By: Leandra Lederman
Since January 18, 2017, the Surly Subgroup has hosted a mini-symposium featuring posts by members of the Discussion Group I organized for the Association of American Law Schools (AALS) annual meeting on the topic of The Future of Tax Administration and Enforcement.” Over the course of the mini-symposium, we have seen a wide range of posts, all of which are listed at the end of this post, following my take on the topic.
Specifically, Sam Brunson argued that, in light of the large tax gap and low IRS audit rate, it’s time for tax returns to be public (with information such as Social Security numbers redacted). Roberta Mann also blogged on possible solutions to the tax gap. In part, she points to improving the process for IRS guidance.
Chris Walker also focused on IRS guidance, blogging on “administrative law exceptionalism,” particularly in the context of the application of APA rules to Treasury rulemaking in Altera, a case in which he served as counsel of record for the U.S. Chamber of Commerce as amicus curiae in support of Petitioner-Appellee Altera in the 9th Circuit, and in which I participated in an amicus brief in support of the Commissioner.
Part of what has caused problems for the IRS has been the outrage in 2013 over its treatment of organizations applying for exemption as social welfare organizations under Code section 501(c)(4) despite names suggesting a focus on political activity. Lloyd Mayer’s post focused on the exempt organizations context, pointing to three issues impeding IRS enforcement: (1) unchecked growth in the use of tax-exempt entities; (2) vague facts-and-circumstances tests for qualifying for tax exemption; and (3) shrinking IRS resources, particularly in the exempt organizations area. He also proposed substantive law changes and a more robust enforcement vehicle.
Shu-Yi Oei and Steven Dean discussed aspects of the international enforcement context. Steven examined the trade-offs of rules versus standards in that context, critiquing both the Foreign Account Tax Compliance Act (FATCA) and the OECD’s Common Reporting Standard. Shu-Yi highlighted the downsides of lawmaking driven by leaked tax-relevant data, including agenda manipulation by leakers; costs and delays in the transmission of leaked information; and resulting laws that are poorly designed and may impose inappropriate burdens, with FATCA an example of that problem.
Clint Locke focused on the IRS, discussing the ethical conflicts IRS attorneys can face in the U.S. Tax Court, particularly when the taxpayer is unrepresented by counsel. He questions whether, in this context, IRS attorneys can ethically serve both the public and the IRS.
Bobby Dexter and Ted Afield addressed non-tax laws that implicate tax enforcement. Bobby argued that the IRS’s power to seize tax refunds for non-tax debts may introduce a variety of problems, including enforcement, privacy, and equity concerns. By contrast, in the student loan context, Ted argued that student loan repayment programs would benefit from being modeled after the offer-in-compromise program.
Tax enforcement certainly is a multi-faceted problem, with no easy solutions. My own view, expressed in “IRS Reform: Politics As Usual?,” 7 Columbia Tax J. 36 (2016), is that the single most important challenge for the future of tax administration is IRS underfunding. That affects all aspects of the IRS’s mission, including service, enforcement, and cybersecurity. It also fosters income inequality. It is hard for the IRS to do anything well when it has been so starved of funding that it is hemorrhaging employees. Punishing perceived transgressions with budget cuts simply starves it further and sets it up to fail. It remains to be seen what will happen in the Trump Administration but Treasury secretary nominee Steven Mnuchin’s early remarks look promising.
The Mini-Symposium posts are all categorized under “2017 Mini-Symposium on Tax Enforcement and Administration;” clicking there lists them in reverse chronological order. For ease of reference, here is a list of the individual posts, in alphabetical order by author, linked at the date:
- W. Edward (“Ted”) Afield, Applying Offer-in-Compromise Principles to Student Loan Repayment (Jan. 27, 2017)
- Samuel D. Brunson, Privacy Is Dead: Crowdsourcing Tax Enforcement (Jan. 30, 2017)
- Steven A. Dean, Rules and Standards in International Tax Enforcement (Feb. 3, 2017)
- Bobby L. Dexter, As If It Were A “Tax” (Feb. 8, 2017)
- Leandra Lederman, 2017 Mini-Symposium on “The Future of Tax Administration and Enforcement” (Jan. 18, 2017)
- Clint Locke, IRS Attorneys as Public Servants and Enforcers (Feb. 1, 2017)
- Roberta F. Mann, Mind the Gap: Effect of IRS Budget Cuts on the Tax Gap and Potential Solutions (Jan. 23, 2017)
- Lloyd Hitoshi Mayer, Is the Emperor Naked? Non-Enforcement of Tax-Exempt Organization Laws (Feb. 6, 2017)
- Shu-Yi Oei, Leak-Driven Lawmaking (Jan. 25, 2017)
- Christopher J. Walker, The Stages of Administrative Law Exceptionalism (Jan. 20, 2017).