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Tax Season

As we approach the deadline for paying federal individual income taxes and, generally, for filing the returns on which such taxes are determined, some of you may be recalling how the Inflation Reduction Act of 2022 appropriated billions of dollars[i] to the IRS to bolster enforcement of the Code, including hiring more enforcement agents, providing legal support, and investing in “investigative technology.”

No doubt, most of you are aware that, for several months now, the IRS has taken every opportunity to remind tax advisers, and the public generally,[ii] that the agency will be focusing its resources on pursuing complex partnerships, large corporations and high-income, high-wealth individuals, presumably because the IRS believes many of these taxpayers may have failed to pay the correct amount of federal income tax.  

With the prospect of legions of newly trained, and AI-assisted, IRS agents reviewing the thousands of tax returns filed, and to be filed, by the target population, I thought I’d try to introduce some levity to ease the tax-induced stress that many have been feeling for a long while now and to remind us that privately owned businesses aren’t the only employer organizations that struggle with wayward employees who inexplicably – to me anyway – succumb to the sin that is known as golf.[iii]

A Federal Ferris Bueller[iv]

Employee worked as an appraiser for the IRS. A couple of years into his stint with the government, Employee transferred from Connecticut[v] to Honolulu, Hawaii.[vi]

Employee’s immediate supervisors were conveniently located in California. Employee worked independently, mostly from home or in the field, and was the only appraiser in the Honolulu office. Employee consistently received performance ratings of at least “exceeds fully successful” on his performance appraisals.[vii]

A few years after his move to Hawaii, one of Employee’s supervisors received an anonymous letter accusing Employee of abusing his work time by “golfing in the early afternoons during the work week.”[viii]

In response, the Treasury Inspector General for Tax Administration (TIGTA)[ix] began an investigation which lasted approximately two and a half years.[x] During the investigation, TIGTA gathered Employee’s golf records from the beginning of his employment with the IRS. It also conducted surveillance of his activities.[xi]

Tsk, Tsk

At the conclusion of the investigation, the Department of the Treasury (DOT) sent Employee a notice proposing termination of his employment on two charges:

  1. the first charge alleged that Employee provided false information regarding his time and attendance records and had played golf during duty hours on 168 occasions; and
  2. the second alleged that Employee provided misleading information regarding his time and attendance records and had played golf on a day on which he took sick leave on 29 occasions.

Employee replied that “despite the fact that he may have played golf on any particular workday” he had a flexible schedule and always worked an 8-hour workday.[xii]

After evaluating the TIGTA report and Employee’s response to the charges, DOT concluded that Employee should be removed.

Employee’s Appeal 

Employee appealed DOT’s decision to the Merit Systems Protection Board (MSPB).[xiii] An administrative judge (AJ) found that the DOT failed to prove the first charge, sustained the second charge, and mitigated Employee’s removal to a 30-day suspension.

Regarding Charge 1, the AJ stated:

Based on the totality of the circumstances, considering the appellant’s plausible explanation of his misunderstanding [regarding time and attendance reporting], the other record evidence corroborating his understanding, and the lack of circumstantial evidence from which an intent to defraud could be inferred, I find the agency did not show he intended to defraud or deceive the government when he completed his time and attendance records.

Considering Charge 2, the AJ found that Employee took sick leave on days when he was not seeking medical treatment and was not medically incapacitated. She also found that, in doing so, he “knowingly provided inaccurate information on his time and attendance records.” The AJ stated that Employee “knew or should have known that paid sick leave was for illness or medical treatment, not for engaging in a recreational activity or sport such as golfing” and that, “as a federal employee, he knew or should have known that he needed to take annual leave for recreational activities or a sport such as playing golf.”[xiv]  

Still, the AJ mitigated the agency’s penalty of removal to a 30-day suspension because she determined that the penalty of removal was “not within the parameters of reasonableness.”

The AJ agreed that Employee had committed a serious offense when he took sick leave and played golf, especially given the nature of his position, which involved a great deal of trust due to the lack of on-site supervision. “However,” she continued, “there are strong mitigating factors here, including the appellant’s potential for rehabilitation.” In addition, the AJ noted that Employee “was remorseful and acknowledged that he made mistakes in his time and attendance practices.”[xv]

Debt Collection

While Employee’s appeal proceeded, the National Finance Center (“NFC”)[xvi] issued a demand notice to Employee for repayment of the hours of sick leave overdrawn at the time of Employee’s separation.

Through the Taxpayer Offset Program (TOP),[xvii] the Bureau of the Fiscal Service[xviii] collected payments toward this “non-tax federal debt” by applying Employee’s Social Security Administration retirement payments toward his debt.

Both parties filed petitions for review of the AJ’s decision by the full MSPB. Employee’s petition included a request for the return of money DOT had taken through the TOP to offset the debt Employee incurred for compensation paid to him for time while he was playing golf.

In its petition, the agency advanced two grounds. First, it contended that, contrary to the AJ’s finding, it proved Charge 1. Second, it argued that, after she sustained eight specifications of Charge 2, the AJ erred in mitigating Employee’s removal to a 30-day suspension.

Relevant here, Employee argued that the AJ erred in sustaining Charge 2. He also argued that the AJ erred in finding that Employee knew his use of sick leave to play golf was improper and that he knowingly provided inaccurate information on his time and attendance records.

The MSPB pointed out that Employee was in a position of trust and dealt with the public, and that his supervisor testified that he lost confidence in Employee.

With that, the MSPB determined that the AJ had erred in mitigating Employee’s penalty from removal to a 30-day suspension. It therefore

reversed the AJ’s decision, sustained Employee’s removal, and found that it was without jurisdiction to order cancelation or amendment of the debt.

The Court’s Decision

Employee appealed the MSPB’s decision to the U.S. Court of Appeals for the Federal Circuit.[xix]  

In brief, the Court explained that it must set aside a [MSPB] decision if it is “(1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (2) obtained without procedures required by law, rule, or regulation having been followed; or (3) unsupported by substantial evidence.”

The Court added that “[Employee] bears the burden of establishing error in the [MSPB’s] decision.”

The Court found that Employee failed to carry this burden and, thus, sustained the MSPB.

Parting Thoughts

I hope you found some reason to chuckle with Employee’s story.

I also hope you agreed with both (a) the DOT’s decision to remove Employee and retrieve the unwarranted sick pay, and (b) the Circuit Court’s affirmation of that decision. It seemed obvious to all involved, except the AJ.

The Internal Revenue Manual states that an IRS employee is expected to conscientiously perform their duties to the government and the public.[xx] Undoubtedly, almost everyone at the IRS abides by this directive. Employee was one of the exceptions. You may have encountered a couple of others; I know I have, but they have been few and far between. Every organization has some folks like that; unfortunately, it’s inevitable.

That said, the IRS must realize that it cannot afford this kind of publicity while in the midst of spending large sums of taxpayer dollars to enhance its investigative capabilities and expand its enforcement activities.

Time will tell.

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The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the Firm.

[i] You’re undoubtedly aware that the total funding for the IRS (approx. $80 billion) was reduced in the debt limit bill last year (approx. $1.4 billion). Congress cut more (approx. $20 billion) in the spending bills that were passed a few weeks ago. It’s still unclear how enforcement may be affected.

[ii] It is an election year after all.

[iii] Yes, I said. “sin.” Just look at the list of businesses, commonly referred to as “sin businesses,” with respect to which investors are denied the benefits of qualified opportunity zone businesses. Golf courses top the list.

[iv] I’ll assume that most of you are familiar with the reference to the 1986 teen comedy film. Did you know that in 2014 the Library of Congress selected the film for preservation in the National Film Registry? Go figure. In fact, this great repository of knowledge described the film as “culturally, historically, or aesthetically significant”. There’s no accounting for taste.

[v] Average lows and highs in Winter of 20 degrees F and 37 degrees F, respectively, and average snowfall of around 30 inches per year.  

[vi] Average daytime Winter temperature of 78 degrees.

[vii] No idea what that means, but it sounds good.

[viii] Undoubtedly from a less accomplished golfer. Query how the letter writer knew of Employee’s exploits on the links.

[ix] This office provides independent oversight of IRS activities. Organizationally, it is part of the DOT but operates independently of DOT’s other bureaus and offices.

[x] Not a typo. After all, this is the federal bureaucracy; few things are done quickly.

[xi] The projects on which our tax dollars are spent.

[xii] At least he didn’t deny playing during work hours. Query how many “remote” workers in the private sector exercise, shop, or see to other personal matters during the workday.

[xiii] A quasi-judicial agency in the Executive branch that serves as “the guardian of Federal merit systems.”

[xiv] Why do folks refer to golf as a sport? It’s billiards on grass.

[xv] I’m thinking the AJ would be welcomed by NYC’s District Attorney.

[xvi] The NFC is housed in the Dept. of Agriculture, from where it provides payroll and other services to more than 170 federal agencies.

[xvii] Are you following all these abbreviations and acronyms? How about the number of divisions within the DOT charged with overseeing its employees?

[xviii] Part of the DOT, this agency provides accounting, financing, collections, payments, and other services to the federal government. Do you need more evidence for the existence of a fourth branch of government: the administrative state. Think on it – the issue of one inveterate golfer at the IRS “required” the involvement of the IRS, TIGTA, MSPB, NFC, and BFS.

[xix] You can’t make up this nonsense. Think about the waste of federal resources. Michael E. Sheiman v. Dept. of Treas., United States Court of Appeals, Fed. Cir.,2024 WL 1433717 (Decided: April 3, 2024).

[xx] IRM 6.735.1.3.