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CHURCH COMMITTEE REPORTS

INTELLIGENCE ACTIVITIES-INTERNAL REVENUE
SERVICE
THURSDAY, OCTOBER 2, 1975
SELECT CO::\DIITTEE To STCDY Gm'ERx::\IEXTAL OPER..-\TlQNS 'VITH RESPECT TO IXTELLIGEXCE ACTIVITIES,
Washington, D.O.
The committee meL pursuant to notice, at 10 :05 a.m.. in room 318,
Russell Senate Office Building, Senator Frank Church (chairman)
presiding.
Present: Senators Church, Tower. Mondale. Huddleston, Morgan,
Hart (Colorado). Baker, ~Iathias, and Schweiker.
Also present: "'i11iam G. ~filler. staff director; Frederick A. O.
Schwarz, Jr., chief counsel, and Curtis R. Smothers, counsel to the
minority.
The CIL\IR::\L\X. The hearing will please come to order.
The Internal Revenue Service is one of the largest repositories of
raw intel1igence information in the l-;-nited States. It has 700 offices
spread across the country. and it employs over 88.000 people, including
more than 2.500 special agents. The data collected by this behemoth
lay bare the lives of 80 million individuals who file their tax
forms each Year.
In meetil{g our obligation to pay taxes on our earnings and thus
support this country. we reveal to the IRS some of the most private
and personal aspects of our lives. 'Ve tell the IRS for whom we work
and how much money we make. 'Ve tell the IRS not only how many
children we haYe, but additionally their educational achievements.
We tell the IRS how we spend and invest our money, what charities
we favor, and how we contribute to the churches we attend.
Upon examination of the 1040 income tax return, which the vast
majority of us are required to file with IRS, one can determine if
we suffered an extensive illness during the previous year, whether we
bought eyeglasses, and the extent to which we traveled. In short,
information we furnish the IRS constitutes an accurate profile of
our lives and our lifestvles.
Moreover, the IRS c~nduds special tax audits and investigations to
gather still more information. Unlike other inteUigence agencies, the
IRS can obtain financial information upon demand, without a
subpena.
The IRS is an intelligence agency in two respects. First, it is a vast
reservoir of detailed personal information about Americans, and second,
it conducts intelligence-collection activities through its own intelligence
division.
(1)
2
The committee intends to explore both aspects of the IRS. In particular,
we will examine closely ways in which other intelligence services
have made use of the IRS as a lending library of tax information.
This great storehouse of data on American citizens has proved to be
irresistibly tantalizing to other Federal agencies, particularly the
FBI. -
The controls over the use of tax information which the IRS releases
to other agencies are inadequate. The committee has found evidence
indicating that the FBI has widely misused IRS tax information to
disrupt political activists. Tax return confidentiality has eroded to the
point ,,,here our Federal Government has turned these supposedly
private documents into instruments of harassment used against citizens
for political reasons. .
If the law does not assure that tax returns filed by Americans will
not be turned against them. our system of voluntary' compliance with
the tax laws faces a doubtful futnre. The committee will go into this
misuse in detail next month. with our hearin!!s on the FBI COINTEL
PRO (Counterintelligence Program) activities.
Today, though, we wish to open this subject by looking at the IRS
as a collector of intelligence.
Most Americans pay their taxes voluntarily and honestly. A few do
not. Because of these few, the IRS has an Intelligence Division comprising
2.700 special agents. whose job is to investigate cases of criminal
tax fraud.
The principal area of inquiry the committee will consider this
morning with Commissioner Donald C. Alexander has to do with the
scope of intelligence practices required by the IRS to do its job of
collecting the taxes. 1Ve especially wish to learn to what extent the
IRS intelligence capacity has been. and to what extent it should be,
employed in the service of objectives whidl fall outsirle the strict
realm of tax compliance. For example, a branch of the IRS, called the
Special Service Staff rSsSl. now defunct. had the task of investigating
political activists. It was aholished by Commissioner Alexander
shortly after he took office in 1973.
One wonders how an agency designed to collect revenue got into
the business of defining and investigating political protesters. There
were some 8.000 individuals and 3.000 organizations on the SSS list.
The incredible overbreadth of the Spef'ial Sl'rvice Staff target list can
only be appreciated by hearing some of the SSS list of suspects.
Let me refer to some of the organizations that wPre on the list: the
American Civil Libertil's Union. thl' American Lihrarv Association.
the Conservative Book Club, the Ford Foundation. the Headstart program.
the XAACP. the Lawwrs Committee for Civil RiO'hts Under
Law. thl' University of North ·Carolina. and approximatel:v fiO brnnf'hes
of the National Urban Ll'ague. Apparently, someone in the IRS or
the FBI, and other Olltsirle contributors to the pro!!ram. felt that
the~e groups and individuals. plus many more, warranted special targetmg
for a conf'entrated tax-enforcement proryram. In essence. they
were to be punished by the IRS for their political views.
Lists like this one highlight a most disturbing asnect of the IRS
amI other intelligence senices. Thev seem to haw an almost inexorable
need to amass information for its·own sake. anrl to find new reasons
3
for expanding intelligence collection-in the case of the IRS. reas?ns
which may bear little relationship to the needs of a tax collectIon
agency. 'Yorse yet. the giant agencies begin t~ run out. of c.antrol
as administrators face the difficult task of knmnng what IS gomg on
\yithin their own mushrooming organizations. These are the dilemmas
we wish to discuss today with the Commissioner of the IRS.
Before \y' man to the Commissioner. I want to defer to Senator
Tower, if .'ou would like to make an opening statement, Senator.
Senato)' TOWER. Thank you. ~Ir. Chairman.
.A.mplifying on your ~tatement ,that an abundance, of intelligen~e
data may pose a danger m and of Itself. I am of the ne\y that !oda.y's
hearino' mows the committee into another phase of our exammatIOn
of tht impact of goyernmental intelligence-gathering activities on
fundamental concepts of pri\'acy and individual liberties. ,
Agencies im'olwd in clandestine collection on the internatIOnal
scene han acknowledged some incidental threats to the privacy a.nd
safety of American citizens. The rationale has been the need to mamtain
it yigilant watch on the national security.
Our examination of the Huston plan rewaled a coming together of
national security and concerns for enforcement of the domestic criminal
la\ys. The potential threats posed by both areas of activity are real,
and I do not seek to minimize our concern. '" e are indeed fortunate
that deadly biological agents nenr left the governmental laboratories
where they were stored.
Our Nati.on and fundamental freedom are the winners when, for
\vhatever reasons, a comprehensive spying effort like the Huston plan
is vetoed. The need for national security and criminal law enforcement
are clearly legitimate concerns, and I firmly believe that needed legislative
reforms can be fashioned to correct abuses while preservmg
necessary and proper intelligence efforts in these yital areas.
"'hen I apply the same standards to the intelligence activities of the
IRS, Mr. Chairman, I am far less sanguine on the issue of the need
for such efforts by the tax collector. I am deeply concerned about the
purpose of IRS intelligence-gathering activities. This concern is twofold.
First. there appears to be a belief that enforcement of the tax
laws, as they relate to evasion of payment. is viewed as a matter to be
handled completely \vithin the IRS structure. as opposed to a situation
warranting the attention of agencies charged with enforcement of the
criminal statutes.
Evasion of taxes is a crime. However, I question the need for IRS
suneillance of nightclub patrons as an investigative technique. I am
uncomfortable with the notion that driving an expensive automobile
to the parking lot of a stadium where a prize fight is being held should,
standing alone, subject one to IRS scrutiny. In a nation which has al\
vays insisted upon the presence of reasonable grounds or probable
cause as a basis for the focusing of its Iaw enforcement apparatus upon
the private citizen, there may be a real need for reassessing the propriety
of vesting police powers in an agency which is, or should be,
primarily concerned with collecting revenue. But at least these efforts
purport to be in discharge of the agency's basic mission.
Of far greater concern to me is a second purpose for much of the IRS
intelligence effort. That is the apparent reliance upon intelligencegathering
as a vehicle for protecting the image of the IRS. I refer par4
ticularly to the intelligence activities which were apparently initiated
in response to congrrssinnal or rxecutivc branch inquiries questioning
the vigor or evenhandedness of IRS efforts against prominent indiyiduals
and organizationf'.
We must not allow any agency of this Government to insure its
existence or prestige hy amassing files on citizens solely for the purpose
of being in a position to represent that it has spied on the right
as thoroughly as it has scrutinized the left, that it is as vigilant with
nonprofit corporations as it is \vith gangsters. The invasions resulting
from such actions far outweigh any need for assurances of IRS objecti\'
ity and only open wider the dool' tlUlt would make IRS an unwitting
tool of thosr who would make imp] opel' or illegal use of such
information.
}fr. Alexander. I hope that you might shed some light on the perceived
nred for IRS intpl1igence. if any, and the need for spending the
capabilities of IRS in the field, as compared ""ith other law enforcelllpnt
aveneips who might assist in frrrptil1:! OFt criminal tax eyasion.
AmI. fina 11y. \vhaL if an\'. ad(litiona1 g'uidal1cp the Congress might
legislate to insure that thi' reVl'l1Ue win be coll\'eted with minimum
invasion of the taxpayer-citizen's rights.
Thank you. Mr. Chairman.
TIle CliAIRMAX. Thank vou. Senator Tower.
And now. Mr. Al\'Xancler. if yon would please stand and take the
oath.
Do von solemnly s,war that all the testimony you will give in this
proceeding will be the truth, the whole truth: and nothing but the
trnth, so help you God?
Mr. ALEXAXDER. I do.
Mr. WHITAKER. I do.
The CHAIRMAX. Mr. Schwarz will b\'gin the questioning.
TESTIMONY OF DONALD C. ALEXANDER, COMMISSIONER, INTERNAL
REVENUE SERVICE; ACCOMPANIED BY SINGLETON WOLFE,
ASSISTANT COMMISSIONER, COMPLIANCE; WARREN BATES, ASSISTANT
COMMISSIONER, INSPECTION; MEADE WHITAKER,
CHIEF COUNSEL; THOMAS J. CLANCY, DIRECTOR, INTELLIGENCE
DIVISION; AND WILLIAM E. WILLIAMS, DEPUTY COMMISSIONER
Mr. SCHWARZ. Accompanying you is your Chief Counsel, Mr.
Whitaker?
Mr. ALEXAXDER. Yes. Meade IVhitaker. Chief Counsel of the Internal
Revenue Senice. ~fr. Chairman. I'd like to introduce some of
the others who are \yith me. if I may. To the rear of :Mr. Whitaker.
on the far right, is ~£r. Singleton "T~lfe. our Assistant Commissioner
for Compliance.
Senator TOWER. 'Vhy don't you have them stand so we can identify
them?
Mr. ALEXAXDER. To Mr. Wo}£e's left is William E. Williams, the
Depnty Commissioner of the Internal Revenue Senice. And to Mr.
Williams' left is 'Varren Bates. our Assistant Commissioner of Inspection.
To the real' of :Mr. ,,-oUe is Mr. Thomas Clancy, the Director
of our Intelligence Division.
('prtain of yonI' sp('(·itj:· (Jlh·,~[-.iOll:" 1!ut.\' lIP hett~r l'pspoJldpd to Ly
~OI!W of t1w [!Plltl"JIlI'II that 1 han' introd'lI'l'd than I,,' lJW, ",[1. ('I,ail'mall.
\\Y01t1d' ~'Oll 1ih, to SI\l':\! 11ll'~'j'o\IP t lint I illl';,(,dlll'l:'.l!
Thl' CIt.\TJLIL\X. YeC': [ tllink!f t111')' arl'i.!·oing tn tl'stify, th,'Y ShCll1J
Ill' ::;\\'onl.
1)() ('a('ll of \Oll soil'lllllh' S\ll'ar Ihat any tl'stiJl101!'" \'IlII lIla\ ~'in'
at this ]1ro(,ppriillg' will 1)(' th,' trllth. the ,y];ole trnth, ;lll~lIlOthijliLllt
t liP 11'nth. so hel p yon nodi
"'Jr. 'VOl,n:. T (In.
:'IIi'. B.\'ITS. I lIn.
}[r. ('1.\:';('Y. 1 dn
Mi'. ,I'lL[ , \)IS. I do.
'Ill(' CII,\m:lr.\X. ~U1rii2'h(, ::\f1. ::-;e]marz.
:Ifl', SClI\\ARlI, ~rl'. ~\lcxand(l'. ,on tl'ok O\'<'l' as Connni~i'.ion,~r
11'111'11 I . •
::\Jr. ALEX.\XDER. ~Iv ('Olllillissil)]l r[;il.t;; -!'r0m ~,LIV 2b, 1\)7;3. I waS
3WOl'n iC OJ: :'ILly:.!!). 1!)T:\. •
:\11'. "-;Cll'''-\I:~. S(>\',. tho ('jl:tirlll~';\ .'lIet LlI(' \ jet' ch:til'lli:Ul horlJ mudc
statpIIlPllls ill Iyhieh t hpy JIldicat ('Ij tl 'I' i I' l"JJl('Cl'Il about the ll~e of
the IHS as an illtclligeil<~(-[:athering ani, of otherageJicie,'i 0f tlh'
(iOYl'l'lllllellt. anl[ in whirh tLI'i j11dicatplltlwjr l'OllCCrn about 1110 ,'i1;g'
thu Jn~; into al'1il'ities ot11e1 thi'tIl tax enfoJ'('pmenL -
The nl'SL ljlH'f-;lion I Lav,' is" ;":lli' raJ '1llestioll: ,1 0 y01[ :oh,,;; (;,OSP
('Oll( ('1'11S I; "\nd tlll' SP('Ollll gpl'l'l'al 'jllp"tiOll. hlYe )'(\11 tried IO do any·
ILing abOla it i
.'fr..\..LEX.\ XlJEll. First. 1 do ",illd',- t 110,:,1:' ('Ol1,'pl'ns. ~~e"()lld, r j,( "e
(riclI. [ am ll'yi 1112', all,l I .~h:'! i ,oLl j Jl ,H' I () \ ["I' tf) do s0ll1Ptlting a]..-111(
it. T find llo(11ing' lll,tit!:c:ir'ni ,'\'tV.H':, e!ip('[II'P Lllv LLfor:'PlPC:llt and
responsibk aml]p~'ai in \\ t'llfon:I'JI,l'nt.
T li.nd that thr II~:-i is a ja~'gc agi'l.1('y l~~lving Lll'g(1 r·(j\Yt:l':-)'1 rUl~:
kl\'jli;':" last "ron· (,I' ,{)'iJid(,l1lj~t1 i"!'Ciunariol1. 'I'lli" information.
tlil'se pOlY '.' L'; , t1wse J(,,.(ll.II'I'POi. lIleall th'lt the IRS has a gn:,:t ,lut)' to
rOll(luct ihelf cifpl'ti \'pl \' ]Int ab, I'psnun"ih1 'I.
'\"'in dl( manatrPlIll'llt 0;' 111'.' (US Ln~'f Iw(~n do;.;:g; "Ill' best to
"aiiSf thl' TR"-: to;-iO :~mdIH'r i1:-:('I£.
::\11'. S~'lf\\~_\HZ" 'l~psttlr(lay. \YI1C'1 \\'!, \\~P1'1' tanZ11Jp 1][ y()t~:' otnr'p,
you g'a Yl'. IE ,ill i 1111'-t !'ation oJ \\'IWI .' ou t hon:..dn h;1<l bel'll all pxeps;,;j",
tendelj(·.'- to ronrV]]tnllP OIl intpilip:PIICI' gathering as 0PPOS8<1 t(, tax
enfol'l'('n1l'nt. the UUl1l]w!' of ill!'PlltS ill 1i,;, Brooklyn offi('c that were
de\'ot.:d to tl10se t\\'o ["tllS oj' :'0111' ',\'ork. WOllid \'on Lecount tllar.
and '.\'hat ]psson \'011 (ll'PI" fr<,lJl it. Hnc]\\'hat \OU did about it?
::\Ir, .-\Ll-;X_\X]\E~(. 011 CU,' 01' '1\." pall,Y tiel(l tl'l]>S, T visited [L,(~
Bn,oklyl\ offil'l', lUl'l 1 "\'as Told Ibn'in!.!, th,d \isil thai "t had SOll1C'
27 il!l:el!t:-, C11:.!.'agrd at tlmt j inl" III gacl;;·ring illLellIg\'l1(,l~ and fl far
smallel nmnlwl' H\g'flgl'd III n,il,a]l) '.\'()!'king (,lISf'S. I believe those
numbers relat('ll to a 1HlI'ti' ll]a]" g-l'<mp of people and probablY they
r1 id nl ,1 ('(.':,'1' ,till Iw sJl('('ia I "g('nts assipll'd n that part iCll]ar distl'id.
BlIt I was roncpl'JIl'll abollt \lbethi'!' Oil1" :-e]];',(l nf priorities was It
,'ound one. l was COl\cell\ed abrlllt (~ii'edivl' use of resoun:es. And
we lune a dntv to lise thp liLlitpel resourcps that WP have ,ffediY-el'!
in rl)P vast job'that'",p han'. .
And I \1'i:S roncenwd ,11so abont HI'~c:ti" t' i ax enforcement. on thu
one hanel, and preservation ,Ii: indi i'ielual rights, on the othel:, I pre6
yiously had the same concern about the workings of the Spe~ial
Service Staff, anothrr example of the use, if you wilL of the IRS
and its people and its powers in a y,;ay that can at best be described
as inappropriate.
\Ve set about to see what we were doing, and why we were doing
it, why we needed to be engaged in generalized intelligence-gathering,
as contrasted with obtaining the specific information that we must
obtain to supplement that which is gin'n to llS, or to correct that
which is given to us. Many taxpayers comply with the law, as you
pointed out, ;\11'. Chairman. but some do not. And we have an obligation
to see to it that the tax burden is spread as the law requires.
To fulfill that obligation. we must gather information, but we need
to gather only that iyhich is related to that job of ours, of tax administration
and t'ax collection, and we need to be cognizant of individual
rights and the Constitution, in our efforts to gatIler it.
-Senator TOWER. I think we do need this -function. I think it is
badIv needed, to have an etfectii-e enforcement of the internal revenue
laws; and I think onr people are generally fine people doing a difficult
job well. I think then' have been some isolated instances of aberrations
and departures from these principles, and I think we need to
correct these instances and to control our operations for the future,
rather than to eliminate the intelligence gathering.
~fr. SCIIW.\RZ. I am sure there are going to be specific examples
that people rome to, but trying to set the framework at the outset, have
you taken steps to cnt back on iyhat can be characterized as generalized
intelligence gathering or finding out information at random about
American citizens?
~fr, Au:xAXDER. Yes. In fiscal veal' Inn, this generalized intelligence
gathering cost the IRS and, 'therefore. the American taxpawrs.
almost $12 million. That was reduced in fiscal vcar 1971) to $4.~ million.
These dollars are a measure of the redudion. .
Mr. Scnw.\Rz. In a couple of your answers, you have referred to
the powers. or large powers. of the IRS. Now, everybody knmvs the
IRS colleds taxes. but what did you mean by focusing on large powers 1
'Yhat powers does it have that other Government agencies may not
have?
'II'. AT,EXAXDER. 'Ve have powers that other arrencies do not have to
obtain information. peremptoTY powers, powers to issue summonses,
to reC]uire information to be fllJ:nished to us. 'Ve haw, fnrther pmvers:
powers to seize property: powers to terminate a taxable year. and then.
hy assessing the tax immediately, and taking collection action, take
money from a taxpayer: thr PO\YCl' to makP a jropardy assessment.
Xow. thrse pOivers are necrssary to tax enforcement. but because thry
a.re so great, berause they are so perrml,tor:" lwcause they can be e,>erclsed
by the IRS ivithol1t the intE'n-rntion of other flp'encies or courts,
assmning we're acting in rrooG faith. iYC have an added obligation to
use them iviselv and only iyhen necessary.
'fl'. SnTinRz. You drew an iml)Ortant distinction there. did vou
not? Supposrdly-althol1O'h iY(' hai-e nOiV sren rvir'lrn('e to the rontran-
agencirs like the FBI cannot enter sonwbodv's h0118e and get
their pllllPr8. iyitllont havinrr a srarrh warrant annroH'd by a rOllrt
all(1 !)'oinrr throl1rrh some pro('('ss of r]wrkino' and limitinp:. whereas the
IRS has thE' power to compel an indii-idual to provide the most inti7
mate details about his financial life, peremptorily, as you say, or
without going through other processes. of the courts~ for example. Is
that right?
~1r. ALEXAXDER. "'VeIL subject, of course. to the fifth amendment
privilege. "There appropriate. 'Ye give a }Iirandn-type warning" immediately
to the taxpayer. in order to make sllre that the taxpayer is
aware of his or her rights. But we do have powers to call upon third
parties. for example, to supply financial information about a taxpayer
to us.
Mr. SCInBRZ. I have nothing further at this point. :\1r. Chairman.
The CHAIR)fAX. Mr. Smothrrs. do yOIl ha"e any questions at this
point?
}Ir. S)fOTIIERS. ~Ir. Chairman. just onp brief arpa of inquiry.
I IUlYe been concerned. }h. Alexander. and the committee has
received information regarding hOlY the IRS deals with its enemies,
if you 'Yill. particularly the tax protestor groups. "Te have information
indicating' that there has been an effort made to infiltrate these
groups. if you ,yilL primarily based on their anti-IRS activities,
including things sueh as efforts at physicaI destruction at your offices
and the filing of reams of blank retmns. Is it yom view that IRS
investigators should be used in this eapacity, or is this a matter better
handled by other investigative agencies like the FBI?
Mr. ALEXAXDER. :\Ir. Smothers. there are instances where the use
of the techniques that you have described would be necessary. Those
instances are few indeed. I think that the IRS has a responsibility
to see to it that those who attempt to defeat tax administration and
tax enforcement do not succeed. And. accordingly, as to tax resisters,
we have an interest. and shall. I think. maintain an interest in making
their efforts fail. But we also haH' a dutv in the fulfillment of thIS
limited goal to live up to the constitutio;lal principles and the law.
because we cannot enforce the law properly by violating the law.
Mr. S)fOTHERR. "Y1r. Alexander, my question goes to who should
be invoh'ed in this enforcement? For example, if we had dissidents
bombing the State Department. then we ,vould certainly ask the
Federal Bureau of InYestigation to look into that. ",Ve would attempt
to apprehend the culprits. Should the IRS be devoting its energies to
the essential task of catching criminals. criminals whose activities
are reallv unrelated to vour fundamental mission ~
Mr. AVU;XAXDER. Xo.v
:\11'. S)fOTHERS. vVould it then be vour recommendation that these
efforts not be dedicated to these kinds of functions?
Mr. ALExA~DER. It is mv recommendation that the efforts that the
IRS mahs in this generai area, as well as the limited area that you
first described. should be limited to those necessary to achieve our
mission of administrating and enforcing tax laws. rather than other
goals. This accounts. I might suggest. for the action that I took that
the chairman described with respect to the Special Service Staff. That
also accounts for certain other actions that the IRS has taken.
Tax protesters are indirectly related to tax administration, in that
those who preach resistance to the tax laws are likely to practice
resistance as ,veIl. ",Ve do have an obligation to see to it that the tax
laws are enforced. and ,ve are concerned about scofflaws. ",Ve should
not be overly concerned. hOlyever, so as to devote undue resources to
8
this task, or to go about thi5 task in a way in ",-11ich our enforcement
tedllliqucs descend to the techniclues of SOllle of those who are opposed
to taxes.
111'. S?rIUrHEHS. Thank you. I have nothing further at this time, Mr.
Chairman.
The CUAIRM.\N. Thank vou.
.Mr. Commissioner, when you became the Commissioner, were you
ild'oJ'med by the staff of the IRS about the existence of this Special
~el'vice group?;
Mr. Au:x.INnUl. -'fr. Chairman. I hall hpard about the Special Service
Staff from prpss rpports prior to the tillle that I took officr. The
day after I took office. 01' the day after I was sworn in on May 30, I had
a mepting ill Illy office with resped to till' Special SelTice Staff and its
then activities.
The CHAIRMAN. Aud was a full disclosure made to you at that time
of the activities of the Special Services Staff ~
:.\1r. ALEXANDER. In llly opinion, not.
The CHAIRMAN. In your opinion not ~
Mr. ALEXANDER. Right.
The CHAIIDIAN. What is the basis for that opinion ~
Mr. ALEXANDER. The basis for that opinion, Mr. Chairman, is my
recollection-which I consider entirelY correct-that I was not told
on May 30 of a fact which some others in the room knew; that a
memorandum describing activities which are antithetical to proper tax
administration was, indeed, an expression of the National Office of
the Internal Revenue Senice about the attitudes and the activities of
the Special Service Staff. That memorandUIll suggested that the IRS
should concern itself with rock festinls. ""here youth and narcotics
may be present. I find nothing in title 26 of the Int~rnal Revenue Code
to suggest that ,,-e should have a concern about rock festivals.
I find that particular illustration, as well as the rest of that memorandum.
to be antithetical to our job. And ,....hen I found out it was a
National Office memorandum rather than an aberration in the field, I
ordered the Special Sen-ice Staff abolished.
The CHAIRMAN. ,Yhen was this memorandum which defines the purposes
alld objectiYCs of the Special Service Staff called to your
attention?
Mr. ALEXANDER. It was raIled to my attention, as a National Office
document at the end of a dialog that I had with the then-Regional
Commissioner of our North Atlantic region. I was trying to find out
why on earth the N'orth Atlantic region issued this memorandum,
and did they rea llv belien this sort of stuff: and if they did, I wanted
to rorrect t1~eir attitude. .
I finally learned. as I rerall, on August 8 of 1973--
The CUAIRlIL\N. ,Vas that 4 months after you took office that you
first learned of this mrmOl'andlllll defining the f11nrtions of the Special
Service Staff?
~fr.A.LExANnER.Almost 4 months.
The CHAIRMAN. Almost 4 months.
Calling your attrntion to the memorandum. which I think for the
Senators' purposes is--
~fr. SCHWARZ. It is ma,l'krd exhibit 1,1
1 See p. :::9.
9
The CHAlR~L\::-r.Do you have that, ~lr. Commissioner?
Mr. ALExAxDER. Yes I do, ::\1r. Chairman.
Mr. SCHWARZ. ~!r. Alexander. it is exhibit 1.
The CHAlR~IAX. Xmv, I read from the memorandum the following
excerpt:
Functioning under the Assistant: Commissioner (Compliance) a ">vedal COlllplianee
group was estahlished in August 19G9 to receiYe and analyze all available
information on organizations and indh'iduals promoting extremist views and
philosophies.
~ow, stopping right there, do you think that it is the proper business
of the IRS, which is set up to collect taxes for this country, to
receive and analyze all anlilable information on organizations and
individuals promoting extremist vie\\'s and their philosophies?
Mr. ALExAxDER. No.
The C'HAIIDL\X. Reading further from the memorandum: "Tlwse
organizations and indi\'iduals can be generally categorized as, (1),
Violent Groups"; and then, "in cate,!:UHT (2), there is ample evidence
of activities involving so-called Xon-Violent Groups, who by alleged
peaceful demonstrations oftentinws delibrrately initiate \'iolence and
destl'llction...
Ko\\', stopping right there, eWll if that \\"('re so, cloes it not follo\v
that protection against violence and (lrstruction is properly the work
of the policp-incl1ll1ing the Federal police. the FBI--and not the concern
or the \vork of the IntPl'llal Hp\"rll1le Service!
3Ir. ALl·;XAXDEH. Yes.
The CHAIH;lL\X [continuing].
Included are those who publicly destroy and burn draft cards, destroy Selective
Service office records, partieipate in all [sie] organize "lay Day demonstratl.Ol:s,
organize and attend rock festinl1s which attract youth and narcotics. aid in
funding the sales of firearms to Irish Repuhlican Army, Arab Terrorists, ct
cptera; trayel to Cuba, Algeria, and 1\'ortll Yietnam in defiance of existing
statutes relating to seditious acts: ineiting eOllllllotion and resistance to authority
hy encouraging defectors in tlle Armed Forces to enter into alliances to subvert
this nation.
XO\Y. lea\·in!! aside \\'hether or not tIll' actual names of individuals
and organizatlons that werc placed on this watch list by the IRS-whether
or not they fit in this category, that \yhole category has
nothing to do with collecting taxes. does it?
::\Ir. J,LEXAXDER. It has nothing to do with it. except insofar as two
things arc cOlwel'lled: First. if an organization claiming tax exemption
is not entitled to it. it is Dill' obligation to do sonwthing about it, and
it is our obligation to determine \yhetlwr an organization claiming' that
status is entitled to it. Second. if someone deduris a contribution to
an organization that is not tax-exempt. an(l therefore not entitled to
receive deductible contributions. it is om obligation to do something
about that.
Beyond that. we haw no concerns in these areas, and these areas
are not a normal part of tax administration.
The CUAIlDL\X. But this memorandum \yent \yay beyond that.
:NIl'. ALExAxDER. 'Yay beyond that. . .
The CHAIlDL\X. 'Ya1' 1)('1'011(1 that. and it ('\'en \\"fnt-in arinal practice-
the Special SCITler Staff went \yay beyond these gronps. I think
it IlIust haw. lYe look at some of tlw indi\'iduals: ,yhat did columnist
.Joseph Alsop han' to do \yith mcl\: festiyals?
10
:Mr. ALEXAXDER. I have no idea. ~Ir. Chairman.
Senator TmnH. That is an intriguing thought, ~Ir. Chairman.
The CIfAlIDUX. 01' funding the sale of firearms for the Irish Hepl.!-
blican Army, or violating sedition laws by traveling to North
VIetnam? I mcan. what was .Toseph Alsop's name doing on that list?
Do you know?
~fr. ,,\L}:XAXDEH. I haw no idea. }[r. Chairman. I have no idea why
my name was on the IGRS (Information Gathering and Retrieval
System) file.
The CHAIIDL\X. ,Yhat about }Iayor .101m Lindsay? Do you know
what connection he had with any of these organizations that would
jnstify pntting his name on the list?
}Ir. ALEXAXDEH. Xo. I do not.
The ClIAlR~L\X.,Yhat about Xobel Prize \yinner Linus Pauling, who
just last week recei \'ed from the President of the "Cnited States the
Xational Science )Iedal? Do YOU know why he \yas on this list to have
his taxes looked at, this list of violent and 'nom'iolent activist groups?
~1J.. ALEXAXDEH. Xo.
The CHAIR\L\X. ,Yhat about Senators Charles Goodell and Ernest
Gruening? Do you know why they \H're on the list '(
Mr. ~lLEXAXDER. Xo.
The CIIAIR\L\X. ,Yhat about Congressman Charles Diggs? Is there
any reason why he was put on a special watch list for examination of
his taxes?
}Ir. ALEXAXDER. Xo.
The CIIAIR~L\X. ,Yell, there arE' other names here that are equally
puzzling-\\Titer .Jimmy Breslin. rock singer .James Brown--
}Ir. ALEXAXnEH. That would eome under the rock singer category.
[General laughter.]
111'. ALEXAXDEH. There was apparently quite a concern about that. I
suppose some of our people did not like rock music. )\0\\" I share that
view. I don't like rock music. But I don't think it has anything to do
with tax E'nforcE'ment or tax administration.
The CHAIR)L\X. ,Yhat about eil,il rights JE'adel's ~\aron Henry and
.Tesse .Tackson and Coretta King?
..\fr. ~\L};XAXDER. The same answer. no.
The CIIAIR~L\X.Or actress Shirley ..\heLaine? ,Vas that because she
,,,ent-did she go to Xorth Vietnam at one point? I do not think so. You
do not know whv she was on it?
.Mr. ALEXA:-WER. I don't.
The CHAIR~rAN. ,VeIL when you discO\'ered names of people and
organizations that even went beyond a memorandum, which you yourself
have described as unrelated in its thrust to tax collection as such,
what did you do?
..\fr. ALEX.\XDER. I ordered the Special Sen-ice Staff aboli~hed. That
order ,,'as given on August 9, uJ7a. It ,yas implemented by manual
supplE'ments issued on August 13. 1973. lYe held the files. I ordered the
files to be held intact-I'm not going to give any negative assurances
to this committee-in order that this committee and other committees
could review these files to see what \vas in them, and see what sort of
information was supplied to us on these more than 11,000 individuals
and organizations as to whom and on which files 'wre maintained.
11
I suggested, ~Ir. Chail1nan. that at the end of all of these inquiries,
I would like to take those files to the Ellipse and hayc the biggest bontire
since ISH. .
The CIIAIR:\IAX. "'Yell. I concur in that judgment. I would only say
this to you: in a 'nty. it might lw a mOl'p important bontire than the
Boston Tea Party when it comes to ]Jl'Otecting individual rights of
American citizens. I am glad you feel that ,vay. I am glad you took that
action.
",Yhat COllce1118 me, and ,,,hat should be of conce111 to this committee,
is that there is apparently no la,,' on the statute books restricting the
extent to '''hich the IRS can be used as the whicle for harassing or
investigating citizens who are engaged in other kinds of activities quite
unrelated to the question of their tax liability. Though in your hands
as Commissioner these abuses might lw stopped. in the hands of a less
SCJ'll]Julous Commissioner tlw.\' could be reinstituted. And I think it is
the work of thi" committep to write the laws in such a wav that that
,,,ill not happen in the future. .'
~rr. ~\U:X.\XDER. ~fr. Chairman. there is one proyision in the Internal
Rewnue Code that does provide a restriction on part of the improper
activities that von haw desC'ribml. In section 7214 of the Internal Revenue
Code. tlw]:e is a prm'ision making it a crime for an Internal Revenue
employee to knowingly (lemancl from a taxpayer a tax other than
what the law reasonably requires. That does not go all the way. 'What
the IHS, the administration. and Congress need to do to safeguard the
future is to ha,'e sound la'Ys. sound procedures. good people, continual
oveTsight. and continual yigilance by the press.
The CIL\IR~rAx. I agree ,,,ith that. ",Ye 'Yill be ,Yorking on rocommendations
after we conclude this inyestigation that will help protect us
against abuses of this kind in the future. And we would solicit your
own l't'commendations in that rl'gard. Yon tried. as Commissioner,
to put a stop to these acti"ities, and we naturall" '\'Plcome anv recommendations
you might 11[1\'e to make. Senator 'Tower? .
Senator TOWER. Thank vou. ~Ir. Chairman.
First. I ,Yould like to commend ~rr. Alexander for "'hat he has done
to cure some of thc problems that ,,,e found within the IHS. Yfr. Alexander.
who decides when to utilize the intel1igcnce apparatus of IRS,
and how much discretion do the district directors exercise in determining
,yhen to emplov this capabilitv. and against whom it should be
targeted?'· ,
:Yfr. ALEXANDER. Senator Tower, I ,,,ill respond generally. and then I
,youldlike for J1r. "'Volfe. who has beE'n in Internal Reycnue far longer
than 1, to supplement my amwer.
Our special ag-ents are frequentlv called in bv revenue agents in our
audit aetivitv. or bv reYenue officers in our colle'etion activity. when the
re"enue ageilt or l:e"enue officPl' finds reason to belieYE'o in the course
of his audit inycstirration or his collection inYestigation. that fraud
has been committed. This accounts for tlw ,QTPater part of investigations
madp b:v our special a[!'ents in our Intelligence Division.
Some cases. hmYE'ver. arise bv reason of communications that we
receive. from informants or othenvise. ,,'hich indicate that tax evasion
has been commiUe(l. and that the chances of fraud warrant the expenditure
of time and money in an im'estigation. Some eases are developed
12
hy the Intelllgence DiyislOn. flcting as snell. after it has collected information
tpHding to estahlish the likelihood of tax eyasion. And. of
i'ourse. onr peoplp also 1york c]osply \yitll tI\(' J)epartnlPllt of .Justice
J:t1YVI'1'';, PlH] otll('1' agencips. in tllP Stl'ikp Fo!'l·cs. of which we now
have 17 aronn([ the ('Olin! n.'. \\1:<.sp acti\,irips aI'(' largely dilw'ted
town rrl organizpd crime.
The ([r:cision 1vOtdd he madc as to whet her to go forward with an
inn·sr.igat.ion on a decpn(ralizhl basi" in onr (list rids hv onr TIt'lrl managG/,";,
'not nec'essarily the di\,ision chief or the lmlll~'h chief or the
group manager. as lundcl'slHnd it. :\O\Y, ~lr. 'Yolfe. 1yonld you care
to snpplement that answer?
.:vfr. "TOLFE. }1r. Towe·!'. HO IH'rcent of the 1york that our Intellig"]
1('" Diyisioll pngagps ill comes fl'()lll rdel'ra Is. eitlH'l' from the Audit
Divisioll of the Internal Renl'1le Senicp or tll(' Collection Di\'isioll.
Tlie rest of it comps through informants or tllrongh information that
our spr~rial agents ~rather in theil' johs.
EYery investi~tatioll mllst \w flppl'O\'l'd by the group manager of
tlw grouI) to \yhich the special ng-ent is assi~l11f'd. ,Ye han> very strict
I'nl(',.; concerning tllP use of flny investigative techniquf's. They must
not (mly he legal but they must have the approval of tlw rhief of
'lw intf'lligenc(' division of that distrirt.
All of tlll'Sf: people nre then nndel' tlw direct control of the District
1lilector of the district to whirh thev are assi'!Jled. Thev also are
pl'ovide2 with very good manual instructions. 'In other ~yords. the
manual instructions nnder \,hieh tlH~,\' arr to operate are prepared
ll\'l'l' in 'Yashingioll.
They am also provided with handbooks, which are distributed
from here in ·Washington. outlining the procedmes which they are
to follow. So those are. in general. the means by which we operate.
Senator TOWER. Thank yon.
Mr. Alexander, who sets thr limits for determining 1,hrn to employ
:mdf,!,rovrr agents and when to aecept and 11S(' information from an
inrol'lnant? For examplp, our committee has been told that unrlerrover
agents at a meeting of tax protestors listened to the protestors' legal
defense plans and then passpd that information on to the F.s. attorneY~
s office.
This wonld appear to me to be an abuse of IRS intelligence eanability.
I would appreciate yonI' comment on the propriety of tactics of
that kino.
}fr. ALEXAXDER. I agTf'P with your conclusion. Spnator Tower. I do
nnt think that IRS nmlerconT !1,!!.'ents shonlrl interfere 1yith the right
(If anynne to coullse1. ,'\nd the illl'ic1ent that YOU mentioned is of
eonsicif'l'ahIe concern to me. .
",Ye han> tightened np materially on nIP use of ull(lercover agents.
1Vr now have. T h('lieve. onl,\' two nnrlercon>r agents in the country
at this particl11ar time doillg this. And we haye called for strict controls
and drcisions at tlw top level before further undercm'er projects
mnv ))(' nndertaken.
Senator TOWER. Mr. Alexander. the datil bllnk of IRS contains a
2:reat ileal or information in addit;ol1 to the tax retllrn rlorumt'nts
that art' supplied bv the taxpayrrs. Why is so mnrh nc1ditional infoI'mntion
llPf'pSsary if no qnestion has hpen raised concerning rptnnlS
fild by a giypn individnal?
13
:\fr. _\LE:\.A~])ER. \\\. need to transcrihe nnr1 retain a vast amount
of information in Oli!' compntp]' centers in order to do our job of
sl'eing' to it that peoplE' pay tlle ('Ol'l'pet tax. no IIl0rp. no less, that we
kno'l' ho'l' l),uch j]]I'~" pay. that IYP b10'1' \yhat tllr· pssP11tial charactpristi<'
s of thpir retlU'll are. so tlwt \Ie "lUI spleet t]I(' returns for
i1ll(lit on an ohjpctin' ba"is. \"hieh arc most like].'" to nped audit.
Am] so if SOl1\('O!W finds he or shp has o\,prlooked sOlllething and
111es a claim for refulld \"illl LIS at a latpr til1l('. m' an' a])le to process
that claim: \\"],el'(, if SOllll'OlH' at a late!' timp decides to use the ]}('nefits
of the income an'ntginl.r provisions, for example. WP are able to deter111ine
from haek years whnl that j)prfion's rppOItrd income 'was, in
order to test to make St1n~ that thnt 1wrso11 is pntitled to thp benefit
\\hir'h is being "['liJII('(1. ~"() ,yp IIp('d to rNain in our data hanks. and
nse n'fV ('arpin]]\', infornwtion from tax rptnrns. Bnt hI' no means
does th~s inforl11l1tion tllat WI.' transrrillP rontain tIl(' pnt'ire mas" of
information rontainpd on an indiyidnal's tax rC'tUl·Jl.
In the first p]arE'. it is not ('ost dfprtiye to transrrilll' and retain
that ,yhich is n01 strictly n('('l'ssnry. am] srconel. IY(' want to maintain
minimum information oil computr:rs. ltaving in mind both the bpnefits
of computers and also the risk of eornpllters.
Nmy. ,ye do have in 0111' i]1te]]i~'encp gatherillp" a compnterized
svstem \,hich we instid1ec1 ill 1\17;). modifierl in 1\174-. and curtailed
e'arJier this ~"ear. and now 1 aIll making surp tlwt it is limited to
matters which shou lrl properly hr mainta ined on a compnter. That
is a different system from wh8t I hw\"e jnst dC'srrilw(1. Senator Tower.
Senator TOWER. :\fr, Alexander. is there periodiC' destruction of
information other than thp retnrns of taxpayerfi ~ Fol' those taxpayers
whose retul'ns haye not bepn called into 'luestion, do you periodically
destroy this information ~
Mr. ALEXAXDF.H. Yes. In' do. sir.
Senator TOWEll, Thank '1'011, :\11', Alexander, :\fr. Chairman.
The CHAIR:lL\X. Thank 'vou, Senator TO'Iwr. Senator :\1ondale?
Senator MO~nALE. Thank yon YE'rv much. :\fr. Chairman.
Commission!'r. may I first' say that I find your attitudC' and ap·
proach very. ypry refreshing. I wish to say that.
As I look at this problem that ~"ou \wre confronted ,Yith when you
assumed office. what yon ,vert' spring:. rrpparently, was one pa;'t of .a
much broader program to haw a secret Gowrlllnrnt countermtelhgence
capability on persons ~llld organilatiOlls ~hought to be dangerous
on some ill-defined Lasis ra H!!i Illl' fI'Olli war ll11rl'st anel civil rights
demonstrations. to rock festi\'als. just flhout eH'rything. In any event,
t'Jw net s\\'ept prad;l'f!1h" pH'J'ynnp.•Joseph Alsop to Rally Quinn.
That is ,yhat vou f')1\wl whell YOU camr in as Commissi011PI' of
Internal Revrnile. Is that correct'?
Mr. ALEX,\XPEH. I ,nmld not \,ant to make it that s,wrping. Senator
::\fondnlc, TIl(' S n l'cinl Sl'T'Yicf' Rtaff im"olvl'd only eight ]wonle in the
IRS. It did mlled informatinn on more than 11.000 inc1i\"iduals and
organizations. It did not conduct audits. It di,] send information out
to the field for andit and collertion action. Rut I don't think it should
he considered in aliI' wav illustmtiw of the Service as a I\'holr.
I think the Servicp heM up well in resisting that.
Srnrttor 11o~]).ILE. I dir] llot ,,"ant to SllQ"Q"PSt that I wrtS gettinQ" at
something rlsp. ~fy question was a broader one direeted not just at
GO-877 0 - '16 - 2
14
IRS but at other agencies "'hich may haye bpen inyoh'ed directly a,nd
indirectly with this counterintelligence capabilit), deyeloped in YUl'ious
agencies in the Federal Goyernment, of which ,w haye seen some examples
herp.
Mr. AU:XAXIlEH. Yes; I think there was a svndrome at that time. I
would like to add that I greatly appreciate what you han' said when
you opened your question,.;. There are some. apparently highly vocal,
that disagree flatly with your statement of apprcJ"al of what I haye
been trying to do.
Senator )IOXIHLE. X0 doubt. I wOllld like to rl'tul'll to that point J
raised in my first qllestion~ because I think it is central to understanding
what it was that you were dealing with and thl' more fundamental
issues that this committl'e IllllSt deal with.
I think what you saw "'as just a part of a broader~ more basic project
by which various agencies~the FBI, the CIA~ and eyen the 'White
House~decided that the criminal laws ,veren~t adpquate to deal with
the threat to this nation and that therefore they needed a new tactic.
That tactic was really borrowed from our tactics oyerseas against
mainly Communist threats, called counterintelligence. "Tithout any
prob1l;ble cause to believe a crime was being committed and taxes being
unpaid, we would throw out a huge net: we would open mail. even
though we did not know what was in it, and intercept comIllunications
with no grounds, thinking we might find something. lYe would send
out Internal Revenue agents to look at people's taxes. not because we
thought they weren't paying taxes. but because we might find out something.
It is that ronrept of counterintelligence turned in on the American
people which I think you had to deal with. That was a piece of it,
because the IRS was getting these requests. as I understand it. from the
FBI. from the CL\., and even from the White House, to investigate
these people~ and the question is why. since it was unrelated in most
cases to taxes. The answer is because of a fundamental philosophy that
the only way to protect this country was to start spying on a broad
cross-section of Americans thought to he dangerous by someone somewhere
in the bureaucracy without legal authority. without definition.
without any restraints and laws. Is that accurate ~
}[r. ALExAxDER. There certainly was a feeling of that kind, Senator
:\fondale. And this mav well have' been a cause. 'if not the cause. of such
thing'S as the Special Service Staff. Some Derceived a need to accomplish
a particular result. fill a void in the law. a voio in capabilitv to
enforce a law. And IRS is a convenirut vehicle. in the eves of some,
to fill the voio. If a law is absent that someone "'i5hes' ,\'('re there,
there is always a tax law. If the people ,,'ere absent that someone wishes
were there, there are always the tax people.
Senator )IoXDALE. All right. Xmy 00 you agree with me that t}lese
tendencies of ill-defined counterintelligence activities. secretlv pursued,
without legal restraints. constitute tendencies that could destroy
American oemocracv. if unrestrained?
:\11'. ALExAxDER. If un1'e<;trained. yes.
Senator )fmmALE. So this is a very serious and profound matter of
continuing a vital. nninhibited democracy.
)[1'. ALEXAXDER. It is.
The CHAIRMAX. Senator :\fondale. mav I just sav flt that point it
has iust been called to my attention. this is how the FBI grepted the
IRS program we are discussing. I have a memorandum here that was
15
written by .Jlr. Brpnllllll, directed to .Jlr. Sullivan in which he made
the follm~·ing comment as to the FBI's reaction [e~hibit 2 ' ]' "A concentrated
program of this nature. if properly implemented, should
deal a blow to dissident elements. This action is long overdue." That
just underscores the point that Senator .Jlondale made. The purpose
had nothing to do with taxes. The purpose was to use a tax collecting
agency to strike, in the words of Mr. Brennan, "a blow to dissident
elements."
Senator .JfOXDALE. Kow, happily, what we have here is a Comm~ssioner-
and I hear this from an sources-who once again believes m
the law and resisting these kinds of pressures. But can you be sure that
these pressures have, in fact, been frustrated completely under your
administration, and is there anything to guarantee that it won't happen
again ~
Fundamentally. I guess what we are up against is this: If you have
a President and people around who are paranoid enough to believe
that we need this illegal, spooky capability of spying on the American
people. how do agencies such as yours exist r Hmv do you say no to
a President?
Mr. ALEXAXDER. I would suppose with extreme difficulty and some
trepidation. Luckily. I have not had to say no to a President because
I have not been asked to do anything illegal and I won't be by President
Ford.
Now you asked several questions--
Senator .JloxDAu:. Let us just take President A and President Band
Commissioner B 10 years from now. I don't want to get into personalities.
but we have seen so much evidence of orders going down directing
subordinate commissioners and officials and the rest to do things
that are illegal and very, very dangerous. I think one of the questions
,ve have to answer. if possible. is hmv do you say no to that kind of
pressure emanating from the 'White House and from the highest officials
in American Government?
.JIr. ALEXAXDER. You have to be ready to do what I have stated several
times that I would do. And what I absolutely would do. If I were
asked to do anything improper, I would refuse to do it. The requester
then would have two choices. One. to agree with my refusal. The other,
to remove me from office. Xow. I don't think that future commissioners
should be subject to this particular difficulty. Particularly when a commissioner
is new in office, the commissioner may think of all the great
things that he or she is going to achieve and be concerned about the
ability to stand up to an improper request. I think future commissioners,
as I have testified before. should have 5-year terms of office.
Xow you asked me whether I am sure that the attitudes and actions
that ,ve have been discussing this morning have pervaded the entire
IRS. I am not. I wish I could give that assurance, I cannot.
Senator .JloxDALE. Thank you. Thank you. Mr. Chairman.
The CIIAIR~L\.X.Thank you, Senator Mondale.
}Ir. SMOTHERS. Mr. Chairman, Senator Goldwater has an opening
statement and some questions [see questions. p. 104] he would like submitted
for the record. .
The CHAIRl\IAN. Without objection it is so ordered.
1 See p. 42.
16
Sl'ATEMEKT OF SE~ATOR BARRY GOLDWATER
The Internal Revenue Service recein's more information from more people
ahont more llrjvate affairs than any other agenr'y in the Unitpd States
Government.
And therpfore. it has in its hands trPlllPndous pO\ver to harass and intimidate
American citizens,
It seems that nearly p\'erybo()y tlla l files a tax rpturn witll the IRS ('an aSSlllnp
tllat someone plsp \vill have a('f'ess to it. Tax returns llHn' sho\\'n up in the hands
of insurance adjustprs. private (lpte(·!ivps. county derk offi(o"s aIHI pven Illl\'e ht>pn
llrinted in npwspapers,
Even though leaks that allow thesp rptllrns to he ()istrill1lted aroulHl nHI~' not
be the fault of tlw Internal ReVel1l1e, the ri>;ht of the taxpayer to prinl<'Y is hein>;
eroded because of it. In fad. th" IRS is becoming a puhliC' lending- Iihrary of
prh'a te information.
Out of 81 million tax returns filed in 197-!. alJout 69 million wprp furnished to
State autllorities in 31' Statps, As surprising- as tllpse numlJP!'s sound, this is a
routine practice and it \l'{l1lld lIe possihle for all 1'1 million rpturns to hp availahle
for inspection if the remaining 12 Statps ",antt'll them,
TheS(, returns IUlve hpen provided to Statp goverlllllents with little or no control
o;'er the information. And, this may aecount for speculation oyer the ~-ears that
tax information ha~ !Jpen released during- state\vide political ealllpaiglls.
En'll the jnry proeess has not h(,,-,n expm)Jt from IRS meddling. .Tur()r~' tax
returns ha"e heen audile(!.
Combine the power of the IRS with modern cOlllputer te('hnolog~' and the door
is open to wholesale abusE' of privaey and thp humbling of prond and lwnest
citizens.
Our tax system is !Ja~ed upon voluntary cooperation, 'rhat cooperation will
erode and fade a",a~', if the unconCPrtlPl! lmreaucrat uses his mightr computer
to harass our friends and neigh!Jors,
The CHAIRMAX. Thank you. Mr. Smothers.
Senator ~fathias is next: .
Senator ~fATHIAS. Thank you, Mr. Chairman.
Commissioner, I think ,,'e ought to try and get the re('ord in as
accurate shape as we ('an here. 'When you abolished the SSS. had you
become aware of the circumstances under ,,'hich it was created?
~Ir. ALEXAXDER. X(): I was awaI'(' of sOllie of the cir('mnstances. but
by no means awar£' of the circumstances as later developed and the
details as later developed.
Senator MATHIAS. Had you been told that Mr. Huston, who
appeared earlier before. this ('ommittee. had been critical of the IRS
in June of 1969 because it was not being active enough in investigating
some of the organizations that were later investigated.
Mr. ALEXAXDF..R. I think I heard something about the Huston plan,
and of course Mr. Dean had testified.
Senator MATHIAS. Of course, this interest on the part or Mr. Huston
predated the Huston plan by several years. ,Vere YOI\ also aware
that the Senate Permanent Subcommittee on Investigations had
expressed a great interest in the IRS files on activist organizations and
ha~ been very critical of the IRS because it was not doing enough in
thIS area?
Mr. ALEXX~\DER. Yes; I was generally aware of that.
Senator MATHIAS. And that in fact the SSS was established on the
very day that ~fr. Green testified brfore the Senate Permanent Subcommittee
on Investigations and after he had been roasted by the
committee because, the IRS hadn't real1y be"n active enough.
~fr. ALEX,\XnER. T think I l(>arned tluit later. Rut I am quite concerned
about pressures from all sides.
17
Senator MATHIAS. ",Vell I think you ought to be concerned by pressure
from all sides. I think the "'hole purpose of this effort that we
are making nm" is to insulate the IRS and other agencies from those
pressures. The pressures can come from the Congress. They did come
from the Congress in HHl9 as well as from the 'White House. And I
think, in considering what "'C aro going to recommend to the Senate
and to thr House in the way of remedial legislation, we ought to
remember that Congress itself was contributing pressure in the .wrong
direction in 1968 and 1969. So we have to provide against mIstakes
that we and our successors "'ill make. as ,w11 as against mistakes that
future Presidents may make, in trying to put the IRS and other
agrncies to improper uses.
There has been some conversation here this morning about informants.
And I wonder if vou could tell us exactly how you use informants
for intelligence purposes. Do you still pay 'them It bounty? .
~fr. ALExAxm~R. I would hesitate to use the word bounty, but sectlon
7623 of the Internal Revenue Code docs provide for IRS paying for
information that would aid the tax system. There are several types
of informants. There are those who have grudges and want to do something
about thrm and have no idea of monetary reward. There are
those who supply information in a particular instance and would not
only like to satisfy whatever grudge they may have but would like to
gain a re"'ard as well.
Senator MATHIAS. It is almost as sweet, not quite but almost as
sweet, as a tax refund for yourself if you can be sure your neighbor is
paying as much as you are. is that not right?
~fr. ALEXAXIlER. Tsuppose it ,,,auld be. Sweetness is, of course, in the
eyes of the beholder.
Senator JfATHIAS. Bittersweet.
Mr. ALEXAXDER. It may br bittrrsweet to the neighbor. but some are
eoncerned not only about what they pay but about what others pay.
And the la,,, does provide-although we do not make lJIass efforts to
encourage informants-for pa~'m('nts for information of "alue in tax
administration. And finally 'H' get to the third type of informant.
And that is the Sarah .Jane Moore type. if I may use a name that has
been in the papers lately. a paid informant. an informant regularly
furnishing information 'to a law enforcement agency and regularly
being paid for that information.
This is, T am told. a very effective law enforcement technique and
a terhnique wry widrly used. It is also a wry dangerous technique
and a techni'lue that must be wry carefully controlled.
Senator MATTJI.\S. That brings me to tIl(' question of control. Is this
controlled in ll.rcordance with a crntralized system or does each
reg-ional office, area office. control the informants, set up the standard
of payments. and generally set out the program?
Mr. ALEXANDER. This last type of informant. the confidential informant
seeking payment. frequently on a reasonably regular basis,
for information fllI'nishrd to us. is now rontrolled in the national
office. Mr. Wolfe controls this. 'Ye have instituted tight controls in the
IRS. 'Ye did not han' these controls before, Senator Mathias, and thig
has accounted for some of our problems.
Senator ~L\TIII.\S. It was very decentralized in the past?
18
Mr. ALExA~m:R. Well, decentralized if you will, uncontrolled if
you will. I am not certain that the question of control is governed by
centralization versus decmtralization. ,Ve operate on a decentralized'
basis as, indeed, we think we must. Our job is largely tax administration,
so we are unlike law enforcement agencies whose jobs are
strictly law enforcement. Law enforcement is ancillary to our major
job. Our major job, as we see iL can best be performed free of political
influences. performed objectively and efficiently. on a decentralized
basis. And we have had the same general relationships, the same general
system since, 1'952.
Law enforcement activities are also decentralized with certain exceptions.
The narcotics program, for example, was controlled out of
our national office. So. it was centralized rather than decentralized.
That program was not a good program for the IRS, and we have discontinued
it as such.
Senator MATHIAS. I think yon should. It was a wise move to discontinue
it because thif': whole area, the use of informants, is, it seems
to me. a very dangerous kind of area to operate in. and one that has
side effects that can be very dangerous, far more dangerous than the
information that an informant may produce.
Let me ask you this: In your Veal' or two as Commissioner. have
you ever been faced with a decision in this area of investigation, this
area of intelligence, the area of confidentiality of returns, in which
you were puzzled as to know what was the right thing to do, what
was the right decision for you to make; and that you had recourse
to the law and could not find the answer or any guidance as to what
was right?
Mr. ALEXAXDER. Yes. There have been some tough calls.
Senator MATHIAS. Could you tell this committee, either now or
perhaps you might like to submit it later in a memorandum, what
some of those areas of decision are in which you felt the law did
not give you the proper support, the proper guidance; which you
felt the Congress had neglected to provide statutory guidelines for
the proper conduct of the IRS?
Mr. ALEXANDER. I would like to think about that question, Senator
Mathias. It seems to me generally that the law as it exists today
provides the mechanism for proper and effective law enforcement,
and at the same time, for responsible and responsive law enforcement.
One of our problems in the IRS has been that in certain isolated
instances the controls that then existed were not respected, or
controls were lacking.
We are attempting at this time, and have been attempting this
year, to institute new and considerably stricter controls in a number
of areas, particularly the one that concerns you and concerns us, confidential
informants. Now the institution of controls, strict controls,
where controls did not previously exist, is a disturbing, unsettled
thing to people. And the reaction of certain of those people has been
very clear in the media this last weekend.
We also, the Chief Counsel and I, are reviewing and have revised
a prior policy of the service toward illegal evidence; we do not believe
that we have any business using it. This is unsettling and disturbing
to some.
19
Senator ~L\TIIL\S. I thank YOU. Commissioner. I think I would. for
one. yalue any thoughts you' haYe in order to expand on this thing.
I think you should impose controls. eyen in the absence of statutory
direction. But I do not think the Congress can pass the buck to you, and
I do not think it is a discharge of our responsibility for the Congress
to pass the buck to you, to take all of the heat on the proper regulation
of other agencies. It might work for Commissioner Alexander.
It might not work with another commissioner, some years hence.
The Congress has a duty to perform and I do not think we can lay
it all on your shoulders.
~Ir. ALEXAXDER. I am grateful to yOll for that statement.
The CII.\TR:\L\X. ",Ye certainly cannot.
Senator Huddleston? .
Senator H"('DDLESTOX. Thank vou. ~Ir. Chairman.
I think that we could agree "ith the statements that have been
expressed by Senator Mathias. that cPrtainly the IRS is not totally
at fault with "'hatever abuses may have occurred. However, I think
we have to accept the fact that the IRS does probably gather more
information on more Americans than any other agency. Certainly it
is a very important aspect of this committee's work in achieving its
objective. Probahly more than any other agency. it, like Caesar's wife,
ought to be above reproach. It is the one area of law enforcement
\vhere the fundamental right of a citizen to be considered innocent
until proven guilty is reversed. He generally is considered guilty until
he can prove himself innocent when a charge is brought.
So I do not think that we can stress too much the necessitv for a
high caliber operation of great integrity when we talk about the IRS.
And that brings me to exploring a little further another area that
Senator ~Iathias was touching upon, and that is the use of informants-
whether or not this might cause some substantial infringement
upon citizens' rights, the rights of privacy and other constitutional
rights. I recalL for instance, the operation in Miami that is generally
referred to as Operation Leprauchaun where a special agent
there had a number of informants working under him. Those informants
also had informants working under them that the special
agent did not even know. He certainly could not be aware of the total
types of operations that they were engaged in, in order to get the information.
Thev talked about it on various occasions. At one time a
woman informant suggested to the agent that she could use her sexual
prowess in order to secure certain information. He maintains that he
did not suggest to her that she should do this. But at the same time, he
did not suggest that she not do this. She could use whatever means that
she might want to employ. Xow it seems to me that if an informant
that is directed by an agent and paid by the Federal Government
becomes an agent of the Government. an arm of the IRS, and to
whatever extent they abridge rights and freedoms, then the IRS is
abridging rights and freedoms.
And I do not know how you can operate without more control than
was demonstrated by the operation, for instance, in Miami; when an
agent does not eYen know who the informants are, where there at least
appeared to be regular payments rather than payments just for specific
information, Xo\\' 'I']llit lla'-; lJ"e!l (1(,,1<' and IS h·ilIg dOJk ilo\Y to ilJl1>
1'0\'(' tllat kind of :Oltllation 'I
~\Ir. Au;x\), lIEU. Senator Hl1\ld \"stOll. \\'P ha Y(' im-t ir\11 f,~d ne,,' eOlltl'
01s Oll payJllt'nts to cOlltldl'ntial infol'lJJall1.~ :tJ\fl 1m SIKh mutter!" a,,:
Operation Lepl'('challn---and Operation LqJ!'l'chaUll is lIOt typical of
the wav the IHS ~oes ahout itf' hmillc>ss or \\pnt ahout its business.
Spna'to!' HrnDL;;f;TO:\. Hut Itl!' u:,e of illfol'lllants is Hot Ullllsual.
Mr..\LEXA:\IlEH. It sho\\'e([ a lark of C'olltrol a1l(1 \I'p hayp instituted
ne\\' controls. IVe have ca11eel ior the highp"t level of r('view of tllP
USe of (:ontidential illfoJ'lllants, 1""' an' l'(,\'iewing the cuntrols that
other ag-enci'~" han> he~'n Iisillg i,)!' some time \\,;111 l('speci to codidential
illfonllaJit~. And. ,.,!rangdy elloll;'!'!l. a "llIt I,as hrollg:ht against
me for trying to find ont tl; what ('.':tpI11 "'P ,ypre Iising eontl(lential
;llfOl'ltl<tllts and to what extent we Wl'l'e p:'yillg them and for what
pJIl'poses. This Sllit has Sll\ce been dismissed,
:\ow. Mr. IVolfe, OUI' Assistant COlllllli,.,siorwl' for COlJlp1ianee~ call
reSpOl1(] in more d..tail 111an I about tite conllols that we now have in
place and I wish he ,Yould supplement lily answer
JIl'. TrOLl'£:. Senatol' HlIddlestoIl. what we haw done i" to cancel rhe
authority of anybody in tlH' iiehll;, pay a eOllfirlclltia l illl'ormant. All~'
payments to any 'iJllfidelltial informant Wllst be per,.,ona11y approved
by me with full details of what information we tiff' paying for~ signed
personalty by the Uegion,tl CO\JIJuissionel' of 1he rrgwll frOln which
the request comes. Furlhermore. our Instrndions are now that we will
only pay for information, lYe "i11not permit 0111' people to take an
informant and <lirect what that illformanr is lIJ do. 1f that ll1fOrmflnl
has information of tax sig-niticallce--and I strpss that- of tax significanee--
then the fiel(l is ppl'lllitled to COllie 10111.1 oilier with the request
that it be pel'mittl"l to pay foJ' that il1fornJatj"JI. Only then lyill
I approve any payment fol' any information.
Senator IIFIJDLESTOS. Do yO\) make any etfon to dr:terllline what
method mig-ht he used Iiy that infonnam to SPCUl'l tlwt information?
:M:r. '\YOLFE. OUI' in~trlldions aLso ])ro\i;lp tllnt IiO informant is to
obtain information iJ1egallv, ~ OIY. the use of ill fonllants. as you have
so well pointed Ollt, can'he (iangel'oJls. lYe (10 /lor aI',\'a.vs !Olo,,:when we
are getting mf'ollJHltillll rxaet]y ho\\- it has IJh'Ji o;Jlainecl. ,Ye do ask
0111' peoph jr) try to (!etennille alII' tilile all 'tnfOl'JlIanl has information-
you an' Hot ah'ay," ;';ill'e. H01' ('ll1\ you Ill' "l1rc, lwulllse you don't
know whether hI' will tell vo\( tlw tmrll or IJUr -II'hether this information
'was Iega Ily obtained.
So we do ask our people to make reawnaL1" inquiry, but we do thar
particularly to sfle whetlwr it liolatps tllt> ljglJi" of tlH' taxI,ayer
invoh'ed.
Senator HuUDLESTOS. That is a departure from the prl'yious policy.
:Mr. .Au:x.',~m'R, It certainly is.
Senator H rDDLESTO':-;, XOIl': ~n ihis matter (Jf inffiT'matioll that VOIl
~!l 1'1' tr , otlwl' a2'erJCles foJ' "l;ieb r IInderstand vou l'l'allv do not haw
nl11c11 diseretion. The statnte sets up the provision fO'1' that undu
regulations issllpd by the Pn'sident. Is tbnt ('\}lTect?
}Ir. ALEXA"DER. That is correct.
21
Sellator I-IFDIJLESTO::\. Bnt it dor~ indicate tlw t ihe FDI. for jnstance,
when reqnestin{! information. ~!JollJd J)i' slwcifie as to what the purpose
is. Is that correct?
}Ir. ALEXXXDEH. Yes.
SPllatOl' HrvDLEsTO:-;. The fnei is they 11ave not been ;.;pecific.
}fr. ~\U:X,\:\TH.H. Yes: the specinl'ity is Hot as g>'ent as it might be.
Senator HnmLE"To"..\8 a matter of fatl. OJ] the reqnests that were
g-in'll at lea~t prin]' to April of thj~ ypar. \vhen I nmlerstand new
reg-nlations \wnt into rfT'ect. it wonld hE' viltnal1y imp08sible for you
01' any COllllllisslonn to dptt'l'IJlilw hom the lemlPst by. for instance,
tIl(' F'nT. \vhether 1)1' not it did COTHply. ' .
}Ir. )\LEX.\ XDEn. Yps; that i" a fa ir statement. T centralized thesr
l'P<]nests in my- office hrCHllSe wp don't want allY tax information going
from the back door to anybod.v else. othpr flg-eneies 01' the ,Vhite House,
et cdera. But it is H'ry difficnIt to do Jl1on~ than jnst look at the face of
thr request. _\nc1 if yOll "ec a nanH' on t hf' n'qne~t thai 11appens to be
n Yf'J'y lik"ly politica1 opponent of thr ppJ'~on making the request, then
that natnrally aT'onsrs f'uriosity. and that J'rqncst dOP" not go anywhere
\1ntil we are CPl'taill it's propel'.
Senator HrDDLEsTOX. Ent. in other words. when you snpplied the
FBI with a list. for im~tancE\ of contrillUtors to a certain rivil rights
organization. yon had no knowledge that they might have flt the time
proposed to takr that list of C'0!:triJmtors to coni!'!", a fraudulent
letter with the signaturp of the indiyid.nal head of this organization all
"tationery that they' hacl secured surrep1ition~ly from this organization.
and mail ont a lrtter to that list of I'ontriblltors designecl to disconrage
them from fmther rontribntions. further participation?
~Ir. ALEXAXDER. Absolutely none. lYe have no knowledge of that.
Senator HmmLEsTo". If you thonght that action was going to
haPren, \vhat would YOllr reaction have been to releasin{! that list?
~Ir. ALExA~nER. 'Well. in the bllre~mcracy, the last one to sign off
generally has the upper hand., all things considered. So. I have an
idea that a requl'st like that would. find its way to the bottom of the
pile and have great difficulty in emerging to the top.
Senator I-h:.'nnLEsTOx. But it is a possibility? It was a suggestion on
the part of a responsible member of the other agency. a strong enough
suggestion. in fact. to be put into writing as a recommendation that
this he done. a memo rE'xhibit :) 1J of ,,'hieh we happl'l1 to hal'e in the
posspssioll of the C'omn1ittee.
1fr. ALEXAXDER. The law needs tightening up, Senator Huddleston,
hadly.
Wie need two thin{!s. ,VP need good 1a \\'s. and we need good people.
Senator Hl'DDLBsTox. 1fr. Alexand.er. a number of methods were
used by the IRS to try to pinpoint areas \\'here tax ension is a way OT
Efr. a normal thing. ancl s0!nrthing that ought to be rhecked. This enables
your agency to pv'[;;- ont groups and do a broad-based
im'estigation.
For instance. in one district. at len:ot. there was an rtfort made to
C'llrrk tIll' fiYe top-pledecl officials in E'\'ery connty. just as a routinE'
thing, even though tlwl'e \,as no indication that there had been any
1 See p. 45.
22
kind of corruption, any kind of tax evasion there. Another group went
to a fight of the world heavyweight champion, )Iohammed Ali-who,
I am glad to say is still the ,,'orId heavy,veight champ-in Atlanta, Ga.
and took down the license numbers of all of those who attended. lind
conducted a surveyof their returns. 1Ve have already mentioned the
ideological groups that haw !wen routinely checked.
First of all, among these kinds of checks. what is the percentage of
returns of those individuals that are actuallv checked?
Mr. ALEXAXDER. That are actually checked in this kind of thing?
Senator HUODLESTOX. Right. After they have been spotlighted or
pinpointed.
Mr. ALEXAXDER. I don't know.
Senator HUDDLESTOX. 'Would it be 50 percent! We have heard evidence
that perhaps 50 percent of them would actually be checked.
Mr. ALEXANDER. I'm going to ask Mr. Bates or ~Ir. 1Volfe or )Ir.
Williams whether they know. I will dig that out and, to the extent
we have anything, Senator, I will supply it for the record.
But I would like to comment on this method of using our resources.
I think checking license plates is an ineffective way to use resources.
Senator HUDDLESTOK. They checked go-go dancers, incidentally, too.
Mr. ALExAxDER. Go-go dancers? I didn't know there was a special
concern as to go-go dancers. Perhaps we found tax evasion among that
group.
But this sort of thing is not the best way to use our people and our
money and our powers. It may be fun and games to the person-Senator
HUDDLESTOX. It might be a little bit more serious than fun
and games.
Mr. ALExAxDER. I agree with you. Some may consider it fun and
games; I consider it verv serious. We have a problem not only of sound
and effective and proper use of resources, but ,,'e have a problem of
living up to the Caesar's wife stricture that people should expect from
an agency with the vast powers, people, and information that we have.
Senator HUDDLESTOX. The fact is that if our figures are right, some
50 percent of people who are targeted like this have their returns inspected.
That means. for those who happen to get on the list because
somebody disagrees with them at the 1Vhite House or the FBI, chances
are 25 times better than for the normal citizen that his tax returns will
be audited. And he will be at least harassed to that extent by the Federal
agency.
And, to go one step further. when you roll all of this together-the
ideological effort. the blanket provisions of picking out politicians,
office-holders or whatever-what has to emerge is an agency here that
has a great propensity and a great ability to conduct a very strong,
thought-policing effort in this country. I think this is where the dangers
lie, in the misuse of the kind of power that resides in the IRS.
Thank you, )11'. Chairman.
The CHAIRl\fAX. Thank you very much. Senator.
Our next member to question is Senator Schweiker.
Senator SCHWEIKER. Thank you, )11'. Chairman.
Commissioner A.lexander, you have thrown this committee off balance
a bit and to some extent caused us some difficulh-, because the
usual scenario that this committee follows is. first. we~ have to fight
tooth and nail to get any document we can place our hands on. Sec23
and, ,ye are told we do not have a right to see the docnments anyway.
Third, ,ye have a bottleneck, that the staff' is not available to provide
us with that information, and we have to wait a couple more weeks
to bring some staffers in. Xext, they argue that under the Constitution,
the Rill of Rights really does not cover the points that we are trying
to raise in their testimony. After that. they insist that no abuses
existed; but whatever occurred, they stopped doing several years ago.
And ,vhere you throw us off balance is, you sort of reversed that
scenario all along the way and made it a little bit more difficult for us
to operate, because you have given us documents right from the start.
Even over this weekend, I understand there were some 50 people working
in your offices to give us information for these hearings.
In addition, you are telling us what the Rill of Rights means, instead
of our telling you, which is a very pleasant change of pace. And
also. you acknowledge that abuses have existed, and, I think more impressive
than that, ~'our record. beginning in 197a, began with correcting
some of those abuses. which no doubt has gotten you into some of
the controversy that you have gotten into.
So it is just a pleasant surprise to run into these kinds of scenarios
instead of the kind we are used to. And, I think, to keep the record
straight and to be objective. our committee should also make that a
matter of record.
I would like, Commissioner, to go into a couple of things that were
happening before you came into office. One of them that disturbed me
particularly-which, again, your office very helpfully supplied information
on-was a project called Operation :\fercury, where, in essence,
any individual who submitted a money order for over $1,000 through
"Western Union, their name was given over, as well as any person who
submitted a money order over $5.000 in the 1969 to 1972 time frame.
As I understand, the result was that anyone who submitted an order,
particularly over $5,000, probably had his tax status looked into in
some degree.
'Would that be a fair sum-up. or maybe. you can elaborate anything
you know about it. even though I know it was before your time.
:\fr. ALExAxDER. I think that is a fair summary of that project, as I
understand it. And I don't have a high regard for that project for two
reasons.
The first goes to the utilization of resourceS. This sort of dragnet
approach would seem questionable at best. A second goes to the problem
that :\fr. 'Volfe and I have been discussing with you this morning,
and that is the question of illegal, or illegally acquired or improperly
acquired, evidence.
Senator SCHWEIKER. And one other project that I would just particularly
like to cite-and thislloes back probably into the late 1960's
time frame. The CIA gave the IRS names of individuals who recently
traveled to Vietnam, the implication being that their tax returns
would be audited.
I wonder if you could tell us what your present policy is in this
area at all. not necessarily Vietnam, but that kind of technique or anything
else you might want to say.
Mr. ALEXAXDER. That technique isn't a good technique. People
should be audited and "elected for audit on an objectiye basis without
regard to their travel. If they attempted to deduct the cost of going to
24
Vie.tnam. then we would be interested in examininO' the validitv of that ' ~ .
claIm. Rut we are not interested in examining people b('C'ause of their
\'iews with respect to Vietnam or anything else.
Senator SOIWEIKEH. Commission('l", on(' of the most frightening aspects.
I think. of the a\\'t'SOIlW pO\Yer that yom (lepartlllPnt has. we
have touched on in a llulllbel' of our questions. "'e have actuall.y seen
it abused. 'Ye are going to come back with a number of hearings on
that with tIl<' FBI and their COIKTELPRO activities. Again. this is
something preceding you.
But I think the larger question is how to keep political influence and
politi('al purposes out of any IRS aetions 01' anclits. I knO\v this is
your concern. too. and I raise tlw question as to what. l<,gislatinly. we
might do to back up a CommissionE'r like yoursE'lf who wants to lay
down policies that might change \vhen a new administration or a new
Commissioner comes in. Do yon have any snggestions that we might
hear to keep asprcts of political life out of the TRS system. and what
you have been doing to do that.
~fr. ALEXAXDER. One suggestion is that of a 5-year term for future
Commissioners. Another suggestion is continna1. constructive oversight
over the IRS and other agencies having broao pO\wrs like ours.
Tax enforcement is too important to leave to thr enforcrrs.
'Yhat we han been doing is not onlv attempting to institute new
controls. not only attemptin~' to oispose of aberrations in the tax system
as we find thrm. surh as the SpE'cial Seni('(> Staff. and to prevent
aberrations from happening in the futnre. but to open up the pror<'ss
by providing our manual. that t<,lJs "'hat w<' 00 and how \w 00 it. and
making everything about our onnlllization open to the publir. so that
all will han arreS8 t.o information that tlwv need to hnve. and so that
the creation of a Speria1SelTir(' Staff "'ou10 come to light when it was
createo. lInl<'8s SGl11e futllre rommis"ioner decined to close the process.
And no flltllrp Commissioner should be ]wrmittrd to close the proress.
Senator SCHWETKER. Follmving lip the awesome power that you
have with the information that comes to vour attention. power that is
provioed to vou and no other Government agencv. one aT the concerns
I han-and I know it is a difficult area. becan'se vou have to strike
some kino of a balance-is the relationships you w'ould logically and
rightfullv have \"ith States and nlllnirimllitips on exrhanging information.
Yon call this a tax treatv with the States.
And I want to make it clear that my question does not imp1v that
States and municipalities should not have proper access to information.
But it just strik<,s me that if we go to great lengths in your Department
and in your area, even with new laws. we still have a tremendous
area here that. to some extent. is a back-door problem.
whereby a State unit. politicallv. or even a city unit. politicaHy, would
want to make use of this material in a political or adverse way to your
instructions. V\That advice can vou give this committee about legislation
to somehow regnInte that: withont oenving the State tax 'functions
and citv tax functions rightful use of this-information. because
here is a wine-open barn door that you really have not dealt with
either.
Mr. AJ~F.XAXDF.R. As VOn ]Joint onto we han a balalWing or eom~ting
interests. First, the interests that an of us have in effective State tax
25
administration; and second. the interests that all of uS have in presening
taxpayer pri,"acy and in preventing abuse of power.
Secretary Simon has sent to the Speaker of the House a recommendation
for a ne,v law to replace the current law with respect to
disclosure of tax information. That new law will govern our future
relationships with the States. It ,,-ill tighten up on present law, in that
Federal tax information would not be supplied to local governmental
units for tax administration purposes. 'iVe think. in striking a proper
balance. the plact' to stop is the States.
In the meantime, we are tightening up administratively by reviewing
our agrppmpnts with the various Statps, 48 in all. and by imposing:
new restrictions on them "with respect to their use of information. new
requirements on them to safeguard information, and new rights in the
IRS to terminate the agreement immediately if the States don't live up
to their obligations.
Senator SCHW"EI}{ER. ~Iight there be some way of having-and
maybe you do: I do not know--having SOIl1P kind of insppetor general
or ombudsman that might just 11t' assigned to sort of freelance around
V0111' whole structure to look out for this? :\Iaybe there is a more
formal thing. I do not know. .
Mr. Au:xxxm:R. 'iYe have thflt now. Spnfltor ScJl\wikpr.l\fr. Bates is
in charge of our Inspection Senice. and Inspection reports directly
to the Deputy Commissioner. :\11'. ""'"illiams. and to me. And their
duty is to freelance around. to look around. to see what we are doing
and how we are doing it. And they have reviewed the very problem
we were just discussing about flisclosure of tax return information to
State tax authorities and local tax authorities. and the use by them of
this information. and the safeguanls that they have institutpci or failed
to institutr. So they han' been looking into this vrry area. Inspection
is a vita]]y important pari or tax administrntion.
Spnator SCHWEIIi:F.R. Thank vou.
That is all the questions. ~fr. ·Chairman.
The CIL\IRUAX. Tlumk von. Spnator Schweiker. Senator Morgan.
Spnfltor ~1oRG.\x. ~fr. Commissioner. I want to ioin in with the
comments of my colleag-ues. and especially those of Spnator Mondale,
in complimenting von for trying to administpr your departnwnL
while at the same time living within the law.
I think onc of the things that this committef', if I mav say so, is
involwfl in is not only the abnse of power. but also tlw actnal violations
of law that arp bping carried on b~" ag-cncips or Government. And r
do not knm\' how we can talk abont curbing increasing crime, how we
can talk abont ~erlPrating morf' resppct for law. when we ourselves
violate it.
So I commend vou ror what von are doin~. And while I do not know
the facts in the' most recrntcase for which yon hav!' come nnder'
rriticism. I c!'rtainly again compliment yon on'the position you have
takpn pnblicly with I'f'g-arc1 to nsing proper law enforcement methods
and t.f'chnifll1f's. I kIl()\\, it is not an rasv position to tnkf'. I had difficulty
in tlw samf' area with peoplf' \\'ho were working for me when I wal';
tn"in.!! to administer the laws of tlw Statf' or Xort.h Carolina.
",Yf' ,wre tfllkin!Y abont intel1i!.[C'lwP !!atlwring in this committl'e's
work. Anel it Sf'pms to me that yon han probably ~ot morp confidential
26
information on individuals and their finances than anv other agency
in Government. Do you agree with that? .,
Mr. ALEXANDER. 'Well, I surely hope so. If another agency has more
than we have, they have no business having it.
Senator MORGAN. And of course, most of this information is submitted
to your department voluntarily by the citizens of this country
who willingly, as a general rule, try to uphold the tax laws.
Mr. ALEXANDER. That is correct.
Senator MORGAN. And I think, as you have pointed out previously,
Mr. Commissioner, if the taxpayers of this country ever conclude that
t~is informati0J?- is being misused, I think you may have substantial
dIfficulty enforcmg these laws.
Mr. ALEXANDER. We would.
Senator MORGAN. But now, in addition to this information that is
submitted to you voluntarily, you have certain powers that have been
granted to the revenue department, the Internal Revenue Service, to
gather information that other law enforcement agencies do not have.
Is that not true?
Mr. ALEXANDER. That is correct, Senator Morgan.
Senator MORGAN. Such as-could you give us an illustration?
Mr. ALEXANDER. Such as one which I mentioned earlier, the right
by administrative summons to call on a third party to give us information
with respect to a taxpayer; the issuance, of course, of an
administrative summons to a taxpayer; the right, with limitations
that we have imposed administratively, to issue a John Doe summons,
a summons issued not with respect to the liability of a named person,
but in an effort to get us to first base where we believe that there has
been a taxable event but we do not know the identity of the particular
taxpayer.
We also have other rights, more in the enforcement area than in
the area of acquiring information. I have touched on those earlier:
terminations of taxable years, levies, and seizures.
Senator MORGAN. In other words, to give an illustration that is
easily understood, ~'ou can go down to my bank, or any taxpayer's
bank, and find out about my account, can you not?
Mr. ALEXANDER. We can, and we need to do that.. VV'e need to have
that power. But we need to understand that a power of this nature
can lead to misuse or abuse or excess.
Senator MORGAN. You need the power, but it was given to you for
the purpose of enforcing the tax laws of this Nation, was it not?
Mr. ALEXANDER. That is correct.
Senator MORGAN. It was not given to you :for the purpose of stifling
dissent, was it?
Mr. ALEXANDER. That is correct; it certainly was not.
Senator MORGAN. It was not to be used :for the purpose o:f harassing
the steel manu:facturers?
Mr. ALEXANDER. That is correct.
Senator MORGAN. It was not given to you :for the power o:f en:forcing
the drug laws o:f this country either?
1fr. ALEXANDER. That is correct.
Senator MORGAN. Then how can anvone justi:fy-I know you do
not-but what is the rationale behind those who try to use these
powers for purposes for other than which they were given?
27
1Ir. ALEXANDER. People perceive a need. They perceive in their own
minds a great need. Pedlaps they perceive a void in the law in certain
areas-or perhaps in tll\' capability of enforcing a law. Perhaps law
enforcement people are I.ot there. The people are being used in other
ways; perhaps one couldn't persuade the FBI to divert itself from
things that the Attorney General called "always foolish and sometimes
outrageous."
So IRS, then, may be considered by those people to be a convenient
vehicle for filling a void that they have discovered; the use of the
tax laws to achieve this perceived good, such as depriving narcotics
traffickers of cash. for example, is not surprising, because narcotics
traffickers would not be at the top of our list, I would say-if we had
one-or people who come rorward to comply with the tax laws.
Senator MORGAN. In other words. to put it more simply, in the minds
of many well-meaning, well-intended public officials, the end justifies
the means.
~fr. ALEXAKDER. Yes.
Senator ~fORGAN. Xow, and to do this, you have probably the largest
intelligence-gathering organization. You have about 14,000 investigators
and 2.500 special agents.
Mr. ALEXANDER. Well, those 14,OOO-actually, it's about 15,000are
revenue agents, and they are not criminal investigators. But we
do have a large investigative rorce in the broad sense or the term. We
have about 2,700 special agents, and our people are good.
Senator MORGAN. And so, because or these rather unusual laws
which grant to the IRS spedal powers which are not normally given,
and could not be given, to law enrorcement agencies, and because of
this vast reservoir or manpower, it is quite orten tempting for others
to look to your department ror assistance in carrying out what they
perceive to be worthwhile objectives.
~Ir. ALEXANDER. It certainly has been tempting, and they would
like to enlist us as foot soldiers in the wars against whomever they
choose to do battle.
Senator ~fORGAN. I wish to say to you. Mr. Commissioner, and to
others. that I think this pattern is not something that came about in
recent years. As long as I have been a lawyer. I have been concerned
about what I consider to be this pattern of abuse, or misuse, of our
tax laws. For instance. as you may have pointed out. you have the right
to make a jeopardy assessment and to take a person's property into
possession without affording that individual any of the due process
remedies that we now use.
~Ir. ALEXANDER. That is a peremptory right. That person can challenge
only the good faith of our action.
Senator MORGAN. Xow. a goood examnle or that wonld be 1971, I
believe, when the Prpsident. in his well-meaning and well-intended
action, ordered the IRA to cooperate with law enforcement officers in
drlll! enforcement. didn't he ~
Mr. ALEYA"'OER. Thilt iR C'orrect.
Senator MORGAN. And the purpose of it being that, if the law enforcement
officers were not able to make a case against someone that
they sllspected of being involved in a crime. then they wonld call on
yOll to rome in and make a ieopardy assessment, or exercise these
extraordinary powers that you have.
28
Mr. ALt;x"\~))EH. hn leot "llre iT \.'orked t11at wav. bnt I will state
that the narcotics program, \yhidl has bepl1 termillatpd. was. in my
.i lldgmmlL not a sound use of IRS\; resonrces. And, in some instanccs,
it was not a sonnd nse or propel' use of IRS'::: powers.
Senator "310HGAx. \Vell, I can tell you of a personal experience, Mr.
CommissioneL somewhat ,;imiJal' 10 yonI' OI\"n. As attorney generalas
the committee has heard me say bdore-thp Blah, Bnl'eau of Investigation
was nndel' my charge. And Thad the finest and most enlightpnpd
director that I think vou would find annyherp. But he was so intent
on doing something about the drug traffic-and it was such an emotional
thing-that if 11(' could not make out a case. then he wonld
turn to you people awl yOIl would seize the money or the automobile.
And I found out about it. an(l then he and I had some rather-not
heated exchanges-but it was a position that was j1lst as hard for me to
defend publicly becanse of emotion as it is for you to defend your
position. I think that's another reason \yhy we need strong men in
po"itions wh('re they ale called upon to exaci3e extraordinarv power.
Mr. Commissioner. my time is np; I would 11kE' to pursue this much
further, and I hope that after we go into the COIXTELPRO activities
Lhat then we wiJl be abh- to come back and put our fingers on some
ilJustrative cases so that the American people can fully comprehend
how dangerous it l?an be for the people of this country for your power
to be abused and misused.
Thank you, Mr. Chairman.
The CHAIKUAX. Thank you. Spnator :\forgan.
I would like to follow up on Senator ~Iorg'an's remark by giving a
roncrete iJlnstration. This comes from an intern:ll mrmorandull1 of the
CIA [exhibit 4 1], and it had to do with the CIA's reqnBSt to the IRS
to do an audit on the magazine "Ramparts." And I read the memorandUlll
which relatps to the- comersations between the CIA and the IRS
working ont this arrangemcnt.
The CIA agent \\"])0 writes the memorandnm writes thl' following:
"I told them of thr infonnrrtion and rnmors we have heard"- "them".
being the 1RS-"about 'Ramparts' proposed ('xpose with particnlar
reference to the 1'.8. ~ational Students Assoeiation." Now that. yon
will remember. was the association that the CIA was heavily involved
lll. and helped to financl'. \Yhen that \vas pxposed. I anI told that the
CIA then, after reIllO\'ing it s connectioll from the organization. urged
the IRS to no longer give it tax-exempt status.
Reading on from the memorandum. "I impressed upon them the
Director's"---this \HJuld be Diredor HeJms--"the Director's concern
and expressed our certainty that 1his is all attack on CIA in particnlar,
and the administration in general."
Reading from the next page of the memo:
I !;uggested that the corporate tax returns of "Ramparts" be examined, and
that any leads to possible finaLcial supporters be followed up by an examination
of their inoividual tax returns, It is unlikel~' that such an examination will o.pwlop
mnch worthwhile informa [ion a,; to the magazine's ~ource of financial support,
but it is possiblp that some leads will be pvident. Thl' returns can be called
in for review by the Assistant Commissionel' for Compliance without causing
any particular notice in the rpspective IRS Districts, The proposed examination
would he made by :\lr. Green who would advise me if there appeared to be any
information on the returns worth following up.
1 See p, 46.
Now I ran't imagine a more dear-cut case of the CIA attempting to
nse the IRS for the purpose of getting a magazine that proposed to
expose acti"ities that the CIA "anted to conceal, or a more threatening
use of ):wvernmental power to undprmine the freedom of the, press
in this country.
The CJuestion I have to ask you. ~fr. Commissioner, is, is it legal for
the IRS to examinE' individual tax returns. or organizational tax returns,
and then supply the information it obtains to the CIA or to the
FBI for purposes uni'elated to tax colledion?
~lr. ALExAxDER. Two points. Number one. the IRS has no business
E'ngaging in the use of its processes to harass people, to harass so-called
enemies of any kind. the magazine you mentioned or anyone else.
Number two. the Director of the CIA can ask the IRS for information
in connectIon ,,-ith a matter officially before the Director, and the
IRS would have a responsibility, nnclei· present law, to supply that
information.
The CHAIR)fAX. Do you know' how a magazine publishing in this
country. operating under the protectire umbrella of the first amendment
to the Constitntion. could be offirially a matter of concern, or be
officially before the Director of CIA, for the purpose of entitling the
agency to obtain the assistance of the IRS to do audits of its accounts?
Mr. ALExAxDER. No, I don't. But the one best capable of answering
that would be the Director of the CIA.
The CHAIR)L\X. I think ,ye will haye Mr. Helms back again and
again and again. -
These are the lists that "e are referring to today-3.000 organizations
appeared on the Special Services Staff list for audits, and 8,000
U.S. citizens. It is our understanding that about half of the names,
organizational and individual names, came to the IRS and were included
on the list at the request of the FBI.
The point that I made earlier I would like to make again at this
time. It is established by the evidence that even the names of individuals
and organizations that were connected with the war protest
movement, or might have had some connection with the problem of
violence at that time, were not a proper use of the tax-collecting power.
I shall ask the committee to release the lists in their entirety; time
does not permit that now. 'When you look at these lists you will see how
far afield they went even of the official purpose that. under the memorandum
to which we have referred, they were supposed to be put. For
example, here are some groups that I have taken from the list since I
have been able to mm-e through it this morning, in addition to those
that I gave at the commencement of the hearing, groups that are
well known to all of us, that appear on this list for purposes of having
~hei~ tax. returns audited. And it is very difficult to find any possible
]u~tIficatlOn for such church groups as the American Jewish Committee,
the American Je'Yish Congress. the Associated Catholic Charities,
the Baptist Foundation of America, the B'nai B'rith Antidefamation.
League, or such Government institutions, if you please, as the
U.S. Civil Rights Commission, or such professional associations as the
Amer~can Law Institute and the Legal Aid Society. Or such political
orgamzations as Americans for Democratic Action.
And, yes, on the other side of the spectrum as well, the Liberty
Lobby, the .John Birch Society, and the United Republicans of America.
Or such citizens associations as Common Cause, the Legal Aid
60-877 0 - 76 - 3
Society, the Committee for a Sane Nuclear Policy, the National Education
Association, the Women's Liberation Movement.
Somehow, the Women's Liberation Movement is on all of the lists.
The Fund for the Republic, such foundations as the Carnegie Foundation,
and such publIcations, magazines and newspapers in this country
as "Human Events", "Playboy", "Commonweal", "Rolling Stone",
"The National Observer", "The New York Review of Books", and
"The Washington Monthly".
I just think that going down the list and pointing out how far afield
the IRS was tasked to go, demonstrates the tremendous dangers to our
privacy and to our liberty that are implicit in this kind of undertaking.
We fought the Revolutionary War over a problem of taxation,
and we had better make certain in the future that the IRS attends to
collect taxes, and doesn't become the instrument for the harassment
of other organizations and other citizens in this country, in connection
with which, or with whom, there are no questions of tax
liability.
Senator Schweiker has a question.
Senator SCHWEIKER. I do have one question for the Commissioner.
I realize again, Mr. Commissioner, this is before your time frame;
maybe you could shed a little light. It has to do with another memo
called "Tax Protest Movement" and a tax protest list, and it is dated
December 6, 1972, to District Director, St. Louis District, from Intelligence
Division [exhibit 51].
It says:
Attached herewith, for your information, is a copy of a list of various members
involved in the tax protest movement. These individuals have been identified
through investigations conducted in the San Francisco District relative to various
tax protest groups. It is believed that some members of these groups are capable
of violence against IRS personnel.
And going through the list of names. the name that obviously comes
to attention first is Senator .roseph Montoya of New Mexico. I wonder,
is there any light you can shed as to why you think Senator Montoya
is violent, or is on a tax protest list? Can you help enlighten us how
this got through the system?
Mr. ALExAxDER. I'm afraid I can't help very much because I can't
put myself in the place of the author of that list. The only connection
that I can think of immediately is that Senator Montoya is, af~r all,
the Chairman of the IRS Appropriations Subcommittee, and someone
might have thought that he did violenc~ to our appropriation. I
can't think of anything else. I think that points up the absurdity of
some of the lengths to which a few people have gone.
Senator SCHWEIKER. Thank you.
Thank you, Mr. Chairman.
The CHAIRl\IAX. Thank you, Senator.
Senator Mondale?
Senator MOXDALE. Commissioner Alexander. in response to the
chairman's question about the CIA inquiry about the tax status of the
Ramparts magazine reporter who might be about to disclose CIA
funding of the National Student Association. I thought I heard vou
say, in your opinion, it is still your duty under the law, should 'the
1 See p. 48.
31
Director of the CIA request access to information, to turn it over to
him?
.Mr. ALExAxDER. It is.
The head of an agency--
Senator ~IoxDALE. In other words. this could still happen today?
~Ir. ALEXAXDER. It could. The Director of the CIA is the head of
an agency, and under these presidentially approved regulations, under
present law, the head of an agency can call on the IRS t? furnish tax
information with respect to a matter officially before hIm. It would
be difficult for IRS to question the Director of the CIA as to what's
officially before him.
Senator MONDAL};. So, if you had a Director who wanted to do the
same thing today, and he asked you officially for the returns, you would
provide them to him today, and you would not inquire of him as to
what he had in mind.
Is that correct ?
Mr. ALEXAXDER. Let me modify what I have just stated.
The Chief Counsel has just pointed out that there is a word, "may,"
in that regulation, rather than "shall." \Ye have been interpreting that
to be "shall," except in these rare instances, of which I gave an example.
It would be very difficult for me to make material changes in
this established practice without a change in the law.
I think you are--
Senator ~IOXDALE. Have you, since 1973, ever inquired of either the
FBI, the Justice Department, or the CIA when they have requested
tax information as to their real reasons and use?
Mr. ALEXANDER. Oh, yes.
Senator MONDALE. You have?
Mr. ALEXAXDER. 'Ye certainly have.
I have personally, and the Chief of our Disclosure Division in our
compliance function has. Yes, we have.
Senator MONDALE. Do you inquire, under all circumstances, whenever
you receive a request to determine that the use of that material
is solely for legitimate and official duties within the law?
Mr. ALEXANDER. The letter requesting the tax returns, under our new
procedures. comes to me.
Now, I look at that letter-there are a number of them, a great
number-in 1974. the tax returns of more than 8,200 people were
requested.
Senator MOXDALE. From the FBI?
Mr.. ALEXAXDER. Ko. These were total requests from governmental
agencIes.
Senator MONDALE. And roughly, what agencies?
Mr. ALEXAXDER. Mainly from the Department of Justice and U.S.
attorneys.
Senator MOXDALE. \Vere some from the CIA?
Mr. ALEXAXDER. According to the lists that have just been handed
me, for the calendar veal' of 1974. which I believe to be correct, there
are none from the CIA. The Department of Justice, which acts on its
own behalf and on behalf of the FBI and U.S. attorneys, is, by far,
our largest customer.
Senator MOXDALE. 'Yhich other customers do you have?
Mr. AU:XAXDER. The Department of Agriculture. the Bureau of
Alcohol, Tobaceo and Firearms, the Department of Commerce, the
32
F.S. Customs Service, tIlt' FedE'l'al Deposit Insurance Corporation, the
Federal Home Loan Bank Board. the Genrral Acounting Office. the
Interstate Commerce Commission. the Department of Labor. the SEC,
and the Renegotiation Board were the requesters in calendar year
Hl74. And a total of 29,529 returns were request€d, Senator ~Iondale.
Senator ~I()xDALE. "CndE'l' your interpretation of the regulation and
statutes. any agenty of the Federal Government tan request these returns
if they certify the pm'pose is official.
Mr. ALl-:X.\XDEH. They need to do something more than that. They
need to give us assurance that they "'ill hold the information confidential.
They need to give us. and are giving ns. some detail as to why
they nepd it. rathpr than just a simple statelnE'nt that it is needed.
~ow, }Ir. "'hitakPl·. would you amplify on that statement?
Senator ~IoxIJALE.•Tust a minute.
This is really disturbing. in my opinion. because I think you are
doing a good job. Bnt Tthink the horse is still out of the barn, and the
IRS is still selTing as a private investigatin~arm for these agencies
whenever there is something tlwy want to know, no matter what
agency it is.•,,"s I read the law. there is supposed to be an inquiry into
whether this is within the official duties of the .rustice Department or
the es. attorney reqnesting it. But instead, just about anybody in government
can inquirp. and I am not at all convinced that you are in a
position to knmy what on Pluth they haV(' in mind with thosp returns.
}1r. ALEXA~DER. Senator }Iondale. the concerns that you express,
that we share. account in considerable measure for our request that
the law be tightened up. so that tlH' law and the regulations will give us
the right to refuse to furnish tax information where we believe that
tiw request is not a propeJ' one. where we believe that there is not a
real need for the information or it can be reasonably acquired elsewhere.
Senator }IoxlJ.\LE. The reason you want to tighten np is that right
now these returns, as we sit here. can be requested and used for illegal
purposes.
Mr. ALEXA~DF.R. I bplieYe that that statf'ment is correct. and T believe
that under thp present rpgulations. it "'ould be difficult, it would
be awbyard at lwst. for us to effectivply police requests so as to be
able to give you absolute assurance that the return was reqnested for a
proper purpose.
Senator M"OXD.\LE. Sow. I want to give one further example here
of why I think the failure to haye proper controls on this information
could. if unrestrictNl. destrov this conntrv's freedoms.
Senator Hnddlpston parlipr rdp!Tpd t(; a civil rights organization
in Atlanta. and I think vou are familiar with this case. We do not
know what actually hapI)rl1rd. and thl' chancrs are that it did not frO
beyond what was rpcommendefl hpre. but we do know that the FBI
obtainerl information. that ,,'as SUjJpospd to be classified in the IRS.
listinfr the donors to this civil rights organization. And this is what
the officer in the .\t1anta office proposed to do-and I'm froinfr to refer
to this ormlllization simply as "ownnization" and its nationally known
leader as [deleted]. [See exhibit 3 1]' Here is what he said:
It is believed that donors and creditors of the organization present two imIJortant
areas for counter·intellig-ence activities. In regard to the donors it is
1 See p. 45.
33
~ugge~ted that official organization ~tatioIlPry bearing [deleted] signature, copies
of which are available to the Atlanta office and will be furnished by ~eparate
conllllunication to the Bureau laboratory for reproduction purposes, be utill~
ill advising the donors that the IRS is currently checking tax records of the
organizatioIl, and that [deleted] through this phony correspondence"-in other
word~. they are going to sign [deleted] name for him-"wants to advise the
dOllor, insuring that he reported hi~ gift,; in accordance with the IRS requirenwnts
,;0 that he will not become im'o[Yed in a tax investigation. It is believed
that such a letter of this tnw from the organization may cause considerable
concern and diminate future contl'ilmtions,
Now this was a (lecision based upon information they were able to
obtain from the IRS. which they were going to use to destroy the
funding of a moderate civil rights organization which apparently
displeased them.
Now, in answer to ~Ir. Huddlpston~s qupstion, you said such a request
would go to the bottom of the pile. It didn't go to the bottom of the
pile. They got the information from the IRS, and-we don't know
,,,hether this actually happened, apparently it did not-but at least
one agent was going to use it to try to chill and undermine one of our
moderate civil rights organizations.
So, do you not see, in the fail11l'e to have the tightest kinds of control
on this information so that it is limited solely to tax enforcement
and carefully defined other official Ipgal uses, that the present loose
control of this information makes it possible to resort to these kinds
of outrageous and totally indefensible and exceedingly dangerous
practices that threaten America~s freedom?
Mr. ALEXAXDER. Ycs, Senator lIondale. 'We certainly believe that
the laws should be tightened up. 'VI' arlo' accountable for our own
actions. The actions of other agencies are matters for which they
should be held accountahle. 'Ve rely upon the present law~ upon good
faith. and 'Yf' think we haYe good reason to so rely. 'Ve would like to
be able to give IOO-percent assurance~ but We cannot.
Senator )IOXDALE. Can there be any solution to this privacy matter
so that they are not abused in these ways unless the Commissioner of
the IRS possesses sole authority oYer those documents and power to
determine whether or not their uses are proper and legal? If you must
continue under present policy. that vests that authority in the FBI,
the .Justice Department and all the other agencies mentioned on those
other lists. can there really be any control?
Mr. ALExANm:R. There 'can be some controls.
Senator :\IONDALE. But not much.
Mr. ALEXANDER. But not absolute controls.
Senator )IoxDALE. All right. Thank you.
The CHAIRl\L\X. Anv other questions?
Senator HrDDLEsTo·x.•Just a loose end or two, :\11'. Chairman.
The CHAIRl\L\X. Yes; certainly, Senator Huddleston.
Senator HrDDLFA"Tox. In respect to the information that you have
given us that certain procedures are now in effect to tighten up the use
of confidential informants, we ha\'e a memo from the IRS to the special
agents in the .JacksoIl\·ille district ,,,hich sets out the procedures
to be llsed. This is dated .July n. 1974 [exhibit 6 1
].
'Ve also ha\'e a tax memo written by one of the agents~ at least, to
whom this ,,,as sent. which is headed "Instructions from .TKW," who
1 See p. 53.
34
is Mr. J. K. Wishwell, and apparently his comments on these sug·
gestions-he writes, for instance, "No 1, reduce fund to $500 for (a
confidential informant) ," on which he writes "ha, ha, ha."
Senator HUDDLESTON. There is another entry in which he says,
"restrict payout to $250 without prior approval," on which he writes,
"ha, ha, ha."
Another provision, "after each payout rendezvous with another
special agent or JlnV and hand deliver receipt, voucher and import
and pick up reimbursement check." He writes, "ha, ha, ha."
"No.7 said he would give me instructions in writing to minimize
misunderstanding," and again he notes, "ha, ha, ha."
Is this the kind of response that you have been experiencing with
these instructions that may have gone out to the agents in the field?
Mr. ALExANDER. I don't think so. I think this gentleman obviously
was a man of few words.
[General laughter.]
Mr. ALEXANDER. This is not typical of the IRS special agent. I think
there are many fine, dedicated people doing a tough job well. I think
there are a few, and a very ,'ocal few, that are impeding efforts toward
making our tax administration system sounder and more responsible,
and this gentleman's repetition of his word "ha" would put him in
this category.
Senator HUDDLESTON. I'm wondering, though, about a gentleman
who's been out in the field dealing with informants who are not people
who would be characterized as pillars of the community. There is one
who turned in his own father as a tax evader. I am wondering if this
is not a commentary on the workability of any set of rules or standards
if you are going to deal with that kind of people.
Mr. ALEXANDER. Well, tight controls, sensible tight standards, are
surely better than the alternative of lax or nonexistent controls and
standards.
'Senator HUDDLESTON. I agree with that. I was just suggesting it is
an area that would require continual supervision if it is to be employed
at all.
Mr. ALEXANDER. It does, Senator Huddleston. This is an area fraught
with danger, the danger of misuse, the danger of actually employing
people of, tat best, doubtful character, doubtful reputation, and doubtful
veracity by the IRS, with its great powers. An additional fact is
that the institution of a criminal investigation itself, when made known
by third party contacts, is a very severely damaging thing to the person
innstigated.
Senator HUDDLESTON. Now, the agency has also used undercover
agents, as I understand, and there is at least one instance where undercover
agents infiltrated the inner circle of an individual who was
undergoing a tax investigation and tax prosecution, as a matter of
fact. Because of this, he was able to learn what the defense strategy was,
what kind of 'affidavits were to be filed, what plea was to be made, and
did, in fad, convey this information to the prosecuting attorney.
Is this the kind of thing that undercover agents are expected to do?
Mr. ALEXANDER. No; it is not.
Senator HUDDLESTON. Do you know o£any other incidents besides
the ones I cited, which is a case out in Los Angeles, Calif., where this
might have occurred?
35
Mr. ALEXANDER. I am aware of that case, and I am disturbed by it.
I do not know personally of any other instances. I don't know whether
those with me tDday know of any others.
Mr. WOLFE. I know of none.
Senator HUDDLESTON. The system which utilizes undercover agents
and informants certainly lends itself to that kind of abuse.
:Mr. ALEXAXDER. That is one of the dangers in the use of a confidential
informant, particularly if the confidential informant is encouraged
by silence, or by adion, or by knowledge and acquiescence, to engage
in activities beyonrl the line, beyond the line legally, beyond the l~ne
ethically and morally. These present very great dangers and I questIOn
whether the benefits to the enforcement of the tax laws are worth the
cost tD enforcement of the tax laws.
Senator HUDDLESTOX. 'Ve also have information that documents
which were maintained in the IGRD system were destroyed contrary
to the regnlar docnmellt rlestruction schedule by the IRS.
First, what was the IGRD~
Mr. ALEXANDER. The IGRD, to which I referred earlier, was the
Intelligence Gathering and Retrieval Unit in the IRS. IGRS was the
Intelligence Gathering and Retrieval System. This was to be a computerized
system for maintaining general intelligence information
that the IRS had gathered. It resulted from a study instituted, I
believe, in 1969, implemented in 1973. and modified in 1974. The Deputy
Commissioner and I suspended this system in January of this year. It
was a system that accumulated a great deal of information of somewhat
doubtful value. But the system itself. the idea of computerizing
this information, is a sound idea. The implementation of the system
was the problem.
Senator HrDDLEsTON. Is there any way to make distinctions among
that evidence that might have been collected illegally, if the evidence
were valid ~
Mr. ALEXAXDER. I think this operated as a vacuum cleaner; everything
went in. in some districts; very little went in, in others. The
district offices were encouraged to build up the system, and some of
them reacted with great vigor to do precisely that, Miami being one
of such offices.
On January 15, we found that 465,442 names were in the system,
and included in those names was mine.
Senator HnmLEsTox. 1Vhat about the destruction of these documents
contrary to procedure ~ 1Vere you aware of that ~
Mr. ALEXANDER. I became aware 'of that recently, and it is very disturbing
to me.
Senator HUDDLESTON. How could it have happened, Or how did it
happen ~
Mr. ALEXAXDER. I don't know of mv own knowledge how that happened.
1Ve give instructions in the l~ational office. 1Ve expect those
instructions will be carried out, and in almost every instance they
are. In some instances. people, through misumlerstandmgs or through
I'm sorry to say. a willful act, refuse to carry them out. '
Senator HUDDLESTOX. Are you aware that in at least two instances
documents were destroyed related to extremist organizations or extremist
individuals?
Mr. ALEXAXDER. I have become aware of that, yes.
36
Senator HCDDLESTON. Do you attach any significance to that?
Mr. ALEXAXDER. Yes: I do. It causes mr deep concern because it
would appear that someone thought that thrse should be destroyed
because of the adwrse impact on. perhaps, the assembler or perhaps
the holder of the document. if they were not destroyed. Of course,
that is a concern for the head of a law enforcement agency.
Senator HUDDLESTON. Also the revelation of how the information
might have been obtained would leave some question.
Mr. ALEXANDER. That is another problem.
Senator HUDDLESTON. Thank vou. ~Ir. Chairman.
Thp CHAIR~L\N. Mr. CommlssiollPr. did yOll tpstify that in 1974.
something in excess of 20.000 income tax returns 'were turned over to
other agencies of the GowrnmE'nt ?
Mr. ALEXANDER. Yes: I did. The number, I believe. was 29.520
plus.
The CHAIR-:lIAN. 29.520 plus?
Mr. ALEXANDER. Yes. The returns were for those 8.210 taxpayers,
Mr. Chairman.
The CHAIR:~L\N. 8,210 taxpayers. Now, does that include returns
that may have been requested and turned over to State governments?
Mr. ALEXANDER. No; not at all.
The CHAIRMAN. Do you have the figure for the latter?
Mr. ALEXANDER. I have a figure, and I would like to supplement this
for the record, to give you the full figure, Mr. Chairman. You see,
returns turned over to the State governments actually consist in large
part of taped transcripts.
Now, my understanding is that in 1974, the taped transcripts of
some 63 million individual returns were turned over to State govern'
nents; but in addition to that I receive a number of requests from
StHte governments for individual returns that are not included within
this figure. We have agreements with 48 of the 50 States. We do not
have agreements with Texas and Nevada. and I would like to supply
for the record, if I can. Mr. Chairman. a full and complete listing for
yOll [exhibit 17 1]" .
The CHAIRMAN. I wish vou would.
You see, as the record stands now, in 1 year alone. nearly 30,000
returns involving more than 8.000 taxpayers, were turned over by the
IRS to other Federal agencies. You have said this is a very loose arrangment.
The laws need to be tightened to give a greater measure of
confidentialitv.
This commlttee. is concerned about what is becoming- obvions in the
course of these hearings, and that is the spreading of "Big Brother"
government methods. and what your testimony shows is that, at least
as of now, every taxpayer in this country is on notice that when his
tax return is filed in the IRS. it means any agency in the Government
that can claim an official interest can get into that tax return for its
own purposes. That is what it means. And. what better form is there
to intimidate people. harass people, force them to comply with whatever
it is !"ome other arrencv mav have in mind. than to have his tax
return and information that it may contain.
1 See p. 103.
37
This morning we have seen further that, until recently at least,
the IRS itself maintained a list of 8,000 individuals and 3,000 organizations
which other agencies of the Government asked them to compile
for the purpose of making tax audits, though clearly from the
nature of these organizations, they are not suspected of owing taxes.
Now, if that isn~ an abuse. I don't know what abuse is.
Furthermore, some of these agencies had no lawful right to request
that these names be placed upon such a list. I gave you an example a
few minutes ago of the CIA making such a request on "Ramparts"
magazine because it feared that "Ramparts" might print something
that the CIA did not want printed. Yet the law on which the CIA
derives its powers provides expressly that the Agency shall have no
police, subpena, or law enforcement powers, or internal security functions.
It was to stay out of domestic affairs. But it didn't, it hasn't,
and it won't until we begin to write the laws much differently and
prescribe penalties for their violation.
I want to thank you, Mr. Commissioner, and I want to thank your
assistants who have come here. I want to thank you for the cooperation
you have given us and the information you have turned over to
us. It is very helpful to the committee.
The committee now stands adjourned.
Our next hearing will be announced by the Chair.
['Vhereupon, at 12: 32 p.m., the committee recessed, to reconvene
upon the call of the Chair.]

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