Paul L. Caron

Thursday, October 23, 2014

Osofsky: Tax Law Nonenforcement

Leigh Osofsky (Miami), Tax Law Nonenforcement:

The Obama Administration has engaged in what some have characterized as an “unprecedented use of executive power” not to enforce certain laws, including immigration laws, federal marijuana laws, and even parts of the Obama Administration’s own Patient Protection and Affordable Care Act. In response to this nonenforcement, commentators have begun asking what would have happened if a President Romney, or a future Republican President, decided not to enforce the tax laws. Could a President decide not to enforce the estate tax, the income tax with respect to millionaires, or the income tax for anyone who has already paid a specified percentage of income in taxes? In answering this question, constitutional scholars have suggested that the President cannot declare categorical, or complete, prospective nonenforcement of some aspect of the law. Recent tax literature examining IRS pronouncements that it will not enforce particular aspects of the tax law has also determined that categorical tax law nonenforcement is troublesome from the perspective of the rule of law.

What has been missing in the existing discussion, especially in the preoccupation with flashy, and relatively infrequent, presidential nonenforcement of the tax law, is a broad based examination of what tax law nonenforcement looks like at the agency level and an accompanying examination of categorical nonenforcement through the lens of the legitimacy of the administrative state.

And yet, focusing on agency directed nonenforcement through this lens is important. Agencies like the IRS must make nonenforcement decisions on a daily basis, which decisions inevitably end up shaping the law on the ground in important ways. A long and extensive literature regarding the legitimacy of the administrative state seeks to justify agencies making significant decisions about rights and obligations under the law, and this literature offers important insights about how certain nonenforcement decisions may increase or decrease the legitimacy of the agency’s nonenforcement. This Article brings this literature to bear by applying theories regarding the legitimacy of the administrative state to tax law nonenforcement directed by the IRS. This examination reveals that, for a number of reasons, categorical nonenforcement may actually help legitimate the tax law nonenforcement that is inevitably going to occur at the hands of the IRS. This conclusion underscores how agency directed nonenforcement and theories of the legitimacy of the administrative state should be a bigger part of the analysis in the broader, and ongoing, discussions regarding executive nonenforcement of the law.

Scholarship, Tax | Permalink