    [House Hearing, 111 Congress]
    [From the U.S. Government Publishing Office]

    H.R. 4735, A BILL TO AMEND TITLE 5, UNITED STATES CODE, TO PROVIDE THAT
     PERSONS HAVING SERIOUSLY DELINQUENT TAX DEBTS SHALL BE INELIGIBLE FOR
                               FEDERAL EMPLOYMENT

    =======================================================================

                                    HEARING

                                   before the

                       SUBCOMMITTEE ON FEDERAL WORKFORCE,
                        POSTAL SERVICE, AND THE DISTRICT
                                  OF COLUMBIA

                                     of the

                             COMMITTEE ON OVERSIGHT
                             AND GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                   H.R. 4735

     TO AMEND TITLE 5, UNITED STATES CODE, TO PROVIDE THAT PERSONS HAVING
        SERIOUSLY DELINQUENT TAX DEBTS SHALL BE INELIGIBLE FOR FEDERAL
                                   EMPLOYMENT

                                   __________

                                 MARCH 17, 2010

                                   __________

                               Serial No. 111-86

                                   __________

    Printed for the use of the Committee on Oversight and Government Reform

      Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                                   index.html
                          http://www.house.gov/reform

                      U.S. GOVERNMENT PRINTING OFFICE
    61-935                    WASHINGTON : 2010
    -----------------------------------------------------------------------
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                  COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                       EDOLPHUS TOWNS, New York, Chairman
    PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
    CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
    ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
    DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
    JOHN F. TIERNEY, Massachusetts       JOHN J. DUNCAN, Jr., Tennessee
    WM. LACY CLAY, Missouri              MICHAEL R. TURNER, Ohio
    DIANE E. WATSON, California          LYNN A. WESTMORELAND, Georgia
    STEPHEN F. LYNCH, Massachusetts      PATRICK T. McHENRY, North Carolina
    JIM COOPER, Tennessee                BRIAN P. BILBRAY, California
    GERALD E. CONNOLLY, Virginia         JIM JORDAN, Ohio
    MIKE QUIGLEY, Illinois               JEFF FLAKE, Arizona
    MARCY KAPTUR, Ohio                   JEFF FORTENBERRY, Nebraska
    ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
        Columbia                         AARON SCHOCK, Illinois
    PATRICK J. KENNEDY, Rhode Island     BLAINE LUETKEMEYER, Missouri
    DANNY K. DAVIS, Illinois             ANH ``JOSPEH'' CAO, Louisiana
    CHRIS VAN HOLLEN, Maryland
    HENRY CUELLAR, Texas
    PAUL W. HODES, New Hampshire
    CHRISTOPHER S. MURPHY, Connecticut
    PETER WELCH, Vermont
    BILL FOSTER, Illinois
    JACKIE SPEIER, California
    STEVE DRIEHAUS, Ohio
    JUDY CHU, California

                          Ron Stroman, Staff Director
                    Michael McCarthy, Deputy Staff Director
                          Carla Hultberg, Chief Clerk
                      Larry Brady, Minority Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on March 17, 2010...................................     1
    Text of H.R. 4735................................................     6
    Statement of:
        Kelley, Colleen, national president, National Treasury
          Employees Union; J. Ward Morrow, assistant general counsel
          for legislation, American Federation of Government
          Employees, AFL-CIO; Richard Oppedisano, national secretary,
          Federal Managers Association; and Christopher Rizek,
          general counsel, Caplin & Drysdale, Chartered..............   113
            Kelley, Colleen..........................................   113
            Morrow, J. Ward..........................................   121
            Oppedisano, Richard......................................   130
        Rizek, Christopher...........................................   139
        Tucker, Beth, Wage and Investment Deputy Commissioner for
          Support, Internal Revenue Service..........................    13
    Letters, statements, etc., submitted for the record by:
        Chaffetz, Hon. Jason, a Representative in Congress from the
          State of Utah, employee tax compliance analysis............   102
        Kelley, Colleen, national president, National Treasury
          Employees Union, prepared statement of.....................   115
        Lynch, Hon. Stephen F., a Representative in Congress from the
          State of Massachusetts:
        National Taxpayer Advocate 2009 Annual Report................    21
            Prepared statement of....................................     4
        Morrow, J. Ward, assistant general counsel for legislation,
          American Federation of Government Employees, AFL-CIO,
          prepared statement of......................................   123
        Oppedisano, Richard, national secretary, Federal Managers
          Association, prepared statement of.........................   132
        Rizek, Christopher, general counsel, Caplin & Drysdale,
          Chartered, prepared statement of...........................   141
        Tucker, Beth, Wage and Investment Deputy Commissioner for
          Support, Internal Revenue Service, prepared statement of...    15

    H.R. 4735, A BILL TO AMEND TITLE 5, UNITED STATES CODE, TO PROVIDE THAT
     PERSONS HAVING SERIOUSLY DELINQUENT TAX DEBTS SHALL BE INELIGIBLE FOR
                               FEDERAL EMPLOYMENT

                                  ----------

                           WEDNESDAY, MARCH 17, 2010

                      House of Representatives,
    Subcommittee on Federal Workforce, Postal Service,
                          and the District of Columbia,
                  Committee on Oversight and Government Reform,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 2:08 p.m. in
    room 2154, Rayburn House Office Building, Hon. Stephen F. Lynch
    (chairman of the subcommittee) presiding.
        Present: Representatives Lynch, Norton, Cummings, Connolly,
    Chaffetz, and Issa.
        Mr. Lynch. Good afternoon. The Subcommitee on the Federal
    Work Force, Postal Service, and the District Columbia hearing
    will now come to order. I want to welcome our ranking member,
    Mr. Chaffetz, and members of the subcommittee, all of our
    hearing witnesses, and all of those in attendance. The purpose
    of today's hearing is to examine H.R. 4735, a bill to amend
    Title 5 of the United States Code to provide that persons
    having seriously delinquent tax debt shall be ineligible for
    Federal employment.
        The Chair, the ranking member, and the subcommittee members
    will each have 5 minutes to make opening statements, and all
    Members will have 3 days to submit statements for the record.
        Mr. Lynch. Again, thank you all for being here. The
    subcommittee convenes today to examine and discuss H.R. 4735,
    which was introduced by my friend, the subcommittee's ranking
    member, Representative Jason Chaffetz, on March 3, 2010.
        In short, H.R. 4735 prohibits individuals who have a lien
    placed against their property by the IRS from being hired for
    Federal civilian service, and also requires any Federal
    employee subject to an IRS lien to be immediately terminated
    from employment.
        While the equitable and robust enforcement of our tax laws
    is commendable, there are serious weaknesses in H.R. 4735 which
    call its objective and its efficacy into question. Under
    current executive branch regulations on standards of ethical
    conduct for employees, the Office of Government Ethics requires
    that Federal workers, ``Satisfy in good faith their obligation
    as citizens, including all just financial obligations,
    especially those such as Federal, state, or local taxes that
    are imposed by law.''
        In short, this means that a condition of employment there
    exists an expectation and a requirement that Federal employees
    demonstrate the highest degree of integrity in tax matters by
    both filing as well as paying their tax obligations. In
    furtherance of this policy, there are currently enhanced
    statutory provisions to allow the IRS to garnish wages of
    Federal employees at rates of recoupment that are in excess of
    those required of non-government workers.
        While the U.S. Tax Code may be complex, the weaknesses of
    H.R. 4735 are not. Simply stated, H.R. 4735 defines the
    offending status as, ``a seriously delinquent tax debt,'' as
    the existence of a lien against that employee's property.
    Pursuant to H.R. 4735, the existence of an IRS lien amounts to
    a legal fact requiring termination or prohibition of hiring,
    and against which no rights of due process exist to challenge
    the validity or the amount of that lien before an impartial
    third party.
        Of course, it may argued that the Federal employee may
    challenge the validity and the amount of the lien from her
    place in the unemployment line after her termination, if she
    has sufficient resources to do so. However, the unemployed
    Federal worker is put at a marked disadvantage and has far less
    opportunity to challenge the IRS decision that is afforded to
    the individual taxpayers generally.
        Moreover, if it is indeed the objective of this legislation
    to recoup taxes by Federal employees, one may reasonably ask
    would it not be easier and more profitable to attach and
    garnish the wages of an employee who works for the Federal
    Government than to terminate him or her.
        Last, while H.R. 4735 exempts military personnel who owe
    large amounts of delinquencies, it ignores the fact that there
    are thousands of State Department, Treasury Department,
    Department of Agriculture, Drug Enforcement Administration,
    FBI, CIA, and Department of Justice employees who are also
    serving in hardship assignments who could be subject to
    termination under this bill. Just as with our military
    families, those civilian Federal assignments have put extreme
    financial pressure on these workers and their families.
        While I understand and in some ways agree with the
    gentleman's interest in promoting the importance of tax
    compliance, I simply find myself unable to support the approach
    he is suggesting, as outlined in H.R. 4735. In fact, the
    measure if enacted as written might actually diminish the
    likelihood that the IRS will recoup any tax debt by leaving the
    delinquent taxpayer unemployed and therefore unable to generate
    any income to satisfy the debt through an installment program
    or a Federal levy.
        In closing, it is my hope that these issues and questions
    concerning the IRS's collection procedures and potential costs
    and impact of H.R. 4735 will be elaborated on further by
    today's witnesses. To that end, I thank each of you for joining
    us today, and I look forward to your testimony.
        I will now recognize our ranking member, the sponsor of
    H.R. 4735, the gentleman from Utah, Mr. Chaffetz, for 5
    minutes.
        Mr. Chaffetz. Top of the morning to you, Chairman, and
    thank you for the hearing in such a timely manner. I do truly
    appreciate it. I would like to ask unanimous consent to enter
    three documents into the record. One is the so-called FERTI
    report, the Federal Employee Retiree Delinquency Initiative, as
    well as the TIGTA, Treasury Inspector General Tax
    Administration, document, as well as President Obama's remarks
    regarding paying of taxes for contractors that was made on
    January 20th of this year.
        Mr. Lynch. Hearing no objection, those records are entered
    into the record.
        [The prepared statement of Hon. Stephen F. Lynch and the
    text of H.R. 4735 follow:]

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    [GRAPHIC] [TIFF OMITTED] T1935.111

        Mr. Chaffetz. Thank you. I would also like to note for the
    record that Mr. Christopher Rizek of Caplin & Drysdale, is one
    of our witnesses today. Today is the first time that I have met
    Mr. Rizek, but it should be noted that my campaign has used
    Caplin & Drysdale for some minor campaign issues. I have had no
    interaction, nor did I have any interaction on the selection of
    this witness, but I do think it is proper to note that for the
    record.
        Mr. Lynch. We will not hold it against him.
        Mr. Chaffetz. Thank you. At the heart of this matter is an
    issue of fairness. And I happen to concur 100 percent with
    President Obama, and I am going to read a few comments that he
    made on January 20th on the signing of a memorandum blocking
    tax delinquent applicants from obtaining government contracts.
    From President Obama, ``All across this country, there are
    people who meet their obligations each and every day. You do
    your jobs. You support your families. You pay your taxes you
    owe because it is a fundamental responsibility of citizenship.
    And yet somehow it has become standard practice in Washington
    to give contracts to companies that don't pay their taxes.''
        Further, he went on to say, ``The status quo then is
    inefficient and it is wasteful. But the larger and more
    fundamental point is that it is wrong. It is simply wrong for
    companies to take taxpayer dollars and not be taxpayers
    themselves. So we need to insist on the same sense of
    responsibility in Washington that so many of you strive to
    uphold in your own lives, in your own families, in your own
    business.''
        That principle is true for contractors, and I think that
    same principle should be true for Federal employees. The
    language that has been presented in this document in much was
    lifted, if you will, or patterned after H.R. 572, which I have
    asked to be joined on as a co-sponsor. I think it is a good
    piece of legislation. I am proud to be a Republican joining on
    as a co-sponsor of this Democratic initiative. I think it is
    right. I support it. And I think we should hope and expect that
    it would pass.
        My simple point that I am trying to make is that the same
    principle for contractors should be true for Federal employees.
    Now the overwhelming majority of Federal employees do the right
    thing. They pay their taxes. They work hard. They contribute to
    the good of the United States of America. But we have a few bad
    apples. And as lawmakers, we have a duty and responsibility to
    hold them to a high standard. Many would argue, including me,
    we should hold them to a little bit higher standard. If you are
    going to have the privilege of working for the United States of
    America, I think you have a duty and obligation to pay your
    taxes.
        Now if somebody is trying to do the right thing, the
    intention is not to just simply lob off their head and ruin
    their lives. There are two fundamental and distinct outs, if
    you will, in this bill, that I do take issue with what has been
    said previously and characterizations of this bill I think are
    inaccurate. There are exceptions to when you would be
    terminated.
        No. 1, a debt that is being paid in a timely manner
    pursuant to an agreement. So if you are trying to dig out from
    under a rock, you are trying to make good, if you are trying to
    actually do the right thing, and you are on a payment plan, of
    course it would not be in the best interest of the United
    States of America or for that person individually for them to
    be fired. So if you are doing the right thing and you are
    trying to pay your obligation and you have a payment plan in
    place, there is no reason to terminate that employment.
        The second part is a debt with respect to which a
    collection due process hearing is requested or pending--there
    is some language in between there--but if you have a request
    for a hearing, or if you have a hearing pending, again under
    this law, under this bill, there would be no reason and no way
    for your employment to be terminated. I think that is fair.
        I am obviously very open to suggestions. But, Mr. Chairman,
    at the core of what I am trying to convey here, is that it is a
    principle that the President has articulated I agree with. Most
    people are not going to be affected by this. If you pay your
    taxes, there will not be a problem. But if you are a Federal
    employee, and you are not paying your taxes, and you are not on
    a plan to do so, then I think you should be fired.
        Thank you, Mr. Chairman.
        Mr. Lynch. I thank the gentleman, and the Chair recognizes
    from the gentle lady from the District of Columbia. Ms. Eleanor
    Holmes Norton, for 5 minutes.
        Ms. Norton. Thank you, Mr. Chairman. I think we have more
    to be thankful to you today that you called this hearing, given
    the markup out of which this hearing developed. I want to say
    Happy St. Patrick's Day to all. I claim admission, not
    necessarily by heritage, but I have a son born on St. Patrick's
    Day.
        When we agree on basic principles, that ought to be the
    first thing we say. And I believe that the overriding principle
    at the markup that all agreed upon was that if you were getting
    paid out of a pot of the taxpayers, you ought to pay in to your
    taxes. Nobody likes to pay taxes, but there is something very
    one-sided about depending on the taxpayers of the taxpayers of
    the United States and being unwilling to do your share.
        With that understanding, we quickly found ourselves plunged
    into factors about which there was no information. To be sure,
    who could disagree that depending on the circumstances--and by
    the way, there was very little information on what kind of
    circumstances should obtain, but depending on the
    circumstances, everybody who works for the Federal Government
    gets paid out of that pot and should have paid the taxes before
    dipping into that pot for your own wages.
        But it was Chairman Lynch who had done so much homework
    that he saved us from the law of unintended consequences. We
    were put to the test of whether we should vote for a bill where
    a hearing had been proved necessary by the abundance of
    questions coming from members of the committee. I was
    particularly concerned because we were dealing with two
    rarified of sections of Federal law. One is the unendingly
    complex and specialized civil service law that is administered
    by OPM. The other is an even more specialized set of law and
    regulations, and that is the tax code itself.
        So anybody who wants to jump off the cliff without a
    hearing on what is going to happen to somebody, whether he
    keeps his job or not, without knowing the consequences in both
    those sets of law is, it seems to me, immediately engaged in a
    project that could result in unfairness that he never intended.
    The least we can do when there are questions raised that were
    as abundant and as meritous as the questions that obtained on
    that day just perhaps 2 weeks ago is to do what the chairman--
    who was perhaps chiefly instrumental in laying on the table
    some of what many of us did not know.
        Let us settle those matters. This is not something that
    will bury the country if we have a hearing first. Here we will
    call and put our side to have a hearing in our own
    subcommittee. What could be more to our advantage than that?
    And I am very pleased that Mr. Chaffetz, who raised the issue
    for contractors, those who raised the issue for Federal
    employees are now able so quickly after those questions came to
    the fore to have a hearing which I believe will satisfy all
    concerned.
        Thank you, Mr. Chairman, again, particularly for your
    interventions at the time of the markup.
        Mr. Lynch. I thank the gentle lady. The Chair now
    recognizes the ranking member for the full committee, Mr. Issa,
    for 5 minutes.
        Mr. Issa. Thank you, Mr. Chairman, and thank you for
    holding this important hearing. I might note that this hearing
    today is on H.R. 4735. Since it was not noticed that way, I
    would like to suggest that we hold a similar hearing on H.R.
    572. As the chairman may know, H.R. 572, the bill that prompted
    this, never had a hearing.
        One of the challenges I think that the chairman and myself
    as ranking member faced in the markup was that we had not
    vetted many of the issues that were brought up related,
    particularly by the majority, related to the Federal employees.
    The amazing thing, of course, is every time somebody on either
    side of the aisle says ``Federal worker,'' we immediately
    realize that what is good for the goose is good for the gander.
        A Federal worker and a Federal contractor have many
    similarities. Since I served on the House Select Intelligence
    Committee, I was very exposed to the fact that we have a huge
    amount of what are contract status employees in the clandestine
    world, but they are really a company of one. And under the H.R.
    572, they would find themselves, if you will, if you were a CIA
    contractor of one, you would find yourself fired over, without
    protection, under H.R. 572--you would find yourself fired
    without protection on exactly what the gentle lady from the
    District of Columbia and others have said we want to have as
    protections not currently in this bill.
        So, Mr. Chairman, I hope today as we go through this
    hearing, that all of us will have both sides of our brain on,
    the one that says ``contractor,'' and the one that says
    ``person,'' because ultimately a great many of our contractors
    are either individuals or very small groups who enjoy all the
    same problems and burdens that Federal employees have.
    Additionally, as it was noted in the markup, Federal workers
    most often run into tax problems because they have small
    businesses or their family has small businesses, or something
    outside of their direct Federal employment.
        I believe that if we on a bipartisan basis work together
    here at the subcommittee, and then at the full committee, we
    can find a harmonized bill, one that provides appropriately
    near or absolute protections for the contractor, thinking in
    terms often of a contractor of one, and for the private person.
    The due process that we ask for a Federal worker to have is
    very appropriate, and making sure that we never have a
    situation in which a person finds themselves willing to catch
    up over time on their taxes, on a voluntary or an agreed basis,
    but at the same time wanting the opportunity to dispute taxes
    they believe they do not owe, and to have all of the normal due
    process, while still enjoying a paycheck.
        So I would join with the gentle lady from the District of
    Columbia and say, when we leave this, we have to leave
    understanding that a large company or a small company that has
    a dispute with the IRS should not find themselves out of a
    contract and thus unable to afford their own defense. Well, in
    fact, if they are given the opportunity to go through the
    process, they may well be vindicated. Certainly for a private
    individual who is a Federal employee, the same is true, and
    probably more obvious.
        So as we go through the hearing today, which I appreciate
    us having, hopefully we are looking in terms of harmonization
    of two sets of Federal workers, the individual Federal worker,
    and the Federal worker under contract. And although they are
    hugely different in many ways, they are from a standpoint of
    not paying their taxes ultimately the same. They can only pay
    their taxes if they have income. We only want to make sure that
    they are in the process of leading to paying their fair taxes.
    And as long as they are, I would assume that the chairman and
    myself are in total agreement we would want them to continue
    being vendors or employees of the Federal Government, as long
    as in fact they are making a good faith effort to either pay
    their taxes or to dispute them, as all of us have a right to
    do.
        I thank the gentleman and yield back.
        Mr. Lynch. I thank the gentleman. It is the custom of this
    subcommittee to swear all witnesses who are to offer testimony.
    So, Ms. Tucker, could I ask you to please rise and raise your
    right hand.
        [Witness sworn.]
        Mr. Lynch. The record will indicate that the witness has
    answered in the affirmative. I would like to just offer a brief
    introduction of Ms. Tucker. Ms. Beth Tucker is currently the
    Wage and Investment Deputy Commissioner for Support for the
    Internal Revenue Service. In this position, Ms. Tucker has
    oversight over all wage and investment support organizations,
    including electronic tax administration and refundable credit
    strategy and finance, business modernization, communications
    liaison, and equal employment opportunity and diversity.
    Welcome, Ms. Tucker. I would like to offer you the chance to
    submit an opening statement for 5 minutes.
        Could you please pull that mic very close to you? It does
    not work very well. Let us just see if it is on. I am not sure.
        Ms. Tucker. I think that is better.
        Mr. Lynch. There you go. Thank you.

         STATEMENT OF BETH TUCKER, WAGE AND INVESTMENT DEPUTY
           COMMISSIONER FOR SUPPORT, INTERNAL REVENUE SERVICE

        Ms. Tucker. Chairman Lynch, Ranking Member Chaffetz, and
    members of the subcommittee, I am pleased to appear before you
    this afternoon to discuss the IRS collection procedures as they
    relate to Federal employees. Today's hearing was called to
    examine H.R. 4735 that would make persons with seriously
    delinquent tax debt ineligible for Federal employment. However,
    I am not here to comment on that legislation, but rather to
    discuss our tax collection process.
        Mr. Chairman, the collection process is the same for all
    individuals. There are no special rules for Federal employees.
    If the taxpayer does not respond to the first or subsequent IRS
    notices of late payment, the account becomes delinquent, and
    the IRS will try to resolve the issue with the taxpayer over
    the telephone or in person. There are a number of payment
    options for those who cannot pay their taxes on time, such as
    extension of time to pay, installment agreements, or offer in
    compromise.
        If a delinquent taxpayer does not cooperate, than the IRS
    may take and force collection action. Enforcement action can
    include serving a notice of levy to attach taxpayer's income or
    assets, such as bank accounts. A levy is a legal seizure of the
    taxpayer's property to satisfy a tax debt, and in some cases
    can include the seizure and sale of real or personal property.
        The IRS may also file a notice of Federal tax lien to
    secure the government's interest in the property the taxpayer
    owns, while establishing priority as a creditor. However, as
    discussed in greater detail in my written testimony, IRS seeks
    to provide the taxpayer an opportunity to pay the tax debt
    voluntarily, making arrangements to pay or supply information
    to show that the payment would create a hardship. Enforced
    collection actions are taken only after repeated attempts to
    contact the taxpayer. The taxpayer can also request a hearing
    with our Office of Appeals, and has the right to appeal certain
    other collection actions.
        The Federal Employee Retiree Delinquency Initiative
    [FERTI], promotes Federal tax compliance among current and
    retired Federal employees. Each year the IRS sends letters to
    the human capital offices of Federal civilian agencies and
    departments participating in the data matching program to
    provide current information on previous year's delinquency
    rates and request the agency's support in promoting tax
    compliance within their work force.
        The letters also raise awareness about the importance of
    timely and accurate returns, reporting all income, having the
    proper amount withheld, providing all required information and
    good recordkeeping. The IRS is also providing Federal agencies
    the tools they need to communicate with their work forces about
    the importance of tax compliance.
        We have drafted generic materials for all agencies, and at
    the request of HUD just this year, tailored them to those
    employees struggling to pay their taxes. We have also provided
    links to IRS communication products, YouTube videos, public
    service announcements that HUD can use to communicate with
    their employees on the Internet and through their own internal
    communication venues.
        The IRS has also made these outreach and education
    materials accessible to a broader audience, ensuring them with
    90 other Federal agencies. We will begin a more comprehensive
    and aggressive outreach campaign this fall based on the lessons
    we have learned this year.
        Mr. Chairman, thank you for the opportunity to testify
    today. We believe that IRS rules and procedures, along with the
    current tax law and regulations, allow for Federal employees to
    rectify their tax obligations. I would now be happy to answer
    any questions you might have.
        [The prepared statement of Ms. Tucker follows:]

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        Mr. Lynch. Thank you. Just for the record, I would like to
    get unanimous consent to submit into the record the National
    Taxpayer Advocate 2009 Annual Report. It reads ``2009 Annual
    Report,'' but it is actually submitted December 2009, so it is
    a fairly recent report.
        [The information referred to follows:]

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        Mr. Lynch. Ms. Tucker, according to the National Taxpayer
    Advocate, they list serious problems with the IRS in terms of
    the taxpayer's position. And it is not meant to be critical of
    you, it is just red flags that the National Taxpayer Advocate
    raises. The most serious problem that they cite is the sheer
    complexity, as the gentleman from California remarked, the
    sheer complexity of the tax code, and the number of disputes
    and difficulties that taxpayers have in just complying.
        The second most serious issue that they raise here in the
    National Taxpayer Advocate is the fact of automatic liens,
    automatic liens against taxpayers without personally dealing
    with the individual taxpayer. Are they off-base here, or are
    those valid, serious concerns?
        Ms. Tucker. Chairman Lynch, I guess first let me address
    the observation about complexity of the tax code. I think for
    any of us that have looked at all of those different volumes,
    obviously it could use may be a little streamlining. I think
    you have also heard our Commissioner talk about the fact that
    he supports simplification.
        I do think, as a former enforcement employee myself, we do
    see situations where the complexity of the tax code does have
    an obvious effect on people's ability to voluntarily comply. So
    that is an area we would seek your support as well, since as
    you know, IRS administers the tax code that Congress passes to
    us.
        The other thing that I would say--you know, I laid out our
    collection procedures in my written testimony. And we believe
    that the process we go through, from the establishment the tax
    delinquency through the first, second, third, fourth notice,
    where we are communicating with the taxpayer, and then also
    giving that taxpayer the opportunity to work with us on a levy
    if there is a source to levy. You know, we believe that we are
    following due process and communicating clearly prior to the
    filing of that lien.
        This is an area that we have ongoing discussion with the
    Taxpayer Advocate about as well. But to the question of----
        Mr. Lynch. Is it a problem? They seem to be saying it is
    your second most serious problem from a taxpayer standpoint,
    that the automatic liens----
        Ms. Tucker. But I think the----
        Mr. Lynch. The automated lien process is----
        Ms. Tucker. The point I would make is we have to go through
    the due process prior to the filing of the lien.
        Mr. Lynch. Now when you say ``due process,'' that is you
    reviewing your own decisions, right?
        Ms. Tucker. That is the collection process where at the
    time a delinquency or balance due is established, then we go
    through a----
        Mr. Lynch. Established by the IRS.
        Ms. Tucker. Correct.
        Mr. Lynch. But this is all--you know, I am a taxpayer. You
    tell me I owe X amount of money. I appeal back to you, though.
    It is not to a third party. You are reviewing your own
    decision. I still say you are wrong.
        Ms. Tucker. Right.
        Mr. Lynch. You say you are right. That is the appeal
    process.
        Ms. Tucker. Yes.
        Mr. Lynch. So it is not like there is a third party coming
    in here and saying, OK, here is the IRS over here, I want to be
    impartial. You are actually your own decisions when these
    notices keep going out. There is no neutral third party here
    that is reviewing this decision. This is not a judicial review.
    This is you reviewing your own situation.
        Ms. Tucker. Correct.
        Mr. Lynch. I think that is what they are getting at from
    the Taxpayer Advocate's point of you that the second most
    serious problem here is the automatic lien issuance. And it
    gives me great pause when I now see a situation where an
    employee, a Federal employee, is going to get a lien, and then
    also that is going to be it for that person.
        Ms. Tucker. But just to clarify, I mean, the taxpayer,
    whether a Federal employee or a private citizen, does have the
    ability to appeal the lien.
        Mr. Lynch. To you.
        Ms. Tucker. To the Internal Revenue Service----
        Mr. Lynch. Right. That is what I am getting at. The first
    time that they get a third party to look at this is tax court.
    And under Mr. Chaffetz's scenario, that Federal employee would
    be fighting it from the unemployment line. That is my problem
    with this. I do not think that is a fair opportunity when you
    are fighting, you know, a tax lien from the unemployment line.
    And I think there is a distinct difference between the
    contractor situation--and we have contractors of all sizes. And
    the problem with trying to address that situation is difficult
    as well. But, you know, for the most part, these large
    contractors and medium-sized contractors, if they do not get a
    government contract, they are still a contractor with 1,000
    other opportunities.
        The comparison here with one Federal employee who has one
    job and gets fired from their one job, and now is in the
    unemployment line, I think that person is in a much more
    vulnerable position.
        But let me ask you, I have been told--we met with the IRS 2
    weeks ago when this issue came up, and we were told that in
    some cases garnishment works very well with the employees, and
    there are a lot of people under the FERTI that are actually
    counted as delinquent who are actually in garnishment. Their
    wages are being garnished by the IRS.
        I am also told that in conjunction with that, oftentimes
    the IRS will file a lien just in case that person comes into
    money, they sell their home, and it protects the position of
    the taxpayer. So you get garnishment coming out every week, but
    in the event that person comes into money or sells their
    residence and now has liquid assets that you can attach, the
    lien is in place so that you can grab that money when it
    becomes available.
        But under this scenario, if that person was in garnishment,
    and then had the lien put on to protect the taxpayer's
    position, that person would be terminated. And I am just
    wondering if you think that will increase our ability to
    recover back taxes from these employees or decrease it?
        Ms. Tucker. To talk about our current process, you are
    absolutely correct in your information, that for Federal
    employees that are in the FERTI program now, that the ability
    to put them on a track to compliance exists in our current
    system by the levy program. So when we have the information
    that says there is a Federal employee that is delinquent--let
    me stress again we are talking about under a 3 percent of the
    Federal work force--then because we have a good levy source,
    then we attach to that. However, if that wage levy will not
    full pay the account within the collection statute, you are
    absolutely correct. I mean, the Federal law states that we
    would then file a lien to protect the government's interest
    should some funds come into play.
        Mr. Lynch. And we would have to fire the employee. So all
    right. Thank you. I yield 5 minutes to the gentleman from Utah,
    Mr. Chaffetz.
        Mr. Chaffetz. I will try to frame my question here by also
    noting that there are two places within this piece of
    legislation that is very specific to the idea and the notion
    that if they are on a payment plan in a timely manner, and No.
    2, as another opportunity, if they have a debt with respect to
    which the collection due process hearing is requested or
    pending, that employee would not be fired.
        Mr. Lynch. Would the gentleman yield?
        Mr. Chaffetz. Sure.
        Mr. Lynch. Garnishment is not an agreement under the Tax
    Code you do not cover a garnishment in your bill.
        Mr. Chaffetz. I use the exact same language from Bill 572
    in H.R. 4735. I do recognize and understand----
        Mr. Lynch. We would not garnish a contractor.
        Mr. Chaffetz. The language that is being used is, I
    believe, exact--there are obviously differences in other parts
    of the bill. And if there are technical changes that need to
    happen in accordance with that, I am totally open to it. But to
    repeatedly state, as if it were a fact, that the person would
    automatically be terminated under this bill I think is
    mischaracterization of what I intended to do and of what is
    literally written in what is a page and a half bill.
        So my question, which I know I need to get to at some
    point, has to do with the time that transpires through this
    process. Some characterizations at the markup were such that
    the IRS just wakes up one morning, and the employee think he is
    good and fine, and shows up 1 day, and the next thing you know
    not only does he have an IRS problem, but he is also fired from
    his job.
        I recognize the variance in how wide the cases and
    situations are. But can you give us a general sense of how much
    time transpires between the first time this taxpayer knows that
    they have some sort of issue with the IRS and the final
    determination as to whether or not that taxpayer is actually
    delinquent? And I know that is a complicated answer, and we
    have a very short amount of time. But I would appreciate you
    taking a stab at it.
        Ms. Tucker. Now let me see if I can lay this out. So once
    the delinquency is established, the balance due then we begin
    the notice process that I referenced earlier. So IRS begins a
    series of four contacts with the taxpayer, where we are mailing
    them the notice, saying here is your balance due, please
    contact us; we want to work this out; here are your options.
        From that point in time, from that first notice, a time
    elapses, generally 5 weeks between the notices, where the
    notices progress to say, please contact us; here is your
    balance due; we need talk to you; please work it out with us,
    all the way through to the fourth notice. The fourth notice is
    then the point in time where we have exhausted all of the
    processes and we begin to look for the levy source to begin to
    do the garnishment.
        I think it is important to note that a large percentage of
    taxpayers, whether it is the civilian taxpayer or even a
    government employee, a large number of folks during that four-
    notice process voluntarily come in before we get to a levy or a
    lien situation and say, let me work an installment agreement,
    which that is exactly how we want the process to work.
        Mr. Chaffetz. So that range of time is----
        Ms. Tucker. Roughly, I would say 4\1/2\ to 5 months of
    contact with the taxpayer saying, here is your balance due;
    please try to get this worked out with this before we go to the
    levy action.
        Mr. Chaffetz. OK. And at what point can the IRS file a
    notice of Federal tax lien?
        Ms. Tucker. You know, at the point in time--and I will give
    you the simplest scenario. When we get to the end of the four
    notices, then we look at the balance due. In the case of the
    Federal work force, because we do have a levy source, we
    immediately go to the 15 percent levy. If that 15 percent levy
    will pay off the balance due before the collection statute
    expires, we let that full pay.
        However, if that wage levy is not going to full pay before
    the collection statute, we have a couple of options. We can
    pull that 15 percent levy back and go for a full wage levy. We
    can begin to levy other bank accounts. If that is not going to
    satisfy the obligation, then at that point we could also file a
    Federal tax lien to protect the government's interest.
        Mr. Chaffetz. Do you know off the top of your head how long
    a period that levy can be in place?
        Ms. Tucker. Well, you know, I think a lot of it is
    dependent on the amount of the deficiency.
        Mr. Chaffetz. Right.
        Ms. Tucker. And if we can work that out before the
    collection statute expires. But if we can see readily that it
    will not, then we would file the lien.
        Mr. Chaffetz. OK. Thank you, Mr. Chairman.
        Mr. Lynch. Thank you. The Chair now recognizes the gentle
    lady from the District of Columbia for 5 minutes.
        Ms. Norton. Thank you very much, Mr. Chairman. I just want
    to note for the record, especially in light of the Ranking
    Member Chaffetz's notion about sauce for the goose and sauce
    for the gander, about which I would not differ, that Mr.
    Chaffetz offered the bill. There were not particular questions
    raised about the contractor side. It was only when we got to
    the employee side that a flurry of questions began to be
    raised.
        I would note also for the record, Mr. Chairman, that a
    hearing has been held and the Congress passed a bill that would
    enforce the very matter that Mr. Chaffetz has before us. It is
    called the Contractor Tax Enforcement Act. It would prohibit
    delinquent Federal tax debtors from being eligible for contract
    with Federal agencies.
        The problem is we passed in the House, but as is the case
    usually, they did not get to the Senate, which is why we are
    here now, and I think in agreement that we should have both
    sides of the coin involved.
        How many employees have been fired at the IRS for
    delinquent tax?
        Ms. Tucker. As you may know, IRS has a stringent employee
    tax compliance program that we have had in place for many
    years. We take our tax obligation as tax administrators very
    seriously. Since the inception of RA-98, which placed an even
    higher standard on IRS employees, we have had 448 removals.
        Ms. Norton. Now what percentage of the work force would
    that amount to?
        Ms. Tucker. Well, at any given time, we have roughly on
    board 100,000 employees. And so if you look at the 448 over the
    life, it is a very----
        Ms. Norton. Tiny percent. And I take it that this--now we
    are talking about mandatory termination, are we not, even for
    minor infractions of the code? And are not we talking about
    that as the only disciplinary action that is available?
        Ms. Tucker. Actually, under the Employee Tax Compliance
    Program, our overall broader program that was in place even
    before Section 1203, which is the harsher interpretation, we do
    have processes where if there is an identification that maybe
    an employee has something questionable on their return, it is
    researched by our own employee tax compliance unit. If it is
    not--and a large number in fact, 75 percent, of those are
    resolved just in communications with----
        Ms. Norton. What percentage was that again?
        Ms. Tucker. 75 percent are resolved with no finding between
    the employee and our employee tax compliance unit.
        Ms. Norton. Now this policy was adopted, I take it, because
    of the specialized nature of the IRS in collecting taxes and
    the embarrassment to the agency and to the government if people
    collect taxes that have not paid their own taxes.
        Ms. Tucker. I think that is a fair statement, that our
    employee tax compliance program, the original longstanding
    program even in advance of 1203, was intended because we do
    have a higher standard because of the nature of our work.
        Ms. Norton. Understood. On page 1 of your prepared
    testimony, you speak of a number of payment options for
    taxpayers who cannot pay their taxes on time. And you speak of
    them--many of us are familiar with them--extension of time to
    pay, installment agreement, delaying collection, or offer of
    compromise. Are these options available to IRS employees?
        Ms. Tucker. IRS employees obviously have the option for
    installment agreements. The other thing that--you know, to walk
    you on through the 1203 provision, which is the provision we
    talked about that resulted in the 488 removals, the way 1203
    reads, if we have employees with the willful failure to file or
    a willful understatement of Federal tax, that is what triggers
    the removal. So the payment issue----
        Ms. Norton. Oh, willful is a very important word there.
        Ms. Tucker. Right.
        Ms. Norton. Indeed, it is the operative word.
        Ms. Tucker. But, no. Our employees do have the option of
    working out installment----
        Ms. Norton. So, for example, the average American can file
    on time, let us say, by or before April 15th, file for an
    extension for the rest of it and pay what he can pay at that
    time. An IRS employee could do the very same thing.
        Ms. Tucker. Yeah.
        Ms. Norton. Finally, do you think that--you have testified
    that IRS, of course, has a very special place, and the policy
    applies, I take it, only to the IRS for that reason. Should
    this policy of mandatory firing apply to every agency, even
    agencies that have nothing to do with tax collection?
        Ms. Tucker. No. As I have stated earlier, you know, as IRS
    administers of the Tax Code, we are really not here to comment
    on the merits of the legislation. But I would say, obviously,
    we believe that every American should file and pay their fair
    share.
        Ms. Norton. But you are unwilling to say----
        Ms. Tucker. But we all say----
        Ms. Norton [continuing]. That the mandatory firing notion--
    you are unwilling to say that should be applied governmentwide
    without other options available?
        Ms. Tucker. What we want to say is we believe our current
    collection process allows for us to deal with all taxpayers,
    including Federal employees, to reach resolution of----
        Ms. Norton. You are not here arguing that the present
    policy in place for the IRS should put in place for every
    agency, yes or no.
        Ms. Tucker. No.
        Ms. Norton. Thank you.
        Mr. Lynch. Thank you. The Chair now recognizes the
    gentleman from California for 5 minutes.
        Mr. Issa. Thank you, Mr. Chairman. Ms. Tucker, is the IRS
    arbitrary and capricious?
        Ms. Tucker. I would think not.
        Mr. Issa. Heavy-handed?
        Ms. Tucker. I would hope note.
        Mr. Issa. Do you deal with corporations, LLCs,
    partnerships, or individuals in a substantially different way
    as to your collection policy?
        Ms. Tucker. Our collection policy applies across the
    spectrum, but obviously, you know, as we are dealing with
    individual taxpayers that maybe do not have full understanding
    of the process, yeah, we do spend additional talking with them,
    trying to explain the options as opposed maybe to a large
    corporate taxpayer that is heavily represented.
        Mr. Issa. So you provide more overhead, more counsel, more
    help to the small and individual because they need it, where a
    larger corporation tends to be much more of a business-to-
    business type of----
        Ms. Tucker. But at the same time, I mean, if anyone needs
    help understanding the collection process, obviously that is
    what we are here for.
        Mr. Issa. So the contractor who has a concession at Camp
    Pendleton who is making hummus and baba ghanoush and Middle
    Eastern sandwiches for my Marines, her and her husband, they
    are unincorporated, they are a little shop that has this long
    line of Marines wanting to get good Middle Eastern food that--
    they do not miss the Middle East, but they miss the food. She
    is going to be treated the same as the Federal worker that
    works on the base, the civilian employee, right?
        Ms. Tucker. The same process for notices, communication
    before we would move to a levy.
        Mr. Issa. OK. Well, I would like to get under something--
    and I do not want to cross over your comfort zone from how you
    want to explain policy, but we have two pieces of legislation
    here that we are really dealing with, 572 and 4735. One is
    dealing with the individual, the other is aimed at contractors.
    Each of them presumes that we need to fire that entity if they
    do not comply. It sounds to me--and correct me if I missed
    something in your earlier explanation--you have all the tools
    you need to at the end of the day collect from somebody just
    easily if they have assets if they are an individual or a
    contractor. Is that correct?
        Ms. Tucker. Let me just, if I could, clarify one point.
        Mr. Issa. Sure, of course.
        Ms. Tucker. You know, the levy process--we go through the
    four notices, and then we place a levy. It is obviously--we
    look at all of the available sources, but the wage levy in the
    case of the Federal employees, I mean, we know where the
    employees work. But in your situation that you described for
    someone maybe that is a contractor, we would do the same thing.
    We would still go in search of levy sources.
        Mr. Issa. Right. But uniquely, the IRS has the right to
    pierce the corporate veil to anyone, whether they are an owner
    of a business or simply somebody who preferred other creditors
    over the IRS. In other words, someone that writes a payroll
    check and signs it and knowingly does not have the taxes paid,
    you can go right around the corporation and you can go after
    them personally. Is not that true?
        Ms. Tucker. That is correct.
        Mr. Issa. That is sort of unique to the--and since you came
    from the enforcement side. So I am going to ask you not a
    conclusion, but a bit of a rhetorical question. We have two
    pieces of legislation. They both presume that only by firing a
    contractor or only by firing an employee can we get their
    attention to pay their bill. Is not it sort of a reasonable
    conclusion that both of these probably should be scraped in
    favor of you have the ability to do it, you are doing your job.
    The awareness of this large number of Federal employees--and I
    am not trying to undercut my colleague here.
        But we have these billions of dollars that have not been
    paid by Federal employees. But they are basically all in the
    process of being collected by you, and ultimately you will
    eventually collect from them. And then if we have a contractor
    who has a tax dispute and loses, or does not take their payroll
    deductions and turn it in, whatever it is, you also have all
    the tools you need.
        So I do not want to reach a complete conclusion because it
    would not be fair to you, but are not both of these bills sort
    of preempting the eventuality of your collecting them, meaning
    if we keep the contractor on, you are going to collect the
    money from them. If we keep the employee on, you are going to
    collect the money from them, and you are going to give them the
    due process since you told me you are not arbitrary and
    capricious--you are going to give them the due process that
    Congress has decided that you have.
        You know, the chairman probably was not on the committee,
    and neither was I, that gave you all those authorities. But the
    amazing thing is we gave you all these authorities, including
    the right to pierce the corporate veil, to lien against
    individuals and so on. Is there sort of a question here that
    both of these bills seek to do the same thing against two
    different groups over whom you have the same reasonable
    authority and you treat them the same?
        Ms. Tucker. You know, I think the short answer to your
    question is do we apply the same collection processes to all
    groups. Yes. I think where the distinction comes in, you know,
    the availability of access to funds could be different because
    if we have a wage levy source, that is much easier to attach
    to.
        Mr. Issa. OK. Well, of course, a government contract is a
    pretty good revenue source, too. One final exit question, if I
    could, Mr. Chairman, in your opinion--and I realize this may
    not be the opinion of the IRS--if one or both of these pieces
    of legislation in some format--you understand the spirit of the
    legislation even if the details are not worked out--if one or
    both of these were passed, would it substantially help you in
    the process of collecting revenue or making revenue out of
    taxes in arrears?
        Ms. Tucker. You know, if I understand both provisions, our
    collection process does not necessarily change because we would
    still continue to go through our first, second, third, fourth
    notice.
        Mr. Issa. Well, actually, the question was more if we fire
    the contractor and/or the employee, does either of those
    actions help you in the collection of taxes.
        Ms. Tucker. You know, the point would be even if someone
    was removed, we would continue to look at all available levy
    sources and attach bank accounts or whatever income source
    there might be.
        Mr. Issa. So nothing is better by firing them, and then we
    could debate whether or not if they lose their salary or they
    lose their contract it would be worse. OK. My time is more than
    expired. I appreciate your indulgence, and I appreciate yours,
    Mr. Chairman. I yield back.
        Mr. Lynch. I am absolutely happy to do that. Mr. Connolly
    from Virginia is recognized for 5 minutes.
        Mr. Connolly. Thank you, Mr. Chairman, and welcome, Ms.
    Tucker. And I am going to plead with you to speak into that
    mic. I cannot hear you.
        Ms. Tucker. OK. Oh, I am sorry.
        Mr. Connolly. Is not there a fundamental difference between
    a situation where a contractor is seeking to get a contract,
    and we say, well, as a precondition of that, you cannot be
    seriously delinquent in your taxes versus a Federal employee
    who may be found to be delinquent in his or her taxes. A, there
    is a difference in terms of their status. And B, is not there a
    difference in the remedies available to the Federal Government
    in both cases?
        Ms. Tucker. From the remedy standpoint, I am not
    understanding the question.
        Mr. Connolly. Ms. Tucker, I cannot hear a word you are
    saying.
        Ms. Tucker. I am sorry. It may be my southern accent
    perhaps.
        Mr. Connolly. No. I promise you that.
        Ms. Tucker. Can you hear me now?
        Mr. Connolly. Yes. It is speaking into the mic.
        Ms. Tucker. All right. No. My question was I am not sure
    what distinction you are asking me to comment on. So I am
    sorry. Maybe I did not understand the question.
        Mr. Connolly. Well, if I am a contractor seeking money from
    the Federal Government, and I say, well, in order to qualify
    for that, you cannot be delinquent, seriously delinquent, in
    your taxes, that is a precondition for getting something.
        Ms. Tucker. Correct.
        Mr. Connolly. If I am already a Federal employee, and for
    whatever reason I find myself in a situation where I am behind
    in paying my taxes, the Federal Government has a whole
    different set of remedies for dealing with me than a
    prospective Federal contractor. Is that not true?
        Ms. Tucker. That is correct.
        Mr. Connolly. Right. Now tell me about this program FERTI.
    FERTI only applies to Federal employees.
        Ms. Tucker. Correct.
        Mr. Connolly. So it is a unique remedy unique to the
    Federal work force.
        Ms. Tucker. Correct.
        Mr. Connolly. Is it available to corporations of Federal
    contractors?
        Ms. Tucker. Well, the FERTI program is unique in that is
    how we track Federal employee delinquencies.
        Mr. Connolly. Right. But what I am getting at, Ms. Tucker--
    excuse me. If I am a Federal contractor, not a Federal
    employee, does FERTI track me?
        Ms. Tucker. No.
        Mr. Connolly. No. So is there already in place something
    that clearly distinguishes a Federal employee from a Federal
    contractor.
        Ms. Tucker. Correct.
        Mr. Connolly. Because I thought I heard my good friend from
    California just now trying to conflate contractors with
    employees. We ought not to impose those on either one of those
    categories because it is self-defeating. And I guess I am
    suggesting, based on your testimony, they are quite different
    categories. They are different--we have different statuses
    here, and we have different remedies available to us. And in
    the case of the legislation proposed by my friend from Utah, it
    seems to me it is a remedy in search of a problem because we
    already have in place for Federal employees lots of tools for
    knowing who you are and knowing how much you owe, if you owe
    anything. Is that not correct?
        Ms. Tucker. That is correct.
        Mr. Connolly. Is it also not true that when FERTI was
    deployed, most recently we found in 2008 a total of $3 billion
    in delinquent taxes in some status of delinquency owed to the
    Federal Government from the Federal work force.
        Ms. Tucker. That is correct.
        Mr. Connolly. And that almost half of that, 1.3 billion,
    was in fact owed by military retirees.
        Ms. Tucker. That is correct.
        Mr. Connolly. Well, would we fire military retirees? Let me
    ask you a question. What is the IRS, or what your understanding
    is, of ``seriously delinquent.''
        Ms. Tucker. You know, the ``seriously delinquent,'' is not
    a designation that we typically use. But for understanding of
    this hearing, we understood that meant----
        Mr. Connolly. Would you repeat? I am sorry. I cannot hear
    you.
        Ms. Tucker. The term ``seriously delinquent'' is not part
    of our nomenclature at IRS, but----
        Mr. Connolly. So here we have some legislation without a
    definition, so you would have to come up with a definition if
    we made this law.
        Ms. Tucker. Well, I think the discussion points that we
    looked at was your definition of ``seriously delinquent'' would
    be the actual filing of a lien. But obviously, many of our
    accounts move into the collection cycle. We could in theory
    file a lien when there is an active levy in place just because
    there was the potential to further protect the government
    interest.
        Mr. Connolly. My final question, because my time is going
    to be up, and I am going to abide by the 5-minute rule--would
    you say that it might be self-defeating, with the best of
    intentions, if we fire people who owe us taxes? Their ability
    to pay what they owe would be severely impaired.
        Ms. Tucker. You know, we see this a lot, even in the public
    sector in general, that absolutely if someone is not employed,
    it does not impact their ability to pay their taxes.
        Mr. Connolly. Thank you. My time is up.
        Mr. Lynch. I thank the gentleman. The Chair now recognizes
    the gentleman from Maryland, Mr. Cummings, for 5 minutes.
        Mr. Cummings. Thank you very much, Mr. Chairman. And, Ms.
    Tucker, thank you very much for being with us. I wanted to just
    go back to my colleague's question with regard to seriously
    delinquent. I want to just try to figure out some things here.
    You said that is a term that you all do not use?
        Ms. Tucker. No. The term ``seriously delinquent,'' we
    understood that to be the definition of the filing of the lien
    for purposes of the legislation.
        Mr. Cummings. I am sure we have a number of people who may
    file, not just Federal employees, but others will file on April
    15th, and in the situation that we find ourselves today, and in
    my district, and all over the country, you have people who
    maybe in January, there were two breadwinners, and now there is
    only one. So they file on April 15th. They owe money, they owe
    money. They had not anticipated that they would be losing half
    the income, and so they do not have the money to pay.
        Some of them may be losing their homes at the same time.
    And so what would a person like that do? I mean, if you were
    advising them, what would you--maybe you would tell them to
    file on time.
        Ms. Tucker. Correct.
        Mr. Cummings. So we will start with that. Now what else
    would you tell them to do?
        Ms. Tucker. You know, this is actually a topic that is
    fairly common now. And in fact, I believe it was just last week
    our Commissioner issued a press release talking about all of
    the assistance options we have for folks that are unemployed or
    dealing with financial difficulties right now. And within that
    information, I mean, we have created a whole host of new
    outreach materials trying to tell people, you know, there are
    assistance options available.
        So once folks file, and their situation has changed, as you
    explained, we ask that they contact us and let us work with
    them to see, do they have the ability to pay, do they have
    appropriate income levels for us to work out some kind of
    installment agreement. Do they have a hardship that makes that
    account currently non-collectible, where we all agree that this
    is not something that you have the ability to pay right now,
    and we will actually suspend the collection action.
        The other tool we have is an offer in compromise, where the
    taxpayer may say, look, this is what I have. This is the
    availability of my assets, and can we settle or compromise that
    tax debt for a lesser amount? So to your point, absolutely, we
    try to work with folks based on changes in their financial
    situation to find a resolution to that collection issue.
        Mr. Cummings. And when you find--you know, and I talk about
    people in this situation because, you know, some people think
    that there are folks who just do not want to pay the taxes. But
    I guess you are beginning to find--and I guess the IRS is
    beginning to prepare for people who may want to pay, but just
    do not know what to do because they just do not have the
    resources. And these are people who may have had--and correct
    me if I am wrong--all the way up to now a consistent pattern of
    paying their taxes and paying them on time and doing--just good
    American citizens.
        Ms. Tucker. Absolutely. I think the heartening thing is the
    majority of taxpayers, they do file and pay on time. That is
    one of the foundations of a voluntary tax system, that the
    majority of folks do come in and file and pay. The other thing
    that we see--and actually, in some ways, the Federal work force
    is a microcosm of the entire population. We do see Federal
    employees, much like folks in the public sector, that have life
    events, whether it is the spouse losing a job, an illness, that
    does result in folks running into some difficulties, saying I
    need a little help. I need some time to pay, or my situation is
    such I am not going to be able to pay for the foreseeable
    future. And we do everything we can to work with folks to try
    and resolve that.
        Mr. Cummings. Now let us say a person is trying to do that.
    They have cooperated. They have requested some leeway to pay.
    What kind of status do you--what do you call that? I mean, you
    do not call it ``seriously delinquent.'' But what might you
    call that?
        Ms. Tucker. So that--and by the way, that is a great
    question. I was trying to figure out how to work that into my
    testimony. You know, if someone is under a good payment
    agreement, in our mind, they are compliant. I mean, they have
    acknowledged their tax liability, and they are saying here is
    what I am doing to get current with that. So we look at that as
    someone in good standing. We have worked an agreement with
    them. They are putting it off, or they are in good standing if
    we say at this point in time you have a hardship, you do not
    have ability to pay, but then at the point in time we see
    income being generated again, in other words, they are
    receiving a W2, then we will go back and say, hey, your
    situation has changed, let us talk.
        Mr. Cummings. The document that you talked about just a
    minute ago, the one that you said where you are laying out all
    of the options and everything, how is that circulated? And the
    reason why I am asking this series of questions is because I
    just want us to be cognizant of the fact that we got some
    people going through some difficulties. There may be people
    that may not know about the things you just said. But then they
    fall into this seriously delinquent situation, and then the
    next thing you know, they have lost their job. Then they cannot
    pay.
        Ms. Tucker. Right.
        Mr. Cummings. But I want to make sure that we are--and I am
    very glad, by the way, to hear the IRS doing that. That is a
    good thing. But I was just wondering--so you think that is a
    good option, the things that you just laid out there?
        Ms. Tucker. Absolutely. The other thing that we are very
    focused on is using a lot of non-traditional ways to get that
    information out. So in addition to the regular ways, the
    posting on our Web site, we are reaching out to community
    coalitions. We are reaching out to the State unemployment. Say
    folks might actually be coming into file unemployment. We are
    reaching out to other Federal assistance links where people
    might be coming in, you know, to get other types of assistance.
        But obviously, the additional help in getting the word out,
    we would appreciate.
        Mr. Cummings. And actually, I see that my time is up. But
    it would be also helpful--and I know you are probably already
    doing this--if you reach out to Members of Congress so we can
    have that on our Web sites to help our constituents.
        Ms. Tucker. Absolutely. If we have not done that, we will
    do that immediately.
        Mr. Cummings. Thank you very much.
        Mr. Lynch. Thanks, gentleman. I yield myself 5 minutes. I
    realize that this is a technicality, but lawmaking is all
    technicality. I have gone over the bill, and the sections that
    provide an exception to termination, a debt that is being paid
    in a timely manner under 6159 of 7122 of the code, or a debt
    with respect to collections under section 6330 or 6015, none of
    that, none of those sections, covers garnishment. So as
    written, this would require the termination of a person who was
    having their wages garnished because none of these exceptions
    covers a person who is having their wages garnished. That is
    just one point. It is a point of law, but it is a point
    nonetheless.
        Second, I know you have said previously that we treat
    everybody the same--I thought Mr. Connolly raised a great
    point, that we track Federal employees. And I know you have
    your hands full doing that. I also want to point out that H.R.
    572, which deals with contractors, has a waiver from debarment
    that can be considered. There is no such waiver of termination
    in H.R. 4735.
        Let me turn to the practicality issue, though. Right now,
    you do this for IRS employees, right?
        Ms. Tucker. Yes, sir.
        Mr. Lynch. How many folks do you have over there the IRS?
        Ms. Tucker. Right now, because it is filing season, we are
    running, I think, roughly around 90,000 employees.
        Mr. Lynch. 90,000?
        Ms. Tucker. Yes, sir.
        Mr. Lynch. OK. H.R. 4735, my friend Mr. Chaffetz's bill,
    would require us to do the same thing you are doing, tracking
    employees, for every Federal employee, every Federal retiree,
    every Postal employee, and every applicant for a Federal
    position. Now forget applicants for Federal positions for a
    minute. But I did the math here. Five million people. Five
    million people, plus all the people who apply for a position
    with the Federal Government, you would need to vet them. Let us
    forget the privacy issues here for a second. You would need to
    track the tax status of every single person.
        What does it cost you now to do 100,000? We are going to
    expand this by 70 times. Multiply by 70 what you are doing now
    for the IRS under this bill.
        Ms. Tucker. You know, of course, there are a lot of
    unknowns about, as you mentioned, the disclosure issues.
        Mr. Lynch. Could you speak into that mic a little bit?
    Thank you.
        Ms. Tucker. Sorry. You know, our current process for our
    employees is a direct data match. How we see this a little bit
    differently, it would almost be like the tax checks that we do
    for some other Federal agencies right now, where they have to
    secure consent from the taxpayer. And so, for example, some of
    the government loans that are given, they will ask for a
    consent to be filed by the individual that is supplying. We do
    the check, have they filed, have they paid, and we send it back
    to that agency.
        So that was the closet program that we currently
    administer.
        Mr. Lynch. Yeah.
        Ms. Tucker. That program--our guesstimate is that it is
    roughly $2.25 per transaction. So we had looked at the fact
    that there is roughly 9 million current Federal employees and
    retirees. And so if you assume the $2.25 per duration of a
    transcript--and this is very rough, very ballpark--you know, we
    are talking about $22 million if it was administered with the
    consent-based program, only giving a transcript back to the
    agency.
        Mr. Lynch. So you think you would be able to investigate
    the tax status of every single Federal employee and every
    single applicant for a Federal position?
        Ms. Tucker. No. What we would be able to do under the
    existing system is much like we do for other Federal----
        Mr. Lynch. Can you do this with existing staff?
        Ms. Tucker. Oh, absolutely not.
        Mr. Lynch. Well, $22 million is not a big number. I am just
    asking you physically. You are not scaring me with $22 million
    to investigate 9 million Federal employees. And I am asking
    you, if that is all it is, that is a pretty reasonable request,
    putting all those other issues aside. What would you need to
    do, the manpower----
        Ms. Tucker. I do not think we know, Chairman Lynch. The
    figure that I cited is based on the fee that we charge right
    for generating a transcript, which is actually--you know, we
    are then counting on the agency that we give that transcript
    back to to be able to interpret what it means, which I think
    that would be a concern as well.
        Mr. Lynch. OK. My time has expired. I am going to let that
    go. The Chair recognizes the gentleman from Utah, Mr. Chaffetz,
    for 5 minutes.
        Mr. Chaffetz. Thank you, Mr. Chairman. No doubt we have a
    multibillion dollar problem, and we are just trying to make it
    better.
        My understanding is that wage garnishment is a levy, not a
    lien. Would that be accurate? Wage garnishment. If we were
    garnishing an employee's wages, that is a levy. It is not
    necessarily a lien against them. Is that accurate?
        Ms. Tucker. A garnishment is part of the levy program.
        Mr. Chaffetz. So it is actually not a lien.
        Mr. Lynch. She did not say that.
        Mr. Chaffetz. Well, the language is pretty clear about a
    lien as opposed to a levy, but--and I do think we owe an
    obligation to--and again, there are different people in
    different categories. Certainly I think it is prudent--and I am
    in, I think, total agreement with the President's philosophy
    and principle here that we ought to be looking closely at
    applicants. And again, I would go back to the quote, and given
    the essence of the time, I would just encourage people to look
    at the President's comments of January 20th. And I am somewhat
    mystified by the so-called logic that says, well, of course
    they have more ability to pay if the government is paying them
    more money. The same is true with the Federal employee. The
    same would be true with the contractor. Of course if we gave
    the contractor a multimillion contract or whatever it might be,
    they are probably going to have more ability to pay.
        But I do not think that logic holds water. It does not for
    contractors, and I do not think it does for Federal employees.
    When you have millions upon millions of people who are doing
    the honest thing, the right thing, I think we have a higher
    obligation to those people.
        I understand the concerns and the questions about seriously
    delinquent. I guess my--and I think that is a valid thing that
    we should continue to flush out, which should be also for H.R.
    4735, as well as H.R. 572, because everybody wants to get this
    right and not have to do a fix. And I really do appreciate the
    hearing because I think we are actually making a lot of
    progress here, and I do appreciate it.
        I would ask unanimous consent to enter into the record this
    employee tax compliance analysis that was done.
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        Mr. Chaffetz. It basically says that before--sorry, let me
    get this right here. The Internal Revenue Service Restructuring
    and Reform Act of 1998--you know, there are multiple factors.
    And I am not trying to oversimplify this. But I do want to
    highlight the fact that between 1993 and 2007, in the IRS
    employees, before they had this new program, there was a high
    of 19,163 people that were having tax compliance issues at the
    IRS, and reached a low of 8,298 in 2005.
        I recognize that the stats within this chart are--you do
    not necessarily have them right in front of you, and they are
    somewhat complicated. But I would like to enter it into the
    record because I think what you will see is the Restructuring
    and Reform Act of 1998--that statistical average of the number
    of IRS employees complying, not falling into this category of
    having delinquent taxes, is significantly lower, in fact 39
    percent lower, than before it was in there.
        I for one do not find that there is a coincidence on the
    fact that, yeah, there are more difficult consequences.
    Consequently, you got a lot of people's attention. And a lot of
    people said, wow, I got to take this seriously. I think that is
    a benefit on not only the contractor side. I think that is a
    benefit on the Federal employee side.
        And I do think, Mr. Chairman, that there is something--and
    I am running out of time here. This idea that somebody is
    trying to do the right thing, somebody is trying to dig out
    from the hole that they are in--but the IRS maybe in the code
    does not have enough time. I think we should look at maybe
    extending that time. If somebody is willing to take a good
    portion of their paycheck, and they have a wife and kids, and
    they have--I am totally open to extending the amount of time
    because if the IRS is testifying here today--is saying, look,
    there are some people, when you cap it out at 15 percent, you
    look at the number of years, and we come out with a formula,
    that does not meet the obligation. We are going to have to do
    something more drastic.
        Given the economic times that we are in, I think we need to
    relook at that formula because I want to be compassionate. If
    somebody is doing the right thing, I will bend over backward to
    help them. It is the people that are cheating the system that I
    want to fire.
        But I think if the IRS is being held to a standard where
    that formula is just not working because we do not have time,
    then let us introduce some legislation in a bipartisan and
    extend that period of time so they can continue to pay off
    their debt over a longer period of time, and we do not ever
    have to get to the point where we have to put a lien on
    somebody. That is the last thing we want to do.
        With that I will yield back. Thanks for my time.
        Mr. Lynch. I thank the gentleman. If I could just respond.
    If the gentleman's bill lays out the definition of ``seriously
    delinquent tax debt,'' and establishes that when a lien is
    issued, pursuant to that, that person will be terminated, but
    as he says, it provides two exceptions. None of those
    exceptions addresses the tax code with respect to garnishment.
    It is just the way the law works.
        He has cited specific sections, none of which deals with
    garnishment. Now it could be cured. I admit, it can be cured.
    But I am just saying, the way the bill is currently written, it
    does not provide an exception for a person whose wages are
    being garnished. That is all I am trying to maintain.
        The Chair recognizes the gentle lady from the District of
    Columbia, Ms. Eleanor Holmes Norton for 5 minutes.
        Ms. Norton. Very important distinction you have raised, Mr.
    Chairman, because the government is getting its money if
    garnishment is occurring.
        I was pleased that the ranking member did indicate
    flexibilities, not only in light of the present economy, but in
    light of the fact we are talking about individuals whose
    circumstances we cannot know very much about because they are
    bound.
        I think what is most important for me is to use what we
    have in place as the; I should say about what we have in place
    as the only program in place now in which Federal employees do
    get some sanctions. And if the IRS has been doing that for
    reasons Ms. Tucker has testified that have to do with its
    specialized nature, I would think we want to make clear before
    we spread that to annuitants across the more than 2 or 3
    million employees in annuitants who have nothing to do with the
    code, we want to be very clear about the distinctions, and to
    apply what we have learned from what amounts to a pilot
    project, because it does inform us.
        As to contractors, I do want to say that Ranking Member
    Issa is fond of using the very smallest contractor, and of
    course that person is like you and me, and he might be selling
    paper clips to the government. OK. That is not what the average
    taxpayer has in mind when they hear a contractor is not paying
    his income tax. And we might want to look at the difference
    between large and medium-sized contracts and the very small
    contractors that are indeed akin to individuals.
        On garnishment, at the IRS, are you fired if your wages are
    being garnished?
        Ms. Tucker. You know, I am not--let me think through how
    our 1203 works. The automatic removal, the 1203 statute that we
    have talked about, is for willful failure to file, and then
    willful understatement. So no, if your wages are being levied,
    garnished, that is not a removable.
        Ms. Norton. You are talking about the IRS----
        Ms. Tucker. At the IRS.
        Ms. Norton. This is a distinction that I ask us to keep in
    mind, that even at the IRS, if the government is getting its
    money, then the notion that has been raised here, how are you
    going to pay if you get fired, begins to disappear. And even at
    the IRS, there has been some understanding that the government
    is getting its money. And willfulness, of course, has been
    taken care of.
        Now one of the problems that came up--garnishment has
    importance for us to bring out here because there is a great
    distinction between the government getting nothing and
    garnishing your wages, and you are getting it. And that IRS
    employee can remained employed.
        But we had a lot of trouble at our hearing on this lien
    business. And I know why we had it, because under the code, if
    the lien is filed, then courts have held you could proceed
    immediately. And we had lots of trouble in understanding
    whether at the IRS or otherwise the government would proceed
    immediately.
        You testified that the lien is to protect the government's
    right.
        Ms. Tucker. Uh-huh.
        Ms. Norton. Now that may be before you know if it is
    willful, for example. Can you establish that if a lien is filed
    that even at the IRS there would not be an automatic firing of
    the employee?
        Ms. Tucker. The lien is filed to protect the government
    from----
        Ms. Norton. And only for that purpose.
        Ms. Tucker. And at the point in time we were looking at the
    collection statute. So even if someone is one a wage levy or we
    are levying bank accounts or other income streams, if it looks
    that the sources will not full pay the debt before the
    collection statute runs, then they put the lien in place to
    protect the government's interests.
        Ms. Norton. This is very important. If we understood--if
    there were regulations where we understood that the lien was--
    if I can use an old-fashioned term--comes at the end of the
    exhaustion of remedies, it would make some of us feel more
    comfortable than what we understand the code means by lien. And
    what the courts have said--a lien is there; I do not have to do
    anything else. Again, regulations could clear that up. It seems
    to me before we even considered going to the rest of the
    workplace, we would have to understand that.
        I would like to give an example. A lot of folks file but
    they want to contest or dispute. Now you could be with the IRS
    if you wanted to do that, too. If you do not believe that you
    owe the government the money, are you required to pay it, even
    if you are contesting?
        Ms. Tucker. No.
        Ms. Norton. And are willing to pay it if you, ``lose?'' Are
    you required to put that money up front?
        Ms. Tucker. The thing that is in my written testimony, it
    talks about the four notice process.
        Ms. Norton. The what?
        Ms. Tucker. In my written testimony, it talks about our
    four notices. Then it talks about the point in time when we
    begin the levy or lien procedures. The taxpayers always have
    the opportunity to appeal. And I think to Chairman Lynch's
    point. It is an appeal process within the----
        Ms. Norton. But I am talking about paying. You know, they
    say I owe $2,000. I say I owe $1,000. I got to pay the $2,000
    and then come back or lose my job at the IRS?
        Ms. Tucker. No. So you are talking about IRS process.
        Ms. Norton. I am, because I am learning from the IRS what
    to do with other employees.
        Ms. Tucker. You know, we will have to get back with you on
    that one as far as the extra process of the lien filing with
    our employee because I want to make sure I give you the right
    answer. So can submit that for the record?
        Ms. Norton. I would ask you would within 30 day get to the
    chairman what to do when you may think that you are being
    overcharged by the IRS, and you do not have the money. Your
    accountant says, look, pay what you can, what you believe you
    owe, but be on notice you may have to pay more if you lose the
    appeal. I am concerned with whether you have to pay up front,
    Mr. Chairman, or whether you get garnished or get your lien
    right there.
        Ms. Tucker. And we will be glad to provide that.
        Ms. Norton. Thank you very much.
        Mr. Lynch. Thank you. I guess, I do not want to beat this
    lien thing any more, but in my earlier discussions with the IRS
    they said that they use sort of a belt-and-suspenders approach
    when there is that tax delinquency out there.
        So they may have, they may have approaches, such as
    garnishment and other things, that they are trying to work. But
    in many cases I was told, just to be sure that the taxpayer is
    protected, that lien goes in place. And the taxpayer advocate
    was saying that it is almost like a mantra; it is an automatic
    thing that is done over at the IRS, that we put the lien in
    place to protect the taxpayer's position. Is that true, or is
    that not true?
        Ms. Tucker. It is true. To go back to the notice process, I
    mean, we do not go out and file a lien automatically. We look
    at the four-notice process, we get to the end of the time. We
    begin hopefully discussion with the taxpayer, because at that
    point we are still hoping they will come in with a voluntary
    installment agreement.
        As we look, then, to say do we need to start filing the
    levies, and we look at the levy sources. If it does not appear
    that those levy sources can full pay within the collection
    statute period, or if we have better reasons to think well,
    gee, the taxpayer is going to begin discharging himself of
    their property, then we will put a lien in place to protect the
    government's interest, while we continue to either pursue the
    other levy sources.
        And the reality is--and I do not have the data with me, we
    can get this back to you--the number of Federal tax liens filed
    in the scope of our overall collection program is, it is truly
    not a huge number compared to the collection interactions we
    engage in.
        Mr. Lynch. OK. So you get more from non-lien activity than
    you do lien activity.
        I know this is a big ask, and I am willing to give you 2
    weeks to come back with this. But I would like to, you know, we
    are talking about, in this bill, investigating the tax status
    of every single Federal employee, every single retiree, every
    single person at the Post Office, every single person that
    applies for a Federal position.
        I happen to think that the cost of that will be staggering,
    in terms of if you are going to do it right, apart from the
    privacy issues. Can you get me a number, in terms of how many,
    I want to know how many new employees you are going to have to
    hire to run that program. And you know, the training costs, the
    hiring costs, office space, equipment, full-time equivalencies
    required, and any other, any other costs that you might, you
    might have in implementing that. Because I seem to think it is
    going to be more than $22 million, you know, especially with
    all the work you have to do right now.
        But I really want to see that. And if you could break it
    out so that we do the Federal employees' costs, and then
    applicants for Federal positions, so we can figure out----
        Ms. Tucker. One of my colleagues, Chairman Lynch, is
    pointing out that the cost that we talked about, the $22
    million, that is just for pure generation of the straight
    transcript. And so----
        Mr. Lynch. Yes, it did not sound to be that much in depth.
    We are talking about making sure that these people are in
    compliance.
        Ms. Tucker. Right.
        Mr. Lynch. I want to know every single Federal employee,
    whether they are in compliance with the Tax Code. And if they
    are filing jointly, I need to know if their spouse is compliant
    or behind. And the same thing with every single person at the
    U.S. Postal Service. And I need to know every single person
    that applies for a government position, in the Federal
    Government. And if they are filing jointly, I need to know what
    their spouse is doing, OK?
        So if you can just spit out that number and tell me what
    the cost is there, because boy, we are going to get to the
    bottom of this and find out who these people are that are not
    paying their taxes. It may cost us more than we bring in, but
    by God, we are going to get to the bottom of this.
        Mr. Chaffetz. Mr. Chairman, if I may.
        Mr. Lynch. Sure, I will yield.
        Mr. Chaffetz. My understanding is we have a spreadsheet,
    broken out by departments with very specific numbers, down to
    the dollar for each department, and where they are at, and what
    percentage of compliance. I would hope that is not going to be
    a major exercise.
        If you came up, and you said, for instance, that the
    balance owed, let us take here Administrative Office of the
    U.S. Courts, $9,549,207, and at a delinquency rate of 2.24
    percent. The calculation of that number would be rather simple.
        I think obviously, moving forward on this, the scoring of
    any types of things would obviously be part of the equation in
    passing any sort of legislation. And I think it is a very fair
    question.
        I do see the Office of Personnel Management actually having
    to deal more with this than necessarily the IRS. I mean, I
    think part of the principle is here that we are going to deal
    with Federal employees and Federal contractors and the general
    public in an equal footing.
        But there is going to be a burden, if you will, of the
    Office of Personnel Management. It is going to have to actually
    implement this, and put it into their programs and disseminate
    that out. I think that is a legitimate cost. But I think that,
    at least from I am just thinking off the top of my head, I did
    not know you were going to ask that, they are the ones that are
    probably going to have more of an impact than necessarily the
    IRS. Because they have policies and procedures they have to
    deal with. They deal with millions of people.
        Ms. Tucker. If I might, though, the data that we report
    through FERDI, because we are talking about very serious
    consequences as far as have you filed or have you paid, our
    data is from a snapshot in time; typically, on September 30.
        Mr. Chaffetz. Right.
        Ms. Tucker. To do the complete tax check, much like we do
    for other agencies where it is not just for providing the
    transcript, for someone to interpret, to look at a transcript
    and say did you file and pay. A more comprehensive tax check,
    where we actually go in, we analyze the transcript, IRS is
    doing the analysis, and we write back to the agency saying--and
    I will pick on my colleague, Mr. Williams over there.
        If we were to actually have to write back to Mr. Williams's
    employer and say we have completed a tax check on Mr. Williams
    for the period of time X, Y, and Z, then we will be spending
    additional resources to say yes, he filed on time, but by the
    way, he owed $200, but he is under a good installment
    agreement. Then we would also, if he was not under an
    installment agreement, we would be obliged to say he filed, but
    he is in, he is currently not in compliance with collection.
        So there would be, I think to clarify your point, Chairman
    Lynch, the giving of a transcript to another agency, for them
    then to interpret what it means is the $2.25 cost I talked
    about, where we are just producing a transcript.
        To do what I believe you are asking, where you would want
    us to do the analysis and do an individualized report on each
    Federal employee, that would have a far greater impact on our
    resources and ability to do that I think in a manner that would
    be fair to the Federal employees we were reporting on.
        Mr. Chaffetz. Mr. Chair, if I can just----
        Mr. Lynch. Sure, go ahead.
        Mr. Chaffetz. And I appreciate your generosity here. I
    think privacy is of the utmost concern. The only people that
    should be classified in this are people that have a lien. And
    that is a much significantly smaller population than doing
    something on each and every single employee.
        Certainly doing a brief background check to make sure that
    a prospective employee does not have a lien is something that I
    do think we should engage with. But you know, again, I just
    want to, for the record, I want to make sure that we are also
    looking into concerns of privacy.
        Mr. Lynch. Let me just claim some time here. We cannot do--
    and Ms. Tucker, you can help me with this. I do not believe we
    can do a snapshot in time of people who are, and have a vetting
    of people who are applying for a Federal position. It does not
    work that way. They are not known entities; they are new
    entities.
        You would need to do what you are asking for in this
    legislation is to determine the tax compliance on one tax
    compliance status of that applicant, just as you are asking for
    the same information for every Federal employee and every U.S.
    Postal Service employee.
        Mr. Chaffetz. We are simply trying to ask whether or not
    they have a lien. Do they have a lien, do they not have a lien.
        And my understanding is a lien becomes a public document.
    These other interactions that they are having with the IRS are
    confidential in nature, and should remain so.
        Mr. Lynch. But you are missing the point here. In order to
    fire a person who has a lien, you have to do a, you know, today
    they have no lien, next month they have a lien.
        In order to catch that--you are asking that when people
    have a lien, they get fired. And so you need to track that
    employee so you know when they have a lien, they get fired.
        Ms. Tucker. Maybe I came up with the super statute, because
    I do not think I put this into my testimony. So for 2008 or
    basically any other years, just to give you a percentage notion
    of how many of the folks that are in FERDI actually really
    moved to a lien status, it is roughly only 12 percent. Most of
    the folks that we are identifying through FERDI, we move them
    into compliance, full compliance, through the wage levy or levy
    of other sources. So I just thought that was important for you
    to understand.
        Mr. Lynch. That is on that one date, the snapshot in time
    that you took, right?
        Ms. Tucker. Correct. So----
        Mr. Lynch. Not tracking these people all the way through
    the system.
        Ms. Tucker. No, sir.
        Mr. Lynch. OK. All right. Ms. Tucker, I think you have
    suffered enough, but let me just ask----
        Ms. Tucker. It has been a pleasure. Just like with
    everybody at work. [Laughter.]
        Mr. Lynch. Yes, I am sure. If there are no further
    questions, I would like to just allow Ms. Tucker to go. And we
    thank you for your willingness to come before the committee and
    help us with our work. Thank you very much. Have a good day.
        Ms. Tucker. Sure, my pleasure.
        Mr. Lynch. Thank you.
        Ms. Tucker. Thank you.
        [Pause.]
        Mr. Lynch. I would like to welcome our next panel of
    witnesses.
        [Recess.]
        Mr. Lynch. Be seated. Welcome. Before we swear our
    witnesses, I will first offer some brief introductions.
        President Colleen Kelley is the President of the National
    Treasury Employees Union. Welcome back.
        The Nation's largest Federal independent Federal sector
    union representing employees in 31 different government
    agencies. Ms. Kelley, a former IRS Revenue Agent, was first
    elected to the union's top post in August 1999.
        Mr. J. Ward Morrow is an assistant general counsel for
    legislation for the American Federation of Government
    Employees, the AFL-CIO. Before joining AFGE, Mr. Morrow served
    as an assistant State's attorney for Baltimore City, and
    special assistant U.S. attorney.
        Mr. Richard Oppedisano was elected national secretary of
    the Federal Managers Association in March 2004, a position he
    has held since that time. Prior to his retirement from the
    Civil Service in 2004, Mr. Oppedisano served as Operations
    Officer and Chief of Staff in the Office of the Commander at
    the U.S. Army Watervliet Arsenal in Watervliet, NY.
        Mr. Christopher Rizek is a member in Caplin & Drysdale's
    Washington, DC, office, where he represents taxpayers and all
    types of Federal, civil, and criminal tax controversy matters;
    and also guides clients through IRS audits, prepares
    administrative claims, and litigates tax and tax-related cases.
    Welcome to you all.
        Let us see, why do not I do this first, and we will get you
    all sworn in. And then we can allow you to offer your opening
    statements. Could I ask you all to rise and raise your right
    hands?
        [Witnesses sworn.]
        Mr. Lynch. The Chair now recognizes President Kelley for 5
    minutes.

      STATEMENTS OF COLLEEN KELLEY, NATIONAL PRESIDENT, NATIONAL
      TREASURY EMPLOYEES UNION; J. WARD MORROW, ASSISTANT GENERAL
      COUNSEL FOR LEGISLATION, AMERICAN FEDERATION OF GOVERNMENT
      EMPLOYEES, AFL-CIO; RICHARD OPPEDISANO, NATIONAL SECRETARY,
     FEDERAL MANAGERS ASSOCIATION; AND CHRISTOPHER RIZEK, GENERAL
                 COUNSEL, CAPLIN & DRYSDALE, CHARTERED

                       STATEMENT OF COLLEEN KELLY

        Ms. Kelley. Thank you very much, Chairman Lynch, Ranking
    Member Chaffetz, and distinguished members of the subcommittee.
    I appreciate the opportunity on behalf of the National Treasury
    Employees Union to provide comments on H.R. 4735, which would
    require the Federal Government to fire workers who have Federal
    tax liabilities, and prohibit job applicants with serious
    delinquencies from being hired.
        NTE firmly believes that each and every Federal employee
    should pay their taxes in a timely manner. But we believe this
    legislation would deprive them of the right of due process
    afforded to other taxpayers.
        Furthermore, we believe that terminating their employment
    or preventing them from obtaining gainful employment would only
    serve to worsen that financial situation, and lessen their
    ability to repay any taxes owed, or to be compliant in the
    future.
        Under H.R. 4735, a prospective or current Federal employee
    would be prohibited from Federal employment based on the
    issuance of a lien, which has been discussed in great detail,
    which is not a final determination of tax liability. When the
    IRS files a notice of Federal tax lien to secure the
    government's interest as a creditor in competition with other
    creditors in certain situations, such as bankruptcy proceedings
    or sales of real estate, a taxpayer has a right to challenge
    the issuance of a lien.
        H.R. 4735 does not include any minimum tax delinquency
    threshold that would trigger the mandatory termination
    provisions. I would note that H.R. 572, the Contractor Tax
    Delinquency legislation that is also under consideration by the
    subcommittee, would only prohibit the awarding of contracts or
    grants that are in excess of $100,000.
        We also have a number of concerns about how the process for
    determining the eligibility of an applicant for Federal
    employment with a tax debt would work.
        In particular, as has been discussed, who would be
    responsible for investigating an applicant's tax situation, and
    making the determination of whether or not they are eligible
    for Federal employment? Where would the funds come from? And
    would an applicant have a right to respond to any problems that
    are found?
        There are laws and regulations in place that address tax
    debts owed by Federal employees. Under 5 U.S.C. 2635, agencies
    can take disciplinary action against employees for failure to
    satisfy their just financial obligations, including their
    obligation to pay Federal, State, and local taxes. These
    disciplinary actions can range from counseling to removal.
        In addition, in 1997 Congress enacted legislation
    authorizing the establishment of the Federal Payment Levy
    Program, which the IRS discussed in detail, allowing the 15
    percent levy of certain Federal payments made to delinquent
    taxpayers. This list of Federal payments, as we have heard,
    does include Federal employment retirement annuities and
    Federal salaries.
        This has been a very successful program, especially with
    regard to withholding payments from Federal salaries. NTEU has
    experience with mandatory termination rules for tax
    infractions. Commonly known as the 10 deadly sins, Section
    1203, which has been discussed, of the IRS Restructuring and
    Reform Act, outlines 10 infractions for which IRS employees
    must be fired. One of the 10 infractions is the untimely filing
    of Federal income taxes, even when a refund is due.
        N.T.E.U believes mandatory termination for even minor tax
    infractions is unduly harsh, and should not be the only
    disciplinary action available. The system in place at the IRS
    takes away discretion from managers, and requires large amounts
    of resources to administer.
        Mr. Chairman, as I have said throughout my testimony, I
    believe that everyone should pay the taxes that they owe. There
    are penalties under the Tax Code for those that do not, and
    there are processes for recouping tax debts from Federal
    employees that are very effective. Requiring the firing of
    Federal employees that owe back taxes, and creating a huge new
    program to check the tax status and lien status of all Federal
    job applicants, is not the best way to address this problem.
        Some may owe taxes because of the actions of a spouse, a
    previous failed business enterprise, or financial hardship and
    illness. Denying them Federal employment that they are
    otherwise qualified for will certainly be unfair in some
    situations, and in many situations will lead to a higher
    likelihood that the government will never receive the taxes
    that it is owed.
        Thank you again for this hearing, and I welcome the
    opportunity to answer any questions.
        [The prepared statement of Ms. Kelley follows:]

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        Mr. Lynch. Thank you. Mr. Morrow, you are now recognized
    for 5 minutes.

                      STATEMENT OF J. WARD MORROW

        Mr. Morrow. Mr. Chairman and subcommittee members, my name
    is J. Ward Morrow. I serve as assistant general counsel for
    American Federation of Government Employees. We represent more
    than 600,000 Federal and District of Columbia workers.
        I am pleased to appear before you to discuss the issues
    related to H.R. 4735.
        AFGE does not support singling out of Federal employees who
    face tax problems. Federal employees are patriots who are
    engaged in public service so that they can contribute to
    helping other fellow Americans. Many civilian employees of the
    Department of Defense serve in supporting roles for deployed
    military personnel.
        Others honorably serve our country in the Department of
    Homeland Security. Others care for wounded veterans. But all
    Federal employees serve the citizens of the United States.
        Sometimes people end up in disputes with the IRS because
    their tax situation is complicated, by a divorce, death of a
    loved one, or other difficult circumstances. Each situation
    must be reviewed on a case-by-case basis.
        Currently Federal employees may be disciplined, up to and
    including termination, for tax misconduct. The Merit Systems
    Protection Board has upheld adverse actions for tax impropriety
    against even non-Treasury employees where they have found a
    nexus to Federal employment.
        For example, in the James A. Mitchell v. United States
    Postal Service, 32-MSPR-362-1987, the U.S. Merit Systems
    Protection Board upheld an Administrative Law Judge's finding
    of the nexus between conduct and the efficiency of the Service.
        Some circumstances, such as employment that required a
    security clearance, or perhaps a suitability determination, a
    serious delinquency may result in the termination of an
    employee due to the nature of that type of employment.
        We believe agencies currently have sufficient authority in
    these areas to make such determinations in appropriate
    circumstances. The matter of a lien being imposed may not be a
    sign that an employee is in a deliberate default.
        It is vital that Federal employees be afforded all of their
    due process rights that Title 5 allows. Some situations may be
    far more intentional and severe than others. Some situations
    may be appropriate for a lesser penalty or other type of
    outcome. It is also possible in this day and age for a
    situation such as identity theft to take place, or other type
    of error that the agency may make. In those cases the Federal
    employee may be incorrectly or unfairly identified as being
    seriously delinquent in their tax payments.
        We believe Federal employees must be given sufficient
    opportunity and due process to show that they are not seriously
    delinquent, as defined by this legislation; and/or that
    termination is not the appropriate penalty in specific
    circumstances.
        We can only speculate as to the variety of situations,
    particularly in this economy, that might exist, so we can be
    clear that a one-size-fits-all penalty will not be able to be
    fairly accommodating all of these possible situations.
        AFGE does applaud the goal of getting all Americans to pay
    their legally required amount of taxes. In many, but not all,
    instances, we believe the goal is best accomplished by having
    an employee who is in default to continuing employment, so
    there is a better opportunity of payment. It stands to reason
    that if an individual is unemployed, they will be in default
    for a far longer period of time, and have less incentive to pay
    any payments.
        We believe any legislation needs to provide for the
    possibility and the type of construction manner for encouraging
    employees, where appropriate, to remain employed; and to get an
    employee who is in default to pay their taxes. To erect a
    permanent barrier to any Federal employment for someone who is
    seeking to be employed, and in good faith desires to make
    payments once employed, would be counter to the desire to get
    the debt paid.
        Since each situation is different and want different
    factors to be examined, it makes more sense to have a process
    that encourages payment, rather than one that may frustrate
    payment.
        In the exercise of their rights, Federal employees might be
    able to show that in fact they are being incorrectly or
    unfairly treated. They deserve this opportunity, rather than a
    rigid penalty, it is fair to look at each situation
    individually for a system that fails to give Federal employees
    a proper process to vindicate themselves.
        Based on the unique needs of the Federal Government, we
    believe that there may be circumstances where the specialized
    talents of an employee might be necessary, even where a tax
    debt might exist. We believe such situations, which we might
    now not even be able to articulate, may exist and could require
    the employment or continued employment of certain individuals
    for a period of time. Any law will need to have this type of
    legitimate need of government service provision to provide the
    adequate flexibility for government operations.
        Currently the IRS has a variety of powers with which to
    enforce the tax laws. We defer to them as to the variety of
    provisions that currently exist. We would note that they do
    have criminal and civil provisions to deal with those who
    deliberately and intentionally fail to pay their legitimate
    taxes.
        The agency is given discretion as to how to seek those
    enforcement provisions, and by the very nature of criminal
    enforcement, the agency has provisions to deal with the most
    severe and intentional violation.
        AFGE recognizes the legislation would attempt to allow for
    a situation--if I may finish my statement, Mr. Chairman--when
    agreement may be entered into by the IRS. This legislation,
    though, does fail to include those who may be making attempts
    to pay, but either have not or cannot agree to the terms
    required for an agreement acceptable to the IRS.
        Again, we state a case-by-case review is more appropriate
    to these types of circumstances.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Morrow follows:]

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        Mr. Lynch. Thank you, sir. Mr. Oppedisano, you are now
    recognized for 5 minutes.

                    STATEMENT OF RICHARD OPPEDISANO

        Mr. Oppedisano. Chairman Lynch, Ranking Member Chaffetz,
    and members of the subcommittee. As Federal managers and
    stakeholders in this legislation, we are----
        Mr. Lynch. Mr. Oppedisano, I am not sure if your mic is
    working.
        Mr. Oppedisano. The light is on. Can you hear me better
    now?
        Mr. Lynch. All right, thank you, sir.
        Mr. Oppedisano. As Federal managers and stakeholders in
    this legislation we are discussing today, we appreciate the
    opportunity to appear before you.
        The Federal Government's most important resources is its
    work force. Federal employees serve alongside their military
    counterparts on the ground in Iraq and other conflicts abroad.
    They are on the cutting edge of disease research, energy
    initiatives, and many social programs that deliver needed
    services to millions of Americans. They are doctors, engineers,
    law enforcement officers working to secure our nation's
    borders.
        Despite their dedication to advancing the nation's
    interests, Federal employees continue to serve as a punching
    bag for the press, and this mentality has crept its way onto
    Capitol Hill. As we debate H.R. 4735, it is critical that
    Members of Congress isolate this issue from other topics
    challenging the Federal work force.
        We are here today to discuss Federal employees who have
    been seriously delinquent on their tax obligations. We are not
    here today to discuss Federal salaries, turnover rates, or a
    multitude of other issues that may deserve debate at some other
    time.
        When public figures lump these issues together, the result
    is a firestorm of anti-Civil-Service zeal that detracts from
    the debate at hand.
        Legislation introduced by Ranking Member Chaffetz would bar
    Federal employees facing serious delinquent tax debt from
    serving in the government. Let us look at the facts.
        In 2008, Federal employees, Federal retirees, active-duty
    military and retired military owed $3 billion in unpaid taxes.
    In terms of dollars, military retirees owed the most, with over
    $1.3 billion in unpaid taxes; 97,000 active Federal employees
    account for $962 million of the $3 billion owed. This
    represents less than 5 percent of the Federal work force.
        Of the individuals this legislation would affect those only
    that are seriously delinquent. It is our belief that very few
    fall within this category. However, we must carefully examine
    what seriously delinquent means.
        According to the legislation, it would affect any employee
    who has a lien filed against his or her property in order to
    recover unpaid taxes. First and foremost, as taxpayers
    ourselves, FMA members in no way, shape, or form support the
    action of Federal employees who neglect to pay their taxes in a
    timely manner. It is extremely distressing to hear stories of
    government employees who receive a Federal salary, while
    refusing to follow tax laws.
        While there are many circumstances that justify filing for
    reconsideration, those who purposely bypass the requirements to
    fulfill their tax obligation should be held accountable. When
    these individuals are civil servants, their conduct can cast a
    dark shadow over their fellow co-workers.
        FMA has several concerns with both the intent and practical
    application of H.R. 4735. It is believed that Federal employees
    should be held to the same standards as the rest of the
    American population, receiving no special treatment, while also
    avoiding the bull's eye that so often falls on their backs.
        Approving this bill would severely jeopardize the ability
    of the IRS agents to direct Federal employees down the path to
    tax settlement; instead, resorting to termination. FMA is
    concerned that H.R. 4735 may restrict Federal employees'
    ability to dispute their tax obligations, while stifling the
    IRS from pursuing payment through established channels.
        We are also concerned that this legislation could relate to
    an ongoing tax dispute that is not resolved as of the filing of
    the lien. Additionally, if a lien has been filed, yet the IRS
    is unsuccessful in its attempt to collect payment, and the
    employee is terminated, one must question how the now-former
    employee is going to repay what is owed, while not collecting a
    paycheck. Ultimately, the government would still be unable to
    recoup payment from this individual.
        We believe this legislation seeks to create a system where
    there is always an easy answer to an individual case requiring
    unique existing exemptions exist. Our tax system does not exist
    in a vacuum. IRS agents are successful because they are trained
    to evaluate each case based on its own set of circumstances.
        While there are certainly individuals who not only refuse
    to pay taxes, this legislation may impact a greater audience
    than intended. It is extremely difficult, and perhaps
    impossible, to judge an individual's intent when it comes to
    the filing of a failure to file taxes. Deliberate or fraudulent
    non-payment is vastly different than a technical mistake, yet
    both may lead to a drawn-out appeal process resulting in
    identical determinations.
        Under H.R. 4735, the employee who makes an innocent mistake
    could be deemed seriously delinquent and unfairly penalized.
        In conclusion, there is no doubt that this issue warrants
    discussion and debate. But we at FMA believe the solution of
    the problems may be realized through greater oversight and
    enforcement of tax laws currently in place. If these laws are
    deemed too lenient, new tax rules and regulations that do not
    isolate Federal employees from the rest of the American public
    should be required.
        No one should be allowed to evade paying taxes that are
    owed according to law, a point we can all agree upon. Singling
    out our nation's civil servants, however, is not the answer.
        Thank you again for this opportunity to express our views,
    and I am happy to answer any questions you may have.
        [The prepared statement of Mr. Oppedisano follows:]

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        Mr. Lynch. Thank you, sir. Mr. Rizek, you are now
    recognized for 5 minutes.

                     STATEMENT OF CHRISTOPHER RIZEK

        Mr. Rizek. Mr. Chairman and members of the subcommittee,
    thank you for inviting me to testify before you regarding H.R.
    4735.
        By way of background, I am a member of the Law Firm of
    Caplin & Drysdale, and also with Professor Norton, who is
    leaving, an adjunct professor over at Georgetown University Law
    Center, where I teach tax administrative practices.
        Mr. Lynch. Mr. Rizek, I am sorry, we are having a problem
    with the microphones. Could you please pull that closer,
    please?
        Mr. Rizek. I never have that problem, usually.
        Mr. Lynch. There you go. Good man, thank you.
        Mr. Rizek. Where I teach tax administration practices and
    procedure. I think I was asked to appear on this panel to
    provide some technical and tax procedural advice, and I hope I
    can help you with that. I disclaim any expertise in Federal
    employment or government contracting law, however.
        I begin with the proposition which I do not think anyone,
    including my fellow panelists, can seriously oppose; that
    Federal employees are responsible for meeting their Federal tax
    obligations, just like any other taxpayers in the United
    States.
        However, I would argue that Federal Civil Service employees
    bear a special responsibility to the public to meet their tax
    obligations, for several reasons.
        First, when anyone cheats, it undermines the perception of
    fairness that is essential to our voluntary self-reporting
    system. Federal employees being particularly visible
    beneficiaries of government support are also thus particularly
    visible when they fail to comply with the tax laws. Such non-
    compliance encourages more.
        As the founder of my law firm, Mortimer Caplin, once said,
    large and continued avoidance of taxes on the part of some has
    a steadily demoralizing effect on the compliance of others.
        It is a symbolic breach of public trust when Federal
    employees are non-compliant. We of course expect our civil
    servants to comply with all the laws, but it is especially
    galling when they are paid by our tax dollars, and yet cheat on
    their taxes, and thus fail to contribute to the general welfare
    themselves.
        That is, as I put it in my written statement, doubly
    insulting to millions of hardworking and compliant taxpayers.
    And I would add, I am a former Federal employee myself, twice,
    and I felt a special obligation to uphold the laws of the
    United States both times.
        For these reasons I support the idea of making Federal
    employees subject to special employment sanctions if they fail
    to comply with the tax laws. And to the extent that idea is
    embodied in H.R. 4735, I support it.
        However, as I describe in my written statement, I believe
    there are a number of significant technical changes in the bill
    that are necessary before it is enacted. Most importantly, as
    we have discussed, reliance on the filing of a Federal tax lien
    for the definition of a seriously delinquent tax debt is far
    too uncertain a standard to which to tie a taxpayer's potential
    for future or continuing Federal employment.
        I recognize that standard is drawn from H.R. 572, regarding
    Federal contractors. I would be prepared to answer questions
    about the parallels and differences between those two
    provisions.
        But in her year-end 2009 report to Congress, the National
    Taxpayer Advocate Report you cited, Chairman Lynch, was
    particularly critical of the IRS's lien-filing methodology,
    describing it with adjectives such as arbitrary and
    inconsistent.
        Notice of a Federal tax lien can legally be filed
    immediately upon failure to pay. And Yetta and I and I think
    most people would not consider that to be a seriously
    delinquent tax debt.
        Conversely, I have had many situations where tax debts have
    gone for very long periods of time, which have never had a
    notice of Federal tax lien filed. The purpose of the notice of
    Federal tax lien is just to protect the priority of the Federal
    tax lien, and I would be happy to talk to the panel about that.
        The one single benefit of the notice of Federal tax lien is
    that it is public; and thus, it would not require amendment of
    the Internal Revenue Code's confidentiality provision, Section
    6103. But that does beg the question of how the agency is
    supposed to know of an employee seriously in delinquent tax
    debt.
        I would note that H.R. 542 debars applicants for awards or
    applicants for employment, or applicants for grants, and
    requires them to certify and obtain a waiver of the
    confidentiality before applying for a Federal grant, and
    obtaining one. I think something similar in this regard might
    be beneficial.
        There are a number of other technical issues discussed in
    my statement, but I want to mention only one. The Restructuring
    Act, the IRS Restructuring Act of 1998, on which I worked when
    I was in the Treasury Department in 1998, contained a similar
    provision applicable solely to IRS employees.
        I believe that the severity of the only sanction available,
    termination or non-eligibility for employment, has contributed
    to that provision being used very rarely. I think Ms. Tucker
    testified that it was roughly 475 over the last 11 years.
        I would like to think that IRS employees are also
    particularly tax-compliant, and perhaps the FERDI data does
    demonstrate that.
        But I would suggest that other sanctions, such as
    disciplinary action or ineligibility for promotion or salary
    increases might be considered.
        In short, I commend the members of the subcommittee for
    seeking to address an important and symbolic area of non-
    compliance with our tax laws, and I generally support the
    concept of making such non-compliant grounds for sanction, or
    even termination, of Federal employees.
        I have a number of technical concerns about the specific
    language of H.R. 4735, however, and I would be happy to discuss
    them further with the members or staff of the subcommittee.
        [The prepared statement of Mr. Rizek follows:]

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        Mr. Lynch. Thank you, sir. I have a quick question. We have
    votes on the floor, but I did want to ask--perhaps Mr.
    Oppedisano and Ms. Kelley might be able to answer this best,
    but Mr. Morrow, obviously, it deals with the workload that
    would be required to do a tax-compliance assessment on every
    single Federal employee and every single Post Office employee,
    and all these applicants for Federal jobs.
        You know, in talking to Ms. Tucker earlier, I think we
    might want to rename this bill the Jobs Bill, given the number
    of people it might hire. So that might be a good thing. I will
    have to rethink my opposition.
        But do you have, you know, just a sense of what this would
    require, No. 1? And No. 2, especially with the hiring process,
    and Mr. Oppedisano, as a representative of the Federal Managers
    Association, I hear a lot of complaints about the time that it
    takes to hire folks. We just went through that yesterday at
    another hearing, where we had, we had a change in the approach
    in one of our agencies in hiring more people after a layoff
    was, well, a downsizing was reversed.
        Could you comment on that, on the workload on the IRS to do
    this vetting for all these employees? And also, the effect that
    it might have on the ability of us to hire people quickly, and
    not have these interminable delays, where we have these
    vacancies for months and months and months, and falling behind
    on the work that needs to be done.
        Ms. Kelley. I think the workload would be huge. And it will
    be interesting when IRS, in accordance with your question,
    thinks through everything that really would need to be done,
    and what that would mean for the current Federal employees and
    retirees.
        When you add on top of that the applicants, one of the
    things that struck me listening to the prior conversation was,
    I know--and you can confirm this with the IRS--but the IRS last
    year, just in 1 year, received 600,000 applications for
    vacancies in the IRS. That is just the IRS.
        Mr. Lynch. OK.
        Ms. Kelley. So when I think of that number----
        Mr. Lynch. Do you know how many positions were up? Because
    I know we just had, we have a new, I think we are hiring
    20,000.
        Ms. Kelley. I believe last year the number they reported
    was they hired 18,000, and received 600,000 applications.
        Mr. Lynch. Wow, OK.
        Ms. Kelley. So you know, when I think about that in terms
    of across government, I cannot even begin to come up with the
    number of dollars or staffing that would be needed. But it
    would be huge, it would absolutely be huge. And it would
    absolutely add onto the time for hiring, which of course
    everyone is so focused on, acknowledging it needs to be cut,
    not increased.
        So there are no systems in place that would automatically
    do it today, so there would have to be new systems and new
    resources.
        Mr. Oppedisano. No disrespect to Mrs. Tucker, but I think
    her figures were a little bit on the low side. And I think your
    question was an excellent one, as far as identifying all of the
    costs that would be involved.
        Also, on my resume I was also the Chief of Recruitment and
    Placement at my site for 13 years. I did recruitment for the
    Federal Government in the Department of Army for 13 years.
    Average timeframe for hiring someone from start--and this is
    after we got out, after we received all the internal paperwork
    processed to go out to do the recruiting action--80 days. In my
    opinion, this would at least double that amount of time.
        Our problem is young people today do not want to wait
    around for 6 months to say whether or not they are going to
    have a job. We need to be able to have the ability to make sure
    that we hire these folks, and have the ability to hire these
    folks, pretty darn quick. Or else they are going to go
    someplace else to go to work.
        So to answer your question, in my opinion, it would at
    least double that timeframe.
        Mr. Lynch. Well, Mr. Morrow.
        Mr. Morrow. And if I may, I listened to that question. And
    I think Ms. Tucker in some ways can only look at it from the
    perspective of her agency. Just keep in mind that with each
    agency that they do this with, you are going to have to have
    somebody doing due diligence at the agency, instead of doing
    their regular work.
        And I do not know what the cost of that is going to be for
    all, you know, the number of people across DHS, DOD, for every
    mechanic that they are going to need to process this form on.
    And then they have to fire that individual. The work is not
    going to get done. You might have passports not getting
    stamped, you are going to have tanks not getting fixed. So they
    have to wait and go through the recruitment process. And again,
    somebody is going to have to do that, and there is a cost to
    that.
        So the cost is not simply just to the IRS to do a computer
    printout. There is a personnel cost to each and every agency to
    do the due diligence, and to send the letters, and to do the
    whatever needs to be done, the processing to get the employee
    out the door. And then you are going to have that same cost
    getting employees back in the door if, in some situations, you
    can even find a qualified employee, who then would have to go
    through this yet additional burden.
        So I mean, I think the costs are going to be far higher,
    and maybe you would have to ask almost each agency what it
    would cost to have every one of these people replaced.
        Mr. Lynch. Very good. Thank you. What I would like to do is
    yield 5 minutes to the ranking member, Mr. Chaffetz.
        Mr. Chaffetz. Thank you. Just to followup on your doubling
    of the time, where in the world did you come up with 80 days?
        Mr. Oppedisano. Where did I come up with----
        Mr. Chaffetz. Yes.
        Mr. Oppedisano. We actually tracked, in the Department of
    Army--these figures are available at the Department of Army. We
    actually tracked the timeframes for filling a vacancy once a
    52, which is a personnel action for retirement----
        Mr. Chaffetz. Oh, I believe the 80 days. What I am saying
    is you suggest that with this piece of legislation it would
    double the time. I want to know where and on what basis you
    suggest that it is going to take 80 days to find out whether or
    not a person has a lien against them.
        Mr. Oppedisano. I said in my opinion it would take an
    additional----
        Mr. Chaffetz. I know. I want to know where you got, what
    you base that on.
        Mr. Oppedisano. No. 1, as the gentleman from the AFGE just
    said, there is a staff requirement----
        Mr. Chaffetz. No, I just want to hear what you have to say.
        Mr. Oppedisano. There are staff requirements that are
    required that are a part of all of this. You have to call the
    employee in, you have to do all the additional paperwork. And
    then maybe you have to go back to the stats again, to go back
    to the beginning of the process, due to the fact that person
    may not have been qualified, or may have disgusted and just
    have walked away, and did not want to seek Federal employment
    any more.
        Mr. Chaffetz. I understand.
        Mr. Oppedisano. So my estimate would be that it would
    probably double the process.
        Mr. Chaffetz. If you would like to provide additional
    information, I would love to see it. Because I think your----
        Mr. Oppedisano. It is my personal opinion.
        Mr. Chaffetz. That is just an irrational number that is
    just plucked out of the air for your own personal convenience.
    There is no way----
        Mr. Oppedisano. That is my personal opinion.
        Mr. Chaffetz. And if you want to provide additional
    information, I would love to see it. I do not think it is
    substantiated or based on anything. Other than trying to scare
    people that it is going to take so much additional time.
        Mr. Oppedisano. My statement back to you would be until
    this law, if it ever did become law, and in fact we would have
    to wait and see what happens.
        He asked my opinion as to how much longer----
        Mr. Chaffetz. I am just asking what you based it on. And I
    do not see anything----
        Mr. Oppedisano. Based on the fact that if, in fact,
    something happens where we have to restart the process again;
    if it takes 80 days under the normal process that we have to
    restart the process, why, we would have to restart the process.
        What happens if that individual turns around and either has
    an action taken against him, or walks away from the process for
    whatever reason? You would start your recruitment action again.
        Mr. Chaffetz. You made your point, I made my point. Do you
    believe that there is any additional special responsibility for
    somebody who is a Federal employee? Above and beyond maybe what
    is happening in the private sector?
        Mr. Oppedisano. No more so than any other American citizen.
        Mr. Chaffetz. And do you believe that there is a
    significant difference between contractors and Federal
    employees?
        Mr. Oppedisano. I think there is a significant difference
    between contractors and Federal employees. Federal employees--
    --
        Mr. Chaffetz. In terms of obligation. Do you think that
    contractors have a higher obligation and threshold than, say,
    Federal employees?
        Mr. Oppedisano. I would say no, they do not have a higher
    obligation.
        Mr. Chaffetz. OK.
        Mr. Oppedisano. What I would say----
        Mr. Chaffetz. Thank you, thank you.
        Mr. Rizek. I just want to add in response, I have no idea
    how long it would take. But I do have a data point, which is a
    different data point than Mr. Oppedisano.
        Almost everyone who ever applies for a mortgage in the
    United States these days has to offer a consent to the mortgage
    company to, for the mortgage company to check with the IRS to
    make sure that they are current in their tax obligations. Now,
    that can be a very limited consent, just to see if they have
    filed or have any outstanding tax debt. But there are millions
    of mortgages executed each year, and they IRS turns those
    around very quickly.
        Mr. Chaffetz. Thank you. This idea, Mr. Morrow, the idea
    that--well, let me do this. My time is coming to a close.
        Ms. Norton [presiding]. Mr. Chaffetz, particularly since
    there are five votes, if you would like to take more time and
    do all of your questions now.
        Mr. Chaffetz. Thank you, I appreciate it. My apologies, but
    we have like zero time on the clock, and we have votes on the
    floor.
        So thank you all very much. We appreciate it. If there are
    additional questions or comments you would like to make as you
    kind of think things through, I am very open to this. I just
    want to do the right thing. And I personally, as I said many
    times here before, the overwhelming majority of people, they do
    the right thing. We ought to pat them on the back and
    congratulate them for that.
        But for that small number of people who are skirting the
    system, just like President Obama has pointed out, I, too, want
    to point out. And I think we need to have more serious
    consequences.
        So I thank you again for your time. And thank you.
        Ms. Norton. Thank you, Mr. Chaffetz. I just want to say to
    those who remain that when we get through with health care
    reform, we can get on to other legislation. We hope that the
    witnesses will abide the fact that even this Member will have
    to be excused to go vote on the floor, in exchange for the
    substantial Federal income taxes paid by the residents of the
    District of Columbia without a vote on final passage.
        I am grateful that the House, in its wisdom, has given me
    the vote in the committee as a whole. And of course, I vote in
    this committee and chair a subcommittee.
        But on legislation such as that coming before the House
    now, the House is able to leave me as the majority of the
    hearing, with what remains of it. And I am pleased to play that
    role temporarily.
        I very much appreciate the testimony we have received. It
    is important to hear from the agency. But that would be a very
    one-sided notion without hearing from those who are also
    affected.
        Let me ask you, Ms. Kelley--could I have--and Mr. Morrow,
    perhaps all of you. But Ms. Kelley is particularly able to
    answer this question because of her affiliation with the IRS.
        First let us establish, when did this rule, unique rule for
    IRS employees become effective?
        Ms. Kelley. It was part of RRA-98, so it was passed in
    1998.
        Ms. Norton. So that would be 1998. Did it come up because
    there had been a significant number of IRS employees who
    somehow the agency had found that--this matter, of course, is
    usually private between the employee and the IRS.
        I am trying to understand what led to this special rule for
    IRS employees, what prompted it, what its derivation was.
        Ms. Kelley. In fact, the history of it is that the IRS did
    not even request that Congress provide them with Section 1203
    as part of RRA-98. It was not initiated by the IRS. It was
    added on the Senate floor. And it is nothing that the IRS ever
    supported.
        So from the beginning----
        Ms. Norton. The agency itself never had an opportunity for
    a hearing before this was passed on the Senate floor?
        Ms. Kelley. In fact, they said it was not necessary. Yes,
    that is true.
        Ms. Norton. Thank you, Ms. Kelley. I mean, we are somehow
    led to believe that when something happens of this kind----
        Mr. Rizek. If I may----
        Ms. Norton. Would you--yes.
        Mr. Rizek. The rest of the provisions in Section 1203 that
    Ms. Kelley is referring to were perceived as taxpayer
    protection provisions, and they were introduced as sort of a
    taxpayer----
        Ms. Norton. The rest of the provisions, meaning what?
        Mr. Rizek. Those two provisions were inserted there, I
    think, just because they were making a list of things for which
    they thought IRS employees should be terminated.
        Ms. Norton. The other provisions had to do with taxpayer
    protection.
        Mr. Rizek. For the most part, correct.
        Ms. Norton. Was this perceived of as a taxpayer protection?
    Was this conceived as a taxpayer protection?
        Mr. Rizek. Section 1203 was.
        Ms. Norton. Ms. Kelley.
        Ms. Kelley. But again, this was not supported even by the
    IRS that it be added. And I would also add, in the last 6
    years, including under the prior administration, from 2003
    through 2009, the last administration has proposed, in each of
    its budget proposals, that this Section of 1203 requiring
    termination of IRS employees for tax issues should be
    eliminated, and that provision should not be in place.
        Ms. Norton. Ms. Kelley, somebody has that in his testimony.
    I noted that for the first time. Who had this in his testimony,
    was it you? That the last administration----
        Ms. Kelley. That was me, yes.
        Ms. Norton. Yes. Itself had proposed----
        Ms. Kelley. Yes, six times.
        Ms. Norton [continuing]. Elimination of this, and replaced
    by what?
        Ms. Kelley. That it just was not necessary. To eliminate
    the mandatory termination provisions for tax issues.
    Recognizing that there were already processes in place to deal
    with them.
        The IRS dealt with, as you heard Ms. Tucker testify, they
    dealt with tax issues very seriously in the IRS long before
    RRA-98.
        Ms. Norton. Using what sorts of procedures?
        Ms. Kelley. Using their personnel procedures. It was, they
    did an education process and explained the obligation of the
    higher standard for administering the tax system. Employees
    knew that when they were hired; they knew they could face
    disciplinary action. And it could have been up to and including
    removal. Sometimes perhaps it was, you know, suspensions or
    other penalties, to make clear that they were not in
    compliance. And of course, the goal was to get them in
    compliance.
        So the IRS enforced all of that, but with an understanding
    that they could apply the appropriate penalty, rather than this
    mandatory termination that was part of 1203.
        Ms. Norton. Which all goes to show what we almost went
    through in this very committee, by pasting something onto
    legislation when there has been no hearing. Almost inevitably
    there are unintended consequences, even if you later do it. You
    need to know what you are doing.
        Ms. Kelley. That is right.
        Ms. Norton. The other remedies--I just may followup with
    Ms. Kelley, and then, of course, you will go next. But Mr.
    Morrow indicated the Merit Systems Protection Board, when it
    gets bad enough, in your testimony--the page is not numbered--
    where if it gets bad enough, it can go--and you even cite a
    case--before the Merit Systems Protection Board for tax
    liability.
        Sorry, who else wishes to speak on that matter?
        Mr. Oppedisano. Ms. Norton, I need to get some
    clarification, because I am not an IRS employee. But I
    understand that the rule on the IRS for the firing for non-tax
    payment is not for all of the employees of the IRS. It is just
    for specific employees who are the tax compliance end of it. It
    is not for managerial, supervision, or clerical.
        Ms. Kelley. Actually, that is not true. It applies to all
    employees, including clerical.
        Mr. Oppedisano. OK.
        Ms. Kelley. It has been applied to grade 4s and 5s.
        Mr. Rizek. But it does not apply to non-payment. It only
    applies to willful failure to file or willful understatement of
    a liability.
        Ms. Norton. I am struck by the issue that the chairman
    raised about hiring. Now, as I understand it, the number of,
    and I do not know how many, but many who wish to be employed
    are now subjected to credit checks. And of course, a lot of
    employers do this, where they pull up the credit report. Is
    that not the case for Federal employees, Mr. Morrow, Ms.
    Kelley?
        Ms. Kelley. I do not know if it is routine. I know it is
    done in many cases, but I do not know.
        Mr. Morrow. That would be my answer. I think you would have
    to ask the agency.
        Certainly in situations for law enforcement officers, where
    suitability or national security certifications are needed, it
    would be. But for some positions it might not be. OPM might
    know the answer to that.
        Ms. Norton. This is all very serious, because all of us can
    perceive of employees at certain levels doing certain kinds of
    work where you would want no taint on the employee's record.
    Ms. Kelley has testified if you are a clerk, you are subject to
    the same sanctions, automatic firing, as I suppose somebody,
    until you get to the Commissioner, who can only be fired for
    cause. A very specific procedure.
        We also heard testimony that, as it turns out, a very small
    number have been fired, rather quintessentially small. Does
    that indicate that the IRS has, in fact, operated with some
    degree of flexibility, even with respect to its own employees,
    rather than automatic firing for so-called willful? And that it
    looks at what is willful and not willful, etc?
        We are trying to find here, I am trying to find here in
    this set of questions what I can about application of this
    automatic firing, that any of you may understand from the way
    it plays out in the field among employees.
        Ms. Kelley. I would say it is two things. And one is the
    communication and education system that the IRS engages in with
    employees. I mean, from day one on the job.
        And then there is annually a reminder of their obligation,
    of assistance that is available, of, you know, what it is that
    they need to do if they do not have the money to pay. I mean,
    it is a non-stop reminder of their obligation and
    communication.
        So my bet is that much----
        Ms. Norton. You know, if a lien occurs, for example, there
    was great discussion in this committee about what can occur
    anywhere when there is a lien, that is it. Many employers--and
    I still am not clear, particularly for the IRS--if a lien
    showed up, whether that would be automatically a trigger for
    firing by the IRS? Or whether, in fact, a lien could result in
    some of the procedures you have outlined for example, Ms.
    Kelley.
        Ms. Kelley. Well, in the, if a lien were filed on an IRS
    employee, they would be looked at very, very closely to
    determine why. And then in the end, they would get down to this
    willful question.
        First and foremost, what they want, and should want, is
    every employee to be in compliance; to, you know, be current in
    their tax filings and in their tax payments, or to be on some
    kind of a payment plan.
        If they were in a lien situation, that could raise a series
    of questions about failure to pay. And it really would depend
    on the specifics of the situation. And the IRS looks at them.
    They take them very seriously, and they look at them very
    closely.
        And I would not attribute the low number of firings that
    seem, you know, that were reported, that everyone has
    categorized as low that Ms. Tucker reported, as meaning that
    the IRS does not take this seriously. It is, they focus on the
    willful, because that is what 1203 says.
        But as I said, before there was ever 1203, the IRS dealt
    with these issues as they always should. I mean, they took it
    seriously, and they had raised the bar. It was a much higher
    standard.
        So in a lot of ways, 1203 really got in the way of them
    doing what they were trying to do, because they were exercising
    judgment on the specific circumstances in a case. Which I think
    is what we would all agree should happen.
        Mr. Rizek. The standards were intentionally set quite high
    in Section 1203, to require termination, since that was the
    only sanction permitted under the provision, only in egregious
    cases. So they required a final determination, it requires that
    the conduct be willful, and it requires that it not be due to
    reasonable cause or neglect.
        Those are all terms of art within the Tax Law, that the tax
    employees of the IRS would clearly understand.
        Ms. Kelley. But I would add that there have been problems
    with it, because willful, what you see as willful can be
    different than what I see as willful. And it is then the
    Commissioner's decision. Only the Commissioner can make the
    decision to not terminate under Section 1203, based on the
    willful determination.
        So it is not a, you know, a test that is pure, and that
    everyone agrees on in every case.
        Ms. Norton. So you would not say that the IRS has unfairly,
    strictly given its opposition in the first place, to the new
    1998 procedure; you would not say that they unfairly applied
    it.
        Ms. Kelley. I would say they worked very hard to put a new
    process in place, which they had to do. They had to create this
    panel to make recommendations to the Commissioner. And they
    worked very hard to put a fair process in place.
        That being said, there have still been a number of
    situations where we disagree that it was willful. But I would
    say in general, they worked very hard to put a fair process in
    place to apply 1203, yes.
        Ms. Norton. Well, what are the issues--Chairman Lynch
    raised this until we had to have this hearing, frankly--about
    the effect of the lien? Because he raises it knowing full well
    that a lien is a lien, and you can have steps before you decide
    to enforce a lien. But you could enforce it once that lien is,
    is there.
        And from your testimony, given willful and the rest of it,
    I gather that even at the IRS, the lien, despite its protection
    of the United States, if it chooses to use it, does not
    automatically attribute I see a lien, your job is gone. That is
    even at the IRS, much less, I suppose, elsewhere.
        At the IRS, a lien shows up. I have not had the opportunity
    to say anything about it, but it is on the books. If I worked
    for almost anybody, they had a piece of paper which they could
    enforce. I wonder if it is the testimony of all of you that
    even at the IRS, one would have to look at things like willful,
    etc.
        Mr. Rizek. It is certainly the case that the mere filing of
    a Federal tax lien against an IRS employee is not grounds for
    termination under Section 1203.
        If, however, the lien has arisen because of willful failure
    to file, they did not file a return at all, or----
        Ms. Norton. But see, you may not know----
        Mr. Rizek [continuing]. Willful understatement----
        Ms. Norton. The employee may not have had the opportunity
    to address willfulness.
        Mr. Rizek. Well, they will always know whether they had
    filed or not.
        Ms. Norton. Yes, by that point.
        Mr. Rizek. OK. So if a Federal tax lien arises because the
    IRS prepares a substitute return, and files a Federal tax lien
    pursuant to that, the taxpayer has plenty of notice about that.
        Ms. Norton. Of course.
        Mr. Rizek. Now, that does not presume that they willfully
    failed to file; they would, of course, have to do an
    investigation of the sort Ms. Kelley described.
        Ms. Norton. Yes. An application, it does not appear that
    the IRS would simply jump on the lien, although that is far
    along in the process.
        Ms. Kelley. No, I was going to suggest actually you might
    want to pose this question to the IRS.
        Ms. Norton. I tried to get it from--she seemed to step away
    from automatic firing, you know, by looking at willfulness and
    the rest of it.
        Ms. Kelley. Right.
        Ms. Norton. And I am trying to find out in practice, since
    the lien troubled many of us because of its legal effects, and
    its immediate legal effect if the entities choose to pursue it.
    We were concerned with particularly going through other Federal
    employees as to whether or not the government would say I have
    a lien, I have not got--I have a lot of work. I now if I try to
    enforce, maybe I will get the attention. The IRS could do that.
        And my question is, would it really do that, especially in
    light of the fact it did not even think that this process was
    necessary in order for it to get compliance with its own
    employees?
        Ms. Kelley. Well, the Employee Tax Compliance Program was
    in place even before 1203, and it continues today.
        When those notices are sent, the four notices that they
    talked about saying that you are delinquent, at some point--and
    this is probably what the IRS needs to answer, because I am not
    sure as to where, at what point in the four notices, and then
    the levy, and then the lien, is the manager given the
    information and told to deal with the employee; to let the
    employee know that, you know, this is--because I can tell you,
    I do not think the IRS would move slowly if they had
    information that an IRS employee had a lien filed against them.
    I think the manager would be calling that employee into their
    office yesterday.
        But I do not know exactly at what point. The manager at
    some point gets involved. And that could be a question for the
    IRS. Because I do not think they would ever be surprised that a
    lien was coming to an IRS employee, because they follow it
    really closely through this Employee Tax Compliance Program.
        Ms. Norton. So all this reference of the IRS notice
    probably well in advance of the lien, and they are trying to
    counsel with the employee ahead of time. Now, imagine that
    happening across the entire government and the annuitants. And
    we are going to counsel you, we are going to deal with you. So
    we have serious concerns about how practical any of this is.
        I have a question. This is from the testimony of Mr.
    Oppedisano. You indicate near the end of your testimony an
    expansion of authority to garnish wages should be considered, I
    take it as an alternative to looking at the, at----
        Mr. Oppedisano. The lien process.
        Ms. Norton [continuing]. What the bill proposes.
        Mr. Oppedisano. Yes.
        Ms. Norton. And why would an expansion be necessary?
        Mr. Oppedisano. First of all, we do not think expansion
    would be necessary, because the provisions of the law are
    already there. But if, in fact, in order to be able to get
    around this legislation, if, in fact, additional IRS rules,
    laws, or regulations could be implemented that would help the
    Federal employer, all American taxpayers, to be able to resolve
    their issues a little bit more judiciously.
        Ms. Norton, I would just like to say one thing. Before we
    came into this room today, I had, one of our members came up to
    me. And she is a single parent. And a few years back she had a
    difficult situation, and she had to make, she negotiated with
    the IRS a payment plan.
        What happened was the IRS failed to process the payment
    plan, the payment book to her, and she never got it. She ended
    up getting a lien applied against her.
        If this law, if this legislation action was in fact law,
    she would have had to have been fired. And that is what we are
    really against.
        Ms. Norton. Did she work for the IRS?
        Mr. Oppedisano. If she worked for any Federal agency.
        Ms. Norton. Well, no, this automatic firing is IRS
    employees.
        Mr. Oppedisano. No, I said if this legislation is passed as
    written.
        Ms. Norton. All right, all right. That is some of the
    practical realities of enforcement have come out only in this
    hearing. These were hardly raised when Members at the markup
    began to raise some of the obvious legal questions.
        I have another question for which I think we would need far
    greater information before proceeding on this bill.
        There is some very scary and bad figures cited about the
    billions of dollars owed by Federal employees. I do not know
    what in the world that means. Owed when? Subject to, subject to
    an employee, subject to contesting? Owed at what point in time?
    You know, no one has indicated what that means.
        Does that really mean, then, that people are carrying
    around years of Federal liability while drawing a paycheck from
    the Federal Government? Mr. Rizek.
        Mr. Rizek. Yes, it does. It means that the tax liability
    has been assessed, which is a formal act entering the liability
    on the books of the United States and making the taxpayer
    liable for it.
        The taxpayer has an opportunity to contest it both before
    that and after that. But if it is assessed and not paid, it is
    carried in that account.
        Ms. Norton. The operative word, Mr. Rizek, is not paid. For
    example, I suppose the example that you have just given, Mr.
    Oppedisano. She is owed that amount until it is paid. Until it
    is paid, it is slated as--I do not know if, in calculating
    these billions of dollars owed, every month they look and see
    how much of it has been paid. They look at when the liability
    was assessed, and these employees owed it. Now they have worked
    out a payment plan, and I do not have any reason to believe
    that somebody is keeping track of how much they pay down until
    they finally do not have any tax liability. Ms. Kelley.
        Ms. Kelley. I think you are right on the mark with that.
    Again, I would, at the risk of suggesting questions you ask the
    IRS, I am going to do that again. Because this is the way I
    understand this.
        They take this snapshot on September 30th each year, of
    dollars owed. So that it is a moving target; for sure, it
    changes. But on September 30th that is the money owed.
        But included in there, if I were to owe $2,000, and I am on
    a 15 percent levy of my wages, I owed $2,000 on September 30th.
    That $2,000 is in there, even though they are taking out 15
    percent every pay period.
        So the next September 30th, whatever they took out of my
    pay, it would be decreased, the amount owed. But I am paying
    that amount, but it is included in the billions that you are
    citing.
        So, you know, you could look at it at first blush and say
    it is owed, and nobody is doing anything about paying. And that
    is not the case. Because everyone who is on a 15 percent
    garnishment of their wages, those dollars are still in there,
    are being carried as due.
        But again, the IRS would really be the ones to clarify
    that, but that is how I understand it.
        Ms. Norton. And a question like that has to be submitted
    for the record. You know, at what point do you assess. And if
    anything, they probably just add ont.
        Ms. Kelley. Well, the next September 30TH----
        Ms. Norton. They add on to this year what you had last
    year.
        Ms. Kelley. The next September 30th anyone new would be
    added, and then any money that was withheld from my garnishment
    would come out.
        Ms. Norton. That would come out, if it was garnished.
        Ms. Kelley. That would come out, because it is not owed any
    more. But the $1,700 I still owe is still there. It was $2,000,
    and now it is, yes.
        Ms. Norton. Perhaps there is a distinction between IRS
    employees and others, I am not sure, especially since the IRS
    opposed the very process that has served as a pilot program for
    what some now want to do to every Federal employee.
        Given the fact that neither this administration or the last
    administration felt, has felt that the fair and reasonable
    thing to do is to apply such a process, I have my serious
    doubts about why anybody would want to proceed after what we
    have learned today.
        And the reason I have doubts is because of how I think
    every hearing should be structured. It is the obligation of an
    agency head to come and defend the agency's practices. You have
    learned nothing about the agency's practices until, as I say to
    my own staff on the committee I chair, until you have heard
    from some real people.
        You represent the real people who would be at the other end
    of the spread, of the IRS procedure across the government. I do
    not speak for any other member of this committee. But speaking
    for myself, having heard realistically how this would apply,
    now knowing that looking at two administrations who do not
    share much in common, neither believe that the present policy
    at the IRS should be in effect.
        I do not see, given your testimony, given what appear to be
    the thoughtful deliberations of two very different
    administrations, why this subcommittee, in the face of the most
    expert testimony we can find, would proceed to spread a bad
    practice across the Federal work force.
        I know I speak on behalf of the chairman when I say at
    least this much: We have benefited tremendously from your
    testimony, and we greatly appreciate your coming to testify
    before us today.
        The hearing is adjourned.
        [Whereupon, at 4:44 p.m., the subcommittee was adjourned.]