Researching Burden of Proof Proposals
Ranking members of the Senate Finance Committee formally asked the U.S. Tax Court for its views on proposed changes to the burden-of-proof rules under the Internal Revenue Service Restructuring and Reform Act of 1997 (HR 2676). The provision would shift the burden of proof from the taxpayer to the IRS at the judicial level of civil tax cases when all administrative remedies have been exhausted and the taxpayer has fully cooperated with the IRS.
In a letter to Tax Court Chief Judge Mary Ann Cohen, committee chairman Senator William V. Roth, Jr. (R-Del.), and ranking Democratic member Senator Daniel Patrick Moynihan (D-N.Y.) said the Finance Committee would consider a provision on the issue of burden of proof early this year for its own IRS restructuring legislation. The letter requested the courts assessment of the impact of shifting the burden of proof on tax administration and tax litigation.
Currently, taxpayers are required to maintain records substantiating the calculation of their income tax liabilities. Proponents of the new provision argue that current law is inconsistent with the rule that individuals are innocent until proven guilty. Those opposed to the provision argue that in civil tax matters, the burden should rest with the party that has control of the facts and records. In a letter to Senator Bill Archer (R-Texas), Paul Cherecwich, Jr., president of the Tax Executives Institute, said that, otherwise, the party with the facts (but not the burden of proof) could prevail simply by concealing records. He also said it could create a more intrusive IRS because the IRS would have to intensify its enforcement activities to sustain its heightened burden.
Judge Cohen, who had been questioned by both Roth and Moynihan at her confirmation hearings last October, said the provision was cumbersome and raised more questions than it answered.