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Waxman Asks IRS To Investigate Blackwater

House Oversight and Government Reform Chairman Henry A. Waxman (D-Calif.) called on the Internal Revenue Service Monday to initiate an investigation into whether Blackwater Worldwide failed to pay millions in federal taxes, reviving a long-dormant congressional inquiry of the North Carolina-based security firm that has protected U.S. personnel in Iraq.

In a letter to acting IRS Commissioner Linda E. Stiff, Waxman asked the agency to review whether Blackwater had complied with federal tax law by designating its security guards as "independent contractors" instead of "employees," directing IRS investigators to "take any appropriate enforcement action." In separate requests, Waxman also asked the Dept. of Labor and the Small Business Administration to open similar investigations.

Aides on the Oversight Committee estimate the security firm has failed to pay $50 million in federal taxes since 2000 under the guidelines of its contract with the State Department, according to an internal memorandum distributed to panel members Modnay. Waxman first notified Blackwater CEO Erik Prince in October 2007 that he believed the company had evaded paying millions of dollars in federal taxes for improperly classifying the security guards who work for his firm. As evidence, committee aides cite more than $144 million in small business set-asides the firm has claimed since 2000 and a series of previous legal arguments, including an IRS ruling from March of last year.

The private security firm has been in the congressional crosshairs since Democrats took power. Prince was forced to testify before the Oversight panel last fall about his company's contracts with the federal government after U.S. media outlets chronicled a spasm of violence in Iraq involving Blackwater security personnel.

Stephen M. Ryan, a lawyer in the Washington office of McDermott, Will & Emery who represented Blackwater before Congress last year, was out of the office Monday morning and unavailable to comment on the oversight chairman's request.

The firm has received nearly $1.25 billion in federal contracts since 2000, according to the Oversight memorandum.