Report on CI Chief's Discussion on the State of IRS CI (7/29/26)

This entry is to alert readers to a recent article on CI. Joseph De Gregorio, Changes to IRS Disclosure Program Should Spark Compliance Checks (Bloomberg Tax 6/26/26), here. The author summarizes some points made by CI Chief Jarod Koopman at the NYU Tax Controversy Forum. 

Key points of the article are (I have bold-faced some from the quotes):

1. “The last 18 months produced a detection gap. Approximately 1,700 IRS-CI employees had been reassigned to Immigration and Customs Enforcement operations by September 2025. Abusive tax scheme investigations collapsed 63% in fiscal year 2025 from 92 to 34, the lowest level in a decade. The enforcement budget was cut 8% for 2026, to its lowest inflation-adjusted level since 1988.”

2, The diverted CI agents are “coming back.”

3. Technology should permit CI to do its job more efficiently. “IRS-CI is running large language models inside its own firewalls, on its own data. The output is enhanced pattern recognition across the Form 1099 universe, the Foreign Bank and Financial Accounts database, the beneficial ownership registry, financial institution suspicious activity reports, and the international information exchange pipeline built under Foreign Account Tax Compliance Act and the common reporting standard. Fewer agents, but agents working with a detection instrument the prior enforcement cycle never had.”

4. “Koopman confirmed that approximately 60% of CI’s current work is on tax fraud.”

5. “Reduced IRS-CI headcount doesn’t mean reduced criminal tax risk. It means the risk shifted from broad detection across a wide population to deep detection concentrated on the cases AI-assisted analytics uncovers from third-party reporting, international data exchange, and financial institution data.

6. “When enforcement resources are constrained, agencies prioritize cleaner, more provable cases with strong paper trails. Clients with amended K-1s, offshore account statements, and Form 8938 discrepancies are exactly who the algorithm finds first.”

D.C. District Court Dismisses Tax Evasion and Tax Perjury Counts for Lack of Venue in D.C. (7/23/26; 7/26/26)

In United States v. O’Donoghue, ___ F.Supp.4th ___ (D.D.C. 7/22/26), the Court (Judge Colleen Kollar-Ketelly) dismissed 8 Counts of a 9 Count indictment for lack of venue in the District of Columbia. The opinion can be viewed: CL here, TN  here, and GS here; the indictment can be viewed: CL here. The dismissed Counts were for tax evasion § 7201 and subscribing to false tax returns § 7201(1) (aka tax perjury). The undismissed count (Count 9) was for making false statements in a proffer session at DOJ offices in D.C., in violation of 18 U.S.C. § 1001.

This post will initially be a notice of the opinion with limited comment. I will post further analysis tomorrow. In the meantime, my initial reading is that it covers a lot of ground familiar to fans of tax crimes (the study rather than the commission). I say that because many leading tax crimes cases make at least a cameo appearance in the opinion.

The overall crux of the case is Constitution Article III’s requirement that trial “of all Crimes . . . shall be held in the State where the said Crimes shall have been committed.” This limits statutes that might otherwise permit venue elsewhere. The Government was relying upon such statutes to permit venue. More on this later. The Government was also arguing that the essential conduct for the 8 dismissed counts included conduct that was outside the U.S., thus permitting venue in the District of Columbia. The Court swatted that down. More on this later.

So, I will just post my quick reactions here and be back with more tomorrow.

1. The lawyering for O’Donoghue appears to have been great! He had good counsel, identified in CL here (click the Parties and Attorneys tab). I haven’t read the briefs but may do so tomorrow or even later—emphasize may because I am otherwise busy). I assume that there was good briefing because I infer that the Court worked from the submissions. Added 7/24/26 4:00pm: The CL Docket Entries are here (some with links to the briefing at ## 79, 89, 95 & 113 (all of . those key documents can be viewed rom the CL docket sheet, except the first; if someone who has joined CL will the CL docket sheet and retrieve it from PACER, it should show up on the CL Docket Sheet; I messed it up on PACER and PACER will not let me retrieve it again.)

2. This may be a pyrrhic victory because, even if the statute of limitations has otherwise closed, 18 U.S.C. § 3288, here, extends the statute of limitations for 6-months after dismissal, assuming an original timely indictment in D.C. Thus, it appears that the Government can seek an indictment in the Western District of Texas which will be a bit of an inconvenience because the undismissed Count (Count Nine, for false statements) will presumably be tried in the District of Columbia, which could add major costs to the Government and O’Donoghue.

Added 7/24/26 1:15pm: