Senate Budget Committee Calls for More IRS Criminal Referrals to the DOJ

According to Law360, the Senate Budget Committee recently held a hearing regarding offshore tax evasion where senators made clear that, in their view, the IRS is not making enough criminal referrals to the Department of Justice. While the hearing in and of itself will likely not immediately change the actions of the IRS, it does raise a red flag over a potential push by lawmakers for the IRS to make more criminal referrals.

Criminal tax referrals are unique in comparison to other white-collar criminal investigations. The DOJ's policies insist that the IRS make a criminal referral to the DOJ first before any prosecution may commence for a tax crime.  

Senator Sheldon Whitehouse had strong words for the IRS, stating that these agencies are sending the message to taxpayers that, by failing to regularly refer cases for prosecution, they will not be held responsible for their illegal actions. This comes off the heels of senators pushing the IRS and DOJ to prosecute Swiss banks accused of hiding American citizen money offshore. Other senators made calls for a massive overhaul of the tax system, which included shifting to a “cash-based” taxation system to avoid loopholes.

Congress has made it clear that it is unhappy with how the IRS is handling criminal referrals to the DOJ, namely on offshore tax evasion matters. Whether this effectuates any sort of change within the federal agencies, especially given the historical lack of funding for the IRS, remains to be seen. Nonetheless, Congress is pushing for change, and the agencies may heed the call. Only time will tell.