Mark Matthews Comments on Moving CI Cases to Treasury

Tax Notes

The Federal Law Enforcement Officers Association (FLEOA), a federal law enforcement trade group, is committed to persuading Congress to move the IRS Criminal Investigation division out of the tax agency and into the Treasury Department. But many tax professionals don’t like the idea of moving CI out of the IRS.

. . .

Mark E. Matthews, a former IRS deputy commissioner for services and enforcement and head of CI from 1999 to 2002, said that relocating CI would “inevitably lead to sharp reductions” in the number of criminal tax cases. Treasury would be more interested in money laundering and other illegal income schemes than the traditional cases that provide a deterrent effect on taxpayers, he predicted, resulting in reduced tax compliance and an increase in the tax gap.

“It is important that the [taxpayer] identify with those singled out for prosecution,” Matthews added. Most taxpayers don’t identify with a tax charge brought against a drug dealer or people engaged in identity theft, he said, adding, “But airline pilots spread the word when other airline pilots are prosecuted. It’s true in any industry.”

Moving CI could also lead to more political interference, Matthews said. “Just as the IRS seems to be moving beyond nearly a decade of political bashing, turning over the criminal tax function to the political Treasury side will further degrade the public’s confidence in the fair and nonpolitical administration of the tax code,” said Matthews, now with Caplin & Drysdale, Chtd. “You might as well schedule the hearings on the resulting scandals now.”

A CI realignment would require revisiting the section 6103 taxpayer information privacy protections, Matthews added, noting that those protections are among the few things partisans on both sides can agree to protect. “People are willing to share sensitive financial information with the IRS because they believe it will not be leaked,” he said.

Not Just a CI Story

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“This just isn’t a CI story only,” Matthews said. Congress needs to reverse the IRS funding cuts of the last decade or so, and the agency must improve both customer service and enforcement efforts on both the civil and criminal sides, he said.

The chaos that ensued on tax day when processing systems failed should serve as a warning about IRS funding as a whole, not just for CI, Matthews cautioned. “What if people can’t get their refunds on time next year?” he said. “I wouldn’t want to be answering the phones on the Hill.”

For the full article, please visit Tax Notes’ website (subscription required).

Excerpt taken from the article “Group Still Pushing to Move CI to Treasury” by William Hoffman for Tax Notes.


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