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. Such neglect is unwarranted and unwise. The 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.
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) 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. In a 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. 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.
March 2015, Vol. 67, No. 2
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