Legal Foundation Demands Answers From IRS Over Risk of 'Discriminatory' Audits

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Records of communications among top-level Biden administration officials are being sought under the Freedom of Information Act (FOIA) that may shed light on how the federal government has altered or plans to alter tax audit policy in accordance with a Feb. 16 Executive Order.

The America First Legal Foundation (AFL), a Washington-based nonprofit agency, filed the formal FOIA request with the Department of the Treasury and the Internal Revenue Service on Tuesday.

The AFL strongly suspects that, in its zeal to correct discriminatory policies that may have adversely affected some racial minorities, the Biden administration has adopted new policies that treat white and Asian taxpayers unfairly, particularly when it comes to determining when to undertake a tax audit.

The organization warns of a "clear and present danger of race-based audits," citing comments from representatives of the Treasury Advisory Committee on Racial Equity (TACRE) to the effect that "tax policy disadvantages Black Americans while Advantaging White Americans" and that, "It is not enough to say 'tax people making over $400,000' if those people who get audited are Black and Brown."

The AFL’s FOIA request (pdf), obtained by The Epoch Times, contains a long list of custodians whose communications may help expose recent policy shifts at the IRS and the Treasury Department that the AFL believes have unfairly hurt white and Asian taxpayers.

The custodians listed on pages four and five of the FOIA request include Janet Yellen, secretary of the Treasury; Wally Adeyemo, deputy secretary; Janis Bowdler, counselor for racial equity; Lily Batchelder, assistant secretary for tax policy; Charles P. Rettig, commissioner for internal revenue; as well as “all political appointees assigned to the IRS” and “all employees and contractors at or equivalent to Grade GS-14 and above assigned to IRS’s Research and Applied Analytics and Statistics (RAAS) organization.”

The request details how President Joe Biden gave sweeping new powers to the federal bureaucracies through his “Executive Order on Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,” which required federal agencies to take many steps to “prevent and remedy discrimination, including protecting the public from algorithmic discrimination.”

In the idiom of the executive order, the term “algorithmic discrimination” refers to “instances where automated systems contribute to unjustified different treatments or impacts disfavoring people based on their actual or perceived race, color, ethnicity” or “any other classification protected by law.”

But, according to the AFL, “When read in context with the Department of the Treasury’s ongoing efforts to racialize tax policy, the new Executive Order signals that the Biden Administration intends to alter Internal Revenue Services’s (IRS) audit algorithms to target white, Asian, or mixed-race taxpayers.”

Policy Rationales

The request goes on to detail further grounds for questioning the purpose and impartiality of the new algorithms.

It notes that Deputy Secretary of the Treasury Adeyemo held a meeting with economists and “racial equity experts” in May 2021 and, according to a Treasury Department press release, gave certain assurances as to the department’s “commitment to racial equity as a key factor in the design of tax compliance.” Equity involves reaching equal outcomes, beyond providing equal opportunities.

The request also cites another official Treasury Department release stating that Adeyemo and Assistant Secretary Batchelder were “examining the tax system through a racial equity lens.”

The Treasury Department ignored Congressional strictures against collecting data on race and ethnicity from other federal agencies, and undertook estimates of the impact that tax policy would have on racial equity by attempting to determine the racial, ethnic, and other demographic characteristics of those subjected to audits, ATL said.

On the heels of these actions and public statements, Janis Bowdler, who held the newly formed post of counselor for racial equity, oversaw the launch of the Treasury Advisory Committee on Racial Equity, the AFL request also noted.

AFL questioned the existence of tax policies that have disfavored racial and ethnic minorities, observing that the Treasury Department released a working paper (pdf) in January 2023 making use of “imputed” racial data.

Some of the conclusions of this paper favor the Biden administration’s positions, while other findings clearly do not, the AFL said. The paper found some disparities among the benefits disbursed to families of different races, but also found that “Black and Hispanic families, which make up a disproportionate share of low-wage workers, disproportionately benefit from the Earned Income Tax Credit,” and that the Premium Tax Credit and Child Tax Credit have benefited Hispanic families above all.

Given the Treasury Department’s own findings, the AFL questions the premise of the federal agencies’ attempts to remedy discrimination against Black and Hispanic taxpayers through the tax system.

The AFL seeks to parse the communications of the individuals named as custodians in its FOIA request in order to understand and, if appropriate, bring before the public just what Biden administration officials are doing to refashion tax policy and whether the consequences will be truly non-discriminatory, rather than hurting white and Asian taxpayers.

The Epoch Times has reached out to the Treasury Department and the IRS for comment.