regulations simply do not permit us to disclose this information. Moreover, apart from the specific requirements of the statute, general philosophical questions arise because many of these rulings involve discussions of the taxpayer's private affairs and plans for the future; thus, it could be (and was), reasonably argued that the information contained in these rulings was essentially proprietary, and its revelation could be inimical to the taxpayer's interest. For a number of years, the foregoing reasoning did indeed seem to represent good and sufficient arguments for not publishing the great majority of our rulings.

When our policy in this area began to be seriously questioned, we found that our position on the general philosophical level, as contrasted with statutory construction, was not entirely satisfactory. Principally, we were troubled by our critics' argument that the contents of the private, or letter rulings might constitute a body of secret tax law, representing official positions on the interpretation of the Internal Revenue Code. The legal research and debate which went into producing these interpretations was paid for by the public, yet they were essentially available only to relatively limited number of tax practitioners. In addition to the substantive questioning of our basic rationale, these and other critics also raised a fundamental issue of principle regarding the letter ruling process, the issue of Internal Revenue's institutional integrity. Now, from the Service's point of view, this was merely an issue of image rather than of fact. These is no question in my mind as to the integrity of the Service in general or its technical rulings process in particular. However, so long as the bulk of our rulings remained closed to public access, the citizenry would have to take our word for our own integrity. Well, if you've read anything about the opinion surveys regarding the public trust of both private and public institutions in the past year or so, you can imagine how effective such a defense of integrity might be.

Public trust is absolutely paramount to maintaining the self-assessed voluntary compliance that makes our system of tax administration possible. If such confidence is not forthcoming, as a matter of course, then we must gain it; we must demonstrate by our actions and our openness that we are entitled to the public's trust. In view of this, I determined that the tax ruling process should be opened up in the future. Now, we are not rushing into this change blindly; nor are we going to jeopardize the taxpayers' reasonable expectations or privacy in pursuit of our institutional self-interest. Our Technical people and our Chief Counsel's office are working to determine the best manner of achieving a maximum degree of public access.

Obviously, we have not worked out the complete details of this change. For example, we have reservations about the extent to which we should release trade secrets submitted with requests for mandatory rulings, those rulings that the taxpayer is required by law to seek, for example under section 367 or to change either the method or period of his accounting. Similary, we will not publish the two thousand or so Technical Advices which we issue each year, inasmuch as they are involved exclusively with the audit process. However, we believe that we will be able to provide public access to all letter rulings; we plan to achieve this access by asking all taxpayers to include a waiver of confidentiality in their request for rulings.

As a footnote to this new policy, I would like to make it clear that this change is prospective and not retroactive; thus, it does not affect our position regarding the Tax Analyst and Advocates suit, presently in the Court of Appeals, which aims to force the Service to open all past letter rulings to the public. Such a course of action remains unacceptable to us because of the specific requirements of the Code and Regulations.

The decision to open the tax ruling process will be realized in practice sometime during the Fall of this year. At approximately the same time, or perhaps in little earlier, the Service will take yet another step in the direction of increased openness; this will be the completion of the release to the public access of the bank of the Internal Revenue Manual. Currently, we are working on the process of dividing that part of our nanual that has not already been released, into two portions; one public, and the other "protection." The protected portion of the manual will be restricted to law enforcement activities only all other aspects of our policies and procedures will be open to the public scrutiny.

In seeking to "redefine tax administration", I am well aware that I may be promoting a losing cause. I say this because I know that my position rests upon principle, and principles and ideals have been losing more and more battles to

pragmatism and expediency in recent years. Principles aside, for example, the proposal that the IRS administer an income maintenance program is, after all, not without its pragmatic appeal. As one of my colleagues has observed, we don't even have to change our stationery; we'll still be the IRS-The Income Redistribution Service.

Beyond the concrete proposals now under discussion for broadening the IRS role, I can see reasonable men advancing new ideas; for example, charging the IRS with the responsibility for policing almost all activities-not just tax-of multi-nationals. Moreover, I am not full certain that we are out of the controls business for good. Further, if the 94th Congress does undertake a full-scale revision of the 1954 Code, I would not be surprised to see a whole raft of new provisions aimed at promoting protection and restoration of the environment built into the Revenue provisions. This would thrust our enforcement and rulings processes squarely within the jurisdiction of the Environmental Protection Act, and put the Service right in the middle of a highly volatile sector of public concern. In summary, I feel rather certain that the continued integrity of Tax Administration cannot rest with the actions of one Commissioner, or be reasonably assured through a single, short-term re-organization of the IRS. Rather, it will be, of necessity, an ongoing effort requiring the conscious participation of our political leadership, IRS management, and the tax law profession, of which I am proud to number myself a member.

[From the Washington Post, Sept. 18, 1976]

DRUG DEALERS AND THE LAW

No one can say for sure, but the best estimates are that between $7 billion and $10 billion in illicit narcotics, particularly heroin, is sold each year in the United States. For years, the principal law enforcement effort has been focused on the lower-level sellers and their customers, pathetic junkies, some of whom sell off a portion of their stash so they can afford their next fix. They are the principal targets, for example, of the New York state drug laws that were enacted three years ago with such fanfare and that now appear to be ineffective. The reason these laws aren't working, according to most authorities familiar with the problem, is that they do not reach the people that law enforcement really should be reaching-the people who import, wholesale and distribute heroin in massive quantities for later street distribution.

And the reason these higher-ups of the heroin traffic are so unreachable is that they themselves rarely have personal contact with the drug or its users. They deal through intermediaries, not all of whom necessarily know for sure who is at the top. The frustration this poses for law enforcement is compounded by the fact that many of these high-level operators are also highly mobile, a mobility facilitated by their large accumulations of cash. Most of this cash is never declared as income. Thus, it has seemed logical for a long time that the agency most able to do damage to the high-level heroin trafficker is the Internal Revenue Service. Not only has IRS a natural interest in large sums of unreported income, it also has legal mechanisms at its disposal that make it possible for that money to be seized when such action is appropriate.

Several weeks ago, Sen. Birch Bayh, chairman of the subcommittee to investigate juvenile delinquency, tried to find out just where IRS stood in this fight against the heroin trafficker, and the record shows that Dr. Bayh didn't learn nearly as much as he had hoped he would. It turns out to be a highly complicated problem for IRS, having to do with its own understanding of what the law permits the agency to do, with its own priorities and with its understanding of the wishes of Congress. Even though Mr. Bayh didn't learn all he wanted to, he and the country got a pretty good idea of what some of the problems are. Donald C. Alexander, the IRS commissioner, told Sen. Bayh: "There are many pressures on the Internal Revenue Service to put everything first . . . so when we are told to take the affirmative resources and assign a certain number of them to one particular program, we need to be told also what we should take them away from. Should we stop trying to prosecute major corporate tax evaders? Should we stop trying to put corrupt politicians in jail? Let's tell us now because there are only so many people."

The hearings revealed that special funds had been allocated for a fight against the narcotics traffic. But over time (and in a manner too complicated to recount),

some of these funds were diverted into other IRS investigative activities. Then, to top it off, some of the IRS budget for enforcement was cut within the administration.

The central point that the hearings developed is that, yes, IRS does have a merchanism for getting at the overlords of the drug trade. Yes, it has been tried with some marginal success, and yes, IRS is still working with the Drug Enforcement Administration on some high priority cases. But, can IRS point to any specific areas in which it can predict a real breakthrough? No, not really. To get into this in a big way is going to require a clearer mandate from Congress, especially as to the money to be spent against drugs and drugs alone.

When listened to very carefully, Mr. Alexander sounds as if he's saying his agency can do this job if it receives the money and the mandate from Congress. Mr. Bayh promised to take the issue up in some detail with the Senate Appropriations Committee. It probably will take more than that. This is a case where the members of Congress who come from areas of high heroin impact are going to have to add their voices to those calling for a serious effort. It would help if citizens from these areas-Washington, D.C. is one such area-joined this campaign. Remember that it was income tax evasion that proved to be the downfall of Al Capone; today's mobsters are probably no tougher. What's required is for Congress and IRS to know that the citizens of the country want action before the heroin epidemic gets seriously out of hand. That is not the only effort that needs to be made, but it's one that should be made, and made without a lot of excuses.

[From the Washington Post, Sept. 22, 1976]

ABORTING AN ANTI-DRUG PLAN

(By Jack Anderson)

Publicly, President Ford has called for a crackdown on the kingpins of the narcotics trade. But behind the scenes, he and Internal Revenue Service Commissioner Donald C. Alexander aborted a tough drug enforcement program.

Mr. Ford's failure to back the program comes at the very time when the heroin flow from Mexico, Europe and the Far East is at a peak and the nation appears headed for a new addiction crisis.

Top narcotics dealers rarely handle the drugs. Instead, they rake in lucrative profits from street sales and hide their illegal spoils in foreign banks. Clearly, IRS is an essential agency in making strong cases against the money men.

Thus, last April, the President ordered Treasury Secretary William E. Simon and Alexander to plan an IRS drug crackdown. The "merchants of death, who profit from the misery and suffering of others, deserve the full measure of national revlusion," Ford said in a major speech.

Treasury officials thought Mr. Ford meant business. They asked the White House for $20.6 million for intelligence operations, much of it to be used in the fight against narcotics.

Mr. Ford's budget office turned down the request.

Meanwhile, Simon established a Treasury Anti-Drug Enforcement Committee. The panel, headed by Treasury Under Secretary Jerry Thomas, was supposed to develop a plan to combat the drug peddlers. Other members included David Macdonald, assistant Treasury secretary for enforcement activities; Veron Acree, commissioner of the U.S. Customs Service; and Alexander.

Thomas, according to a confidential memorandum, submitted a dynamic 14point plan developed by Macdonald that called for a strong IRS role in fighting drug traffickers. Under the proposal, which the committee supported, the IRS would annually investigate at least 600 of the biggest drug dealers in the country. The Macdonald plan never saw the light of day. Alexander refused to set up an anti-drug program within the IRS and dispatched a weaker proposal to Simon's office. His memorandum called for a simple exchange of information between the IRS and the Drug Enforcement Administration. The document falsely indicated that the Alexander plan had Thomas' approval.

Indeed, Thomas was not even invited to a secret meeting between Alexander and top Treasury aides where the final agreement between IRS and DEA was drawn up.

Shortly afterward, Thomas wrote another confidential memo imploring his committee members to accept at least a portion of the stronger Macdonald

plan. "Without these components," the document states, "it is unlikely that a new program will be . . . successful . . . As a matter of fact, it does not appear that the IRS agreement (with DEA) provides for a separate, identifiable program as contemplated by the President."

Thomas' attempt to save the Macdonald proposal failed, and the woefully inadequate agreement between the IRS and DEA was adopted.

To silence internal opposition to the weak program, the White House quietly moved Macdonald from Treasury to a Navy Department job which has nothing to do with drug enforcement.

Rep. Charles Vanik (D-Ohio) will expose the lackluster efforts of the IRS and the White House to fight drug abuse in testimony before the new Select Committee on Narcotics and Drug Abuse.

Footnote: White House spokesmen have consistently said that the administration is doing all it can to fight narcotics traffic. An IRS spokesman told our associate Marc Smolonsky that the 14-point plan was an old concept violently criticized by the courts, Congress and the public. He said "the present approach is both effective and fair” because it applies tax laws equally regardless of the taxpayer's business.

Unloved Diplomat-Secretary of State Henry A. Kissinger summarily dismissed James Akins from his job as ambassador to Saudi Arabia last year without telling the diplomat the reason why.

"I've pressed for reasons," Akins wrote to Sen. Charles H. Percy (R-Ill.), "and have been told only that Kissinger dislikes me and that certain aspects of my reporting have ‘annoyed' him. There has been no suggestion that anything I have written is wrong or that any analysis is faulty-just that my reporting doesn't fit in with what the Secretary wants to hear."

[From the Washington Post, Sept. 22, 1976]

IRS CHECKS TAX FILES OF DRUG KINGS

(By John M. Goshko)

The Internal Revenue Service is checking the tax returns of 375 persons believed to be among the nation's top-ranking traffickers in illicit narcotics, IRS Commissioner Donald C. Alexander said yesterday.

Alexander disclosed this information in an interview where he discussed IRS's new efforts to assist the Drug Enforcement Administration's war against the $10 billion annual traffic in heroin and other illegal drugs.

In response to a directive from President Ford, Alexander and DEA Administrator Peter B. Bensinger signed an agreement on July 27, calling for intensified cooperation between the two agencies.

The pact gives IRS responsibility for pursuing high-level drug dealers who violate federal tax laws by failing to report and pay taxes on profits earned through illegal narcotics dealings.

"DEA has already given us the names and some details as to 375 individuals," Alexander said, "and we're well into the process of pulling the tax returns of these individuals and seeing what they show."

"As a result of what we've found, some already have been put under taxevasion investigations; and we expect that, as we complete their returns, others will be, too," he added.

Neither Alexander nor DEA officials would reveal the names of those being probed. However, Alexander said, all 375 fall into the category of what DEA calls "Class I violators"-persons suspected of being the leaders or financiers of large-scale narcotics rings with dealings running into millions of dollars.

IRS's enlistment in the drug war is an extension of its long-time involvement in combatting organized crime. Ever since the successful 1930 prosecution of Al Capone on tax charges, the federal tax laws have provided an effective weapon for putting leading rackets figures in prison.

This is done by making a "net worth case"-laboriously piecing together a picture of a target individual's financial status by tracking down his holdings and expenditures and then comparing this net worth with the person's reported income.

"Our job is to enforce the tax laws," Alexander said, "so it's perfectly proper for us to go after persons who make huge illegal profits from drugs and who hide these profits and pay no taxes on them."

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But, he cautioned against the idea that a crackdown by IRS on drug dealers can, by itself, significantly halt the drug traffic. Similarly, Alexander said, while IRS can provide important support for the federal drive against narcotics, it should not be regarded as the agency carrying the major burden of this drive. "For one thing, our involvement can't extend beyond enforcement of the tax laws," he noted, "and that makes us a somewhat limited instrument for combatting the drug problem, which involves questions of both supply and demand. "If we succeed in taking some narcotics kingpins out of circulation on tax charges, we still wouldn't necessarily be putting an end to the traffic. We'd have dealt something of a blow to supply, but we'd have done nothing to curb demand; and somebody will come along to fill any demand that gives promise of big profits."

In addition, he added, IRS, which last year had its investigative staff cut by 10 per cent, faces a problem on priorities.

"You have to choose between other programs that also are highly importantother aspects of organized crime like gambling, corrupt politicians or major corporate evaders of the tax system. Any big concentration of our investigative personnel against narcotics dealers means there has to be some lessening of these investigations.

"I also think the FBI could do more in this area than it has done," he added. "The FBI is supposed to investigate organized crime, and the narcotics traffic at the top levels is a specialized facet of organized crime activity. Maybe the bureau should put some of those informers that they're taking away from domestic intelligence work into the narcotics field."

[From the Washington Post, Sept. 27, 1976]

IRS CHIEF STRUCK TAX QUESTION

(By Jack Anderson and Les Whitten)

Over the strong protests of his own enforcement officials, Internal Revenue Service Commissioner Donald C. Alexander last year struck a key question off the income tax forms. The question, which simply asked the taxpayers whether they maintained a foreign account, was intended to catch tax evaders.

Big-time criminals, from corporate embezzlers to mobsters, use secret foreign bank accounts to escape paying U.S. taxes. The taxes they avoid, of course, must be made up by the honest taxpayers.

The question about foreign bank accounts has been used by the IRS to trap tax cheaters. In the biggest tax haven case in history, for example, Ohio businessman Jack Payner has been indicted for falsely answering "no" to the question. Yet Alexander began maneuvering to remove the foreign bank account question from the tax form even before he was sworn in as IRS commissioner. It is an interesting coincidence that his former Cincinnati law firm has been linked to a tax haven in the Bahamas.

An IRS informant in the Bahamas swiped a Rolodex off the desk of H. Michael Wolstencroft, director of the Castle Bank and Trust Ltd. Three cards on the Rolodex contained names of lawyers in Alexander's old firm. We were able to reach only one of the attorneys, who said he had no idea how his name got on the Rolodex.

On May 22, 1973, exactly one week before Alexander took the oath of office, he began a behind-the-scenes campaign to eliminate the foreign bank account question from the tax forms. He forwarded a letter, dealing with an unrelated subject, from a South Carolina lawyer to the IRS committee that deals with tax forms. In an accompanying memo, intended for official eyes only, Alexander brought up the foreign bank account question.

He followed the memo with pressure to remove the troublesome question from the tax forms. This was opposed by his enforcement people. John Olszewski, then the IRS intelligence chief, wrote a confidential memo: "The loss of this (question) would seriously restrict our efforts to identify those who would use foreign banking facilities in avoidance and evasion schemes."

A similar memo from Edward Morgan, then the assistant Treasury secretary in charge of enforcement, also advised Alexander that the question "is a factor in the Treasury Department's efforts to combat the use of foreign bank accounts to facilitate illegal activities." Morgan added sternly that "dropping it from the tax returns at this time would be counter-productive."