Senate in Near-Unanimous Vote Approves Massive IRS OverhaulBy Albert B. Crenshaw
The Washington Post
The Senate voted unanimously Thursday to approve the most far-reaching overhaul of the Internal Revenue Service in more than 45 years, responding to a political outcry over alleged abuses by IRS agents and managers.
The measure, passed by a vote of 97 to 0, would set up an oversight board comprised mostly of non-government members to review IRS operations and set policy, and establish greater Treasury Department control over the internal unit that investigates complaints against the agency.
It would also grant taxpayers extensive new rights in dealing with the IRS. Under the bill, if a taxpayer became embroiled in a court battle with the government over a tax liability, the burden of proof would fall on the IRS rather than the taxpayer, so long as the taxpayer kept records and cooperated with the IRS.
The measure would also provide new protections for people stuck with tax bills incurred by a former spouse, limit penalties and interest now imposed in a variety of situations, and restrict the agency's collection methods.
The Senate bill would cost the Treasury some $18.3 billion over 10 years, most of that from revenue losses resulting from the new taxpayer rights. The senators agreed to pay for those costs by restricting several corporate writeoffs, and by making it easier for well-heeled senior citizens to convert traditional individual retirement accounts to new Roth IRAs. Critics charged that the IRA provision would gain revenue only in the short run while losing it in future years.
"The IRS is going to change and change dramatically as result of this" legislation, said Sen. Bob Kerrey (D-Neb.) who co-chaired a congressional commission that spent a year studying the agency, and who along with Finance Committee Chairman William Roth Jr. (R-Del.) was a key architect of the measure.
Beyond the rules and structural changes, Roth said the bill would change the culture of the IRS from one focused on law enforcement to one focused on customer service.
The bill now heads for conference with the House, which passed a less wide-ranging measure last fall. That bill would cost $2.6 billion over five years.
The reform bill emerged after two widely publicized sets of hearings at the Senate Finance Committee in which an array of taxpayers and IRS workers recounted stories of abuses allegedly perpetrated by the agency. The hearings brought an outpouring of public support for drastic change in the procedures governing IRS operations.
The bill would change the agency and its relationship with taxpayers in three key ways:
- The agency's structure would be revamped for the first time since 1952.
A nine-member oversight board would be set up to set strategy for the agency. It would be comprised of the Treasury Secretary, a representative of the IRS employees union, the IRS commissioner, and six private citizens with expertise in areas such as management, small business, and information systems.
The present structure, in which the agency is divided into geographic fiefdoms, would be abandoned. The agency would be reorganized around the specific types of taxpayers - individuals, large business, small business, and so on.
- The commissioner would be given more personnel flexibility.
In an effort to entice qualified outsiders into the agency, and to make the best use of the current workforce, the commissioner would be allowed to give some workers higher pay, and to move senior executives around within the agency.
- Taxpayer rights would be greatly widened.
The measure would allow "innocent spouses" to opt to be taxed only on the portion of the family income attributable to them, a provision that might aid as many as 50,000 taxpayers, mostly women, who find themselves liable for tax bills incurred by their husbands or ex-husbands.The government would bear the burden of proving a taxpayer incorrect in a dispute that reached the courts. But to prevent taxpayers from simply defying the IRS to prove its case, the bill would require proper record-keeping by the taxpayer.
It would also expand taxpayers' rights to recover civil damages in the event of improper collection activities by the IRS or negligent actions by IRS employees. The Finance Committee heard numerous horror stories of threats used to compel payment or property seized for taxes that were not owed.
And the measure would eliminate penalties and interest for delinquent taxpayers under certain circumstances.