Proposal to shift burden of proof – comments submitted Oct 14, 1997 by Tax Executives Institute to U.S. Representative Bill Archer regarding the proposed burden shift from taxpayers to the IRS

On October 14, 1997, Tax Executives Institute submitted the following comments to Representative Bill Archer, Chairman of the House Committee on Ways and Means, concerning the Chairman’s support for a proposal to shift the burden of proof from the taxpayer to the Internal Revenue Service in tax disputes. The comments took the form of a letter from TEI President Paul Cherecwich, Jr.

On behalf of Tax Executives Institute, I am writing to express serious concern about your statements supporting legislation to shift the burden of proof in tax matters. While such a proposal may seem consistent with the laudable push to enact a new taxpayer bill of rights, it is in reality misguided. Tax Executives Institute is convinced that, if implemented, the proposal would lead to either a more intrusive Internal Revenue Service or a completely ineffective one. Neither one of those choices would be good for the country. Consequently, TEI strongly urges you to reconsider your support for the proposal.


Tax Executives Institute is the principal association of corporate tax executives in North America. TEI is a nonpartisan, not-for-profit membership association that represents approximately 5,000 in-house tax professionals employed by 2,800 of the leading companies in the United States and Canada. TEI is dedicated to the development and effective implementation of sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike.

Tax Executives Institute is supportive of the Ways and Means Committee’s recent efforts to improve the tax system and to enhance taxpayer rights. I was pleased and honored to have been asked by the Committee to testify recently on proposals to restructure the Internal Revenue Service, and continue to believe that pending legislative proposals hold much promise for improving the management and oversight of the IRS. TEI pledges its ongoing support for good-faith efforts to improve the tax system and increase taxpayer protections. Regrettably, the proposal to shift the burden of proof in tax cases is not one of those proposals.

Proposal to Shift the Burden of Proof

Under current law, a taxpayer is generally required to maintain records substantiating the calculation of his or her income tax liability. Proponents of burden-shifting legislation have argued that the current rule is unfair because elsewhere in America citizens are presumed innocent until proven guilty and that the same standard should apply to dealings with the IRS.

This argument, while facile, really misses the point. It is true that the innocent-until-proven-guilty rule generally applies to criminal matters. It is also true that in criminal tax matters — and, indeed, in matters involving civil tax fraud and certain penalties — the government already has the burden of proof. It is in civil tax matters where the burden is placed on the taxpayer. This standard comports with the age-old principle that the burden should generally rest with the party who has control of the facts and records — in this case, the taxpayer. Otherwise, the party with the facts (but not the burden of Proof) could prevail, simply by concealment. A taxpayer’s hide-the-ball strategy would insulate wrongdoers from paying their fair share, thereby requiring the rest of us to pay more. In other words, the issue is not whether a taxpayer is assumed “guilty” until proven innocent; it is whether the taxpayer is accountable for what is claimed on the tax return.

Consider this example: On his tax return, a taxpayer claims a deduction for donating $200 a week to his church, but in fact only donated $20 a week. The return is then audited and the IRS agent asks for substantiation. The taxpayer replies that he has no substantiation because the donations were made in cash. He challenges the IRS to disprove his claim. How does the IRS demonstrate that the donation was not made? Under current law, taxpayers must document their contributions (and other deductions) because they shoulder the burden of proof (and have access to the records — if any — substantiating their claims). Under the burden-shifting proposal, a dishonest taxpayer would have an incentive to stonewall the IRS and escape paying his fair share.

Once again, honest taxpayers would suffer under this proposal because there will always be a few who will try to “game” the system. For example, if shifting the burden were to reduce voluntary compliance by as little as one percent, there would be a $10 billion annual decrease in tax revenues — revenues that would have to be made up by honest taxpayers.

Mr. Chairman, TEI is well aware of your support for efforts to “get the IRS out of the lives of the American people” and to protect taxpayers from intrusive requests. Ironically, your proposal would move the tax system in the opposite direction. This is because, if the burden of proof were shifted to the government in tax cases, the IRS’s enforcement efforts would have to be intensified as the agency endeavored to sustain its heightened burden. If the taxpayer had no burden to come forward with the facts, the IRS would have to undertake to discover them itself. These intensified audits may well increase as the IRS struggles to reconcile reported income with expenditures. More summonses — including those issued to third parties — would undoubtedly be issued and more issues litigated, particularly in the Tax Court where there is no prepayment requirement. While Tax Executives Institute supports giving the IRS sufficient resources and tools to do its job, we question whether support currently exists for expanding the agency’s compliance activities. Equally important, although some advocates of changing the burden of proof suggest that the problems can be resolved by delaying the burden shift until a case goes to court, all that would do is postpone the day of reckoning. Indeed, such a provision would encourage more taxpayers to bypass administrative remedies, thereby consuming time and resources of not only the IRS but also the courts. Stated differently, delaying a bad idea does not make it a good one.

In summary, although the proposal to shift the burden of proof may be well-intended, it represents the archetypal “easy solution” that H.L. Mencken warned existed to every human problem — neat, plausible, and wrong. The end result of shifting the burden of proof could well be a more intrusive IRS, a decrease in tax revenues, and a less efficient tax system. Accordingly, we request that you reconsider your support for shifting the burden of proof in civil tax matters.


Tax Executives Institute appreciates this opportunity to present its views on the proposal to shift the burden of proof. Any questions about the Institute’s views should be directed to either Michael J. Murphy, TEI’s Executive Director, or Timothy J. McCormally, the Institute’s General Counsel and Director of Tax Affairs. Both individuals can be reached at (202) 638-5601.

COPYRIGHT 1997 Tax Executives Institute, Inc.

COPYRIGHT 2004 Gale Group

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