Leigh Osofsky (North Carolina; Google Scholar) presents Legitimacy and Tax Enforcement, 61 Harv. J. on Leg. __ (2024) (with Joshua D. Blank (UC-Irvine; Google Scholar)) at Florida today as part of its Tax Colloquium hosted by Yariv Brauner:
One of the most powerful charges that can be leveled against the IRS is that it is targeting taxpayers. Charges of political targeting have dogged the IRS for over a century, including in major controversies such as the so-called Tea Party auditing scandal in 2013. Commentators and scholars have long-critiqued the IRS for focusing audit resources on some of the lowest-income Americans. And, most recently, a group of researchers estimated that the IRS audits Black taxpayers at a 2.9 to 4.7 times greater rate, as compared to non-Black taxpayers. In response, legislators demanded action, there was widespread public consternation, and IRS officials stated that they were “deeply concerned by these findings.” These, and other, controversies suggest deep disdain for the targeting of taxpayers by the IRS.
But these critiques are in tension with another facet of tax enforcement: due to limited resources, the IRS is always focusing on some taxpayers more than others. Moreover, there are often good enforcement reasons for the IRS to focus on certain groups of taxpayers. At the heart of tax enforcement, then, is a fundamental question: what distinguishes legitimate focusing of tax enforcement resources, on the one hand, from illegitimate targeting, on the other? Despite the importance of this question, there is no existing answer, or even much theoretical examination of it, in the law or legal literature.
In this Article, we explore this critical question, and why our legal system fails to answer to it. We explain that nondiscrimination law distinguishes between legitimate differences in treatment, on the one hand, versus illegitimate discrimination, on the other. In theory, nondiscrimination law could apply to tax, and other forms, of enforcement. However, legal doctrines designed to protect agencies’ enforcement discretion result in effective nonapplication of nondiscrimination law to enforcement. The IRS also fails to communicate with the public about how it makes its enforcement decisions in a way that is sensitive to targeting concerns. The resulting lack of a legal or other framework for making legitimate tax enforcement decisions leaves taxpayers vulnerable to auditing without sufficient accountability, and threatens the perceived legitimacy of the IRS.
Having identified the problems with the IRS making enforcement decisions largely in a legal and communicative vacuum, we conclude by exploring reform possibilities. We argue that the IRS should communicate more clearly its enforcement values and constraints, and how it is responding to them in a manner that accounts for non-discrimination norms. We propose several specific reforms that would increase transparency regarding the IRS’s tax enforcement decisions and the impact of those decisions on different groups of taxpayers. These transparency measures, we argue, would help yield greater, if not perfect, accountability for the value-laden enforcement decisions that the IRS inevitably must make.