President Trump Should Stop Federal Sanctuary Policies
On January 25th, President Trumps signed an Executive order titled “Enhancing Public Safety in The Interior of the United States.” In that order, he directs all federal agencies to employ “all lawful means” to enforce the immigration laws of the United States and singles out for priority removal seven classes of immigrants including those who have filed false documents, or given false testimony, before a government agency and those who have “abused any program related to the receipt of public benefits (such as food stamps and Medicaid).”
What President Trump probably does not know is the Internal Revenue Service (IRS) cannot legally comply with the order. Here’s why.
Internal Revenue Code Section 6103 (IRS 6103) prohibits the IRS from sharing tax return information with other agencies, such as Immigration and Customs Enforcement (ICE), without the approval of a federal judge or other statutory exception. IRS 6103 is meant to encourage taxpayers to truthfully report their personal financial details on their tax returns by ensuring that the information will be kept confidential. Despite the impression created by the Tea Party debacle, the IRS interprets this section very broadly.
For example, in 2004 I was a supervisor of a group of special agents that found child pornography on a computer seized from a parolee who decided to switch careers and become a tax preparer specializing in bogus returns. I disclosed the existence of the child pornography to his parole officer. I ended up under internal affairs investigation because, as an IRS attorney put it, the child pornography constituted confidential taxpayer information. Pleading the 5th before Congress and line dancing on duty is okay, but God forbid you try to protect future taxpayers from a potential sexual predator.
IRC 6103 also shields immigrants (both lawful and unlawful) who falsely claim refundable tax credits to which they may not be entitled.
IRC 6103 also shields immigrants (both lawful and unlawful) who falsely claim refundable tax credits to which they may not be entitled. Consider this example. A return preparer in Wisconsin filed 9,400 returns claiming $34 million in refunds over a five-year period for thousands of clients, most of whom did not have a Social Security number but instead used an Individual Taxpayer Identification Number (ITIN), indicating that they were almost certainly in the country illegally.
About 75% of the children claimed on the return also had ITIN’s, meaning they either resided in Mexico or were in the United States illegally. The return preparer just agreed to plead guilty to filing about three dozen false returns on behalf of her clients resulting in about $500,000 of bogus tax refunds. The American Taxpayer will absorb the fraud, probably around $30 million, related to the returns not examined because the IRS didn’t have the personnel to audit more clients.
In the plea agreement, the return preparer admitted that she prepared a return which stated that the taxpayer (her client) was supporting six dependents (all with ITINS) at his home in the United States, when in fact five of his dependents resided in Mexico (assuming they were dependents at all). By claiming that the dependents lived with him, the client received the Additional Child Tax Credit (ACTC), which is a refundable credit worth about $1,000 per child under 17 years of age.
IRC 6103 prohibits the IRS from sending to Immigration and Customs Enforcement the name of the client who claimed the false dependents, much less the names of the other clients that were audited or should have been audited. Does that sound like a government that’s committed to consistently enforcing the rule of law?
Under President Trump’s Executive Order, however, the IRS should disclose the names of the clients who signed the false tax returns that claimed dependents to which they were not entitled legally entitled.
Here’s an idea for President Trump and our lawmakers. They should revise IRS 6103 to better reflect the balance between taxpayer privacy, revenue protection and immigration enforcement. Specifically, the statutory revision should allow, or even require, the IRS to disclose to ICE the identifying information of any taxpayer covered under his new executive order.
(In case you were wondering, the Treasury Inspector General for Tax Administration (TIGTA) cleared me of any wrongdoing about the disclosure to the probation officer.)