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Friday, September 8, 2023

Weekly SSRN Tax Article Review And Roundup: Saito Reviews Sarkar’s Internal Revenue’s External Borders

This week, Blaine Saito (Ohio State; Google Scholar) reviews a new work by Shayak Sarkar (UC-Davis; Google Scholar), Internal Revenue's External Borders, 112 Calif. L. Rev __ (2024).

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When asked does the IRS aid Immigration and Customs Enforcement (ICE) and other authorities that seek to remove undocumented immigrants, my reflexive response is no. After all, that undermines many of the goals of the tax system from revenue collection to the provision of social welfare programs. But in his piece, Internal Revenue’s External Borders, 112 Calif. L. Rev. ___ (2024). Shayak Sakar shows how the IRS does collaborate in violent immigration raids. It cautions that coordination between the IRS and other agencies is not an unalloyed good. And sometimes our instincts and sense of the protections that the tax system provides can be wrong on the ground.

Sarkar opens with how the IRS gets entangled with ICE’s immigration raid. IRS’s Criminal Investigation (CI) division often investigates employers who fail to meet their tax obligations. IRS often seeks a search warrant of the employment site, and in doing so, it often seeks to cooperate with other law enforcement agencies for help. ICE is one of the agencies called upon for assistance, even when the IRS does not intend it to be an immigration enforcement action. Yet, when the IRS calls ICE for support, the tax investigation investigation turns into a detention and removal raid for immigrants.

Sarkar uses case studies to motivate these points that lead toward immigrant employees suffering far worse than their employers as a result of the employers’ tax crimes. In one situation in Maryland, the IRS worked with ICE, and detained numerous employees and instituted removal proceedings against them. But they also problematically ensnared those lawfully present, like permanent residents, subjecting them to interrogations and other civil rights violations. In South Carolina, the IRS agent writing the search warrant used the term Hispanic in the warrant when describing the employees. The IRS asked ICE to assist in the raid of the workplace. There the agents from the IRS, ICE, and other agencies pointed guns at and only at Latinos. They detained only Latinos. Whites were unmolested.

Sarkar identifies two problems with the IRS working with ICE in these raids. First, it erodes trust not only with undocumented immigrants, but with the broader immigrant community. Everyone working in the U.S. has tax obligations, including undocumented immigrants. This distrust also harms the other roles of the IRS as a distributor of social welfare programs like the EITC.  People who qualify may not seek these benefits out of fear for what may happen to themselves, their families, and their friends. Second, these raids lead to the IRS to turn away from its main mission as tax collection to one focused on law and immigration enforcement. That in turn drains already tight resources at the IRS.

Those caught in these raids also have little protection. First, Sarkar notes the Fourth Amendment’s exclusionary rule does not work in removal proceedings, because removal is a civil proceeding. While there is some language in cases here that may help, the current state of the law is not favorable.

Tax lawyers may think that I.R.C. § 6103, which protects tax return and tax return information would protect immigrants. But in this situation of an IRS-ICE joint raid on an employer, I.R.C. § 6103 serves to protect the taxpayer information of the employer from the employees. The IRS often denies Freedom of Information Act (FOIA) requests from employees harmed by the raid on I.R.C. § 6103 grounds. But without information from these FOIA requests, those harmed cannot publicize the raids or pursue mechanisms of relief.

Perhaps the best current avenue for relief for those caught up in a raid is civil rights law. Unfortunately, the courts have limited the most direct access to such relief under 42 U.S.C. § 1983 and Bivens through the expansion of qualified immunity. But Sarkar notes that 42 U.S.C. § 1985’s prohibition of conspiracy to deprive others of civil rights does provide relief. Sarkar argues that case law on qualified immunity under § 1985(3) tends to focus on the intracorporate conspiracy doctrine. The doctrine posits that agents of the same legal entity do not conspire together. But in the situation of the IRS working with ICE and others, that does not apply, because they are not in the same department of government.

Sarkar then proposes some solutions drawing from California, which passed a series of law that limited participation between state agencies and ICE. These motivate his proposed reforms.

The first is changing how CI works. The IRS should work more on implementing what is in the I.R.M. itself regarding search warrants. The I.R.M. states that there needs to be a reason why “leads intrusive means are not being used,” and thinking through “potential problems and proposed resolutions.” CI should effectuate this language and plan for potential problems that immigrant employees may face even if a warrant is needed.

Second, Sarkar focuses on the use and content of interagency agreements. The most prevalent agreement is the memorandum of understanding (MOU). While not legally binding, MOUs serve as useful coordination tools. Sarkar also shows that MOUs can establish coordination walls. For example, the Department of Labor (DOL) and ICE have an MOU. The MOU establishes limitations. Those limitations in turn help DOL enforce workplace violations without worrying that some of the key witnesses will get caught in an ICE raid and removal proceedings.

Finally, the IRS could help provide immigration relief for employees, because they are often the witnesses to the illegal tax conduct. The IRS CI division could take a larger role as a certifying agency for a U-visa, which provides immigration relief to victims of crime who cooperate with law enforcement. While these tax employment crimes are not on the enumerated list, many other crimes that may flow from these, like obstruction of justice or threatening an immigrant with deportation, do qualify for the U-visa. Proactive steps could then help these people from being collateral damage.

The article is important to shatter our sense that the tax system is somehow separate from some of the problems we have seen in removals and family separation. But knowing that the IRS and the tax system is involved in this problem, at least for many of those on the left working in tax, is an important horror with which we need to grapple.

Second, Sarkar forces a reconsideration of our understanding of I.R.C. § 6103. The piece raises some deep questions about the balance between privacy of tax return information and the needs of transparency to address problematic situations. It raises questions as to the extent of law enforcement’s access to this type of information. And weirdly, the problem here cannot even be solved through § 6103 per se. After all, many caught in the tax-immigration raid dragnet and put into removal proceedings did not get there because of sharing of their taxpayer information. Rather it happened because the IRS called on ICE to help them to execute a search warrant. It is thus important to understand the limits too of the protections of § 6103, especially to groups like immigrants.

Finally, the piece raises the concerns about agency coordination that the IRS could undertake. Like many things, there are good and bad parts to it. On the positive end, coordination can help improve the IRS’s delivery of services and provide information to agencies seeking to help people. On the flip side, coordination can create law enforcement dragnets and lead toward the human costs of immigration enforcement. Sarkar makes us think carefully as to how the IRS coordinates, with whom it works, and what are the parameters of that coordination. It serves, then, as a reminder that, like so much of tax, these things are often decided in the details. And yet, those details can have life changing effects, positive and negative.

Here’s the rest of this week’s SSRN Tax Roundup:

https://taxprof.typepad.com/taxprof_blog/2023/09/weekly-ssrn-tax-article-review-and-roundup-saito-reviews-sarkars-internal-revenues-external-borders.html

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