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.
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