Inequitable administration: documenting family for tax purposes.

AuthorInfanti, Anthony C.
PositionIntroduction through II. Deductions, Credits, and Exclusions A. Documenting Relatives and Other Family Members 2. Overlap with Other Tax Deductions and Credits for Dependents, p. 329-361

Abstract

Family can bring us joy, and it can bring us grief It can also bring us tax benefits and tax detriments. Often, as a means of ensuring compliance with Internal Revenue Code provisions that turn on a family relationship, taxpayers are required to document their relationship with a family member. Most visibly, taxpayers are denied an additional personal exemption for a child or other dependent unless they furnish the individual's name, Social Security number, and relationship to the taxpayer.

In this article, I undertake the first systematic examination of these documentation requirements. Given the privileging of the "traditional" family throughout the Code, one might expect to see that same privileging mirrored in the administrative structure that underpins the Code's family tax provisions. Indeed, on their very face, the information-reporting rules that apply to jointly owned income-producing property do just that.

Once the inquiry is expanded to cover other family tax provisions, however, it quickly becomes clear that the administrative structure underpinning the family tax provisions has also been strongly influenced by endemic privilegings along a variety of other axes of subordination--from class to race to gender to sexual orientation. To address and remedy these defects in the administrative structure underpinning the family tax provisions, this article advocates an approach to documenting family for tax purposes that does" not invidiously discriminate among taxpayers.

INTRODUCTION

Family is important to each of us--no matter whether it is the family that we are born into, the family that we choose, or the family that chooses us. Family also plays an important role in determining the size of our tax bills. For instance, having a child may render a taxpayer eligible for the child tax credit, an additional personal exemption, and tax relief for childcare costs incurred to enable her to be gainfully employed. (1) In addition to these benefits, the expenses of adopting a child may be creditable against the taxpayer's tax bill. (2) Taking in a family member or friend might also permit the taxpayer to claim an additional personal exemption and to deduct medical or other expenses paid on that person's behalf. (3) Where the ownership of an interest in a corporation or partnership is relevant to determining tax liability, the taxpayer's ownership is often aggregated with that of her family members--sometimes to the taxpayer's benefit and at other times to her detriment. (4) Similarly, families are sometimes treated as a larger economic unit for tax purposes, with the individual members presumed to be indifferent to the allocation of legal ownership of assets among them. (5) Moreover, the decision to remain single or to couple (whether within or without marriage) opens a veritable Pandora's box of tax consequences. (6)

When taking family into account for all of these purposes, the Internal Revenue Code (Code) clearly privileges the so-called traditional family over all others. Lesbian and gay families fit uncomfortably, if at all, into the normative structure of the Code. (7) Married women who work outside the home may be penalized for this decision. (8) And other nontraditional families (9) often fall through the cracks. (10) For example, in Leonard v. Commissioner, the Tax Court held that a taxpayer who supported a disabled friend and the friend's grandchildren --all of whom lived with her--was eligible to claim an additional personal exemption for each of the children but was ineligible to claim the child-care credit, the child tax credit, the additional child tax credit, or the earned income credit because those same children were not "qualifying" children. (11)

In this Article, I break new ground by undertaking the first systematic examination of the administrative structure that underpins the Code's family tax provisions. (12) In this examination, I focus on the presence or absence of requirements to identify and document a taxpayer's family members. Though, as a working hypothesis, one might expect these identification and documentation requirements simply to mirror the Code's ubiquitous privileging of the "traditional" family, (13) the picture is actually rendered far more complex by the influence of privilegings along a number of interconnected axes of subordination.

Such an intricate web of interconnected subordination is precisely what we would expect to see when the dominant group in society obtains and maintains its status as such at least in part through control of the flow of ideas--what Antonio Gramsci referred to as "hegemony." As Douglas Litowitz has noted, "Gramsci's work on hegemony provides a useful starting point for legal scholars who understand that domination is often subtle, invisible, and consensual." (14) Though i have provided a fuller description of Gramsci's conceptualization of hegemony elsewhere, (15) this short recapitulation of the concept nicely highlights its relevance here:

By hegemony Gramsci meant the permeation throughout civil society--including a whole range of structures and activities like trade unions, schools, the churches, and the family --of an entire system of values, attitudes, beliefs, morality, etc. that is in one way or another supportive of the established order and the class interests that dominate it. Hegemony in this sense might be defined as an "organizing principle", or world-view (or combination of such world-views), that is diffused by agencies of ideological control and socialization into every area of daily life. To the extent that this prevailing consciousness is internalized by the broad masses, it becomes part of "common sense"; as all ruling elites seek to perpetuate their power, wealth, and status, they necessarily attempt to popularize their own philosophy, culture, morality, etc. and render them unchallengeable, part of the natural order of things. (16) It should come as no surprise, then, that the interconnecting lines of subordination in the administrative structure underpinning the family tax provisions are not the result of deliberate action by Congress or the Internal Revenue Service (IRS). They are instead the product of "endemic" privilegings--that is, privilegings that have become so normal, so ingrained in our nature, such a part of our "world-view" that they manifest themselves without conscious thought.

Our unearthing of the endemic privilegings embedded in the identification and documentation requirements in the Code's family tax provisions will proceed in three parts. In Part I, we begin our analysis with an examination of the information-reporting requirements that attach to jointly owned income-producing property. This examination reveals the expected influence of the privileging of heterosexuality and different-sex marriage upon the administrative structure underpinning the family tax provisions in the Code. It also begins to complicate the expected picture by demonstrating how this privileging of the "traditional" family concomitantly reinforces privilegings along other axes of subordination.

The next two parts of the article work in tandem, as their import only truly emerges when we juxtapose them and compare and contrast the provisions discussed in each of them. In Part II, we will examine the deductions, credits, and exclusions that are provided (or, conversely, denied) to a taxpayer with respect to her family members. From the taxpayer's perspective, these are perhaps the most salient family tax provisions in the Code. From any perspective, they are also the provisions that do the most to convey a sense of randomness in the administrative structure underpinning the family tax provisions and lend support for the notion that the privilegings embedded in that administrative structure are a manifestation of Gramscian hegemony. Nonetheless, these provisions, like the information-reporting rules described in Part I, clearly establish a baseline of identification and documentation of family members.

In Part III, we will examine the rules that attribute ownership of property between family members--from the conventional rules attributing the ownership of stock among family members, to business and investment incentives that disregard transactions among family members either to prevent abuse or to facilitate the delivery of tax incentives, to the "kiddie" tax that prevents parents from assigning investment income to their minor children, and so on. The dearth of identification and documentation requirements in the numerous and varied provisions covered in Part III stands in stark contrast to the general baseline of identification and documentation that we will have encountered in Part II (and, for that matter, even in Part I) of this Article.

In this contrast, we will detect the influence of endemic privilegings along a number of axes of subordination. It will become clear that the wealthy are subjected to less stringent reporting requirements than low- or middle-income taxpayers when it comes to identifying and documenting family members. We will explore how this class-based privileging implicates and intersects privilegings along other axes of subordination, including race, ethnicity, gender, sexual orientation, and marital status.

Throughout the Article, it will become apparent that, even though Congress and the IRS have not taken a deliberative approach when imposing identification and documentation requirements, endemic privilegings along multiple axes of subordination have subtly influenced the decision whether or not to employ identification and documentation requirements as a tool for enforcing the Code's family tax provisions. To redress this unconscious discrimination, the concluding section of this article will advocate a more uniform and deliberative approach to documenting family for tax purposes--and one that does not invidiously discriminate among taxpayers. I suggest that the baseline of...

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