The IRS Should Not Be Trusted to Enforce Obamacare with Fines and Fees Considering the Latest Scandal Surrounding the Agency

Former IRS official sought to hide information, lawmakers assert

July 10, 2014

Reuters - Congressional Republicans asserted on Wednesday that new emails show a former Internal Revenue Service official deliberately sought to hide information from Congress, opening a new chapter in a probe of IRS treatment of conservative groups.

An email exchange released by House Oversight Committee Chairman Darrell Issa shows the former official, Lois Lerner, asking a colleague whether communications made through an internal messaging system can be searched by Congress. Issa said the exchange, culled from documents provided to Congress last week, showed that Lerner was "leading an effort to hide information from congressional inquiries."

The latest accusation prompted heated questioning of IRS Commissioner John Koskinen at a hearing and angry exchanges among a Democrat and Republicans on the panel.

In the emails, Lerner says she has been telling colleagues to be cautious about what they say in emails and asks whether internal messages are subject to the same data transparency rules. Her colleague replies that even though some messages could be exempt, they should still be treated as if reviewable. 

Republicans have been investigating IRS scrutiny of conservative groups seeking tax-exempt status since the practice burst into view in May 2013. That was when Lerner publicly apologized for it at a conference.

Her unexpected statement triggered the worst crisis at the IRS in years, with Republicans accusing the agency of singling out conservative groups, some aligned with the Tea Party, for unfair treatment. Lerner retired from the IRS in September.

The issue had faded from view until last month when the IRS acknowledged losing some of Lerner's emails, which Republicans want for review. Republicans accused the IRS of hiding them and of obstructing the congressional inquiry.

Democrats, for their part, accused Republicans of rehashing baseless accusations for political theater in what has come to be known as the IRS Tea Party targeting affair.

The IRS reviews the activities of non-profit organizations seeking exemptions from paying taxes because U.S. law limits their political involvement. Non-profits have increasingly been used as conduits for political spending, especially by conservatives.

On Wednesday, several Republican lawmakers on the panel grilled Koskinen about when the agency would make officials available to talk about how the emails were misplaced.

Koskinen said he could not do so until an internal investigation is complete. He also said he had never heard of the internal messaging system. 

Lerner’s questions about internal messages suggest she had something to hide, Republican Representative Jim Jordan said, prompting an angry exchange with Gerry Connolly, a Democrat.

Connolly said one interpretation of Lerner’s emails could be that she understood that internal messages should be treated as reviewable by Congress.

"You expect us, and more importantly the American people, to believe that, oh yeah, perfect, now we know we need to save these? That is the most ridiculous interpretation," Jordan said.

In response, Connolly said: 

"As a matter of personal privilege, I would ask that my colleague not question another member as ridiculous."

Industry group: IRS lost email story ‘makes no sense,’ records should have been kept

June 27, 2014

Fox News - An industry group is claiming the IRS should have kept full records of its apparent destruction of ex-official Lois Lerner's hard drive, saying "the notion that these emails just magically vanished makes no sense whatsoever." 
 

The latest to weigh in on the lost emails controversy is the head of the International Association of Information Technology Asset Managers. Group president Barbara Rembiesa released a statement on Thursday questioning recent testimony by IRS Commissioner John Koskinen, who told Congress last Friday that Lerner's hard drive was "recycled and destroyed" after it crashed in 2011. 

She claimed that a certified "IT asset destruction" team should have been brought in to document and complete that process. 

"If this was done, there would be records. If this was not done, this is the smoking gun that proves the drive or drives were destroyed improperly -- or not at all," she said. 

Rembiesa adds her voice to a growing list of industry experts dubious about agency claims that Lerner's emails disappeared after a hard-drive crash in 2011. 

Lerner is the former head of the Exempt Organizations division, and is at the heart of the controversy over agency targeting of Tea Party groups. After the IRS revealed earlier this month that many of her emails from 2009 to 2011 were gone, outraged Republicans arranged a rapid-fire string of hearings on the matter -- and on the sidelines, some computer experts backed up their suspicions. 

The IRS, though, insists this was simply a case of a routine computer failure -- one of thousands across the federal government. Koskinen testified on the matter twice since last week, stressing that despite the computer problems, the agency was able to recover 67,000 Lerner emails, including 24,000 from other accounts, from January 2009 to May 2013. 

"It's not unusual for computers anywhere to fail, especially at the IRS in light of the aged equipment IRS employees often have to use," Koskinen testified Monday, claiming over 2,000 agency workers had hard-drive crashes so far this year. 

A letter obtained Friday by Fox News from  Koskinen to House Ways and Means Committee Chairman Dave Camp, R-Mich., said that production of Lerner’s emails should be to the committee “by the end of next week.”

Koskinen said he had hoped to provide the committees “with responses today…but critical information is still being collected and verified.”

Last Friday, he told the House Ways and Means Committee that he understands Lerner's hard drive was physically destroyed after technicians were unable to recover data from it in 2011. 

At that hearing, Chairman Dave Camp, R-Mich., suggested that the government might have a tracking system of sorts. Koskinen said he wasn't aware of whether hard drives have "identifiers," but said: "If they have serial numbers, you're welcome to them."

Apparently not satisfied with the response, Camp and Rep. Charles Boustany, R-La., blasted out a new round of requests on Friday to various branches of the Obama administration asking for details on how they learned of the crash and information from the IRS on the effort to retrieve data from agency computers. They requested the serial numbers of all failed devices and documents on efforts to recover the data.

"We still can't get straight answers from the IRS or this administration about the circumstances of the destroyed IRS emails," they said in a statement. 

Meanwhile, Republican calls on Capitol Hill for a special prosecutor to probe the IRS were getting louder.

"All this garbage about, they have old computers is ridiculous. They have the best software. The best hardware," Rep. Louis Gohmert, R-Texas, said.

Gohmert says money should be offered to get to the bottom of the missing emails -- $1 million to recover them, and $500,000 for information on who destroyed them. 

"We know those emails are out there. We know they can be found," he said. "We just need people to help find them."

Koskinen, though, claimed there was no crime involved. 

In Minnesota on Thursday, President Obama referred to recent controversies as "phony scandals," suggesting they are all about politics. 

"It's all geared towards the next election or ginning up a base," he said. "It's not on the level. And that must feel frustrating, and it makes people cynical."

The IRS and its 46 new powers to enforce ObamaCare  

June 5, 2013
 

Galen Institute - The power granted to the IRS to enforce ObamaCare’s mandates, taxes, penalties, reporting, and other requirements is unprecedented. Based upon Government Accountability Office data, we count 46 new responsibilities assigned to the IRS under the health law.

IRS officials have acknowledged the huge problems these major new responsibilities will create for the agency.  On March 5, 2013, an official from the Treasury Department’s Inspector General for Tax Administration, J. Russell George, testified before the House Appropriations Committee. Mr. George was asked about the tax implications of ObamaCare.

“It is unprecedented in recent history, the amount of responsibility the IRS is being given in an area that most people don’t think of as an IRS function,” George said. 

Americans, he added, will have more questions about their taxes because of health care penalties or credits, flooding already busy call-in and walk-in tax help centers.

“This is going to lead to problems, sir,” he testified.

Many people are especially concerned about assigning an unprecedented number of major new responsibilities to implement ObamaCare to an agency whose primary task is collecting revenues to fund the Federal government.

We have used the GAO list as the basis for our list and have organized it by categories of new tasks:  Collecting taxes, distributing subsidies, collecting information, and enforcing compliance.

Collecting taxes

1. Charitable Hospital Tax: Imposes additional reporting requirements for charitable hospitals to qualify as tax-exempt under IRC 501(c)(3) and requires hospitals to conduct a community health needs assessment at least once every 3 years and to adopt a financial assistance policy and policy relating to emergency medical care.
2. Codification of the “Economic Substance Doctrine”: Clarifies and enhances the applications of the economic substance doctrine and imposes penalties for underpayments attributable to transactions lacking economic substance.
3. “Black liquor” tax hike: Amends the cellulosic biofuel producer credit (nonrefundable tax credit of about $1.01 for each gallon of qualified fuel production of the producer) to exclude fuels with significant water, sediment, or ash content (such as black liquor).
4. Tax on Innovator Drug Companies: Imposes a fee on each covered entity engaged in the business of manufacturing or importing branded prescription drugs.
5. Blue Cross/Blue Shield Tax Hike: Limits eligibility for deductions under section 833 (treatment of Blue Cross and Blue Shield) unless the organizations meet a medical loss ratio standard of at least 85 percent for the taxable year.
6. Tax on Indoor Tanning Services: Imposes a tax on any indoor tanning service equal to 10 percent of amount paid for service.
7. Medicine Cabinet Tax: Repeals the tax exclusion for over-the-counter medicines under a Health Flexible Spending Arrangement (FSA), Health Reimbursement Arrangement (HRA), Health Savings Account (HSA), or Archer Medical Savings Account (MSA), unless the medicine is prescribed by a physician.
8. HSA Withdrawal Tax Hike: Increases tax on distributions from HSAs and Archer MSAs not used for medical expenses.
9. Employer Reporting of Insurance on W-2: Requires employers to disclose the value of the employee’s health insurance coverage sponsored by the employer on the annual Form W-2.
10. Surtax on Investment Income: Imposes an unearned income Medicare contribution tax of 3.8 percent on individuals, estates, and trusts on the lesser of net investment income or the excess of modified adjusted gross income (AGI + foreign earned income) over a threshold of $200,000 (individual) or $250,000 (joint).
11. Hike in Medicare Payroll Tax: Imposes an additional Hospital Insurance (Medicare) Tax of 0.9 percent on wages over $200,000 for individuals and over $250,000 for couples filing jointly.
12. Tax on Medical Device Manufacturers: Imposes a tax of 2.3 percent on the sale price of any taxable medical device on the manufacturer, producer, or importer.
13. High Medical Bills Tax: Increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5 percent of Adjusted Gross Income (AGI) to 10 percent of AGA (unless taxpayer turns 65 during 2013-2016 and then threshold remains at 7.5 percent).
14. Flexible Spending Account Cap: Limits health FSAs under cafeteria plans to a maximum of $2,500 adjusted for inflation.
15. Retiree Rx Drug Coverage Tax Hike: Allows the deduction for retiree prescription drug expenses only after the deduction amount is reduced by the amount of the excludable subsidy payments received.
16. Compensation Limit: Denies the business expenses deductions for wage payments made to individuals for services performed for certain health insurance providers if the payment exceeds $500,000.
17. PCORI Fee:  Imposes a fee through 2019 on specified health insurance policies and applicable self-insured health plans to fund the Patient-Centered Outcomes Research Trust Fund to be used for comparative effectiveness research.
18. Individual Mandate Tax: Requires all U.S. citizens and legal residents and their dependents to maintain minimum essential insurance coverage unless exempted starting in 2014 and imposes a fine on those failing to maintain such coverage.
19. Employer Mandate Tax: Imposes a penalty on large employers (50+ FTEs) who (1) do not offer coverage for all of their full-time employees, offer unaffordable minimum essential coverage, or offer plans with high out-of-pocket costs and (2) have at least one full-time employee certified as having purchased health insurance through a state exchange and was eligible for a tax credit or subsidy.
20. Tax on Health Insurers: Imposes an annual fee on any entity that provides health insurance for any U.S. health risk with net premiums written during the calendar year that exceed $25 million.
21. Excise Tax on Health Insurance: Imposes a 40 percent excise tax on high cost employer-sponsored health insurance coverage on the aggregate value of certain benefits that exceeds the threshold amount.

Distributing subsidies

1. Early Retiree Subsidy: Establishes a temporary reinsurance program to provide reimbursement for a portion of the cost of providing health insurance coverage to early retirees.
2. Nonprofit Tax Exemption: Provides tax exemption for nonprofit health insurance companies receiving federal start-up grants or loans to provide insurance to individuals and small groups.
3. Reinsurance Tax Exemption: Provides tax exemption for entities providing reinsurance for individual policies during first 3 years of state exchanges.
4. State Exchange Tax Credit: Provides premium assistance refundable tax credits for applicable taxpayers who purchase insurance through a state exchange, paid directly to the insurance plans monthly or to individuals who pay out-of-pocket at the end of the taxable year.
5. Cost-Sharing Subsidy: Provides a cost-sharing subsidy for applicable taxpayers to reduce annual out-of-pocket deductibles.
6. Small Business Tax Credit: Provides nonrefundable tax credits for qualified small employers (no more than 25 full-time equivalents (FTE) with annual wages averaging no more than $50,000) for contributions made on behalf of its employees for premiums for qualified health plans.
7. Small Business Tax Exclusion: Offers tax exclusion for reimbursement of premiums for small-group exchange participating health plans offered by small employers to all full-time employees as part of a cafeteria plan.
8. Indian Tribe Tax Exclusion: Allows an exclusion from gross income for the value of specified Indian tribe health care benefits.
9. Therapeutic Discovery Tax Credit: Establishes a 50 percent nonrefundable investment tax credit for qualified therapeutic discovery projects.
10. Adoption Tax Credit: Increases the maximum adoption tax credit and the maximum exclusion for employer-provided adoption assistance for 2010 and 2011 to $13,170 per eligible child.
11. Tax Exclusion for Dependent Coverage: Extends the exclusion from gross income for reimbursements for medical expenses under an employer-provided accident or health plan to employees’ children under 27 years.
12. Advance Tax Credit and Cost-Sharing Reductions: Allows advance determinations and payment of premium tax credits and cost-sharing reductions.
13. Health Care Services Loan Tax Exemption: Excludes from gross income amounts received by a taxpayer under any state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health care services in underserved or health professional shortage areas.

Collecting Information

1. State Exchange Information Reporting: Requires state exchanges to send to Treasury a list of the individuals exempt from having minimum essential coverage, those eligible for the premium assistance tax credit, and those who notified the exchange of change in employer or who ceased coverage of a qualified health plan.
2. Exchange Participation Requirement: Outlines the procedures for determining eligibility for exchange participation, premium tax credits and reduced cost-sharing, and individual responsibility exemptions.
3. Taxpayer Information Disclosure: Authorizes IRS to disclose certain taxpayer information to HHS for purposes of determining eligibility for premium tax credit, cost-sharing subsidy, or state programs including Medicaid, including (1) taxpayer identity; (2) the filing status of such taxpayer; (3) the modified adjusted gross income of taxpayer, spouse, or dependents; and (4) tax year of information.
4. Insurance Provider Information Reporting: Requires every person who provides minimum essential coverage to file an information return with the insured individuals and with IRS.
5. Large Employer Information Reporting: Requires information reporting of health insurance coverage information by large employers (subject to IRC 4980H) and certain other employers.
6. Medicare Beneficiary Information Disclosure: Authorizes IRS to disclose certain taxpayer information to the Social Security Administration (SSA) regarding reduction in the subsidy for Medicare Part D for high-income beneficiaries. (Conforming amendment)

Enforcing compliance

1. Health Plan Penalty: Imposes a penalty on health plans identified in an annual Department of Health and Human Services (HHS) penalty fee report, which is to be collected by the Financial Management Service after notice by the Department of the Treasury (Treasury).
2. New Group Plan Penalty: Subjects new group health plans to certain Public Health Service Act requirements and imposes the excise tax on plans that fail to meet those requirements. (Conforming amendment)
3. Group Plan Compensation Discrimination Prohibition: Prohibits group health plans from discriminating in favor of highly compensated individuals.
4. Nonprofit Indicator System: Requires the independent institute partnering with the National Academy of Sciences (NAS) to implement a key national indicator system to be a nonprofit entity under section 501(c)(3).
5. Small Business Exemption for Cafeteria Plans: Allows small businesses to offer simple cafeteria plans-plans that increase employees’ health benefit options without the nondiscrimination requirements of regular cafeteria plans.
6. Corporate Tax Advance: Increases the required payment of corporate estimated tax due in the third quarter of 2014 by 15.75 percent for corporations with more than $1 billion in assets, and reduces the next payment due by the same amount.