TaxProf Blog

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

Wednesday, April 9, 2008

DOJ Announces National Tax Defier Initiative

Doj_sealThe Department of Justice yesterday announced that it has created a National Tax Defier Initiative:

Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division, announced the creation of the National Tax Defier Initiative or TAXDEF. The purpose of this initiative is to reaffirm and reinvigorate the Tax Division’s commitment to investigate, pursue and, where appropriate, prosecute those who take concrete action to defy and deny the fundamental validity of the tax laws. ...

This initiative is aimed at stopping those tax defiers who do not meet their federal tax obligations and seek to transfer those obligations to their neighbor’s back. The tax defier is not someone who has a legitimate or factual dispute about the amount of tax due. The tax defier is not someone who is merely exercising his or her First Amendment rights to challenge the tax policy choices that Congress has made. Instead, the tax defier is someone who rejects the legal foundation of the tax system, despite decades of legal precedent upholding the system’s constitutional and statutory validity, and who takes specific and concrete action to violate the law. It is this tax defier conduct, which results in fraudulent claims, frivolous returns and bogus schemes, that threatens the foundation of our tax system and must be vigorously countered. This activity not only wastes limited governmental investigative, administrative and judicial resources, but it also fundamentally undermines the public’s confidence in the fairness of the tax system.

Although the Tax Division and the IRS have been effective at times in combating tax defier activity, the problem demands constant vigilance. Today I want to renew and revitalize the Tax Division’s commitment to combating tax defier activity by announcing the creation of the National Tax Defier Initiative, or TAXDEF. Jennifer Ihlo will serve as the National Director of TAXDEF and she will report directly to me. Her primary mission will be to ensure that we are using all of the tools in our enforcement arsenal to address this nationwide problem.

The TAXDEF initiative will:

  • Strengthen and expand coordination among the Tax Division, IRS and US Attorneys’ offices to ensure that both criminal and civil enforcement tools are fully considered and utilized.
  • Leverage expertise and resources to enable agents and attorneys across the country to efficiently detect, investigate and where appropriate, prosecute tax defiers, viewing enforcement from a national rather than regional or local perspective.
  • Expand our efforts to enjoin tax defier activity. Since 2001 the Tax Division has obtained over 300 civil injunctions against tax promoters and preparers, over a third of which directly involved tax defier activity. Injunctions are a powerful method of stopping the promotion of tax defier activity at the earliest possible moment. We estimate that we have collected over $600 million in tax as a result of our efforts.
  • Maximize our use of technology to detect, develop and prosecute cases. The explosion of the Internet in the last decade has greatly facilitated tax defier activity and turned what was once a paper–based local or regional enterprise into a click and download national operation. Our response must take full advantage of ongoing changes in technology.
  • Alert and educate the public to the falsity of tax defier claims and publicize the consequences of tax defier conduct. Simply stated, we want to pull back the curtain and show the public that the promoters of these schemes are not wizards imparting the secrets of a “tax-free universe” but are nothing more than garden variety hucksters and modern day snake oil salesmen peddling tax evasion schemes.

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