Editor’s Notebook

I’m glad I’m not Lois Lerner. Nothing personal, mind you, but a recent letter and a New York Times article (both reprinted below) about the U.S. Chamber of Commerce and related entities will reinforce impressions of the EO function as being unable to deal with tough cases.

For Doug Shulman, Steve Miller, Sarah Hall Ingram, Lois Lerner, and Nan Downing, surely at least one of them is thinking:

To audit or not to audit – that is the question:

Whether ‘tis nobler in the mind to suffer

The slings and arrows of outrageous fortune,

Or to take arms against a sea of troubles

And by opposing end them?

What to do? Opening an audit involving the U.S. Chamber of Commerce will bring a firestorm of criticism from Republicans who will charge White House complicity. Clearly a no-win situation for Commissioner Shulman whose budget may be in Republican hands next year. As explained to me by someone who should know, an IRS Commissioner may seek advice from his boss, the Secretary of the Treasury. The Secretary, in turn, may seek advice from his boss, the President. Does seeking advice from the President include his senior staff? I’m not sure. And does seeking advice or direction include advice on an audit? Can Obama tell Geithner to tell Shulman to audit the U.S. Chamber of Commerce? I think he can, but let me know if I’m wrong.

Old Business

In regard to “Our Tongue-Tied IRS” (Email Update 2010-110), I’ve been told “It’s the cubicles, stupid,” as in “It’s the economy, stupid.”  

According to my informants, cubicle existence — at 1750 Pennsylvania Avenue, home of the EO Division — is a bummer, along with no library, no nothing. It’s flying coach in a plane full of unhappy passengers. JetBlue, anyone?

As one former IRSer has noted, “Cubicles are: ‘space efficient, personnel and work inefficient.’ The government wasted the money it saved on cubicles by wasting the time of very expensive personnel through constant interruptions and distractions. Why return a phone call when you are supposed to be quiet?”

My view: The overwhelming chorus seems to be that everyone hates cubicles. From my personal observations over the years, no one ever seems to be in their cubicles. Where they are I don’t know. Some may be working at home. Some may be working the night shift. Some may be working at Starbucks, but the short is, nobody may be at their cubicle when you call.

Cubicles are for cold callers and complaint centers, where no one lasts more than a month. Putting folks with 19 years of education or more in a cubicle is insulting and demeaning. The IRS is paying its tax law specialists $70,000 to $90,000 a year (the working grade salary in the EO Division). Rather then drive these folks to drink, at least give them a place where they can work and where they may want to be. “Penny-wise, pound-foolish” is the only way to describe the IRS’s treatment of its worker bees.

More Old Business

In regard to the Optimist Clubs’ rulings (Email Update 2010-111), former IRSer Conrad Rosenberg had these comments:

“Highlighting how nebulous the meaning of ‘social welfare’ can be, I once wrote (this would have been sometime during the neolithic age) a piece for either the late lamented EO Handbook or possibly for a CPE article. My illustration, as I remember it, postulated two diametrically opposed organizations, both of which would have no problem qualifying under (c)(4). The first was organized and operated primarily for the purpose of guaranteeing the preservation of certain acreage in South Philadelphia for the indigenous wildlife (mostly rats and squirrels); the second was intent on dedicating the identical tract to the development of a football stadium that would supposedly benefit the surrounding deteriorated community. The IRS would make no value judgment in deciding that both would meet the requirements of (c)(4), although an objective argument could well be made that neither would.”

1 – Correction

2 – Thorek Hospital and Medical Center

3 – Quote of the Week

4 – End of the World Postponed to October 15
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1 – More on “Oh, never mind”

2 – A Real Life Mess — A Lawyer’s Dilemma?
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ABA’s Recommendations for More PRI Examples

I’m reprinting below the recent comments of the ABA’s Tax Section. I’ve also reprinted my prior comments on the ABA’s earlier recommendations. I continue to have concerns that we will have an “anything goes” situation with private foundations and their PRIs. Who determines a below-market rate of interest and how? Who determines that conventional sources of financing are not available and how? Who determines that no for-profit investors are interested and how? Should equity investments and “equity kickers” be allowed in any instances? Doesn’t the potential for high profits attract venture capital? Should foundations become owners of the ventures they are financing?