The ongoing lapse in federal government appropriations is now the longest in modern history. On January 15, the IRS released an updated shutdown plan which substantially alters how the ongoing shutdown impacts taxpayers. Regular PT contributor Bob Kamman described the updated plan here; he summarized the original shutdown plan here. The biggest change of plan is the recall of about half the IRS workforce primarily to process tax returns and ensure that refunds will be paid this filing season. But the plan also calls for expanded operations in another important arena: collections. And automated notices of intent to levy are still being issued. Meanwhile, Taxpayer Advocate Service (TAS) employees are largely furloughed and those who are excepted are not permitted to work on individual taxpayer cases. This situation raises important questions about the IRS and Treasury’s interpretation of the Anti-Deficiency Act. What should be TAS’s role in a shutdown, and who will protect taxpayer rights if TAS is not permitted to engage in those activities?
Spending and taxation authority reside in Congress under Article I, Section 8 of the Constitution; the Executive has no independent taxation or spending power. Separately, Article I Section 9 prevents unauthorized spending, providing that “No Money shall be drawn from the Treasury, but in consequence of appropriations made by law.” When a lapse in appropriations occurs, the government necessarily shuts down. Neither the President nor Congress decides to shut down the Government; it happens automatically under the Constitution.
Statutory law develops the constitutional prohibitions and invokes the criminal law to enforce the prohibition. Under Section 1341(a) to Title 31 of the U.S. Code, federal employees “may not make or authorize an expenditure or obligation” or involve the “government in a contract or obligation” absent a lawful appropriation. Similarly, under Section 1342, federal employees “may not accept voluntary services for the government … except for emergencies involving the safety of human life or the protection of property.” The “emergency” exception is narrowly defined to exclude “ongoing, regular functions of government the suspension of which would not imminently threaten the safety of human life or the protection of property.” Section 1350 makes a knowing violation of either provision a felony punishable by up to two years in prison.
So, when there is no Congressional appropriation funding the IRS, the Anti-Deficiency Act allows the agency to continue limited operations only “for emergencies involving the safety of human life or the protection of property,” albeit with “volunteer” labor.
This brings us to the Taxpayer Advocate Service. Given the substantial expansion of IRS operations reflected in the revised shutdown plan, it was disappointing to see the role of the Taxpayer Advocate Service remain the same. Bob Kamman notes:
There are now two “excepted” Category B employees allowed in each local office: The local TA, and either a group manager or a “lead case advocate.” Their jobs are to “Check mail to comply with the IRS’s requirement to open and process checks during a shutdown while also complying with the statutory requirements that TAS maintain confidential and separate communications with taxpayers and that TAS operate independently of any other IRS office . . .Screen the mail for incoming requests for Taxpayer Assistance Orders and notify the appropriate Business Unit that a request has been made tolling any statute of limitations.”
It doesn’t sound like they are allowed to answer the phone or work cases. Protecting IRS integrity doesn’t extend this far?
Apparently it doesn’t, at least not in the eyes of the IRS. Multiple TAS employees have privately confirmed that they are not permitted to work on taxpayer cases during the shutdown, even where a hardship is present.
TAS plays a crucial role in the tax collection system, as a backstop protecting taxpayers from serious financial hardship. As such, one might think that TAS activities related to taxpayer hardships would be excepted. Certainly taxpayers threatened with homelessness or living without heat or water view their situations as “emergencies involving the safety of human life or the protection of property”. However, the IRS Office of Chief Counsel has interpreted the “protection of property” prong to refer only to government property (Exception Category B of the shutdown plan: “Necessary for the Safety of Human Life or Protection of Government Property”). The NTA strongly disagrees with this interpretation, and she has called on Congress to clarify the statute.
In her Fiscal Year 2015 Objectives Report to Congress (June 30, 2014), Nina Olson analyzed the Anti-Deficiency Act and raised several concerns with the IRS’s interpretation of its exceptions as applied to TAS. She also compared the IRS’s 2013 shutdown policy to its prior shutdown contingency plan and to the interpretations of other federal agencies and the OMB. It’s illuminating to revisit that report now in light of the original and revised shutdown plans for 2018/2019. I recommend reading the report for the full background and detailed analysis.
The good news is that the IRS has addressed or partially addressed some of the NTA’s previous concerns. The January 2019 shutdown plan provides for the recall of 1,989 SBSE collection representatives whose duties include releasing liens and levies as required by law. Shockingly, release of levies was not a function performed at all during the 2013 shutdown. The current plan also preserves TAS’s independence by permitting TAS employees to open their own mail, which also was not allowed in 2013. However, the IRS has not changed its interpretation of the “protection of property” exception and it has not conceded that TAS plays an integral role in protecting the integrity of tax collection and in preventing taxpayers from experiencing irreparable harm.
The limited IRS telephone service provided for in the new shutdown plan has only been open since January 22, and it is not clear yet whether the current operations plan will be sufficient to protect taxpayers against serious harm from unlawful collection actions. Anecdotal reports on the ABA Tax Section’s Low-Income Taxpayer email list suggest that taxpayers and representatives may experience inconsistent treatment when calling in, with some IRS representatives able to accept faxed authorizations and some not, and some representatives claiming they have no ability to address the caller’s hardship. Problems with front-line collection employees are nothing new to taxpayer representatives. One could argue that the sufficiency of the new shutdown plan is not open to debate, as Congress has already determined in enacting sections 7803(c) and 7811 that the NTA and TAS are a necessary safeguard within the system to protect taxpayers from unlawful collection action.
When the shutdown ends, I anticipate the NTA forcefully renewing her legislative recommendation that Congress
Clarify that the emergency exception to the Anti-Deficiency Act for the protection of property includes taxpayer property as well as government property. Alternatively, clarify that the National Taxpayer Advocate may incur obligations in advance of appropriations for purposes of assisting taxpayers experiencing an economic hardship within the meaning of IRC § 6343(a)(1)(D) due to an IRS action or inaction, and that the IRS may incur obligations in advance of appropriations for purposes of complying with any Taxpayer Assistance Order issued pursuant to IRC § 7811.
Such clarification would be a relief for taxpayers in a world in which future shutdowns seem inevitable.