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Florida Law Review Founded 1948 Florida Law Review Founded 1948 Formerly University of Florida Law Review VOLUME 56 JANUARY 2004 NUMBER 1 TAX ADMINISTRATION AS INQUISITORIAL PROCESS AND THE PARTIAL PARADIGM SHIFT IN THE IRS RESTRUCTURING AND REFORM ACT OF 1998 Bryan T. Camp * ** I. INTRODUCTION ....................................2 II. THE CRITICAL NEED FOR INFORMATION ................5 III. TAX ADMINISTRATION AS INQUISITORIAL PROCESS ......17 A. Inquisitorial Process Defined .....................17 B. The Service As Decisionmaker ....................20 1. Tax Determination ..........................20 2. Tax Collection ..............................26 C. The Service As Evidence-Gatherer .................31 1. The Modern Summons Power ..................32 2. The Inquisitorial History of the Summons Power ............................36 a. Civil War to the Revised Statutes . 37 b. Revised Statutes to the 1954 Code ..............................45 * © 2004 by Bryan T. Camp. ** Associate Professor, Texas Tech University School of Law. B.A. Haverford College, 1982; J.D. University of Virginia, 1987; M.A. University of Virginia, 1988; LL.M. Columbia University, 1993. I am grateful for the research assistance of Peter Hall, who quickly and ably pulled together the statistics on CDP and summons cases for me. I am also grateful for the many thoughtful comments I received from, in alphabetical order, Danshera Cords, Steve Johnson, Leandra Lederman, Chris Pietruszkiewicz, Larry Schattner, and Nancy Soonpaa; naturally I remain responsible for all errors of commission and omission. I am most grateful of all for my patient and understanding wife, and for her support through both this writing process and the entire tenure process. Now I know why authors thank their spouses. Finally, I would be remiss not to thank the members of the Florida Law Review whose perspicacity in selecting this Article for publication was well matched by their fine edits and substantive comments, all of which added value to the piece. 1 2 FLORIDA LAW REVIEW [Vol. 56 3. The Inquisitorial Logic of Summons Opinions Since 1954 .........................51 a. Probable Cause ..........................53 b. Improper Purpose .........................58 i. Criminal Investigations . 58 ii. Third Party and John Doe Summons ............................63 iii. Dual Purpose .........................71 D. Summary .....................................77 IV. RRA 98: SWINGING PENDULUM OR SHIFTING PARADIGM ? . 78 A. The Bark .....................................80 1. Autonomy and Truth .........................82 2. Checks and Balances .........................86 3. Old Whine In New Bottles: The Contrast Between 1998 and 1953 ......................87 B. The Bite ......................................91 1. Adversarial Structural Changes . 91 a. External Decisionmakers ...................92 b. Quasi-External Decisionmakers: Offices of Taxpayer Advocate and Appeals . 93 c. Elevating the IRM into Law . 103 2. Tax Determination as Adversarial Process . 108 a. Burden of Proof .........................108 b. Suspension of Interest ....................114 3. Tax Collection as Adversarial Process . 117 a. Seizure Restrictions ......................118 b. Collection Due Process ...................119 4. Evidence-Gathering as Adversarial Process . 128 V. CONCLUSION ...................................132 I. INTRODUCTION The tax code is a puzzle. Whether one views it as an engaging enigma or a ridiculous riddle, the tax code requires careful and considered attention to fit the statutory pieces together to form a sensible picture. The procedural pieces of the puzzle, however, are often neglected by taxwriters and academics. Tax academics eschew procedure because it is not “real” tax law and nontax academics tend to see it as isolated from the mainstream of legal thought. 1 Such neglect is unwarranted and unwise. The 1. See generally Paul L. Caron, Tax Myopia, or Mama Don’t Let Your Babies Grow Up to be Tax Lawyers , 13 VA. TAX REV . 517, 590 (1994), making a general plea for more 2004] TAX ADMINISTRATION AS INQUISITORIAL PROCESS 3 ideas underlying tax administration deserve as much attention as those underlying substantive tax provisions if the puzzle pieces are to fit. This Article joins the small but growing number of commentators who have begun to apply ideas from other areas of academic study, such as civil procedure and administrative law, to tax administration, and vice versa .2 In this Article, I pursue three goals. The first is to describe and justify the inquisitorial nature of tax administration. I offer the conception of tax administration as two related but distinct functions: tax determination and tax collection, both of which employ inquisitorial processes. I suggest that the justification for the use of these processes lies in the government’s need for information to ensure that all taxpayers pay their “proper” tax and thereby encourage voluntary compliance. My second goal is to show how certain procedural provisions in the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98) 3 reflect Congressional ignorance of the basic inquisitorial process paradigm under which the Internal Revenue Service (the Service) has operated; the new statutes instead link to a conception of tax administration as primarily adversarial. 4 In a interdisciplinary work and concluding: A symbiotic relationship between tax and nontax law will deepen our tax understanding while providing a fertile area in which to test and refine nontax principles. Accordingly, in performing their tax legislation, administration, and litigation functions, the relevant players must resist the notion that they bring nothing to the table other than their special tax expertise and background. By replacing their narrow tax lens with a panoramic perspective of the legal landscape, the tax debate will be invigorated with nontax learning while the special talents of tax lawyers and professors will generate insights useful to their nontax counterparts. Id. 2. See, e.g., Steve R. Johnson, The Dangers of Symbolic Legislation: Perceptions and Realities of the New Burden-of-Proof Rules , 84 IOWA L. REV . 413 (1999) (arguing that changes in tax procedure were a “pernicious exercise in symbolic legislation”); cf. Marcus Schoenfeld, A Critique of the Internal Revenue Service’s Refusal to Disclose How It “Determined” a Tax Deficiency, and of the Tax Court’s Acquiescence With This View , 33 IND . L. REV . 517 (2000) with Leandra Lederman, Are There Procedural Deficiencies in Tax Fraud Cases?: A Reply to Professor Schoenfeld , 35 IND . L. REV . 143 (2001) (debating the conceptual and doctrinal role of the Tax Court vis-á-vis the Service’s determination of liability in fraud cases); Leandra Lederman, “Civil”izing Tax Procedure: Applying General Federal Learning to Statutory Notices of Deficiency , 30 U.C. DAVIS L. REV . 183 (1996) (linking practical difficulties in tax administration to the conceptual and doctrinal confusion about notices of deficiency). 3. Pub. L. No. 105-206, 112 Stat. 685 (1998). All citations to code sections are to the Internal Revenue Code of 1986, unless otherwise indicated. 4. It is thus beyond the scope of this Article to discuss those changes that introduce notions of “equity” at odds with the traditional “turn-square-corners” approach of administrative law in general and tax administration in particular: notably the provisions governing Offers In 4 FLORIDA LAW REVIEW [Vol. 56 fundamental way, the so-called “reforms” of the RRA 98 are bottomed on a paradigm in significant tension with the paradigm underlying prior law. This tension has already created a practical uncertainty in procedural matters and will likely create more as both the Service and the courts struggle to execute and interpret the new laws. 5 Finally, if nothing else, I hope to convince the reader that discussion of tax administration should not be so much about “customer service” versus “tax enforcement” models of administration, but should instead focus on the degree to which tax administration should or should not be inquisitorial. This Article proceeds in three parts. Part II links the viability of our “voluntary” system of tax compliance to the Service’s ability to acquire the information necessary for a “proper” determination of tax and explains how this ability, combined with the information asymmetry between taxpayers and government, forms the basis for an inquisitorial system of tax administration. Part III explains how both Congress and the courts have indeed adopted an essentially inquisitorial system of tax determination and collection, and how courts police the Service’s administration of the tax laws using inquisitorial logic. In so doing, Part III offers a conceptualization of tax administration as two relatively autonomous procedural boxes, one called “determination” and the other called “collection.” Part IV demonstrates how, beginning with the dramatic hearings held by the Senate Finance Committee in September 1997, the history of RRA 98 evidences not merely the taxwriters’ ignorance and misunderstanding of tax procedure but also of the underlying inquisitorial nature of the process. As a result, RRA 98 attempts to insert provisions grounded in adversarial logic into a scheme heretofore grounded in inquisitorial logic: a classic case of round pegs inserted into square holes. It should, therefore, come as no surprise that the puzzle pieces do not fit well together. Compromise, § 7122, Taxpayer Assistance Orders, § 7811, and the spousal relief provisions
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