When average Americans need help with their federal income taxes, they hire an accountant or buy a computer program to ensure that they don't miss out on any deductions. But when corporate giants like Detroit-based DTE Energy want to save millions, they turn to Washington, D.C., lobbyists.
The energy services provider relied on its lobbyists—not accountants—when the Internal Revenue Service began reviewing, in 2003, a controversial tax credit that benefits it and other companies that turn coal into synthetic fuels. But after only four months of investigation and heavy industry pressure on Congress and the IRS, the agency dropped the inquiry, preserving the program that gave DTE Energy more than $200 million in tax credits that year.
"We wanted to make sure [the IRS] had all the available information and technical expertise needed to make the final determination," said Renze Hoeksema, the director of government affairs at DTE Energy about contacting the IRS on the company's behalf.
DTE Energy is not alone. Nearly 500 companies and organizations have reported lobbying the IRS between 1998 and 2004, putting the nation's revenue collector among the top 30 most frequently lobbied federal agencies, according to a study of federal lobbying records by the Center for Public Integrity. In fact, more companies and organizations reported lobbying the IRS than the Navy, the Joint Chiefs of Staff and the President of the United States combined.
Indeed, among the top 250 companies and organizations that have spent the most money lobbying the federal government, one in three has lobbied the IRS.
Some of the biggest groups in Washington, D.C., —such as the U.S. Chamber of Commerce, the American Gaming Association and even the AFL-CIO—have pressed their case to the IRS either through their own in-house lobbyists or by hiring specialists who have ties to the agency or the congressional panels that oversee it.
Leonard Oursler, chief of congressional affairs at the IRS, said he was surprised to learn that so many groups have reported contacting the agency in order to advance their interests. Although it is unlikely the IRS would do anything to try to shape legislation, Oursler said, lobbyists may attempt to influence how the IRS administers its rules. Such rules, however, could be worth tens if not hundreds of millions of dollars to a company's bottom line.
"We fight hard to stay out of the political fray," Oursler said. "You would want your tax collector to stay out of it."
Under the Lobbying Disclosure Act of 1995, lobbyists can offer vague descriptions of why they are contacting a federal agency, so it is impossible to determine exactly how the nearly 500 companies sought to influence the Internal Revenue Service. But Keith Ashdown, vice president for policy and communications at the federal-budget watchdog Taxpayers for Common Sense, called the lobbying on the synthetic fuels credit a "perfect example" of how special interests get their way with the IRS.
"There is this assumption that lobbying begins at the doors of Capitol Hill, but that is a fallacy," Ashdown said. Many private companies have found that lobbying federal agencies, including the IRS, has been "very effective," he added.
It has also been very effective for the K Street firms that represent the companies. Government relations giant Van Scoyoc Associates, which reported nearly $90 million in lobbying fees during the past six years, was retained to represent the interests of more than 50 clients in front of the IRS between 1998 and 2004—more than any other private law firm, according to the Center for Public Integrity's LobbyWatch analysis of public filings.
Jeffery Trinca, a vice president at Van Scoyoc, said most of the time he spends lobbying the IRS is used to work out policy that coordinates the interests of his clients along with the interests of the agency.
"I work on issues that involve tax administration, but I rarely take a cab down to 1111 Constitution Ave. and go in and say 'please, Mr. Commissioner,'" Trinca, who worked for the National Commission on Restructuring the IRS during a one year sabbatical from the law firm, told the Center.
Not all lobbying of the IRS has to do with influencing tax regulations; some include contracts that benefit a particular company. For example, Trinca's client Computer Sciences Corp. , which is one of the companies that reported contacting the IRS the most during the last six years, lobbies mainly on issues that pertain to congressional budget allocations, he said. The more money Congress gives the IRS means the more the agency can spend on computers, which benefits his client, Trinca said.
Trinca worked for a congressional commission, not actually for the IRS. But at least 30 registered lobbyists have previously held positions within the agency, including two of its former commissioners: Donald Alexander, a partner at Akin Gump Strauss Hauer & Feld, and Fred Goldberg Jr., a partner at Skadden, Arps, Slate, Meagher & Flom.
Although neither Goldberg nor Alexander has reported lobbying the IRS on their disclosure forms, both specialize in tax law at their respective firms. According to Goldberg's biography on his law firm's Web site he has "represented clients and groups of companies on issues of industry-wide significance in administrative proceedings before the IRS."
In an interview with the Center, Goldberg said he does not consider his actions in front of the IRS as "lobbying in the traditional sense" but more as protecting a client during an audit.
"There is an audit, a controversy over the law and the facts, and the practitioner represents the taxpayer during audit, in appeals and in court," he said.
Goldberg said the activities more commonly associated with lobbying, such as pushing for changes in the tax rules and influencing legislation, generally take place with the House, the Senate and the Treasury Department, not the IRS.
The Congressional Record bears Goldberg out. During the last six years more than 6,800 bills sought changes to U.S tax policy and procedure. And in the first three months of the 109th Congress, lawmakers introduced a total of 413 bills in the House and Senate to amend the Internal Revenue Code that governs the federal tax system.
That tinkering with the tax code has provided lobbyists with a lot of work. Since 1998, more than 3,500 companies or organizations lobbied the federal government on tax issues directly, or hired one of 885 outside firms to do so on their behalf. And as companies such as DTE Energy can attest, the time and money spent lobbying can be a small price to pay for the tax help even the best accountants could not provide.