The Functional Government Initiative (FGI) is taking legal action against the Internal Revenue Service (IRS), accusing the agency of withholding records pertaining to former IRS official Nikole Flax during her tenure overseeing a notable budget expansion and recruitment drive.
"This isn’t the first time the IRS has claimed they can’t find records. When FGI first started an investigation into the IRS’ plan to hire 87,000 new agents, the agency claimed it had no records or analysis regarding the issue. After FGI filed suit, the IRS then magically said they likely have thousands of records," FGI spokesman Peter McGinnis said in a provided statement.
"Now it’s happening again. You would think that an agency that exists to inspect the records of more and more U.S. taxpayers would at least make a show of being transparent itself.”
The American Rescue Plan Act, signed into law by President Biden in March 2021, mandates third-party settlement organizations, including PayPal, Venmo, and Cash App, to notify the IRS about individuals receiving over $600 through their platforms. Moreover, the Inflation Reduction Act (IRA) of 2022 designated an $80 billion fund for the IRS to bolster tax enforcement measures and staffing. This resulted in the recruitment of 87,000 new employees.
Flax, with a history of prominent roles at the IRS, served as the chief of staff during a controversial period when the IRS was under scrutiny for allegedly targeting certain conservative groups seeking non-profit status. A notable hard drive crash at the time, one among seven involving IRS personnel connected to the controversy, hindered the media and congressional investigators from accessing her official documents.
More recently, Flax spearheaded the IRS’s IRA 2022 Transformation and Implementation Office, which was responsible for the enactment of the Inflation Reduction Act and the onboarding of the new 87,000 IRS agents.
FGI's pursuit of transparency led the organization to submit a Freedom of Information Act (FOIA) request to the IRS in February 2023, seeking Flax's records related to tax enforcement modifications, transaction surveillance, among other topics. The IRS initially stated they were unable to conduct keyword-based searches and could only comb through email subject lines, excluding other document types such as texts and letters. After asserting no records were found, FGI appealed to the Independent Office of Appeals, which determined that a comprehensive search was not carried out. Since this decision, the IRS has remained steadfast in its refusal to release the records, prompting FGI to proceed with a lawsuit.
