What to Watch for in the Wake of the Tax Division’s Demise

The Trump administration is moving forward with its plan to eliminate the Department of Justice’s Tax Division and disperse its responsibilities to other parts of the DOJ. Since 1933, the DOJ has centralized tax functions through the Tax Division to ensure uniform and coordinated enforcement of criminal, civil, and appellate tax matters.

The Trump administration has offered scant justification or detail for eliminating the Tax Division. If better oversight is, in fact, the goal, other options are available, which the administration has also failed to discuss or analyze. For instance, the administration could have appointed a Senate-confirmed Assistant Attorney General for Tax—a position that has not been held by a political appointee since 2014.

The administration has not made more than the most basic features of the restructuring public. It is not clear that the administration has a plan for how the Tax Division’s responsibilities and staff will be deployed, what resources will be made available to staff made responsible for tax enforcement, and what changes will be made to existing policies and practices for tax prosecutions and litigation.

If a major restructuring of DOJ tax enforcement proceeds with no clear goals and no clear plan, it will likely further degrade tax compliance, especially when paired with recent attorney departures, including several senior litigators and supervisors, at the Tax Division and the IRS Office of Chief Counsel.

As they say, the devil is in the details, and journalists, practitioners, and other stakeholders should be on the lookout for further changes to regulations, guidance, and future budget choices, outlined below, to understand how tax enforcement will be affected by the reorganization.

Tax Division Background

Tax administration and enforcement is handled jointly by the IRS, IRS Office of Chief Counsel, Department of Treasury, and DOJ. Historically, DOJ has been responsible for virtually all civil and criminal litigation arising under the internal revenue laws in all state and federal courts except the US Tax Court. Although the number of disputes going to court is small in the entire tax enforcement scheme, criminal convictions and civil judgments play a key role in deterring those who might cheat and encouraging voluntary compliance. Court decisions have an outsized effect on what the internal revenue laws mean and the government’s ability to consider regulations and guidance. In addition, public court filings and proceedings give everyone a look at how the tax laws are, or are not, being enforced. Because tax returns and audits are shielded from public view under tax privacy laws, court cases provide an important source of sunshine on tax enforcement.

Since 1933, DOJ’s tax enforcement responsibilities have been assigned to its Tax Division. The Tax Division consisted of attorneys dedicated to enforcing tax laws, and was organized into criminal enforcement, civil litigation, and appellate sections. History of the Tax Division (updated Sept. 2, 2025). By consolidating civil and criminal tax enforcement in a single DOJ component, the Tax Division achieved its original main goal of bringing needed uniformity and oversight to tax administration, as discussed further below. Karen E. Kelly, recently head of the Tax Division, and Francesca Ugolini, the appellate section’s former chief, have explored the Tax Division’s history, recounted several of its notable achievements, and described its impacts on tax enforcement in thoughtful comments on the Division’s demise. Nathan J. Richmond, Dismantling of Justice Department’s Tax Division Has Resumed, Tax Notes Today Fed. (Sept. 26, 2025); Francesca Ugolini, A Eulogy for the Tax Division, Tax Notes Today Fed. (Sept. 23, 2025); David Steward, Karen Kelly, Ex-DOJ Official Talks Tax Division Dissolution, Future Enforcement, Tax Notes Talk (Sept. 26, 2025).

In doing so, the Division regularly collected two or three times its budget, while also prevailing against hundreds of millions of dollars, or billions of dollars in some years, in claims against the government. Tax Division Fiscal Year 2025 Budget Narrative, Civil Cases Successfully Litigated in the Trial Courts FY19-FY23, pp. 3-4, 19 (2024). In the performance measures used to assess the Tax Division’s work on DOJ’s strategic objectives, it ranked highly relative to other DOJ components, regularly achieving a success rate in its civil and criminal litigation exceeding 90%. Id., pp. 19–23. And in the annual Federal Employee Viewpoint Survey, the Division ranked among the top 10 of all components across the federal government in taking full advantage of the Division’s employees’ capabilities. Partnership for Public Service, 2024 Best Places to Work in the Federal Government Rankings, BestPlacestoWork.org.

The administration’s fiscal year 2026 budget proposal, however, provides that the Tax Division “will be eliminated as a standalone component, with its civil enforcement work transferred to [the Civil Division] and its criminal enforcement work being transferred to [the Criminal Division].” Justice Management Division Budget Staff, US Department of Justice Fiscal Year 2026 Budget and Performance Summary, p. 10 (June 13, 2025). The exact timing of this reorganization is uncertain but appears to be under way.[1] The elimination of the Tax Division was initially scheduled for early August 2025, a date that had been reportedly pushed back pending Attorney General Pam Bondi’s sign-off on an agency-wide reorganization memo; the memo was reportedly signed mid-September. See Justice Management Division Budget Staff, US Department of Justice Fiscal Year 2026 Budget and Performance Summary, p. 10 (June 13, 2025); Erin Schilling, Justice Department to Eliminate Tax Unit as Workforce Shrinks, Daily Tax Rep. (June 16, 2025); M. Rapoport, IRS Attorney Exodus Gives Companies a Leg Up in Court Cases, Daily Tax Rep. (Sept. 15, 2025). As of September 25, 2025, the Tax Division website has been archived, and the DOJ organizational chart includes a new Tax Litigation Branch within the Civil Division and a new Tax Section within the Criminal Division. U.S. Department of Justice Organizational Chart (updated Sept. 15, 2025). But the Justice Manual—which contains DOJ’s official policies and procedures—still has Title 6 assigning responsibilities and conferring authority to the apparently demolished Tax Division. Similarly, tax enforcement is not listed as a major function of either the Civil or Criminal Divisions. Thus, at this time, little is known about the reorganization beyond the broadest outlines.

Uniformity and Coordination Goals Achieved

In 1933, an Executive Order moved tax litigation from Treasury to DOJ, and the Tax Division was created to consolidate all the litigation involving the internal revenue laws in one DOJ component. Exec. Order 6166—Organization of executive agencies of June 10, 1933, as amended by Exec. Order No. 6228 of July 28, 1933. (Exec. Order 6166 of June 10, 1933, does not appear in the Fed. Reg. system). The consolidation was intended to foster uniformity through centralized control of tax litigation. Lucius A. Buck, Federal Tax Litigation and the Tax Division of the Department of Justice, 27 Va. L. Rev. 873, 882 (1940-1941).

Removing tax litigation (outside the Tax Court) from Treasury and the IRS means that DOJ attorneys review the IRS’s administrative positions before they are adopted as positions in court. This gives taxpayers an independent review of the government’s position by lawyers who were not involved in the original administrative determination. Johnnie M. Walters, The Role of the Department of Justice in Tax Litigation, 23 S.C.L. Rev. 193, 194 (1971). Placing that review in a division exclusively dedicated to tax issues provided a necessary level of expertise. Enforcing the nation’s tax laws fully, fairly, and consistently, through both criminal and civil litigation, remained the Tax Division’s mission.

The Tax Division brought uniformity to civil tax litigation in the federal courts by handling those cases itself. Two exceptions were the US Attorneys’ Offices (USAOs) in the Southern District of New York and Central District of California, which had their own tax sections working with the Tax Division’s supervisors on arguments, settlements, and appeals. The six regional trial sections, along with the Court of Federal Claims section, coordinated the civil cases with the IRS Office of Chief Counsel. The Division’s Appellate Section handled appeals from both the Tax Division’s trial sections as well as any appeal from the US Tax Court.

Criminal tax enforcement responsibilities were shared between the Tax Division and USAOs, with the Tax Division retaining formal oversight to ensure uniformity. The Division handled tax crimes in Title 26 through three regional trial sections and the Criminal Appeals and Tax Enforcement Policy Section. Uniformity was ensured through the requirement that US Attorneys generally secure Tax Division approval (1) before initiating a criminal tax grand jury investigation and (2) before bringing criminal tax charges. Criminal Tax Manual, §1.02 (2022) (reviewed July 2, 2025). After an investigation or tax charges are authorized, most cases have been handled by a USAO or by a team of prosecutors from the Tax Division and a USAO, and a smaller number by Tax Division prosecutors alone. Who handles a case has largely been based on a USAO’s workload and expertise with the type of investigation or prosecution the Tax Division authorized. Having the attorneys responsible for reviewing whether grand juries should be initiated or charges brought handle their own litigation effectively gives them the experience to make reasonable decisions.

Elimination Lacks Clear Goals and Plan

DOJ has not stated a specific reason for eliminating the Tax Division beyond commenting that "[t]he reorganization provides more oversight to the tax enforcement function and more effectively distributes resources.” Justice Management Division Budget Staff, US Department of Justice Fiscal Year 2026 Budget and Performance Summary, p. 10 (June 13, 2025). Speaking generally of the Department’s reorganization plan, Attorney General Bondi said, "[T]he 2026 budget continues my commitment…to find savings in the Department, reduce inefficiencies, and delivering value to the American taxpayer…In FY 2026, the Department will merge components that work in overlapping areas. This will make our law enforcement…more effective.” House Appropriations Subcommittee on Commerce, Justice, Science and Related Agencies Holds Hearing on Fiscal Year 2026 Department of Justice Budget Request, pp. 2-3 (June 23, 2025). In response to a recent inquiry, a DOJ spokesperson said, “The proposed restructuring of the Tax Division will not impact the ability of its civil litigators and criminal prosecutors from advancing its mission to fairly and consistently enforce the nation’s tax laws.” M. Rapoport, IRS Attorney Exodus Gives Companies a Leg Up in Court Cases, Daily Tax Rep. (Sept. 15, 2025).

The choice to create a consolidated Division in 1933 advanced the stated goal of better coordinated litigation. But it is hard to see how the Attorney General’s proposed reorganization can be measured against the murkier goals publicly shared for this reorganization to ensure “more oversight” and more effectively distributed resources. The Tax Division is not the only DOJ litigating component with specialized focus and expertise to handle both civil and criminal work: the Antitrust, Civil Rights, Environment and Natural Resources, and National Security Divisions also exist independent of the Civil and Criminal Divisions. If effective distribution of resources is obtained by putting all civil work in the Civil Division and all criminal matters in the Criminal Division, the Antitrust, Civil Rights, and Environment and Natural Resources Divisions would fall under the same analysis. Yet the Attorney General has not proposed to eliminate any of these divisions or consolidate their functions into other litigating divisions.

As with any complex statutory scheme, high-level litigation requires familiarity with the substantive law at issue. Whatever one thinks of “tax exceptionalism,” tax litigation and prosecutions involve a host of complex procedure and anti-abuse doctrines unique to tax law. And a sufficient understanding of substantive tax law is critical if tax administration is to be served by DOJ providing an independent review of the IRS’s decisions before they are defended in court. See Attorneys Oppose Dismantling of DOJ Tax Division, Tax Notes Today Federal, (April 2, 2025). This letter from a wide range of attorneys who worked for and handled cases against the Tax Division was addressing a memorandum from the Deputy Attorney General that proposed to “reassign[] TAX personnel to US Attorneys’ Offices while maintaining a core team of supervisory attorneys to administer relevant provisions of the Justice Manual,” but their concerns apply as well to splitting up the attorneys and moving them to components with large portfolios. Memorandum from the Deputy Attorney General, Soliciting Feedback for Agency Reorganization Plan and RIF (Mar. 25, 2025). Without any more specific goals stated in public, it is impossible to measure whether the Tax Division’s elimination is a success.

The desire for more oversight of tax litigation may be reasonable; the work is important and has far-reaching effects. The obvious way to do so would be to fill the Tax Division’s Assistant Attorney General (AAG) position, which —uniquely among DOJ litigating divisions— has been without a Senate-confirmed appointee for nearly a decade. Indeed, over the past 25 years, only three AAGs were nominated by a president and confirmed by the Senate: Eileen J. O’Connor (who served from 2001 to 2007), Nathan J. Hochman (2007 to 2008), and Kathryn Keneally, the last person confirmed to the post (2012 to 2014). Cumulatively, these three AAGs ran the Division for slightly more than nine years. Non-Senate-confirmed political appointees ran the Division for another six years and two months. This left the Division under the leadership of career Tax Division attorneys for nine years, including the last four years and several months. The reasons for leaving the Division without a confirmed AAG or political leadership were never explained. An immediate solution to more direct political oversight of tax enforcement would seem to be putting an AAG and political appointees in place.

Looking for oversight by moving attorneys to the Civil and Criminal Divisions risks, instead, diluting the effectiveness of the Tax Division’s stewardship. While the final plans have not been explained, it appears that both the Civil and Criminal Divisions will organize their acquired tax functions under non-Senate-confirmed deputy positions, with the Tax Section in the Criminal Division under a deputy who also supervises other non-tax functions. In the Tax Division, a Deputy Assistant Attorney General (DAAG) supervised the civil trial sections, another DAAG supervised the Appellate Section, and a third supervised the four criminal enforcement sections. Thus, while immediate case supervision by first-line supervisors may not change with this move, the involvement by DAAGs will be reduced as they are responsible for larger portfolios. It was the DAAGs who handled much of the coordination within the Division and with the IRS and IRS Office of Chief Counsel. There may be less oversight, and greater potential for disparate arguments and positions, in that regard. One step up, the AAGs for the Civil and Criminal Divisions have vast portfolios. It is difficult to conceive that they will be able to spend significant time supervising tax litigation. The reason of “more oversight” seems to be a platitude more than a tangible goal.

Eliminating the Tax Division will come with its own additional burdens and costs. Splitting the Tax Division between the Civil and Criminal Divisions will make it harder, but not impossible, to maintain uniform positions in tax litigation. Although the Tax Division’s civil trial, civil appellate, and criminal work were handled in independent litigating components, the DAAGs responsible for each of the three worked together daily to ensure coordination and uniformity. Issues arising in or potentially affecting more than one area were routinely discussed among the DAAGs. The Division’s section chiefs met monthly to share and discuss issues arising across the Division. Coordinating a consistent response to those issues within the Tax Division was a major part of the DAAGs’ function and responsibilities. For example, the Tax Division’s success in the Swiss Bank Program would not have been possible without the collaboration of attorneys across the criminal, civil, and appellate sections. David Voreacos, DOJ Is Urged Not to Dissolve Its Tax Division in Restructuring, Bloomberg News (Apr. 3, 2025); DOJ Tax Divion, Swiss Bank Program. On the other hand, as my former colleague Francesca Ugolini has noted, the reorganization could result in greater collaboration within the Civil Division on cross-cutting issues that affect tax enforcement. Francesca Ugolini, A Eulogy for the Tax Division, Tax Notes Today Federal (Sept. 23, 2025).

The Attorney General’s hope for efficiencies from splitting up the Tax Division may also run aground on the practical problems of dealing with the stringent taxpayer privacy protections required by §6103 and the mandates for handling electronic files containing returns or return information. Those mandates, for example, include ensuring that electronic files are only available to the employees “personally and directly engaged in the matter.” 26 U.S.C. §6103(h)(2). Modifying applications for Tax Division use to ensure compliance with these rules to prevent browsing was a cumbersome process. Moving those requirements from one component to now two DOJ Divisions will require additional and duplicative work in those divisions on physical and electronic document storage, handling, logging, and destruction. Everyone involved with returns and return information must now comply with additional mandatory annual training and reporting requirements to ensure the safety of sensitive taxpayer information. IRS Safeguards Program Webpage; see also IRS Pub. 1075, Tax Information Security Guidelines for Federal, State and Local Agencies (Rev. 11-2021). The value of requiring a generalist population to comply with extensive, specialized requirements that had been the responsibility of a specialized organization is elusive.

These are among some of many tradeoffs and complexities in restructuring DOJ tax enforcement that should be considered and addressed upfront—and transparently—in order to avoid unnecessarily risking damaging tax enforcement. There is no indication that the administration has done so.

Even without clearly defined reasons, goals, or plans, it is possible that tax enforcement could continue with results similar to those the Tax Division achieved. But without clear reasons for the change and given the many obstacles to successful change that the administration does not seem to have grappled with, it seems more likely that tax enforcement will be eroded.

Changes to Watch For

In the absence of any public plans, those interested in how the Tax Division’s elimination will affect fair and uniform tax enforcement can watch for the policies DOJ adopts, how it allocates its tax enforcement resources, and how those changes operate going forward.

First, the administration will need to amend regulations and directives that govern the responsibilities of the Tax Division to accommodate the new structure, and how it does so will give some indication of potential impacts on tax enforcement. These regulations and directives include:

• The two regulations carving out responsibilities for the Tax Division, 28 C.F.R. §0.70 and §0.71, will need to be revised to describe which responsibilities are being assigned to the Civil and Criminal Divisions.
• The regulation governing which settlements Assistant Attorneys General are authorized to accept or reject, 28 C.F.R. §0.160, will also need to be revised to remove references to the Tax Division AAG.
• Tax Division Directives 83 and 139 (found in the Appendix to 28 C.F.R. Part O, Subpart Y) that allocate the Tax Division AAG’s authority among the Division’s supervisors will need to be amended to reflect the new organization in other components.
• Perhaps most importantly, Title 6 of the Justice Manual will need to be withdrawn or revised to reflect the policies and practices of the Civil and Criminal Divisions.

These provisions currently manifest the decisions to centralize tax enforcement decisions and bring about the uniformity that makes for a fair system. A revised Justice Manual that delegates more decisions to US Attorneys to commence a grand jury investigation without the Tax Division’s review or guidance, for example, might reflect a potential time savings and faster-moving process, but at the expense of uniformity. The Justice Manual has many such allocations of authority to watch. Thus far, the only guidance changes publicly considered by the administration are anticipated conforming amendments to Treasury regulations.

Second, any public statements about how existing tax enforcement programs and initiatives will be carried on will be an important measure to follow. Tax Division Programs and Initiatives (visited July 2, 2025). For example, the Division developed robust programs to enforce employment tax laws and challenge tax-fraud promoters by coordinating civil and criminal resources at DOJ and IRS. Separating the criminal and civil tax components endangers these focused efforts to make tax enforcement appropriate and effective across the potential civil and criminal actions.

Third, the resources allocated to tax enforcement will also be important to follow, to the extent possible. With tax functions subsumed into other divisions, budget requests may no longer include tax-specific line items, making resources hard to track. For example, it is easy to see the quality and quantity of information about tax enforcement that is likely to go missing by comparing the Budget Requests from the Civil, Criminal, and Tax Divisions. Although all three Budget Submissions for Fiscal Year 2025 were removed from the Department’s website, they are available. FY 2025 Congressional Budget Submission. The Tax Division’s fiscal year 2025 request has 10 pages delineating the investigations and cases undertaken and resolved followed by tables of performance metrics. In contrast, the work of individual sections and branches in the Civil and Criminal Divisions is reduced to just a paragraph or two, and nearly all the performance metrics are reported at the division level.

The President’s 2026 budget request for the Civil Division contemplates a reduction of 107 employees (including 67 attorneys) due to “streamlining and efficiencies” from eliminating the Tax Division, but it is unclear how this downsizing will affect tax enforcement functions. Justice Management Division Budget Staff, US Department of Justice Fiscal Year 2026 Budget and Performance Summary, p. 74 (June 13, 2025). The DOJ’s Strategic Plan may also offer clues on the allocation of resources. DOJ’s Strategic Plan for 2022-2026 stated that “the Department will use all available tools to ensure strong, consistent, and uniform enforcement of the internal revenue laws to help ensure that everyone pays what they owe. Honest taxpayers must be able to trust that they will not bear an undue share of the federal tax burden.” DOJ Strategic Plan 2022-2026, Strategic Goal 1, Strategy 4, Protect the Public Fisc (updated Sept. 23, 2025). (There is no Strategic Plan on DOJ’s website on September 15, 2025.) It may be indicative of the administration’s priorities if Attorney General Bondi’s strategic plan—which has yet to be released—has a similar commitment to fair and effective tax enforcement. If tax enforcement is downplayed, it may be a signal of more resources being diverted beyond the staffing cuts already made.

Finally, even if there is a stated commitment to tax enforcement resources, pay attention to resources diverted during a budget year. As a standalone component, the Tax Division’s annual budget defined what resources were available to the Division for tax enforcement. Taking resources from the Tax Division in the past required the involvement of the Deputy AG or Associate AG (i.e., the number two and three officials in the entire Justice Department). With tax attorneys in the Civil and Criminal Divisions, however, those attorneys are subject to being detailed or assigned to other work within those Divisions at any time. For example, the Civil Division’s AAG issued a memo in June 2025 directing the Civil Division’s attorneys to prioritize investigations and enforcement actions around five goals; attorneys formerly of the Tax Division could be assigned to these non-tax enforcement goals. See Brett Shumante, Memorandum to All Civil Division Employees, Civil Division Enforcement Priorities (June 11, 2025). Whether tax enforcement resources are diverted to meet the AAG’s priorities will be a real issue.

And, as described above, it is likely that reporting about how resources were used will be reported at the division level, obscuring resources diverted from tax enforcement.

Consistent attention to the way DOJ handles tax enforcement will be crucial for those committed to fair and uniform tax enforcement. If the Civil and Criminal Divisions do not provide specific information about resources devoted to tax enforcement and the performance achieved, interested parties should affirmatively seek the information. Specific questions to ask or developments to track include:

Whether DOJ will commit to tracking and reporting staff time spent on tax enforcement versus other civil and criminal enforcement responsibilities and priorities; Whether DOJ will continue to track and report metrics that were routinely reported by the Tax Division, including the number of full-time employees dedicated to civil and criminal tax enforcement, the number of criminal tax investigations authorized and cases prosecuted, and case success rates, which were previously reported in the Division’s Performance Tables in its annual budget request; Whether Tax Division attorneys will be reassigned to other kinds of cases following the reorganization, and/or whether attorneys at DOJ not supervised by experienced tax litigators will be given a tax portfolio; The IRS taking a position in a Tax Court case inconsistent with DOJ’s position in a district court case; Instances of the government abandoning a position in a filed case without a discernable reason for the change; and, Whether the Civil and Criminal Divisions articulate goals for tax enforcement that complement the IRS’s efforts and the actions undertaken to achieve them.

While the number of disputes handled by DOJ may be a small number in terms of all tax enforcement, those investigations and cases play an important role in both tax administration. Allowing them to whither under the Attorney General’s decision to eliminate the Tax Division poses a significant risk to voluntary tax compliance.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

David Hubbert is a Senior Fellow focusing primarily on litigation at the Tax Law Center. He spent nearly 40 years handling and supervising a wide range of DOJ Tax Division’s civil and appellate litigation in addition to advising senior leadership in the DOJ, the IRS, and IRS Office of Chief Counsel on tax administration and enforcement issues.

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