Originally published on Forbes.com.
It may or may not be necessary for tax law to be complex and difficult to understand. The one thing tax law should not be, though, is secret. What is said and written about the tax law by people who work for the government should be open and transparent. There might be a question about how bad insider trading really is. There is no question that insider tax law is bad. That is more or less my restatement of the values behind the crusade of Paul Streckfus.
Paul Streckfus is not that well known and has a pretty low internet profile as far as the mainstream goes. People involved in exempt organization tax law know who he is and probably have an opinion about him – one way or the other. He is the editor of the EO Tax Journal. More on Mr. Streckfus and the EO Tax Journal later. Here is one of the issues surrounding secret tax law.
The Inside Dope
I am always skeptical when someone tells me that they know what the IRS is really up to. The last time I heard a lot about that was during the excitement about the implementation of repair regulations. It seemed like every consultant who was trying to pitch a study of dubious value had a source insider the IRS. Here is how I saw it:
The people most passionate about their answers being the right answers have inside information from the IRS. They claim that the people they spoke to at the IRS are the ones who really know, unlike the IRS guys that the people with different answers spoke to.
Mr. Steckfus, however, has worked on exposing a systematic way that high-level practitioners who can spend a lot on the most exclusive conferences can be getting inside dope. Conference sponsors invite IRS officials to speak at their events and then bar press coverage.
Here is part of his statement on that issue.
When I was with Tax Analysts in the late eighties/early nineties we would get complaints from speakers at tax gatherings that they had been misquoted. I suggested that we invest in tape recorders (then state-of-the-art) and instruct all reporters to record speakers so we would have a record of what was said.
I next suggested that we transcribe the entire meeting of the EO Committee of the ABA’s Tax Section based on a recording of the meeting. Initially there was some concern that no one would attend these meetings if there was a transcript later but instead the EO Committee has become one of the largest committees of the ABA Tax Section. I think committee members like seeing their words in print. The ABA’s policy has always been to record all its sessions and to place no restrictions on the press.
When I began this publication my goal was and continues to be to record and transcribe the remarks of Treasury and IRS speakers at whatever programs they speak.
I have never claimed the right to record private practitioners, only Treasury and IRS speakers, yet some program sponsors are always throwing up roadblocks to my recording of government speakers. Unfortunately, Treasury and IRS have never made it clear that their employees are not to speak at programs that impose restrictions on press coverage. I’m also disappointed in those Treasury and IRS employees who participate in these gatherings, knowing the press is being excluded, or worse, sneaking off to speak at private gatherings.
How I Learned About Paul Streckfus
I have Judicial Watch to thank for introducing me to Paul Streckfus. In one of the numerous document dumps that were part of the JW scandal coverage, at the very beginning, there is an email dated September 15, 2010 in which Lois Lerner forwards EOT Update 2010-130 with the comment “More fuel for the potential c4 project fire”. Mr. Streckfus’s coverage of the interminable IRS scandal was harsh on both the IRS for mismanagement and timidity in the face of blatant political activity by 501(c)(4) organizations and also on the scandal narrative promoted by Republicans.
The NYU Conference
Mr. Streckfus connects the scandal to his concern about press restrictions on conference coverage. He has a particular concern with the annual conference of the National Center on Philanthropy and Law at NYU, which gigged him for quoting Lois Lerner in 2011. Mr. Streckfus had concerns about the way the conference was run.
If the conference is only benefitting a select few (the invited participants), should IRS and Treasury representatives be in attendance? I believe that the government guests (Susan Brown, Karin Gross, Lois Lerner, and Ruth Madrigal) may be violating IRS policy as set forth in Policy Statement 1-181 (IRM 1.2.19.1.8), ……
While none of the government guests were listed as presenters or commentators, the opportunity to interact with the invited participants included, on the first day, a half-hour coffee break, a reception, and a dinner and, on the second day, another half-hour coffee break, lunch, and a “sherry bar.” Clearly the opportunities for participants to interact with the IRS and Treasury guests were manifold. In addition, invited participants had the opportunity to similarly interact with Alex Reid and Gordon Clay of the Joint Committee on Taxation.
Many years ago New York University sponsored an annual Tax Seminar for Government, which became known as the notorious Eagle Lodge gathering, at which government officials and private practitioners met in private, away from the prying eyes of press and public. Eventually, bowing to criticism, NYU ended these secret meetings. It seems to me that the annual NCPL conference is becoming Eagle Lodge all over again.
Attending the conference as press, Mr. Streckfus had agreed in writing that he would not attribute remarks to any participant without their permission, but given his understanding of IRS policy, he did not think that rule applied to IRS speakers.
Professor Harvey Dale, Director of the center thought differently and e-mailed Streckfus
Despite your written undertaking to abide by that ground rule, you then proceeded, in that same Email Update, to write: “Lois Lerner probably had the best comment: ‘You’re never going to get to any conclusions on these issues.’ (I can identify Lois because it is against IRS policy for her to speak privately at a gathering, so I submit IRS policy supersedes NYU policy here.)” You made the decision to violate your written undertaking without discussing it with Lois Lerner, with me, or with anyone else at the NCPL. That shows a lack of integrity.
That was in 2011, but apparently this is still a thing, When I wrote Professor Dale, he called me in less than an hour. Let’s just say that Mr. Streckfus and Professor Dale have harsh words for one another and Professor Dale says that much that Mr. Streckfus says about the conference is untrue. Professor Dale explained to me that the rule at the NYU conference aids transparency. And I learned something new. It is called the Chatham House Rule.
When a meeting, or part thereof, is held under the Chatham House Rule, participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.
The advantage according to the Chatham House website is that:
It allows people to speak as individuals, and to express views that may not be those of their organizations, and therefore it encourages free discussion. People usually feel more relaxed if they don’t have to worry about their reputation or the implications if they are publicly quoted.
With a name like that, I figured Chatham House must be in the UK. And I got that right. Chatham House is the Royal Institute of International Affairs in London.
For all the bad blood between them Mr. Streckfus and Professor Dale seem to have similar views on the sad state of IRS oversight of the not-for-profit sector. And Professor Dale still follows EOTJ.
About EOTJ
The EO Tax Journal has what has become a pretty old school publication method – a daily email. Prior copies as far back as 2010 are available on a very bare-bones website. Access to that is included with the subscription.
It goes out early in the morning – 4:58 EST yesterday morning as it happens. I thought that was the result of some sort of sophisticated program. Actually it just reflects the way that Paul Streckfus organizes his day. He has trouble staying up much past eight at night, so he gets up early and finishes up the day’s journal. After that, he goes out with his walking club to get some exercise.
EO Tax Journal is pretty much Paul Streckfus. He lives in Pasadena, Maryland, and years ago purchased the house next door to serve as the journal’s headquarters. A couple of people work for him there transcribing conference recordings and managing subscriptions. All the original material in EOTJ is his work except for some reader comments. Most of the comment is not original, though. The journal is a curation of developments in the area of tax-exempt law. Yesterday’s issue is fairly typical:
1 – Editor’s Notebook
2 – Upcoming Conferences – Save the Date
3 – Draft Form 990-T Instructions Provide Hints Regarding New Code Provisions 512(a)(6) and (a)(7)
4 – IRS Rules Trust’s Income Is Excludable under Section 115(1) Because the Income Derives from Exercise of Essential Governmental Function (PLR 201844001)
5 – IRS Rules, for Purposes of Computing UBTI and the Set-Aside under Section 512(a)(3)(E)(i), the Applicable Account Limit under Section 419A(c)(6) May Be Computed by Including Insurance Premiums for Medical Benefits as Qualified Direct Costs (PLR 201844005)
Mr. Streckfus told me that he had thought of moving toward a more web-oriented format, but that his readers insist that they like getting the email first thing to start their day. He has over a thousand subscribers including some IRS offices. He told me that people in the EO tax community tend to have strong feelings about him and his work. He is hard on donor-advised funds and conservation easements among other things.
EOTJ sits behind what is, in my mind, a formidable pay wall, assertions of affordability to the contrary notwithstanding.
Because of its low overhead, the EO Tax Journal is very affordable. All practitioners at one location may receive the daily email updates and have access to the website for only $599 a year. Individuals may subscribe for a personal use only subscription for $299 a year.
Actually Bruce R Hopkins Nonprofit Counsel costs even more.
About Paul Streckfus
I just had to know more about what created the gadfly of the Tax Exempt world and was amazed to find out how much we have in common. We are not that far apart in age and both resent the way the airlines torture 6’4″ people. He attended parochial grammar school and Catholic high school, as did I. He was inspired by JFK’s call to “Ask not what your country can do for you – ask what you can do for your country”
And here we see what a profound difference a few years makes in the life of experience of a member of my generation. The “counter-culture” spread unevenly in the sixties and a University of Maryland student majoring in economics and business could be relatively unaffected by it when he graduated in 1968. He wanted to live out that idealism by becoming a Navy pilot but lacked good enough eyesight. The next best thing was enlisting in the Army and going infantry – 101st Airborne Division. Disillusionment came quickly in Vietnam in 1969. He referred me to a book called A Bright Shining Lie. His company took 50% casualties while he was with it. I turned 16 in 1968 making my experience of the same period more confusing than disillusioning and, of course, exceedingly more benign.
After discharge, Mr. Streckfus started participating in Vietnam Veterans Against the War and perhaps more to the point enrolled in law school at Georgetown. He was full-time at first but then needed to switch to part-time and take a job. It happened that the IRS was hiring and they needed a tax law specialist in EO. Things would tighten up later and the job would be restricted to people who had already graduated from law school. He went from GS-7 to GS-13. This is not long after the Tax Reform Act of 1969, so it was an exciting time. Mr. Streckfus worked the exemption applications of many prominent not for profits, not that he could tell me which ones. The best story is that he succeeded someone with a penchant for turning down civil rights organizations. The proposed denials on his desk turned into approvals.
He left the IRS and bounced around a bit in some law firms and even a CPA firm, the doomed Laventhol & Horvath as it turned out. Finally, he ended up at Tax Analysts editing and writing, which gave him the background to start his own publication in the nineties – print, of course, converting to email distribution in 2000.
People ask him why he doesn’t retire and he doesn’t really understand. What could be more rewarding than getting up early every morning and writing about arcane tax matters? I get it. Although I am a little less extreme. I start at 5:00 AM at the earliest, rather than finishing then. He has no succession plan, so let’s all wish him good health and longevity.
The Other Secret Tax Law
The other source of secret tax law, that is even more disturbing than the conferences, is the Tax Court’s lack of electronic transparency. Decisions and orders are available on-line but petitions and briefs are not. Large firms have the resources to get them, but they are effectively inaccessible to the little people, including tax bloggers like me and Lew Taishoff. The only exempt area decisions are generally small organizations that are either egregious or hapless like the Marley Fund. Large organizations will generally settle with the terms of the settlement being confidential. Mr. Streckfus wrote today about an unusual case that went to District Court – Life Extension Foundation.
If this case had been filed in Tax Court, we would probably have never known of its existence. But, having been filed in a U.S. District Court, there is PACER access to the court documents.
What’s unfortunate is that the case ended in an unexplained stipulated decision. The case involved many EO tax issues but how they were resolved will probably never be known. I think the judge should have insisted that the settlement agreement be attached to the Joint Stipulation of Dismissal or at a minimum a statement of how the various issues were resolved be included in the settlement agreement.
Leandra Lederman has a recent article – Increased Transparency in the U.S. Tax Court: Has the Moment Arrived? that digs into the issue more deeply than I can here.
On Being A Gadfly
In some ways, Mr. Streckfus seems to continue the youthful idealism that motivated him to take up an M-16 and then protest the war he had fought in after laying it down. He tries to shine a light on the abuse in the area of exempt organizations. He sympathizes, though, with the lawyers and accountants in the field who, unlike him have mortgages to pay and kids to support. And they apparently keep reading his stuff – like it or not.
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