A Sun Has Set: Reflections on the Honorable John Lewis

Over the next days, weeks, months, and years, there will be many tributes to Congressman John Lewis, who passed away on July 17, 2020.  Historians and advocates will assess his enormous contributions in the fields of human and civil rights.  Here, today, I just want to share how John Lewis affected my life and my work.

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I was seven years old when John Lewis boarded the bus south in the first wave of Freedom Riders, and I have no memories of hearing about them.  But even at that age I was acutely aware of racial prejudice; my mother had been raised in Mississippi and I could sense her fear and anxiety over racial matters.  I had personally experienced scorn and ridicule at school because of my family’s religious beliefs and practices, so I knew some measure of cruelty people could inflict because of perceived differences.  I also knew religious beliefs were a matter of free exercise, whereas skin color was not.  I was not sure what all that meant, but I was aware, from my own home environment, that people of color experienced discrimination in ways I did not.

But nothing prepared me, at the age of eleven, for the events shown on the news the night of March 7, 1965, when I watched peaceful human beings be bludgeoned and set upon by dogs, simply because they wanted to cross a bridge.  More astonishing to me, though, was the courage of those human beings, moving forward even as they knew they would face violence.  The conviction and strength of their beliefs affected me profoundly.  They showed they could speak truth to power and were willing to accept the consequences.  I took that lesson to heart, and it altered the trajectory of my life.

Fast forward several decades to 2011, the 50th anniversary of the Freedom Riders.  By that time, as National Taxpayer Advocate, I had testified before the Ways and Means Committee, and its Subcommittee on Oversight, about ten times, and had testified before Congress about forty times.  For much of that time Congressman Lewis was either chair or ranking member of the Oversight Subcommittee.  I had worked with his staff on numerous occasions on legislative proposals, many incorporating the recommendations in the National Taxpayer Advocate’s Annual Reports to Congress.  One of my most treasured possessions is a copy of the Taxpayer First Act signed by Chairman Neal and inscribed – yes, inscribed – by John Lewis.

Whenever I testified, regardless of which party was in control of the House or Senate, I was a bipartisan witness, asked to testify by both the Chair and the Ranking Member.  But for the hearing on May 25, 2011, for the first and only time in my career, I was a Democratic witness at a hearing on “Improper Payments in the Administration of Refundable Tax Credits”.  I was understandably nervous about the hearing; the subject of improper payments and the Earned Income Tax Credit is very politically charged and I was aware many people wanted more enforcement focus on the EITC. I knew I was going to have to present a persuasive case for a more nuanced approach, and I was going to have to do that even as the members of one party did not want me there.

As fortune would have it, the week before, on May 16, 2011, PBS aired the documentary Freedom Riders, a film by Stanley Nelson, based on Raymond Arsenault’s book, “Freedom Riders: 1961 and the struggle for Racial Justice.”  I had watched that film, curled up in fetal position through most of it.  It was with the memories of that film and those events fresh in my mind that I approached the hearing.  Also during that week, I had listened to radio and television interviews with Congressman Lewis, as he reflected on past and current times.  As I approached the hearing, I kept in my mind’s eye the deliberate courage and peaceful strength of those individuals who created a movement.  I knew, too, the steely determination and strategy it took to survive such events.  What I was facing was child’s play, but they were my role models.

The hearing went very well and respectfully.  After the hearing, Congressman Lewis came over to thank me.  The room was buzzing, with side conversations and people milling about.  Reporters were leaving the room, the court reporter was packing up.  I mumbled some thanks about the invitation, and then told the Congressman that I had seen his interviews and seen the film and that I was just so profoundly grateful for his work.  He took both my hands in his and looked me in the eyes and for the next five minutes or longer just spoke to me, never moving his eyes, talking about those events and the challenges today.  The world just stopped for me.  And apparently it did for others, too, because out of the corner of my eye I could see people stop moving and then slowly edge toward us, to listen in.

The moments ended, the Congressman had to move on, and so did I.  Well, almost.  Anyone who has felt the strength of those hands and of that gaze is not the same.  They impart compassion, yes,  but they urge you on and they do not accept excuses.

Occasionally, as a person in a position of some authority, I could use that authority to accomplish something that might not happen under normal circumstances.  Later in 2011, all of the Local Taxpayer Advocates (LTAs) were going to be in Washington DC for a leadership training meeting.  I had been frustrated how many of the LTAs seemed burned out and were not advocating as vigorously on various issues as I would like them to.  It kept coming to me that they needed more courage.

In the weeks leading up to the showing of the film Freedom Riders in the spring of 2011, there were posters on the Washington DC Metro promoting the film, with a picture of a bombed out bus, and the tagline, “Would you get on the bus?”  That line kept going through my mind all summer; it made it clear that societal and systemic change starts with individual acts of courage and conviction.  That is what the LTAs needed to understand – that despite all the roadblocks put in front of them by their colleagues at the IRS, it was their responsibility to stand fast, and they needed to muster their courage to do that.

Well.  I decided that we would show the Freedom Riders film mid-way through the leadership meeting.  My staff thought I was nuts, but I insisted: we would dedicate an entire afternoon to the film.  We printed up “tickets” that said, Would you get on the bus?  I asked three LTAs, who were African American and were over the TAS offices in the deep south, to be on a panel after the film.  I introduced the film by saying I just wanted people to watch it and think about the courage these people showed, what it took for them to do what they did, and how that would apply to them.  I could tell that everyone thought this was just another crazy NTA thing they had to go along with, and many of the African Americans in the room were suspicious; what was the subtext here?

After the film, there was absolute silence.  And then the three LTAs on the panel started speaking.  They shared their experiences, their families’ experiences, what they experienced to that day, in terms of racism.  They spoke about the quiet courage required every single day of their existence, to assert their humanity and go through life with dignity.  Then others in the audience stood up and spoke; people talked about how the film affected them, how it made them reflect on their own beliefs and actions, and also how it made them look at their work with renewed commitment.  People broke for the day and carried those conversations on at dinner and the next day.

There were no miracles after that – no all-of-a-sudden people showed more courage.  But some did.  It was a small step, and it mattered.

On March 7, 2019, I had my final hearing before Congressman Lewis as chair of the Ways and Means Oversight Subcommittee.  Seven days before, I had announced my pending retirement as National Taxpayer Advocate.  At the end of the hearing, I approached the dais to thank the Chairman.  Again, he took my both my hands, looked in my eyes, and said, “A sun is setting.”  We hugged.  (You can watch the hearing here.)

Hon. John Lewis and Nina Olson embrace following her testimony on March 7, 2019.
Screen shot of Hon. John Lewis and Nina Olson embracing following a Congressional hearing on March 7, 2019.

Over the course of John Lewis’ long life, he saw many a sun set.  But what John Lewis knew, and I learned from him, is after each sun has set, there is a new dawn.  It is up to each and every one of us to determine what the new dawn brings. To mix metaphors, will you get on that bus?

NTA Blog Post On “Protecting the Rights of Taxpayers Who Rely on FAQs” Is Timely and Welcome, But Doesn’t Go Far Enough

We welcome first time guest bloggers Alice G.  Abreu and Richard K. Greenstein, both Professors of Law at Temple’s Beasley School of Law in Philadelphia.  They offer their reactions to the recent blogpost in which the National Taxpayer Advocate, Erin Collins, addresses the issue of taxpayer reliance on frequently asked questions (FAQs) and makes several recommendations. The issue of taxpayer reliance on FAQs specifically, and subregulatory guidance more generally, is not new, but it has received increased attention given the accelerated pace of tax legislation in response to the COVID-19 pandemic and the IRS’s need to provide prompt guidance. Professors Abreu and Greenstein have spoken and are writing on the subject and here they not only offer their reactions to National Taxpayer Advocate’s recent post but also their own recommendations.

We have touched on this issue before here with an excellent post in May by Monte Jackel and PT Contributor Nina Olson blogged on this topic when she was the National Taxpayer Advocate.  Keith

Kudos to NTA Erin Collins for taking on the issue of taxpayer reliance on IRS written guidance.  Her blogpost, released on July 7, is spot-on in identifying an important problem.  We particularly liked that she began by framing the issue clearly and persuasively: she described the plight of a taxpayer who goes to the IRS website for guidance on the deductibility of a particular item, finds a Frequently Asked Question (FAQ) on point, and takes the deduction, only to be audited and denied the deduction because the IRS changed its position, and is subjected to the 20 percent accuracy related penalty to boot. To make matters worse, the taxpayer can no longer access the FAQ because the IRS has removed it from its website, and no archive of removed FAQs exists.

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We agree with NTA Collins that “[i]f the Taxpayer Bill of Rights is to be given meaning, this scenario violates ‘The Right to Informed’ and ‘The Right to a Fair and Just Tax System.’”  We also emphatically agree that “[i]t is neither fair nor reasonable for the government to impose a penalty against a taxpayer who follows information the government provides on its website.” But we think that by focusing on the penalty, NTA Collins understates the unfairness faced by the taxpayer in this scenario.  Of course it is unfair for a taxpayer to be penalized for doing what the IRS itself said she could do, in a document specifically intended to guide taxpayer actions. And it is also unfair for the IRS to take down the document so that the taxpayer cannot offer it in support of a claim that she had “reasonable cause” for the position that resulted in the alleged underpayment, as provided by IRC § 6664(c)(1), which should allow her to avoid the penalty without reaching the question of whether the FAQ constitutes substantial authority for the taxpayer’s position. Indeed, removing an FAQ from the IRS website after a taxpayer has relied on it may also violate the taxpayer’s “Right to Challenge the IRS’s Position and Be Heard” because the IRS is thereby interfering with the taxpayer’s ability to provide adequate documentation for her position.  We therefore heartily endorse the NTA’s recommendation that the IRS create and maintain an archive of all FAQs issued.

But the unfairness depicted in the opening scenario of the NTA’s blogpost is far deeper than the post acknowledges. The core unfairness is that by refusing to stand by the positions it takes in written guidance intended for the specific purpose of informing taxpayers, the IRS is disrespecting the taxpayer’s reasonable reliance. And respect for the reliance interest is at the core of justice. Outside of the tax law, respect for reliance has led to the development of entirely new theories of obligation, such as promissory estoppel.  As we have previously noted, by refusing to stand by its written statements the IRS is behaving like the Peanuts character Lucy:  Lucy tormented Charlie Brown by repeatedly offering to hold a football for him to kick, only to pull it away just as he was going to kick it, which sent him up in the air and caused him to end up lying flat on his back. The IRS should not behave like Lucy, and taxpayers deserve to be treated better than Charlie Brown.

We therefore believe that the IRS, which itself adopted the Taxpayer Bill of Rights even before Congress made it a part of IRC § 7803(a)(3) in 2015, should change its position and respect taxpayer reliance on written guidance, whether that guidance is included in the Internal Revenue Bulletin or in publications, instructions to forms, FAQs, or other written guidance.  Respecting reliance operationalizes the taxpayer’s right to be informed as well as the right to a fair and just tax system because respecting reliance is at the core of justice and due process.

We understand the IRS’s need for nimbleness in issuing guidance in the face of recently enacted and immediately effective legislation, and we agree with NTA Collins that “[b]ecause FAQ’s aren’t subject to thorough review, Treasury and the IRS may later decide some of them are wrong and change them.” Indeed, we believe that similar concerns apply to much subregulatory guidance, and we think it salutary for the IRS to remain open to alternative interpretations of legislative language and to change its position in light of further reflection and discussion. As Stanley Fish noted over three decades ago, “No text reads itself.” Stanley Fish, Consequences, 11 Critical Inquiry 433, 446 (1985) (“The semantic meaning of the text does not announce itself; it must be decided upon, that is, interpreted . . . . In short, no text reads itself . . . .”). The susceptibility of provisions of the Internal Revenue Code to reinterpretation is ongoing.

But neither the IRS’s need for nimbleness in issuing guidance nor its understandable desire for precision, which NTA Collins noted, require that it refuse to stand by the positions it takes in published documents it issues for the specific purpose of guiding taxpayer behavior. The IRS is entitled to change its position, but until it announces that it has done so it should stand by that position, and not assert a different position against taxpayers who have reasonably relied on its publicly issued written statement. While we agree with NTA Collins that FAQs and other written documents intended for taxpayer guidance should constitute substantial authority for penalty relief purposes, we don’t think her recommendation to classify FAQs as “’Internal Revenue Service information’” under Treasury Regulation § 1.6662-4(d)(3)(iii),” goes far enough. The IRS should stand by its all of its written, publicly announced, positions until it announces that it has changed positions, and it should do so for all purposes, not just for penalty protection. In other words, the IRS should apply the changed position prospectively only and not apply it to any taxpayer who has reasonably relied.

Moreover, the IRS’s inclusion of a non-reliance disclaimer in some FAQs, like many courts’ assertion that “[i]t is hornbook law that informal publications all the way up to revenue rulings are simply guides to taxpayers, and a taxpayer relies on them at his peril,” Caterpillar Tractor Co. v. United States, 218 Ct. Cl. 517 (1978) (citing, Carpenter v. United States, 495 F.2d 175 (5th Cir. 1974)), while arguably well intentioned, only serves to undermine the agency’s legitimacy.  As NTA Collins pithily observed, “Why should taxpayers even bother reading and following FAQs if they can’t rely on them and if the IRS can change its position at any time and assess both tax and penalties?” The same question can be asked with respect to publications and instructions to forms.

We publicly expressed our views on taxpayers’ right to rely on statements in IRS written guidance in May, 2019, at the 4th International Taxpayer Rights Conference in Minneapolis when we participated in a panel discussion at a session on “The Virtues of Tax Authority Advice.” A recording of that panel discussion is available here and archived materials from the Conference can be found here. (Information on future International Taxpayer Rights Conferences to be held in Pretoria, South Africa, and Athens Greece, can be found here.) Our Conference presentation is now a draft article which we expect to be able to post on SSRN in a few weeks; its working title is Stand by your Words: Operationalizing Taxpayer Right to be Informed. In addition to fleshing out the positions articulated here and explaining why the change in the IRS’s stance on taxpayer reliance should not result in weaponizing IRS written guidance, we also argue that if the IRS persists in behaving as depicted by the opening scenario of the NTA’s blog, courts should apply the doctrine of equitable estoppel to protect taxpayers from harm.  We recognize that asserting equitable estoppel against the government is extraordinarily difficult, but, again, we believe that enactment of the TBOR and its adoption by the IRS provide a basis for a change in the status quo.

Sending Notices with Bad Dates

On June 22, 2020 National Taxpayer Advocate Erin Collins issued a blog post advising readers to keep an eye out for notices with expired action dates.  The post notes that “during the shutdown, the IRS generated more than 20 million notices; however, these notices were not mailed.  As a result, the notices bear dates that now have passed, some by several months and some of the notices require taxpayers to respond by deadlines that have also passed.” I will repeat myself once or twice in this post but if I am reading it correctly the IRS is knowingly and intentionally creating a false entry on thousands, perhaps tens of thousands, of taxpayers’ official records of account.

The NTA describes as a silver lining the fact that the IRS is granting additional time to respond before interest or penalties apply and that the IRS is putting inserts with the letters to explain something about the mismatch in the date of mailing and the dates on the letters.  I will talk more about some of the letters the NTA mentions in her blog post.  I found myself wondering about several things that were not explained in the NTA’s blog post.  Why did the IRS print these notices?  Why doesn’t the IRS shred the notices and recycle the paper in order to issue new notices with the proper dates on the notices?  Why hasn’t the IRS issued a news release or Tax Tip about the notices to alert taxpayers and practitioners?  Prior to the NTA blog post, the IRS only released this information though its National Public Liaison (NPL), which, while helpful, does not reach a wide audience. And while many people read the NTA blog posts, I don’t think it has a readership on a par with broadly released statements from the IRS.

The IRS might think it has communicated to practitioners. It pushed this news out through the NPL on June 9. The stakeholder liaison is an inadequate way to disseminate important news. On the day of the stakeholder liaison email, IRS quietly updated the page on IRS operational status to include the information. It also posted this news as a “Statement on Balance Due Notices” here.  I do not want to detract from the important discussion of the decision itself, but it is also worth mentioning that the information the IRS has made public on this situation and the method and medium of making it public, fails to signal the importance of this action.

Yesterday the NTA released her 2021 Objectives Report to Congress, which confirms the information in her blog post. Kudos to the NTA for including the problem of outdated notices in the news release accompanying the report. This will help get the word out to practitioners.

In a letter to Commissioner Rettig, Representatives Neal and Lewis expressed their concern over the outdated notices and suggested that the IRS take steps to “ensure no taxpayers are penalized” for the IRS’s inability to timely process correspondence. For the reasons explained below, this will not be easy to do if the IRS moves forward with its plan to mail the outdated notices.

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The NTA states that several dozen kinds of IRS notices will be mailed in the next month or two.  Maybe there is still time for the IRS to reconsider its decision to send out-of-date notices.  I hope so.  Here, I will discuss a few of the notices she mentioned.  Before starting the specific discussion, I note that many of these notices are required by statute.  I draw a distinction between statutorily required notices and other types of IRS notices.  While the best practice would be to send out notices on the date listed on the notice for all notices, the purposeful mailing of misdated statutorily required notices creates a more serious problem.

No matter what an insert says, the taxpayer will receive a statutorily mandated notice triggering statutorily prescribed duties and response times with the wrong date on the notice and the wrong date(s) for responding.  In the last two sentences of her blog post the NTA mentions that the IRS computer system will show as the business record of the IRS the wrong date.  She says “[c]ompounding confusion surrounding notice dates, IRS transcripts for taxpayers’ accounts will also reflect incorrect dates for some of the notices.” 

This could have grave consequences for both taxpayers and the IRS if the dates on the letters compromise the IRS business records.  First, taxpayers who do not keep the envelope and the letter may have trouble proving that the dates on the letter did not reflect the actual mailing date when making a future challenge.  Second, if the IRS builds a business record which it knows contains inaccurate information it makes all of its records suspect.  Courts regularly rely on certified transcripts from the IRS for the accuracy of the date an action took place.  If the IRS knowingly puts the wrong dates into its system of records, that calls the entire system into question.  This could have consequences for the IRS far beyond the consequences of recycling these letters and making sure that its records accurately reflect actions taken.

Here you have the NTA saying that the IRS business record is inaccurate.  That could be powerful evidence in court to strike at many IRS actions taken that stem from 2020.  It also has the potential to support grounds for damages if certain collection actions occur after a wrongful assessment or wrongful filing of a notice of federal tax lien.  It may present the possibility that in a CDP case a taxpayer may wish to lean on a rights-based failure to inform argument as a grounds to invalidate the proposed collection action.

Notice and Demand

IRC 6303 requires that the IRS send out a notice and demand letter within 60 days of the making of an assessment.  Case law going back at least three decades holds that the failure to send the notice and demand letter within the 60-day period does not invalidate the assessment but there is some possibly contrary case law.  The failure impacts the timing of the creation of the federal tax lien.  IRC 6321 and 6322 provide that the federal tax lien arises upon assessment, notice and demand and failure to pay within the demand period.  Ordinarily, failure to pay within the demand period causes the federal tax lien to relate back to the date of assessment.  If the IRS sends out the notice and demand beyond the 60-day period, the FTL will only arise upon non-payment and will not relate back to assessment.

You might say “so what,” because who cares about the FTL.  Only after the IRS filed the notice of federal tax lien (NFTL) does the IRS create a perfected lien.  The unperfected FTL still, however, has meaning.  For example, it attaches to property transferred for less than full value.  If a fight arises regarding the attachment of the FTL, the actual date of the mailing of the notice and demand letter matters.  Because of the pandemic, the IRS could not avoid sending out many notice and demand letters after the 60-day period.  Sending them out beyond the time frame must occur due to no fault of the IRS but sending a significantly backdated letter will undoubtedly confuse many recipients and may cause some to even challenge the validity of a notice which on its face asks the taxpayer to do something impossible.  If the notice and demand letter is invalid, the IRS has real problems because it would not have created the FTL, which has many consequences, including but certainly not limited to violating disclosure of a taxpayer’s liability if the IRS records a notice of federal tax lien when no underlying lien exists.

There is also the problem of the address.  The IRS must mail the notice and demand letter to the taxpayer’s last known address.  The IRS must use the taxpayer’s address as shown on the taxpayers most recently filed and properly processed return, unless clear and concise notification of a different address is provided. See, e.g., Duplicki v. Comm’r, T.C. Summary Opinion 2012-117.If these notices have been sitting in the bowels of a service center for months during the filing season, it is quite possible that many taxpayers have filed returns between the time of the creation of the notice and demand letter and the mailing of that letter.  The NTA does not mention if the insert changes the address on the letter.  I imagine it does not.  While many paper returns filed in the past few months remain in the parking lots of the service centers to which they were sent, the vast majority of taxpayers filed electronically.  Many of those returns will have gone through processing, and the IRS will know the taxpayer’s new address before these musty notices get mailed.  Mailing the notice and demand letters to something other than the taxpayer’s last known address will create an invalid notice and demand letter creating the same problems described above.  Maybe these are all notice and demand letters based on returns filed with insufficient remittance and processed early in the filing season, so the notice on the letter is the address on the most recent return.  If these notices do not come from that source, the likelihood that a fair percentage will bear an address other than the last known address is reasonably high.  This means taxpayers should be prepared to challenge the notices on this basis, which is not often done.

Math Error Notices

As most readers know the name math error notice is a misnomer.  Subsection 6213(g)(2) provides the definition of math error notice.  Sixteen different actions trigger the sending of a math error notice only one of which is 1+1=3.  Earlier this year, Les updated Chapter 10 of the treatise “IRS Practice and Procedure” and adopted the practice of the Taxpayer Advocate Service of calling this notice the summary assessment authority notice.  For this post I will stick with the misleading language of the statute, but errors in math play a small role in these notices.

The math error notice provides an exception to the need for the IRS to send a notice of deficiency in order to make an assessment.  Instead of a 90-day letter offering the chance to go to Tax Court, the taxpayer receiving a math error notice has 60 days to write back to the IRS expressing disagreement or the IRS will make the assessment.  We have not written enough about math error notices but some of our prior posts on this topic exists here, here, here and here.  Nina Olson wrote often about these notices as the NTA.  Find some of her writings here, here, here and here

This notice cuts off rights.  Most taxpayers fail to respond giving the IRS a shorter, easier path to assessment than the notice of deficiency.  Math error notices confuse taxpayers in the best of times as discussed in some of the NTA annual reports.  If you couple the ordinary confusion of these notices with dates that make no sense, the likelihood of a failure to response undoubtedly goes up.

Note that the math error notice must be mailed to the taxpayer’s last known address and the discussion above concerning notices with something other than the last known address applies here.  If the math error notice goes to the wrong address but the IRS makes an assessment following a failure of the taxpayer to respond, then the IRS has a bad assessment and all of the things that flow from a bad assessment.  These “things” can take a lot of time and effort to unwind.  They can also cause the IRS to lose the right to assess if the unwinding occurs after the statute of limitations on assessment has passed.

On a smaller scale the government faced a similar problem in the government shutdowns of 2013 and 2018-2019.  The system seems to generate notices automatically at certain points in time.  The system does not understand when the government ceases to operate.  In the prior shutdowns it sent out notices of deficiency and collection due process notices while the government was closed, but those letters didn’t have the wrong date and the taxpayer could still file a Tax Court petition or CDP request in the right time frame.

Collection Due Process Notices  

I wrote a blog post in 2018 about a CDP case in which the Revenue Officer went to the taxpayer’s house to deliver the CDP notice but the taxpayer’s dog deterred the RO from making delivery.  He went back to his office and mailed the CDP notice to the taxpayer to avoid bodily injury; however, he mailed the notice two days later.  When he mailed the notice, it still bore the date of his canine-thwarted personal delivery effort.  The Tax Court concluded that the time to make a CDP request runs from the date of mailing (or delivery) and not the date on the CDP notice.

Now the IRS will throw into the system potentially thousands of wrongly dated CDP notices, causing the recipients confusion and filing dates that may or may not fall within 30 days of the actual date of mailing.  How many taxpayers will keep the letter and the envelope?  Will the IRS have the correct date of mailing in its database or the original date of mailing?  Remember that these mailings result not from a single RO working a case but from a mass-produced effort at the service centers.

Are CDP notices sent by the IRS with knowingly wrong dates valid CDP notices?  If invalid, it makes all downstream levy actions wrongful.  Will the CDP notices be sent to the taxpayer’s last known address or to some other address?  If sent to something other than the taxpayer’s last known address, the CDP notices are not good.

Conclusion

The IRS should throw away these letters.  (Recycle them please with appropriate taxpayer identification precautions.)  Send new letters in which the dates on the letters match the dates of mailing.  Yes, this will be expensive in cost of production of the letters and the time it takes to create the new letters.  But it may prove less expensive than the alternative.  It certainly will create less confusion among the taxpayers receiving the letters, the representatives trying to assist the letters, and the courts interpreting the IRS actions.

Erin M. Collins Appointed National Taxpayer Advocate

The Treasury Department and the IRS announced today that Attorney Erin M. Collins has been appointed to serve as the National Taxpayer Advocate.

Ms. Collins’ extensive background in the tax community includes twenty years as a Managing Director of KPMG’s Tax Controversy Services practice for the Western Area.  Prior to that, she was an attorney in the Office of Chief Counsel for the IRS for 15 years.  Throughout her career, she represented individuals, partnerships and corporate taxpayers on technical and procedural tax matters, and has also provided pro bono services to taxpayers to resolve disputes with the IRS.

For the past decade, Ms. Collins has dedicated significant time and energy to inspire professional women to work with teen girls from under resourced communities through after-school and weekend mentorship programs.  The programs focus on helping the girls fulfill their potential by empowering them to build confidence to pursue higher education and professional careers.  She also donated her time to non-profit boards focusing on underserved communities where English is typically the second language spoken at home. 

The full announcement is here.

We need a permanent National Taxpayer Advocate, now.

Contributor Nina Olson returns with her thoughts on the importance of filling the vacancy at the head of the Taxpayer Advocate Service.

This week, the acting National Taxpayer Advocate released the 2019 Annual Report to Congress, on the heels of the IRS’s release of its own “annual report” about its performance. Reading the two documents together, one wonders whether they are reporting on the same agency. The NTA’s report focuses on the challenges the agency faces and makes concrete recommendations about how to address them; the IRS’s report celebrates the agency’s performance over the last year and how it is on track to fulfill the goals of its 2018 to 2022 strategic plan. One report is forward looking; the other is a status update.

I’ll be scouring the contents of both reports over the next month or so, but their arrival reminds me of the important and unique role the National Taxpayer Advocate (NTA) plays in U.S. tax administration today. The NTA is the protector of taxpayer rights and, according to the National Commission on Restructuring the IRS, serves as the “voice of the taxpayer” inside the agency. Each of the Most Serious Problems, Most Litigated Issues, and Legislative Recommendations in the NTA’s 2019 Annual Report to Congress is prefaced with the relevant rights enunciated in the Taxpayer Bill of Rights; they form the framework for analysis. On the other hand, the IRS annual report doesn’t get around to mentioning “taxpayer rights” until page 12. Tellingly, the words “taxpayer rights” do not appear in any of the strategic goals listed in the annual report, nor are they listed among the “core values” of the agency.

This contrast highlights why it is so important to have a permanent National Taxpayer Advocate in place, to hold the IRS’s feet to the fire about promotion and protection of taxpayer rights, especially as it hires more audit and collection employees and launches new compliance and enforcement initiatives. The NTA is the person at the table of the IRS senior leadership who is charged (by Congress) with reminding the IRS that its primary job is to promote voluntary compliance, that enforcement revenue only counts for about 2 percent of all revenue collected, that the vast majority of U.S. taxpayers are trying to comply with the mind-numbingly complex tax laws, and that personal assistance and education is a, if not the, most significant factor in enabling these taxpayers to meet their obligations.

That is why it is so disturbing that there is no permanent NTA appointed by the Secretary of the Treasury, a full nine months after I announced my retirement as the NTA. On March 1, 2019, I publicly informed Treasury, the IRS, and everyone else that I would be retiring on July 31, 2019. I announced my retirement that early, against the counsel of several of my closest advisors and friends who feared I might become a “lame duck,” because I believed it was important to have a successor named and ready to assume the duties immediately upon my retirement. I knew of several highly qualified people interested in the job, and indeed, the recruitment process identified several excellent candidates. At the time of my retirement, I knew of three excellent candidates who were on a very short list.

So what happened? Why is there no NTA? I have no clue. What I do know is that despite the excellent interim leadership of the Taxpayer Advocate Service, no acting NTA can do the job as Congress envisioned. Indeed, Bridget Roberts, the acting NTA, states in the 2019 Annual Report, “As in other organizations, acting leaders are caretakers — charged with keeping the trains running on time but lacking the authority to make significant changes and often not taken as seriously as permanent officials.”

Let’s take a step back and look at what Congress did in 1998 when it amended IRC 7803(c), the statute that lays out the requirements for and duties of the Office of the Taxpayer Advocate. Congress made changes to this statute after widespread dissatisfaction with the then-Taxpayer Advocate structure surfaced in the hearings before the National Commission on Restructuring the Internal Revenue Service. In the chapter titled “Taxpayer Rights,” the Commission outlined these concerns:

Currently, the national Taxpayer Advocate is not viewed as independent by many in Congress. This view is based in part on the placement of the Advocate within the IRS and the fact that only career employees have been chosen to fill the position. Because a candidate for the job is likely to have additional career ambitions at the IRS after performing the Advocate position, it is difficult to perceive the Advocate as independent when the position is regarded as just another assignment for an IRS executive, with the Commissioner viewing his or her performance as determining the next position. Additionally, while the Advocate has provided recommendations for improvements at the IRS, these recommendations merely tend to highlight ongoing IRS corrective efforts with little in the way of recommendations that focus attention on issues that the IRS either is doing nothing or its efforts are inadequate. Finally, what recommendations the Advocate has provided have limited value because they do not prescribe specific legislative or administrative corrections.

A Vision for a New IRS, Report of the National Commission on Restructuring the Internal Revenue Service, June 25, 1997, at 43.

Congress addressed these concerns in the Internal Revenue Service Restructuring and Reform Act of 1998. It sought to ensure the independence of the Advocate by radically transforming the Office of the Taxpayer Advocate into an independent organization within the IRS. IRC 7803(c) explicitly lays out the requirements for appointment of the NTA and the qualifications of the person who fills that position. (By the way, 7803(c) is longer than 7803(a) or (b) which govern the positions of Commissioner and Chief Counsel, respectively. 7803(a) was recently lengthened by the addition of 7803(a)(3), which requires the Commissioner to ensure that IRS employees “are familiar with and act in accord with taxpayer rights ….”)

  • First, the National Taxpayer Advocate “shall be appointed by the Secretary of the Treasury after consultation with Commissioner of Internal Revenue and the Oversight Board and without regard to the provisions of title 5, United States Code, relating to appointments in the competitive servicer or the Senior Executive Service.”
  • Second, the NTA cannot have worked for the IRS for 2 years immediately preceding the appointment or 5 years immediately after leaving the position (there is an exception for current employees of TAS).
  • Third, the NTA must have the following experience: “(I) a background in customer service as well as tax law; and (II) experience in representing individual taxpayers.” (7803(c)(1)(B)(iii))

Thus, according to the law, the Secretary can make this appointment without it being nominated by the President or confirmed by the Senate. The usual hiring processes for federal civil service or Senior Executive Service do not apply – the Secretary merely needs to make his or her decision, sign an appointment document, and that’s it. Obviously, there should be a background check, and ultimately a tax check and tax audit, but the appointment of the NTA is one of the least bureaucratic in the federal government. So bureaucratic hurdles are not an excuse for the delay in appointing the Advocate.

It is interesting to note that Congress sought to balance the voices that the Secretary listened to in making his or her appointment decision. Not only is that decision made in consultation with the Commissioner, but also the Oversight Board weighs in. When I was under consideration for the position in late 2000, I was interviewed by the Commissioner several times, and had a lengthy interview with a subpanel of the Oversight Board. The Commissioner produced a memo for the Secretary recommending my appointment, and the Oversight Board produced a 27-page report (if recollection serves) including observations about each of the candidates and ultimately recommending my appointment. Thus, the Secretary had ample information with which to make his decision.

Today, there is no functioning Oversight Board. The Secretary only has the consultation of the Commissioner. The Commissioner’s statutory duty is to “administer, manage, conduct, direct, and supervise the execution and application of the internal revenue laws…” One of the Oversight Board’s statutory responsibilities is “[t]o ensure the proper treatment of taxpayers by the employees of the Internal Revenue Service.” The Oversight Board brings this perspective to the selection process for the NTA. While the Commissioner may factor this in to his or her recommendation, the loss of the Oversight Board’s perspective means that the Secretary only has the IRS’s official perspective to rely on. The balance that RRA 98 brought to the selection process is missing.

Which brings me back to my original observation about the two reports released this week.

The NTA’s statutory duty is to assist taxpayers in resolving their problems with the IRS and to identify and make administrative and legislative recommendations to mitigate such problems. [7803(c)(2)(A)(i)-(iv)]. The National Taxpayer Advocate’s Annual Report to Congress is the key vehicle for fulfilling that duty. In the words of the Restructuring Commission, the NTA must “focus attention on issues that the IRS either is doing nothing or its efforts are inadequate.” In order to do this well, Congress has required that the NTA has experience in representing individual taxpayers. That is, the NTA must have sat across the table from the IRS and knows what it is like to be an individual taxpayer battling the IRS bureaucracy. The NTA must have experienced firsthand the pain of taxpayers. A successful NTA brings that knowledge and experience to every meeting with IRS officials and employees and never lets them forget it.

Today, no matter how articulate and talented TAS leadership is, that strong, independent, experienced voice, carrying with it the authority of the Secretary’s appointment, is missing as the IRS embarks on its enforcement “build” and drafts the numerous reports required by the Taxpayer First Act. This is something all of us who practice in and study the field of tax should care about.

We need a strong, qualified National Taxpayer Advocate. Now.

Acting NTA Blog Highlights Role of TAS Recommendations on Taxpayer First Act Legislation and Challenges That The IRS Faces

Acting National Taxpayer Advocate Bridget Roberts’ recent blog post Highlights of the Taxpayer First Act and Its Impact on TAS and Taxpayer Rights discusses some of the main TFA provisions, including the impact of TFA on TAS and how many of TAS’ past recommendations have had a direct impact on the legislative changes.  While many of the provisions of TFA influence tax policy and administration rather than directly impacting tax procedure, the policy and administration changes will have direct and indirect influences on the tax procedures facing taxpayers and practitioners.

The post includes useful links to some of the major TFA changes. Some of the provisions are starting to generate litigation (see, for example, what evidence the Tax Court can consider in innocent spouse cases, a topic that PT has covered already a few times –see Christine’s discussion at TFA Update: Innocent Spouse Tangles Begin.)

In this post I will highlight the key parts of the post as well as offer some brief comments on some of the challenges the IRS faces as it marches toward meeting the TFA requirement of reporting on customer service and modernization.

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Highlights of NTA Post

First, the post is a reminder of how important TAS’s reports have been over the years as a contributing factor to legislative change. The Acting NTA notes that about 25 provisions within TFA were “recommended or strongly supported by the NTA or TAS.” The NTA blog post has a handy table with the TFA provisions, as well as links to underlying TAS work that relates to the TFA provisions.

Second, the post emphasizes that a few of the TFA changes directly implicate TAS, including the following:

  1. New rules on the next permanent NTA’s salary to limit the possibility that an NTA will face a personal financial conflict of interest when interacting with the Commissioner,
  2. A codification of the Taxpayer Advocate Directive (TAD) authority to make somewhat analogous the NTA’s ability to elevate systemic issues with its ability to raise individual case matters in Taxpayer Assistance Orders,
  3. Reducing the NTA’s annual reporting requirement on the most serious problems from 20 to 10,
  4. Requiring coordination with TIGTA on research studies, and
  5. Requiring the IRS to provide statistical support on TAS research studies, and requiring the NTA in the research reports to report in whether the IRS provided the support and determined the validity of the information.

Finally, the post praises for IRS and the way it is prioritizing implementing some of TFA’s sweeping changes, including the setting up of a dedicated “office within the IRS to oversee and coordinate the agency’s TFA implementation efforts.” While noting that the office includes the Commissioner’s Chief of Staff and executives from W&I, SBSE and IT, the Acting NTA notes one concern:

My one concern is that TAS has not been included as a core member of the TFA implementation team. Congress created the position of the NTA to serve as the statutory voice of the taxpayer within the IRS. To implement the aptly named “Taxpayer First Act,” I believe TAS should have a seat at the table to the same extent as key IRS operating divisions, particularly for purposes of implementing the TFA requirements that the IRS develop a comprehensive customer service strategy, modernize the IRS’s organizational structure, create online taxpayer accounts, and develop a comprehensive employee training strategy that includes taxpayer rights.

Concluding Brief Thoughts on TFA and Challenges the IRS Faces

In the run up to TFA and its requirement that IRS report on modernizing its structure and customer service strategy, IRS has dedicated a significant amount of time and energy around these issues. To that end see, for example the 2019 IRS Integrated Modernization Business Plan, released a few months before TFA became law this past summer. Part of the business plan had its origin in the IRS Future State initiative, as the GAO discussed in a 2018 letter with the subject Tax Administration: Status of IRS Future State Division to Senators Hatch and Wyden. That letter provides a nice historical perspective on Future State and its rebranding. Future State was a topic that inspired the recently retired NTA Nina Olson to conduct nationwide forums, which was a Special Focus in the NTA’s 2016 Annual Report to Congress.

In an era of scarce resources and rapid technological changes, tax administrators worldwide are focusing on how to efficiently deliver services. Online tools offer the promise of taxpayers able to help themselves, and minimize costly person-to-person exchanges.

Yet, one of the key themes that emerges from reading the transcripts of the 12 TAS led public forums on taxpayer needs and preferences is that there is a wide range of taxpayer resources and skills. Failing to recognize those differences when building models of service and enforcement can have an outsize impact on vulnerable taxpayers.

A Pew Research Center piece from earlier this year highlights the differing levels of access to technology across income classes, as well as the different ways that lower income individuals access the internet (see below). Simply put, lower income individuals have less access to the internet. When they do access the internet, they are often dependent on smart phones rather than tablets, laptops or desktops. The reliance on smart phones for internet access for more vulnerable taxpayers, combined with how important refundable credits are to the economic welfare of low and moderate income Americans, means that a tax system that fails to recognize the preferences and needs of these taxpayers is likely to fail to deliver quality service to many taxpayers who most need it.

This is a key challenge for those who are charged with the responsibility of ensuring that we have a 21st century tax system that delivers to all taxpayers. There is no simple way to build a world class tax system, especially one that is charged with not just collecting revenues (a herculean task in itself) but also a system that is responsible for delivering benefits that can mean the difference between living in and out of poverty.

Status of Several Issues Pushed by TAS

As regular readers of the blog know, we published reflections on the tenure of Nina Olson throughout the month of July leading up to her retirement.  The reflections came from many different perspectives and offered a variety of thoughts on her tenure.  Thank you to everyone who wrote a reflection or commented on the site.  On her last day, Nina published a blog post providing an update on a number of issues she was working to resolve before she left.  If you have not read her final blog post as NTA, it’s worth reading to learn where the issues stand if you are following an issue about which she commented.  I will briefly recap them below to allow you to decide if she wrote on an issue close to your heart.

One of the issues Nina pushed during her time as NTA was taxpayer rights.  Paul Harrison, the director of the low income taxpayer clinic at Ladder Up in Chicago, wrote a reflection on Nina as a song focusing primarily on taxpayer rights.  The song is included in this post as well.

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Private Debt Collection

On this issue Congress stepped up and took care of a major concern raised by Nina.  It excluded from the list of accounts that the IRS should refer to the private debt collectors taxpayers falling below 200% of poverty.  It also excluded certain taxpayers receiving means tested income.  These changes definitely benefit the low income individuals who will no longer be receiving the multitude of contacts from the collectors.  I think they also benefit the PDCs and the IRS.  Chasing most of these individuals for payment is, more often than not, a losing proposition.

Training on Taxpayer Rights

I have written before about cases in which taxpayers have argued that TBOR has the “teeth” to stop the IRS from certain action or behavior.  In those cases the IRS argues that TBOR lacks teeth to allow the court to stop its action and the taxpayer argues that for TBOR to have meaning it must stop certain types of behavior.  If TBOR has any teeth, it certainly should have teeth regarding the training of IRS employees on the enumerated rights since that is discussed in the statute. Congress stepped in again here and ordered the IRS to develop a plan for training employees on taxpayer rights.

Exclusion of TAS Open Cases from Passport Certification

The IRS has administratively and temporarily pulled cases from the passport certification process if the taxpayer is working with TAS to resolve the issue.  This is a good result for taxpayers trying actively to work out their cases.  It will be interesting to watch and she if this becomes a permanent practice or just a temporary experiment.

Economic Hardship Indicator

Nina sought to have the IRS tag the accounts of qualifying taxpayers and to stop affirmative collection from people with the indicator.  She marks this as unfinished business since the IRS did not adopt her recommendation.

TAS Attorney Hiring Prohibition

Nina hired a number of attorneys to work with her within TAS.  Starting in 2015 Treasury basically stopped allowing her to hire attorneys to work directly under the NTA.  She did not succeed in changing the Treasury policy before she left.  This issue does not have a direct impact on practice before the IRS but, obviously, impacts the functioning of TAS.

Internal Revenue Manual Chapters on Taxpayer Assistance Orders and Taxpayer Advocate Directives

Nina has proposed some changes to the operation of TAOs which the IRS has not yet accepted.

Transparency of Chief Counsel Guidance

In 1998 Congress required many advisory opinions issued by Chief Counsel’s Office be made public.  Some advice is still not seeing the light of day.  Nina suggests that changes are forthcoming.

Conclusion

The details are in her blog post.  The purpose of this post is to alert you to the issues she discusses in case one or more of those issues is of interest to you.   

Now for the promised song about taxpayer rights:

(What’s so Funny ‘Bout) Asserting Taxpayer Rights?

(To the tune of (What’s so Funny ‘Bout) Peace, Love, and Understanding? By Nick Lowe. Famously covered by Elvis Costello & the Attractions of whom, I’ve been told on good authority, the erstwhile NTA was a fan.)

As I read through
The IRC
Searchin’ for fairness or a bit of integrity

I ask myself
Is all hope lost
Is there only debt, dis’lowance, and inequity?

And each time
I feel like this inside,
There’s only one thing I wanna know:

What’s so funny ‘bout asserting taxpayer ri-ights? Ohh!
What’s so funny ‘bout asserting taxpayer ri-ights?

And as I walked on
Through troubled seas
I’m so glad I found the LITC
‘Cause they the strong
And they are the trusted
And they are the LITC
Sweet LITC!

‘cause each time another notice arrives, just makes me wanna cry.
What’s so funny ‘bout asserting taxpayer ri-ights? Ohh!
What’s so funny ‘bout asserting taxpayer ri-ights?

‘Cause they the strong
And they are the trusted
And they are the LITC
Sweet LITC!

‘cause each time another notice arrives, just makes me wanna cry.
What’s so funny ‘bout asserting taxpayer ri-ights/ Ohh!
What’s so funny ‘bout asserting taxpayer ri-ights?

A Message from the National Taxpayer Advocate

Nina E. Olson smiling, wearing a purple suit.

Friends and Colleagues,

I have been thinking what I can say to everyone who has been writing “reflections” throughout this month, and I have been having a hard time finding words.  Let me just say I am overwhelmed.  It has been my privilege to be part of a journey along which I have met so many fine people, who have dedicated their lives and made sacrifices to protect taxpayer rights, who care about access to justice and the fundamental fairness of the tax system.

 It is to you all that I owe thanks and appreciation.  That I have in some way been able to influence peoples’ lives and choices was never anything I set out to do, and I am just humbled and a bit astonished to read folks’ reflections.  I look forward to working with you all going forward, in my next step, through the Center for Taxpayer Rights.  You can reach me at neo@taxpayer-rights.org.

Nina