IG’s Recently Released Investigation, Requested by Lawmakers, Revealed “Possibility of Undue Influence by Former or Prospective Employers” on IRS Officials
Washington, D.C. – United States Representative Pramila Jayapal (D-Wash.) and United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Finance Committee, sent a letter to Daniel Werfel, Commissioner of the Internal Revenue Service (IRS), following the release of a troubling report from the Treasury Inspector General for Tax Administration (TIGTA) regarding its investigation into conflict-of-interest issues at the IRS. The lawmakers are calling on Commissioner Werfel to take additional action to address the abuse of the revolving door between giant accounting firms and the IRS, which threatens the important work of the agency.
“We are pleased that the IRS agreed with and moved to implement the two recommendations from TIGTA’s review. However, we believe additional action is necessary and have introduced legislation to stop big corporations from manipulating the government and the American tax system with revolving-door schemes… Even without new legislation, however, the IRS has the power to address conflict-of interest issues at the agency,” wrote the lawmakers.
The lawmakers’ letter is part of a multi-year investigation by Senator Warren and Representative Jayapal. In September 2021, the New York Times published a story about an alleged corrupt revolving-door scheme involving the world’s largest accounting firms and the Treasury Department, in which the firm’s tax lawyers took senior positions at the Treasury Department and IRS, wrote policies to favor their former corporate clients, and then returned to the accounting firms with loftier titles and bigger paychecks. After Senator Warren and Representative Jayapal sought and obtained information from the accounting firms regarding this scheme, the lawmakers asked the Inspectors General for the Treasury Department and the IRS to conduct their own investigations and to report back on their findings.
TIGTA’s investigation found that between 2017 and 2021, 496 IRS employees – or 15% of the agency’s workforce – received income from a large accounting firm or large corporation either before joining the IRS, during their time at the IRS, or after leaving the IRS. Thirty-seven of those employees were IRS executives, senior officials responsible for key agency decision making.
“Standing alone, the fact that some IRS employees chose to work in the private sector before or after their government service is not necessarily problematic. But as TIGTA’s report noted, ‘this practice increases the risk for conflicts of interest’ and ‘the possibility of undue influence by former or prospective employers,’ a concern that is amplified when 15% of our country’s tax-enforcement agency has worked for the world’s largest accounting firms and corporations,” continued the lawmakers.
Representative Jayapal and Senator Warren highlighted three particularly troubling findings about conflicts of interest at the IRS:
- An undisclosed number of IRS executives did not complete their required STOCK Act disclosure forms when seeking private-sector jobs as federal employees. Section 17 of the STOCK Act prohibits executives and senior-level federal employees from negotiating or agreeing to future employment, unless the employee files a statement with their agency’s ethics office within three days and recuses themselves from matters where a conflict or the appearance of a conflict results.
- TIGTA was unable to determine whether the 232 IRS employees who worked for large accounting firms before or after their time at the agency had improper conflicts while serving in the federal government. The IRS does not receive information about the clients of agency employees when they worked in the private sector, and the accounting firms refused to provide any client information in response to the lawmakers’ requests. But as TIGTA’s report explained, “without this information, it is impossible to fully understand or address any potential conflicts of interest or ethics violations.”
- At least eighteen IRS employees worked on private letter rulings in which the accounting firm they worked for, either immediately before or after their time at the IRS, was the taxpayer’s representative. Their work calls into question the impartiality of the affected rulings and raises broader concerns about other areas where inappropriate conflicts may have affected the agency’s work.
The lawmakers are asking the IRS to answer a set of questions about its plans to address conflicts of interest and the revolving door between giant accounting firms and the IRS by October 11, 2023.