New TAS Report on the Low Income Taxpayer Clinic program
Tax issues aren’t always the first thing on peoples’ minds as they struggle with poverty. Likewise, while English isn’t everyone’s first language, navigating the U.S. Tax Code can mean learning a third. Congress for these and other reasons created the Low Income Taxpayer Clinic (LITC) program. Now in 18th year, the program released its annual report last week.
Law schools and public interest law firms have operated tax clinics for low-income people since the 1970s. The first appeared at Hofstra and Harvard Universities. Congress set up the program now in place to fund these clinics in 1998.
133 clinics nationwide now receive a total of about $10 million each year. Individually, they may receive up to $100,000 a year in federal support to do what they do.
Though operations at each federally funded LITC are tailored to the unique needs of local populations, they generally provide
- help for low-income people and people whose first languages aren’t English as they wrangle and file their taxes;
- pro bono or cheap representation for these people in tax court, and;
- political advocacy on their behalf, though federally funded clinics of this type do face some lobbying restrictions.
LITCs secured for taxpayers more that $5.2 million and corrected or decreased liabilities in excess of $51.2 million during 2014, according to the new report.
A high-profile instance of LITC activity in recent years: a Chicago lawyer owed about $1.8 million in back taxes after 20 years of checkered success in private practice. He had by the late 1990s fallen behind on payments to the IRS. While “in a fog,” the lawyer miscommunicated with an IRS agent, who then later threatened to
put him out of business unless he consented to waive the statute of limitations until 2009 for overdue taxes dating back to 1981. A month later, the agent returned to try to seize [his] office furniture, and a few weeks after that tried to seal the elevator to [the attorney’s] office.
Jonathan P. Decatorsmith of the LITC at Chicago-Kent College of Law sued the IRS Commissioner on the destitute attorney’s behalf, claiming the IRS acted inappropriately. A judge favored the complainant in a 2011 ruling.
Overall, the LITCs support program is lean and well-run.
About 85% of the grant money goes to staffing and services. Operation and occupancy costs account for the remainder.
Improper or fraudulent diversions of LITC funding are either rare or underinvestigated, though a 2005 audit reveals some tax compliance troubles. The U.S. Treasury also gripes a bit over grant application and salary disbursement records, site visit policies, etc.
Despite these minor foibles, however, LITCs will become increasingly important in coming years as Congress reduces funding for the IRS. The National Taxpayer Advocate’s 2014 Report to Congress identified a 17% reduction in the IRS’s budget between 2010 and 2015.
While the cuts have caused what is termed an “erosion of taxpayer service” in the report, the LITC program ranks among the only national-level measures dedicated to the improvement of this service.