About Low-Income Taxpayer Clinics
Low-income Taxpayer Clinics (LITCs) are programs that provide representation to low-income taxpayers in federal (and in some cases, state and local) tax disputes. They are part of a larger universe of programs, including student tax clinics, Volunteer Income Tax Assistance (VITA), and Tax Counseling for the Elderly (TCE), that provide a broad array of tax services to historically underserved populations.
Tax Clinics began in the mid-1970s when several law schools established clinical programs for students interested in tax practice. Law students, with the appropriate certification and under the guidance of tax professors, represented clients before the Internal Revenue Service and the United States Tax Court. The student tax clinics serve dual goals – educating student lawyers and encouraging them to contribute to the public good.
In 1992, The Community Tax Law Project became the first independent (i.e., nonacademic) low-income taxpayer clinic in the nation. CTLP is modeled after traditional legal aid societies. It maintains a staff of in-house tax professionals as well as an active panel of volunteer attorneys, enrolled agents, and accountants who accept cases on a pro bono basis.
IRS Restructuring Legislation
In 1997, the late Professor Janet Spragens, Director of the Federal Tax Clinic at American University Washington College of Law, appeared before the National Commission on Restructuring the Internal Revenue Service and advocated for federal funding of low-income taxpayer clinics. Her proposal was adopted by the Commission as one of its recommendations for a fairer and more modernized IRS.
During 1997 and 1998, Congress held numerous hearings leading up to the enactment of the Internal Revenue Service Restructuring and Reform Act of 1998 (Public Law 105-206). Nina Olson, CTLP’s founder and first Executive Director, testified before the House Ways and Means Oversight Subcommittee and the Senate Finance Committee about the importance of low-income taxpayer clinics and other taxpayer rights issues.
Congress heeded these calls for equal access to representation in tax disputes. Internal Revenue Code Section 7526, enacted by the IRS Restructuring and Reform Act of 1998 (RRA), authorizes the Secretary of the Treasury to provide matching funds for grants to “qualified low-income taxpayer clinics.” Such grants may not exceed $100,000 per clinic per year. Clinics must match IRS funding on a dollar-for-dollar basis, although in-kind contributions can be counted as part of the match. The IRS may award multi-year grants for a period up to three years.
Statutory Definition of a Low-income Taxpayer Clinic
Qualified low-income taxpayer clinics must either provide representation to low-income taxpayers in controversies involving the IRS or operate programs that inform individuals who speak English as a second language (ESL) about their rights and responsibilities as taxpayers. (Clinics can, of course, provide both of these services.) Qualified clinics must provide such services on a pro bono basis or for a nominal fee. A qualified low-income taxpayer clinic includes clinical programs at accredited law, business, or accounting schools and 501(c)(3) organizations that provide representation of low-income taxpayers through either in-house staff or referral to qualified representatives.
Qualified clinics must document that their client base satisfies two requirements. First, 90% of all cases open during the grant cycle must involve taxpayers whose income is at or below 250% of the federal poverty guidelines. Second, accepted cases generally should not involve over $50,000 in controversy for any tax year.
The statute provides that eligibility for grant awards shall be determined under the following criteria:
- the number of taxpayers who will be served by the clinic, including the number of ESL taxpayers in the clinic’s geographic area;
- the existence of other LITCs serving the same population;
- the quality of the LITC program, including staff and volunteer qualifications and the LITC’s record, if any, of serving low-income taxpayers; and
- the clinic’s alternative funding sources, including grants and contributions as well as the sponsoring institution’s endowment and other resources.
The Growth of Low-income Taxpayer Clinics
As of July 22, 1998, only 15 tax clinics existed nationwide; of those clinics, 14 were situated at law or accounting schools. By the time the IRS awarded its first cycle of grants for fiscal year 1999, 34 such programs were in existence. The FY 2000 grant cycle witnessed an even more staggering growth in LITC creation, particularly among nonprofit organizations. In 2016, 134 clinics in 49 states and the District of Columbia received more than $11.4 million in funding.
LITCs and the Holistic Delivery of Legal Services
Attorneys involved in the delivery of legal services to the poor are now exploring the concept of “holistic” legal services. This approach to poverty law views a legal service organization as a comprehensive support for low-income persons who seek to transcend poverty. In essence, the legal service provider focuses simultaneously on the many facets of a client’s life to empower the client to achieve genuine and lasting improvement in quality of life.
The trend toward holistic legal service delivery helps explain the interest of legal aid societies and other nonprofit community service providers in the low-income taxpayer clinic grant program. Whether a case involves proving Earned Income Tax Credit eligibility for a welfare-to-work program participant, obtaining innocent spouse relief for a victim of domestic violence, or closing an offer-in-compromise for a disabled person, substantial benefits are conferred upon low-income persons as a result of the LITC’s representation. The resolution of a tax matter often enables the taxpayer to address other problems, such as obtaining better housing, purchasing or repairing a vehicle, or obtaining needed medical care with the tax refund or relief.
To learn more about the IRS Low-income Taxpayer Clinic grant program,
visit the IRS website or contact:
Internal Revenue Service
Taxpayer Advocate Service
LITC Program Office
TA:LITC, Room 1034
1111 Constitution Ave. NW
Washington, DC 20224