44 Pages Posted: 12 Mar 2014 Last revised: 27 Jun 2014
Date Written: June 25, 2014
The current controversy involving possible political targeting by the IRS in administering the exempt organization (EO) tax laws is simply the latest in a long succession of similar allegations spanning at least five decades. This article proposes to address the problem through increased transparency of the IRS’s administrative actions involving EOs. Greater transparency responds directly to the public’s frustration in not being able to monitor the agency and gain confidence that the laws are being applied in an even-handed manner.
Proposals to increase the transparency of government commonly confront some claimed governmental interest in secrecy, such as a national security or law enforcement concern. Transparency of the government’s tax decisions, however, encounters the further problem that it violates the privacy rights of taxpayers. This latter clash arises because the government’s tax administration decisions generally turn on the information it has extracted under compulsion from taxpayers. Thus, meaningful transparency of one (the government’s tax decisions) almost necessarily requires meaningful transparency of the other (taxpayer tax return information). Fortunately, Congress has long recognized good policy reasons to make public a substantial amount of EO tax return information. Thus, slight liberalizations of the existing disclosure rules for such information may allow sufficient transparency to satisfy the public’s right to know in the precise area of the law that has generated the most controversy. Opening up more EO tax return information and IRS EO decision-making to public scrutiny would tend to deter IRS misbehavior, reduce suspicions of such misconduct, and promote fuller communication both to establish any impropriety and avert false charges against the agency.
Keywords: exempt organizations, IRS, transparency, political targeting, right to know, taxpayer privacy, tax return information, disclosure, confidentiality, section 6103, secret law
JEL Classification: H10, H11, H19, H20, K20, K34, K42, L30, L31
Suggested Citation: Suggested Citation
Yin, George K., Reforming (and Saving) the IRS by Respecting the Public's Right to Know (June 25, 2014). Virginia Public Law and Legal Theory Research Paper No. 2014-22. Available at SSRN: https://ssrn.com/abstract=2407668 or http://dx.doi.org/10.2139/ssrn.2407668