Collection Due Process At 25: A Still Important and Needed Check On IRS Collection Power

Abstract

The modern tax collection system has its origin in the IRS Restructuring and Reform Act of 1998. RRA 98’s CDP provisions radically changed the relationship between the IRS and taxpayers in the collection process. One key aspect of CDP was its opening up some aspects of IRS collection determinations to judicial review.

Was subjecting some previously unreviewable IRS collection decisions to the possibility of judicial review a positive development? Any additional procedural requirements increase agency costs. The same is true of CDP. The costs of CDP include agency resources to satisfy CDP’s notice requirement, agency and judicial costs to satisfy hearing requirements, and an impact on collections when recalcitrant taxpayers use CDP to avoid or delay paying an assessed liability.

A steady drumbeat of academics has highlighted those costs. In the years following its enactment, I offered my views as to why I felt CDP, while not without some flaws, was a positive step for tax administration.

I continue to believe that CDP provides a needed systemic check on the IRS’s still broad collection powers. This Article builds on and expands my earlier work by exploring recent scholarship that considers how the deferential court review of agency practice and the wise use of remand power provide distinct benefits for high-volume agency adjudications. That scholarship emphasizes how the deferential abuse of discretion review that is the default standard in administrative law allows for the judiciary to engage with an administrative agency and provide needed oversight.

In this article, I also propose modest changes to CDP so that it can better reflect taxpayer rights, an important benchmark following the 2015 codification of the Taxpayer Bill of Rights that the IRS had administratively adopted in 2014.

Keywords: IRS, CDP, tax collection, judicial review, remand,

JEL Classification: K34, K23