1999.

The commission found that CID agents do not systematically abuse their authority to seek search warrants, that the agents' undercover practices conform with those of other federal law enforcement agencies, and that they are properly trained to use their weapons.