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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, August 27, 2004

Lustig on Corporate Law Perspective on IRS Oversight Board

Friday, August 27, 2004

Eric Lustig (New England) has published IRS, Inc.--The IRS Oversight Board--Effective Reform or Just Politics? Some Early Thoughts from a Corporate Law Perspective, 42 Duq. L. Rev. 725 (2004). Here is part of the Introduction:

This article examines the new IRS Oversight Board as a governance device, particularly in light of corporate governance in the private sector. The article will first trace the history of the IRS and explore past organizational and governance problems. Focus will then shift to the reforms enacted in the 1998 IRS Restructuring and Reform Act, with particular attention paid to the structural changes and establishment of the IRS Oversight Board. The article will then examine the process of seating the initial board as well as its foray into the 2002 IRS budget battle and the search for the new IRS Commissioner. The article will review the IRS Oversight Board from a corporate perspective by examining the role of directors in governing private corporations. The analysis tests the corporate analogy and considers recent criticisms of the corporate board model of governance in light of the current corporate scandals.

This article will conclude that the IRS Oversight Board as a governance mechanism does not approach the reform suggested by the political rhetoric and does not significantly improve governance shortcomings. This article argues that the corporate board analogy is misplaced. The IRS is not a private corporation. Nor is it a government corporation. Moreover, the characteristics which make a private corporation's board of directors effective are not present. Specifically missing is the plenary power of a corporate board of directors.
This article ultimately concludes that to the extent that the creation of the IRS Oversight Board rests on a corporate analogy, its reform power ends up as ineffective and a failure of tax policy.

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