The hidden cost of the War on Terror

Supreme Court asked to decide whether attorney general illegally changed IRS regulations to allow federal police powers Congress meant to curb


WASHINGTON, D.C. (April 14, 2005) Millions of Americans put down a good chunk of their earnings each year as the tax man takes his cut to provide services, like protecting us from terrorists.

      But the U.S. Supreme Court is being asked in Payne v. USA to decide whether former Attorney General John Ashcroft illegally rewrote IRS regulations in a surreptitious end-run around congressional limits on federal police powers – powers that were meant to protect citizens from the damage caused not by terrorists, but by the IRS.

      In a 270-page petition filed on Tuesday, Houston lawyer Jerry S. Payne argues that the attorney general’s post-9/11 strategy to obtain increases in police powers to fight the war on terror has a darker – and illegal – side. While current congressional hearings revisit the controversial but overt powers granted to federal agencies under the provisions of the Patriot Act, the attorney general in 2003 rewrote IRS regulations that had restricted treasury investigators from disclosing that a citizen is under criminal investigation in order to gather information from third parties. Payne claims that even before the regulation was revamped the IRS police were not required to have “probable cause” to believe a crime had occurred or was about to occur before they could investigate citizens, obtain bank records or contact business associates.

      “That’s why the attorney general’s plan focused on the IRS,” Payne said in an interview on Wednesday.

      “The federal police agencies are coordinating and functioning as a unit,” says Payne. “The common sequence is the FBI identifies a ‘target,’ then the FBI gives the ‘target’ to the IRS police, who investigate the target because the IRS police have authority to investigate without any evidence that a crime has been committed.”

            This latest battle between Payne and the IRS, which began with an investigation of the attorney’s tax statements in the early 1990s, opens a can of worms for the government as it tries to obtain more IRS positions for enforcement purposes.

            “Average Americans pay their taxes honestly and accurately, and have every right to be confident that when they do so, their neighbors and competitors are doing the same,” IRS Commissioner Mark W. Everson said in a March 15 speech at National Press Club.  “Let me provide an overview of the steps we have taken over the past year to bolster this confidence, turning briefly to each of our four service-wide enforcement priorities.

            “Our first enforcement priority is to discourage and deter non-compliance, with emphasis on corrosive activity by corporations, high-income individuals and other contributors to the tax gap.”

            Payne argues that the IRS is not using the enforcement police to crack down on tax deadbeats, but is diverting the agents to do the bidding of the FBI in the War on Terror. The FBI must have probable cause to investigate but the IRS – under the illegally changed regulations – can investigate virtually any crime without a reason and damage a possibly innocent citizen.

            “The changed regulations take away a citizen’s chance to provide the information sought by the IRS police without friends and customers learning there is a criminal investigation,” says Payne, who was the target of an investigation but was cleared at trial – after his law practice was damaged by agents.

            “The FBI is the ‘front man’ in seeking expansion and renewal of the Patriot Act,” says Payne. “The IRS is seeking more IRS police, they say, because of the Tax Cheater.

            “But the reality is that the IRS police are being used to investigate the FBI’s “targets,” which has reduced the IRS police availability to find tax cheats.”

            A call to Milwaukee’s IRS office regarding the changes in regulations prompted a return call from a woman who declined to identify herself inviting the reporter to come in person to the federal building, and to bring I.D. “We don’t give out that information on the phone,” she said.