Tax Enforcement by the Private Sector: Deputizing Tax Insurers

October 10, 2024, 4 - 5 p.m.
Heather M. Field, J.D., UC Law, San Francisco
The IRS is outgunned when trying to ensure compliance by large corporations and other sophisticated taxpayers, but the private sector might be able to help. This talk argues for using a private sector party-tax insurers-to expand the IRS’s enforcement abilities. Tax insurance is just insurance: If an insured tax position is successfully challenged by a tax authority, the insurer commits to paying the additional taxes owed (plus interest and penalties), up to the policy limit. This talk proposes that the IRS take advantage of insurers’ informational and capacity advantages by effectively deputizing insurers as private sector tax enforcers, treating the positions they insure as having been “sustained” in a private “audit.” With the right combination of sticks and carrots, private sector tax enforcers could be incentivized to live up to their commitment to “sustain” only strong positions, and taxpayers could be incentivized to pursue “audits” by private sector tax enforcers that live up to those commitments. The talk also identifies the potential concerns the proposal would need to overcome to harness a growing private sector industry for the public good.
Recommended Reading: Heather M. Field, Tax Enforcement by the Private Sector: Deputizing Tax Insurers, 99 Ind. L.J. 1179 (2024).