‘The Evil That Men
Do Lives After Them . . .’1
Bryan T. Camp is an associate professor of law,
Texas Tech University School of Law.
This is the second of a new column in Tax Notes. The
column will generally explore the laws and policies of
tax administration. Its goals are to help readers navigate the laws of tax administration by (1) guiding
them through the thickets of particular procedural
problems and (2) giving them a sense of the larger tax
administration forest.
Copyright 2004 Bryan T. Camp.
All rights reserved.
Friends, readers, colleagues, I come not to praise RRA
98 but to bury it.2 In 1997 the noble senators on the Senate
Finance Committee told us that the IRS was abusive. If
so, it was a grievous fault and grievously has the IRS —
and the worthy cause of efficient and just tax administration — paid for it. Last month I suggested that the
doctrines that create the forest of tax administration laws
have historically favored inquisitorial methods of determining and collecting tax liabilities over adversarial
methods.3 In the next few columns, I hope to build a case
that RRA 98 did not merely trim back unruly branches of
that law, but instead basically clear-cut the old growth
and attempted to supplant it with procedures grounded
in adversarial process paradigms. I do not believe the
lawmakers fully understood what they were doing, with
the result that RRA 98 is pretty much a hack job. While
tax procedure law has never been a walk in the park, it is
now more like a federal disaster area and neither the IRS
or the courts can really clean up the mess created by
Congress. It is up to the legislature to either weed out the
most noxious of the new provisions or else just spray the
whole mess with a virtual jug of RoundUp and plant
anew.
The lawmakers’ essential goof was to change the
inquisitorial nature of the IRS tax determination and
collection process by inserting statutes based on an
adversarial model of tax administration. Recall that last
1
The quote is the fourth line of Marc Antony’s funeral
oration in William Shakespeare’s Julius Caesar.
2
RRA 98 is the common acronym for the Internal Revenue
Service Restructuring and Reform Act of 1998, P.L. 105-206, 112
Stat. 685 (1998).
3
Bryan T. Camp, ‘‘The Inquisitorial Process of Tax Administration,’’ Tax Notes, June 21, 2004, p. 1549.
TAX NOTES, July 26, 2004
month I defined a system as ‘‘inquisitorial’’ if it has either
or both of two interrelated characteristics: (a) it combines
the power to decide a legal issue with the power to
decide what evidence is necessary or enough to make the
substantive determination; and (b) it prefers discovery of
truth over restrictions on government intrusions into
personal privacy (what I called ‘‘autonomy’’ in the prior
column). So to the extent that RRA 98 moves the tax
determination and collection system away from these
two characteristics, the system becomes less inquisitorial
and more adversarial. Doing so may or may not be a
good idea; one could certainly make a rational decision to
move tax administration towards an adversarial process.
And we should have that debate (perhaps in a different
column or forum). But whether one believes RRA 98 went
too far or did not go far enough, the point of this column
in the next few months is that it mucked up tax practice
and procedure and needs fixing.4
This column will look at the basis for the lawmakers’
actions in 1998 to see just what they thought were the
problems with tax administration, as evidenced by their
rhetoric and the Senate Finance Committee’s investigations of IRS abuse. I hope you will agree with me that the
4
As Prof. Michael Asimow from UCLA put it in an e-mail to
me earlier this year: ‘‘It is absurd to turn the IRS’ investigation
stage, or its collection stage, into an adversarial process.’’ Prof.
Asimow suggests that the tax administration system is ultimately adversarial in the sense that if the taxpayer does not like
the IRS action, the taxpayer can always dispute it in an
adversarial forum — the Tax Court, or district court, or Court of
Federal Claims. The ultimate decisions, he suggests, are thus
still made in an adversarial forum and the IRS is ‘‘no different
from any prosecutor (or any law enforcement administrative
agency like the FTC or SEC).’’ While I agree that taxpayers in
theory have recourse to courts, I suggest that in practice (a)
access to courts is significantly reduced by various barriers to
review, including the full payment rule, and (b) review by
courts is generally perfunctory thanks to strong legal presumptions that favor the IRS’s liability and collection decisions. I
think the IRS really is different. For example, when a grand jury
indicts, the government must then prove its case before a petit
jury. So while the grand jury has broad subpoena powers, its
decision to indict is interstitial, subject to the rules of evidence
and the government’s ultimate burden to prove its case in
another forum. In contrast, the IRS’s decision on tax liability is
not preliminary to the government proving its case in another
forum. Even today, it can use that decision, as reflected in the
assessment, to take significant unilateral administrative collection actions, such as offset and the levying of state income tax
refunds. As I explain further below, the deficiency procedures
are simply not implicated for the majority of accounts receivable. It is true that the IRS cannot put people in prison, but it can
take their property or rights to property, which is still a pretty
significant intrusion into the private sphere.
439
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by Bryan T. Camp
COMMENTARY / CAMP’S COMPENDIUM
‘Abuse’ Versus ‘Law and Order’
What has always struck me as odd about the 1997 and
1998 Senate Finance Committee hearings on the IRS
abuse of taxpayers was the strange rhetoric coming from
the mouths of the Republicans and Democrats.6 Test
yourself: From which party would you expect to hear
complaints about erosion of individual civil rights from a
government law enforcement agency’s attempt to enforce
the law? Which party would you expect to vigorously
promote the need for resources and power necessary to
catch lawbreakers? If you are like me, you would expect
the thrust of Democratic critiques to be about protecting
individuals from law enforcement abuses, parried by the
Republican rhetorical riposte of ‘‘law and order.’’
The rhetoric about alleged IRS abuse was all backwards in the fall of 1997 and spring of 1998. Republicans
sounded like Democrats. They complained incessantly
and everywhere (including, notably, their campaign materials) that the IRS had ‘‘the biggest network of potential
intrusion into the privacy of every American,’’ that it
‘‘uses tactics that we would view . . . as inappropriate’’ to
assess and collect taxes.7 They expressed ‘‘a deep concern
and a fundamental belief that such a violation of . . . civil
rights should not . . . take place, not in America.’’8 On the
other hand, the voice of law and order came from the
Democrat side: ‘‘This objective [preventing abuse] is
particularly important when such actions are done in the
name of law enforcement. At the same time, we must do
so in a way that does not undermine those who are
performing crucial law enforcement missions. . . . Law
5
Thus, I will devote the next few columns to the provisions
relating to collection due process, third-party contacts, burdenof-proof shifts, the tax advice privilege, and the expanded
powers of IRS Appeals and the National Taxpayer Advocate.
6
The hearings held in September 1997 are printed as S.Hrg.
105-190; those from January 1998 are S.Hrg. 105-529; and those
from April 1998 are at S.Hrg. 105-598.
7
The first quote is from Rep. Bill Archer, R-Texas, in a news
conference on Sept. 30, 1997 (you can see the transcript in the
LEXIS ‘‘FDCH Political Transcripts’’ database). The second
quote is from Sen. Phil Gramm’s, R-Texas, opening remarks in
S.Hrg. 105-190 at 16.
8
Sen. William Roth, R-Del., opening remarks in S.Hrg. 105190 at 2.
440
enforcement is never easy. It is always subject to abuse.’’9
‘‘[W]e also need to keep in mind we need a revenue
agency in the United States to do the very difficult work
of colleting those revenues that we as a Congress said
people are responsible to pay.’’10
‘So Are They All, All Honorable Men’
So it was the Republicans who said the IRS was
abusive. Specifically, the most significant RRA 98 reforms
regarding tax determination and collection came from the
efforts of the Senate Finance Committee, led by the
Honorable William Roth and Honorable Charles Grassley, R-Iowa.11 Sens. Roth and Grassley concluded that the
IRS was abusive. Sen. Roth’s staff worked hard for some
eight months to find cases of abuse to present to the
American public.12 It is true that before their efforts,
evidence of abuse was scattered and insignificant. The
bipartisan National Commission on Restructuring the
Internal Revenue Service specifically found ‘‘very few
examples of IRS personnel abusing power’’ after its year
of intensive study of the agency.13 But maybe the Commission did not look hard enough. The senators certainly
said the IRS was abusive. And the senators were honorable men. It is also true that after the Senate Finance
Committee presented its public parade of horribles,
follow-up investigations revealed that the drama was
more fiction than fact, and the tales of woe were woefully
unsupported.14 But the senators said the IRS was abusive.
And surely the senators were honorable men. Finally, it is
true that, unlike the sensational Senate investigations of
the IRS in the early 1950s — which resulted in the
removal, resignation, and criminal convictions of an
extraordinarily high number of high-ranking IRS officials
— the 1998 Senate investigation resulted in no removals,
9
11.
15.
Remarks of Rep. Steny Hoyer, D-Md., in S.Hrg. 105-190 at
10
Remarks of Sen. Kent Conrad, D-N.D., in S.Hrg. 105-190 at
11
See Statement of Rep. Rob Portman, R-Ohio, S.Hrg. 105-529
at 52-53 (Jan. 29, 1998) (noting that while the House had passed
legislation based on the restructuring commission’s recommendations, ‘‘it was this committee, the Finance Committee’s work
and particularly your hearings this September that really focused all of America on the need to fundamentally reform this
troubled agency.’’); Statement of Sen. Don Nickles, R-Okla., S.
Hrg. 105-598 at 10 (April 28, 1998) (‘‘I have got about a dozen
things that we added that was not [sic] in the House bill, [but]
is in the Senate bill.’’).
12
See Testimony of Mike Dolan, IRS Acting Commissioner, S.
Hrg. 105-190 at 200 (referring to the opening announcement of
the investigation); See generally Opening Statement of Sen. Roth,
id. at 323-324 (describing the course and methods of the committee investigation).
13
Report of National Commission on Restructuring the Internal Revenue Service, ‘‘A Vision for a New IRS,’’ June 27, 1997,
at 48.
14
See Bryan T. Camp, ‘‘Tax Administration As Inquisitorial
Process and the Partial Paradigm Shift in the IRS Restructuring
and Reform Act of 1998,’’ 56 Fla. L. Rev. at 81 (2004), citing GAO
and The New York Times investigations, particularly the fine
efforts of David Cay Johnston to sort out the fact from the
fantasy.
TAX NOTES, July 26, 2004
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lawmakers’ rhetoric was pretty incoherent, and the Senate investigation poorly done by almost any objective
standard. Starting next month, I will look at how the
rhetorical excesses found unfortunate expression in some
of the key provisions in RRA 98 and will show how these
provisions stem from the essential goof of mixing adversarial with inquisitorial process.5
This month I should like to make observations about:
(1) the overall thrust of rhetorical gamesmanship during
1997-1998; (2) the sloppiness of the actual investigation
into IRS ‘‘abuse’’; (3) how the specific rhetoric used to
critique the IRS processes linked ‘‘abuse’’ with inquisitorial modes of procedure, thus setting the stage for adversarial ‘‘reform’’; and finally (4) how even at the technical
level, the drafters struggled with concepts of tax administration.
COMMENTARY / CAMP’S COMPENDIUM
Rhetoric
The critique of the IRS was grounded in adversarial
logic. Consider this exchange between Sen. Roth and
former IRS Commissioner Margaret M. Richardson in the
September 1997 hearings. Commissioner Richardson was
testifying about a proposal to shift the burden of proving
the correct tax liabilities from the Service to taxpayers.
She was against the proposal, as were all the other
witnesses who were attorneys. But politicians on both
sides of the aisle had found good press in comparing the
15
Id. at 87-91 (comparing and contrasting 1950s investigation
results with 1990s investigation results).
16
See Harold Dubroff, ‘‘The United States Tax Court: An
Historical Analysis,’’ 40 Albany L. Rev. 7, 23-24 (1975). Prof.
Dubroff quotes one 1923 contemporary urging that ‘‘All those
familiar with the situation at Washington are agreed that if the
income tax is to be preserved its friends will have to make a
vigorous fight for better administration.’’
17
For example, Sen. Conrad pointed out that some colleagues
were making political hay of the alleged problems with the IRS
by sending out mailers to constituents saying ‘‘We want to end
the IRS’s reign of terror.’’ S.Hrg. 105-190 at 15. Rep. Archer also
made explicit links between the administration of the tax laws
and income tax in a news conference on September 30, 1997. As
reported by FDCH Political Transcripts, after attacking IRS
abuse, Archer said that the abuse was inherent in the administration of an income tax: ‘‘But clearly, part of our problem today
is the way the IRS had been managed; but a potentially bigger
part of the problem is the complexity of the code itself. Which I
believe is an inherent flaw in any tax system that is based on
income.’’ The logic implicit in those comments is that if tax
liabilities are indeterminate then there is no ‘‘true’’ liability for
the IRS to find. If so, then there is no point in giving any special
deference to the agency’s determinations, undercutting one of
the justifications for an inquisitorial system. Archer did not put
it that way, but that is what his comments imply.
TAX NOTES, July 26, 2004
civil tax administration system with the criminal justice
system and declaring that it was wrong to give criminals
a presumption of innocence while making taxpayers bear
the burden of proving their ‘‘innocence’’ from additional
tax liabilities.18 When Commissioner Richardson tried to
explain her opposition to the proposal, Sen. Roth interrupted her:
Ms. Richardson: . . . What concerns me, and I think
many people who have worked in the tax area, is
that the taxpayer really is in possession of the facts
and does have the knowledge about —
The Chairman: Isn’t a person accused of a crime, a
murder, also the one, peculiarly, with the knowledge and information?
Ms. Richardson: Well, we are talking about civil
proceedings here, not criminal proceedings. . . .
As I discussed last month, a central justification for the
inquisitorial nature of tax administration has been that
the information necessary to exercise the governmental
taxing power is initially entirely in the hands of the
taxpayers. That is a key reason why the IRS has historically been given the twin powers of investigation and
determination, both for the determination tax liability
and collecting it. Sen. Roth rejected that justification by
reference to the highly adversarial process of criminal
prosecution. In criminal prosecutions, the presumption of
innocence is one of the ways in which adversarial process
prefers individual autonomy over truth — as seen by the
adage ‘‘better 10 guilty persons be set free than 1 innocent
person be deprived of liberty.’’ In contrast, the historic
preference in tax administration has been to presume the
agency has got it right and leave it up to the taxpayer to
prove the agency wrong. On the autonomy scale, a
citizen’s freedom to avoid paying the taxes necessary to
support the Democracy is nowhere near as important as
freedom from physical captivity and penal sanction.
Many of the complaints about IRS abuse expressed a
concern that the IRS had too much power. The objections
were (a) that the taxpayer was presumed ‘‘guilty’’ of
owing the taxes as determined by the IRS (as in the
example I give above), and (b) the decisionmaker was
also the evidence gatherer. ‘‘The IRS can take a taxpayer’s
home by just the signature of the district director
alone.’’19 ‘‘Liens and levies may be filed against those
whom the IRS knows have no liability for a particular tax.
Parents, relatives, a company employee may have liens
filed against their property or have a paycheck levied in
order to get the real taxpayer to comply.’’20 The rhetorical
response to the complaints was to advocate adversarial
process as a check on the power of the IRS’s power to be
18
‘‘Criminals have more rights in this country than taxpayers
do. It shouldn’t be that way. That’s wrong and we’re going to fix
it,’’ proclaimed Rep. Archer on October 21, 1997. (Transcript
available on LEXIS in the FDCH Political Transcripts database).
Rep. Richard Gephardt, D-Mo., made a similar pronouncement
on the same day.
19
Testimony of Robert Schriebman, September 1997 Hearings, S.Hrg. 105-190 at 40.
20
Roth, Opening Statement, September 1997 Hearings, at 4
(describing forthcoming witness testimony).
441
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no forced resignations, and no indictments (much less
any convictions).15 Yet Sens. Roth and Grassley said the
IRS was abusive, and on that basis proposed the farreaching reforms of RRA 98.
So why did the honorable Republicans propose such
profound changes in the law based on such poor data?
One answer is as old as the income tax itself. Prof. Harold
Dubroff recounts that in the early days of the income tax
administration some commentators were concerned that
opponents of an income tax were deliberately sabotaging
the administrative process to subvert the tax structure.16
And some of the rhetoric by some of the Republican
politicians in 1997 has the faint odor of subversion,
particularly to the noses of those inclined to sniff out
conspiracies.17
One does not have to be a conspiracy theorist, however, to account for either the impetus for or the resultant
reforms of RRA 98. One can salute Sens. Roth, Grassley,
and their hardworking staff for their dedication to good
government even while concluding that their efforts were
unwise, undesirable, and poorly executed. For however
honorable the motives may have been, the twin evils of
ignorance and carelessness explain the reforms quite
well. One sees it in the rhetoric. One sees it in the
drafting. Let’s look at some of both.
COMMENTARY / CAMP’S COMPENDIUM
I am still totally convinced that the problem is this
agency has too much unchecked power. An agency
in a free society should never have the ability to
investigate, evaluate, and basically prosecute, all
wrapped up into one. There clearly is an absence of
checks and balances within this agency, and I think
it needs to be changed. *** With the Internal Revenue Service, you have no external checks, and I
think, basically, that is the problem.22
Another prominent critique of the period expressed
the idea that the Service should not be entrusted with
determining taxes because the Tax Code was so complicated that there was no ‘‘true’’ liability. That was part of
Rep. Archer’s shtick. ‘‘Income,’’ he declared, ‘‘is a subjective term.’’23 Likewise, the Hon. Sen. Roth said the code
was ‘‘too complex to be efficiently and consistently
administered by the Internal Revenue Service.’’ And Sen.
Ben Nighthorse Campbell complained that taxpayers
were ‘‘tired of being notified years after they have filed
that they have an additional tax obligation, which has by
then grown to several times the initial debt because of
interest and penalties.’’24 Implicit in this complaint is that
the IRS is not simply discovering the taxpayer’s true tax
liability by correcting taxpayer error, but is actually
changing the tax liability by finding an ‘‘additional tax
obligation’’ that was not there until the IRS said so.
In sum, and as I describe in much more detail elsewhere, the rhetoric used by Sens. Roth, Grassley, and
others of their ilk expressed two key concerns: (a) the IRS
had too much power to determine and collect taxes
without the approval of an ‘‘independent’’ reviewer and
(b) the need to discover or collect the ‘‘true’’ or ‘‘correct’’
income tax liability of a taxpayer should take a back seat
to the need to keep the IRS from disrupting ‘‘the most
21
Testimony of Robert Schriebman, September 1997 Hearings, S.Hrg. 105-190 at 40.
22
Opening Statement of Sen. Phil Gramm, R-Texas, April
1998 Hearings, S.Hrg. 105-598 at 211. Note again the use of the
word ‘‘prosecute,’’ implicitly labeling tax determination as a
criminal process. Note also the incoherency of these remarks.
Sen. Gramm apparently did not believe that the FBI, SEC, local
police, grand juries, or any other of our government institutions
have a place in a free society because, on a daily basis they each
‘‘investigate, evaluate, and basically prosecute.’’ Such strong
anti-‘‘law and order’’ rhetoric is, once again, very surprising to
hear from Sen. Gramm. If one substitutes ‘‘decide the liability’’
for ‘‘evaluate’’ in Sen. Gramm’s statement, one gets closer to a
coherent criticism of the system.
23
News conference of September 30, 1997, reported in FDCH
Political Transcripts, available on LEXIS.
24
Sen. Ben Nighthorse Campbell, R-Colo., ‘‘Internal Revenue
Service Methods,’’ Hearings Before a Subcommittee of the
Senate Committee on Appropriations, S.Hrg. 105-581 at 2 (January 1998).
442
sensitive aspects of our citizens’ private lives.’’ The first
concern, of course, matches the first distinction I posit
between inquisitorial and adversarial systems. The RRA
98 reformers wanted to separate the decisionmaking
powers from the information-gathering powers by making the IRS ‘‘accountable’’ to independent bodies, either
external or internal to the IRS. Likewise, note that the
second key concern reflects the second distinction I make
between inquisitorial and adversarial process; here the
RRA 98 reformers sought to promote individual autonomy over the discovery of truth, which in the tax
arena means the true and correct tax liability. Starting
next month, I will explore how specific reforms did this.
Now, however, I would like to end this month’s column
with an example of careless drafting.
Drafting
As to the drafting, check out the Senate Finance
Committee’s proposal for section 6404(g), which would
have required that interest on underpayments be suspended anytime the IRS ‘‘does not provide a Notice of
Deficiency to the taxpayer’’ within one year of the return
being filed (or the due date, whichever was later).25
Echoing the comments of Sen. Campell (see above) and
many others, the Senate Finance Committee’s April 22,
1998, report expresses the committee’s concern that ‘‘the
IRS should promptly inform taxpayers of their obligations with respect to tax deficiencies and amounts due. In
addition, the committee is concerned that accrual of
interest and penalties absent prompt resolution of tax
deficiencies may lead to the perception that the IRS is
more concerned about collecting revenue than in resolving taxpayer’s problems.’’26
The proposed provision reflected a fundamental misunderstanding of tax administration: It assumed (1) that
unpaid tax liabilities are the result of tax deficiencies and
(2) that taxpayer ‘‘problems’’ come about because of
disagreements with the Service about the amount of taxes
owed. Both assumptions are bogus. Well over half of the
Service’s accounts receivables are taxpayers whose liability was ‘‘determined’’ by the IRS by accepting their
returns as filed.27 As I explained last month, for very
practical reasons, the IRS decides to accept most returns
as filed, but it is still the IRS’s determination that leads to
the assessment. It is just that in almost all cases, the IRS
agrees with the taxpayer, except for some of the unlucky
0.5 percent of taxpayers whose returns are audited. Thus,
most unpaid tax liabilities do not involve amounts that
were ever subject to the deficiency procedure but are
simply the result of taxpayers who self-report the tax
25
Section 3305 of H.R. 2676, as passed by the Senate on May
7, 1998 (emphasis added). RRA 98 wound its way through the
legislative process mostly in the form of H.R. 2676. The House
version passed the House on November 5, 1997. The Senate
Finance Committee kept the number but struck the text and
substituted its own bill. As thus modified, the Senate passed
H.R. 2676 on May 7, 1998. The conference committee met on
May 10, 1998, and produced its report on May 24, 1998. See
generally http://thomas.loc.gov for the bill’s history.
26
S.Rep. 105-174 (April 22, 1998) at 64.
27
See Camp, 56 Fl. L. Rev. at 115, note 589.
TAX NOTES, July 26, 2004
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both the decisionmaker and evidence gatherer. ‘‘See, the
problem that you have is that you have got an internal
conflict of interest within the IRS. They are their own
judge and jury over people’s lives. Let us remove that.
This will cure the ‘Ivory Soap’s’ worth of taxpayer
abuse.’’21
Sen. Phil Gramm put it this way:
COMMENTARY / CAMP’S COMPENDIUM
Even though Treasury and the IRS pointed all this out,
the Senate still went ahead with the proposal and it was
passed by the full Senate. Fortunately, the Conference
Committee fixed the problem by changing ‘‘Notice of
Deficiency’’ to ‘‘a notice to the taxpayer specifically
stating the taxpayer’s liability.’’ The enacted language is
thus broad enough to cover the demand for payment
notices that are routinely sent out per section 6303. And,
for whatever reason, the drafters put in a redundancy,
providing that interest is not suspended ‘‘with respect to
any tax liability shown on the return.’’28
The story of section 6404(g) is basically a story of a
very bad draft that got fixed in conference. The part fixed,
however, was the technical goof caused by failure to
understand the deficiency process. The larger problem
with section 6404(g) is how it undermines inquisitorial
process. Compare the new section 6404(g) with section
6404(e). The latter section gives the IRS discretion to
abate any interest attributable to ‘‘any unreasonable error
or delay’’ made by an IRS employee. The reformers,
however, did not trust the IRS to be both the ‘‘judge and
jury’’ to decide when to abate. So section 6404(g) essentially provides the congressional judgment of what is an
‘‘unreasonable delay.’’ Although this particular reform
does not directly shift the prior process of interest abatement to adversarial mode, it does remove decisionmaking power from the IRS by creation of a bright-line rule.29
It is not the prime example of how RRA 98 shifted tax
administration into a new paradigm, but it still reflects
some of the adversarial thinking that went into RRA 98.
For this column’s purposes, however, I offer it to you as
evidence of the taxwriters’ lack of basic technical knowledge of tax administration. One should not be surprised
to see some confusion at the conceptual level of adversarial and inquisitorial process as well. I submit that one
does see that in the CDP provisions and other provisions
that I shall discuss in the next few columns.
28
I confess that I am clueless on that extra language’s
purpose. The only time I can think it might apply is when the
taxpayer self-reports a liability, does not pay it, and the IRS
takes more than one year to issue the section 6303 Notice and
Demand for Payment. That does not make any sense, however,
since (a) as a legal matter, section 6303 requires the IRS to issue
the notice and demand for payment within 60 days of the
assessment, and courts have held that the failure to do so results
in the nonattachment of the tax lien and the inability of the
Service to use its levy powers. See Behren v. United States, 764 F.
Supp. 180 (S.D. Fla. 1991), and (b) as a practical matter, the IRS
submissions processing is pretty darned efficient at sending out
that first notice (the CP 501 for IMF accounts). Of more interest
is the effect of this little tidbit of legislative history on the
situation in Montgomery v. Commissioner, 122 T.C. No. 1, Doc
2004-1409, 2004 TNT 15-9 (January 2004). On one hand, the
section 6404(g) history supports the concurring opinions, who
point out how Congress failed to respond to criticisms of CDP
made by Treasury. See concuring opinions of Judges Laro and
Gale. On the other hand, the section 6404(g) history supports
Judge Halpern’s dissent, too. Because Congress went to so much
trouble (using redundant language, even) to explicitly deny
interest abatement for the liability that taxpayers self-reported
even if the IRS fails to give ‘‘any’’ notice within one year, it
makes little sense to infer that Congress would allow those same
taxpayers to dispute their self-reported liability in a CDP
hearing.
29
Even as ‘‘fixed’’ in conference, section 6404(g) is still subject
to a number of other criticisms, notably that it cuts directly
against the idea expressed in section 6501 that the IRS should
have three years to identify and examine returns. See Camp, 56
Fla. L. Rev. at 115-116.
TAX NOTES, July 26, 2004
443
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liability but for whatever reason do not fully pay it. Most
taxpayer ‘‘problems’’ with the IRS come about for one
very simple reason: The taxpayer is a debtor who cannot
or will not pay the creditor. That surely does create a
problem, but not one addressed by the Senate’s proposed
interest forgiveness provision. Even when the taxpayer
and the IRS disagree about the proper amount of taxes,
the IRS follows the deficiency procedures only for income, gift, and estate tax liabilities. For assessable penalties, excise taxes, and employment taxes, the IRS does not
issue a notice of deficiency, even when it disagrees with
the taxpayer on the amount owed. So the Senate proposal
would have given federal interest-free loans to taxpayers
who misreported excise and employment taxes. Worse,
the bulk of accounts receivable — where there would
never be a deficiency and hence, never a notice of
deficiency — would run forever interest-free after the
first year.