For my final post on the Taxpayer Assistance and Service Act, I want to focus on the importance of one provision in particular, given its relevance to legal education as well as to the needs of low-income taxpayers. Despite their crucial work, low-income taxpayer clinics (LITCs) have been underfunded and unable to serve all eligible taxpayers due to outdated statutory limits related to their grant funding. Section 110 of the Act seeks to remedy this in order to strengthen these clinics and expand their capacity.
LITC grants have historically been capped at $100,000 per clinic, with total funding limited to $6 million annually. While Congress has sometimes allocated more than this amount, the statutory cap has remained in place, creating uncertainty for clinics trying to plan for sustainable growth. Additionally, LITCs were required to match 100% of their federal grant funding, making it difficult for clinics to expand in communities with limited local funding sources. Compounding these difficulties has been the fact that the statutory maximum grant cap has not been indexed for inflation, causing the real value of the grant to decline since its inception.
Section 110 addresses these issues by (1) removing the outdated $6 million funding cap and $100,000 per clinic limits and (2) allowing clinics to match less than 100% of their federal grants, with a minimum match of 25% when necessary to improve taxpayer service. These changes make it easier for LITCs to access federal funds and to serve a broader population, particularly in underrepresented rural and urban communities. This increased LITC funding will better promote social justice, protect taxpayer rights, and help bridge the digital divide in tax administration. It will also better enable some of the technological modernization proposals discussed in my prior post to succeed.
There is a common misconception in the academic clinical community that low-income taxpayer clinics do not have as strong a connection to a social justice mission as other types of clinics, which usually arises out of lack of appreciation for the work that LITCs engage in as well as how tax problems can have a significant impact on the overall economic lives of the economically vulnerable. LITCs play an essential role in ensuring that low-income taxpayers can assert their rights when dealing with the IRS. These clinics: (1) provide legal representation for individuals facing audits, tax debt collection, and disputes over tax credits; (2) educate taxpayers about their rights and responsibilities under tax law, helping them avoid costly mistakes; and (3) advocate for systemic reforms that improve fairness in tax administration. In addition, many taxpayers assisted by LITCs are among society’s most vulnerable, including individuals who are survivors of human trafficking or domestic abuse who have been left with fraudulent tax liabilities by abusers; individuals who struggle with housing insecurity and who cannot afford professional tax representation; and individuals who depend on tax credits like the Earned Income Tax Credit (EITC) to meet their basic living expenses, especially if they have children. Tax law, as it turns out, is thus deeply intertwined with social justice. Many social justice issues—poverty, housing insecurity, racial discrimination, and access to healthcare—are directly affected by tax policies. However, low-income individuals often lack the resources to challenge unjust tax liabilities, leading to outcomes that exacerbate economic hardship.
In addition to the direct social justice benefits of LITCs current work, LITCs will inevitably need to grow and expand their reach in the future if they are to help mitigate the impacts of the digital divide that could threaten the success of the IRS’s modernization initiatives that I discussed in my previous post. While digital systems offer convenience for some taxpayers, they also create significant barriers for others, particularly those who lack internet access or digital literacy; have language barriers that make online interfaces difficult to use; or face cognitive or literacy challenges that prevent them from understanding automated responses. If Congress adopts the other technological modernization provisions of Section I of the Act, low-income taxpayers face an increased risk of being excluded from critical tax resolution mechanisms. This will make the work of LITCs even more crucial and provides an additional justification for increased resources being directed at LITCs.
With expanded funding, LITCs will have more resources that can allow take steps to lessen the impact of the digital divide without having to reduce individual controversy representation, such as offering digital literacy programs to help taxpayers navigate online IRS platforms; providing in-person support for individuals struggling with automated tax resolution tools; and advocating for policy changes that ensure digital systems do not disproportionately harm vulnerable populations. By ensuring that LITCs have the resources to assist taxpayers in a digital-first IRS landscape, Section 110 helps prevent economic disenfranchisement in the tax system.
Section 110 should also be of particular interest to the academic community and will hopefully contribute to the further growth of academic LITCs. These clinics, housed in law schools and universities, not only provide critical representation and advocacy for low-income taxpayers but also serve as training grounds for the next generation of tax attorneys, policymakers, and advocates.
Academic LITCs provide law students with hands-on experience in tax representation, allowing them to develop practical legal skills through direct casework; a deeper understanding of tax law’s impact on low-income populations; and a commitment to pro bono and public interest work. By increasing funding and incentivizing more law schools to start such clinics, academic LITCs can expand student participation, ensuring that more future tax professionals gain experience in taxpayer advocacy and contribute to a fairer tax system.
Academic LITCs are also often uniquely positioned, as compared to legal service organizations, to leverage the resources of their universities to conduct empirical research on taxpayer rights and compliance issues that can serve as the foundation for robust policy advocacy and commentary on legislation and IRS policies through a lens of how these policies can best be structured to benefit low-income communities. With increased funding, academic LITCs can expand their research initiatives, influencing tax policy at both state and national levels to create a more equitable tax system.
With additional resources, academic LITCs are also well-positioned to leverage interdisciplinary partnerships across their universities to allow them to play a crucial role in bridging the taxpayer digital divide. Apart from the training that they are able to provide to their students in technology-driven taxpayer advocacy as well as the in-person interface that they can provide to low-income taxpayers without technological access, these clinics are well positioned to develop more systemic solutions through collaborations with other university disciplines such as computer science and the social sciences to help develop online tools and resources to assist low-income taxpayers.
The proposal in Section 110 of the Taxpayer Assistance and Service Act represents a critical step toward making the tax system more equitable and accessible for all Americans. By lifting outdated funding caps and increasing flexibility in grant matching requirements, this legislation ensures that Low-Income Taxpayer Clinics can expand their services, reach more taxpayers, and provide critical legal assistance. In a time when tax disputes are increasingly being moved online, LITCs serve as a vital lifeline for individuals who would otherwise be left without recourse. Strengthening LITCs means strengthening taxpayer rights, economic justice, and access to fair tax representation. And, if you’re a law professor (or dean) reading this and your law school doesn’t yet have an LITC, the potential availability of increased grant funding could be a great time to start one.
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