NTA Blog: Low Income Taxpayer Clinic Program Celebrates 20th Anniversary
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It gives me great pleasure to celebrate the 20th Anniversary of the Low Income Taxpayer Clinic (LITC) program. As part of the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98), Congress enacted IRC § 7526 to authorize funding for tax clinics. This section authorized grants not to exceed $100,000 to develop, expand, or continue low income taxpayer clinics. It required that grantees provide 100 percent matching funds to ensure that clinics were not solely dependent upon federal funding and to encourage clinics to seek broad-based support for their work.
Six years prior to the passage of IRC § 7526, I founded The Community Tax Law Project (CTLP). It was the first independent IRC § 501(c)(3) tax clinic in the nation. At the time, there were approximately 14 other clinics, located at academic institutions, providing representation to low income taxpayers before the IRS. I started CTLP because I saw time and again how unrepresented taxpayers were at a disadvantage in trying to resolve their problems before the IRS. Taxpayers went unrepresented because they could not afford to pay someone to advocate on their behalf. At the same time, tax controversy lawyers like myself wanted to do pro bono work in the field of their expertise, but there were no venues for volunteering in the context of representation before the IRS.
Along with the late Professor Janet Spragens of American University, I advocated for passage of IRC § 7526 because I knew the need was greater than what could be met with the resources that were available at the time. I understood that our federal tax system, one predicated upon voluntary compliance, would suffer if taxpayers believed the system was unfair and chose to drop out of the system in lieu of facing the daunting task of trying to understand and be understood. I saw taxpayers for whom English was a second language, who were taken advantage of by uninformed or fraudulent providers, who wanted to follow the law but didn’t know how. At the time, federal work requirements for welfare recipients were being implemented. In Virginia I saw well-intentioned social service agencies encouraging low income persons to start child care businesses in their homes, without any inkling of the tax consequences of such an endeavor. To me, this was an educational (and representational) vacuum that LITCs could fill.
During the hearings that led up to RRA 98, before both the House of Representatives and the Senate, I and others pointed out that an important perspective, that of the low income taxpayer, was not adequately considered by the IRS when making policy and administering programs. Moreover, because few cases involving issues of low income taxpayers were brought by experienced tax attorneys in the federal courts, the case law did not reflect the tax issues of a large swath of the U.S. taxpayer population. And there were no advocates of the low income taxpayer submitting comments on Treasury regulations. All of these voids resulted in a tax system that reflected the concerns and issues of taxpayers who could afford to pay representatives but was fundamentally unfair.
With the bipartisan passage of IRC § 7526, Congress responded to our concerns and recognized the need to expand access to representation to low income taxpayers with controversies before the IRS. Congress also recognized that language should not be a barrier that prevents taxpayers from understanding and fulfilling their rights and responsibilities under the tax code.
The first clinics received funding in 1999. Less than $1.5 million dollars was awarded to 34 entities in 18 states. In 2018, just over $11.8 million dollars was awarded to 134 grantees in 48 states and the District of Columbia. From 2012 to 2016, LITCs represented more than 52,400 taxpayers involved in controversies before the IRS and educated about 450,000 low income taxpayers and taxpayers for whom English is a second language about their taxpayer rights and responsibilities. In addition to providing representation and education, LITCs also identify problems within the IRS and advocate for changes. Changes that the clinics advocate for will often benefit taxpayers beyond just those they represent.
The clinics currently funded by the LITC program include academic institutions, legal aid programs, and nonprofits. The different types of clinics bring unique strengths to the LITC program. Academic institutions help students develop strong writing, research, and client counseling skills while providing needed representation to low income taxpayers in a supervised setting. Legal aid programs and nonprofits often provide a variety of services and may have spent years developing strategies to reach and assist low income individuals with a broad array of social, economic, and legal issues. Over 281,140 hours of pro bono assistance were donated by LITC volunteers from 2012-2016. Law schools have sponsored symposia on the problems of low income taxpayers, and there is a growing literature on tax administration issues relating to this population, as well as participation in the rulemaking process. And in 2017, LITCs and their volunteers represented low income taxpayers in 1,012 cases before the U.S. Tax Court. Through collaboration, LITCs have built an incredible network through which knowledge and skills are shared and enhanced to the benefit of the LITC community and the taxpayers they serve.
Below are just two of the stories of thousands of taxpayers who have been helped by the clinics.
LITC resolves identity theft matter and helps taxpayer receive thousands in improperly offset refunds.
A taxpayer came to the LITC for assistance after the IRS levied his wages. The taxpayer had grown frustrated with the tax system because for several years the IRS had applied his tax refunds to an existing tax debt and he did not understand why. Eventually, the taxpayer stopped filing returns, which led to the IRS placing the levy on his wages. After researching his account, an LITC representative determined that an identity thief had worked under his Social Security number for many years, and the improperly reported wages caused the taxpayer’s debt and the resulting levy. The LITC and TAS advocated for the IRS to issue the taxpayer thousands in refunds, clear the taxpayer’s account, and release the levy.
LITC obtains offer in compromise (OIC) and restoration of disability benefits for veteran.
A veteran double-amputee came to the LITC because he was facing an unpaid tax debt that had grown to over $100,000. The taxpayer, who was living near poverty, lacked the resources to pay the debt or hire a representative. The IRS was levying the taxpayer’s disability benefits and he was desperate for a resolution. The LITC prepared a financial information statement and submitted an OIC to resolve the six-figure debt for $500. The IRS accepted the offer, which restored the taxpayer’s disability benefits and gave him a fresh start.
In 20 years, the LITC Program has provided access to justice to thousands of United States taxpayers, educated thousands, and helped bring about positive changes to the administration of the tax code. I am deeply grateful to all those who have served low income taxpayers through this program over the past 20 years. It has been a privilege to oversee the grant-making process and see the dedication of so many people.
But there is still more work to be done. As we begin the next 20 years of the LITC program, I challenge the LITC community to continue to innovate and collaborate to fulfill the mission of the LITC Program which is to ensure the fairness and integrity of the tax system for all taxpayers. And I encourage all tax professionals to reach out to your nearest clinic and volunteer your time. I can personally attest there is no more satisfying work, professionally, than helping a low income taxpayer in a dispute with the IRS.
You can read about the important activity of the LITC Program in the Program Report. To see a listing of the LITCs and their locations throughout the United States, visit the LITC page on the Taxpayer Advocate Service website.
The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate is appointed by the Secretary of the Treasury and reports to the Commissioner of Internal Revenue. However, the National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.