World Bank Attacks Effort to Bar Outside Counsel in Summons Cases

PUBLIC SUBMISSION

Docket: IRS-2018-0008
Certain Non-Government Attorneys Not Authorized To Participate in Examinations of Books and Witnesses as a Section 6103(n) Contractor (REG-132434-17)

Comment On: IRS-2018-0008-0007
Certain Non-Government Attorneys Not Authorized to Participate in Examinations of Books and Witnesses as Section 6103(n) Contractors; Hearing

Document: IRS-2018-0008-0012
Certain Non-Government Attorneys Not Authorized To Participate in Examinations of Books and Witnesses as a Section 6103(n) Contractor (REG-132434-17)

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Submitter Information

Name: Jacqueline Coolidge

Address:

Email: jcoolidge@schoolbench.com

Phone: 3016461940

Organization: World Bank

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General Comment

Outline of topics to be discussed by Jacqueline Coolidge at a Public Hearing scheduled for July 31, 2018 10:00 a.m. re

Notice of Proposed Rulemaking REG-132434-17 (Certain Non-Government Attorneys Not Authorized to Participate in Examinations of Books and Witnesses as a Section 6103(n) contractor)

The proposed regulation would prevent the IRS from getting the help of outside counsel when it is up against multinational corporations in complex tax cases involving a summons. While the rationale for the proposed change is to contribute to a reduction in regulatory burdens, the great majority of tax-related regulations, including in countries where the revenue service uses risk-based audit, impinge overwhelmingly on small and medium enterprises, but constitute only a miniscule fraction of a percent for large businesses. The current regulation proposed for reform is relevant almost exclusively for large multinational corporations, so the proposed change would not yield a significant improvement, but would almost certainly hamper the ability of the IRS to enforce the law.

The proposed regulation makes an artificial distinction between substance expertise (primarily specialists in foreign, state, or local law, including tax law, or in non-tax substantive law that is relevant to an issue in the examination) and providing legal services as an attorney. This distinction creates more confusion and complexity than the current, existing regulation.

The net effect appears to be the hobbling of the IRS in cases where it may be examining complex transactions including international transfer pricing, where both US tax law and one or more foreign tax laws or regulations are involved. Such cases may involve many millions of dollars of potential tax liability, where multinational corporations have ready access to armies of tax lawyers, while the US IRS, already budget-constrained (and suffering from many years of budget cuts), would be further reduced to fighting such cases with only its in-house resources.

While it is always a good practice to periodically review, streamline, and update regulations, there does not appear to be merit behind the proposal to restrict the IRS to in-house resources while the taxpayers it may need to examine or audit have full access to any and all resources they can afford. Tilting the playing field against the IRS would make it much more likely that multinational corporations could get away with more aggressive and potentially abusive international tax maneuvers involving a combination of US tax laws and foreign tax laws. Since questions related to US tax laws would inevitably be involved, the IRS could face litigation for hiring outside counsel that considered both US tax laws and the relevant foreign ones.

It may be beneficial to further clarify that outside counsel must be under the full control of IRS staff or even possibly to ensure that only IRS staff are allowed to question witnesses under oath. It makes no sense to bar the IRS from hiring outside counsel to review documents, develop examination and/or litigation strategy, draft interrogatories, or prepare memoranda and briefs. Hobbling the IRS would most likely result in yet more successful tax avoidance (and even evasion) on the part of large multinational corporations, leaving the remainder of US taxpayers to bear the burden of under-resourced public services.

Please note I would like to speak at the public hearing scheduled for July 31, 2018.