The IRS potentially broke federal law by hiring the trial law firm Quinn Emanuel to perform an audit of Microsoft. The unusual decision has prompted an investigation by the Senate Finance Committee over whether the agency is unnecessarily putting taxpayer data at risk and wasting taxpayer dollars. The trial law firm is billing taxpayers at least $1,000 per hour.
In a letter released Wednesday, Finance Committee Chairman Orrin Hatch (R-Utah) questioned the hiring of expensive trial lawyers and asked the IRS to explain its decision. Specifically Hatch noted that the decision violates federal law, removes taxpayer protections, and raises questions the IRS’s ability to allocate its limited resources. As the letter states:
“The IRS’s hiring of a private contractor to conduct an examination of a taxpayer raises concerns because the action: 1) appears to violate federal law and the express will of the Congress; 2) removes taxpayer protections by allowing the performance of inherently governmental functions by private contractors; and 3) calls into question the IRS’s use of its limited resources.”
Chairman Hatch asked the agency to immediately stop using the expensive firm, citing the significant risks of using private contractors for the examination of records and handling of sworn testimony.
The IRS made the decision to hire expensive trial lawyers despite having over 40,000 employees dedicated to enforcement efforts. Additionally, the agency had the option to turn to the IRS office of Chief Counsel or a Department of Justice attorney, both of which have the expertise to conduct an examination without risking sensitive information. Instead, the agency choose to bring in a litigation-only white shoe law firm. The elite law firm was hired under an initial $2.2 million contract and is charging taxpayers over $1,000 an hour.
Earlier this year, the Taxpayer Advocate - an independent watchdog – raised concerns that the IRS was unable to justify its spending decisions. Despite having the data available to make these decisions, the agency did not bother to develop this data into a useful analysis. Given the carefree way in which the IRS is contracting trial lawyers, questions have to be asked about how the agency allocates its resources.