Officials at the U.S. Department of Justice have announced plans to eliminate its Tax Division and relocate its attorneys to other divisions within the department. In existence for more than 90 years, the Tax Division is one of the main operating divisions within the Justice Department and has primary responsibility for criminal and civil tax litigation in federal district courts across the nation.
The Tax Division’s mission is “to enforce the nation’s tax laws fully, fairly, and consistently, through both criminal and civil litigation, in order to promote voluntary compliance with the tax laws, maintain public confidence in the integrity of the tax system, and promote the sound development of the law.”
The Tax Division’s history dates to 1933, when President Franklin D. Roosevelt issued an executive order consolidating control of all federal tax litigation within the Justice Department. Later that year, the Tax Division was created and charged with primary responsibility for supervising all federal litigation involving federal taxes to ensure uniformity with respect to tax litigation. The Tax Division’s website states that “centralized control of tax litigation better enables the government to take consistent positions on tax issues and thereby promote the fair and uniform enforcement of the tax laws.”
Efforts to dismantle the Tax Division started almost immediately following Inauguration Day as part of the new administration’s sprawling initiative to improve federal government efficiency. In an internal memo proposing a significant reorganization of the Justice Department, Deputy Attorney General Todd Blanche proposed disbanding the Tax Division and reassigning its personnel to U.S. Attorney’s Offices throughout the country. That proposal prompted a strong rebuke from more than 60 veteran tax controversy attorneys, who wrote in a letter to the Deputy Attorney General that “d]ismantling the Tax Division would do a grave disservice to tax administration by destroying consistent and competent application of our tax laws.” The letter further stated the plan to disperse the responsibility for federal tax enforcement to each of the 94 U.S. Attorney’s Offices would “significantly impair the fair and consistent enforcement of our tax laws around the country.”
Justice Department leadership evidently got the point, and subsequently announced a modified plan for the Tax Division last month at a New York University tax controversy seminar. Acting Deputy Assistant Attorney General Karen Kelly said that the current plan for the Tax Division is to separate the civil and criminal tax units within the division and relocate them to the existing Civil and Criminal Divisions, respectively. In each of the Civil Division and Criminal Division, there will be a tax section to house the personnel being transferred from the Tax Division. Around 300 Tax Division employees would move to the Civil Division, while approximately 100 would relocate to the Criminal Division. “Reports of our death are greatly exaggerated,” Kelly said. “Tax enforcement is going to continue.”
Notwithstanding Kelly’s remarks, the extent to which traditional tax enforcement actually continues remains to be seen, especially given significant workforce reductions and planned budget cuts at the Internal Revenue Service, which works closely with the Tax Division on civil and criminal enforcement. At the same conference, Kelly also announced that the Justice Department will focus more on cases that involve both tax and immigration offenses, such as businesses that are alleged to be harboring unauthorized immigrants, consistent with the administration’s highly-publicized immigration crackdown.
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