“At their core, taxpayer rights are human rights.”
—Nina Olson, National Taxpayer Advocate
In 2015, Congress enacted the Taxpayer Bill of Rights (TBOR) in section 7803(a)(3) (https://www.law.cornell.edu/uscode/text/26/7803) of the Internal Revenue Code to ensure that each and every taxpayer has fundamental rights in dealing with the Internal Revenue Service (IRS). The codification of these fundamental rights was an important accomplishment and reflects years of hard work and dedication by National Taxpayer Advocate Nina Olson.
Each of the ten rights enumerated in section 7803(a)(3) is listed below, with links to specific information provided on the IRS’s website on each right.
- The right to be informed.
- The right to quality services.
- The right to pay no more than the correct amount of tax.
- The right to challenge the position of the Internal Revenue Service and be heard.
- The right to appeal a decision of the Internal Revenue Service in an independent forum.
- The right to finality.
- The right to privacy.
- The right to confidentiality.
- The right to retain representation.
- The right to a fair and just tax system.
The Taxpayer Advocate Service (TAS) has also provided guidance as to what each right means for taxpayers. Additionally, the Internal Revenue Manual repeatedly instructs IRS employees to be familiar with and act in accord with the TBOR.
Application of the TBOR
The TBOR reflects an important development in the administration of the Code and the recognition of the level of service that the IRS must provide to taxpayers in the increasingly complex world of taxation. The TBOR is important for all taxpayers, ranging from low-income individuals to large multinational companies. But many questions remain for taxpayers and practitioners, perhaps most notably how the rights can be enforced and what remedies are available for a violation of the TBOR.1
To date, courts have not interpreted section 7803(a)(3) or provided guidance as to what remedies, if any, are available for alleged violations of the TBOR. And, it is unclear in what forum taxpayers can challenge any alleged violations. However, it is only a matter of time.
An important development in this area involves pending litigation regarding Right 5, the right to appeal a decision of the Internal Revenue Service in an independent forum. In the litigation, the IRS denied the taxpayer’s request to pursue the IRS Appeals process because it determined that litigation of the case was in the interest of sound tax administration. The taxpayer filed a complaint in district court challenging this denial, relying in part on Right 5 and arguing that access to IRS Appeals is a mandatory right. In response, the government has argued that there is no statutory right to access to IRS Appeals because section 7803(a)(3) merely directs the IRS to ensure it employees are familiar with and comply with the TBOR.2
It will be interesting to see whether the district court decides this issue or finds another way to dispose of the case. Regardless of whether the court addresses the issue, this will not be the last word and one can expect that the Tax Court will be called upon at some point to address issues related to the interpretation and implementation of the TBOR. Depending on the outcome of judicial decisions, it is possible that Congress may be called upon to address the TBOR in more detail.
So, what does this all mean for taxpayers who believe that their rights have been violated? And how can practitioners effectively represent their clients in situations involved perceived violations? The answer is unclear at this point, but given the importance of the TBOR and the potential to use it as a sword against the IRS in appropriate situations it cannot be overlooked in trying to resolve disputes with the IRS. Possible approaches include elevating concerns beyond the revenue agent level, working with TAS, and making members of Congress aware of any issues that might be appropriate for legislative changes.
As noted above, only time will tell whether the TBOR will gain traction with the courts. An analogy could be made to the Administrative Procedures Act (“APA”) and its application to tax law. Although APA challenges were made over the years in tax cases, these challenges historically did not bear much fruit for taxpayers. That all changed when the Supreme Court stated in Mayo Found. for Medical Educ. & Research v. United States, 562 U.S. 44, 55 (2011), that “we are not inclined to carve out an approach to administrative review good for tax law only.” Since that statement, administrative law issues have figured prominently in several tax cases and certain practices of Treasury and the IRS in issuing published guidance have been questioned. Perhaps the same will happen with the TBOR. ■
1 For example, Alice Abreu and Richard Greenstein of Temple University have suggested in their article “Embracing the TBOR (Taxpayer Bill of Rights)” that “the TBOR has the power to transform the tax practice and the relationship between taxpayers and the IRS.”
2 For more background on this case, see Les Book’s post, Facebook Asserts that TBOR Mandates Right to Appeals (March 14, 2018).