Thursday, November 30, 2006
Stephanie Hoffer (Northwestern) has published Hobgoblin of Little Minds No More: Justice Requires an IRS Duty of Consistency, 2006 Utah L. Rev. 317. Here is the Conclusion:
The arguments for application of a broader duty of consistency to the Service outweigh the arguments against it. In addition, there is at least some modicum of judicial support for the idea. Finally, our history and sense of justice demand it. Courts should require the Service to give similar treatment to similarly situated taxpayers and should accept written rulings as evidence of disparate treatment. Whether a taxpayer is similarly situated to others should depend on facts relevant to the operation of the statute or statutes in question. In addition, courts should acknowledge that taxpayers under significant hardship are not similarly situated to those who are not. Doing so will allow the Service to consider equity in cases where it is necessary. In addition, if a broader duty of consistency is to comport with Supreme Court jurisprudence, the Service must be afforded an opportunity to correct its mistakes. To ensure that those corrections are fair to taxpayers, the Service should make them in the most transparent way possible. Therefore, courts should adopt the rule in Conway Import Co., which would permit taxpayers to use written rulings as evidence of disparate treatment until the Service publishes its change of position in writing.
By adopting the positions above, courts would not only afford taxpayers fair treatment, they would also decrease transaction costs and increase efficiency by making tax results more reliable. For decades, agency rhetoric and court dicta have supported a consistency requirement while actual decisions have suppressed such a result. Applying a broad-based duty of consistency to the Service is not a new idea, but it is one whose time has come. Ample precedent exists for imposition of the duty, and justice demands it.