Scott Michel Comments on Idea to Disperse DOJ Tax Lawyers in Tax Notes

Reports of a Justice Department memo suggesting sending Tax Division lawyers to the various U.S. attorneys’ offices drew commendations and criticisms from the tax community.

Several media outlets reported on March 27 and 28 that an internal Justice Department memo from deputy attorney general Todd Blanche suggested several changes to the department in the name of streamlining the government’s workforce, including reassigning Tax Division lawyers to U.S. attorneys’ offices across the nation.

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On March 28, Scott D. Michel of Caplin & Drysdale Chtd. told Tax Notes that breaking up the Tax Division could undermine tax compliance and enforcement policy. “The Tax Division has held a historic place in our voluntary compliance system, and the attorneys who work there constitute the equivalent of one of the most qualified, expert law firms in the world, focused on criminal and civil tax enforcement and collection,” he said.

“It seems pretty clear that an anti-tax enforcement mood has overtaken D.C., notwithstanding our huge compliance gap and massive deficit,” Michel said. “But there are other, more efficient ways to promote tax compliance and deter tax evasion than breaking up the practitioners in the Tax Division and sending them far afield, particularly if they will now report, even in part, to 93 different bosses with 93 different sets of resource issues and priorities.”

“Centralized tax enforcement run out of a fully staffed Tax Division in D.C., particularly with a presidentially nominated [assistant attorney general], helps promote uniformity in developing and pursuing the government’s civil and criminal tax compliance priorities and consistency in navigating the complexities of the Internal Revenue Code,” Michel said. For example, the Tax Division’s Swiss bank program likely wouldn’t have come about in a decentralized system, he said.

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While some U.S. attorneys’ offices have their own separate tax units, most judicial districts don’t, Michel said. “It’s not yet clear whether the reassigned Tax Division attorneys would report to senior division management in D.C. or, at least in part, to the separate U.S. attorneys. But tax enforcement, particularly in legal-source income cases, will likely decline dramatically if each individual U.S. attorney’s office can decide when to bring tax cases and what kinds of cases to bring,” he said.

“Even if the division is still run by senior attorneys out of D.C., the plan as reported would reduce collaboration, innovation, and the development of heightened expertise, and it would lead to less efficient budgeting and administration, not more,” Michel said.

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