IRS Leadership Shakeup: From Tea Party Scandals to Today’s Leave of Absence – Chaos on Repeat

If you thought the IRS couldn’t get any more chaotic, congratulations: the agency just said “hold my audit file" with the new IRS Leadership Shakeup.

On July 29, 2025, Holly Paz, head of the IRS’s Large Business & International (LB&I) Division, and Elizabeth Kastenberg, acting director of the Office of Professional Responsibility (OPR), were placed on administrative leave (same leave the DRP'ers are on) pending an internal investigation.

When you didn't think it would happen to you.

These aren’t mid-level managers. These are two of the most critical leadership roles in the IRS:

• LB&I Division – oversees audits of the biggest companies, global partnerships, and complex high-dollar taxpayers.

• OPR – polices tax professionals (like CPAs, attorneys, and enrolled agents) when it comes to ethics and standards.

The official word: an investigation into “conduct toward Republicans.”Translation: Washington, D.C. has decided that politics now has a seat at the exam table.

And for those of us who’ve been here before? This is déjà vu with a side of paperwork.

Why the IRS Leadership Shakeup Matters—Now

1. LB&I is the IRS’s corporate enforcement backbone. With Paz on leave, large corporate audits could slow down even further. And let’s be real: they were already moving at the speed of a fax machine in 2024.

2. OPR keeps the tax profession honest. If there’s a leadership vacuum here, it could mean delays in discipline cases against unethical tax practitioners. Or worse—no one watching the henhouse.

3. The timing is brutal. This comes right after Billy Long (yes, the former Congressman, former employee retention credit promoter, and present Auctioneer) took over as IRS Commissioner and amid massive workforce cuts. When you’ve already lost half your leadership and a quarter of your staff, this is the opposite of stability.

   

   "When you're in a holding pattern waiting on a decision that you should have already made."

Administrative Leave ≠ Guilty

In IRS-speak, “administrative leave” doesn’t mean someone is guilty. It’s HR’s way of hitting the pause button while the internal watchdog sniffs around. They still get paid. They just aren’t making decisions while the investigation is underway.

The Tea Party Connection: Old Scars, New Spotlight

If Holly Paz’s name sounds familiar, it’s because she was at the center of one of the IRS’s biggest scandals:the 2010–2013 Tea Party targeting controversy, where certain tax-exempt applications were flagged for extra scrutiny if they contained keywords like “Tea Party” or “Patriots.”

The fallout was huge:

• Applications languished for months or years

• Accusations of political bias flew

• Multiple lawsuits and investigations were launched

In 2017, during NorCal Tea Party Patriots v. IRS, her deposition (along with Lois Lerner’s) was unsealed, and those transcripts still haunt the Service.

Paz in Her Own Words

From those unsealed court documents:

“For most (c)(4) applications—even with some political language—I believed approval was legally warranted.”– Holly Paz, deposition, 2017

That directly undercuts the IRS’s blanket targeting approach.

And on whether this issue was new:

“Political campaign intervention in 501(c)(4)s was not something we had previously dealt with very much.”– Holly Paz, deposition, 2017

Yet in a 2011 email, Paz herself wrote:

“…the fact that this is not a new issue for the agency.”

That’s not just a gap—it’s a canyon between the sworn testimony and the paper trail.

The Four Big Inconsistencies Investigators Flagged

Congressional reports laid out four key points where Holly Paz’s statements didn’t line up with the evidence:

1. Novelty of the issue – She said it was new; her own email says it wasn’t.

2. Equal treatment of political groups – She compared “Tea Party” groups to “generic” cases (“like Kleenex”), but field staff confirmed progressive groups weren’t targeted.

3. Awareness of BOLO list changes – Claimed April 2012; emails show January 2012.

4. Knowledge of improper screening – Said June 2011; internal memos show she was informed by March 2011.

These are pulled directly from House Oversight and Judicial Watch records.

Honestly, the fact the oversight committee were able to parce together minor discrepancies between dates is telling. It's telling that it wasn't as polical as it sounded - it really highlighted how out of wonk things get when the most senior leaders micromanage decisions and operations from their level.

"When the person who has no idea how the work gets done… tells the people who actually do it exactly how to do it."

Take a look at my recent blog article showing how the highest level 'executives' are getting MORE involved with field decisions. It's not surprising she couldn't remember all her emails as a current IRS executive said:

"I know from personal experience trying to get her on the phone is a wasted cause. It's all email with that one."

Anyhow - enough of the inside scoop and non-proprietary information. . .

Timeline: Then to Now

Date	Event
2010–2013	Targeting of “Tea Party” 501(c)(4) applications leads to congressional investigations.
May 2013	IG report exposes practice; Holly Paz testifies, claiming it was a new issue.
2017	Paz and Lois Lerner depositions taken in NorCal Tea Party Patriots v. IRS.
2022	Court orders large-scale unsealing of deposition transcripts, with some redactions.
June 2025	Former Rep. Billy Long becomes IRS Commissioner.
July 29, 2025	Holly Paz and Elizabeth Kastenberg placed on administrative leave amid investigation into “conduct toward Republicans.”

What It Means for Businesses and Tax Professionals

• Audits: Expect an even slower LB&I process. Approval chains were already long; this adds another bottleneck.

• Oversight: OPR’s disciplinary reviews may slow down, meaning rogue preparers might get a longer leash.

• Uncertainty: Leadership turbulence = unpredictability in compliance priorities.

  
  

ExFed Tax Perspective

Having worked inside this agency, I can tell you this:The IRS’s mission was once clear. These days, it’s starting to feel like a reality show. The whole spilled tea thing was not Paz's only job. She would have been in the know and involved in all operational decisions.

But here’s the good news: even when the IRS is distracted, your compliance and planning shouldn’t be. If you’re a business or high-net-worth individual, these leadership changes are your signal to shore up your records, plan ahead, and get good representation.

Key Takeaway

From the Tea Party scandal to today’s shakeup, Holly Paz has been at the center of some of the IRS’s most politically charged chapters.And while the cast of characters changes, the script—politics, oversight failures, and taxpayer headaches—remains the same.

The IRS may be distracted, but your tax exposure isn’t. Enforcement is still pressing along. Get ahead of the chaos before it gets ahead of you.