By Lori Montgomery
Washington Post Staff Writer
Friday, September 24, 2010; 6:00 PM
Republican senators are demanding an investigation into remarks by a senior Obama administration official about Koch Industries to determine whether the White House illegally accessed the company's tax information.
Koch Industries is the privately held oil refiner run by libertarian billionaires Charles and David Koch. The pair have bankrolled a number of conservative organizations, and were described in a recent New Yorker magazine story as "waging a war against Obama." In speeches, the president has twice singled out one Koch-financed group, Americans for Prosperity, noting that the organization with the "harmless-sounding" name is spending millions of dollars to defeat Democratic candidates.
Enter the President's Economic Recovery Advisory Board, which issued a report in late August about the U.S. tax system. During a background briefing for reporters, a senior administration official noted a trend in corporations organizing as pass-through entities to avoid paying corporate taxes, and singled out Koch Industries as an example. The official was speaking on condition of anonymity to describe a report that, at that point, had yet to be released.
"So in this country we have partnerships, we have S corps, we have LLCs, we have a series of entities that do not pay corporate income tax," the official said, according to a transcript obtained by the Weekly Standard. "Some of which are really giant firms, you know, Koch Industries is a multibillion dollar business."
But Koch Industries has never publicly discussed its tax status, according to its lawyer. And that prompted Sen. Charles Grassley (R-Iowa), the senior Republican on the Senate Finance Committee, and six of his GOP colleagues to demand an investigation.
In a letter sent Friday, Grassley and Sens. Jon Kyl (Ariz.), Jim Bunning (Ky.), Pat Roberts (Kan.), Michael B. Enzi (Wyo.), John Cornyn (Tex.) and John Ensign (Nev.) asked the Treasury inspector general for tax administration to determine whether Watergate-era laws protecting confidential taxpayer information had been violated.
"The statement that Koch is a pass-through entity implies direct knowledge of Koch's legal and tax status, which would appear to be a violation," the senators wrote. "Alternatively, if the statement was based on speculation, it raises the question of whether the Administration speculating about any specific taxpayer's liability is appropriate."
The statement is "also troubling because it was made shortly after the President highlighted the advocacy work of certain tax-exempt organizations funded by Koch Industries, Inc. and its owners," the senators wrote. "We are concerned that the [board's] statement singling out Koch Industries, Inc. so soon after the President's statement was politically motivated."
The senators instructed the IG to obtain a transcript of the Aug. 27 phone call and determine whether board employees had access to tax returns, how many returns they reviewed, and - if the answer is zero - "what was the basis for the statement regarding Koch's legal and tax status?"
Asked about the incident, a White House official said Friday that the "statement was not based on any review of tax filings and we will not use this example in the future."