From the Milken Institute Review, August 6:
IRS Officials' Stock Holdings and Corporate Tax Outcomes
The Internal Revenue Service plays an important role in improving corporate transparency and encouraging corporations to act in the best interests of their shareholders and other stakeholders. The agency makes increasingly consequential decisions about audit selection and strategy, and receives substantial private financial disclosures from firms.
However, its enforcement activities and other interactions with firms remain private until they are disclosed by the firm in financial statements. Thus investors are not immediately aware of IRS-related information about the firms they invest in, which potentially creates profitable trading opportunities for tax officials. Our research investigates whether the stock trades of high-ranking IRS officials are associated with tax-related information.
Nuts and Bolts
IRS officials likely possess relevant information about firms from at least three sources. First, they are privy to information on enforcement decisions concerning corporate taxpayers before it is disclosed to the public. Second, they have access to corporate tax returns, which are not publicly disclosed but contain valuable information about firms’ operations and organizational structures. Third, they have advance notice of IRS policy adjustments and initiatives that may lead to changes in scrutiny for certain firms and industries. This information — not available to other market participants — may cause the personal financial transactions of IRS officials to be associated with positive abnormal returns and future tax enforcement outcomes.We created a dataset of more than 5,000 private stock transactions conducted by IRS officials between 2016 and 2020, using financial disclosure forms recently released to the public. We began by analyzing the extent to which the stock transactions of these officials generated positive abnormal returns. Our findings reveal that IRS officials’ trades, predominantly their purchases, generated abnormal returns of 0.7 percent to 3.5 percent 60 to 120 days after the trade. These findings suggest that IRS officials had relevant information that the market had yet to fully incorporate into stock prices....
....MUCH MORE
Some days I wake up and think "I sure could use some of that 'relevant information that the market had yet to fully incorporate into stock prices'"