Simplexity: Plain Language and the Tax Law

IntroductionImagine it is April 15th, "Tax Day," and as the sole owner of a local pizza shop, you are racing to complete your annual tax return before the U.S. Post office closes. Specifically, you are trying to decide whether you can claim a tax deduction for a $6000 expense you paid last winter to fix your restaurant's copper piping, which was damaged as a result of a flood. (Your expenses for plumbing are usually around $3000 annually.) You understand from the owner of the barbecue restaurant next door that his accountant recently told him he could not deduct expenses for "improvements."1 Now imagine that you read the following two statements, the first of which is from Treasury regulations and the second of which is from an IRS publication regarding business expenses:Statement 1: "Requirement to capitalize amounts paid for improvements. Except as provided in paragraph (h) or paragraph (n) of this section or under § 1.263(a)-1(f), a taxpayer generally must capitalize the related amounts (as defined in paragraph (g)(3) of this section) paid to improve a unit of property owned by the taxpayer."2Statement 2: "Improvements. Improvements are generally major expenditures. Some examples are new electric wiring, a new roof, a new floor, new plumbing, bricking up windows to strengthen a wall, and lighting improvements."3As you struggle to make a decision about whether to deduct the copper piping expense, which of these two statements is more helpful to you?If you are like most people, you will most likely find Statement 2 to be far more helpful than Statement 1. After reading Statement 2, you may decide that your expense was a "major expenditure"-it was double your usual expense- and, as a result, you cannot claim the deduction. This conclusion, however, is not necessarily correct. The "major expenditure" standard in Statement 2, from the IRS publication,4 does not appear anywhere in the Internal Revenue Code or Treasury regulations. Further, the provisions that Statement 1, from the Treasury regulations,5 references contain specific examples that provide support for allowing you to deduct the expense immediately.6 While Statement 2 may help you to make a decision regarding the deduction, this decision may not be consistent with the tax law.As this hypothetical illustrates, the IRS often attempts to explain tax law that consists of complex, ambiguous statutory rules and administrative regulations using terms that are "[c]lear and simple"7 to most taxpayers. While the IRS assesses and collects over three trillion dollars in tax liability annually as a tax enforcement agency,8 the agency also assists hundreds of millions of taxpayers each year9 in its dual role as a customer service organization.10 In this latter capacity, the IRS bears a duty to explain the tax law to taxpayers,11 and taxpayers, likewise, possess the right to be informed by the IRS about the tax law.12 Further, as a result of the implementation of the Plain Writing Act of 2010, spearheaded by Cass Sunstein in his role as Administrator of the Office of Information and Regulatory Affairs,13 the IRS must use plain language to convey the tax law in "easily understandable language on all of [its] forms, publications, documents and notices."14 Sunstein and others have heralded initiatives like the Plain Writing Act as increasing "simplicity,"15 which they argue enables taxpayers to self-assess their own tax liability, ensures equal access to information about government programs and services, and increases government transparency.16 As Sunstein has noted, the introduction of plain language in government communications should "promote clarity, because it is designed to ensure that when government communicates with citizens, it does so in a way that people can easily understand."17This Article casts plain language efforts in a different light. As we argue, rather than achieving simplicity, which would involve reform of the underlying law,18 the use of plain language to describe complex legal rules and regulations often yields "simplexity. …