DOJ Division Breakup Stokes Concern of Weakened Tax Enforcement

The Justice Department’s proposed tax division split sends another signal that enforcement will decline, further emboldening cheats, tax controversy lawyers said.

The department plans to transfer the tax division’s enforcement work to respective criminal and civil divisions as part of its broader reorganization plan, which also includes axing thousands of positions. Without a designated tax division, it could mean less internal backing for tax enforcement funding and inexperienced attorneys defending the government in tax cases, lawyers said.

While the DOJ said the move was a way to provide more oversight in tax enforcement and more effectively distribute resources in its budget request to Congress for next fiscal year, others who previously worked inside the division see it as a way to weaken efforts against tax avoidance. Former DOJ attorneys and IRS officials decried an earlier proposal to spread tax division attorneys among US Attorneys’ offices across the country.

“This is not about efficiency,” said Kathy Keneally, former assistant attorney general of the tax division. “The tax division always brought in recoveries far in excess of its budget, and sent the clear message that our tax laws will be enforced.”

The reorganization is set for August, according to budget documents. The tax division split will send 98 employees and around $20 million to the criminal division and 264 employees and $85 million to the civil division.

The tax division had 503 employees, 390 of whom were attorneys, in 2024. The tax division’s lawyers support the IRS in collecting taxes and prosecuting fraud.

“The decision to break up the Tax Division makes their jobs harder, to the detriment of all honest taxpayers,” Keneally said.

DOJ didn’t immediately respond to a request for comment.

Signal to Taxpayers

The threat of prosecution from the tax division drives voluntary compliance, said Frank Agostino, founder of Agostino & Associates PC. The existence of a separate DOJ division sends the message that paying taxes isn’t optional and that tax cheats will face consequences.

“When you eliminate that, you encourage people to take a chance and play audit roulette,” Agostino said.

The split of the tax division comes as massive workforce cuts at the IRS over the past few months have already led people to become more risk -tolerant with their tax stances, attorneys said.

DOJ budget documents indicate there will be a newly established “Tax Branch” within the civil division, though it’s not clear that will be the same case on the criminal side.

Keeping a unit with a dedicated tax staff within the civil and criminal divisions could limit any negative impacts of the reorganization by retaining institutional knowledge and ensuring attorneys who specialize in tax are on tax cases, said Brian Harris, an attorney at Fogarty Mueller Harris PLLC.

Cases will take longer and frustrate taxpayers—especially those disputing refunds—if other attorneys without tax experience in the civil division take on tax cases, said Starling Marshall, a Crowell & Moring LLP partner and former DOJ tax attorney.

Those with complicated tax returns may be more willing to turn to litigation if they expect DOJ attorneys who don’t specialize in tax are taking their cases, Marshall said. That’ll make it harder for the government to fight for taxes owed.

While it defends the federal government and works closely with the IRS, the tax division doesn’t always side with the agency and may opt for a more taxpayer-friendly battle, said Gil Rothenberg, former chief of the tax division’s appellate section. Attorneys with little to no tax experience could choose to give more deference to the IRS’s position if they have a weak understanding of the tax law.

Fighting for Funding

Tax enforcement will now have to compete for funding amid other priorities in the civil and criminal divisions and could be pushed aside in favor of the hot issue of the moment, such as immigration, Agostino said.

“If you don’t dedicate the money and prioritize it, that money won’t go to tax,” Agostino said.

Folding the tax division means there’s no longer senior officials who can fight for tax enforcement funding, Rothenberg said. Each DOJ division is led by a Senate-confirmed appointee, though the tax division—created in 1934—hasn’t had a confirmed leader since the Obama administration.

“You don’t have the gravitas anymore if you don’t have a dedicated Senate-confirmed tax leader there for internal budget negotiations,” Rothenberg said.

Coordinating with the IRS is also more difficult without a separate tax division, Rothenberg said. The tax division leader and top IRS attorney often held monthly meetings to discuss common tax disputes and gray areas in tax law.

“If you make the tax division part of a subset of a larger mission, it kind of loses its focus,” Rothenberg said.