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Abstract:
Virtual worlds, including massive multi-player on-line role-playing games (game worlds), such as City of Heroes, Everquest, and World of Warcraft, have become popular sources of entertainment. Game worlds provide scripted contexts for events such as quests. Other virtual worlds, such as Second Life, are unstructured virtual environments that lack specific goals but allow participants to socialize and engage virtually in such activities as shopping or attending a concert. Many of these worlds have become commodified, with millions of dollars of real-world trade in virtual items taking place every year. Most game worlds prohibit these real market transactions, but some worlds actually encourage it. Second Life, for example, grants participants intellectual property rights in their creations.

Although it seems intuitively the case that someone who accepts real money for the transfer of a virtual item should be taxed, what about the player who only accumulates items or virtual currency within a virtual world? Is valuable "loot" acquired in a game taxable, as a prize or award is? And is the profit in a purely in-game trade or sale for virtual currency taxable? This is an important set of questions, given the tax revenues at stake. Although the Internal Revenue Service has not yet attempted to tax transactions within virtual worlds, it is aware of the issue, and there is pressure on the government to determine how to resolve it, given that the economies of some virtual worlds are comparable to those of small countries. The Joint Economic Committee has announced that it is studying the issue.

Most people's intuition probably would be that accumulation of assets within a "game" should not be taxed even though the federal income tax applies even to non-cash accessions to wealth. This Article argues that federal income tax law and policy support that result. Loot "drops" in game worlds should not be treated as taxable prizes and awards, but rather should be treated like other property that requires effort to obtain, such as fish pulled from the ocean, which is taxed only upon sale. Moreover, in-game trades of virtual items should not be treated as taxable barter. If courts uphold game agreements that purport to provide players with a mere license to use the game, in-game trades do not constitute realization events and thus are not taxable. Otherwise, tax policy considerations suggest that Congress should provide nonrecognition for these exchanges.

By contrast, in virtual worlds that are intentionally commodified, such as Second Life, tax doctrine and policy counsel taxation of even in-world sales for virtual currency, regardless of whether the participant cashes out. However, as in game worlds, participants should not be taxed on purely in-world trades of non-currency items. This approach would allow entertainment value to go untaxed without creating a new tax shelter for virtual commerce.

Virtual worlds, MMORPG, Second Life, World of Warcraft, taxation of barter, virtual property

Abstract:
What will increase individuals' compliance with the federal income tax? There are rich legal, economic, and sociological literatures examining this question. The traditional answer that increased enforcement will increase compliance is supported by both economic modeling and a number of experiments. However, studies show that appeals to normative beliefs about honesty in taxpaying play an important role as well.

A number of scholars have suggested that vigorous enforcement of the tax laws may be counterproductive because it may suggest that noncompliance is the norm. This article argues, in part, that enforcement and a compliance norm are not inconsistent but rather are complementary. In other words, enforcement can buttress norms-based appeals for compliance. To support this argument, the article draws on an array of empirical evidence from both experimental "games" conducted in the laboratory and field experiments involving taxpayers.

The interplay of enforcement and taxpaying norms manifests itself somewhat differently in different contexts. Studies suggest that there is a societal norm of compliance with tax obligations but that there may be a norm of noncompliance among certain groups. The IRS may therefore be best served by targeted compliance strategies. With respect to mainstream, generally compliant taxpayers, the IRS can rely on broad-based matching of information returns with taxpayer returns, low levels of audits, and norms-based appeals. With respect to groups with norms of noncompliance, the IRS can use enforcement not only for detection and deterrence but also to try to build a critical mass of compliant taxpayers and thereby influence the group norm.

Taxation and Revenue, Tax Evasion, Fiscal Policies and Behavior of Economic Agents, Law and Economics, Tax Law, Legal Procedure

Abstract:
The Internal Revenue Service Restructuring and Reform Act of 1998 directed the IRS to transform itself into an agency focused on "customers." What affect will such a focus on service have on compliance? This article analyzes not only the post-IRS reform statistics on enforced compliance but also considers the more important question of the likely impact of IRS friendliness on so-called "voluntary compliance."

Although some have suggested that a kinder IRS might prompt increased voluntary compliance, this article argues that it likely will not, based on the literature examining the impact on voluntary compliance of tax collector service to taxpayers and the use of a softer tone in correspondence with taxpayers. By contrast, the literature reflects the possibility that the perception of procedural fairness on the part of the IRS might increase compliance. This suggests that the IRS can benefit from treating taxpayers fairly but that it would be unwise for the IRS to focus on service at the expense of enforcement. (A related paper considers the interplay between norms and enforcement in tax compliance.)

Taxation Subsidies and Revenue, Tax Evasion, Fiscal Policies for Law and Economics, Tax Law, Legal Procedure

Abstract:
Recent legal and economic scholarship has recognized that the government can use structural systems as an efficient way to reduce prohibited behavior. The federal tax system employs structural mechanisms, such as withholding taxes, to foster compliance. The use of structural systems to reduce tax evasion need not be limited to tax administration, however. The Article argues that substantive federal income tax law can - and in many contexts does - foster compliance by harnessing the structural incentives of third parties. Although this phenomenon has gone largely unnoticed, third parties are routinely used by the tax system to verify the bona fides of taxpayer claims in diverse contexts involving reimbursed amounts and other receipts. Yet, third parties do not always behave in ways that are helpful for tax enforcement. The Article therefore identifies contexts in which a third party may have an incentive to collude with the taxpayer. The Article argues that these contexts are ones that the government needs to scrutinize closely and, in certain cases, obstruct with legislation. By contrast, the government can afford to free ride on the incentives of a third party in contexts in which the transfer of funds from the third party to the taxpayer is a zero-sum game.

tax compliance, tax evasion, tax shelters, structural systems, third parties

Abstract:
Do attorneys really add value or can unrepresented parties achieve equivalent results? This fundamental question ordinarily is difficult to answer empirically. An equally important question both for attorneys and the justice system is whether attorneys prolong disputes or instead facilitate expeditious resolution of cases.

Fortunately, there is a federal court that provides an excellent laboratory in which to test and answer these questions. In the United States Tax Court (Tax Court), where most federal tax cases are litigated, the government always is represented by Internal Revenue Service attorneys but a large portion of the taxpayer litigants proceed pro se. In addition, the Tax Court is exceptional in that it maintains files on cases that settle. Furthermore, Tax Court disputes involve money, so case outcomes can be readily compared. These institutional characteristics provide the rare opportunity to isolate the effects of lawyers on outcomes in both settled and tried cases.

In order to assess the predicted and actual impacts of attorneys on case outcomes, the article identifies five distinct ways in which attorneys typically differ from unrepresented parties and explores how each of those characteristics may affect case outcomes. The article then exploits the opportunity afforded by the institutional features of the Tax Court; using a unique database of randomly selected cases, the study tests the impact of attorneys on financial outcomes in both tried and settled cases. It also tests the effects of attorneys on time to settlement and time to trial.

Interestingly, the study found that the presence of an attorney for the taxpayer significantly improved the taxpayer's financial outcome in tried cases, an effect that increased with the experience of the attorney. No such effect existed in settled cases. Although the latter result initially is surprising, it highlights the paramount importance of procedural expertise in formal trial proceedings, as opposed to negotiations with the opposing party. The study also found that the presence of an attorney for the taxpayer did not affect time elapsed to trial or settlement. Thus, the study found that taxpayers' attorneys, who generally are paid by the hour, neither prolonged disputes nor expedited their resolution but did significantly improve the financial outcomes of the cases they tried.

lawyers, lawsuits, settlement, litigation, justice system, dispute resolution, judges, taxation, Tax Court, empirical study

Abstract:
Abusive transactions that claim inappropriate tax benefits are a perennial problem, but they are particularly distressing in a weak economy. When the IRS claims a transaction is abusive, courts generally examine whether the taxpayer had a business purpose and whether the transaction had economic substance (essentially a prospect of profit before taxes). This two-pronged economic substance doctrine developed from a series of Supreme Court cases. Courts do not apply the doctrine consistently, however, so the prospect of codifying the doctrine as a revenue-raiser is very much on the table.

Unfortunately, the economic substance doctrine provides a poor proxy for the real question, which was applied in early Supreme Court cases - whether the claimed tax results are consistent with Congress's intent. One important drawback of the shift from a focus on congressional intent to a focus on the taxpayer's intent and the prospect of pre-tax profit is a doctrine that is much easier for taxpayers to manipulate. The result is a test that does little to distinguish tax shelters and other abusive transactions from legitimate ones.

The Article therefore argues that modern economic substance doctrine should be abandoned and replaced with a direct inquiry into congressional intent. The Article does not focus on how such an inquiry into congressional intent should be incorporated into tax disputes; others have addressed that issue from a variety of perspectives. Rather, the Article examines why courts today generally do not perform this vital inquiry in cases of claimed abuse of the tax laws, and explains why they should.

In developing this argument, the Article explains that identifying abusive transactions is so difficult largely because some tax statutes merely try to measure income while others try to provide an incentive for particular behavior. Identifying which goal is operative in a particular provision requires ascertaining congressional intent. The Article traces the development of the economic substance doctrine to pinpoint when it shifted its focus away from congressional intent. It also critiques the subjective and objective prongs of the existing doctrine, showing how they can be exploited to allow abusive transactions to stand simply because they are bundled with business activity.

Business purpose, economic substance, tax shelter, Congressional intent, Gregory v. Helvering, Knetsch, Frank Lyon, sham transaction

Abstract:
Accountability is a critically important protection for any justice system; its absence provides an opportunity for shortcuts that may undermine procedural fairness or even change case outcomes. Yet, the United States Tax Court, which is an Article I court, is not subject to Administrative Office of U.S. Courts or the U.S. Judicial Conference - institutions that serve and oversee the federal judiciary. In addition, because the Tax Court is not an administrative agency, it is not covered by the Administrative Procedure Act or the Freedom of Information Act.

The principal source of oversight of Tax Court actions is appellate review. Although the appeals process allows for correction of errors in individual cases, it is a poor vehicle for systemic oversight. Notably, it contains no mechanism for oversight of actions taken outside of the official record of a case. Moreover, appellate review is not available in about half of the cases on the Tax Court's docket. In those cases, the Tax Court's decision on what procedures to adopt and how to apply them is final.

Given this lack of accountability, it may not be surprising that the Tax Court has adopted opaque processes in a number of contexts in which transparency is the norm among courts. It has kept various case files, factfinding reports, and even opinions confidential. It also releases only limited aggregate statistics, and changed a procedural rule to eliminate transparency in certain large cases. Moreover, until it was criticized by the United States Supreme Court in Ballard v. Commissioner, 544 U.S. 40 (2005), the Tax Court adopted and amended its Rules of Practice and Procedure without input from the public. An investigation after Ballard was decided revealed several cases with substantial amounts at stake in which the Tax Court's official opinion not only differed significantly from the trial judge's findings, it held for the other party.

The Tax Court should be subject to the same systemic oversight that our system demands of Article III courts and the Court of Federal Claims. Making the Tax Court subject to the Administrative Office of U.S. Courts and, with respect to its rulemaking, to the U.S. Judicial Conference, would increase the Tax Court's accountability significantly. It would also increase trust in the court. In addition, adoption of this proposal would occasion minimal increased cost to the federal government because it would utilize established bodies that already provide services and oversight to other courts.

Transparency, accountability, federal courts, Tax Court, Article I courts, rulemaking, Special Trial Judges, Administrative Office of U.S. Courts, Rules Enabling Act

Abstract:
Since 2003, the Green Bag Journal has been commissioning and distributing limited edition bobblehead likenesses of the Justices of the United States Supreme Court. Demand for the bobble Supremes has not been limited to existing recipients, and bobble longing has inspired purchases and even poetry. Given the importance of the bobble Supreme phenomenon to the national economy, the time has come for guidance on the tax consequences of their receipt, ownership, and transfer. Fortunately, draft proposed regulations on the federal income tax treatment of bobble Supremes recently surfaced. Although the regulations have not and never will be officially sanctioned (and, worse yet, are in Q&A format), they provide that they will affect owners and custodians, former owners and custodians, and prospective owners and custodians of bobble Supremes, as well as anyone who does not read them in full and send them to ten friends. Public comments on the proposed regulations are solicited by mail or via a website provided for that purpose; written or electronic comments must be received by April 16, 2007 to be assured of consideration.

tax, income, bobblehead, Supreme Court, humor, Green Bag

Abstract:
Settlement and precedent conflict because a settlement precludes a potential precedent. Precedent is the foundation of our common law system, but settlement is the usual outcome of any dispute. Even considering only cases actually docketed in court, approximately 90 percent settle; many additional disputes settle before docketing. Given the fact that the overwhelming majority of cases settle, and given the public value of precedent, one might seek to encourage trials, at least in cases that stand to resolve controversial issues. Instead, courts, commentators, and federal policy, seem to favor settlement, with little attention given to precedent that may be lost in the process.

The favoritism of settlement is consistent with the view that litigation serves as a dispute-resolution mechanism. Under this view, bringing peace to the parties is paramount, and precedent created through court decisions is a "mere byproduct" of the dispute-resolution process. The dispute-resolution model fits well with the perspective of litigants, who control most aspects of litigation, including whether and when they settle. Litigants, both actual and prospective, have strong incentives to settle because the costs of litigation so outweigh the costs of settlement. In addition, because of the justiciability constraints in Article III courts, cases in those courts fit the dispute-resolution model of litigation well. That is, in courts created under the authority of Article III of the Constitution, evolution of the law occurs only in actual disputes that arise between adverse parties. And in justiciability doctrine, as predicted by the dispute resolution model, third-party concerns about precedent play no role.

As this approach to precedent reveals, the dispute-resolution model of litigation focuses on the private costs and benefits of litigation or settlement. Owen Fiss, by contrast, views courts as institutions that help illuminate public values. He therefore purports to be "against" settlement. Of course, each of these views only explains a part of the litigation process, and both are right in the sense that all litigation includes both private and public aspects. An appropriate model of the litigation process should balance both private and public roles in litigation, to illuminate the roles of both precedent and settlement.

Part I of the article develops a basic model of the prototypical litigation, in which the parties are the ones who bargain over settlement, and non-parties are not involved. It explores how even in this simple scenario, private and public concerns over settlement and precedent conflict. It also examines how settlement nonrandomly affects the substantive content of precedent, as well as the path-dependence of precedent.

Part II complicates the model. It considers the question of the proper role of settlement and precedent in litigation influenced by third-party interest groups. This Part considers the effect of third-party maneuvering in both Article III cases, using the controversial settlement in Piscataway Township Board of Ed. v. Taxman, as an example, and in Article I cases, using as an example Smith v. Commissioner, a tax shelter case involving an unsucessful third-party attempt to engineer a settlement. Part III of the article draws on the expanded model to gain insights into the public and private factors in litigation and settlement in Article I courts and in Article III courts. In part, Part III looks at judges' own incentives to encourage settlement as one source of the general favoritism of settlement, as well as the extent to which encouraging settlement is efficient. It also considers the consequences of settlements obtained through third-party "engineering" of a settlement to avoid unfavorable precedent, concluding that these settlements should not be treated differently from other settlements simply because a third party funded the settlement.

Abstract:
Case law and commentators sometimes speak as if all income-producing activities are taxed similarly. However, that simply is not true for individuals. Although the expenses and losses of business activities generally are deductible from income of any source and net losses can be carried to other tax years, individuals' investment expenses and losses generally are deductible only from investment income. Although many of the provisions restricting investment-related deductions were enacted at different times, and each one has its own rationale, the combined effect of these provisions on individual investors is a systematic preference for business losses over investment losses.

Economists have shown that a tax system that allows full deduction of the losses from an activity effectively shifts part of the risk of that activity to the government. This, in turn, allows the investor to increase investment in that activity without increasing his risk. In other words, the deductibility of a net loss from an activity provides a subsidy for that activity. Federal income tax law therefore implicitly subsidizes entrepreneurship by individuals.

The implicit subsidy for entrepreneurship is strongest for high-income individuals, for a number of reasons, including the progressivity of the federal income tax. That is, given progressive marginal income tax rates, taxpayers with significant income from other sources benefit most from the deduction of losses. In addition, as the article shows, despite progressive taxation, high-income individuals are not disproportionately taxed if the business is successful. In fact, high-income individuals obtain the largest benefit from techniques, such as incorporating the business, that lower the effective tax rate applied to a successful business. These insights highlight the importance of considering tax changes in a larger context. For example, as discussed in the article, lowering individual income tax rates may actually decrease entrepreneurship by individuals.

tax law, business tax, corporate finance, government policy

Abstract:
In his book "Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich - and Cheat Everybody Else", David Cay Johnston, the Pulitzer Prize-winning reporter for the New York Times, covers a wide array of topics, including some that are quite complex, in a very readable way. The federal income tax system generally and tax compliance in particular are important focuses of the book, but the theme that implicitly connects chapters that otherwise appear unrelated is a variety of aspects of income inequality.

Although "Perfectly Legal" does not make a clear case that politicians and others have combined in a covert campaign, it is nonetheless an engaging book containing many interesting stories. Some of its best chapters provide revealing insights into the inner workings of the IRS. The important effects that procedural rules can have on enforcement of the tax laws suggests that any comprehensive effort at tax simplification should address procedural complexity.

Taxation, tax compliance, IRS

Abstract:
A core problem for enforcement of tax laws is asymmetric information. The taxpayer knows the facts regarding the relevant transactions it engages in during the year-or at least has ready access to that information. The government is forced to play catch-up, obtaining that information either from the taxpayer or from third parties.

Information reporting is routinely used to address this information gap. The government obtains information about the taxpayer's tax situation from a third party and-equally important-the taxpayer knows that the government has received that information. This fosters taxpayer honesty.

Information reporting is not a panacea, however. It imposes costs on the private parties who are required to report. Moreover, it will not be equally effective in all situations. Generally speaking, the effectiveness and efficiency of information reporting varies with who the reporters are, what they are reporting about, and how much information they are required to include. Accordingly, the Essay proposes six distinct factors as a framework for evaluating information reporting requirements. The Essay also applies these factors to three current information reporting proposals and three recently enacted reporting requirements that are scheduled to become effective in 2011.

The proposed framework suggests that some of the laws and proposals will likely be much more effective than others in improving tax compliance. For example, the recent amendment requiring reporting by brokers of basis in investments will likely prove very valuable, as would the proposed elimination of the reporting exemption for payments for services provided by certain small corporations. Other information reporting laws and proposals have less promise. For example, the new requirement for information reporting by online auction sites such as eBay regarding the gross receipts of their high-volume sellers will likely make only a minimal impact on the tax gap. Information reports in that context cannot include basis information that is known, if at all, only by the sellers. Least worthwhile are proposals that require decentralized information reporting, particularly in non-arm's length contexts, such as requiring reporting by recipients of gifts in excess of the annual gift-tax free limit.

Tax gap, tax compliance, tax evasion, information reporting, asymmetric information, income tax, gift tax, small businesses, eBay

Abstract:
Although most scholars agree that litigated cases are an unrepresentative sample of legal disputes, scholars disagree on what causes trials, and there is little empirical evidence to illuminate the question. In order to understand the extent to which published cases reveal only a distorted view of peoples' behavior in response to legal rules, we need to determine the mechanisms by which cases are selected for trial.

Empirical tests of formal models of suit and settlement have been limited by the strong assumptions behind the models, assumptions that generally do not hold true in actual cases. Another difficulty in studying empirically what causes trials is the general lack of data on settlements. However, unlike most courts, the United States Tax Court (Tax Court), retains records on cases that settle after being docketed. Tax Court cases therefore provide an unusual opportunity to compare cases that went to trial with those that settled prior to trial. My study of these cases found that trials are nonrandom, and that identifiable features of the case, the judge, and the taxpayer are predictive of whether or not a case will go to trial. This is important new information that illuminates theoretical modeling of which cases go to trial.

My data set consisted of random sample of about 400 recent cases docketed in Tax Court, of which approximately half settled and the other half went to trial. In order to avoid the problem of limiting assumptions that are not true of actual cases, and the problem of subjective judgments about the merits of a case, I tested for nonrandomness by comparing the attributes of tried cases in the sample with the attributes of settled cases in the sample. More specifically, I tested whether any of nine characteristics of a case were statistically significant predictors of the type of outcome, that is, trial or settlement. Each of the nine variables used in the study, STAKES, APPEALS, JUDGETYPE, DECADE, BACKGROUND, PARTY, TAXPAYER, REGION, and COUNSEL, reflects a characteristic of either the case itself, the taxpayer involved in the case, or the judge assigned to the case. I used multiple regression analysis to test whether any of the nine independent variables, controlling for the other variables, were predictive of the dependent variable, TRIAL, which would indicate an effect on whether a case would go to trial or not.

Analysis of the data revealed that five of the nine independent variables, APPEALS, STAKES, JUDGETYPE, DECADE, and BACKGROUND, were statistically significant in predicting an increased likelihood that a case will go to trial. Thus, importantly, the data demonstrated a nonrandom selection of cases for trial: Tried cases were statistically different from settled ones. The specific results are even more interesting in that they provide insights into the mechanisms at work in Tax Court, which in turn illuminates the applicability of the various theoretical models to actual cases.

Abstract:
Article I courts are the other federal courts, infrequently studied despite their important role in the judiciary. This article focuses on the United States Tax Court, an Article I court that hears approximately 95 percent of litigated federal tax cases. The article argues that the Tax Court's current tendency to apply equitable doctrines when necessary to avoid harsh outcomes dictated by statute lacks constitutional authority. First, the article examines the role of Article I courts in the federal judicial system and under the Constitution. Next, it considers the historical and modern meanings of equity and equitable powers in the context of the distinction between law and equity. The article then discusses the Tax Court's use of equity, focusing on the doctrines of equitable recoupment, equitable estoppel, and equitable relief from joint and several tax liability for an innocent spouse. Finally, it examines possible sources of equitable power for the Tax Court, including applicable statutes, and the possible equity-like ancestry of Tax Court overpayment claims. The article concludes that Article I courts have limited sources of equitable power, and that for the Tax Court to apply equitable principles as it has been doing, Congress will need to take appropriate action - within constitutional limits - to broaden or redefine the jurisdiction of the court.

Abstract:
The Internal Revenue Code permits the Chief Judge of the United States Tax Court to assign to Special Trial Judges cases that involve amounts in controversy over $50,000, but does not permit Special Trial Judges to enter the decision of the court in those cases. Instead, under Tax Court Rule 183, after conducting the trial in such a case, the Special Trial Judge must submit a report, including findings of fact and opinion, to the Chief Judge, and the Chief Judge will assign the case to a Judge or Division of the Court... Rule 183 further provides that due regard shall be given to the circumstance that the Special Trial Judge had the opportunity to evaluate the credibility of witnesses, and the findings of fact recommended by the Special Trial Judge shall be presumed to be correct. This article argues that the Special Trial Judge's report should be disclosed, at least to reviewing Courts of Appeals.

Tax law, tax procedure, tax policy, court procedure

Abstract:
Tax procedure has been rather isolated from the main currents of civil procedure. Using the statutory notice of deficiency as an exemplar, the article explores how viewing tax procedure issues from the perspective of general civil litigation can facilitate procedural regularity and foster fairness to United States Tax Court contestants. The statutory notice is the document by which the IRS forewarns a taxpayer of impending assessment of tax greater than the amount reported on the taxpayer's return. The article identifies three functions of the notice and their general civil litigation analogues. First, like legal process, it provides the taxpayer with notice and an opportunity to be heard. Second, a valid statutory notice is a prerequisite to Tax Court subject matter jurisdiction. Third, like a complaint in general civil litigation, the notice helps to frame the issues and allocate the burden of proof. Taxpayers' challenges to defective statutory notices are generally framed as notions to dismiss for lack of subject matter jurisdiction on the ground that the notice is invalid. The taxpayer's incentive to make this motion is that only a valid notice tolls the statute of limitations on assessment; accordingly, on dismissal, the statue often will have expired, freeing the taxpayer from liability. The article recommends that the Tax Court borrow the learning of Bell v. Hood, that is, distinguish between allegations adequate to invoke subject matter jurisdiction and the additional requisites for pleading a cognizable claim. By doing so, the Tax Court could distinguish jurisdictional invalidity from other defects, and in turn apply remedies more appropriately geared to the several functions of the statutory notice.

Abstract:
Millions of people participate in virtual worlds. The popular virtual world Second Life is designed to be a platform for commerce. This essay argues that profits received in the form of Linden dollars (Second Life's currency) should be taxed in much the same way profits received via PayPal, a widely used electronic-payment system, are. Although Second Life profits could instead be taxed once the taxpayer cashes out, that would create a special exception for Second Life that does not exist for platforms such as eBay, which would facilitate abuse and distort economic activity.

Virtual worlds, MMORPG, Second Life, World of Warcraft, eBay, PayPal, taxation

Abstract:
Since 1988, Congress has enacted three "taxpayer bills of rights." Each of these bills has contained a series of amendments and additions to the procedural provisions of the Internal Revenue Code. Many of the new provisions have been prompted by anecdotes about taxpayers injured by the Internal Revenue Service (IRS). The article points out that, because anecdotes are rarely representative, and sometimes are inaccurate, the resulting legislation is more symbolic than effective. In fact, many of the so-called "rights" are actually duties imposed on the IRS without remedies for their violation. In addition, the bills have added costs to all tax controversies without regard to the usefulness of the new procedures to taxpayers.

Although "horror story" anecdotes of taxpayer abuses are not a representative basis for legislation, there are some taxpayers actually victimized by IRS agents. The article argues that taxpayers harmed by inappropriate IRS activity need more than symbolism. "Taxpayer bill of rights" legislation is unhelpful because it generally does not provide suitable remedies to injured taxpayers. Congress is currently considering Taxpayer Bill of Rights 2000, but that legislation does not address this issue. The article proposes instead a civil damage remedy to compensate taxpayers who suffer material harm resulting from IRS personnel violation of applicable laws or rules.

Abstract:
This article responds to Professor Steve Johnson's reply (Tax Notes, July 17, 2000, p. 395) to Professor Lederman's article critiquing taxpayer bill of rights legislation and proposing a damages remedy as an alternative (Tax Notes, May 22, 2000, p. 1133). This response discusses the substance of the proposed remedy in more detail. It disputes Professor Johnson's contentions that the proposal would do more harm than good by promoting wasteful, frivolous litigation. It also refutes his contention that the passage of time will solve most of the problems with the IRS, detailing why the proposed remedy would be a better approach.

Abstract:
This article considers the application of the statute of limitations on refund claims to a situation in which the taxpayer elected to credit a claimed overpayment estimated tax liability for the following year. The article focuses primarily on the district court decisions in Harrigill v. United States. In Harrigill, the court misapplied the statute of limitations of Internal Revenue Code section 6511, Lederman claims, apparently testing the timeliness of the taxpayer's 1995 return/claim with respect to her 1994 return/claim. The court appeared to believe that its finding that a large remittance made by the taxpayer with an extension of time to file her 1994 return constituted a deposit was critical to the outcome of the case. Lederman argues, however, on the facts of the case, whether that remittance was a payment or a deposit was irrelevant. Instead, critical to the analysis of the facts in Harrigill is the application of section 6513, a statute that the court did not address.

Abstract:
This article replies to an article written by Anthony Newton. (Tax Notes, May 14, 2001, p. 1139.) Mr. Newton argued that Shea v. Commissioner, 112 T.C. 183 (1999), will help alleviate the burden on taxpayers from uninformative notices of deficiency. This reply contends that although Shea may have reached a correct result in shifting the burden of proof to the IRS, it did so by muddying an important area of the law. In fact, by conflating two procedural rules to reach its decision, the Tax Court may have eliminated the possibility of sanction for some uninformative notices.

Abstract:
This article begins with the premise that clarification of the proper application of the statutes of limitations on refund claims to delinquent returns is still sorely needed. It considers such recent cases as Anastasoff and Weisbart, and argues for a uniform three-year limitations period under section 6511, coupled with application of the "mailbox rule" under section 7502 to a timely mailed but late-arriving refund claim made on a delinquent return. The article further suggests that the applicability of section 7503 to extend the due date for a return should not extend the deadline for a refund claim when the return was not actually filed on the extended due date.