In court and into the tax code with the Cal Poly Low Income Taxpayer Clinic
The fifth floor of the federal courthouse in Fresno is filled with marble columns, wooden benches, and nervous energy. It’s an overcast morning in October of 2019 and Judge Diana L. Leyden is in the building from D.C. to oversee a docket of small tax cases, drawn together from across the Central Coast and Central Valley, an appearance on a national rotation that takes her to courtrooms around the country.
The Internal Revenue Service’s legal council is also present to preside over the government’s position in the roughly 30 cases on the schedule. Otherwise, the only other lawyers, legal professionals, or tax code experts in the wings of Courtroom #14 are two representatives from a small nonprofit—tax lawyers doing pro bono work—and the Cal Poly Low Income Taxpayer Clinic team, wearing dark suits in the front row, mainly comprised of accounting students from the Orfalea College of Business.
According to a 2018 National Taxpayer Advocate report, more than 80 percent of cases in tax court are brought by unrepresented taxpayers. That statistic seems to underestimate the reality in Judge Leyden’s courtroom. As the morning progresses, it becomes clear that none of the taxpayers on the docket—whose cases range from disputes over improper deductions, unreported income, improperly filed education credits, and other issues—have come with legal counsel.
The judge, for her part, is extremely careful to point out that this doesn’t mean the procedures are destined to be skewed unfairly. In fact, she pauses often in her orientation remarks, unpacking procedures, informing the assembled taxpayers of their rights, and translating legalese into common language. She also makes note, repeatedly, that in addition to the pro bono lawyers, the Cal Poly LITC is on hand precisely to assist with cases.
Spearheaded by its executive director, attorney and professor Lisa Sperow, the clinic can offer insight, push back against the government’s arguments, and even represent taxpayers at trial. “They’re an important and valuable resource that I hope you’ll all consider taking advantage of,” Leyden says, then begins ticking through the docket, calling each taxpayer up to determine whether they’d like to accept the government’s position or dispute it in a second session of short trials later.
“Measured in terms of its caseload, the number of cases that it closes, along with the amount of interests and penalties that are saved—any metric that you use—it’s just remarkably successful.”Eddie Quijano
Of the 30 or so items at issue, only a handful of the litigants choose to challenge the government’s position—and even then, most are open and shut cases. When the judge explains a sticking point, however, involving unreimbursed mileage deductions, there are nods of recognition among the LITC students. The clinic, as it turns out, recently consulted on a similar bookkeeping case, settling a favorable outcome for one of its clients.
Two student workers, Juan Moreno and Chloe Nessen, are identified by the team as having a strong understanding of the topic. Sperow then approaches the litigant, addresses the judge, and disappears into an anteroom, accompanied by Nessen, the taxpayer, and the IRS lawyer. About twenty minutes later, after establishing a stipulation of facts and reviewing the case details and paperwork, the group emerges with a settlement in place, another favorable outcome.
The IRS concedes to pay the litigant roughly 90 percent of what they’re entitled to in tax returns, thanks to the Cohan Rule, a precedent based on a Second Circuit decision from 1930, which Sperow and her LITC students have applied to establish a firm foothold for the taxpayer.
Serving underrepresented populations, and ensuring the fairness of the tax system by educating low income taxpayers about their rights, is the core of the Cal Poly LITC mandate. Like other Low Income Taxpayer Clinics, it was launched in part by the IRS to help balance a process that can be highly stressful, confusing, and difficult for taxpayers to navigate—especially if they’re of low income, speak English as a second language, or lack the resources to secure independent counsel.
All LITC services are free or low cost for eligible low income taxpayers. Although the clinics receive partial funding from the IRS, their operations, employees, and volunteers are completely independent in order to ensure they represent only the interests of their clients.
The LITC at Cal Poly, while underwritten by a $100,000 grant from the federal government, is bolstered by an in-kind donation from the college through the accounting department. This duel funding helps create not only a high-demand work opportunity for the clinic’s student employees, but also establishes a public service that benefits tax payers, streamlines courtroom and settlement proceedings, and brings equity to the legal system.
“It’s a win-win for everyone,” says Eddy Quijano, a former senior trial attorney with the IRS in Los Angeles and New Orleans, who as a former accounting area chair led the Orfalea College of Business’ effort to form the LITC in 2010 and continues to act as a pro bono legal counsel for its clients.
“We help resolve cases. The judge prefers if someone with training asks the questions and navigates proceedings in the courtroom. We know what points to make. We know which documents to present, how take a reasonable position, how to produce high-quality information and facts to ensure the fair administration of federal tax laws. Our clients get excellent representation and the federal government saves time and money in court and counsel.”
Sperow, who has been teaching at Cal Poly since 2001, became the director of the LITC in 2012, just a few years after it was founded. Prior to Cal Poly, she served as a trial attorney for the United States Department of Justice and has been practicing law for almost 25 years. According to Quijano, she’s the main reason that, ten years-plus into the project, the Cal Poly LITC is so highly regarded nationally, remaining the only university-affiliated tax clinic not attached directly to a law school.
“From the moment she took over it has been meteoric growth,” he says. “She won’t tell you this, but I think it’s the most outstanding clinic in California. That’s why Ms. Sperow serves on panels in Washington, both with the Low Income Tax Section of the American Bar Association, as well as the Tax Advocate Service, where at the annual meetings she leads workshops. Organizationally and substantively, she’s built this clinic on such incredible leverage, on such incredible leadership skills. She hires students who are rocket smart and who are highly organized—and if you look at the mission of the clinic, it’s one of the best programs we have from a Learn By Doing perspective. The students can go on power of attorney for the IRS, they know how to apply the tax code. Measured in terms of its caseload, the number of cases it closes, along with the amount of interests and penalties that are saved—any metric that you use—it’s just remarkably successful.”
“It’s small work with a big effect. We’re just using our accounting knowledge to do what we can for our clients. A lot of people don’t know their rights and it takes courage to ask for help.”Kshitij Mehta
To underscore Quijano’s point, in the last year alone, Sperow and her core team of student workers—Kshitij Mehta, Omer Khan, Juan Moreno, Jennifer Garcia, and Jackie Pederson—have helped 79 clients deal with 243 different legal and tax issues, including 13 cases settled before the United States Tax Court. Collectively, they saved their clients more than $400,000 in reduced liabilities, earned them $20,000 in cash refunds, hosted 38 educational/outreach activities impacting more than 1,300 community members, provided 67 consultations on tax controversies, benefited from 204 volunteer hours from pro bono contributors, and educated or employed 60 Cal Poly undergraduate and graduate students.
Scaled over ten years, the numbers are even more impressive, equaling 393 participating students, $4 million in total liabilities reduced, and 11,120 community members assisted. As an additional point of merit, Sperow was also presented in March of 2020 with the Outstanding Woman Lawyer of the Year award by the Women Lawyers Association of SLO County.
On a late January morning, a few months after their court appearance in Fresno, the LITC’s team of student workers huddle around a table, stacked with pizza and tax documents, for a staff meeting. Accounting senior Kshitij Mehta has just graduated and is on his way to join EY, where he’s planning to gain more hands-on accounting experience before he applies to law school. Masters in Accounting student Jennifer Garcia is assessing her role as a leader for the LITC Outreach Team, as well as preparing to assume an auditing position at PwC. Like Mehta, Omer Khan, the LITC’s grant coordinator, is also preparing to join EY, while political science major and Outreach Team co-leader Juan Moreno is focusing on his law school applications.
Despite the collection of serious minds, converged to solve serious problems, the conversation shifts to lighter topics once they dig into the food—ranging from weekend plans, to the difficulties of apartment hunting in San Francisco, to tax code jokes (which exist, apparently). The students spend a lot of time on the phone, consulting with clients, or at their monitors, pouring through endless scrolls of tax code, which makes any chance to refuel and decompress a welcome opportunity.
Inevitably, things turn back to business as they pack up the empty pizza boxes and refocus. Garcia and Kahn sit down and launch a new suite of tax software that’s just been installed throughout the office, Moreno checks in with Sperow, and Mehta—with just a few weeks left before he leaves for his new job—takes a moment to reflect on his time with the LITC and how it’s framed his education at the Orfalea College of Business.
“It’s small work with a big effect,” he says. “We’re just using our accounting knowledge to do what we can for our clients, who in many ways have complicated cases and complicated backgrounds. A lot of people don’t know their rights and it takes courage to ask for help. When they do, we want to offer everything we can since we have the knowledge and the resources to make an outsized impact.”