A federal judge allowed Microsoft’s lawsuit against the IRS to move forward this week, as the technology giant and the tax agency battle over an ongoing audit.
District Judge Ricardo Martinez granted Microsoft’s request for an evidentiary hearing, saying the company had raised sufficient questions about the IRS’s hiring of an outside law firm to help with the audit.
{mosads}The IRS awarded Quinn Emanuel a $2.2 million contract to help the agency audit Microsoft’s offshore dealings and holdings. The agency also released a temporary regulation to allow itself to hire an outside firm to take testimony for audits, after securing Quinn Emanuel’s assistance.
Microsoft objected to the IRS’s use of a private firm to handle government functions, an objection also raised by Republicans like Senate Finance Committee Chairman Orrin Hatch (Utah). Rep. Peter Roskam (R-Ill.) has also questioned why the IRS is spending money on outside law firms at a time that it’s complaining about its shrinking budget.
“Federal law does not allow for contracting out these inherently governmental activities, not least of all because it threatens taxpayer privacy and confidentiality. The IRS’s decision to pay a private law firm $1,100 an hour also reflects a fundamental lack of judgment at a time when the agency is clamoring for more budgetary resources,” Roskam said in a statement.
“The IRS already has access to one of the most high-powered litigation shops around, the U.S. Department of Justice, and the taxpayers are already paying for that.”
The IRS said it wouldn’t comment on pending litigation.
Martinez was nominated by former President George W. Bush, and was confirmed by the Senate unanimously.