Senator: IRS paying private lawyers $1,000 an hour, despite ‘underfunding’ complaints

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Despite repeated cries of agency poverty from IRS leaders, a top Republican senator says the nation's chief revenue collector is paying private attorneys more than $1,000 an hour to help conduct a high-profile audit.

Senate Finance Committee Chairman Orrin Hatch, R-Utah, fired off a letter to IRS Commissioner John Koskinen airing his concerns earlier this month. Hatch questioned not only the cost of the contract, but the decision to use an outside contractor for an investigation involving potentially sensitive tax information.

"In my experience as chairman, I know that both the IRS Office of Chief Counsel and Justice Department employ excellent attorneys who should be more than able to conduct an examination without turning over interviews and document requests to private contractors," Hatch wrote.

His letter said the contract inked last year with law firm Quinn Emanuel is worth $2.2 million, and allows for attorneys to reap over $1,000 an hour "to carry out functions that are more properly carried out by Treasury officials."

The contract reportedly is to help audit Microsoft. The Wall Street Journal reported earlier this month that investigators are looking at whether Microsoft used improper tactics to shift profits offshore and reduce taxes -- and the IRS might have turned to the private firm to turn up the pressure.

But Hatch said in his letter that taxpayer examinations can only be conducted by Treasury officials unless Congress says otherwise.

Hatch wrote that Congress created "safeguards" around confidential taxpayer information by prohibiting U.S. officials from disclosing it in most cases -- it follows, he argued, "that certain revenue functions may be carried out only by specified officers of the Treasury Department and that taxpayer data can only be disclosed in limited circumstances."

The Quinn Emanuel contract, he wrote, "marks the first time, to the Committee's knowledge, that the agency has hired a private contractor to take such an involved role in an examination."

Hatch noted the Treasury Department and IRS issued a "temporary regulation" after retaining the firm allowing contractors to take "compulsory, sworn testimony" for IRS investigations, and to get access to confidential taxpayer information.

Hatch called this an "unprecedented expansion of the role of outside contractors in the examination process, and one that violates" federal provisions.

He wrote: "The IRS's hiring of a private contractor to conduct an examination of a taxpayer raises concerns because the action: 1) appears to violate federal law and the express will of the Congress; 2) removes taxpayer protections by allowing the performance of inherently governmental functions by private contractors; and 3) calls into question the IRS's use of its limited resources."

The hourly fee was reported earlier in The Daily Caller.

Leaders at the IRS, which has faced intense congressional scrutiny ever since it was revealed that conservative groups seeking nonprofit status were targeted for additional scrutiny, have maintained their agency is struggling with declining budgets.

Commissioner Koskinen said in February that cuts have "deeply eroded our ability to provide critical services for taxpayers."

In March, he called "underfunding" the biggest challenge facing the IRS.