Federal Judge Could Force IRS To Release Internal Records in Alleged Political ‘Weaponization’ Case

Three companies suing the agency say IRS agents fraudulently ‘backdated’ documents

A federal judge could soon rule on whether the Internal Revenue Service falsified records to target companies for tax penalties, according to new court filings on Friday.

Three companies filed a motion on Friday asking the U.S. District Court for the District of Columbia to determine whether there is sufficient evidence that the IRS fraudulently “backdated” documents while cracking down on “syndicated conservation easement” schemes, which allow individuals and corporations to offset their taxes by donating land to charitable groups.

The filing is part of a two-year-long Freedom of Information Act case against the IRS. The plaintiffs, Arden Row Assets, Basswood Aggregates, and Delwood Resources, claim IRS agents hit their companies with millions of dollars in tax penalties without proper authorization, and later fraudulently backdated documents to cover up the misconduct.

If the court decides there is sufficient evidence of wrongdoing by the IRS, it could force the agency to release internal records related to the case.

Critics of the tax bureau say the case is a prime example of politicized “weaponization” by the IRS, an agency that has faced extensive budget cuts and layoffs by the Trump administration.

“In the emails between the IRS agents, it’s clear that they know they didn’t properly date the documents, and they seem to have no concern about backdating the forms,” Rod Rosenstein, the former deputy attorney general who is representing the companies suing the IRS, told the Washington Free Beacon.

Rosenstein said it appears that agents were “encouraged to pursue penalties in easement cases” which “may have created pressure to pursue penalties even when they failed to get the required approval.”

Over the past decade, the IRS has launched a crackdown against “syndicated conservation easements,” a tax loophole that allows companies to donate undeveloped land to nonprofit groups for a tax writeoff. The easements have been criticized by some lawmakers who say they’re being abused by companies that buy up low-worth land, obtain inflated land value assessments, and then sell off portions to investors looking for tax breaks.

The lawsuit cited internal IRS emails that appeared to show agents discussing backdating forms that authorized millions of dollars of penalties against the plaintiff companies.

In one email from March 2022, an IRS field agent emailed a manager requesting that he “backdate his signature on each Penalty Approval Lead Sheet,” according to a court filing from the plaintiffs.

“Ideally (?) the date you use to sign should be either the date you ‘approved’ penalties against Taxpayer (7/14/21) … or a little thereafter?” the agent wrote.

The manager responded that he signed the date “July 14, 2021,” which was eight months prior.

The companies in the lawsuit have been seeking additional records, which the IRS has fought by claiming the documents are exempt from public release. Lawyers for the plaintiffs argued there is already enough evidence of IRS misconduct to override the agency’s exemption claim.

“In this unusual case, the Court cannot follow the routine practice of deferring to the government’s assertions of FOIA exemptions because there is overwhelming evidence both that the underlying documents were used in a fraudulent scheme and that the IRS made improper redactions in response to this Court’s order,” said Rosenstein in the filing on Friday.

“When taxpayers rely on the tool provided by Congress to expose wrongdoing, the IRS should not seek to conceal it,” said the filing. “Plaintiffs have a legal right to see the requested documents, and disclosure will deter future IRS misconduct.”