What’s Next After Justice Department Dissolved Its Tax Division

The Justice Department officially dissolved the almost century-old tax division, a controversial move that comes after a year of attorney departures.

All tax enforcement functions are now split between the new tax litigation branch in the civil division and the tax section in the criminal division. The reorganization was finalized Nov. 30, according to a DOJ spokesperson.

Critics of the tax division split say it sends a signal that enforcement won’t be a top priority. The spokesperson said the change won’t impact the mission to “fairly and consistently” enforce tax laws.

The move was initially planned for August but was delayed in part due to the longest-ever federal government shutdown. Here’s what to watch after the restructuring.

Handling Workforce Exodus

The tax division has faced an exodus of tax attorneys who’ve been reassigned, quit, or prodded to leave this year as the Trump administration sought to shrink the federal workforce. The division lost more than a third of its career managers.

The new tax management will have to figure out how to handle the caseloads, said Francesca Ugolini, a SouthBank Legal partner who led the appellate section of the DOJ tax division until earlier this year.

Some DOJ attorneys have withdrawn from tax-related appeals court cases, including those on cases with billions of dollars at stake. About 40% of the DOJ’s tax appellate attorneys have quit or been reassigned, according to an August filing by a department attorney.

In 3M Co. v. Commissioner, a department attorney asked for more time to file a petition, in part because of the tax division reorganization.

“In addition to any short-term operations problems that may occur during this reorganization, the restructuring would likely require any petition in this case to go through additional layers of review by attorneys who were not involved in the proceedings below,” a Nov. 21 court filing reads.

Who’s Leading

Joshua Wu, a tax controversy counsel at Latham & Watkins LLP, is expected to lead the new civil tax branch. Wu served as the deputy assistant attorney general for appellate and review in the DOJ Tax Division from 2019 to 2021.

Jennifer Hodge, a 20-year DOJ veteran, will lead to the criminal tax unit. She also will oversee the Office of Enforcement Operations and the Public Integrity Section, according to a DOJ organizational chart updated Sept. 15.

Process Changes

The Justice Department will have to revise policies and regulations that refer to approvals needed from the tax division now that it no longer exists.

For example, there hasn’t been any indication of how the department will adjust regulations that refer to approvals needed from assistant attorney general of the tax division, a position that no longer exists, said Dave Hubbert, a senior fellow at NYU Law’s Tax Law Center who led the tax division until earlier this year.

“What’s been made public today with the change in the tax division status still doesn’t answer some questions about who has responsibility and authority for cases involving internal revenue matters,” Hubbert said.

If those aren’t changed, it could open the department to taxpayer challenges, Ugolini said.

“If the Justice Manual is referring to tax division people and procedures, and there’s no longer a tax division, you need to replace that with something pretty quickly to foreclose the possibility of people challenging actions taken by the department as not authorized,” Ugolini said.

Tax Enforcement Priorities

President Donald Trump and his allies have indicated plans to crack down on nonprofits that could be funding terrorism or political violence, which could become a priority of the criminal tax section.

Wu and Hodge as the deputy assistant attorneys general for the divisions will likely set the priorities, Ugolini said. The civil tax division typically follows the lead of the IRS on compliance initiatives.

Priorities of the dissolved tax division—potentially on the back burner now—include employment tax enforcement, offshore compliance, Swiss banks helping Americans evade taxes, identity fraud, and fraudulent tax return preparers and tax-fraud promoters.