II 110th CONGRESS 1st Session S. 335 IN THE SENATE OF THE UNITED STATES January 18, 2007 Mr. Dorgan (for himself, Mrs. Murray, Ms. Mikulski, Mr. Akaka, Mr. Leahy, Mr. Levin, Mr. Kennedy, Ms. Cantwell, Mr. Rockefeller, Mr. Kerry, Mr. Inouye, Mr. Cardin, Mrs. Boxer, Mr. Lieberman, Mr. Menendez, Mrs. Feinstein, and Mr. Lautenberg) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To prohibit the Internal Revenue Service from using private debt collection companies, and for other purposes.

1.

Prohibition on use by Internal Revenue Service of private debt collectors

(a)

Findings

Congress finds the following: (1)The Internal Revenue Service announced plans to outsource part of its tax debt collection responsibilities to private debt collection companies beginning on September 7, 2006. (2)The Internal Revenue Service intends to turn over confidential information involving over 2,500,000 taxpayer accounts to 12 private companies for debt collection purposes when its plan is fully implemented. (3)Recent evidence continues to suggest that the Internal Revenue Service does not have adequate systems in place to ensure that taxpayer information shared with private debt collection companies is properly secured and that such information will not be accessible to those who would misuse such information. (4)During the initial phase of its plan, the Internal Revenue Service has agreed to pay very large commissions of 21 to 24 percent of the amount of tax debt collected by 3 private debt collection companies on cases that the Internal Revenue Service considers relatively simple. (5)The Internal Revenue Service failed miserably when it attempted a similar tax debt collection privatization plan in 1996 and found that private debt collectors harassed many taxpayers, violated Federal debt collection laws, and did not properly secure sensitive taxpayer information as required by law. (6)The use of Internal Revenue Service employees to collect tax debt would cost only 3 cents for every dollar collected while the use of private debt collectors would cost almost 25 cents for every dollar collected. (7)The National Taxpayer Advocate, an independent voice in the Internal Revenue Service for taxpayers, has called for the immediate termination of the private debt collection program calling it an exercise in futility and vastly more expensive than the Internal Revenue Service ever imagined. (8)The National Taxpayer Advocate has also warned Congress that private debt collection companies operating under rules of profit maximization could have less incentive to provide important taxpayer rights training to their employees. (9)The collection of tax revenue is a core function of the Internal Revenue Service and appropriate Internal Revenue Service staffing should be assigned to this function to achieve debt collection objectives. (10)Taxpayers trust the Internal Revenue Service to keep their tax return information confidential and expect that those who collect taxes are not part of a money-making venture with profit motive as the overriding principle. (11)The Taxpayer Advocacy Panel, a nationwide advisory group appointed by the Secretary of the Treasury to improve the responsiveness of the Internal Revenue Service to the needs of taxpayers, has called on the Internal Revenue Service to abandon all plans to outsource any taxpayer debts and to restrict collection activities to properly trained and proficient Internal Revenue Service personnel. (12)In June 2006, the United States House of Representatives overwhelmingly passed a fiscal year 2007 spending bill funding the Internal Revenue Service that included language prohibiting the Internal Revenue Service from using any of such funds for its private tax debt collection initiative. (13)A year-long Government Accountability Office examination of the private debt collection program issued in September 2006 found that, like the 1996 pilot, the program may actually lose money by the scheduled conclusion of its initial phase in December 2007. (b)

Prohibition on use of private debt collectors

Notwithstanding section 6306 of the Internal Revenue Code of 1986, the Internal Revenue Service shall suspend immediately and indefinitely the use of private debt collection companies, and no funds made available to the Internal Revenue Service for fiscal year 2007 and in any subsequent fiscal years shall be used to enter into, renew, extend, administer, implement, enforce, or provide oversight of any qualified tax collection contract (as defined in section 6306(b) of such Code).