An empirical study of the effect of the change in the burden of proof in the Internal Revenue Service Restructuring and Reform Act of 1998 on the United States Tax Court

Tax collectors have been burdened with bad reputations throughout the centuries, and the Internal Revenue Service is no exception. After reports of abuses towards taxpayers by the IRS, Congress passed the Internal Revenue Service Restructuring and Reform Act of 1998. The Act included a shift in the burden of proof in tax cases from the taxpayer to the IRS under certain conditions and went into effect on July 23, 1998. This study tested whether the shift in the burden of proof has affected the outcomes of tax cases in the U.S. Tax Court.; The dataset included regular and memorandum decisions issued by the U.S. Tax Court for individual taxpayers between July 23, 1991, and July 22, 2005. A total of 2,450 cases were included in the dataset. The statistical analyses used include contingency tables, t-tests, multiple regression, and logistic regression.; The results demonstrated that the average reduction in the amount of taxes that taxpayers owe is less after the change in the burden of proof than before the change. However, the results of the t-tests and regressions suggested that this difference was not significant. Congress had intended for the change in the burden of proof to assist taxpayers when they are litigating cases against the IRS. However, since there was an insignificant decrease in the reduction of the amounts owed by individual taxpayers, the results suggested that the legislation was not as helpful as was expected.; The control variables for the type of case, attorney representation, and the judicial variables of eliteness of law school and undergraduate college, type of law school and undergraduate college, and prior governmental work experience had significant effects on the decisions in U.S. Tax Court cases. Concerns of those opposed to the change in the burden of proof were examined, including an increase in litigation and intrusiveness of the IRS during audits. Although the number of appeals by taxpayers increased, the number of examinations conducted by the IRS decreased. The results suggested that the changes did not have a significant effect on the outcomes in tax cases.