Paul L. Caron

Wednesday, December 31, 2014

Osofsky Reviews Zelenak's Custom and the Rule of Law in the Administration of the Income Tax

JotwellLeigh Osofsky (Miami), The IRS as Tax Law Nonenforcer (Jotwell) (reviewing Lawrence Zelenak (Duke), Custom and the Rule of Law in the Administration of the Income Tax, 62 Duke L.J. 829 (2012)):

Zelenak laments the difficulty in challenging customary deviations. He usefully explores how the pro-taxpayer nature of customary deviations and limitations on third-party taxpayer standing leave little room for outsiders to step in and prevent customary deviations from going too far. Zelenak leaves the reader with the sense that customary deviations can in some cases be desirable, in some cases problematic, but in all cases difficult to do anything about as a result of limitations on taxpayer standing and the real threat that allowing standing to challenge the deviations may pose to the administrability of the tax system. Zelenak’s most concrete proposal is for “Congress to enact a new Code provision specifically authorizing the Treasury Department to issue regulations narrowing the statutory definition of gross income with respect to non-cash benefits received outside of an employment context, whenever the IRS decides that administrative concerns make such a narrowing advisable,” and that “Congress might decide to give the Treasury Department similar authority to revise by regulation other specified Code sections”  

Zelenak leaves aside a full exploration of potential problems with this proposal. Rather, his contribution is to expose the conundrum of customary deviations, which form a subset of the broader set of strategies that the IRS uses to manage an enforcement mandate that exceeds its capacity. His essay thus points to the broader problem of the IRS’s inevitable enforcement discretion and what, if anything, should be done about it.

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