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IRS to Delay Collecting Back Taxes From Katrina Victims

By David Cay Johnston
THE NEW YORK TIMES

The commissioner of Internal Revenue ordered his agency to delay collecting back taxes from Hurricane Katrina victims until after the Nov. 7 elections and the holiday season, saying he did so in part to avoid negative publicity.

The commissioner, Mark W. Everson, who has close ties to the White House, said in an interview that postponing collections until after the midterm elections, along with postponing notices to people who failed to file tax returns, was a routine effort to avoid casting his agency in a bad light.

“We are very sensitive to political perceptions,” Everson said, adding that he regularly discussed with his senior staff when to take actions and make announcements in light of whether they would annoy a powerful member of Congress or get lost in the flow of news.

The tax agency has broad discretion to change filing deadlines in the case of disasters and has traditionally eased off tax collections before the December holidays.

But four former IRS commissioners, who served under presidents of both parties, said that doing so because of an election was improper and indefensible.

Everson issued the order to delay enforcement during an Oct. 10 telephone conference call with some of the career civil servants working on tax enforcement in the areas that were devastated by the hurricane.

“We just spoke to the commissioner on the enforcement issue in the gulf,” wrote Beth Tucker, the IRS executive in charge of dealing with Hurricane Katrina victims, in an e-mail message to her team obtained by The New York Times. “He prefers that we do not resume any enforcement actions until after Dec. 31 due to the upcoming elections, holiday season, etc.”

Former Commissioner Jerome Kurtz, who served under President Jimmy Carter, responded, “Never, never, never,” when asked if he would have considered delaying broad-based enforcement actions, like sending notices, because of any election, national or local. “Oh my God, that is unthinkable,” Kurtz said.

On the other hand, Mark E. Matthews, the IRS deputy director of services and enforcement, who participated in the conference call with Everson, said that “the reference to elections was in a litany of things we were running through here” and that “I did not read it as being politicized.” Matthews noted that he is a Democrat who worked in the Clinton administration.

In the wake of Hurricane Katrina — during which hundreds of thousands of people lost their homes, incomes and tax records — the IRS delayed the filing deadline for 2005 taxes to Oct. 16, 2006, for those living in the counties most affected by the storm. Normally, those taxpayers who did not file returns or pay their taxes by that extended deadline would begin receiving notices and, eventually, collection demands from the IRS. Everson’s order delayed those collection efforts until early next year.