Document Type


Publication Date

Spring 2010

Publication Title

Tennessee Law Review

Publication Title (Abbreviation)

Tenn. L. Rev.





First Page


Last Page



The IRS should endeavor to treat similarly-situated taxpayers similarly, but does this aspiration rise to the level of a judicially enforceable duty? If the IRS takes a position on Taxpayer B that is correct under the law but is inconsistent with a position the IRS took on similarly-situated Taxpayer A, should the IRS’s position on Taxpayer B fail simply because of the inconsistency? These questions implicate important themes, such as fairness, the rule of law, separation of powers, administrative exigencies, the role of common law making in a highly positivistic system, and the sustainability of legal regimes.

A constitutional standard applies to the most egregious cases, but the overwhelming majority of cases present subconstitutional, rather than constitutional, issues. Since there is no controlling statute, these issues have been addressed as a matter of common law. Unfortunately, this exercise in common law making has failed badly. Despite over half a century of decisions, there is no settled rule. Judicial inconsistency has been the response to IRS inconsistency – at least six different approaches have been suggested by courts and commentators. There is no perceptible movement towards coalescence around any of these approaches, and few cases have undertaken a searching examination of the variety of views, the main precedents, and the powerful conflicting values at issue.

Given the failure of common law making in this area, this article argues that a statutory solution is necessary. Crafting the solution is challenging, however, due to a clash between the head and the heart. Viewed solely as a matter of legal doctrine, the right answer is that there should be no judicially enforceable duty of tax consistency on the Government. This answer is supported by a number of compelling rationales based on the separation of powers principle and the exigencies of administering a tax system involving billions of points of contact between taxpayers and the IRS.

On the other hand, the cold logic of those rationales does not satisfy our cherished and deeply held notions of fairness. Considering the claims of justice, it would be unrealistic to believe that judges and legislators could muster the intellectual discipline to adhere over the long term to a “no judicially enforceable duty of consistency” position.

Thus, the challenge is to achieve a solution that balances the needs of the system with the needs of the conscience in ways that are both sound and sustainable. This article proposes to achieve this delicate balance by amending the Internal Revenue Code to permit abatement of interest on tax understatements – but not abatement of the understatements themselves – when the taxpayer relied on a high-level Treasury or IRS interpretation that the IRS later disregarded.

In many cases, interest is a substantial component of the total tax liability. Accordingly, excusing the taxpayer from interest liability would both meaningfully benefit the taxpayer and meaningfully punish the IRS for its inconsistency. However, the requirement of reliance and the fact that the taxpayer would not be relieved of the underlying deficiency would prevent windfalls and preserve the substantive liability rules enacted by Congress. An approach that provides meaningful correction, but not overcorrection, would produce the least harm to tax administration and offer the best prospects for sustainability. As an additional benefit, the proposal builds on statutory trends regarding interest liability on tax underpayments.


© 2010 Steve R. Johnson


First published in Tennessee Law Review.

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