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Senate Majority Leader Chuck Schumer (D-NY) speaks to the press during the weekly Senate Democratic leadership press conference, at the Capitol in Washington, March 7, 2023.
Sludge produces investigative journalism on lobbying and money in politics. The American Prospect is republishing this article.
Not long after Tax Day this year, a government report is due to Congress that could be a first step in helping Americans pay less to file their annual tax returns. The report could set up a collision between lawmakers and their campaign donors in the lucrative tax preparation business—as well as the giant lobbying firms that advocate for their interests on Capitol Hill.
For decades, financial software companies—led by Intuit, owner of TurboTax—have waged a formidable influence campaign to block the Internal Revenue Service (IRS) from offering an officially-supported, free tax filing tool online. The IRS currently offers an array of third-party tools that are free for households that earn $73,000 and under, but the options, sponsored by little-known companies with names like TaxSlayer, are used by only 2-3% of taxpayers. The little-used IRS program means hefty revenue—estimated at $1 billion annually—for the market-dominating Intuit, which also owns QuickBooks and Credit Karma, from customers who start using one of its heavily-advertised products only to encounter fees along the way.
Intuit’s spending on federal lobbying reached a new high of more than $3.5 million last year, OpenSecrets News reported, as the company faced heightened scrutiny from Sen. Elizabeth Warren (D-Mass.) and House lawmakers like Rep. Katie Porter (D-Calif.) into the company’s “revolving door” hiring practices.
The tax prep companies’ lobbying campaign had a setback last year. In August, Sen. Warren announced that the Democrats’ Inflation Reduction Act (IRA), signed that month by President Biden, included $15 million for a “task force to design an IRS-run free ‘direct efile’ tax return service,” building on legislation she had introduced. The report, including feedback from an independent third party on the feasibility of the program, is due to Congress within nine months of the IRA’s enactment—at the latest, by May 16, 2023.
If the U.S. joined other wealthy countries in offering a free government-sponsored tax filing service, not only could far more taxpayers use the official option, but also the U.S. could move a step closer to having the IRS provide a pre-populated return for taxpayers to approve, slashing the cost and stress of the process. A study highlighted by ProPublica journalists Justin Elliott and Paul Kiel found that somewhere from 41% to 48% of all returns could be pre-filled by the IRS. Intuit said in a statement this month that such a government-run option would be “a waste of taxpayer dollars.”
Intuit isn’t the only company with a financial interest in keeping Tax Day as usual. The law firm Brownstein Hyatt Farber Schreck (BHFS) was the number one spender last year on federal lobbying, and since December 2018 it has lobbied for Intuit subsidiary Credit Karma, which says it shares data with its parent company. BHFS reported $240,000 in lobbying for Credit Karma last year, tied with government affairs shop Ice Miller Strategies for the most Intuit spent with an outside firm. With BHFS, Intuit’s lobbyists included policy director Zachary Pfister, a former House Democratic staffer and Democratic bundler. Among the specific lobbying issues that BHFS mentioned in the fourth quarter of 2022, according to disclosures filed with the Senate, was “Promote consumer access to responsible financial product.” Other reports last year show BHFS lobbyists mentioning issues of data privacy and “Support FINTECH innovation and consumer protections.”
In January, BHFS threw its 12th annual fundraiser for the Democratic Senatorial Campaign Committee (DSCC), raising $525,000, according to an item in Punchbowl News. Hosts included Nadeam Elshami, a BHFS policy director and former communications director for House Speaker Nancy Pelosi who lobbied for Intuit last year. Last year’s BHFS fundraiser, held at the Charlie Palmer steakhouse by the Capitol, saw at least two BHFS lobbyists for Intuit mixing with Senate Democrats: Pfister and attorney Katelynn Bradley, a former senior counsel with the House Committee on Financial Services.
Real-time transparency is lacking on political donations raised through lobbying firm bundling.
Most of the BHFS lobbyists last year for Intuit’s subsidiary traveled through the revolving door from government employment. Other lobbyists from the firm named in Senate lobbying reports included the following: Travis Norton, formerly counsel to Sen. Tim Scott (R-S.C.) and general counsel & parliamentarian to the House Financial Services Committee; Greta Joynes, formerly deputy chief of staff and legislative director for former Rep. John Shimkus (R-Ill.); and Brian McGuire, a former chief of staff for Senate Minority Leader Mitch McConnell and former assistant secretary for legislative affairs at the Department of the Treasury.
The Punchbowl News item relayed that more than half of the Senate Democratic caucus was in attendance at the BHFS fundraiser. That headcount would be more than the 22 Democratic senators who joined as co-sponsors of Warren’s Tax Filing Simplification Act of 2022, a bill in the previous Congress that would have required the IRS to establish a free online tax preparation and filing service. Among other provisions, the bill would have put the responsibility on the IRS to facilitate claims for the child care and the earned income tax credits, and conduct an outreach campaign for the bill’s programs and the new software tools. The bill’s House companion in the previous Congress gathered 53 co-sponsors, all Democrats. Tax prep company H&R Block mentioned Warren’s bill in several lobbying reports last year.
Real-time transparency is lacking on political donations raised through lobbying firm bundling. Word of the events often comes first from Beltway media reports, with figures possibly leaked by the lobbying firms to show off their influence with federal lawmakers. The six-figure fundraising events by firms like BHFS are eventually disclosed as PAC contribution sums in lobbyist bundling reports, filed semi-annually with the Federal Election Commission by recipients like the DSCC. Few voters may realize that multidisciplinary firms like BHFS, which spent more than $60 million on lobbying last year, also bundle campaign contributions for the politicians who decide whether to advance legislation they’re discussing. BHFS did not respond to a request for comment on the possibility that its fundraising for Senate Democrats while lobbying for Intuit could influence lawmakers to slow momentum to develop a government-run free filing service.
In addition to bundling donations to party groups, lobbying firm BHFS also donates directly to the Senate Democratic campaign arm through its PAC. Its PAC made contributions of $35,000 to the DSCC in the 2022 election cycle, as well as $30,000 to the Democratic Congressional Campaign Committee (DCCC), and at least $4,000 to Senate Majority Leader Chuck Schumer’s campaign committee last cycle. Former Majority Leader Nancy Pelosi’s campaign received at least $10,000 from BHFS during the midterm cycle. Government ethics experts have recommended adopting laws banning registered lobbyists from fundraising, but legislation to that end was not included in the major ethics push of the previous Congress, the Democrats’ For the People Act of 2021. The campaign finance and elections reform package ran aground in the second half of 2021 due to Senate filibusters led by Republicans and a variety of objections from Sen. Joe Manchin (D-W.V.) to its ethics provisions.
The vast majority of the more than five dozen lobbyists used by Intuit last year have previously worked in the federal government, according to records maintained by OpenSecrets. Other lobbyists registered by Intuit included Christopher Leahy, formerly the policy coordinator & counsel for the House Energy & Commerce Committee, and Brian McCullough, formerly professional staff with the committee.
Since mid-2021, TurboTax’s owners Intuit have also contracted with the second highest-spending lobbying firm last year, law firm Akin Gump, spending close to half a million dollars. The firm’s lobbying reports for Intuit mention some of the same issues, stylized the same way as those filed by BHFS: “Support FINTECH innovation and consumer protections; Promote financial health and literacy for small businesses; Issues related to data privacy.” Akin Gump bundled more than $364,000 in the 2022 cycle for the DSCC, according to a tally of periodic bundling reports filed with the FEC. The combined contributions to the DSCC last cycle bundled by the top two lobbying firms, BHFS and Akin Gump, each of which have hundreds of clients, reached $1.3 million.
In the midterm elections cycle, Intuit’s PAC and employees contributed more than $50,000 to each the DSCC and its Republican counterpart the National Republican Senate Committee (NRSC). Company CEO Sasan Goodarzi recently called a government-run tax prep service “unquestionably a conflict of interest.” Goodarzi, a member of the Business Roundtable lobbying group that opposed the Democrats’ Build Back Better Act budget plan, gave $100,000 to the super PAC aligned with Senate Republican leaders on March 30, 2022, according to FEC records.
A measure like Warren’s to cut the waste around Tax Day will likely have to get through the Senate. Under current Senate procedure, a legislative item that is not exempt from cloture rules needs at least 60 votes to overcome a potential filibustering objection from one senator. The filibuster rules could be changed with a simple majority of senators establishing a new precedent, an option that a Brookings Institution expert describes as “reform by ruling.” However, Arizona Sen. Kyrsten Sinema became an independent in December, using high-profile media appearances to defend her opposition to any filibuster changes, while Manchin has similarly resisted attempts to change the filibuster rules, whose 60-vote threshold for advancing legislation was set in 1975.
