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White House Adviser Goolsbee's Comment on Koch Taxes Reviewed by Treasury

The Treasury Department is reviewing complaints by Republicans that White House adviser Austan Goolsbee may have broken confidentiality laws by commenting on the tax structure of Koch Industries Inc., a political foe of President Barack Obama.

Russell George, the Treasury inspector general for tax administration, told Iowa Senator Charles Grassley, the top Republican on the tax-writing Finance Committee, in a Sept. 28 letter that he has begun a review at the senator’s request. The panel’s six other Republicans also sought the probe.

During a conference call with reporters in August, Goolsbee, chairman of Obama’s Council of Economic Advisers, identified Koch Industries as an example of a “multibillion- dollar business” that uses a tax structure originally intended to benefit small businesses.

Those structures, including partnerships and S- corporations, don’t pay corporate-level tax and are at the heart of a broader debate over whether tax rates scheduled to increase in January will hurt “small business.”

Senate Minority Leader Mitch McConnell of Kentucky and other Republicans oppose Obama’s proposal to let the top two marginal tax rates rise, saying that the increase would hurt half of all small-business profits because their owners pay taxes at individual rather than corporate rates.

Photographer: Andrew Harrer/Bloomberg

Austan Goolsbee, senior White House economic advisor. Close

Austan Goolsbee, senior White House economic advisor.

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Photographer: Andrew Harrer/Bloomberg

Austan Goolsbee, senior White House economic advisor.

Tax experts say that figure is exaggerated because it counts so-called “pass-through” businesses that are popular because they allow profits and losses to be reported on owners’ personal tax returns without a layer of corporate tax.

“I think” Koch Industries is one of those types of businesses, Goolsbee told reporters on Aug. 27.

Obama Critic

Koch Industries’ political action committee is a reliable donor to Republican candidates. The Koch family also is tied to Americans for Prosperity, a Republican-leaning group that has spent millions on ads criticizing the government’s $814 billion stimulus program and “wasteful government spending.”

David Koch, executive vice president of closely held Koch Industries, of Wichita, Kansas, is chairman of the Americans for Prosperity Foundation.

Obama has singled out Americans for Prosperity by name while criticizing the influx of special-interest money into this year’s elections.

Koch Industries, in a Sept. 22 statement, said the White House comment appears “politically motivated.”

‘Deeply Concerned’

Mark Holden, a company senior vice president, in a statement three days later said he was “deeply concerned about what, if any, access the administration has had to Koch Industries’ confidential tax information.” The statement said the company “does pay corporate income taxes and complies with all its tax obligations.”

It is a felony for government officials to disclose tax- return information. Grassley and his Republican colleagues in their complaint to George said “it appears to be a violation” of the confidentiality law.

White House spokesman Robert Gibbs today said Goolsbee’s statement “was not in any way based on any review of tax filings.” A White House official yesterday said the administration won’t use Koch as an example in the future.

David Barnes, a spokesman for George, said he couldn’t comment on specific cases. The inspector general “works to be responsive, however, to all requests concerning issues within” the office’s “statutory jurisdiction,” Barnes said.

IRS Procedures

Christopher Bergin, chief executive of Tax Analysts, a Falls Church, Virginia, publisher of tax information, said it’s “incredibly unlikely” that top White House officials would violate confidentiality laws. Even if they tried, IRS procedures put in place after President Richard Nixon tried to use the agency for political purposes would stop them, Bergin said.

“Alleging that any White House would go into your tax information because you’re their enemy?” said Bergin, whose group frequently sues the IRS to disclose tax information.

“You’re alleging that not only the administration did this, but that the IRS had to be complicit,” he said. “This is from Mars right now.”

IRS spokesman Dean Patterson declined to comment.

To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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