Tax Notes Today captured Christopher S. Rizek's panel discussion "Tax Transparency: The Good, the Bad, and the Future," which focused on the IRS seeking balance between taxpayers' rights to privacy and confidentiality, and media and governments' demands for transparency. For the complete article, please visit Tax Notes Today's website (subscription required).
Excerpt taken from the article "Contest Continues Over IRS Transparency Versus Confidentiality" by William Hoffman for Tax Notes Today.
The IRS is issuing fewer guidance documents than it has in decades, its process for answering Freedom of Information Act requests is cumbersome and slow, and the Service over-redacts documents it does release based on flimsy rationales of protecting taxpayer information under section 6103, said panelist Christopher S. Rizek of Caplin & Drysdale.
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The two-hour discussion at the Ronald Reagan International Trade Center in Washington was moderated by Robert Goulder, senior tax policy counsel with Tax Analysts, and covered a wide range of issues, from Rizek's description of a "seriously broken FOIA process," to pleas from Tonuzi that the IRS needs to preserve its ability to keep private some "pre-decisional" discussions about regulatory proposals, to Olson's concerns about IRS computer software that might automate decisions on taxpayer problems without obvious reference to laws or regulations.
Guidance Decline 'Indisputable'
"I don't think there's anybody who disagrees that more transparency and guidance is good; it's better than less guidance," Rizek said. "The law's just too complicated. The more complications there are in the law, the more demand there is for guidance."
"The numbers are indisputable," that formal guidance issued by the IRS has declined steeply since the 1950s, Rizek said. The IRS frequently published more than 600 revenue rulings per year in the 1950s, but since 2004, "there has not been a single year over 100," he said. He noted that in 2014 the IRS published 34 revenue rulings. Revenue procedure issuances have followed a similar downward trend, Rizek claimed, though not as steep.
"It's clear, I think, that over the past 40 years, since [sections] 6103 and 6110 were enacted in their present form, the expansion of access to informal guidance has gone in the opposite direction from the decline in the amount of formal guidance," Rizek said. Resource constraints could account for some of the decline, he said, though he added, "Is there a connection between the expansion of access to informal guidance, and the resulting need-slash-lack-of-need for the IRS to issue formal rulings?"
The Tax Court recently held in Altera v. Commissioner, 145 T.C. No. 3 (2015) 2015 TNT 144-9: Court Opinions, that the Administrative Procedure Act requires the IRS to justify policy decisions, Rizek said. Tax controversy specialists are now data-mining regulatory files to discover whether a regulatory provision that snagged them was adequately justified, he noted. (Prior analysis 2015 TNT 158-1: News Stories.)
"Maybe the short-term benefit that the government got from arguing for the uniform application of Chevron -- and no special treatment for tax guidance -- will have a long-term cost, which is that Treasury and the IRS really do have to justify every single policy decision they make in regulations, in more detail than they otherwise would have cared to," Rizek said. "And I have a sneaking suspicion that's going to slow down the reg process."