A former deputy to Lois Lerner -- who oversaw the IRS division accused of targeting conservative groups during the Obama years -- was placed on leave after lawmakers raised alarms that a new sub-department she was leading was becoming politicized.
In 2013, Lerner was hauled before Congress, where it was revealed her agency had wrongfully scrutinized tax-exempt applications related to the phrases "Tea Party," "9/12" and "Constitution." The Treasury's inspector general later confirmed "inappropriate criteria" was used to target conservative groups and criticized ineffective oversight of systemic bias.
IRS Commissioner of Large Business and International Division Holly Paz -- Lerner's then-deputy -- was placed on leave last week as lawmakers drew attention to a subordinate work-unit aimed at auditing pass-through businesses that Biden-era Commissioner Danny Werfel had created and assigned her to lead.
According to Google's AI, a pass through business is a fairly standard kind of business framework.
A pass-through business (also known as a flow-through entity or fiscally transparent entity) is a business structure in which the profits and losses of the business are passed through directly to the owners or shareholders, according to Wikipedia. Unlike C-corporations, the business entity itself is not subject to corporate income tax. Instead, the owners report their share of the business's income or loss on their personal tax returns and pay taxes at their individual income tax rates.
Key aspects of pass-through businesses
No double taxation: The main advantage is avoiding the double taxation faced by C corporations, where profits are taxed at the corporate level and again when distributed to shareholders.
Taxation at individual rates: Owners are taxed on the business income at their individual income tax rates.
Common types: Includes sole proprietorships, partnerships, S corporations, and limited liability companies (LLCs) that choose to be taxed as a sole proprietorship or partnership.
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Werfel called the new work-unit a big step in "ensur[ing] the IRS holds the nation's wealthiest filers accountable," and Paz called it an "important change" in the IRS structure.
However, by 2025, lawmakers, including Sen. Marsha Blackburn, R-Tenn., warned that the pass-thru-business compliance unit had transformed to be "motivated by ideology rather than principles of sound tax administration."
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Around that time, Sen. Joni Ernst, R-Iowa., warned Treasury Secretary Scott Bessent that Paz's team "has made tongue-in-cheek political comments," including their stated wish to "make basis great again" -- a phrase regarding taxation loss/gain that hearkens to President Donald Trump's MAGA slogan.
In that regard, Rep. Lloyd Smucker, R-Pa., wrote to IRS Commissioner Billy Long in July that a Biden-era "basis-shifting transaction rule" had "extended the scope" of enforcement.
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Chuck Flint, a former top aide to Blackburn and president of the Alliance for IRS Accountability, told Fox News Digital on Tuesday that Paz's past targeting of conservative groups makes her "unfit for government service."
Flint said her statements to Congress and role as LB&I chief "places a cloud over the IRS."
Holly Paz is accused of changing the rules for businesses so that more of them will be audited -- and so Biden's legions of new IRS employees would have a larger pool of victims to harass:
Blackburn warned in her letter to Bessent that an IRS news release referencing targeting "complex arrangements" lacked clear definitions and created the impression that legitimate business structures could be unfairly targeted based on legal structure versus actual tax compliance risk.
"Even more concerning, the announcement explicitly states that the bureaucratic changes were designed primarily to 'achieve its goal of increased audit rates in this complex area'.
"This focus on increasing audits rather than improving compliance suggests an agenda-driven approach to enforcement," Blackburn said.
In her letter, Ernst warned Bessent that Paz's team members "have also undermined their appearance of impartiality by comparing legally acceptable transactions to obscene material, saying, 'It's one of those 'You know it when you see it' -- a joking reference to [Supreme Court Justice Potter Stewart's] attempt to define pornography.
Corrupt bureaucrats (and corrupt media shills) always want to operate in a rules-free environment where they can accuse and harass as it pleases them, without any rules restraining their whim.