IRS Business Chief Sues IRS Alleging Retaliation to Oust Her (1)

A top IRS leader put on administrative leave for her unspecified, alleged conduct against Republicans is suing the IRS and the Treasury Department, claiming they unlawfully violated her privacy.

Holly Paz, commissioner of the Large Business and International Division, filed a complaint in the US District Court for the District of Columbia Thursday against the agencies, alleging they leaked her employment data and violated the Privacy Act. She asked the agencies to pay damages.

“Ms. Paz is the subject of an intentional vindictive, retaliatory undertaking by officials employed by the Defendants who are unlawfully leaking information retrieved from her Privacy Act Systems of Records to third parties, to include the media,” the complaint said.

Two IRS officials, including Paz, were put on administrative leave July 29 while the IRS investigated their alleged conduct, a person familiar with the situation said at the time.

Paz and Elizabeth Kastenberg, who oversaw the Office of Professional Responsibility, both worked for Lois Lerner, the central figure of the 2013 tax-exempt controversy.

Right-wing groups leading up to the attempted firings amplified calls to remove IRS officials with ties to the matter.

Over a decade ago, the IRS’s tax-exempt division was found to have flagged conservative-leaning nonprofit applications spurring investigations and congressional hearings. It was later found that the IRS was also flagging progressive groups.

On Sept. 9, Fox News and the Washington Examiner wrongly reported that Paz was fired from the IRS. Both have since corrected some stories. Bloomberg Tax’s reporting is mentioned in the suit.

Paz remains on administrative leave and is in the advance notice period after the IRS proposed her removal, the lawsuit said.

Paz, who was notified Sept. 2 of the IRS’s proposal to remove her from the agency, has until Oct. 17 to respond. She requested an oral reply which has not been set yet.

IRS and Treasury spokespeople didn’t immediately return requests for comment on the complaint.

Paz is represented by Mark S. Zaid, P.C.

The case is Paz v. IRS, D.D.C., No. 1:25-cv-03256, 9/18/25