Juneteenth And Section 7503: A New Federal Holiday Give a New “Last Chance” For Some

Today guest blogger Bryan Camp discuses the implications for tax procedure of the new federal holiday celebrating Juneteenth. National recognition of Juneteenth resulted from a years-long campaign by many including the incredible 94-year old activist and survivor of white supremacist violence Opal Lee. Christine

Yesterday, President Biden signed legislation that made June 19th a federal holiday. It’s the first new federal holiday since President Reagan signed on to the creation of Martin Luther King Day back in 1983.

The new holiday means paid time off for some. Certainly all federal workers will get it, and other workers, too, to the extent one’s employer automatically pegs paid holidays to the federal calendar.

But the first thought for tax procedure nerds is, of course, IRC §7503. That statute provides that when any deadline for performing “any act” required under “this title” falls on Saturday, Sunday, or a “legal holiday,” why then “the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday.” The Tax Court piggybacks off of this rule, saying that §7503 also applies to deadlines for Tax Court petitions. TC Rule 22.

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Section 7503 will apply to the new holiday just like it applies to others. This year, for example, June 19th falls on a Saturday. The enacting legislation says that when that happens, the holiday will be celebrated on the preceding Friday, June 18th. And THAT means that June 18th is now a legal holiday, so §7503 acts to defer any act due today until Monday, June 21st. I have not read the legislation, but I am guessing that when June 19th falls on a Sunday, the holiday will be celebrated on the next day, Monday. After all, we cannot let holidays go to waste.

Let’s call that the 3-day weekend rule!

This is also a good moment to review a couple of other quirks about §7503 associated with the statute’s definition of “legal holiday.” Surprisingly, the term is not defined to mean a federal holiday, at least not directly. Let me explain.

The term encompasses two types of holidays. First, the term means any federal holiday. Technically, the statute actually says that the term just refers to “a legal holiday in the District of Columbia.” However, since DC is currently under federal jurisdiction that statutory definition means that any federal holiday is a “legal holiday.”

One quirk involving this definition is that DC celebrates a holiday called “Emancipation Day.” That day is supposed to fall on April 16th but the enacting legislation also contains a 3-day weekend rule. The result is that when April 15th falls on a Saturday, that means that Monday April 17th is a legal holiday in DC, which means that §7503 kicks in and pushes the April 15th filing date to April 18th. That is what happened in 2017 for tax year 2016 returns.

The second type of holiday that triggers operation of §7503 is trickier to figure out. It provides that when any act is required “to be performed, at any office of the Secretary or at any other office of the United States or any agency thereof, located outside the District of Columbia but within an internal revenue district” then the term “legal holiday” also means “a Statewide legal holiday in the State where such office is located.”

One example of a statewide legal holiday that sometimes affects the April 15th filing deadline is the Patriots Day holiday. No, it’s not about the sports team. It is designated to be celebrated on the third Monday in April (so no need for a 3-day weekend rule). Several states have that day as a statewide holiday.

So what happens when the third Monday in April is the 15th, 16th, or 17th (do you see why it matters that it falls on the 16th or 17th?). So far, the IRS has taken the position that only those taxpayers who live in the states that celebrate the holiday can use §7503, to push their filing deadline to Tuesday, even if they are required to file in an IRS Campus that is not in a state celebrating that holiday. See IRS Notice 2006-23. That does not make much sense to me. The statutory language would appear to key the effect of a statewide holiday to whether the IRS office where a document must be filed is in the state, not where the taxpayer required to file happens to live. Thus, because there is a a returns processing center in Andover Massachusetts, a state that observes Patriots Day, then §7503 should apply to all taxpayers required to file in Andover.

Section 7503 is woefully outdated. The reason for the two separate definitions was that in the old days, taxpayers filed their returns in local offices but much of the processing and assessment work was done in Washington D.C. And when I say “the old days” folks, I mean the really old days, before the introduction of the Computing Centers and centralized returns processing in the early 1960’s! That’s how outdated the language is.

Further, alert readers will also notice that the statute refers to “internal revenue districts.” They no longer exist. They were abolished by the 1998 IRS Restructuring and Reform Act. But did Congress think to change the language in §7503? Noooooo. So we just stumble along, applying outdated statutory language to new situations as best we can. Thankfully, the creation of a new federal holiday fits very nicely within the definition of “legal holiday” contained in §7503. ….until D.C. achieves statehood.

Calling the Number Provided in IRS Correspondence

This has been a tough year for the IRS.  For a variety of reasons not the least of which is the pandemic, it has faced numerous challenges.  My understanding is that its performance in answering the general phone line during the filing season ranged somewhere between 2-5% which is not good but it’s not zero. 

A couple years ago I wrote a complaining post about the offer in compromise unit in Brookhaven that gave out a phone number no one ever answered.  I know from personal experience with that number how frustrating it can be to try to reach a number, the only number you are given, and no one ever answers.  I likened the situation to the circumstances facing Joseph K in Franz Kafka’s classic novel, The Trial.  After I wrote that post, the phone problem with Brookhaven was fixed very quickly.  Inspired by that success, and discouraged my two specialty phone numbers that seem to be a dead letter box, I am writing another post about phone numbers the IRS provides but does not answer.  I am not sure how this happens but it should not.  I hope that someone can address the problem.

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The first phone number that no one answers is the phone number for people seeking to verify their ID.  I encountered this earlier this year when I had back to back offer in compromise cases the examiners expressed a readiness to accept but the taxpayers had an outstanding ID verification issue.  I obtained the phone number to verify their identity and gave it to the clients expressing to them the urgency with which they needed to address the verification issue.  Each client took me seriously and tried to verify their identity but could never get through.  The offer examiners give you a deadline to do the things they request of you.  I understand why they do this and do my best to meet their deadlines but here we could not meet the deadline since the clients could not get anyone to answer the phone.  I sent a message to my local taxpayer advocate asking if he could help.  He got each of the cases assigned to a case advocate.  The case advocate was able to make the ID verification happen, the clients got their offers accepted, all was well but this is an expensive way for the IRS to deal with a bad phone number.

This past week I received a phone call from the person who runs the After Innocence project.  He has created an organization to assist exonerees with all of the issues they face once released.  The tax clinic at Harvard does the tax work for the exonerees and it has been very rewarding work for the students over the past several years.  We have Kelley Miller to thank for getting us started and for jumping in to assist us occasionally.  The director of the project reached out to me because he now has 20 exonerees who need to verify their ID with the IRS in order to receive a refund or a stimulus payment; however, he cannot get anyone to answer the phone when he calls the number provided.  I was not surprised that he was having trouble with this since his difficulty mirrored the difficulty my clients had earlier this year.  Because going through the verification process serves as a gateway to other matters – getting an offer accepted or getting a refund – this is a critical number.  I solicit suggestions on how to get through to the number or to work around the problem created by the IRS not picking up the phone when the number provided in its correspondence is used.

A second phone number is not working according to readers of the blog.  I do not have personal experience with this number.  I wrote a post last June about lost or destroyed EIP cards.  We have received 27 comments on this post to date but I want to highlight some that focus on the phone issue and two which are very recent:

June 25, 2020 – Did you figure out how to get your replacement card cuz I have had no luck and when calling that number it told me the same thing I am stuck and need help

March 31, 2021 – There is no number that one they have 1800-240-8100 does not work

April 26, 2021 – The only recourse is to call an 800 customer service line, when you are prompted to press 2 for a lost card, it spews some rigamarole and disconnects you…I’ve tried several times to replace my lost card,
With the same result

May 13, 2021 – Same Results that Number does not Work. What can you do? It says press 2 , and then says check http://www.irs.gov/eip which leads back to that number which you can’t do anything. If you find any info which works let me know via email

The inability to get through to a specific phone number for resolving a problem creates more problems that the difficulty getting through with a general call.  Neither problem is good but if you need to get through to a number to receive a refund or a replacement stimulus card the inability to get through becomes magnified.  If/when Congress gives the IRS additional funding, I hope that some of it will be headed to fix these types of customer service issues.

Advanced Child Tax Credit

Congress has passed legislation creating a much expanded child tax credit (CTC) and requiring the IRS to make advance payments of the CTC during the 2021 tax year starting in July.  The expanded credit provides a $3,600 credit for every child under 6 and a $3,000 credit for every child under 17.  The expanded CTC does not require that taxpayers have earned income in order to qualify.  The credit will phase out for taxpayers earning more than X and completely vanish for taxpayers earning more than Y.  Currently, the expanded CTC only happens for the 2021 tax year though many efforts exist to expand it to a more permanent fixture.  Whether the expanded CTC has a life beyond 2021 could depend on the ability of the IRS to surmount the significant administrative hurdles to make it happen without drawing too many negative stories of parents unpaid or ineligible individuals paid.  The IRS faces a tough challenge.  

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At the ABA Tax Section meeting last week there was a couple programs on the CTC because this is such a big change and because the almost immediate implementation raises many questions as well as many challenges.  At the Individual and Family meeting on Friday panelist Margot Crandall-Hollick, Acting Section Research Manager, Congressional Research Service, created some excellent slides showing the history of the CTC and the way it will work for different families.  Recent studies indicate that nearly 1 in 7 US children live in poverty. Originally enacted in 1997, the child tax credit (CTC) is part of our nation’s patchwork efforts to address the high costs of raising children. The panel   focused on the underlying policy issues behind the adoption of the expanded CTC and administrative issues associated with the implementation. 

Ms. Crandall-Hollick has kindly allowed us to display those slides here:

In addition to the background information about CTC and the basics of the law, the panel included Ken Corbin, the Commissioner for Wage & Investment at the IRS who is tasked with making this work.  He provided some answers regarding where the IRS in its effort to ramp up for this and noted some areas where the IRS still seeks answers.  Mr. Corbin pointed to the experience of the IRS in issuing the stimulus payments as the starting point for its approach to delivering the advanced CTC payments.  He not only talked about lessons learned from this experience but the partnerships developed with the Social Security and Veterans Administrations as well as other partner within and without the government.  He sounded positive that the IRS can meet this challenge.  I certainly hope that it can, because the delivery of the advanced CTC payments represents a significant policy shift to insure that children will have a better chance.

One of the major problems with the Earned Income Tax Credit, the largest refundable credit the IRS has administered to this point, concerns payments to the wrong individual, which can occur for a wide variety of reasons.  The fluidity of many family situations often makes it difficult to correctly claim the credit, the complexity creates confusion and the refundable nature of the credit creates an incentive to wrongfully claim the credit that proves too tempting for some taxpayers and some preparers.  He spoke of a new authentication process the IRS has developed that will work on the phone or in person.  Perhaps this authentication process will eliminate some of the problems that have caused concern with the payments of the EITC refundable credit and perhaps the tool(s) developed for the expanded CTC will have some crossover benefits in boosting the accuracy of the EITC claims.  I am glad to hear that it has developed such a process.  I am a bit concerned that even if the process works perfectly, the IRS ability to answer the phone and to meet taxpayers in person may create a barrier to the success of the process. 

Mr. Corbin indicated that the IRS will potentially send out three letters to the intended recipients of the expanded CTC.  First, the individual will receive a notice alerting them to their potential eligibility.  I assume that this letter will provide some mechanism for the individual to opt out of the expanded CTC as opting out is one of the features of the program.  By opting out the individual identified by the IRS signals that someone else, usually the other parent, should receive the advance payment of the expanded CTC.  Second, the individual will receive a notice that the payment is coming.  I assume this notice will signal the amount of the payment.  He did not provide enough detail to make clear whether the first or the second notice would provide an opportunity for the taxpayer to notify the IRS that the number of eligible children in the IRS calculation is wrong perhaps because of a new birth or a child moving to live with a different family unit.  Third the individual who has received the payments will receive a reconciliation statement at the end of 2021 that will be used to file with their 2021 tax return.  The IRS may develop a system similar to the premium tax credit by which taxpayers will reconcile that the payments received were correct.

In response to questions Mr. Corbin indicated that the IRS was still working on the process for resolving disputes over who is entitled to the advanced CTC payment.  While the vast majority of cases will probably work smoothly, family dynamics dictate that situations will exist where more than one person claims the credit for a child.  Given the abbreviated time frames within which the payment determinations are being made the ability of the IRS to create a system for resolving disputes during the 2021 period will provide quite a challenge and could severely strain its resources.  On the other hand, if the IRS cannot find a reasonable way to handle disputes, it will receive much criticism.

Congress has once again tasked the IRS to perform a very difficult task in a short time period while its resources are already strained past the point of allowing it to provide the best service on the tasks already on its plate.  The IRS will once again try to pull a rabbit out of the hat as it did with the stimulus payments.  There will, no doubt, be problems.  Keeping the problems to a minimum and delivering the payments to families could impact the long term viability of a program that makes a lot of sense.

Observations from the ABA Tax Section Meeting

This week is the ABA Tax Section meeting.  Normally, this is the biggest meeting of the year because it takes place in DC and the Tax Section can attract all of the government speakers.  With everything happening in the tax world at the moment, there would be lots of important players to see in person.  Like almost all meetings, this one is virtual which in some ways makes it easier to attend but in others leaves an empty feeling.

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Even though the meeting is not physically in DC, there have been lots of government speakers and things to report from the meeting so far.  Judge Toro, representing the Tax Court, indicated that the Court is pleased with the results of some of the changes it has made to its procedures as a result of the pandemic.  To assist the remote trial process, some documents, such as the stipulation of facts, need to be filed before calendar call.  The Court is also holding many more pre-trial conferences and getting engaged with the parties earlier in the process and this is apparently leading to results that the Court finds pleasing.

While some judges routinely engaged with taxpayers prior to calendar call, for many Tax Court judges their first interaction with taxpayers occurred at calendar call unless the petitioner or the government sought a pre-trial conference.  It always seemed to me that the process would benefit from earlier engagement by the judge assigned to try the case and it does not surprise me that the Court is finding this helpful in moving the cases.  I hope that the practice takes hold and continues post-pandemic because it helps everyone.  

The Tax Court has a relatively high default rate of petitioners who file but get dismissed for failure to properly prosecute.  Certainly, the petitioner who files and does not engage bears some responsibility for their action, but the system seemed designed to promote disengagement.  With over 70% of the petitioners filing pro se, these petitioners receive an answer which in almost all cases denies everything they have alleged in their petition.  A surprising number of pro se petitioners believe that the answer means they have lost the case because they do not understand the role of pleadings.  Then, after the answer, nothing happens on their case for months in many cases because the attorney who answers the case ships it off to Appeals which takes a long time to engage with the taxpayer.

During this period the taxpayers, who were among the 3% of statutory notice recipients engaged enough to petition the Tax Court, lose their interest in the case and drop out ultimately resulting in a dismissal for failure to properly prosecute.  The Tax Court sends them a letter acknowledging their petition and providing some guidance on what will happen with their case but the letter does not really prepare them for the Answer and the long period of silence.  The more the Court engages with them the less taxpayers will drop out of the system and the better prepared they will be when it comes time to try their case or, even better, to resolve it by settlement.  Some of the actions the Court is taking during the pandemic have helped this situation.  It will be interesting to see if these actions statistically make a difference in the number of drop out cases over the long haul.

Earlier this week the Tax Section announced that Special Trial Judge Panuthos received this year’s Distinguished Service Award.  Judge Panuthos is a great selection and his selection provides recognition for the work he has done over decades to make the Tax Court a more inclusive place for the many pro se taxpayers who come there.  The Tax Court recognized Judge Panuthos for his work in 2012 by bestowing upon him the Murdock Award for distinguished service to the Tax Court.  The ABA recognition helps in continuing to highlight the importance of his work in making sure that underrepresented individuals receive proper treatment in the tax system.  

Yesterday, the Tax Section held an event with Judge Panuthos and this year’s Janet Spragens Pro Bono Award winner, Susan Morgenstern, to highlight their work on behalf of low income taxpayers.  Susan was one of the early entrants to the world of low income tax clinics at Legal Services organizations and promoted tax clinics to other Legal Services organizations.  Now, the tax clinics at these organizations represent the largest number of tax clinics.  Because Legal Services organizations serve low income individuals with a wide variety of civil legal problems, getting tax clinics into these organizations has been a vital benefit to providing them with necessary representation as the tax code became the source for more and more benefit programs.  Linking back to the earlier discussion about dismissals for failure to properly prosecute, Susan has pushed the Court for many years to provide stronger engagement to address that problem.

Another topic discussed yesterday at the ABA meeting by a Chief Counsel executive on an issue written about frequently in this blog concerns the timing of supervisory approval in penalty cases.  On May 11, 2021, another IRC 6751(b) case came out holding that the IRS did not approve the penalty in time, Battat v. Commissioner, T.C. Memo 2021-57.  Although arguably not breaking new ground, which is why it came out as a memo opinion, it tossed the penalty because the revenue agent put it in a report before getting approval.  Like many of these cases in the past year, this case goes back to action taken a decade ago.  The docket number in the case is 17784-12 which tells you that it was filed with the Tax Court nine years ago.  Nonetheless, the comments from Chief Counsel at the meeting essentially stated that as the Court pushes the timing of the approval back further and further in time it will force agents to get approval for penalties before they have properly developed the facts.  

I understand the concern but am not sure I agree with it.  Many of the cases coming out relate to a period before the IRS paid attention to the statute.  Now that it is paying attention to the statute, perhaps revenue agents will develop the facts before they issue their reports.  No doubt there will be cases where taxpayers do not work with the agents and the agent will issue a report uncertain about all of the facts.  I hope that the exercise causes agents to pay more attention to penalties rather than being casual about them and I suspect it already has.  The next fight in the circuit courts may occur over the automatic approval cases of 6751(b)(2)(B) and what constitutes, or should constitute, the waiver for penalties imposed  where the IRS seeks the exception from prior approval of “any other penalty automatically calculated through electronic means.”  I think we will hear from Caleb Smith on this issue in a couple of posts in the near future.

Senate Finance Committee Tax Gap Hearing Today

Last month Commissioner Rettig testified before the Senate Finance Committee, and he stated that the tax gap could be approaching $1 trillion annually. That got a lot of attention, especially as the IRS’s own official tax gap estimates pegged the average gross tax gap at $441 billion per year, though it is based on data from 2011-2013.  There’s also a lot of attention in general to possible changes to the Code as a part of the administration’s proposed legislation including many recommendations related to tax procedure. Some people are predicting that this could be the biggest year for changes to tax procedure since 1998. 

Today the Senate Finance Committee’s Subcommittee on Taxation and IRS Oversight will be holding a follow up hearing on the tax gap. The testimony will be live streamed starting at 2:30. 

We will update this post later with links to the written testimony of the witnesses.

Here is the witness line up for today:

Barry Johnson, Acting Chief, Research And Analytics Officer, Internal Revenue Service

Doug O’Donnell, Deputy Commissioner, Services & Enforcement, Internal Revenue Service

J. Russell George,Treasury Inspector General For Tax Administration

Nina E. Olson, Executive Director, Center for Taxpayer Rights

Charles O. Rossotti, Former Commissioner (1997-2002), Internal Revenue Service

UPDATE: See here for a link to a recording of the testimony https://www.youtube.com/watch?v=frlZ6GQnd6A

Preview of This Week’s ABA Tax Section Virtual May Meeting

The ABA Section of Taxation kicks off its third full virtual meeting today. A full week of programming follows today’s plenary session. I will preview a few sessions of interest in this post. The full program is available here. To register, click here. (Registration is free for J.D. and LL.M. students.) Sessions are all held live, but registrants can also view sessions on replay – a major bonus of the virtual format for those of us who like to attend multiple committee meetings. New attendees are encouraged to join an orientation reception this afternoon at 4:30 p.m. Eastern, hosted by the Young Lawyers Forum and the Diversity Committee.

The opening plenary today at 11 a.m. Eastern features Kimberly A. Clausing, Deputy Assistant Secretary, Tax Analysis, U.S. Department of Treasury, discussing tax policy priorities within the new administration and how tax policy has been designed to respond to key challenges of today, including economic recovery, social inequality, and climate change.

Also of note, at the plenary session the Tax Section will present two important awards to two extremely deserving people: The Section will present the 2021 Janet Spragens Pro Bono Award to Susan Morgenstern and the 2021 Distinguished Service Award to Hon. Peter J. Panuthos. Susan Morgenstern and Judge Panuthos have long been champions of inclusivity and fair treatment for taxpayers.  They will engage in a longer conversation on Wednesday afternoon at 4:30 p.m. eastern, moderated by Nina Olson.

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Readers of this blog may be interested in the panels happening at the Administrative Practice, Individual & Family Taxation, Court Procedure & Practice, Diversity, Tax Collection, Bankruptcy and Workouts Committee, and Teaching Tax Committees, as well as the Pro Bono and Tax Clinics Committee. There are too many excellent panels to highlight them all here. I encourage readers to check out the full program and the schedule at a glance.

The Administrative Practice committee meets at 10:30 eastern on the morning of Wednesday, May 12, presenting Important Developments and then a panel on refund claims and procedures which is sure to be of interest.

Where, Oh Where Could My Refund Be? Obtaining a tax refund is not limited to simply as filing an income tax return and reporting an overpayment. This panel will discuss various topics with respect to seeking a refund, including informal and formal refund claims, protective refund claims, and tentative refund claims. Discussion will highlight particular issues and procedures in seeking a refund during the COVID pandemic.

Moderator: Sanessa Griffiths, Skadden Arps Slate Meagher & Flom LLP, Washington, DC Panelists: Jorge Castro, Miller & Chevalier, Washington, DC; Bridget Roberts, Deputy National Taxpayer Advocate, Taxpayer Advocate Service, IRS, Washington, DC

On Wednesday afternoon, Court Procedure & Practice presents a session on Best Practices for Virtual Trials before the U.S. Tax Court.

Best Practices for Virtual Trials Before the U.S. Tax Court. Since the COVID-19 pandemic forced the U.S. Tax Court to convert to a virtual trial format on Zoomgov, over 100 cases have gone to trial. The IRS Office of Chief Counsel has developed a series of best practices which they have been using to train their trial attorneys, and have graciously agreed to share those best practices with members of the Tax Section. The panel will discuss the technology and practical issues both parties face in preparing a case for trial in a virtual environment, including the use of “step-aside” consultation rooms. Moderator: Karen J. Lapekas, Lapekas Law PA, Miami, FL Panelists: Honorable Judge Emin Toro, U.S. Tax Court, Washington, DC; Shawna A. Early, Special Trial Counsel, SB/SE, IRS Office of Chief Counsel, New York, NY; W Curtis Elliott, Jr., Culp, Elliott & Carpenter PLLC, Charlotte, NC

Also on Wednesday afternoon, Teaching Taxation presents an important program on the role of law schools in promoting tax justice, and the Diversity Committee presents Part One of a two-part series with the Pro Bono and Tax Clinics Committee focused on addressing discrimination with the IRS.

Law Schools and Access to Tax Justice. How can law schools help improve access to tax justice? Panelists will present models of law school courses through which students provide tax services or representation to taxpayers, or for which access to justice is the primary subject of the course. The panel will engage a variety of perspectives including different areas of tax law, different pedagogical approaches, and different institutional commitments by the law schools. Topics will include Volunteer Income Tax Assistance, Low-Income Taxpayer Clinics, a seminar on Taxes and Social Justice, a Business Tax Practicum, and the Adopt-a-Base program.

Moderator: Michelle Lyon Drumbl, Robert O. Bentley Professor and Director, Tax Clinic, Washington & Lee University School of Law, Lexington, VA Panelists: Alice Abreu, Professor of Law and Director, Center for Tax Law and Public Policy, Temple University Beasley School of Law, Philadelphia, PA; C. Wells Hall III, Partner, Nelson Mullins, Charlotte, NC and Charleston, SC; Matthew T. James, Visiting Practice Professor of Law and Director, Low Income Taxpayer Clinic, Temple University Beasley School of Law, Philadelphia, PA; Francine Lipman, William S. Boyd Professor of Law, William S. Boyd School of Law, University of Nevada, Las Vegas, NV; Manoj Viswanathan, Professor of Law and Co-Director, Center on Tax Law, UC Hastings Law, San Francisco, CA

The Multicultural Taxpayer: How to Address Discrimination with the IRS. Please join us for Part I of a two-panel series, with Part II taking place during the Pro Bono and Tax Clinic Committee session. In advocating for any taxpayer with the IRS, no one should tolerate being discriminated against because of age, sex, color, disability, race, religion, or national origin. The panel will provide an overview of implicit bias against multicultural taxpayers and highlight the IRS’ investment in equity, diversity, and inclusion. Panelists will also discuss how to report discrimination to the IRS, resources available to multicultural taxpayers, and best practices to ensure that tax practitioners, taxpayers, and IRS employees are treated fairly and respectfully.

Moderator: Michael A. Wallace, EA, Agostino and Associates, PC, Hackensack, NJ Panelists: Barbara Kaplan, Esq, Greenberg Traurig, New York, NY; Keisha Clark-Proctor, IRS Office of Equity Diversity and Inclusion, New York, NY; Brenda Stuart-Luke, IRS Communication & Liaison, New York, NY; Darol Tucker, IRS Taxpayer Advocate Service, New York, NY

The Pro Bono and Tax Clinics committee has quite a slate of programming on Thursday, beginning in the morning with a discussion of the American Rescue Plan Act of 2021, and then with a discussion of current tax issues impacting agricultural guestworkers.

Tax Issues on the Horizon. Panelists will discuss the tax provisions of the American Rescue Plan of 2021 including the third stimulus check and changes to the anti-poverty credits. Panelists will discuss both the important policy effects of the new law, including the recurring Child Tax Credit payments, as well as the nuance and specifics of the statutory language within the bill. Moderator: Beverly Winstead, Clinical Professor of Law, Maryland Carey School of Law, Baltimore, MD (Invited) Panelists: Elaine Maag, Principal Research Associate, Urban Institute, Washington, DC; Joshua Beck, Senior Tax Analyst, Attorney Advisor Group, Taxpayer Advocate Service, Des Moines, IA

The Taxation of H2A Workers. Panelists will discuss ongoing efforts to maintain the exemption amount under IRC § 873(b)(3) for non-resident farmworkers, focusing on H-2A workers, including varying results at the administrative level and potential litigation in the Court of Federal Claims.

Moderator: Luz Arevalo, Senior Attorney, Low Income Taxpayer Clinic, Greater Boston Legal Services, Boston, MA Panelists: Robert Nassau, Teaching Professor & Director, Low Income Taxpayer Clinic, Syracuse Law School, Syracuse, New York; Iris Figueroa, Director of Economic & Environmental Justice, Farmworker Justice, Washington D.C. (Invited), IRS Speaker (Invited)

Thursday afternoon PBTC programming continues with its annual U.S. Tax Court Update session, and Part Two of the joint program with the Diversity Committee on discrimination and bias.

U.S. Tax Court Update. Chief Special Trial Judge Carluzzo together with Special Trial Judges Panuthos and Leyden will discuss updates from the Tax Court. Topics include issues associated with the Court’s limited scope agreement, upcoming access to court records, and a summary of new and emerging issues from calendar call participants.

Moderator: Susan Morgenstern, Taxpayer Advocate Service, Cleveland, OH Panelists: The Honorable Lewis R. Carluzzo, Chief Special Trial Judge, US Tax Court, Washington, DC; The Honorable Peter J. Panuthos, Special Trial Judge, US Tax Court, Washington, DC; The Honorable Diana L. Leyden, Special Trial Judge, US Tax Court, Washington, DC

Elimination of Bias in Tax Practice, Part II. This is the second of a two-part discussion of the elimination of bias in tax practice. Attendance in Part I sponsored by Diversity is recommended but not mandatory. This panel will focus on the elimination of bias in the attorney client relationship, and help tax professionals identify implicit and explicit bias in working with low-income clients and focus on best practices for promoting sensitivity to cultural difference. The panel will also raise attorneys’ ethical obligations as it relates to the elimination of bias. It is recommended that attendees take an Implicit Association Test prior to attending the session, https://implicit.harvard.edu/implicit/takeatest.html

Moderator: Terri Morris, Christine Brunswick Fellow, Community Tax Law Project, Richmond, VA (Invited) Panelists: Tamara Borland, LITC Program Director, Taxpayer Advocate Service; Walter May, Assistant to the Bishop of the Evangelical Lutheran Church (Invited); Michelle Ferreira, Greenberg Traurig, San Francisco, CA

On Friday, the Individual & Family Taxation Committee has a star-studded session on the Child Tax Credit.

Expanding the Child Tax Credit: Policy Issues and Legal Issues. Recent studies indicate that nearly 1 in 7 US children live in poverty. Originally enacted in 1997, the child tax credit (CTC) is part of our nation’s patchwork efforts to address the high costs of raising children. In recent months, there have been a number of legislative proposals that modify and expand the CTC, including proposals that would allow for regular distributions of the CTC beyond the current annual mechanism. This panel will focus on the underlying policy issues and legal issues associated with a potential major legislative overhaul of the CTC.

Moderator: Michelle Lyon Drumbl, Robert O. Bentley Professor of Law, Director, Tax Clinic, Washington & Lee University School of Law, Lexington, VA. Panelists: Ken Corbin, Commissioner, Wage & Income Division, Internal Revenue Service, Washington, DC; Margot Crandall-Hollick, Acting Section Research Manager, Congressional Research Service, Washington, DC; Pamela Herd, Professor, McCourt School of Public Policy, Georgetown University, Washington, DC; Rebecca M. Thompson, Director, Field Engagement and Taxpayer Opportunity Network, Prosperity Now, Washington, DC

5th International Conference on Taxpayer Rights – Registration is Now Open

Sometimes, in the midst of all that is going on in one’s own professional life, it helps to take a step back and think about first principles of tax administration.  It is also fascinating to learn about tax administration in countries not your own – so that you look at your own tax system with new eyes, and think about how things might be done differently.  That is the underlying rationale of the International Conference on Taxpayer Rights, which I first convened as the National Taxpayer Advocate in 2015, and for which the Center for Taxpayer Rights has picked up the mantle.  So I’m pleased to announce that registration is now open for the 5th International Conference on Taxpayer Rights (ITRC), which will be held online.  You can check out the agenda and register for the conference here.

This year, the Center will convene not one, but two (!) conferences, because we had to move back a year the conference originally scheduled for 2020.  The first ITRC will be held on 26 to 28 May, 2021.  For each conference we try to focus our panels around a general theme, and the 5th ITRC theme is Quality Tax Audits and the Protection of Taxpayer Rights.  This theme will be explored in six panels over two days:

  • Foundational audit principles and applicable taxpayer rights;
  • The conduct of tax audits and the intersection of taxpayer rights: case studies;
  • Audits and taxpayer rights in an environment of cross-border cooperation;
  • Audit selection in the twenty-first century;
  • The impact if audits on future compliance; and
  • Criminal investigations and civil tax audits.
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The moderators and panelists represent 15 countries, and come from different disciplines and roles in tax administration.  We have members of the judiciary, tax agency governors, former commissioners and other agency personnel, tax professionals, and professors of tax, economics, psychology, and anthropology, as well as private practitioners and representatives of international organizations.  This is a cross-cultural and interdisciplinary group, and if past conferences are any indicator, the discussions will be fascinating.

New with this conference is a pre-conference Low Income Taxpayer Clinic Workshop on May 26, focusing on Representing Low Income and Small Business Taxpayers in the COVID-19 Economy.  International interest in clinics for low income and other underrepresented taxpayers has been growing over the years, with the movement expanding to Australia, UK, and Ireland.  Through this workshop, which is free, people can learn about starting an LITC in their country and learn about the work of existing LITCs.  We also plan to continue this workshop as part of future ITRCs, with different topics each year.  You can learn a bit about international LITCs by watching the Center’s Tax Chat! with several directors of LITCs from different countries.  Access the Tax Chat! here.  (By the way, subscribe to our YouTube channel so you can learn about future Tax Chats!)

Normally, we rotate holding the conference in a different part of the world each year, but of course the coronavirus pandemic threw a spanner in the works on that plan.  This year we planned to be in Athens, Greece, and we still have the National and Kapodistrian University of Athens School of Law as our host organization, but we will be holding the conference online.  The hours of the sessions each day are scheduled on Central European Summer Time, which might be early for Pacific Coast folks, but if you register and miss the first session, we will send you a link to the recording the same day so you can watch it then, albeit a bit out of order.

As I mentioned earlier, we plan to hold a second conference this year – the rescheduled 2020 conference.  The theme of the 6th International Conference on Taxpayer Rights is Taxpayer Rights, Human Rights: Issues for Developing Countries.  This will be a fascinating conference, and I am hopeful we all will be able to meet on October 6 and 7, 2021 at the University of Pretoria in South Africa.  You can see the agenda for the 6th ITRC here.  And if you’d like to get a bit of a preview of this conference, check out the Center’s Tax Chat! video with Riel Frantzen, Annet Oguttu, and Asha Ramgobin of the University of Pretoria here.

So.  Please take a look at the conference.  This is not your normal tax practice continuing education program.  It is a venue for thinking about how we might improve tax administration and enhance the protection of taxpayer rights.  It’s an opportunity to learn from other countries, other cultures, other tax administration.  I’ve learned so much from the conferences in the past.  I just wish we could meet in person in Athens!

Hope to “see” you online though – you can register for the conference here.

Biden Administration Floats Refundable Pet Tax Credit Idea to Boost Child Tax Credit

Last week, Assistant Secretary for Tax Policy nominee Lily Batchelder floated the latest in the Biden Administration’s efforts to provide tax relief to the nation’s millions of people suffering due to the pandemic: a $250 refundable tax credit for families with children under the age of 18 who have pets in their household.

President Biden with his dog, Major
Photo by Stephanie Gomez/Delaware Humane Association, via NY Times/Associated Press
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In speaking at the Tax Policy Center webinar entitled “Thinking Outside the Box Tax Policy Ideas”, Batchelder cited the overwhelming research showing that the presence of certain family pets has a strong correlation with positive outcomes in children, including health, education and lifetime earnings. (See, for example this recent research study by Robert Matchock, Pet Ownership and Physical Health)

Insisting that the Biden Administration will continue its evidence based approach to good governance, current Assistant Secretary Mark Mazur noted that evidence has tied positive outcomes to only certain pets-namely dogs and cats. As such, the Treasury officials expected that the legislative language they would support would not extend to other household friends. Mazur acknowledged that the research to date has not studied other animals nearly as much as dogs and cats although there is preliminary research showing that larger rodents (such as chinchillas) have had a positive impact on mental health across age ranges.

Facing questions about whether this might be expanded to older Americans, as the data strongly correlates pet ownership with positive health outcomes among seniors, Mazur was noncommittal, though he emphasized that the Administration’s focus in the near term was on improving conditions for families with children.

“It might be the camel’s nose in the tent,” said Mazur, “but for now we are tying this to our proposals to make permanent the expanded child tax credit that Congress enacted last month.”

Needless to say the proposal generated quite a stir in the webinar. Former NTA and current Executive Director of the Center for Taxpayer Rights Nina Olson asked if Treasury expected IRS to expand its nonfiler portal to allow nonfiling taxpayers to enter pet information alongside their children. Commissioner Rettig, also on the panel, in noting that he is the first Commissioner in IRS history to own not one but two adopted retired Greyhound racers, suggested that Congress should allocate an additional $100 million to its proposed upgrade of technology in order to allow it to build the pet database. 

Panelist and Tax Notes’ tax historian Joseph Thorndike noted that many of these pets may be the direct descendants of pets removed from being claimed as dependents in 1986 when Congress began requiring taxpayers to list the social security number of dependents which caused almost seven million dependents to disappear in one year.  He noted that the ancestors of today’s household pets would no doubt be smiling down as pets once again returned to the 1040.

While not on the panel, former Treasury Secretary Larry Summers, who was slated to speak on a separate panel with former Commissioner Rossotti about the Rossotti/Sarin/Summers tax gap proposal, interrupted Batchelder, stating that the “last thing poor people need is more money in their pockets. I worry about the inflationary impact in the important pet sector.”

As with any proposed credit expansion, there are lots of ancillary issues. PT’s own Keith Fogg notes that “in the 1860s in the predecessor to Section 6334 Congress allowed as part of the property exempt from levy one cow, three pigs, five sheep and the wool thereon. Although that was changed to livestock in 1954 it’s good to see animals formally entering the code again.”

Click here for a link to a video of the webinar.