Richard Lavoie


The purpose of this article is to examine the considerations that should influence the development of appropriate controversy position standards for the Service. In this regard it is crucial to understand the inherent duality in the Service's role. On one hand it is charged with enforcing the Internal Revenue Code (the "Code"), and as a result it attempts to maximize the collection of all legally owed taxes. On the other, the Service is charged with maintaining the efficient and fair operation of the tax system as a whole. The United States federal income tax system is premised on voluntary taxpayer compliance with the Code. Taxpayer compliance is linked to perceptions regarding the overall fairness of the tax system. When taxpayers perceive the Service as overreaching, they lose faith in the system and voluntary compliance is harmed. For instance, when the Service publishes one-sided guidance it undercuts its important taxpayer education efforts because taxpayers "learn" that the tax law will be interpreted in a biased manner. To avoid these pitfalls, it is necessary for the Service to strike an appropriate balance in taking positions to mitigate the tensions inherent in its dual role of facilitating voluntary compliance and policing against non-compliance.

Part II of this article reviews the current position standards that apply to taxpayers and the Service. Part III examines the key considerations which should be taken into account in developing controversy position standards for the Service. Part IV makes an initial attempt at developing a set of controversy guidelines for the Service and analyzes some possible critiques of the proposed guidelines. Part V concludes that in order to protect the integrity of the self-assessment tax system the Service must articulate clear and administrable position standards for use by Service employees that take a balanced view of the tax law and prevent overreaching by the government.

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