A federal inspector general is looking into whether the Obama administration used confidential taxpayer information in an effort to attack a political opponent, Koch Industries.
The review was revealed Tuesday by Sen. Charles E. Grassley of Iowa, two weeks after he and a handful of other top Senate Republicans called for the Treasury Department’s inspector general for tax issues to look into the matter, saying either administration officials had illegal access to taxpayer information or were inappropriately speculating in public about the company’s tax status.
Charles and David Koch, brothers who control the Kansas-based company, are libertarians who have used some of their wealth to fund conservative groups and causes that oppose much of President Obama’s agenda. Mr. Obama has singled out the company for criticism in speeches.
In an Aug. 27 briefing with some reporters on calls to restructure the corporate tax code, an unidentified administration official cited Koch Industries, a major privately held energy company, by name, and then seemed to indicate that the company didn’t pay any corporate income tax, according to the Wall Street Journal.
“In this country, we have partnerships, we have [S corporations], we have [limited-liability companies], we have a series of entities that do not pay corporate income tax,” said the senior administration official, according to press reports. “Some of which are really giant firms - you know, Koch Industries is a multibillion-dollar business.”
The Weekly Standard, which first questioned whether the comments crossed a legal line, has reported that the unidentified administration official “appears to have been” Austan Goolsbee, named last month as chairman of the White House Council of Economic Advisers.
A White House official said Tuesday that the administration will not use the Koch example in the future, but that the comment was “not based on any review of tax filings.” Other White House officials have told reporters that the information was publicly available, including in testimony to the President’s Economic Recovery Advisory Board and on Koch’s website.
But an attorney for Koch said in a statement last month that the company does pay corporate income taxes and that information about its structure and tax liability are not publicly available.
Mr. Grassley and his fellow Republicans pointed to that statement in their request for an investigation.
“The statement that Koch is a [nontaxable] pass-through entity implies direct knowledge of Koch’s legal and tax status, which would appear to be a violation of Section 6103” of the Internal Revenue Code, the senators wrote. “Alternatively, if the statement was based on speculation, it raises the question of whether the administration speculating about any specific taxpayer’s liability is appropriate.”
In a reply to Mr. Grassley, Treasury Inspector General J. Russell George said he will review the chain of events.
“As the inspector general charged with ensuring, among other things, the fair implementation of our nation’s system of tax administration, … I have ordered the commencement of a review into the matters alleged,” he said.
Still, Mr. George said that, since Republicans are in the minority, there are some constraints on what he’ll be able to share with the GOP after the review is completed.
Koch has become a target for Democrats in recent months for funding Americans for Prosperity, a conservative lobbying group, among other conservative and libertarian causes. In an August speech, Mr. Obama said Americans for Prosperity was an example of why the country needs to write new campaign-finance rules.
“They don’t have to say who exactly the Americans for Prosperity are,” Mr. Obama said. “You don’t know if it’s a foreign-controlled corporation. You don’t know if it’s a big oil company or a big bank.”