Sen. Hatch: IRS Hiring of Law Firm for $2.2M Audit May Be Illegal

The Senate Finance Committee is investigating the Internal Revenue Service's decision to pen a $2.2 million contract with the law firm Quinn Emanuel for a corporate audit, saying the contract may violate laws against the IRS sharing confidential taxpayer information.

The contract equals out to about $1,000 an hour for Quinn Emanuel to audit the Microsoft Corp., reports The Daily Caller, and comes at a time when the agency claims to be underfunded.

Sen. Orrin Hatch, R-Utah, who chairs the Senate Finance Committee, told IRS Commissioner John Koskinen in a letter earlier this month that there are statutory prohibitions about outsourcing certain functions.

"In May of last year, the IRS hired a litigation law firm to assist in the income tax audit and investigation of a corporate taxpayer, including the conduct of sworn interviews," Hatch said in his letter. "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."

Koskinen has blamed budget cuts approved by Congress for its reductions in taxpayer services, as the agency's budget has been slashed by $1.2 billion since 2010.

Koskinen has also said budget cuts will force the IRS to curtail its law enforcement capabilities, according to The Washington Times.

During tax season, the IRS's overloaded phone system disconnected on more than 8 million people, with only 40 percent actually getting through to a person.

According to a staff report in April by Republicans on the House Ways and Means Committee, the IRS diverted millions from taxpayer services and other areas to pay for President Barack Obama's healthcare law.

However, Hatch noted that the Obama administration re-wrote its own rules after hiring Quinn Emanuel, and that just weeks after the law firm was retained, the IRS and the Treasury Department issued a temporary regulation that allows third party contractors to "take compulsory, sworn testimony in connection with an IRS investigation."

The new regulations allow a third party, like Quinn Emanuel, to question witnesses under oath and to have access to their confidential taxpayer information "while raising questions over how well that information is then protected from further disclosure."

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