IRS Now Targeting People Who Threaten Washington's “Ability to Govern"

The tax agency could now target protesters, broad new guidelines suggest

(Image credit: Kate Kohn)

The Internal Revenue Service (IRS) is positioned to do much more than just collect your taxes as it turns its attention to individuals who threaten the U.S. government’s “ability to govern,” a vague new criteria for criminal investigations, according to its own operating manual. 

Buried in the fine print is the revelation that the IRS is pivoting away from its post-9/11 focus on financing of foreign terror groups like al Qaeda and criminal money laundering to a much broader and ill-defined “national security” threat. The shift, revealed in the latest versions of the voluminous Internal Revenue Manual, applies to IRS participation in dozens of federal government “national security” investigative task forces, which were previously referred to as “narcotics and terrorism” task forces until late last year. 

The shift involves the tax agency in everything from maintaining the safety of the stock market to protecting critical infrastructure.

Though the IRS employs over 83,000 civil servants, some 3,000 are assigned to its Criminal Investigation division, which investigates tax and banking improprieties, public corruption, identity threats, narcotics and terrorist financing. Criminal investigations is also deeply involved in federal government and intelligence community efforts to police non-financial crimes, according to the IRS’s operating manual.

According to the IRS, ‘national security’ refers to “The national defense or foreign relations of the U.S. and includes, within a Treasury context, U.S. economic vitality, global competitiveness, market sensitivity, and tracking terrorist assets/financial crimes.” The IRS is casting a wide net that could entangle anyone from Americans protesting their government’s “foreign relations” to day traders.

The new focus of investigative work by the IRS follows a federal government shift away from international terrorism to organized crime and transnational criminal activities. The realignment comes at a time when the entire national security complex is trying to put the counter-terrorism era behind it, focusing on China and so-called great power conflict, a thrust that more easily justifies its almost trillion dollar a year budget.

The IRS has repeatedly ranked as the most disliked federal agency and is the perpetual subject of much speculation regarding financial snooping and politically-motivated audits targeting individuals on both the right and left. The use of the tax agency as a political weapon goes back to President Franklin Delano Roosevelt, who used the IRS to launch an investigation into populist firebrand Huey Long, then a popular Louisiana Governor and a threat to FDR’s reelection. The Nixon administration created a special IRS unit to go after political activists and dissidents during the Vietnam War era. More recently, President Trump sought to use the IRS to audit his political opponents, according to his former chief of staff retired Marine Corps Gen. John F. Kelly. (During the Trump administration, the IRS conducted intensive audits of two Trump antagonists, former FBI Director James Comey and FBI Deputy Director Andrew McCabe, though the agency maintains that these were random.) The IRS also failed to carry out mandatory audits on President Trump when he was in office, a congressional investigation later found. (And an IRS contractor was sentenced to five years in prison for leaking the former president’s tax returns.)

During the Biden administration, the IRS has received a windfall in federal funding. The passage of the Inflation Reduction Act in 2022 provided the IRS with about $80 billion over the next decade, which the administration says will double the size of the agency and allow the IRS to hire 20,000 new employees. The IRS says that it is planning more audit focus on the wealthiest taxpayers and large corporations. “There is no new wave of audits coming for middle- and low-income [individuals] … coming for mom and pops,” says IRS Commissioner Danny Werfel.

Unless, that is, they are individuals who threaten the federal government’s “ability to govern” or present a “threat to the public safety or national security interests of the United States.”

The IRS’s manual provides guidance to its army of federal law enforcement officers, called special agents, in its Criminal Investigation division. Those agents, the manual says, are assigned to a blistering array of task forces run by the White House, the intelligence community, and the FBI, including the National Joint Terrorism Task Force and its subordinate local Joint Terrorism Task Forces (JTTFs), the National Counterintelligence Task Force and its subordinate local Counterintelligence Task Forces (CITF), Organized Crime and Drug Enforcement Task Forces, High Intensity Drug Trafficking Area task forces, Financial Investigative Task Forces, and Financial Crimes Task Forces.

When IRS special agents are assigned as task force officers in support of federal national security investigations, they work with both sponsoring agencies as well as with state and local law enforcement officials. The manual states that IRS agents “will not compete with DEA or FBI personnel for informants or information,” and it lays out rules for sharing taxpayer information that could indicate non-tax crimes:

“The IRS may disclose in writing, return information, other than taxpayer return information which may constitute evidence of a violation of federal criminal laws to the extent necessary to apprise the head of the appropriate federal agency charged with the responsibility for enforcing such laws. In instances where the information alleging the subject's possible violation of a federal non-tax crime was furnished to the IRS by a federal law enforcement agency, it is not necessary to channel that information back to the same agency.”

In its investigative work, the IRS is allowed to share money obtained through Department of the Treasury enforcements with local law enforcement. This includes paying confidential informants and financing undercover operations, including rental of safe houses, and purchasing wires and bugs used in clandestine investigations. The IRS, through “Suspicious Activity Report Review Teams,” is also allowed to analyze financial transactions about $10,000 to develop investigations “involving both legal and illegal source income.”

The greatest change for the IRS though is greater involvement in “non-drug centric Priority Transnational Organization Crime (PTOC) investigations,” according to the manual.

“The PTOC investigations involve support for the highest priority transnational organized crime (TOC) that pose the greatest threat to public safety and national security, identified in Attorney General’s Top International Criminal Organization Targets (TICOT) List,” the manual states. Other watchlists referenced in the manual include the Consolidated Priority Organization Target (CPOT) list, the Regional Priority Organization Target (RPOT), and the interagency Threat Mitigation Working Group (TMWG) list. The latter list includes individuals “subject to U.S. legal jurisdiction and [in cases where their] activities significantly impact the United States or present a significant existing or emerging threat to the public safety or national security interests of the United States.”

The list of IRS investigative interests is a long one, spanning individuals and organizations that:

• “advance the proliferation of weapons of mass destruction or their delivery systems”

• “facilitate the activities of State Department-designated Foreign Terrorist Organizations”

• “engage in or facilitate corruption of domestic or foreign public officials that threatens the political stability of sovereign nations, especially the United States or its allies”

• “conduct or facilitate cyber or other activities that threaten to destabilize the U.S. critical infrastructure, key resources, or ability to govern”

• “conduct or facilitate cyber or other activities that penetrate or destabilize global financial or strategic markets or institutions”

• “facilitate espionage by foreign intelligence organizations or governments hostile to the United States”

• “obstruct justice by advancing technology and techniques to combat law enforcement in its efforts to combat Transnational Organized Crime (TOC)”

Protecting stock markets and critical infrastructure, protecting the “ability to govern” — that is, the workings of United States officialdom– is hardly a mission historically associated with America’s tax collectors. Their inclusion as criteria to involve IRS special agents in federal investigations opens the door for overreach and abuse. At a time when the IRS is subject to partisan political attack (the FY 2024 final budget reduced the $80 billion earmarked to the IRS by $20 billion), broadening the IRS mission does little to achieve what the agency says is its goal, which is forcing millionaires and billionaires to pay their fair share.

Testifying before Congress earlier this year, IRS Commissioner Werfel said that before taking the job, he was told by the Biden White House that he should prepare for “unprecedented and unrelenting political headwinds.” Werfel claims that the IRS has no political motivations and likens the role of the IRS to that of referees in sports. “We don’t mind people booing. Boo away,” Werfel says. “That's fine, but don't eliminate the ability of the referee to do their job effectively.” 

The commissioner might be well meaning, but the IRS expansion into “national security” contradicts his claim of singularly focusing on fighting tax evasion. Instead of just calling fouls on the teams, the IRS is now policing the crowd as well.

— Edited by William M. Arkin.

*Shouts out to the great Kate Kohn, who made the graphic for this article. You can follow her on Twitter (fine, X) @kathrwn or her blog, Underwire.