Mark Matthews Comments on Moving IRS Criminal Investigation Division to Treasury

Tax Notes spoke with Mark E. Matthews concerning a proposal to move the IRS Criminal Investigation division over to the Treasury Department.  The move could cause unnecessary turmoil and confusion for taxpayers and practitioners, to the long-term detriment of voluntary tax compliance.  For the full story, please visit Tax Notes’ website (subscription required).

Excerpt taken from the article “Former IRS, DOJ Execs Pound Proposal to Move CI to Treasury” by William Hoffman for Tax Notes.

"I am confident that the overwhelming majority, if not all, of former senior tax enforcement professionals would strongly oppose the proposed legislation," said Mark E. Matthews, former CI chief (2000-2002), referring to the CI Realignment Act (H.R. 5296 2016 TNT 104-64: Proposed Legislation), introduced by House Ways and Means Committee member George Holding, R-N.C.

"The only possible result would be a sharp decrease in the number of pure criminal tax cases, which are already in decline due to the recent IRS budget cuts," said Matthews, who also served as IRS deputy commissioner for services and enforcement (2003-2006) and is now with Caplin & Drysdale Chtd. "It would be the next logical step in effectively decriminalizing tax enforcement in this country."

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Unanswered Questions

Like the rest of the IRS, CI has been under budget pressures that have reduced staff, as well as the number of investigations and convictions it produces.

CI hit its "high-water mark" in special agent numbers in 1995, when 3,363 were employed at the division, Matthews noted in a March 14 Viewpoint 2016 TNT 50-14: Viewpoint in Tax Notes. Currently, it's almost one-third fewer, at 2,288 CI special agents, he said.

The stresses on CI resources have begun showing up in its results, measured in criminal cases and convictions. Investigations initiated have dropped from 5,314 in 2013 to 3,853 in 2015, Matthews said. Convictions over the same period fell from 3,865 to 3,208, he said.

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Matthews said, "If IRS CI were to be moved to Treasury, it would require substantial changes to the tax disclosure statute [section 6103], meaning that some of the most sensitive tax information conceivable -- who is being investigated criminally -- would be moved into the Treasury Department. This has likewise been resisted by knowledgeable tax enforcement professionals of both parties."

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"It is very important to tax compliance that pure tax cases involving no other criminal conduct be prosecuted as pure tax cases," Skarlatos said. "When tax prosecutions are combined with other criminal conduct such as drug cases, or money laundering, or securities fraud, the public gets the impression that tax noncompliance by itself is never prosecuted and failing to pay taxes is criminal only when other bad conduct is involved."

Matthews agreed. "Moving CI out of IRS reduces the power and influence of the IRS commissioner to maintain an appropriate focus on traditional tax enforcement," he said.