[Congressional Record Volume 143, Number 153 (Wednesday, November 5, 1997)]
[House]
[Pages H10001-H10040]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1997
Mr. DREIER. Mr. Speaker, by direction of the Committee on Rules, I
call up House Resolution 303 and ask for its immediate consideration.
The Clerk read the resolution, as follows:
H. Res. 303
Resolved, That upon the adoption of this resolution it
shall be in order without intervention of any point of order
to consider in the House the bill (H.R. 2676) to amend the
Internal Revenue Code of 1986 to restructure and reform the
Internal Revenue Service, and for other purposes. The bill
shall be considered as read for amendment. The amendment in
the nature of a substitute recommended by the Committee on
Ways and Means now printed in the bill, modified by the
amendments printed in the report of the Committee on Rules
accompanying this resolution, shall be considered as adopted.
All points of order against the bill, as amended, are waived.
The previous question shall be considered as ordered on the
bill, as amended, to final passage without intervening motion
except: (1) two hours of debate on the bill, as amended,
which shall be equally divided and controlled by the chairman
and ranking minority member of the Committee on Ways and
Means; and (2) one motion to recommit with or without
instructions.
The SPEAKER pro tempore (Mr. Sununu). The gentleman from California
[Mr. Dreier] is recognized for 1 hour.
Mr. DREIER. Mr. Speaker, for the purpose of debate only, I yield the
customary 30 minutes to the gentleman from Texas [Mr. Frost], pending
which I yield myself such time as I may consume. During consideration
of this resolution, all time yielded is for the purpose of debate only.
(Mr. DREIER asked and was given permission to revise and extend his
remarks and include extraneous material.)
Mr. DREIER. Mr. Speaker, this rule makes in order H.R. 2676, the IRS
Restructuring and Reform Act of 1997, under a closed rule providing for
2 hours of debate in the House equally divided and controlled by the
chairman and ranking minority member of the Committee on Ways and
Means.
The rule provides that the amendment in the nature of a substitute
recommended by the House Committee on Ways and Means, as modified by
the noncontroversial amendments printed in the report to accompany this
rule, be considered as adopted.
The first amendment simply clarifies the authorization for low-income
taxpayer clinics and the salaries of members of the IRS Oversight Board
to address Budget Act violations.
The second amendment clarifies that IRS management and employees may
address any flexibility issues in a demonstration project.
The third amendment is a Rules Committee substitute making a number
of clarifying and technical changes to section 422 relating to the
Joint Committee on Taxation's preparation of a tax complexity analysis.
The fourth amendment adds the text of H.R. 2645, the Tax Technical
Corrections Act of 1997, which makes bipartisan and noncontroversial
corrections to reflect the intent of the Taxpayer Relief Act of 1997.
Mr. Speaker, I want to applaud the gentleman from Texas [Mr. Archer]
and the original sponsors of this bipartisan IRS reform bill, the
gentleman from Ohio [Mr. Portman] and the gentleman from Maryland [Mr.
Cardin]. Thanks to their tremendous skill and determination in moving
this historic bill forward, we are about to end once and for all some
of the most egregious and abusive practices of the Internal Revenue
Service.
I also want to commend the gentleman from Ohio [Mr. Portman] for his
efforts as cochairman of the bipartisan National Commission on
Restructuring the Internal Revenue Service. The Commission conducted a
yearlong audit of the IRS and found a troubled agency that wastes
billions of dollars in resources and lacks a culture of customer
service. The audit also revealed an agency that is fraught with
management, governance and oversight problems and is unaccountable to
Congress and the American people.
These problems were further illustrated during 3 days of Senate
Finance Committee hearings in September, which revealed an out-of-
control agency that intentionally engages in unnecessary and sometimes
illegal tactics to harass middle-income taxpayers who have limited due
process rights.
If enacted, H.R. 2676 will bring about the first comprehensive reform
of the IRS in four decades. It will make the IRS more user-friendly,
among other things, establishing an independent governing board and
shifting the burden of proof from the taxpayer to the IRS in disputes
that reach Tax Court.
These reforms will make the IRS more accountable to the American
people. They will enhance the fairness of the tax collection process by
giving the taxpayer the benefit of the doubt when he or she has
cooperated with the IRS and has documented evidence of compliance.
These reforms will not solve the more intractable problems brought on
by a complicated and inefficient Tax Code itself. The solutions to
those problems require comprehensive reform of the Internal Revenue
Code, which I hope very much the House will address next year. But the
reforms contained in H.R. 2676 will go a long way toward protecting the
rights of taxpayers, making the IRS more accountable, and restoring
public confidence in the way the IRS enforces our tax laws.
Mr. Speaker, I urge my colleagues to support this very fair and
balanced rule, and I urge strong support, bipartisan support, of this
bill.
Mr. Speaker, I include the following extraneous material for the
Record:
Explanation of Rules Committee Substitute to Section 422 of H.R. 2676
As reported by the House Committee on Ways and Means,
Section 422 of H.R. 2676 requires the Joint Committee on
Taxation to provide a ``Tax Complexity Analysis'' for
legislation reported by the House Committee on Ways and Means
and the Senate Committee on Finance and all conference
reports that would amend the Internal Revenue Code. The
analysis would identify those provisions in a bill or
conference report that the staff of the Joint Committee on
Taxation determines would add significant complexity or
simplification to the tax laws. If the report accompanying
such legislation does not include a Tax Complexity Analysis,
the legislation would be subject to a point of order in the
House and Senate.
The Rules Committee substitute makes a number of clarifying
and technical changes to Section 422.
For purposes of the requirement that the Joint Committee on
Taxation provide a ``Tax Complexity Analysis,'' the term
``legislation'' is further defined as ``bills or joint
resolutions'' reported by the House Committee on Ways and
Means, the Senate Committee on Finance or a committee of
conference.
For purposes of compliance with Section 422, the Committee
involved shall either include the Tax Complexity Analysis in
the
[[Page H10002]]
committee report or cause it to be printed in the
Congressional Record prior to consideration of the
legislation in the House and Senate.
References to ``the staff'' of the Joint Committee on
Taxation are removed.
Tax Complexity Analysis is defined as ``a report which is
prepared by the Joint Committee on Taxation and which
identifies the provisions of the legislation adding
significant complexity or providing significant
simplification (as determined by the Joint Committee on
Taxation) and includes the basis for such determination.''
Language containing the point of order in the House of
Representatives with respect to legislation reported by the
Committee on Ways and Means and by a committee of conference
is stricken from Section 8024 of the Internal Revenue Code
and inserted in the rules of the House of Representatives.
Specifically:
Clause 2(l) of House rule XI is amended to require the
report of the Committee on Ways and Means on any bill or
joint resolution containing any provision amending the
Internal Revenue Code of 1986 to contain a Tax Complexity
Analysis unless the Committee causes to have such Analysis
printed in the Congressional Record prior to the
consideration of the bill or joint resolution; and
House rule XXVIII is amended to prohibit consideration of a
conference report which contains any provision amending the
Internal Revenue Code unless the accompanying joint statement
of managers contains a Tax Complexity Analysis, unless such
Analysis is printed in the Congressional Record prior to the
consideration of the report.
____
Committee on Rules,
House of Representatives,
Washington, DC, October 28, 1997.
Hon. Bill Archer,
Chairman, Committee on Ways and Means, Longworth House Office
Building, Washington, DC.
Dear Mr. Chairman: I am writing concerning H.R. 2676, The
Internal Revenue Service Restructuring and Reform Act of
1997, which your committee ordered reported on October 22 by
a vote of 33-4.
This legislation contains provisions in Title IV,
Congressional Accountability for the Internal Revenue
Service, which fall within the jurisdiction of the Committee
on Rules.
The Committee on Rules does not intend to consider this
bill as a matter of original jurisdiction. It is the
intention of the Committee to address several concerns with
the proposed language in Title IV during the Rules
Committee's consideration of an appropriate rule for this
legislation.
I reserve jurisdiction of the Committee on Rules over all
bills relating to the rules, joint rules, and the order of
business of the House. It would also be my intention to be
represented on the conference committee on this bill. Thank
you for your consideration.
Sincerely,
Gerald B. Solomon,
Chairman.
Mr. Speaker, I reserve the balance of my time.
Mr. FROST. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in support of H.R. 2676, the Internal Revenue
Service Restructuring and Reform Act of 1997, and this rule which
provides for its consideration. The rule is closed, but because this is
vitally important legislation and is supported by both Democrats and
Republicans, liberals, moderates and conservatives, I believe the House
should proceed with the consideration of this legislation in order to
speed it on its way to the President's desk.
Mr. Speaker, in my nearly 19 years in Congress, I have received many,
many complaints from my constituents regarding their difficulties in
resolving disputes with the Internal Revenue Service. The report of the
Portman-Kerrey Commission, which detailed abuses and mismanagement
within the agency coupled with recent congressional hearings which
revealed very publicly a number of disturbing abuses perpetuated--
perpetrated by the IRS against taxpayers have provided ample evidence
that the many complaints we have all heard are based on real problems
for real people.
Mr. Speaker, while the IRS must fulfill its mission of administering
our tax laws and enforcing collection, the IRS cannot be permitted to
abuse the rights of American taxpayers. H.R. 2676 will go a long way
toward correcting abuses and ensuring that the agency is restructured
in such a way that honest taxpayers need not fear undue harassment and
reprisals from the IRS.
This legislation contains several provisions which will substantially
strengthen taxpayers' rights in dealing with the IRS. This bill makes
it more difficult for the IRS to hold a spouse responsible for mistakes
made on taxpayer returns by the other spouse. It allows taxpayers to
sue the Federal Government for up to $100,000 in civil damages caused
by IRS employees who negligently disregard tax laws, and in those cases
which come before the U.S. Tax Court, places the burden of proof on the
IRS rather than on the taxpayer.
{time} 1115
These are but a small part of this bill but important reforms that
will help all honest and law-abiding taxpayers.
Mr. Speaker, the bill also establishes an oversight board for the IRS
which will bring private sector expertise to the management and
administration of the agency. The board will not have any
responsibility for or authority over the development and formulation of
Federal tax policy but would, instead, work to ensure that the agency
works for the benefit of taxpayers and the country as a whole.
I am disappointed, however, that the Committee on Rules did not
provide for the consideration of an amendment that I, along with my
colleague from Pennsylvania, Mr. Gekas, sought to have made part of
H.R. 2676.
Our amendment seeks to correct a provision in current law which
requires that local governments file W-2 forms for poll workers in
spite of the fact that these workers are, for the most part, retired
persons who earn only a hundred dollars or so for their work on
election day. This requirement places a heavy financial and
administrative burden on localities. I would hope that in the not too
distant future the Congress will fix what is an onerous burden for
local government.
Mr. Speaker, as a cosponsor of H.R. 2676, I am delighted that the
Congress is taking action on this matter prior to our adjournment for
the year. I encourage my colleagues to support the rule in order to
move quickly to the consideration of this landmark legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. DREIER. Mr. Speaker, I yield 2 minutes to the gentleman from
Sanibel, FL [Mr. Goss], my very good friend and the distinguished
chairman of the Subcommittee on Budget and Legislative Process and the
Permanent Select Committee on Intelligence.
(Mr. GOSS asked and was given permission to revise and extend his
remarks.)
Mr. GOSS. Mr. Speaker, I thank my distinguished friend from the
greater metropolitan downtown area of Claremont, CA, the vice chairman
of the Committee on Rules and leader of many good causes in this House,
for yielding me this time, and I rise in support of his rule. It is a
closed rule, but it is a good rule; it is time tested for debating tax-
related bills under the jurisdiction of the Committee on Ways and
Means.
For years, millions of Americans have known what we are today finally
acknowledging here on the floor of the House, that the IRS is
inefficient, it is unaccountable, and it is often downright abusive for
the very people who pay the salaries, the American taxpayer. Even the
most routine audit can strike fear in the hearts of Americans, and even
more disturbing is the belief by many Americans that the IRS targets
based on partisan political motive.
The facts serve to underscore their anxiety. In 1993, the IRS gave
the wrong answer to taxpayer questions millions of times. Last year,
only one in five calls to the IRS customer hotline apparently got
through, and even then we were not sure the answer was right.
Today we are taking the first concrete steps to clean up this agency.
Congressional hearings have demonstrated clearly and poignantly the
need for structural reform at the IRS, and we are acting. Built on the
recommendations of the bipartisan commission chaired by the gentleman
from Ohio [Mr. Portman] and the gentleman from Maryland [Mr. Cardin],
H.R. 2676 will create mechanisms to ensure that the IRS serves
Americans with the respect and dignity that we all deserve.
For starters, the bill creates an independent oversight board
composed of private citizens. The board will place a needed check on
the excesses of the agency as well as restore accountability for the
American taxpayer. By changing the burden of proof in tax court
proceedings, H.R. 2676 will make sure that law-abiding taxpayers are
guaranteed the same basic rights offered in other judicial proceedings.
They are still innocent until proven guilty, which is our way.
[[Page H10003]]
After weeks of stops and starts, hesitation, rhetoric, the Clinton
administration has finally decided to join our effort in these first
steps. They recognize this is a good effort. I welcome the President's
conversion, and I urge my colleagues to support this fair rule and this
important bipartisan bill.
Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from
Maryland [Mr. Cardin].
Mr. CARDIN. Mr. Speaker, I want to thank my friend from Texas [Mr.
Frost] for yielding me this time.
I want to compliment the Committee on Rules for bringing out this
rule, and I hope that it will receive strong support by both sides of
the aisle.
During the consideration of the underlying bill by the Committee on
Ways and Means, there was only one amendment that was not approved by
the committee that was offered. I want to thank the Committee on Rules
for dealing with that amendment by the gentleman from California [Mr.
Stark] in the self-executing rule that adopts the amendment. So we have
really taken care of all the concerns of Members that have offered
changes.
The reason why this rule and the underlying bill will receive strong
bipartisan support is that it was developed by the National Commission
on Restructuring the IRS, and it was adopted in a bipartisan manner in
that commission.
I particularly want to compliment our colleague, the gentleman from
Ohio [Mr. Portman], for the work that he did in leading that commission
and keeping us focused on dealing with the problems of the IRS so that
we could bring the bill to the floor in a way that it could receive
strong support by all Members of this House.
I also want to compliment the gentleman from Texas [Mr. Archer], the
chairman of the Committee on Ways and Means, and the gentleman from New
York [Mr. Rangel], the ranking member. The Committee on Ways and Means
took a good bill and made it better, and we worked in a bipartisan way
to do that.
By adopting this rule, this House has the opportunity to pass today a
bill that will deal with the problems at the IRS before the next tax
season. I hope that what we are doing here in this House, the other
body will follow suit so that we can pass meaningful reform of the IRS
now to help our taxpayers before April of next year.
Mr. DREIER. Mr. Speaker, I yield 2 minutes to the gentleman from
Morris, IL [Mr. Weller], my very good friend, a member of the Committee
on Ways and Means.
(Mr. WELLER asked and was given permission to revise and extend his
remarks.)
Mr. WELLER. Mr. Speaker, let me begin as I rise in support of this
rule and this bill to commend the chairman of the Committee on Ways and
Means, the gentleman from Texas [Mr. Archer], and the ranking member,
the gentleman from New York [Mr. Rangel], for management of this bill,
but particularly I want to commend the gentleman from Ohio [Mr.
Portman] and the gentleman from Maryland [Mr. Cardin] for their
leadership on managing this bill as well because this legislation is
such an important victory for middle class taxpayers.
There is no agency in more need of reform than the Internal Revenue
Service, and that is why we all stand here today in support of very
important legislation, legislation that is really a long time coming,
but legislation that is a big victory for the middle class.
There are two very, very important changes, fundamental changes, that
are included in this legislation I would like to note, and probably the
most important one is the one which shifts the burden of proof off the
backs of the taxpayer and on to the IRS. There is no greater complaint
that I hear back home in Illinois than, when someone is audited by the
IRS, they are treated as guilty until proven innocent, whereas if
someone is in a criminal court, they are innocent until proven guilty.
This legislation gives the taxpayers, those who play by the rules, work
hard, and pay their taxes on time, the same protections with the IRS
that one enjoys in the courtroom. That is a big victory for the middle
class.
And during this process, we also learned about some of the impact of
what the IRS has done in the past and how they treat human beings. One
of the issues that we also address in this is a particularly important
issue to those that we call the unlucky and innocent spouse.
We discovered in many cases that someone who is a deadbeat parent is
also a deadbeat taxpayer. In a case where you have a deadbeat dad who
is not paying his child support and not paying his taxes, who do my
colleagues think the IRS went after? That poor, unlucky, innocent
working mom with the kids whose husband is not paying the child
support. And the IRS showed up wanting to collect his taxes from her.
This legislation puts in place more protections to protect the unlucky,
innocent spouse.
These are two important victories, shifting the burden of proof so
that someone is innocent until proven guilty with the IRS, and also
another important victory is protecting the unlucky and innocent
spouse.
My colleagues, this legislation deserves bipartisan support, and it
is a big victory.
Mr. FROST. Mr. Speaker, I yield 4 minutes to the gentleman from Ohio
[Mr. Traficant].
(Mr. TRAFICANT asked and was given permission to revise and extend
his remarks.)
Mr. TRAFICANT. Mr. Speaker, today is a day that I am very glad to see
come, and in a way I am also sad. For 10 years I have worked to shift
the burden of proof in the civil tax case, and I guess I am glad
because today we finally get a chance to see that on the House floor.
What I am sad about, to be quite honest, is I have offered this bill
for 10 years and could never get a hearing from my Democrat colleagues.
I believe today's legislation will probably continue to keep a majority
in this House for Republicans. And I know Democrats are saying, why
does Mr. Traficant say that? I think the Democrat Party is going to
have to deal with the substantive issues and problems of our country if
we want to take the House back.
I want to thank the Republican Party for including the Traficant
provision. I want to thank the gentleman from Texas [Mr. Archer] and
the gentleman from Ohio [Mr. Portman], and I want to thank the
gentleman from New York [Mr. Rangel] and the gentleman from Maryland
[Mr. Cardin]. In all fairness, they were not in that position to make
those decisions years ago, and maybe we would have had more success had
we had it.
But I think there are some other people that have to be thanked. My
strategy was to get the American people to support that legislation.
The White House never wanted it. Quite frankly, no one wanted it. And
now 98 percent of the American people support the burden of proof shift
in a civil tax case, the No. 1 supported bill in the Congress. I want
to thank Rush Limbaugh, I want to thank Michael Reagan, I want to thank
Mary Matalin, I want to thank Blanquita Cullum, I want to thank Jane
Wallace and Bay Buchanan and Pat Buchanan. I want to thank Ron Verb and
Ron Novak. I want to thank Jeff and Flash Talk Show out of Cleveland
and the great work they did in the Midwest. I want to thank Jack
Anderson, George Will, the gentleman from New York [Mr. Solomon],
Joseph Sobran. I want to thank everyone in America who helped to bring
this day about. And I want to again commend the Republican Party; they
have done the right thing.
Now just let me say this, that I do not know how much time I have
left, but years ago a family in North Carolina by the name of Counsel
had a problem, and Alex Counsel actually took his life, and when he did
so, he left a message in the form of a suicide note to his wife. He
said, Kay, I have taken my life in order to provide money for you and
our family to fight the IRS, which is out of control and has taken
liens against our property illegally. I have made the only decision I
can, Kay. Take the insurance money and save our good name.
My colleagues, what has happened to us? How did we allow the greatest
tenet of America's freedom, innocent until proven guilty, the accuser
carries the burden, to be shifted like this in a court of law? I mean,
what has happened to us?
Then you have IRS agents testifying behind screens with voice
scramblers
[[Page H10004]]
because they, too, are afraid of the IRS.
Now I see some of the Democrat staffers laughing. Man, we have
laughed on this one for sure.
It is the right thing to do. I support this rule, I support this
bill, and I want to compliment Chairman Bill Archer, because without
the gentleman from Texas [Mr. Archer] standing up to both the White
House and the other body, my provision still is not free and clear, and
I predict the other body will challenge it, and I predict the White
House will come out against it, and now the IRS is putting the spin: It
is not really going to do that much.
Well, just years ago they said it was going to bust the bank and it
was going to make tax protesters and tax cheats win out. I think the
IRS has given us a lot of lies over the years, and I believe this bill
will help to straighten that out.
So I am sad to see that it is not the Democrat Party that has brought
the bill, but I commend the Republicans.
Mr. DREIER. Mr. Speaker, I yield myself such time as I may consume.
Let me first say that I want to congratulate my friend from Ohio. I
remember very well when he took me to the well and had me sign a
discharge petition to release this burden of proof legislation, and it
has taken a long time getting to this point. I remember he told me that
I might be in trouble for signing that discharge petition when he stood
over me as I did it, but I still followed his directive.
Mr. Speaker, I yield such time as he may consume to the gentleman
from Glens Falls, NY [Mr. Solomon], my friend and the chairman of the
Committee on Rules.
{time} 1130
Mr. SOLOMON. I thank the gentleman from Claremont, CA [Mr. Dreier],
the vice chairman of the Committee on Rules, for giving me the time to
request unanimous consent to revise and extend my remarks and to praise
the gentleman from Texas [Mr. Archer]; the gentleman from Ohio [Mr.
Portman]; the gentleman from California [Mr. Dreier]; and especially
the gentleman from Ohio [Mr. Traficant]. Without him, this legislation
never would have reached this floor, and I commend him for it.
Mr. Speaker, I thank the gentleman from California for yielding me
the time.
Mr. Speaker, a Washington Post magazine spoof in December of 1991 on
the role of the IRS succinctly characterizes many Americans view of the
IRS today. It read, ``In a sweeping post-coup reform move, Gorbachev
abolished the Communist Party and fired thousands of entrenched hard-
line Kremlin bureaucrats, all of whom were immediately hired by the
Internal Revenue Service.''
Now we know that IRS employees are not former Kremlin agents but the
characterization of IRS agents as part of an American Gestapo
contingent strikes a nerve among the American people.
Many taxpayers are forced to live in fear that making a minor error
in the myriad tax forms and requirements they are faced with each year
will result in a demanding visit by an IRS agent or even a severe
punishment. Today the IRS is a bureaucracy out of control because of
the lack of proper checks and balances, which are pillars of the
American system of government.
In recognition of this out of control bureaucracy and the growing
cries for fundamental reform by the American people, the National
Commission on Restructuring the IRS, chaired by Representative Portman
and Senator Kerrey of Nebraska was established. Its year-long mission
was to make recommendations for modernizing and improving its
efficiency and taxpayer services. On June 25, 1997, the Commission
issued a comprehensive report making recommendations relating to the
executive branch governance and management of the IRS, congressional
oversight of the IRS, personnel flexibility, customer service and
compliance, technology modernization, electronic filing, tax law
simplification, taxpayer rights, and financial accountability.
These extensive recommendations provided the foundation for the
legislation this House will be considering today.
H.R. 2676, the IRS Restructuring and Reform Act, introduced by
Representatives Archer, Portman, and Cardin, builds on the commission's
recommendations to form a comprehensive IRS reform package.
For example, the bill establishes the Internal Revenue Service
Oversight Board, within the Treasury Department, whose general
responsibilities are to oversee the Internal Revenue Service in its
administration, management, conduct, direction and supervision of the
execution and application of our country's internal revenue laws.
The bill also makes it unlawful for the President, Vice President,
their employees and all Cabinet heads to request that any officer or
employee of the IRS conduct or terminate an audit or begin or terminate
an investigation with respect to any particular taxpayers.
Perhaps even more important, this reform package shifts the burden of
proof in any court tax proceeding from the taxpayer to the Secretary of
the Treasury. This bill will greatly increase the accountability and
efficiency of the IRS and will help to restore the confidence and faith
of the American people in its government.
Mr. Speaker, I would also be remiss if I did not commend our
colleagues Chairman Bill Archer and Representative Rob Portman of the
Ways and Means Committee for their steadfast and thorough efforts in
producing this legislation.
The bipartisan work of the commission combined with the bipartisan
efforts of the Ways and Means Committee have produced meaningful reform
that will be to the benefit of every American taxpayer.
Mr. Speaker, the Constitution grants this Congress the authority to
raise the revenue necessary to run the Federal Government. While I
would contend that this Congress has a long way to go toward reforming
our overall tax system, this first reform effort in four decades of the
agency charged with collecting that revenue, is a giant leap in
responsibility fulfilling this constitutional duty.
For these reasons, I urge all of my colleagues to support this fair
rule and to support this historic legislation.
Mr. DREIER. Mr. Speaker, I yield 2 minutes to the gentleman from
Omaha, NE [Mr. Christensen], the future Governor.
Mr. CHRISTENSEN. Mr. Speaker, I thank my friend for yielding me this
time.
Mr. Speaker, this is a great day. It is a great day for all of us,
but it is a great day for the gentleman from Ohio [Mr. Traficant].
There has not been anybody who has been in the well fighting for this
day longer, more arduously, than he. It is hard to believe why some
staffers over there on the Democrat side are scowling at the gentleman
and have their arms crossed. They just do not get it. They do not
understand what the IRS has done to the taxpayer.
The gentleman's provision on taking the burden of proof off the
taxpayer is going to turn what has been a lopsided situation for a
number of years and turn it back in favor of the taxpayer.
In America, we have always known the principle that one is presumed
innocent until proven guilty. But in the IRS, as long as I have known
about it and as long as I have heard the gentleman from Ohio [Mr.
Traficant] talking about it, one is guilty, and one has to prove one's
innocence. His provision is going to change that.
So I thank the gentleman from Ohio for his fight, and I thank him for
everything that he is doing. Nebraskans thank the gentleman, and
western Nebraskans thank the gentleman. As I have talked to them a
number of times, they wanted the gentleman from Ohio [Mr. Traficant] to
come out to Nebraska and talk about IRS reform and talk about changing
the way things are done in Washington.
Mr. Speaker, the Department of Treasury could have fixed this, but
they never got it done, they never attempted it. But the gentleman from
Ohio [Mr. Portman] and the gentleman from Nebraska [Mr. Kerrey], on the
Senate side, put this legislation together with the help of my
chairman, the gentleman from Texas [Mr. Archer].
This provision also as an authority called the oversight board that
is going to be having some real citizens that are nongovernmental
citizens putting their expertise to work. I believe that this board
will provide some commonsense oversight that is much needed in this
area.
The IRS has got to do a better job of providing fair tax treatment
that it has been commissioned to do. This bill is a small step in the
right direction until we pull out the IRS by its roots, as my chairman
has hoped to do for a very long time, and move to either a sales tax or
a flat tax approach. This is an intermediary step; it is a step in the
right direction. I thank the gentleman from New York for assisting us
with this. He has been a great support and we thank him for his help.
Mr. Speaker. I rise in strong support today for H.R. 2676, the
Internal Revenue Service Restructuring and Reform Act of 1997.
Some say the three most frightening letters of the alphabet are IRS--
and for good reason.
[[Page H10005]]
The IRS is one of the most bureaucratic, outdated, and inefficient
government agencies and it touches every hard-working, tax-paying
American.
The IRS Restructuring and Reform Act would help fix what ails the
IRS.
In America, people are presumed innocent until proven guilty. In the
IRS, it is the other way around--the taxpayer bears the burden of
proving himself or herself innocent.
This bill shifts the burden of proof in court proceedings from the
taxpayer to the IRS.
This bill also creates an Independent Oversight Board that includes
non-governmental experts who can bring new thinking and a more tax-
payer oriented culture to the IRS.
If the Department of Treasury could have fixed the IRS, they would
have done so already.
This oversight board will have real power and authority--it won't
just be another governmental advisory board.
Those of us committed to easing the burden on taxpayers will continue
to work to replace the income tax with a more simple and fair Tax Code.
But as long as we have an income tax, the IRS must do a better job of
providing fair treatment and efficient customer service to the Nation's
taxpayers. This bill is a step in that direction.
I urge my fellow colleagues to cast their vote for a more fair and
efficient IRS for America's taxpayers. Thank you Mr. Speaker, I yield
back the balance of my time.
Mr. FROST. Mr. Speaker, I yield 2 minutes to the gentleman from Texas
[Mr. Green].
Mr. GREEN. Mr. Speaker, I would like to thank my colleague from Texas
and a member of the Committee on Rules for allowing me to speak in
support of not only the rule today, but also the IRS reform bill.
As a cosponsor of the bill of the gentleman from Ohio [Mr. Traficant]
earlier, I support one of the issues particularly that is in this bill,
where the reform would allow for the burden of proof to be placed on
the IRS instead of on the taxpayer, but I also want to compliment both
the Democratic Members and the Republican Members and my colleague the
gentleman from Houston, Texas [Mr. Archer], on the bill. I know from
the Republican side, we hear this is a small step, but let me tell my
colleagues, this is a much bigger step than it may be considered,
because in my two terms here before, we did not get to this point, even
during the last session of Congress, to get to the point where we can
really talk about an IRS reform bill.
Mr. Speaker, it is a bipartisan bill. I am glad the President decided
to support it, but there are a number of Democrats who supported the
issue long before the Committee on Ways and Means brought it up. If one
is mistreated by a government agency, whether it be the IRS or HUD or
anyone else, or EPA, it is not a Democratic or Republican problem, it
is a problem that we all need to address, and that is why I think it is
important that this bill is a bipartisan bill today. Again, I
congratulate the people who put it together on the Committee on Ways
and Means.
I support the change that puts the burden of proof on the IRS, in tax
disputes that come before the IRS tax court. People's lives have been
turned into a living hell by a system that assumed they were guilty as
charged and before they actually knew what they were guilty of. Again,
I think we understand that that burden of proof is so important because
if a person accused of a criminal crime in our country is innocent
until proven guilty, we need to do that at least in the tax courts of
our land.
I am also pleased that the President will continue to appoint the IRS
Commissioner and to remove the Commissioner at will. As we increase the
power and the influence of the Independent Advisory Board, it is
important to make sure the final authority rests with an elected
office; and whether on the Republican side one agrees with this
President or not, it is important that an elected official have that
authority, because the buck stops there.
Taxpayers also receive other rights in the bill, such as innocent
spouses will no longer be held responsible by mistakes made by the
other spouse on tax returns. That is why I encourage my colleagues to
vote for the bill and the rule.
Mr. Speaker, I rise in support of the IRS reform bill.
Mr. Speaker, I believe the bill we have before us will bring much-
needed reform to the Internal Revenue Service and Relief to those
Americans who are audited to be treated fairly.
As a long-time sponsor of the bill by Mr. Traficant, I support the
change that will place the burden of proof on the IRS in most tax
disputes that will come before the IRS Tax Court. As the recent
congressional hearings demonstrated, people's lives have turned into a
living hell by a system that assumed they were guilty as charged.
I am also pleased the President will retain the ability to appoint
the IRS Commissioner and to remove the Commissioner at will. As we
increase the power and influence of the independent advisory board, it
is important to place the final authority over the performance of the
Commissioner with the President. The buck stops there.
Taxpayers will also receive other rights on this bill: innocent
spouses will no longer be held responsible for mistakes made by the
other spouse on a tax return. And taxpayers will be able to sue the
Government for civil damages caused by IRS employees who negligently
disregard laws.
I urge support for this bill.
Mr. FROST. Mr. Speaker, if the gentleman has no other speakers, then
we urge adoption of the rule and adoption of the bill, and yield back
the balance of our time.
Mr. DREIER. Mr. Speaker, I yield myself such time as I may consume to
say that this is our great opportunity to finally deal with this issue
of the burden of proof, which has been a long time in coming. The
leadership of the gentleman from Texas [Mr. Archer] and the gentleman
from Ohio [Mr. Portman] and others have made this day possible, and I
am very happy that we have seen our colleagues on the other side of the
aisle come, not quite kicking and screaming, but they have now come
enthusiastically in support of what I think is very good public policy.
With that, I urge support of the previous question, support of the
rule and support of the bill that will come from my friends on the
Committee on Ways and Means.
Mr. Speaker, I yield back the balance of my time, and I move the
previous question on the resolution.
The previous question was ordered.
The SPEAKER pro tempore. The question is on the resolution.
The resolution was agreed to.
A motion to reconsider was laid on the table.
{time} 1145
Mr. BUNNING. Mr. Speaker, pursuant to House Resolution 303, I call up
the bill (H.R. 2676) to amend the Internal Revenue Code of 1986 to
restructure and reform the Internal Revenue Service, and for other
purposes, and ask for its immediate consideration in the House.
The Clerk read the title of the bill.
The SPEAKER pro tempore (Mr. Sununu). Pursuant to House Resolution
303, the amendment in the nature of a substitute printed in the bill,
modified by the amendments printed in House Report 105-380, is adopted.
The text of the committee amendment in the nature of a substitute, as
modified by the amendments printed in House Report 105-380, is as
follows:
H.R. 2676
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF
CONTENTS.
(a) Short Title.--This Act may be cited as the ``Internal
Revenue Service Restructuring and Reform Act of 1997''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I--EXECUTIVE BRANCH GOVERNANCE AND SENIOR MANAGEMENT OF THE
INTERNAL REVENUE SERVICE
Subtitle A--Executive Branch Governance and Senior Management
Sec. 101. Internal Revenue Service Oversight Board.
Sec. 102. Commissioner of Internal Revenue; other officials.
Sec. 103. Other personnel.
Sec. 104. Prohibition on executive branch influence over taxpayer
audits and other investigations.
Subtitle B--Personnel Flexibilities
Sec. 111. Personnel flexibilities.
TITLE II--ELECTRONIC FILING
Sec. 201. Electronic filing of tax and information returns.
[[Page H10006]]
Sec. 202. Due date for certain information returns filed
electronically.
Sec. 203. Paperless electronic filing.
Sec. 204. Return-free tax system.
Sec. 205. Access to account information.
TITLE III--TAXPAYER PROTECTION AND RIGHTS
Sec. 300. Short title.
Subtitle A--Burden of Proof
Sec. 301. Burden of proof.
Subtitle B--Proceedings by Taxpayers
Sec. 311. Expansion of authority to award costs and certain fees.
Sec. 312. Civil damages for negligence in collection actions.
Sec. 313. Increase in size of cases permitted on small case calendar.
Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To
Manage Their Financial Affairs Due to Disabilities
Sec. 321. Spouse relieved in whole or in part of liability in certain
cases.
Sec. 322. Suspension of statute of limitations on filing refund claims
during periods of disability.
Subtitle D--Provisions Relating to Interest
Sec. 331. Elimination of interest rate differential on overlapping
periods of interest on income tax overpayments and
underpayments.
Sec. 332. Increase in overpayment rate payable to taxpayers other than
corporations.
Subtitle E--Protections for Taxpayers Subject to Audit or Collection
Activities
Sec. 341. Privilege of confidentiality extended to taxpayer's dealings
with non-attorneys authorized to practice before Internal
Revenue Service.
Sec. 342. Expansion of authority to issue taxpayer assistance orders.
Sec. 343. Limitation on financial status audit techniques.
Sec. 344. Limitation on authority to require production of computer
source code.
Sec. 345. Procedures relating to extensions of statute of limitations
by agreement.
Sec. 346. Offers-in-compromise.
Sec. 347. Notice of deficiency to specify deadlines for filing Tax
Court petition.
Sec. 348. Refund or credit of overpayments before final determination.
Sec. 349. Threat of audit prohibited to coerce Tip Reporting
Alternative Commitment Agreements.
Subtitle F--Disclosures to Taxpayers
Sec. 351. Explanation of joint and several liability.
Sec. 352. Explanation of taxpayers' rights in interviews with the
Internal Revenue Service.
Sec. 353. Disclosure of criteria for examination selection.
Sec. 354. Explanations of appeals and collection process.
Subtitle G--Low Income Taxpayer Clinics
Sec. 361. Low income taxpayer clinics.
Subtitle H--Other Matters
Sec. 371. Actions for refund with respect to certain estates which have
elected the installment method of payment.
Sec. 372. Cataloging complaints.
Sec. 373. Archive of records of Internal Revenue Service.
Sec. 374. Payment of taxes.
Sec. 375. Clarification of authority of Secretary relating to the
making of elections.
Sec. 376. Limitation on penalty on individual's failure to pay for
months during period of installment agreement.
Subtitle I--Studies
Sec. 381. Penalty administration.
Sec. 382. Confidentiality of tax return information.
TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE
Subtitle A--Oversight
Sec. 401. Expansion of duties of the Joint Committee on Taxation.
Sec. 402. Coordinated oversight reports.
Subtitle B--Budget
Sec. 411. Funding for century date change.
Sec. 412. Financial Management Advisory Group.
Subtitle C--Tax Law Complexity
Sec. 421. Role of the Internal Revenue Service.
Sec. 422. Tax complexity analysis.
TITLE V--CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION
Sec. 501. Clarification of deduction for deferred compensation.
TITLE I--EXECUTIVE BRANCH GOVERNANCE AND SENIOR MANAGEMENT OF THE
INTERNAL REVENUE SERVICE
Subtitle A--Executive Branch Governance and Senior Management
SEC. 101. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.
(a) In General.--Section 7802 (relating to the Commissioner
of Internal Revenue) is amended to read as follows:
``SEC. 7802. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.
``(a) Establishment.--There is established within the
Department of the Treasury the Internal Revenue Service
Oversight Board (hereafter in this subchapter referred to as
the `Oversight Board').
``(b) Membership.--
``(1) Composition.--The Oversight Board shall be composed
of 11 members, as follows:
``(A) 8 members shall be individuals who are not Federal
officers or employees and who are appointed by the President,
by and with the advice and consent of the Senate.
``(B) 1 member shall be the Secretary of the Treasury or,
if the Secretary so designates, the Deputy Secretary of the
Treasury.
``(C) 1 member shall be the Commissioner of Internal
Revenue.
``(D) 1 member shall be an individual who is a
representative of an organization that represents a
substantial number of Internal Revenue Service employees and
who is appointed by the President, by and with the advice and
consent of the Senate.
``(2) Qualifications and terms.--
``(A) Qualifications.--Members of the Oversight Board
described in paragraph (1)(A) shall be appointed solely on
the basis of their professional experience and expertise in 1
or more of the following areas:
``(i) Management of large service organizations.
``(ii) Customer service.
``(iii) Federal tax laws, including tax administration and
compliance.
``(iv) Information technology.
``(v) Organization development.
``(vi) The needs and concerns of taxpayers.
In the aggregate, the members of the Oversight Board
described in paragraph (1)(A) should collectively bring to
bear expertise in all of the areas described in the preceding
sentence.
``(B) Terms.--Each member who is described in paragraph
(1)(A) or (D) shall be appointed for a term of 5 years,
except that of the members first appointed under paragraph
(1)(A)--
``(i) 1 member shall be appointed for a term of 1 year,
``(ii) 1 member shall be appointed for a term of 2 years,
``(iii) 2 members shall be appointed for a term of 3 years,
and
``(iv) 2 members shall be appointed for a term of 4 years.
Such terms shall begin on the date of appointment.
``(C) Reappointment.--An individual who is described in
paragraph (1)(A) may be appointed to no more than two 5-year
terms on the Oversight Board.
``(D) Vacancy.--Any vacancy on the Oversight Board shall be
filled in the same manner as the original appointment. Any
member appointed to fill a vacancy occurring before the
expiration of the term for which the member's predecessor was
appointed shall be appointed for the remainder of that term.
``(E) Special government employees.--During the entire
period that an individual appointed under paragraph (1)(A) is
a member of the Oversight Board, such individual shall be
treated as--
``(i) serving as a special government employee (as defined
in section 202 of title 18, United States Code) and as
described in section 207(c)(2) of such title 18, and
``(ii) serving as an officer or employee referred to in
section 101(f) of the Ethics in Government Act of 1978 for
purposes of title I of such Act.
``(3) Quorum.--6 members of the Oversight Board shall
constitute a quorum. A majority of members present and voting
shall be required for the Oversight Board to take action.
``(4) Removal.--
``(A) In general.--Any member of the Oversight Board may be
removed at the will of the President.
``(B) Secretary and commissioner.--An individual described
in subparagraph (B) or (C) of paragraph (1) shall be removed
upon termination of employment.
``(C) Representative of internal revenue service
employees.--The member described in paragraph (1)(D) shall be
removed upon termination of employment, membership, or other
affiliation with the organization described in such
paragraph.
``(5) Claims.--
``(A) In general.--Members of the Oversight Board who are
described in paragraph (1)(A) or (D) shall have no personal
liability under Federal law with respect to any claim arising
out of or resulting from an act or omission by such member
within the scope of service as a member. The preceding
sentence shall not be construed to limit personal liability
for criminal acts or omissions, willful or malicious conduct,
acts or omissions for private gain, or any other act or
omission outside the scope of the service of such member on
the Oversight Board.
``(B) Effect on other law.--This paragraph shall not be
construed--
``(i) to affect any other immunities and protections that
may be available to such member under applicable law with
respect to such transactions,
``(ii) to affect any other right or remedy against the
United States under applicable law, or
``(iii) to limit or alter in any way the immunities that
are available under applicable law for Federal officers and
employees.
``(c) General Responsibilities.--
``(1) In general.--The Oversight Board shall oversee the
Internal Revenue Service in its administration, management,
conduct, direction, and supervision of the execution and
application of the internal revenue laws or related statutes
and tax conventions to which the United States is a party.
``(2) Exceptions.--The Oversight Board shall have no
responsibilities or authority with respect to--
``(A) the development and formulation of Federal tax policy
relating to existing or proposed internal revenue laws,
related statutes, and tax conventions,
``(B) law enforcement activities of the Internal Revenue
Service, including compliance activities
[[Page H10007]]
such as criminal investigations, examinations, and collection
activities, or
``(C) specific procurement activities of the Internal
Revenue Service.
``(3) Restriction on disclosure of return information to
oversight board members.--No return, return information, or
taxpayer return information (as defined in section 6103(b))
may be disclosed to any member of the Oversight Board
described in subsection (b)(1)(A) or (D). Any request for
information not permitted to be disclosed under the preceding
sentence, and any contact relating to a specific taxpayer,
made by a member of the Oversight Board so described to an
officer or employee of the Internal Revenue Service shall be
reported by such officer or employee to the Secretary and the
Joint Committee on Taxation.
``(d) Specific Responsibilities.--The Oversight Board shall
have the following specific responsibilities:
``(1) Strategic plans.--To review and approve strategic
plans of the Internal Revenue Service, including the
establishment of--
``(A) mission and objectives, and standards of performance
relative to either, and
``(B) annual and long-range strategic plans.
``(2) Operational plans.--To review the operational
functions of the Internal Revenue Service, including--
``(A) plans for modernization of the tax system,
``(B) plans for outsourcing or managed competition, and
``(C) plans for training and education.
``(3) Management.--To--
``(A) recommend to the President candidates for appointment
as the Commissioner of Internal Revenue and recommend to the
President the removal of the Commissioner,
``(B) review the Commissioner's selection, evaluation, and
compensation of senior managers, and
``(C) review and approve the Commissioner's plans for any
major reorganization of the Internal Revenue Service.
``(4) Budget.--To--
``(A) review and approve the budget request of the Internal
Revenue Service prepared by the Commissioner,
``(B) submit such budget request to the Secretary of the
Treasury, and
``(C) ensure that the budget request supports the annual
and long-range strategic plans.
The Secretary shall submit the budget request referred to in
paragraph (4)(B) for any fiscal year to the President who
shall submit such request, without revision, to Congress
together with the President's annual budget request for the
Internal Revenue Service for such fiscal year.
``(e) Board Personnel Matters.--
``(1) Compensation of members.--
``(A) In general.--Each member of the Oversight Board who
is described in subsection (b)(1)(A) shall be compensated at
a rate not to exceed $30,000 per year. All other members of
the Oversight Board shall serve without compensation for such
service.
``(B) Chairperson.--In lieu of the amount specified in
subparagraph (A), the Chairperson of the Oversight Board
shall be compensated at a rate not to exceed $50,000.
``(2) Travel expenses.--The members of the Oversight Board
shall be allowed travel expenses, including per diem in lieu
of subsistence, at rates authorized for employees of agencies
under subchapter I of chapter 57 of title 5, United States
Code, while away from their homes or regular places of
business for purposes of attending meetings of the Oversight
Board.
``(3) Staff.--At the request of the Chairperson of the
Oversight Board, the Commissioner shall detail to the
Oversight Board such personnel as may be necessary to enable
the Oversight Board to perform its duties. Such detail shall
be without interruption or loss of civil service status or
privilege.
``(4) Procurement of temporary and intermittent services.--
The Chairperson of the Oversight Board may procure temporary
and intermittent services under section 3109(b) of title 5,
United States Code.
``(f) Administrative Matters.--
``(1) Chair.--The members of the Oversight Board shall
elect for a 2-year term a chairperson from among the members
appointed under subsection (b)(1)(A).
``(2) Committees.--The Oversight Board may establish such
committees as the Oversight Board determines appropriate.
``(3) Meetings.--The Oversight Board shall meet at least
once each month and at such other times as the Oversight
Board determines appropriate.
``(4) Reports.--The Oversight Board shall each year report
to the President and the Congress with respect to the conduct
of its responsibilities under this title.''.
(b) Conforming Amendments.--
(1) Section 4946(c) (relating to definitions and special
rules for chapter 42) is amended--
(A) by striking ``or'' at the end of paragraph (5),
(B) by striking the period at the end of paragraph (6) and
inserting ``, or'', and
(C) by adding at the end the following new paragraph:
``(7) a member of the Internal Revenue Service Oversight
Board.''.
(2) The table of sections for subchapter A of chapter 80 is
amended by striking the item relating to section 7802 and
inserting the following new item:
``Sec. 7802. Internal Revenue Service Oversight Board.''
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
take effect on the date of the enactment of this Act.
(2) Nominations to internal revenue service oversight
board.--The President shall submit nominations under section
7802 of the Internal Revenue Code of 1986, as added by this
section, to the Senate not later than 6 months after the date
of the enactment of this Act.
SEC. 102. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFICIALS.
(a) In General.--Section 7803 (relating to other personnel)
is amended to read as follows:
``SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; OTHER
OFFICIALS.
``(a) Commissioner of Internal Revenue.--
``(1) Appointment.--
``(A) In general.--There shall be in the Department of the
Treasury a Commissioner of Internal Revenue who shall be
appointed by the President, by and with the advice and
consent of the Senate, to a 5-year term. The appointment
shall be made without regard to political affiliation or
activity.
``(B) Vacancy.--Any individual appointed to fill a vacancy
in the position of Commissioner occurring before the
expiration of the term for which such individual's
predecessor was appointed shall be appointed only for the
remainder of that term.
``(C) Removal.--The Commissioner may be removed at the will
of the President.
``(2) Duties.--The Commissioner shall have such duties and
powers as the Secretary may prescribe, including the power
to--
``(A) administer, manage, conduct, direct, and supervise
the execution and application of the internal revenue laws or
related statutes and tax conventions to which the United
States is a party; and
``(B) recommend to the President a candidate for
appointment as Chief Counsel for the Internal Revenue Service
when a vacancy occurs, and recommend to the President the
removal of such Chief Counsel.
If the Secretary determines not to delegate a power specified
in subparagraph (A) or (B), such determination may not take
effect until 30 days after the Secretary notifies the
Committees on Ways and Means, Government Reform and
Oversight, and Appropriations of the House of
Representatives, the Committees on Finance, Government
Operations, and Appropriations of the Senate, and the Joint
Committee on Taxation.
``(3) Consultation with board.--The Commissioner shall
consult with the Oversight Board on all matters set forth in
paragraphs (2) and (3) (other than paragraph (3)(A)) of
section 7802(d).
``(b) Assistant Commissioner for Employee Plans and Exempt
Organizations.--There is established within the Internal
Revenue Service an office to be known as the `Office of
Employee Plans and Exempt Organizations' to be under the
supervision and direction of an Assistant Commissioner of
Internal Revenue. As head of the Office, the Assistant
Commissioner shall be responsible for carrying out such
functions as the Secretary may prescribe with respect to
organizations exempt from tax under section 501(a) and with
respect to plans to which part I of subchapter D of chapter 1
applies (and with respect to organizations designed to be
exempt under such section and plans designed to be plans to
which such part applies) and other nonqualified deferred
compensation arrangements. The Assistant Commissioner shall
report annually to the Commissioner with respect to the
Assistant Commissioner's responsibilities under this section.
``(c) Office of Taxpayer Advocate.--
``(1) In general.--
``(A) Establishment.--There is established in the Internal
Revenue Service an office to be known as the `Office of the
Taxpayer Advocate'. Such office shall be under the
supervision and direction of an official to be known as the
`Taxpayer Advocate' who shall be appointed with the approval
of the Oversight Board by the Commissioner of Internal
Revenue and shall report directly to the Commissioner. The
Taxpayer Advocate shall be entitled to compensation at the
same rate as the highest level official reporting directly to
the Commissioner of Internal Revenue.
``(B) Restriction on subsequent employment.--An individual
who is an officer or employee of the Internal Revenue Service
may be appointed as Taxpayer Advocate only if such individual
agrees not to accept any employment with the Internal Revenue
Service for at least 5 years after ceasing to be the Taxpayer
Advocate.
``(2) Functions of office.--
``(A) In general.--It shall be the function of the Office
of Taxpayer Advocate to--
``(i) assist taxpayers in resolving problems with the
Internal Revenue Service,
``(ii) identify areas in which taxpayers have problems in
dealings with the Internal Revenue Service,
``(iii) to the extent possible, propose changes in the
administrative practices of the Internal Revenue Service to
mitigate problems identified under clause (ii), and
``(iv) identify potential legislative changes which may be
appropriate to mitigate such problems.
``(B) Annual reports.--
``(i) Objectives.--Not later than June 30 of each calendar
year, the Taxpayer Advocate shall report to the Committee on
Ways and Means of the House of Representatives and the
Committee on Finance of the Senate on the objectives of the
Taxpayer Advocate for the fiscal year beginning in such
calendar year. Any such report shall contain full and
substantive analysis, in addition to statistical information.
``(ii) Activities.--Not later than December 31 of each
calendar year, the Taxpayer Advocate shall report to the
Committee on Ways and Means of the House of Representatives
and the Committee on Finance of the Senate on the activities
of the Taxpayer Advocate during the fiscal year ending during
such calendar year. Any
[[Page H10008]]
such report shall contain full and substantive analysis, in
addition to statistical information, and shall--
``(I) identify the initiatives the Taxpayer Advocate has
taken on improving taxpayer services and Internal Revenue
Service responsiveness,
``(II) contain recommendations received from individuals
with the authority to issue Taxpayer Assistance Orders under
section 7811,
``(III) contain a summary of at least 20 of the most
serious problems encountered by taxpayers, including a
description of the nature of such problems,
``(IV) contain an inventory of the items described in
subclauses (I), (II), and (III) for which action has been
taken and the result of such action,
``(V) contain an inventory of the items described in
subclauses (I), (II), and (III) for which action remains to
be completed and the period during which each item has
remained on such inventory,
``(VI) contain an inventory of the items described in
subclauses (I), (II), and (III) for which no action has been
taken, the period during which each item has remained on such
inventory, the reasons for the inaction, and identify any
Internal Revenue Service official who is responsible for such
inaction,
``(VII) identify any Taxpayer Assistance Order which was
not honored by the Internal Revenue Service in a timely
manner, as specified under section 7811(b),
``(VIII) contain recommendations for such administrative
and legislative action as may be appropriate to resolve
problems encountered by taxpayers,
``(IX) identify areas of the tax law that impose
significant compliance burdens on taxpayers or the Internal
Revenue Service, including specific recommendations for
remedying these problems,
``(X) in conjunction with the National Director of Appeals,
identify the 10 most litigated issues for each category of
taxpayers, including recommendations for mitigating such
disputes, and
``(XI) include such other information as the Taxpayer
Advocate may deem advisable.
``(iii) Report to be submitted directly.--Each report
required under this subparagraph shall be provided directly
to the committees described in clauses (i) and (ii) without
any prior review or comment from the Oversight Board, the
Secretary of the Treasury, any other officer or employee of
the Department of the Treasury, or the Office of Management
and Budget.
``(C) Other responsibilities.--The Taxpayer Advocate
shall--
``(i) monitor the coverage and geographic allocation of
problem resolution officers, and
``(ii) develop guidance to be distributed to all Internal
Revenue Service officers and employees outlining the criteria
for referral of taxpayer inquiries to problem resolution
officers.
``(3) Responsibilities of commissioner.--The Commissioner
shall establish procedures requiring a formal response to all
recommendations submitted to the Commissioner by the Taxpayer
Advocate within 3 months after submission to the
Commissioner.''.
(b) Conforming Amendments.--
(1) The table of sections for subchapter A of chapter 80 is
amended by striking the item relating to section 7803 and
inserting the following new item:
``Sec. 7803. Commissioner of Internal Revenue; other officials.''
(2) Subsection (b) of section 5109 of title 5, United
States Code, is amended by striking ``7802(b)'' and inserting
``7803(b)''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
take effect on the date of the enactment of this Act.
(2) Current officers.--
(A) In the case of an individual serving as Commissioner of
Internal Revenue on the date of the enactment of this Act who
was appointed to such position before such date, the 5-year
term required by section 7803(a)(1) of the Internal Revenue
Code of 1986, as added by this section, shall begin as of the
date of such appointment.
(B) Section 7803(c)(1)(B) of such Code, as added by this
section, shall not apply to the individual serving as
Taxpayer Advocate on the date of the enactment of this Act.
SEC. 103. OTHER PERSONNEL.
(a) In General.--Section 7804 (relating to the effect of
reorganization plans) is amended to read as follows:
``SEC. 7804. OTHER PERSONNEL.
``(a) Appointment and Supervision.--Unless otherwise
prescribed by the Secretary, the Commissioner of Internal
Revenue is authorized to employ such number of persons as the
Commissioner deems proper for the administration and
enforcement of the internal revenue laws, and the
Commissioner shall issue all necessary directions,
instructions, orders, and rules applicable to such persons.
``(b) Posts of Duty of Employees in Field Service or
Traveling.--Unless otherwise prescribed by the Secretary--
``(1) Designation of post of duty.--The Commissioner shall
determine and designate the posts of duty of all such persons
engaged in field work or traveling on official business
outside of the District of Columbia.
``(2) Detail of personnel from field service.--The
Commissioner may order any such person engaged in field work
to duty in the District of Columbia, for such periods as the
Commissioner may prescribe, and to any designated post of
duty outside the District of Columbia upon the completion of
such duty.
``(c) Delinquent Internal Revenue Officers and Employees.--
If any officer or employee of the Treasury Department acting
in connection with the internal revenue laws fails to account
for and pay over any amount of money or property collected or
received by him in connection with the internal revenue laws,
the Secretary shall issue notice and demand to such officer
or employee for payment of the amount which he failed to
account for and pay over, and, upon failure to pay the amount
demanded within the time specified in such notice, the amount
so demanded shall be deemed imposed upon such officer or
employee and assessed upon the date of such notice and
demand, and the provisions of chapter 64 and all other
provisions of law relating to the collection of assessed
taxes shall be applicable in respect of such amount.''.
(b) Conforming Amendments.--
(1) Subsection (b) of section 6344 is amended by striking
``section 7803(d)'' and inserting ``section 7804(c)''.
(2) The table of sections for subchapter A of chapter 80 is
amended by striking the item relating to section 7804 and
inserting the following new item:
``Sec. 7804. Other personnel.''
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 104. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER
TAXPAYER AUDITS AND OTHER INVESTIGATIONS.
(a) In General.--Part I of subchapter A of chapter 75
(relating to crimes, other offenses, and forfeitures) is
amended by adding after section 7216 the following new
section:
``SEC. 7217. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER
TAXPAYER AUDITS AND OTHER INVESTIGATIONS.
``(a) Prohibition.--It shall be unlawful for any applicable
person to request any officer or employee of the Internal
Revenue Service to conduct or terminate an audit or other
investigation of any particular taxpayer with respect to the
tax liability of such taxpayer.
``(b) Reporting Requirement.--Any officer or employee of
the Internal Revenue Service receiving any request prohibited
by subsection (a) shall report the receipt of such request to
the Chief Inspector of the Internal Revenue Service.
``(c) Exceptions.--Subsection (a) shall not apply to--
``(1) any request made to an applicable person by the
taxpayer or a representative of the taxpayer and forwarded by
such applicable person to the Internal Revenue Service,
``(2) any request by an applicable person for disclosure of
return or return information under section 6103 if such
request is made in accordance with the requirements of such
section, or
``(3) any request by the Secretary of the Treasury as a
consequence of the implementation of a change in tax policy.
``(d) Penalty.--Any person who willfully violates
subsection (a) or fails to report under subsection (b) shall
be punished upon conviction by a fine in any amount not
exceeding $5,000, or imprisonment of not more than 5 years,
or both, together with the costs of prosecution.
``(e) Applicable Person.--For purposes of this section, the
term `applicable person' means--
``(1) the President, the Vice President, any employee of
the executive office of the President, and any employee of
the executive office of the Vice President, and
``(2) any individual (other than the Attorney General of
the United States) serving in a position specified in section
5312 of title 5, United States Code.''
(b) Clerical Amendment.--The table of sections for part I
of subchapter A of chapter 75 is amended by adding after the
item relating to section 7216 the following new item:
``Sec. 7217. Prohibition on executive branch influence over taxpayer
audits and other investigations.''
(c) Effective Date.--The amendments made by this section
shall apply to requests made after the date of the enactment
of this Act.
Subtitle B--Personnel Flexibilities
SEC. 111. PERSONNEL FLEXIBILITIES.
(a) In General.--Part III of title 5, United States Code,
is amended by adding at the end the following new subpart:
``Subpart I--Miscellaneous
``CHAPTER 93--PERSONNEL FLEXIBILITIES RELATING TO THE INTERNAL REVENUE
SERVICE
``Sec.
``9301. General requirements.
``9302. Flexibilities relating to performance management.
``9303. Staffing flexibilities.
``9304. Flexibilities relating to demonstration projects.
``Sec. 9301. General requirements
``(a) Conformance With Merit System Principles, Etc.--Any
flexibilities under this chapter shall be exercised in a
manner consistent with--
``(1) chapter 23, relating to merit system principles and
prohibited personnel practices; and
``(2) provisions of this title (outside of this subpart)
relating to preference eligibles.
``(b) Requirement Relating to Units Represented by Labor
Organizations.--
``(1) Written agreement required.--Employees within a unit
with respect to which a labor organization is accorded
exclusive recognition under chapter 71 shall not be subject
to the exercise of any flexibility under section 9302, 9303,
or 9304, unless there is a written agreement between the
Internal Revenue Service and the organization permitting such
exercise.
``(2) Definition of a written agreement.--In order to
satisfy paragraph (1), a written agreement--
``(A) need not be a collective bargaining agreement within
the meaning of section 7103(8); and
[[Page H10009]]
``(B) may not be an agreement imposed by the Federal
Service Impasses Panel under section 7119.
``(3) Includible matters.--The written agreement may
address any flexibilities under section 9302, 9303, or 9304,
including any matter proposed to be included in a
demonstration project under section 9304.
``Sec. 9302. Flexibilities relating to performance management
``(a) In General.--The Commissioner of Internal Revenue
shall, within a year after the date of the enactment of this
chapter, establish a performance management system which--
``(1) subject to section 9301(b), shall cover all employees
of the Internal Revenue Service other than--
``(A) the members of the Internal Revenue Service Oversight
Board;
``(B) the Commissioner of Internal Revenue; and
``(C) the Chief Counsel for the Internal Revenue Service;
``(2) shall maintain individual accountability by--
``(A) establishing standards of performance which--
``(i) shall permit the accurate evaluation of each
employee's performance on the basis of the individual and
organizational performance requirements applicable with
respect to the evaluation period involved, taking into
account individual contributions toward the attainment of any
goals or objectives under paragraph (3);
``(ii) shall be communicated to an employee before the
start of any period with respect to which the performance of
such employee is to be evaluated using such standards; and
``(iii) shall include at least 2 standards of performance,
the lowest of which shall denote the retention standard and
shall be equivalent to fully successful performance;
``(B) providing for periodic performance evaluations to
determine whether employees are meeting all applicable
retention standards; and
``(C) using the results of such employee's performance
evaluation as a basis for adjustments in pay and other
appropriate personnel actions; and
``(3) shall provide for (A) establishing goals or
objectives for individual, group, or organizational
performance (or any combination thereof), consistent with
Internal Revenue Service performance planning procedures,
including those established under the Government Performance
and Results Act of 1993, the Information Technology
Management Reform Act of 1996, Revenue Procedure 64-22 (as in
effect on July 30, 1997), and taxpayer service surveys, (B)
communicating such goals or objectives to employees, and
(C) using such goals or objectives to make performance
distinctions among employees or groups of employees.
For purposes of this title, performance of an employee during
any period in which such employee is subject to standards of
performance under paragraph (2) shall be considered to be
`unacceptable' if the performance of such employee during
such period fails to meet any retention standard.
``(b) Awards.--
``(1) For superior accomplishments.--In the case of a
proposed award based on the efforts of an employee or former
employee of the Internal Revenue Service, any approval
required under the provisions of section 4502(b) shall be
considered to have been granted if the Office of Personnel
Management does not disapprove the proposed award within 60
days after receiving the appropriate certification described
in such provisions.
``(2) For employees who report directly to the
commissioner.--
``(A) In general.--In the case of an employee of the
Internal Revenue Service who reports directly to the
Commissioner of Internal Revenue, a cash award in an amount
up to 50 percent of such employee's annual rate of basic pay
may be made if the Commissioner finds such an award to be
warranted based on such employee's performance.
``(B) Nature of an award.--A cash award under this
paragraph shall not be considered to be part of basic pay.
``(C) Tax enforcement results.--A cash award under this
paragraph may not be based solely on tax enforcement results.
``(D) Eligible employees.--Whether or not an employee is an
employee who reports directly to the Commissioner of Internal
Revenue shall, for purposes of this paragraph, be determined
under regulations which the Commissioner shall prescribe,
except that in no event shall more than 8 employees be
eligible for a cash award under this paragraph in any
calendar year.
``(E) Limitation on compensation.--For purposes of applying
section 5307 to an employee in connection with any calendar
year to which an award made under this paragraph to such
employee is attributable, subsection (a)(1) of such section
shall be applied by substituting `to equal or exceed the
annual rate of compensation for the Vice President for such
calendar year' for `to exceed the annual rate of basic pay
payable for level I of the Executive Schedule, as of the end
of such calendar year'.
``(F) Approval required.--An award under this paragraph may
not be made unless--
``(i) the Commissioner of Internal Revenue certifies to the
Office of Personnel Management that such award is warranted;
and
``(ii) the Office approves, or does not disapprove, the
proposed award within 60 days after the date on which it is
so certified.
``(3) Based on savings.--
``(A) In general.--The Commissioner of Internal Revenue may
authorize the payment of cash awards to employees based on
documented financial savings achieved by a group or
organization which such employees comprise, if such payments
are made pursuant to a plan which--
``(i) specifies minimum levels of service and quality to be
maintained while achieving such financial savings; and
``(ii) is in conformance with criteria prescribed by the
Office of Personnel Management.
``(B) Funding.--A cash award under this paragraph may be
paid from the fund or appropriation available to the activity
primarily benefiting or the various activities benefiting.
``(C) Tax enforcement results.--A cash award under this
paragraph may not be based solely on tax enforcement results.
``(c) Other Provisions.--
``(1) Notice provisions.--In applying sections
4303(b)(1)(A) and 7513(b)(1) to employees of the Internal
Revenue Service, `15 days' shall be substituted for `30
days'.
``(2) Appeals.--Notwithstanding the second sentence of
section 5335(c), an employee of the Internal Revenue Service
shall not have a right to appeal the denial of a periodic
step increase under section 5335 to the Merit Systems
Protection Board.
``Sec. 9303. Staffing flexibilities
``(a) Eligibility To Compete for A Permanent Appointment in
the Competitive Service.--
``(1) Eligibility of qualified veterans.--
``(A) In general.--No veteran described in subparagraph (B)
shall be denied the opportunity to compete for an announced
vacant competitive service position within the Internal
Revenue Service by reason of--
``(i) not having acquired competitive status; or
``(ii) not being an employee of that agency.
``(B) Description.--An individual shall, for purposes of a
position for which such individual is applying, be considered
a veteran described in this subparagraph if such individual--
``(i) is either a preference eligible, or an individual
(other than a preference eligible) who has been separated
from the armed forces under honorable conditions after at
least 3 years of active service; and
``(ii) meets the minimum qualification requirements for the
position sought.
``(2) Eligibility of certain temporary employees.--
``(A) In general.--No temporary employee described in
subparagraph (B) shall be denied the opportunity to compete
for an announced vacant competitive service position within
the Internal Revenue Service by reason of not having acquired
competitive status.
``(B) Description.--An individual shall, for purposes of a
position for which such individual is applying, be considered
a temporary employee described in this subparagraph if--
``(i) such individual is then currently serving as a
temporary employee in the Internal Revenue Service;
``(ii) such individual has completed at least 2 years of
current continuous service in the competitive service under 1
or more term appointments, each of which was made under
competitive procedures prescribed for permanent appointments;
``(iii) such individual's performance under each term
appointment referred to in clause (ii) met all applicable
retention standards; and
``(iv) such individual meets the minimum qualification
requirements for the position sought.
``(b) Rating Systems.--
``(1) In general.--Notwithstanding subchapter I of chapter
33, the Commissioner of Internal Revenue may establish
category rating systems for evaluating job applicants for
positions in the competitive service, under which qualified
candidates are divided into 2 or more quality categories on
the basis of relative degrees of merit, rather than assigned
individual numerical ratings. Each applicant who meets the
minimum qualification requirements for the position to be
filled shall be assigned to an appropriate category based on
an evaluation of the applicant's knowledge, skills, and
abilities relative to those needed for successful performance
in the job to be filled.
``(2) Treatment of preference eligibles.--Within each
quality category established under paragraph (1), preference
eligibles shall be listed ahead of individuals who are not
preference eligibles. For other than scientific and
professional positions at or higher than GS-9 (or
equivalent), preference eligibles who have a compensable
service-connected disability of 10 percent or more, and who
meet the minimum qualification standards, shall be listed in
the highest quality category.
``(3) Selection process.--An appointing authority may
select any applicant from the highest quality category or, if
fewer than 3 candidates have been assigned to the highest
quality category, from a merged category consisting of the
highest and second highest quality categories.
Notwithstanding the preceding sentence, the appointing
authority may not pass over a preference eligible in the same
or a higher category from which selection is made, unless the
requirements of section 3317(b) or 3318(b), as applicable,
are satisfied, except that in no event may certification of a
preference eligible under this subsection be discontinued by
the Internal Revenue Service under section 3317(b) before the
end of the 6-month period beginning on the date of such
employee's first certification.
``(c) Involuntary Reassignments and Removals of Career
Appointees in the Senior Executive Service.--Neither section
3395(e)(1) nor section 3592(b)(1) shall apply with respect to
the Internal Revenue Service.
``(d) Probationary Periods.--Notwithstanding any other
provision of law or regulation, the Commissioner of Internal
Revenue may establish a period of probation under section
3321 of up to 3 years for any position if, as determined by
the Commissioner, a shorter period would be insufficient for
the incumbent to demonstrate complete proficiency in such
position.
``(e) Provisions That Remain Applicable.--No provision of
this section exempts the Internal Revenue Service from--
[[Page H10010]]
``(1) any employment priorities established under direction
of the President for the placement of surplus or displaced
employees; or
``(2) its obligations under any court order or decree
relating to the employment practices of the Internal Revenue
Service.
``Sec. 9304. Flexibilities relating to demonstration projects
``(a) Authority To Conduct.--The Commissioner of Internal
Revenue may, in accordance with this section, conduct 1 or
more demonstration projects to improve personnel management;
provide increased individual accountability; eliminate
obstacles to the removal of or imposing any disciplinary
action with respect to poor performers, subject to the
requirements of due process; expedite appeals from adverse
actions or performance-based actions; and promote pay based
on performance.
``(b) General Requirements.--Except as provided in
subsection (c), each demonstration project under this section
shall comply with the provisions of section 4703.
``(c) Special Rules.--For purposes of any demonstration
project under this section--
``(1) Authority of commissioner.--The Commissioner of
Internal Revenue shall exercise the authority provided to the
Office of Personnel Management under section 4703.
``(2) Provisions not applicable.--The following provisions
of section 4703 shall not apply:
``(A) Paragraphs (3) through (6) of subsection (b).
``(B) Paragraphs (1), (2)(B)(ii), and (4) of subsection
(c).
``(C) Subsections (d) through (g).
``(d) Notification Required To Be Given.--
``(1) To employees.--The Commissioner of Internal Revenue
shall notify employees likely to be affected by a project
proposed under this section at least 90 days in advance of
the date such project is to take effect.
``(2) To congress and opm.--The Commissioner of Internal
Revenue shall, with respect to each demonstration project
under this section, provide each House of Congress and the
Office of Personnel Management with a report, at least 30
days in advance of the date such project is to take effect,
setting forth the final version of the plan for such project.
Such report shall, with respect to the project to which it
relates, include the information specified in section
4703(b)(1).
``(e) Limitations.--No demonstration project under this
section may--
``(1) provide for a waiver of any regulation prescribed
under any provision of law referred to in paragraph (2)(B)(i)
or (3) of section 4703(c);
``(2) provide for a waiver of subchapter V of chapter 63 or
subpart G of part III (or any regulations prescribed under
such subchapter or subpart);
``(3) provide for a waiver of any law or regulation
relating to preference eligibles as defined in section 2108
or subchapter II or III of chapter 73 (or any regulations
prescribed thereunder);
``(4) permit collective bargaining over pay or benefits, or
require collective bargaining over any matter which would not
be required under section 7106; or
``(5) include a system for measuring performance that
provides for only 1 level of performance at or above the
level of fully successful or better.
``(f) Permissible Projects.--Notwithstanding any other
provision of law, a demonstration project under this
section--
``(1) may establish alternative means of resolving any
dispute within the jurisdiction of the Equal Employment
Opportunity Commission, the Merit Systems Protection Board,
the Federal Labor Relations Authority, or the Federal Service
Impasses Panel; and
``(2) may permit the Internal Revenue Service to adopt any
alternative dispute resolution procedure that a private
entity may lawfully adopt.
``(g) Consultation and Coordination.--The Commissioner of
Internal Revenue shall consult with the Director of the
Office of Personnel Management in the development and
implementation of each demonstration project under this
section and shall submit such reports to the Director as the
Director may require. The Director or the Commissioner of
Internal Revenue may terminate a demonstration project under
this section if either of them determines that the project
creates a substantial hardship on, or is not in the best
interests of, the public, the Federal Government, employees,
or qualified applicants for employment with the Internal
Revenue Service.
``(h) Termination.--Each demonstration project under this
section shall terminate before the end of the 5-year period
beginning on the date on which the project takes effect,
except that any such project may continue beyond the end of
such period, for not to exceed 2 years, if the Commissioner
of Internal Revenue, with the concurrence of the Director,
determines such extension is necessary to validate the
results of the project. Not later than 6 months before the
end of the 5-year period and any extension under the
preceding sentence, the Commissioner of Internal Revenue
shall, with respect to the demonstration project involved,
submit a legislative proposal to the Congress if the
Commissioner determines that such project should be made
permanent, in whole or in part.''
(b) Clerical Amendment.--The analysis for part III of title
5, United States Code, is amended by adding at the end the
following:
``Subpart I--Miscellaneous
``93. Personnel Flexibilities Relating to the Internal Revenue
Service.......................................................9301''.
(c) Effective Date.--This section shall take effect on the
date of enactment of this Act.
TITLE II--ELECTRONIC FILING
SEC. 201. ELECTRONIC FILING OF TAX AND INFORMATION RETURNS.
(a) In General.--It is the policy of the Congress that
paperless filing should be the preferred and most convenient
means of filing tax and information returns, and that by the
year 2007, no more than 20 percent of all such returns should
be filed on paper.
(b) Strategic Plan.--
(1) In general.--Not later than 180 days after the date of
the enactment of this Act, the Secretary of the Treasury or
the Secretary's delegate (hereafter in this section referred
to as the ``Secretary'') shall establish a plan to eliminate
barriers, provide incentives, and use competitive market
forces to increase electronic filing gradually over the next
10 years while maintaining processing times for paper returns
at 40 days. To the extent practicable, such plan shall
provide that all returns prepared electronically for taxable
years beginning after 2001 shall be filed electronically.
(2) Electronic commerce advisory group.--To ensure that the
Secretary receives input from the private sector in the
development and implementation of the plan required by
paragraph (1), the Secretary shall convene an electronic
commerce advisory group to include representatives from the
small business community and from the tax practitioner,
preparer, and computerized tax processor communities and
other representatives from the electronic filing industry.
(c) Promotion of Electronic Filing and Incentives.--Section
6011 is amended by redesignating subsection (f) as subsection
(g) and by inserting after subsection (e) the following new
subsection:
``(f) Promotion of Electronic Filing.--
``(1) In general.--The Secretary is authorized to promote
the benefits of and encourage the use of electronic tax
administration programs, as they become available, through
the use of mass communications and other means.
``(2) Incentives.--The Secretary may implement procedures
to provide for the payment of appropriate incentives for
electronically filed returns.''
(d) Annual Reports.--Not later than June 30 of each
calendar year after 1997, the Chairperson of the Internal
Revenue Service Oversight Board, the Secretary, and the
Chairperson of the electronic commerce advisory group
established under subsection (b)(2) shall report to the
Committees on Ways and Means, Appropriations, and Government
Reform and Oversight of the House of Representatives, the
Committees on Finance, Appropriations, and Government Affairs
of the Senate, and the Joint Committee on Taxation, on--
(1) the progress of the Internal Revenue Service in meeting
the goal of receiving electronically 80 percent of tax and
information returns by 2007;
(2) the status of the plan required by subsection (b); and
(3) the legislative changes necessary to assist the
Internal Revenue Service in meeting such goal.
SEC. 202. DUE DATE FOR CERTAIN INFORMATION RETURNS FILED
ELECTRONICALLY.
(a) In General.--Section 6071 (relating to time for filing
returns and other documents) is amended by redesignating
subsection (b) as subsection (c) and by inserting after
subsection (a) the following new subsection:
``(b) Electronically Filed Information Returns.--Returns
made under subparts B and C of part III of this subchapter
which are filed electronically shall be filed on or before
March 31 of the year following the calendar year to which
such returns relate.''
(b) Effective Date.--The amendment made by this section
shall apply to returns required to be filed after December
31, 1999.
SEC. 203. PAPERLESS ELECTRONIC FILING.
(a) In General.--Section 6061 (relating to signing of
returns and other documents) is amended--
(1) by striking ``Except as otherwise provided by'' and
inserting the following:
``(a) General Rule.--Except as otherwise provided by
subsection (b) and'', and
(2) by adding at the end the following new subsection:
``(b) Electronic Signatures.--
``(1) In general.--The Secretary shall develop procedures
for the acceptance of signatures in digital or other
electronic form. Until such time as such procedures are in
place, the Secretary may waive the requirement of a signature
for all returns or classes of returns, or may provide for
alternative methods of subscribing all returns, declarations,
statements, or other documents required or permitted to be
made or written under internal revenue laws and regulations.
``(2) Treatment of alternative methods.--Notwithstanding
any other provision of law, any return, declaration,
statement or other document filed without signature under the
authority of this subsection or verified, signed or
subscribed under any method adopted under paragraph (1) shall
be treated for all purposes (both civil and criminal,
including penalties for perjury) in the same manner as though
signed and subscribed. Any such return, declaration,
statement or other document shall be presumed to have been
actually submitted and subscribed by the person on whose
behalf it was submitted.
``(3) Published guidance.--The Secretary shall publish
guidance as appropriate to define and implement any waiver of
the signature requirements.''
(b) Acknowledgment of Electronic Filing.--Section 7502(c)
is amended to read as follows:
``(c) Registered and Certified Mailing; Electronic
Filing.--
``(1) Registered mail.--For purposes of this section, if
any return, claim, statement, or other document, or payment,
is sent by United States registered mail--
``(A) such registration shall be prima facie evidence that
the return, claim, statement, or other
[[Page H10011]]
document was delivered to the agency, officer, or office to
which addressed, and
``(B) the date of registration shall be deemed the postmark
date.
``(2) Certified mail; electronic filing.--The Secretary is
authorized to provide by regulations the extent to which the
provisions of paragraph (1) with respect to prima facie
evidence of delivery and the postmark date shall apply to
certified mail and electronic filing.''.
(c) Establishment of Procedures for Other Information.--In
the case of taxable periods beginning after December 31,
1998, the Secretary of the Treasury or the Secretary's
delegate shall, to the extent practicable, establish
procedures to accept, in electronic form, any other
information, statements, elections, or schedules, from
taxpayers filing returns electronically, so that such
taxpayers will not be required to file any paper.
(d) Procedures for Communications Between IRS and Preparer
of Electronically Filed Returns.--The Secretary shall
establish procedures for taxpayers to authorize, on
electronically filed returns, the preparer of such returns to
communicate with the Internal Revenue Service on matters
included on such returns.
(e) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 204. RETURN-FREE TAX SYSTEM.
(a) In General.--The Secretary of the Treasury or the
Secretary's delegate shall develop procedures for the
implementation of a return-free tax system under which
appropriate individuals would be permitted to comply with the
Internal Revenue Code of 1986 without making the return
required under section 6012 of such Code for taxable years
beginning after 2007.
(b) Report.--Not later than June 30 of each calendar year
after 1999, such Secretary shall report to the Committee on
Ways and Means of the House of Representatives, the Committee
on Finance of the Senate, and the Joint Committee on Taxation
on--
(1) what additional resources the Internal Revenue Service
would need to implement such a system,
(2) the changes to the Internal Revenue Code of 1986 that
could enhance the use of such a system,
(3) the procedures developed pursuant to subsection (a),
and
(4) the number and classes of taxpayers that would be
permitted to use the procedures developed pursuant to
subsection (a).
SEC. 205. ACCESS TO ACCOUNT INFORMATION.
Not later than December 31, 2006, the Secretary of the
Treasury or the Secretary's delegate shall develop procedures
under which a taxpayer filing returns electronically would be
able to review the taxpayer's account electronically, but
only if all necessary safeguards to ensure the privacy of
such account information are in place.
TITLE III--TAXPAYER PROTECTION AND RIGHTS
SEC. 300. SHORT TITLE.
This title may be cited as the ``Taxpayer Bill of Rights
3''.
Subtitle A--Burden of Proof
SEC. 301. BURDEN OF PROOF.
(a) In General.--Chapter 76 (relating to judicial
proceedings) is amended by adding at the end the following
new subchapter:
``Subchapter E--Burden of Proof
``Sec. 7491. Burden of proof.
``SEC. 7491. BURDEN OF PROOF.
``(a) General Rule.--The Secretary shall have the burden of
proof in any court proceeding with respect to any factual
issue relevant to ascertaining the income tax liability of a
taxpayer.
``(b) Limitations.--Subsection (a) shall only apply with
respect to an issue if--
``(1) the taxpayer asserts a reasonable dispute with
respect to such issue,
``(2) the taxpayer has fully cooperated with the Secretary
with respect to such issue, including providing, within a
reasonable period of time, access to and inspection of all
witnesses, information, and documents within the control of
the taxpayer, as reasonably requested by the Secretary,
and
``(3) in the case of a partnership, corporation, or trust,
the taxpayer is described in section 7430(c)(4)(A)(ii).
``(c) Substantiation.--Nothing in this section shall be
construed to override any requirement of this title to
substantiate any item.''
(b) Conforming Amendments.--
(1) Section 6201 is amended by striking subsection (d) and
redesignating subsection (e) as subsection (d).
(2) The table of subchapters for chapter 76 is amended by
adding at the end the following new item:
``Subchapter E. Burden of proof.''
(c) Effective Date.--The amendments made by this section
shall apply to court proceedings arising in connection with
examinations commencing after the date of the enactment of
this Act.
Subtitle B--Proceedings by Taxpayers
SEC. 311. EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN
FEES.
(a) Award of Higher Attorney's Fees Based on Complexity of
Issues.--Clause (iii) of section 7430(c)(1)(B) (relating to
the award of costs and certain fees) is amended by inserting
``the difficulty of the issues presented in the case, or the
local availability of tax expertise,'' before ``justifies a
higher rate''.
(b) Award of Administrative Costs Incurred After 30-Day
Letter.--Paragraph (2) of section 7430(c) is amended by
striking the last sentence and inserting the following:
``Such term shall only include costs incurred on or after
whichever of the following is the earliest: (i) the date of
the receipt by the taxpayer of the notice of the decision of
the Internal Revenue Service Office of Appeals, (ii) the date
of the notice of deficiency, or (iii) the date on which the
1st letter of proposed deficiency which allows the taxpayer
an opportunity for administrative review in the Internal
Revenue Service Office of Appeals is sent.''.
(c) Award of Fees for Certain Additional Services.--
Paragraph (3) of section 7430(c) is amended to read as
follows:
``(3) Attorney's fees.--
``(A) In general.--For purposes of paragraphs (1) and (2),
fees for the services of an individual (whether or not an
attorney) who is authorized to practice before the Tax Court
or before the Internal Revenue Service shall be treated as
fees for the services of an attorney.
``(B) Pro bono services.--In any case in which the court
could have awarded attorney's fees under subsection (a) but
for the fact that an individual is representing the
prevailing party for no fee or for a fee which (taking into
account all the facts and circumstances) is no more than a
nominal fee, the court may also award a judgment or
settlement for such amounts as the court determines to be
appropriate (based on hours worked and costs expended) for
services of such individual but only if such award is paid to
such individual or such individual's employer.''
(d) Determination of Whether Position of United States is
Substantially Justified.--Subparagraph (B) of section
7430(c)(4) is amended by redesignating clause (iii) as clause
(iv) and by inserting after clause (ii) the following new
clause:
``(iii) Effect of losing on substantially similar issues.--
In determining for purposes of clause (i) whether the
position of the United States was substantially justified,
the court shall take into account whether the United States
has lost in courts of appeal for other circuits on
substantially similar issues.''
(e) Effective Date.--The amendments made by this section
shall apply to costs incurred (and, in the case of the
amendment made by subsection (c), services performed) more
than 180 days after the date of the enactment of this Act.
SEC. 312. CIVIL DAMAGES FOR NEGLIGENCE IN COLLECTION ACTIONS.
(a) In General.--Section 7433 (relating to civil damages
for certain unauthorized collection actions) is amended--
(1) in subsection (a), by inserting ``, or by reason of
negligence,'' after ``recklessly or intentionally'', and
(2) in subsection (b)--
(A) in the matter preceding paragraph (1), by inserting
``($100,000, in the case of negligence)'' after
``$1,000,000'', and
(B) in paragraph (1), by inserting ``or negligent'' after
``reckless or intentional''.
(b) Requirement That Administrative Remedies Be
Exhausted.--Paragraph (1) of section 7433(d) is amended to
read as follows:
``(1) Requirement that administrative remedies be
exhausted.--A judgment for damages shall not be awarded under
subsection (b) unless the court determines that the plaintiff
has exhausted the administrative remedies available to such
plaintiff within the Internal Revenue Service.''
(c) Effective Date.--The amendments made by this section
shall apply to actions of officers or employees of the
Internal Revenue Service after the date of the enactment of
this Act.
SEC. 313. INCREASE IN SIZE OF CASES PERMITTED ON SMALL CASE
CALENDAR.
(a) In General.--Subsection (a) of section 7463 (relating
to disputes involving $10,000 or less) is amended by striking
``$10,000'' each place it appears and inserting ``$25,000''.
(b) Conforming Amendments.--
(1) The section heading for section 7463 is amended by
striking ``$10,000'' and inserting ``$25,000''.
(2) The item relating to section 7463 in the table of
sections for part II of subchapter C of chapter 76 is amended
by striking ``$10,000'' and inserting ``$25,000''.
(c) Effective Date.--The amendments made by this section
shall apply to proceedings commencing after the date of the
enactment of this Act.
Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To
Manage Their Financial Affairs Due to Disabilities
SEC. 321. SPOUSE RELIEVED IN WHOLE OR IN PART OF LIABILITY IN
CERTAIN CASES.
(a) In General.--Subpart B of part II of subchapter A of
chapter 61 is amended by inserting after section 6014 the
following new section:
``SEC. 6015. INNOCENT SPOUSE RELIEF; PETITION TO TAX COURT.
``(a) Spouse Relieved of Liability in Certain Cases.--
``(1) In general.--Under procedures prescribed by the
Secretary, if--
``(A) a joint return has been made under section 6013 for a
taxable year,
``(B) on such return there is an understatement of tax
attributable to erroneous items of 1 spouse,
``(C) the other spouse establishes that in signing the
return he or she did not know, and had no reason to know,
that there was such understatement,
``(D) taking into account all the facts and circumstances,
it is inequitable to hold the other spouse liable for the
deficiency in tax for such taxable year attributable to such
understatement, and
``(E) the other spouse claims (in such form as the
Secretary may prescribe) the benefits of this subsection not
later than the date which is 2 years after the date of the
assessment of such deficiency,
[[Page H10012]]
then the other spouse shall be relieved of liability for tax
(including interest, penalties, and other amounts) for such
taxable year to the extent such liability is attributable to
such understatement.
``(2) Apportionment of relief.--If a spouse who, but for
paragraph (1)(C), would be relieved of liability under
paragraph (1), establishes that in signing the return such
spouse did not know, and had no reason to know, the extent of
such understatement, then such spouse shall be relieved of
liability for tax (including interest, penalties, and other
amounts) for such taxable year to the extent that such
liability is attributable to the portion of such
understatement of which such spouse did not know and had no
reason to know.
``(3) Understatement.--For purposes of this subsection, the
term `understatement' has the meaning given to such term by
section 6662(d)(2)(A).
``(4) Special rule for community property income.--For
purposes of this subsection, the determination of the spouse
to whom items of gross income (other than gross income from
property) are attributable shall be made without regard to
community property laws.
``(b) Petition for Review By Tax Court.--In the case of an
individual who has filed a claim under subsection (a) within
the period specified in subsection (a)(1)(E)--
``(1) In general.--Such individual may petition the Tax
Court (and the Tax Court shall have jurisdiction) to
determine such claim if such petition is filed during the 90-
day period beginning on the earlier of--
``(A) the date which is 6 months after the date such claim
is filed with the Secretary, or
``(B) the date on which the Secretary mails by certified or
registered mail a notice to such individual denying such
claim.
Such 90-day period shall be determined by not counting
Saturday, Sunday, or a legal holiday in the District of
Columbia as the last day of such period.
``(2) Restrictions applicable to collection of
assessment.--
``(A) In general.--Except as otherwise provided in section
6851 or 6861, no levy or proceeding in court for collection
of any assessment to which such claim relates shall be made,
begun, or prosecuted, until the expiration of the 90-day
period described in paragraph (1), nor, if a petition has
been filed with the Tax Court, until the decision of the Tax
Court has become final. Rules similar to the rules of section
7485 shall apply with respect to the collection of such
assessment.
``(B) Authority to enjoin collection actions.--
Notwithstanding the provisions of section 7421(a), the
beginning of such proceeding or levy during the time the
prohibition under subparagraph (A) is in force may be
enjoined by a proceeding in the proper court, including the
Tax Court. The Tax Court shall have no jurisdiction under
this paragraph to enjoin any action or proceeding unless a
timely petition for a determination of such claim has been
filed and then only in respect of the amount of the
assessment to which such claim relates.
``(C) Jeopardy collection.--If the Secretary makes a
finding that the collection of the tax is in jeopardy,
nothing in this subsection shall prevent the immediate
collection of such tax.
``(c) Suspension of Running of Period of Limitations.--The
running of the period of limitations in section 6502 on the
collection of the assessment to which the petition under
subsection (b) relates shall be suspended for the period
during which the Secretary is prohibited by subsection (b)
from collecting by levy or a proceeding in court and for 60
days thereafter.
``(d) Applicable Rules.--
``(1) Allowance of application.--Except as provided in
paragraph (2), notwithstanding any other law or rule of law
(other than section 6512(b), 7121, or 7122), credit or refund
shall be allowed or made to the extent attributable to the
application of this section.
``(2) Res judicata.--In the case of any claim under
subsection (a), the determination of the Tax Court in any
prior proceeding for the same taxable periods in which the
decision has become final, shall be conclusive except with
respect to the qualification of the spouse for relief which
was not an issue in such proceeding. The preceding sentence
shall not apply if the Tax Court determines that the spouse
participated meaningfully in such prior proceeding.
``(3) Limitation on tax court jurisdiction.--If a suit for
refund is begun by either spouse pursuant to section 6532,
the Tax Court shall lose jurisdiction of the spouse's action
under this section to whatever extent jurisdiction is
acquired by the district court or the United States Court of
Federal Claims over the taxable years that are the subject of
the suit for refund.''
(b) Separate Form For Applying For Spousal Relief.--Not
later than 180 days after the date of the enactment of this
Act, the Secretary of the Treasury shall develop a separate
form with instructions for use by taxpayers in applying for
relief under section 6015(a) of the Internal Revenue Code of
1986, as added by this section.
(c) Conforming Amendments.--
(1) Section 6013 is amended by striking subsection (e).
(2) Subparagraph (A) of section 6230(c)(5) is amended by
striking ``section 6013(e)'' and inserting ``section 6015''.
(d) Clerical Amendment.--The table of sections for subpart
B of part II of subchapter A of chapter 61 is amended by
inserting after the item relating to section 6014 the
following new item:
``Sec. 6015. Innocent spouse relief; petition to Tax Court.''
(e) Effective Date.--The amendments made by this section
shall apply to understatements for taxable years beginning
after the date of the enactment of this Act.
SEC. 322. SUSPENSION OF STATUTE OF LIMITATIONS ON FILING
REFUND CLAIMS DURING PERIODS OF DISABILITY.
(a) In General.--Section 6511 (relating to limitations on
credit or refund) is amended by redesignating subsection (h)
as subsection (i) and by inserting after subsection (g) the
following new subsection:
``(h) Running of Periods of Limitation Suspended While
Taxpayer Is Unable To Manage Financial Affairs Due to
Disability.--
``(1) In general.--In the case of an individual, the
running of the periods specified in subsections (a), (b), and
(c) shall be suspended during any period of such individual's
life that such individual is financially disabled.
``(2) Financially disabled.--
``(A) In general.--For purposes of paragraph (1), an
individual is financially disabled if such individual is
unable to manage his financial affairs by reason of his
medically determinable physical or mental impairment which
can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than
12 months. An individual shall not be considered to have such
an impairment unless proof of the existence thereof is
furnished in such form and manner as the Secretary may
require.
``(B) Exception where individual has guardian, etc.--An
individual shall not be treated as financially disabled
during any period that such individual's spouse or any other
person is authorized to act on behalf of such individual in
financial matters.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to periods of disability before, on, or after the
date of the enactment of this Act but shall not apply to any
claim for credit or refund which (without regard to such
amendment) is barred by the operation of any law or rule of
law (including res judicata) as of January 1, 1998.
Subtitle D--Provisions Relating to Interest
SEC. 331. ELIMINATION OF INTEREST RATE DIFFERENTIAL ON
OVERLAPPING PERIODS OF INTEREST ON INCOME TAX
OVERPAYMENTS AND UNDERPAYMENTS.
(a) In General.--Section 6621 (relating to determination of
rate of interest) is amended by adding at the end the
following new subsection:
``(d) Elimination of Interest on Overlapping Periods of
Income Tax Overpayments and Underpayments.--To the extent
that, for any period, interest is payable under subchapter A
and allowable under subchapter B on equivalent underpayments
and overpayments by the same taxpayer of tax imposed by
chapters 1 and 2, the net rate of interest under this section
on such amounts shall be zero for such period.''
(b) Conforming Amendment.--Subsection (f) of section 6601
(relating to satisfaction by credits) is amended by adding at
the end the following new sentence: ``The preceding sentence
shall not apply to the extent that section 6621(d) applies.''
(c) Effective Date.--The amendments made by this section
shall apply to interest for calendar quarters beginning after
the date of the enactment of this Act.
SEC. 332. INCREASE IN OVERPAYMENT RATE PAYABLE TO TAXPAYERS
OTHER THAN CORPORATIONS.
(a) In General.--Subparagraph (B) of section 6621(a)(1)
(defining overpayment rate) is amended to read as follows:
``(B) 3 percentage points (2 percentage points in the case
of a corporation).''
(b) Effective Date.--The amendment made by this section
shall apply to interest for calendar quarters beginning after
the date of the enactment of this Act.
Subtitle E--Protections for Taxpayers Subject to Audit or Collection
Activities
SEC. 341. PRIVILEGE OF CONFIDENTIALITY EXTENDED TO TAXPAYER'S
DEALINGS WITH NON-ATTORNEYS AUTHORIZED TO
PRACTICE BEFORE INTERNAL REVENUE SERVICE.
Section 7602 (relating to examination of books and
witnesses) is amended by adding at the end the following new
subsection:
``(d) Privilege of Confidentiality Extended to Taxpayer's
Dealings with Non-Attorneys Authorized to Practice Before
Internal Revenue Service.--
``(1) In general.--In any noncriminal proceeding before the
Internal Revenue Service, the taxpayer shall be entitled to
the same common law protections of confidentiality with
respect to tax advice furnished by any qualified
individual (in a manner consistent with State law for such
individual's profession) as the taxpayer would have if
such individual were an attorney.
``(2) Qualified individual.--For purposes of paragraph (1),
the term `qualified individual' means any individual (other
than an attorney) who is authorized to practice before the
Internal Revenue Service.''
SEC. 342. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE
ORDERS.
Section 7811(a) (relating to taxpayer assistance orders) is
amended--
(1) by striking ``Upon application'' and inserting the
following:
``(1) In general.--Upon application'',
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new paragraphs:
``(2) Issuance of taxpayer assistance orders.--For purposes
of determining whether to issue a taxpayer assistance order,
the Taxpayer Advocate shall consider the following factors,
among others:
``(A) Whether there is an immediate threat of adverse
action.
``(B) Whether there has been an unreasonable delay in
resolving taxpayer account problems.
``(C) Whether the taxpayer will have to pay significant
costs (including fees for professional representation) if
relief is not granted.
[[Page H10013]]
``(D) Whether the taxpayer will suffer irreparable injury,
or a long-term adverse impact, if relief is not granted.
``(3) Standard where administrative guidance not
followed.--In cases where any Internal Revenue Service
employee is not following applicable published administrative
guidance (including the Internal Revenue Manual), the
Taxpayer Advocate shall construe the factors taken into
account in determining whether to issue a taxpayer assistance
order in the manner most favorable to the taxpayer.''
SEC. 343. LIMITATION ON FINANCIAL STATUS AUDIT TECHNIQUES.
Section 7602 is amended by adding at the end the following
new subsection:
``(e) Limitation on Examination on Unreported Income.--The
Secretary shall not use financial status or economic reality
examination techniques to determine the existence of
unreported income of any taxpayer unless the Secretary has a
reasonable indication that there is a likelihood of such
unreported income.''
SEC. 344. LIMITATION ON AUTHORITY TO REQUIRE PRODUCTION OF
COMPUTER SOURCE CODE.
(a) In General.--Section 7602 is amended by adding at the
end the following new subsection:
``(f) Limitation on Authority To Require Production of
Computer Source Code.--
``(1) In general.--No summons may be issued under this
title, and the Secretary may not begin any action under
section 7604 to enforce any summons, to produce or examine
any tax-related computer source code.
``(2) Exception where information not otherwise available
to verify correctness of item on return.--Paragraph (1) shall
not apply to any portion of a tax-related computer source
code if--
``(A) the Secretary is unable to otherwise reasonably
ascertain the correctness of any item on a return from--
``(i) the taxpayer's books, papers, records, or other data,
or
``(ii) the computer software program and the associated
data which, when executed, produces the output to prepare the
return for the period involved, and
``(B) the Secretary identifies with reasonable specificity
such portion as to be used to verify the correctness of such
item.
The Secretary shall be treated as meeting the requirements of
subparagraphs (A) and (B) after the 90th day after the
Secretary makes a formal request to the taxpayer and the
owner or developer of the computer software program for the
material described in subparagraph (A)(ii) if such material
is not provided before the close of such 90th day.
``(3) Other exceptions.--Paragraph (1) shall not apply to--
``(A) any inquiry into any offense connected with the
administration or enforcement of the internal revenue laws,
and
``(B) any tax-related computer source code developed by (or
primarily for the benefit of) the taxpayer or a related
person (within the meaning of section 267 or 707(b)) for
internal use by the taxpayer or such person and not for
commercial distribution.
``(4) Tax-related computer source code.--For purposes of
this subsection, the term `tax-related computer source code'
means--
``(A) the computer source code for any computer software
program for accounting, tax return preparation or compliance,
or tax planning, or
``(B) design and development materials related to such a
software program (including program notes and memoranda).
``(5) Right to contest summons.--The determination of
whether the requirements of subparagraphs (A) and (B) of
paragraph (2) are met or whether any exception under
paragraph (3) applies may be contested in any proceeding
under section 7604.
``(6) Protection of trade secrets and other confidential
information.--In any court proceeding to enforce a summons
for any portion of a tax-related computer source code, the
court may issue any order necessary to prevent the disclosure
of trade secrets or other confidential information with
respect to such source code, including providing that any
information be placed under seal to be opened only as
directed by the court.''
(b) Application of Special Procedures for Third-Party
Summonses.--Paragraph (3) of section 7609(a) (defining third-
party recordkeeper) is amended by striking ``and'' at the end
of subparagraph (H), by striking a period at the end of
subparagraph (I) and inserting ``, and'', and by adding at
the end the following:
``(J) any owner or developer of a tax-related computer
source code (as defined in section 7602(f)(4)).
Subparagraph (J) shall apply only with respect to a summons
requiring the production of the source code referred to in
subparagraph (J) or the program and data described in section
7602(f)(2)(A)(ii) to which such source code relates.''
(c) Effective Date.--The amendments made by this section
shall apply to summonses issued more than 90 days after the
date of the enactment of this Act.
SEC. 345. PROCEDURES RELATING TO EXTENSIONS OF STATUTE OF
LIMITATIONS BY AGREEMENT.
(a) In General.--Paragraph (4) of section 6501(c) (relating
to the period for limitations on assessment and collection)
is amended--
(1) by striking ``Where'' and inserting the following:
``(A) In general.--Where'',
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new subparagraph:
``(B) Notice to taxpayer of right to refuse or limit
extension.--The Secretary shall notify the taxpayer of the
taxpayer's right to refuse to extend the period of
limitations, or to limit such extension to particular issues,
on each occasion when the taxpayer is requested to provide
such consent.''
(b) Effective Date.--The amendments made by this section
shall apply to requests to extend the period of limitations
made after the date of the enactment of this Act.
SEC. 346. OFFERS-IN-COMPROMISE.
(a) Allowances For Basic Living Expenses.--Section 7122
(relating to offers-in-compromise) is amended by adding at
the end the following new subsection:
``(c) Allowances For Basic Living Expenses.--The Secretary
shall develop and publish schedules of national and local
allowances designed to provide that taxpayers entering into a
compromise have an adequate means to provide for basic living
expenses.''
(b) Preparation of Statement Relating to Offers-in-
Compromise.--The Secretary of the Treasury shall prepare a
statement which sets forth in simple, nontechnical terms the
rights of a taxpayer and the obligations of the Internal
Revenue Service relating to offers-in-compromise. Such
statement shall--
(1) advise taxpayers who have entered into a compromise
agreement of the advantages of promptly notifying the
Internal Revenue Service of any change of address or marital
status, and
(2) provide notice to taxpayers that in the case of a
compromise agreement terminated due to the actions of 1
spouse or former spouse, the Internal Revenue Service will,
upon application, reinstate such agreement with the spouse or
former spouse who remains in compliance with such agreement.
SEC. 347. NOTICE OF DEFICIENCY TO SPECIFY DEADLINES FOR
FILING TAX COURT PETITION.
(a) In General.--The Secretary of the Treasury or the
Secretary's delegate shall include on each notice of
deficiency under section 6212 of the Internal Revenue Code of
1986 the date determined by such Secretary (or delegate) as
the last day on which the taxpayer may file a petition with
the Tax Court.
(b) Later Filing Deadlines Specified on Notice of
Deficiency To Be Binding.--Subsection (a) of section 6213
(relating to restrictions applicable to deficiencies;
petition to Tax Court) is amended by adding at the end
the following new sentence: ``Any petition filed with the
Tax Court on or before the last date specified for filing
such petition by the Secretary in the notice of deficiency
shall be treated as timely filed.''
(c) Effective Date.--Subsection (a) and the amendment made
by subsection (b) shall apply to notices mailed after
December 31, 1998.
SEC. 348. REFUND OR CREDIT OF OVERPAYMENTS BEFORE FINAL
DETERMINATION.
(a) Tax Court Proceedings.--Subsection (a) of section 6213
is amended--
(1) by striking ``, including the Tax Court.'' and
inserting ``, including the Tax Court, and a refund may be
ordered by such court of any amount collected within the
period during which the Secretary is prohibited from
collecting by levy or through a proceeding in court under the
provisions of this subsection.'', and
(2) by striking ``to enjoin any action or proceeding'' and
inserting ``to enjoin any action or proceeding or order any
refund''.
(b) Other Proceedings.--Subsection (a) of section 6512 is
amended by striking the period at the end of paragraph (4)
and inserting ``, and'', and by inserting after paragraph (4)
the following new paragraphs:
``(5) As to any amount collected within the period during
which the Secretary is prohibited from making the assessment
or from collecting by levy or through a proceeding in court
under the provisions of section 6213(a), and
``(6) As to overpayments the Secretary is authorized to
refund or credit pending appeal as provided in subsection
(b).''
(c) Refund or Credit Pending Appeal.--Paragraph (1) of
section 6512(b) is amended by adding at the end the following
new sentence: ``If a notice of appeal in respect of the
decision of the Tax Court is filed under section 7483, the
Secretary is authorized to refund or credit the overpayment
determined by the Tax Court to the extent the overpayment is
not contested on appeal.''
(d) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 349. THREAT OF AUDIT PROHIBITED TO COERCE TIP REPORTING
ALTERNATIVE COMMITMENT AGREEMENTS.
The Secretary of the Treasury or the Secretary's delegate
shall instruct employees of the Internal Revenue Service that
they may not threaten to audit any taxpayer in an attempt to
coerce the taxpayer into entering into a Tip Reporting
Alternative Commitment Agreement.
Subtitle F--Disclosures to Taxpayers
SEC. 351. EXPLANATION OF JOINT AND SEVERAL LIABILITY.
The Secretary of the Treasury or the Secretary's delegate
shall, as soon as practicable, but not later than 180 days
after the date of the enactment of this Act, establish
procedures to clearly alert married taxpayers of their joint
and several liabilities on all appropriate publications and
instructions.
SEC. 352. EXPLANATION OF TAXPAYERS' RIGHTS IN INTERVIEWS WITH
THE INTERNAL REVENUE SERVICE.
The Secretary of the Treasury or the Secretary's delegate
shall, as soon as practicable, but not later than 180 days
after the date of the enactment of this Act, revise the
statement required by section 6227 of the Omnibus Taxpayer
Bill of Rights (Internal Revenue Service Publication No. 1)
to more clearly inform taxpayers of their rights--
[[Page H10014]]
(1) to be represented at interviews with the Internal
Revenue Service by any person authorized to practice before
the Internal Revenue Service, and
(2) to suspend an interview pursuant to section 7521(b)(2)
of the Internal Revenue Code of 1986.
SEC. 353. DISCLOSURE OF CRITERIA FOR EXAMINATION SELECTION.
(a) In General.--The Secretary of the Treasury or the
Secretary's delegate shall, as soon as practicable, but not
later than 180 days after the date of the enactment of this
Act, incorporate into the statement required by section 6227
of the Omnibus Taxpayer Bill of Rights (Internal Revenue
Service Publication No. 1) a statement which sets forth in
simple and nontechnical terms the criteria and procedures for
selecting taxpayers for examination. Such statement shall not
include any information the disclosure of which would be
detrimental to law enforcement, but shall specify the general
procedures used by the Internal Revenue Service, including
whether taxpayers are selected for examination on the basis
of information available in the media or on the basis of
information provided to the Internal Revenue Service by
informants.
(b) Transmission to Committees of Congress.--The Secretary
shall transmit drafts of the statement required under
subsection (a) (or proposed revisions to any such statement)
to the Committee on Ways and Means of the House of
Representatives, the Committee on Finance of the Senate, and
the Joint Committee on Taxation on the same day.
SEC. 354. EXPLANATIONS OF APPEALS AND COLLECTION PROCESS.
The Secretary of the Treasury or the Secretary's delegate
shall, as soon as practicable but not later than 180 days
after the date of the enactment of this Act, include with any
1st letter of proposed deficiency which allows the taxpayer
an opportunity for administrative review in the Internal
Revenue Service Office of Appeals an explanation of the
appeals process and the collection process with respect to
such proposed deficiency.
Subtitle G--Low Income Taxpayer Clinics
SEC. 361. LOW INCOME TAXPAYER CLINICS.
(a) In General.--Chapter 77 (relating to miscellaneous
provisions) is amended by adding at the end the following new
section:
``SEC. 7525. LOW INCOME TAXPAYER CLINICS.
``(a) In General.--The Secretary may, subject to the
availability of appropriated funds, make grants to provide
matching funds for the development, expansion, or
continuation of qualified low income taxpayer clinics.
``(b) Definitions.--For purposes of this section--
``(1) Qualified low income taxpayer clinic.--
``(A) In general.--The term `qualified low income taxpayer
clinic' means a clinic that--
``(i) does not charge more than a nominal fee for its
services (except for reimbursement of actual costs incurred),
and
``(ii)(I) represents low income taxpayers in controversies
with the Internal Revenue Service, or
``(II) operates programs to inform individuals for whom
English is a second language about their rights and
responsibilities under this title.
``(B) Representation of low income taxpayers.--A clinic
meets the requirements of subparagraph (A)(ii)(I) if--
``(i) at least 90 percent of the taxpayers represented by
the clinic have incomes which do not exceed 250 percent of
the poverty level, as determined in accordance with criteria
established by the Director of the Office of Management and
Budget, and
``(ii) the amount in controversy for any taxable year
generally does not exceed the amount specified in section
7463.
``(2) Clinic.--The term `clinic' includes--
``(A) a clinical program at an accredited law school in
which students represent low income taxpayers in
controversies arising under this title, and
``(B) an organization described in section 501(c) and
exempt from tax under section 501(a) which satisfies the
requirements of paragraph (1) through representation of
taxpayers or referral of taxpayers to qualified
representatives.
``(3) Qualified representative.--The term `qualified
representative' means any individual (whether or not an
attorney) who is authorized to practice before the Internal
Revenue Service or the applicable court.
``(c) Special Rules and Limitations.--
``(1) Aggregate limitation.--Unless otherwise provided by
specific appropriation, the Secretary shall not allocate more
than $3,000,000 per year (exclusive of costs of administering
the program) to grants under this section.
``(2) Limitation on annual grants to a clinic.--The
aggregate amount of grants which may be made under this
section to a clinic for a year shall not exceed $100,000.
``(3) Multi-year grants.--Upon application of a qualified
low income taxpayer clinic, the Secretary is authorized to
award a multi-year grant not to exceed 3 years.
``(4) Criteria for awards.--In determining whether to make
a grant under this section, the Secretary shall consider--
``(A) the numbers of taxpayers who will be served by the
clinic, including the number of taxpayers in the geographical
area for whom English is a second language,
``(B) the existence of other low income taxpayer clinics
serving the same population,
``(C) the quality of the program offered by the low income
taxpayer clinic, including the qualifications of its
administrators and qualified representatives, and its record,
if any, in providing service to low income taxpayers, and
``(D) alternative funding sources available to the clinic,
including amounts received from other grants and
contributions, and the endowment and resources of the
institution sponsoring the clinic.
``(5) Requirement of matching funds.--A low income taxpayer
clinic must provide matching funds on a dollar for dollar
basis for all grants provided under this section. Matching
funds may include--
``(A) the salary (including fringe benefits) of individuals
performing services for the clinic, and
``(B) the cost of equipment used in the clinic.
Indirect expenses, including general overhead of the
institution sponsoring the clinic, shall not be counted as
matching funds.''
(b) Clerical Amendment.--The table of sections for chapter
77 is amended by adding at the end the following new section:
``Sec. 7525. Low income taxpayer clinics.''
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
Subtitle H--Other Matters
SEC. 371. ACTIONS FOR REFUND WITH RESPECT TO CERTAIN ESTATES
WHICH HAVE ELECTED THE INSTALLMENT METHOD OF
PAYMENT.
(a) In General.--Section 7422 is amended by redesignating
subsection (j) as subsection (k) and by inserting after
subsection (i) the following new subsection:
``(j) Special Rule for Actions With Respect to Estates for
Which An Election Under Section 6166 Is Made.--
``(1) In general.--The district courts of the United States
and the United States Court of Federal Claims shall have
jurisdiction over any action brought by the representative of
an estate to which this subsection applies to determine the
correct amount of the estate tax liability of such estate (or
for any refund with respect thereto) even if the full amount
of such liability has not been paid.
``(2) Estates to which subsection applies.--This subsection
shall apply to any estate if, as of the date the action is
filed--
``(A) an election under section 6166 is in effect with
respect to such estate,
``(B) no portion of the installments payable under such
section have been accelerated, and
``(C) all installments the due date for which is on or
before the date the action is filed have been paid.
``(3) Prohibition on collection of disallowed liability.--
If the court redetermines under paragraph (1) the estate tax
liability of an estate, no part of such liability which is
disallowed by a decision of such court which has become final
may be collected by the Secretary, and amounts paid in excess
of the installments determined by the court as currently due
and payable shall be refunded.''
(b) Extension of Time To File Refund Suit.--Section 7479
(relating to declaratory judgments relating to eligibility of
estate with respect to installment payments under section
6166) is amended by adding at the end the following new
subsection:
``(c) Extension of Time To File Refund Suit.--The 2-year
period in section 6532(a)(1) for filing suit for refund after
disallowance of a claim shall be suspended during the 90-day
period after the mailing of the notice referred to in
subsection (b)(3) and, if a pleading has been filed with the
Tax Court under this section, until the decision of the Tax
Court has become final.''
(c) Effective Date.--The amendments made by this section
shall apply to any claim for refund filed after the date of
the enactment of this Act.
SEC. 372. CATALOGING COMPLAINTS.
In collecting data for the report required under section
1211 of Taxpayer Bill of Rights 2 (Public Law 104-168), the
Secretary of the Treasury or the Secretary's delegate shall
maintain records of taxpayer complaints of misconduct by
Internal Revenue Service employees on an individual employee
basis.
SEC. 373. ARCHIVE OF RECORDS OF INTERNAL REVENUE SERVICE.
(a) In General.--Subsection (l) of section 6103 (relating
to confidentiality and disclosure of returns and return
information) is amended by adding at the end the following
new paragraph:
``(17) Disclosure to national archives and records
administration.--The Secretary shall, upon written request
from the Archivist of the United States, disclose or
authorize the disclosure of returns and return information to
officers and employees of the National Archives and Records
Administration for purposes of, and only to the extent
necessary in, the appraisal of records for destruction or
retention. No such officer or employee shall, except to the
extent authorized by subsections (f), (i)(7), or (p),
disclose any return or return information disclosed under the
preceding sentence to any person other than to the Secretary,
or to another officer or employee of the National Archives
and Records Administration whose official duties require such
disclosure for purposes of such appraisal.''
(b) Conforming Amendments.--Section 6103(p) is amended--
(1) in paragraph (3)(A), by striking ``or (16)'' and
inserting ``(16), or (17)'',
(2) in paragraph (4), by striking ``or (14)'' and inserting
``, (14), or (17)'' in the matter preceding subparagraph (A),
and
(3) in paragraph (4)(F)(ii), by striking ``or (15)'' and
inserting ``, (15), or (17)''.
(c) Effective Date.--The amendments made by this section
shall apply to requests made by the Archivist of the United
States after the date of the enactment of this Act.
SEC. 374. PAYMENT OF TAXES.
The Secretary of the Treasury or the Secretary's delegate
shall establish such rules, regulations, and procedures as
are necessary to allow payment of taxes by check or money
order made payable to the United States Treasury.
[[Page H10015]]
SEC. 375. CLARIFICATION OF AUTHORITY OF SECRETARY RELATING TO
THE MAKING OF ELECTIONS.
Subsection (d) of section 7805 is amended by striking ``by
regulations or forms''.
SEC. 376. LIMITATION ON PENALTY ON INDIVIDUAL'S FAILURE TO
PAY FOR MONTHS DURING PERIOD OF INSTALLMENT
AGREEMENT.
(a) In General.--Section 6651 (relating to failure to file
tax return or to pay tax) is amended by adding at the end the
following new subsection:
``(h) Limitation on Penalty on Individual's Failure To Pay
for Months During Period of Installment Agreement.--No
addition to the tax shall be imposed under paragraph (2) or
(3) of subsection (a) with respect to the tax liability of an
individual for any month during which an installment
agreement under section 6159 is in effect for the payment of
such tax to the extent that imposing an addition to the tax
under such paragraph for such month would result in the
aggregate number of percentage points of such addition to the
tax exceeding 9.5.''
(b) Effective Date.--The amendment made by this section
shall apply for purposes of determining additions to the tax
for months beginning after the date of the enactment of this
Act.
Subtitle I--Studies
SEC. 381. PENALTY ADMINISTRATION.
The Joint Committee on Taxation shall conduct a study--
(1) reviewing the administration and implementation by the
Internal Revenue Service of the penalty reform provisions of
the Omnibus Budget Reconciliation Act of 1989, and
(2) making any legislative and administrative
recommendations it deems appropriate to simplify penalty
administration and reduce taxpayer burden.
Such study shall be submitted to the Committee on Ways and
Means of the House of Representatives and the Committee on
Finance of the Senate not later than 9 months after the date
of enactment of this Act.
SEC. 382. CONFIDENTIALITY OF TAX RETURN INFORMATION.
The Joint Committee on Taxation shall conduct a study of
the scope and use of provisions regarding taxpayer
confidentiality, and shall report the findings of such study,
together with such recommendations as it deems appropriate,
to the Congress not later than one year after the date of the
enactment of this Act. Such study shall examine the present
protections for taxpayer privacy, the need for third parties
to use tax return information, and the ability to achieve
greater levels of voluntary compliance by allowing the public
to know who is legally required to file tax returns, but does
not file tax returns.
TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE
Subtitle A--Oversight
SEC. 401. EXPANSION OF DUTIES OF THE JOINT COMMITTEE ON
TAXATION.
(a) In General.--Section 8021 (relating to the powers of
the Joint Committee on Taxation) is amended by adding at the
end the following new subsections:
``(e) Investigations.--The Joint Committee shall review all
requests (other than requests by the chairman or ranking
member of a Committee or Subcommittee) for investigations of
the Internal Revenue Service by the General Accounting
Office, and approve such requests when appropriate, with a
view towards eliminating overlapping investigations, ensuring
that the General Accounting Office has the capacity to handle
the investigation, and ensuring that investigations focus on
areas of primary importance to tax administration.
``(f) Relating to Joint Hearings.--
``(1) In general.--The Chief of Staff, and such other staff
as are appointed pursuant to section 8004, shall provide such
assistance as is required for joint hearings described in
paragraph (2).
``(2) Joint hearings.--On or before April 1 of each
calendar year after 1997, there shall be a joint hearing of
two members of the majority and one member of the minority
from each of the Committees on Finance, Appropriations, and
Government Affairs of the Senate, and the Committees on Ways
and Means, Appropriations, and Government Reform and
Oversight of the House of Representatives, to review the
strategic plans and budget for the Internal Revenue Service.
After the conclusion of the annual filing season, there shall
be a second annual joint hearing to review the other matters
outlined in section 8022(3)(C).''
(b) Effective Dates.--
(1) Subsection (e) of section 8021 of the Internal Revenue
Code of 1986, as added by subsection (a) of this section,
shall apply to requests made after the date of enactment of
this Act.
(2) Subsection (f) of section 8021 of the Internal Revenue
Code of 1986, as added by subsection (a) of this section,
shall take effect on the date of the enactment of this Act.
SEC. 402. COORDINATED OVERSIGHT REPORTS.
(a) In General.--Paragraph (3) of section 8022 (relating to
the duties of the Joint Committee on Taxation) is amended to
read as follows:
``(3) Reports.--
``(A) To report, from time to time, to the Committee on
Finance and the Committee on Ways and Means, and, in its
discretion, to the Senate or House of Representatives, or
both, the results of its investigations, together with such
recommendations as it may deem advisable.
``(B) To report, annually, to the Committee on Finance and
the Committee on Ways and Means on the overall state of the
Federal tax system, together with recommendations with
respect to possible simplification proposals and other
matters relating to the administration of the Federal tax
system as it may deem advisable.
``(C) To report, annually, to the Committees on Finance,
Appropriations, and Government Affairs of the Senate, and to
the Committees on Ways and Means, Appropriations, and
Government Reform and Oversight of the House of
Representatives, with respect to--
``(i) strategic and business plans for the Internal Revenue
Service;
``(ii) progress of the Internal Revenue Service in meeting
its objectives;
``(iii) the budget for the Internal Revenue Service and
whether it supports its objectives;
``(iv) progress of the Internal Revenue Service in
improving taxpayer service and compliance;
``(v) progress of the Internal Revenue Service on
technology modernization; and
``(vi) the annual filing season.''
(b) Effective Date.--The amendment made by this section
shall take effect on the date of the enactment of this Act.
Subtitle B--Budget
SEC. 411. FUNDING FOR CENTURY DATE CHANGE.
It is the sense of Congress that the Internal Revenue
Service efforts to resolve the century date change computing
problems should be funded fully to provide for certain
resolution of such problems.
SEC. 412. FINANCIAL MANAGEMENT ADVISORY GROUP.
The Commissioner shall convene a financial management
advisory group consisting of individuals with expertise in
governmental accounting and auditing from both the private
sector and the Government to advise the Commissioner on
financial management issues, including--
(1) the continued partnership between the Internal Revenue
Service and the General Accounting Office;
(2) the financial accounting aspects of the Internal
Revenue Service's system modernization;
(3) the necessity and utility of year-round auditing; and
(4) the Commissioner's plans for improving its financial
management system.
Subtitle C--Tax Law Complexity
SEC. 421. ROLE OF THE INTERNAL REVENUE SERVICE.
It is the sense of Congress that the Internal Revenue
Service should provide the Congress with an independent view
of tax administration, and that during the legislative
process, the tax writing committees of the Congress should
hear from front-line technical experts at the Internal
Revenue Service with respect to the administrability of
pending amendments to the Internal Revenue Code of 1986.
SEC. 422. TAX COMPLEXITY ANALYSIS.
(a) Requiring Analysis to Accompany Certain Legislation.--
(1) In general.--Chapter 92 (relating to powers and duties
of the Joint Committee on Taxation) is amended by adding at
the end the following new section:
``SEC. 8024. TAX COMPLEXITY ANALYSIS.
``(a) In General.--If--
``(1) a bill or joint resolution is reported by the
Committee on Finance of the Senate, the Committee on Ways and
Means of the House of Representatives, or any committee of
conference, and
``(2) such legislation includes any provision amending the
Internal Revenue Code of 1986,
the report for such legislation shall contain a Tax
Complexity Analysis unless the committee involved causes to
have the Tax Complexity Analysis printed in the Congressional
Record prior to the consideration of the legislation in the
House of Representatives or the Senate (as the case may be).
``(b) Legislation Subject to Point of Order.--It shall not
be in order in the Senate to consider any bill or joint
resolution described in subsection (a) required to be
accompanied by a Tax Complexity Analysis that does not
contain a Tax Complexity Analysis.
``(c) Responsibilities of the Commissioner.--The
Commissioner shall provide the Joint Committee on Taxation
with such information as is necessary to prepare Tax
Complexity Analyses.
``(d) Tax Complexity Analysis Defined.--For purposes of
this section, the term `Tax Complexity Analysis' means, with
respect to a bill or joint resolution, a report which is
prepared by the Joint Committee on Taxation and which
identifies the provisions of the legislation adding
significant complexity or providing significant
simplification (as determined by the Joint Committee) and
includes the basis for such determination.''
(2) Clerical amendment.--The table of sections for chapter
92 is amended by adding at the end the following new item:
``Sec. 8024. Tax complexity analysis.''
(b) Legislation Subject to Point of Order in House of
Representatives.--
(1) Legislation reported by committee on ways and means.--
Clause 2(l) of rule XI of the Rules of the House of
Representatives is amended by adding at the end the following
new subparagraph:
``(8) The report of the Committee on Ways and Means on any
bill or joint resolution containing any provision amending
the Internal Revenue Code of 1986 shall include a Tax
Complexity Analysis prepared by the Joint Committee on
Taxation in accordance with section 8024 of the Internal
Revenue Code of 1986 unless the Committee on Ways and Means
causes to have such Analysis printed in the Congressional
Record prior to the consideration of the bill or joint
resolution.''.
(2) Conference reports.--Rule XXVIII of the Rules of the
House of Representatives is amended by adding at the end the
following new clause:
[[Page H10016]]
``7. It shall not be in order to consider the report of a
committee of conference which contains any provision amending
the Internal Revenue Code of 1986 unless--
``(a) the accompanying joint explanatory statement contains
a Tax Complexity Analysis prepared by the Joint Committee on
Taxation in accordance with section 8024 of the Internal
Revenue Code of 1986, or
``(b) such Analysis is printed in the Congressional Record
prior to the consideration of the report.''.
(c) Effective Date.--The amendments made by this section
shall apply to legislation considered on or after January 1,
1998.
TITLE V--CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION
SEC. 501. CLARIFICATION OF DEDUCTION FOR DEFERRED
COMPENSATION.
(a) In General.--Subsection (a) of section 404 is amended
by adding at the end the following new paragraph:
``(11) Determinations relating to deferred compensation.--
``(A) In general.--For purposes of determining under this
section--
``(i) whether compensation of an employee is deferred
compensation, and
``(ii) when deferred compensation is paid,
no amount shall be treated as received by the employee, or
paid, until it is actually received by the employee.
``(B) Exception.--Subparagraph (A) shall not apply to
severance pay.''
(b) Sick Leave Pay Treated Like Vacation Pay.--Paragraph
(5) of section 404(a) is amended by inserting ``or sick leave
pay'' after ``vacation pay''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years ending after October 8, 1997.
(2) Change in method of accounting.--In the case of any
taxpayer required by this section to change its method of
accounting for its first taxable year ending after October 8,
1997--
(A) such change shall be treated as initiated by the
taxpayer,
(B) such change shall be treated as made with the consent
of the Secretary of the Treasury, and
(C) the net amount of the adjustments required to be taken
into account by the taxpayer under section 481 of the
Internal Revenue Code of 1986 shall be taken into account in
such first taxable year.
TITLE VI--TAX TECHNICAL CORRECTIONS ACT OF 1997
SEC. 601. SHORT TITLE.
This title may be cited as the ``Tax Technical Corrections
Act of 1997''.
SEC. 602. DEFINITIONS.
For purposes of this title--
(1) 1986 code.--The term ``1986 Code'' means the Internal
Revenue Code of 1986.
(2) 1997 act.--The term ``1997 Act'' means the Taxpayer
Relief Act of 1997.
SEC. 603. AMENDMENTS RELATED TO TITLE I OF 1997 ACT.
(a) Amendments Related to Section 101(a) of 1997 Act.--
(1) Subsection (d) of section 24 of the 1986 Code is
amended--
(A) by striking paragraphs (3) and (4),
(B) by redesignating paragraph (5) as paragraph (3), and
(C) by striking paragraphs (1) and (2) and inserting the
following new paragraphs:
``(1) In general.--In the case of a taxpayer with 3 or more
qualifying children for any taxable year, the aggregate
credits allowed under subpart C shall be increased by the
lesser of--
``(A) the credit which would be allowed under this section
without regard to this subsection and the limitation under
section 26(a), or
``(B) the amount by which the aggregate amount of credits
allowed by this subpart (without regard to this subsection)
would increase if the limitation imposed by section 26(a)
were increased by the excess (if any) of--
``(i) the taxpayer's social security taxes for the taxable
year, over
``(ii) the credit allowed under section 32 (determined
without regard to subsection (n)) for the taxable year.
The amount of the credit allowed under this subsection shall
not be treated as a credit allowed under this subpart and
shall reduce the amount of credit otherwise allowable under
subsection (a) without regard to section 26(a).
``(2) Reduction of credit to taxpayer subject to
alternative minimum tax.--The credit determined under this
subsection for the taxable year shall be reduced by the
excess (if any) of--
``(A) the amount of tax imposed by section 55 (relating to
alternative minimum tax) with respect to such taxpayer for
such taxable year, over
``(B) the amount of the reduction under section 32(h) with
respect to such taxpayer for such taxable year.''
(2) Paragraph (3) of section 24(d) of the 1986 Code (as
redesignated by paragraph (1)) is amended by striking
``paragraph (3)'' and inserting ``paragraph (1)''.
(b) Amendments Related to Section 101(b) of 1997 Act.--
(1) The subsection (m) of section 32 of the 1986 Code added
by section 101(b) of the 1997 Act is amended to read as
follows:
``(n) Supplemental Child Credit.--
``(1) In general.--In the case of a taxpayer with respect
to whom a credit is allowed under section 24 for the taxable
year, the credit otherwise allowable under this section shall
be increased by the lesser of--
``(A) the credit which would be allowed under section 24
without regard to this subsection and the limitation under
section 26(a), or
``(B) the amount by which the aggregate amount of credits
allowed by subpart A (without regard to this subsection)
would be reduced if the limitation imposed by section 26(a)
were reduced by the excess (if any) of--
``(i) the credit allowed by this section (without regard to
this subsection) for the taxable year, over
``(ii) the taxpayer's social security taxes (as defined in
section 24(d)) for the taxable year.
The credit determined under this subsection shall be allowed
without regard to any other provision of this section,
including subsection (d).
``(2) Coordination with other credits.--
``(A) In general.--The amount of the credit under this
subsection shall reduce the amount of the credit otherwise
allowable under section 24, but the amount of the credit
under this subsection (and such reduction) shall not
otherwise be taken into account in determining the amount of
any other credit allowable under this part.
``(B) Treatment of credit under section 24(d).--For
purposes of this subsection, the credit determined under
section 24(d) shall be treated as not allowed under section
24.''
SEC. 604. AMENDMENTS RELATED TO TITLE II OF 1997 ACT.
(a) Amendments Related to Section 201 of 1997 Act.--
(1) The item relating to section 25A in the table of
sections for subpart A of part IV of subchapter A of chapter
1 of the 1986 Code is amended to read as follows:
``Sec. 25A. Hope and Lifetime Learning credits.''
(2) Subsection (a) of section 6050S of the 1986 Code is
amended to read as follows:
``(a) In General.--Any person--
``(1) which is an eligible educational institution--
``(A) which receives payments for qualified tuition and
related expenses with respect to any individual for any
calendar year, or
``(B) which makes reimbursements or refunds (or similar
amounts) to any individual of qualified tuition and related
expenses,
``(2) which is engaged in a trade or business of making
payments to any individual under an insurance arrangement as
reimbursements or refunds (or similar amounts) of qualified
tuition and related expenses, or
``(3) except as provided in regulations, any person which
is engaged in a trade or business and, in the course of
which, receives from any individual interest aggregating $600
or more for any calendar year on 1 or more qualified
education loans,
shall make the return described in subsection (b) with
respect to the individual at such time as the Secretary may
by regulations prescribe.''
(3) Subparagraph (A) of section 201(c)(2) of the 1997 Act
is amended to read as follows:
``(A) Subparagraph (B) of section 6724(d)(1) (relating to
definitions) is amended by redesignating clauses (x) through
(xv) as clauses (xi) through (xvi), respectively, and by
inserting after clause (ix) the following new clause:
`` `(x) section 6050S (relating to returns relating to
payments for qualified tuition and related expenses),' ''.
(b) Amendments Related to Section 211 of 1997 Act.--
(1) Paragraph (3) of section 135(c) of the 1986 Code is
amended to read as follows:
``(3) Eligible educational institution.--The term `eligible
educational institution' has the meaning given such term by
section 529(e)(5).''.
(2) Subparagraph (A) of section 529(c)(3) of the 1986 Code
is amended by striking ``section 72(b)'' and inserting
``section 72''.
(c) Amendments Related to Section 213 of 1997 Act.--
(1)(A) Section 530(b)(1)(E) of the 1986 Code (defining
education individual retirement account) is amended to read
as follows:
``(E) Any balance to the credit of the designated
beneficiary on the date on which the beneficiary attains age
30 shall be distributed within 30 days after such date to the
beneficiary or, if the beneficiary dies before attaining age
30, shall be distributed within 30 days after the date of
death to the estate of such beneficiary.''
(B) Subsection (d) of section 530 of the 1986 Code is
amended by adding at the end the following new paragraph:
``(8) Deemed distribution on required distribution date.--
In any case in which a distribution is required under
subsection (b)(1)(E), any balance to the credit of a
designated beneficiary as of the close of the 30-day period
referred to in such subsection for making such distribution
shall be deemed distributed at the close of such period.''
(2)(A) Paragraph (1) of section 530(d) of the 1986 Code is
amended by striking ``section 72(b)'' and inserting ``section
72''.
(B) Subsection (e) of section 72 of the 1986 Code is
amended by inserting after paragraph (8) the following new
paragraph:
``(9) Extension of paragraph (2)(b) to qualified state
tuition programs and educational individual retirement
accounts.--Notwithstanding any other provision of this
subsection, paragraph (2)(B) shall apply to amounts received
under a qualified State tuition program (as defined in
section 529(b)) or under an education individual retirement
account (as defined in section 530(b)). The rule of paragraph
(8)(B) shall apply for purposes of this paragraph.''
(3) So much of section 530(d)(4)(C) of the 1986 Code as
precedes clause (ii) thereof is amended to read as follows:
``(C) Contributions returned before due date of return.--
Subparagraph (A) shall not apply to the distribution of any
contribution made during a taxable year on behalf of the
designated beneficiary if--
``(i) such distribution is made on or before the day
prescribed by law (including extensions of
[[Page H10017]]
time) for filing the beneficiary's return of tax for the
taxable year or, if the beneficiary is not required to file
such a return, the 15th day of the 4th month of the taxable
year following the taxable year, and''.
(4) Subparagraph (C) of section 135(c)(2) of the 1986 Code
is amended--
(A) by inserting ``and education individual retirement
accounts'' in the heading after ``program'', and
(B) by striking ``section 529(c)(3)(A)'' and inserting
``section 72''.
(5) Subparagraph (A) of section 4973(e)(1) of the 1986 Code
is amended by inserting before the comma ``(or, if less, the
sum of the maximum amounts permitted to be contributed under
section 530(c) by the contributors to such accounts for such
year)''.
(d) Amendment Related to Section 224 of 1997 Act.--Section
170(e)(6)(F) of the 1986 Code (relating to termination) is
amended by striking ``1999'' and inserting ``2000''.
(e) Amendments Related to Section 225 of 1997 Act.--
(1) The last sentence of section 108(f)(2) of the 1986 Code
is amended to read as follows:
``The term `student loan' includes any loan made by an
educational organization described in section
170(b)(1)(A)(ii) or by an organization exempt from tax under
section 501(a) to refinance a loan to an individual to assist
the individual in attending any such educational organization
but only if the refinancing loan is pursuant to a program of
the refinancing organization which is designed as described
in subparagraph (D)(ii).''
(2) Section 108(f)(3) of the 1986 Code is amended by
striking ``(or by an organization described in paragraph
(2)(E) from funds provided by an organization described in
paragraph (2)(D))''.
(f) Amendments Related to Section 226 of 1997 Act.--
(1) Section 226(a) of the 1997 Act is amended by striking
``section 1397E'' and inserting ``section 1397D''.
(2) Section 1397E(d)(4)(B) of the 1986 Code is amended by
striking ``local education agency as defined'' and inserting
``local educational agency as defined''.
SEC. 605. AMENDMENTS RELATED TO TITLE III OF 1997 ACT.
(a) Amendments Related to Section 301 of 1997 Act.--Section
219(g) of the 1986 Code is amended--
(1) by inserting ``or the individual's spouse'' after
``individual'' in paragraph (1), and
(2) by striking paragraph (7) and inserting:
``(7) Special rule for spouses who are not active
participants.--If this subsection applies to an individual
for any taxable year solely because their spouse is an active
participant, then, in applying this subsection to the
individual (but not their spouse)--
``(A) the applicable dollar amount under paragraph
(3)(B)(i) shall be $150,000, and
``(B) the amount applicable under paragraph (2)(A)(ii)
shall be $10,000.''
(b) Amendments Related to Section 302 of 1997 Act.--
(1) Section 408A(c)(3)(A) of the 1986 Code is amended by
striking ``shall be reduced'' and inserting ``shall not
exceed an amount equal to the amount determined under
paragraph (2)(A) for such taxable year, reduced''.
(2) Section 408A(c)(3) of the 1986 Code (relating to limits
based on modified adjusted gross income) is amended--
(A) by inserting ``or a married individual filing a
separate return'' after ``joint return'' in subparagraph
(A)(ii), and
(B) by striking ``and the deduction under section 219 shall
be taken into account'' in subparagraph (C)(i).
(3) Section 408A(d)(2) of the 1986 Code (defining qualified
distribution) is amended by striking subparagraph (B) and
inserting the following:
``(B) Distributions within nonexclusion period.--A payment
or distribution from a Roth IRA shall not be treated as a
qualified distribution under subparagraph (A) if such payment
or distribution is made before the exclusion date for the
Roth IRA.
``(C) Exclusion date.--For purposes of this section, the
exclusion date for any Roth IRA is the first day of the
taxable year immediately following the 5-taxable year period
beginning with--
``(i) the first taxable year for which a contribution to
any Roth IRA maintained for the benefit of the individual was
made, or
``(ii) in the case of a Roth IRA to which 1 or more
qualified rollover contributions were made--
``(I) from an individual retirement plan other than a Roth
IRA, or
``(II) from another Roth IRA to the extent such
contributions are properly allocable to contributions
described in subclause (I),
the most recent taxable year for which any such qualified
rollover contribution was made.''
(4) Section 408A(d)(3) of the 1986 Code (relating to
rollovers from IRAs other than Roth IRAs) is amended by
adding at the end the following:
``(F) Special rule for applying section 72.--
``(i) In general.--If--
``(I) any distribution from a Roth IRA is made before the
exclusion date, and
``(II) any portion of such distribution is properly
allocable to a qualified rollover contribution described in
paragraph (2)(C)(ii),
then section 72(t) shall be applied as if such portion were
includible in gross income.
``(ii) Limitation.--Clause (i) shall apply only to the
extent of the amount includible in gross income under
subparagraph (A)(i) by reason of the qualified rollover
contribution.
``(G) Special rules for contributions to which 4-year
averaging applies.--In the case of a qualified rollover
contribution to a Roth IRA of a distribution to which
subparagraph (A)(iii) applied, the following rules shall
apply:
``(i) Death of distributee.--
``(I) In general.--If the individual required to include
amounts in gross income under such subparagraph dies before
all of such amounts are included, all remaining amounts shall
be included in gross income for the taxable year which
includes the date of death.
``(II) Special rule for surviving spouse.--If the spouse of
the individual described in subclause (I) acquires the Roth
IRA to which such qualified rollover contribution is properly
allocable, the spouse may elect to include the remaining
amounts described in subclause (I) in the spouse's gross
income in the taxable years of the spouse ending with or
within the taxable years of such individual in which such
amounts would otherwise have been includible.
``(ii) Additional tax for early distribution.--
``(I) In general.--If any distribution from a Roth IRA is
made before the exclusion date, and any portion of such
distribution is properly allocable to such qualified rollover
contribution, the distributee's tax under this chapter for
the taxable year in which the amount is received shall be
increased by 10 percent of the amount of such portion not in
excess of the amount includible in gross income under
subparagraph (A)(i) by reason of such qualified rollover
contribution.
``(II) Treatment of tax.--For purposes of this title, any
tax imposed by subclause (I) shall be treated as a tax
imposed by section 72(t) and shall be in addition to any
other tax imposed by such section.''
(5)(A) Section 408A(d)(4) of the 1986 Code is amended to
read as follows:
``(4) Aggregation and ordering rules.--
``(A) Aggregation rules.--Section 408(d)(2) shall be
applied separately with respect to--
``(i) Roth IRAs and other individual retirement plans,
``(ii) Roth IRAs described in paragraph (2)(C)(ii) and Roth
IRAs not so described, and
``(iii) Roth IRAs described in paragraph (2)(C)(ii) with
different exclusion dates.
``(B) Ordering rules.--For purposes of applying section 72
to any distribution from a Roth IRA which is not a qualified
distribution, such distribution shall be treated as made--
``(i) from contributions to the extent that the amount of
such distribution, when added to all previous distributions
from the Roth IRA, does not exceed the aggregate
contributions to the Roth IRA, and
``(ii) from such contributions in the following order:
``(I) Qualified rollover contributions to the extent
includible in gross income in the manner described in
paragraph (3)(A)(iii).
``(II) Qualified rollover contributions not described in
subclause (I) to the extent includible in gross income under
paragraph (3)(A).
``(III) Contributions not described in subclause (I) or
(II).
Such rules shall also apply in determining the character of
qualified rollover contributions from one Roth IRA to another
Roth IRA.''
(B) Section 408A(d)(1) of the 1986 Code is amended to read
as follows:
``(1) Exclusion.--Any qualified distribution from a Roth
IRA shall not be includible in gross income.''
(6)(A) Section 408A(d) of the 1986 Code (relating to
distribution rules) is amended by adding at the end the
following:
``(6) Taxpayer may make adjustments before due date.--
``(A) In general.--Except as provided by the Secretary, if,
on or before the due date for any taxable year, a taxpayer
transfers in a trustee-to-trustee transfer any contribution
to an individual retirement plan made during such taxable
year from such plan to any other individual retirement plan,
then, for purposes of this chapter, such contribution shall
be treated as having been made to the transferee plan (and
not the transferor plan).
``(B) Special rules.--
``(i) Transfer of earnings.--Subparagraph (A) shall not
apply to the transfer of any contribution unless such
transfer is accompanied by any net income allocable to such
contribution.
``(ii) No deduction.--Subparagraph (A) shall apply to the
transfer of any contribution only to the extent no deduction
was allowed with respect to the contribution to the
transferor plan.
``(C) Due date.--For purposes of this paragraph, the due
date for any taxable year is the last date for filing the
return of tax for such taxable year (including extensions).''
(B) Section 408A(d)(3) of the 1986 Code, as amended by this
subsection, is amended by striking subparagraph (D) and by
redesignating subparagraphs (E), (F), and (G) as
subparagraphs (D), (E), and (F), respectively.
(7) Section 302(b) of the 1997 Act is amended by striking
``Section 4973(b)'' and inserting ``Section 4973''.
(8) Section 408A of the 1986 Code is amended by adding at
the end the following new subsection:
``(f) Individual Retirement Plan.--For purposes of this
section, except as provided by the Secretary, the term
`individual retirement plan' shall not include a simplified
employee pension or a simple retirement account.''
[[Page H10018]]
(c) Amendments Related to Section 303 of 1997 Act.--
(1) Section 72(t)(8)(E) of the 1986 Code is amended--
(A) by striking ``120 days'' and inserting ``120th day'',
and
(B) by striking ``60 days'' and inserting ``60th day''.
(2)(A) Section 402(c) of the 1986 Code is amended by adding
at the end the following:
``(11) Denial of rollover treatment for transfers of
hardship distributions to individual retirement plans.--This
subsection shall not apply to the transfer of any hardship
distribution described in section 401(k)(2)(B)(i)(IV) from a
qualified cash or deferred arrangement to an eligible
retirement plan described in clause (i) or (ii) of paragraph
(8)(B).''
(B) The amendment made by this paragraph shall apply to
distributions made after December 31, 1997.
(d) Amendments Related to Section 311 of 1997 Act.--
(1) Subsection (h) of section 1 of the 1986 Code (relating
to maximum capital gains rate) is amended to read as follows:
``(h) Maximum Capital Gains Rate.--
``(1) In general.--If a taxpayer has a net capital gain for
any taxable year, the tax imposed by this section for such
taxable year shall not exceed the sum of--
``(A) a tax computed at the rates and in the same manner as
if this subsection had not been enacted on the greater of--
``(i) taxable income reduced by the net capital gain, or
``(ii) the lesser of--
``(I) the amount of taxable income taxed at a rate below 28
percent, or
``(II) taxable income reduced by the adjusted net capital
gain,
``(B) 10 percent of so much of the adjusted net capital
gain (or, if less, taxable income) as does not exceed the
excess (if any) of--
``(i) the amount of taxable income which would (without
regard to this paragraph) be taxed at a rate below 28
percent, over
``(ii) the taxable income reduced by the adjusted net
capital gain,
``(C) 20 percent of the adjusted net capital gain (or, if
less, taxable income) in excess of the amount on which a tax
is determined under subparagraph (B),
``(D) 25 percent of the excess (if any) of--
``(i) the unrecaptured section 1250 gain (or, if less, the
net capital gain), over
``(ii) the excess (if any) of--
``(I) the sum of the amount on which tax is determined
under subparagraph (A) plus the net capital gain, over
``(II) taxable income, and
``(E) 28 percent of the amount of taxable income in excess
of the sum of the amounts on which tax is determined under
the preceding subparagraphs of this paragraph.
``(2) Reduced capital gain rates for qualified 5-year
gain.--
``(A) Reduction in 10-percent rate.--In the case of any
taxable year beginning after December 31, 2000, the rate
under paragraph (1)(B) shall be 8 percent with respect to so
much of the amount to which the 10-percent rate would
otherwise apply as does not exceed qualified 5-year gain, and
10 percent with respect to the remainder of such amount.
``(B) Reduction in 20-percent rate.--The rate under
paragraph (1)(C) shall be 18 percent with respect to so much
of the amount to which the 20-percent rate would otherwise
apply as does not exceed the lesser of--
``(i) the excess of qualified 5-year gain over the amount
of such gain taken into account under subparagraph (A) of
this paragraph, or
``(ii) the amount of qualified 5-year gain (determined by
taking into account only property the holding period for
which begins after December 31, 2000),
and 20 percent with respect to the remainder of such amount.
For purposes of determining under the preceding sentence
whether the holding period of property begins after December
31, 2000, the holding period of property acquired pursuant to
the exercise of an option (or other right or obligation to
acquire property) shall include the period such option (or
other right or obligation) was held.
``(3) Net capital gain taken into account as investment
income.--For purposes of this subsection, the net capital
gain for any taxable year shall be reduced (but not below
zero) by the amount which the taxpayer takes into account as
investment income under section 163(d)(4)(B)(iii).
``(4) Adjusted net capital gain.--For purposes of this
subsection, the term `adjusted net capital gain' means net
capital gain reduced (but not below zero) by the sum of--
``(A) unrecaptured section 1250 gain, and
``(B) 28 percent rate gain.
``(5) 28 percent rate gain.--For purposes of this
subsection--
``(A) In general.--The term `28 percent rate gain' means
the excess (if any) of--
``(i) the sum of--
``(I) the aggregate long-term capital gain from property
held for more than 1 year but not more than 18 months,
``(II) collectibles gain, and
``(III) section 1202 gain, over
``(ii) the sum of--
``(I) the aggregate long-term capital loss (not described
in subclause (IV)) from property referred to in clause
(i)(I),
``(II) collectibles loss,
``(III) the net short-term capital loss, and
``(IV) the amount of long-term capital loss carried under
section 1212(b)(1)(B) to the taxable year.
``(B) Special rules.--
``(i) Short sales and options.--Rules similar to the rules
of subsections (b) and (d) of section 1233 shall apply to
substantially identical property, and section 1092(f) with
respect to stock, held for more than 1 year but not more than
18 months.
``(ii) Section 1256 contracts.--Amounts treated as long-
term capital gain or loss under section 1256(a)(3) shall be
treated as attributable to property held for more than 18
months.
``(6) Collectibles gain and loss.--For purposes of this
subsection--
``(A) In general.--The terms `collectibles gain' and
`collectibles loss' mean gain or loss (respectively) from the
sale or exchange of a collectible (as defined in section
408(m) without regard to paragraph (3) thereof) which is a
capital asset held for more than 18 months but only to the
extent such gain is taken into account in computing gross
income and such loss is taken into account in computing
taxable income.
``(B) Partnerships, etc.--For purposes of subparagraph (A),
any gain from the sale of an interest in a partnership, S
corporation, or trust which is attributable to unrealized
appreciation in the value of collectibles shall be treated as
gain from the sale or exchange of a collectible. Rules
similar to the rules of section 751 shall apply for purposes
of the preceding sentence.
``(7) Unrecaptured section 1250 gain.--For purposes of this
subsection--
``(A) In general.--The term `unrecaptured section 1250
gain' means the excess (if any) of--
``(i) the amount of long-term capital gain (not otherwise
treated as ordinary income) which would be treated as
ordinary income if--
``(I) section 1250(b)(1) included all depreciation and the
applicable percentage under section 1250(a) were 100 percent,
and
``(II) only gain from property held for more than 18 months
were taken into account, over
``(ii) the excess (if any) of--
``(I) the amount described in paragraph (5)(A)(ii), over
``(II) the amount described in paragraph (5)(A)(i).
``(B) Limitation with respect to section 1231 property.--
The amount described in subparagraph (A)(i) from sales,
exchanges, and conversions described in section 1231(a)(3)(A)
for any taxable year shall not exceed the net section 1231
gain (as defined in section 1231(c)(3)) for such year.
``(8) Section 1202 gain.--For purposes of this subsection,
the term `section 1202 gain' means an amount equal to the
gain excluded from gross income under section 1202(a).
``(9) Qualified 5-year gain.--For purposes of this
subsection, the term `qualified 5-year gain' means the amount
of long-term capital gain which would be computed for the
taxable year if only gains from the sale or exchange of
property held by the taxpayer for more than 5 years were
taken into account. The determination under the preceding
sentence shall be made without regard to collectibles gain,
gain described in paragraph (7)(A)(i), and section 1202 gain.
``(10) Coordination with recapture of net ordinary losses
under section 1231.--If any amount is treated as ordinary
income under section 1231(c), such amount shall be allocated
among the separate categories of net section 1231 gain (as
defined in section 1231(c)(3)) in such manner as the
Secretary may by forms or regulations prescribe.
``(11) Regulations.--The Secretary may prescribe such
regulations as are appropriate (including regulations
requiring reporting) to apply this subsection in the case of
sales and exchanges by pass-thru entities and of interests in
such entities.
``(12) Pass-thru entity defined.--For purposes of this
subsection, the term `pass-thru entity' means--
``(A) a regulated investment company,
``(B) a real estate investment trust,
``(C) an S corporation,
``(D) a partnership,
``(E) an estate or trust,
``(F) a common trust fund,
``(G) a foreign investment company which is described in
section 1246(b)(1) and for which an election is in effect
under section 1247, and
``(H) a qualified electing fund (as defined in section
1295).
``(13) Special rules for periods during 1997.--
``(A) Determination of 28 percent rate gain.--In applying
paragraph (5)--
``(i) the amount determined under subclause (I) of
paragraph (5)(A)(i) shall include long-term capital gain (not
otherwise described in paragraph (5)(A)(i)) which is properly
taken into account for the portion of the taxable year before
May 7, 1997,
``(ii) the amounts determined under subclause (I) of
paragraph (5)(A)(ii) shall include long-term capital loss
(not otherwise described in paragraph (5)(A)(ii)) which is
properly taken into account for the portion of the taxable
year before May 7, 1997, and
``(iii) clauses (i)(I) and (ii)(I) of paragraph (5)(A)
shall be applied by not taking into account any gain and loss
on property held for more than 1 year but not more than 18
months which is properly taken into account for the portion
of the taxable year after May 6, 1997, and before July 29,
1997.
``(B) Other special rules.--
``(i) Determination of unrecaptured section 1250 gain not
to include pre-may 7, 1997
[[Page H10019]]
gain.--The amount determined under paragraph (7)(A)(i) shall
not include gain properly taken into account for the portion
of the taxable year before May 7, 1997.
``(ii) Other transitional rules for 18-month holding
period.--Paragraphs (6)(A) and (7)(A)(i)(II) shall be applied
by substituting `1 year' for `18 months' with respect to gain
properly taken into account for the portion of the taxable
year after May 6, 1997, and before July 29, 1997.
``(C) Special rules for pass-thru entities.--In applying
this paragraph with respect to any pass-thru entity, the
determination of when gains and loss are properly taken into
account shall be made at the entity level.''
(2) In general.--Paragraph (3) of section 55(b) of the 1986
Code is amended to read as follows:
``(3) Maximum rate of tax on net capital gain of
noncorporate taxpayers.--The amount determined under the
first sentence of paragraph (1)(A)(i) shall not exceed the
sum of--
``(A) the amount determined under such first sentence
computed at the rates and in the same manner as if this
paragraph had not been enacted on the taxable excess reduced
by the lesser of--
``(i) the net capital gain, or
``(ii) the sum of--
``(I) the adjusted net capital gain, plus
``(II) the unrecaptured section 1250 gain, plus
``(B) 10 percent of so much of the adjusted net capital
gain (or, if less, taxable excess) as does not exceed the
amount on which a tax is determined under section 1(h)(1)(B),
plus
``(C) 20 percent of the adjusted net capital gain (or, if
less, taxable excess) in excess of the amount on which tax is
determined under subparagraph (B), plus
``(D) 25 percent of the amount of taxable excess in excess
of the sum of the amounts on which tax is determined under
the preceding subparagraphs of this paragraph.
In the case of taxable years beginning after December 31,
2000, rules similar to the rules of section 1(h)(2) shall
apply for purposes of subparagraphs (B) and (C). Terms used
in this paragraph which are also used in section 1(h) shall
have the respective meanings given such terms by section 1(h)
but computed with the adjustments under this part.''.
(3) Section 57(a)(7) of the 1986 Code is amended by adding
at the end the following new sentence: ``In the case of stock
the holding period of which begins after December 31, 2000
(determined with the application of the last sentence of
section 1(h)(2)(B)), the preceding sentence shall be applied
by substituting `28 percent' for `42 percent'.''.
(4) Paragraphs (11) and (12) of section 1223, and section
1235(a), of the 1986 Code are each amended by striking ``1
year'' each place it appears and inserting ``18 months''.
(e) Amendments Related to Section 312 of 1997 Act.--
(1) Section 121(c)(1) of the 1986 Code is amended to read
as follows:
``(1) In general.--In the case of a sale or exchange to
which this subsection applies, the ownership and use
requirements of subsection (a), and subsection (b)(3), shall
not apply; but the dollar limitation under paragraph (1) or
(2) of subsection (b), whichever is applicable, shall be
equal to--
``(A) the amount which bears the same ratio to such
limitation (determined without regard to this paragraph) as
``(B)(i) the shorter of--
``(I) the aggregate periods, during the 5-year period
ending on the date of such sale or exchange, such property
has been owned and used by the taxpayer as the taxpayer's
principal residence, or
``(II) the period after the date of the most recent prior
sale or exchange by the taxpayer to which subsection (a)
applied and before the date of such sale or exchange, bears
to
``(ii) 2 years.''.
(2) Section 312(d)(2) of the 1997 Act (relating to sales
before date of enactment) is amended by inserting ``on or''
before ``before'' each place it appears in the text and
heading.
(f) Amendment Related to Section 313 of 1997 Act.--Section
1045 of the 1986 Code is amended by adding at the end the
following new subsection:
``(c) Limitation on Application to Partnerships and S
Corporations.--Subsection (a) shall apply to a partnership or
S corporation for a taxable year only if at all times during
such taxable year all of the partners in the partnership, or
all of the shareholders of the S corporation, are natural
persons or estates.''
SEC. 606. AMENDMENTS RELATED TO TITLE V OF 1997 ACT.
(a) Amendments Related to Section 501 of 1997 Act.--
(1) Subsection (c) of section 2631 of the 1986 Code is
amended by striking ``an individual who dies'' and inserting
``a generation-skipping transfer''.
(2) Subsection (f) of section 501 of the 1997 Act is
amended by inserting ``(other than the amendment made by
subsection (d))'' after ``this section''.
(b) Amendments Related to Section 502 of 1997 Act.--
(1) Subsection (a) of section 2033A of the 1986 Code is
amended to read as follows:
``(a) Exclusion.--
``(1) In general.--In the case of an estate of a decedent
to which this section applies, the value of the gross estate
shall not include the lesser of--
``(A) the adjusted value of the qualified family-owned
business interests of the decedent otherwise includible in
the estate, or
``(B) the exclusion limitation with respect to such estate.
``(2) Exclusion limitation.--
``(A) In general.--The exclusion limitation with respect to
any estate is the amount of reduction in the tentative tax
base with respect to such estate which would be required in
order to reduce the tax imposed by section 2001(b)
(determined without regard to this section) by an amount
equal to the maximum credit equivalent benefit.
``(B) Maximum credit equivalent benefit.--For purposes of
subparagraph (A), the term `maximum credit equivalent
benefit' means the excess of--
``(i) the amount by which the tentative tax imposed by
section 2001(b) (determined without regard to this section)
would be reduced if the tentative tax base were reduced by
$675,000, over
``(ii) the amount by which the applicable credit amount
under section 2010(c) with respect to such estate exceeds
such applicable credit amount in effect for 1998.
``(C) Tentative tax base.--For purposes of this paragraph,
the term `tentative tax base' means the amount with respect
to which the tax imposed by section 2001(b) would be computed
without regard to this section.''
(2) Section 2033A(b)(3) of the 1986 Code is amended to read
as follows:
``(3) Includible gifts of interests.--The amount of the
gifts of qualified family-owned business interests determined
under this paragraph is the sum of--
``(A) the amount of such gifts from the decedent to members
of the decedent's family taken into account under section
2001(b)(1)(B), plus
``(B) the amount of such gifts otherwise excluded under
section 2503(b),
to the extent such interests are continuously held by members
of such family (other than the decedent's spouse) between the
date of the gift and the date of the decedent's death.''
(c) Amendments Related to Section 503 of the 1997 Act.--
(1) Clause (iii) of section 6166(b)(7)(A) of the 1986 Code
is amended to read as follows:
``(iii) for purposes of applying section 6601(j), the 2-
percent portion (as defined in such section) shall be treated
as being zero.''
(2) Clause (iii) of section 6166(b)(8)(A) of the 1986 Code
is amended to read as follows:
``(iii) 2-percent interest rate not to apply.--For purposes
of applying section 6601(j), the 2-percent portion (as
defined in such section) shall be treated as being zero.''
(d) Amendment Related to Section 505 of the 1997 Act.--
Paragraphs (1) and (2) of section 7479(a) of the 1986 Code
are each amended by striking ``an estate,'' and inserting
``an estate (or with respect to any property included
therein),''.
(e) Amendments Related to Section 506 of the 1997 Act.--
(1) Subsection (c) of section 2504 of the 1986 Code is
amended by striking ``was assessed or paid'' and inserting
``was finally determined for purposes of this chapter''.
(2) Paragraph (1) of section 506(e) of the 1997 Act is
amended by striking ``and (c)'' and inserting ``, (c), and
(d)''.
SEC. 607. AMENDMENTS RELATED TO TITLE VII OF 1997 ACT.
(a) Amendment Related to Section 1400 of 1986 Code.--
Section 1400(b)(2)(B) of the 1986 Code is amended by
inserting ``as determined on the basis of the 1990 census''
after ``percent''.
(b) Amendments Related to Section 1400B of 1986 Code.--
(1) Section 1400B(d)(2) of the 1986 Code is amended by
inserting ``as determined on the basis of the 1990 census''
after ``percent''.
(2) Section 1400B(b) of the 1986 Code is amended by
redesignating paragraphs (6) and (7) as paragraphs (5) and
(6), respectively.
(c) Amendments Related to Section 1400C of 1986 Code.--
(1) Paragraph (1) of section 1400C(c) of the 1986 Code is
amended to read as follows:
``(1) In general.--The term `first-time homebuyer' means
any individual if such individual (and if married, such
individual's spouse) had no present ownership interest in a
principal residence in the District of Columbia during the 1-
year period ending on the date of the purchase of the
principal residence to which this section applies.''
(2) Subparagraph (B) of section 1400C(e)(2) of the 1986
Code is amended by inserting before the period ``on the date
the taxpayer first occupies such residence''.
(3) Paragraph (3) of section 1400C(e) of the 1986 Code is
amended by striking all that follows ``principal residence''
and inserting ``on the date such residence is purchased.''
(4) Subsection (i) of section 1400C of the 1986 Code is
amended to read as follows:
``(i) Application of Section.--This section shall apply to
property purchased after August 4, 1997, and before January
1, 2001.''
(5) Subsection (c) of section 23 of the 1986 Code is
amended by inserting ``and section 1400C'' after ``other than
this section''.
(6) Subparagraph (C) of section 25(e)(1) of the 1986 Code
is amended by striking ``section 23'' and inserting
``sections 23 and 1400C''.
SEC. 608. AMENDMENTS RELATED TO TITLE IX OF 1997 ACT.
(a) Amendment Related to Section 901 of 1997 Act.--Section
9503(c)(7) of the 1986 Code is amended--
(1) by striking ``resulting from the amendments made by''
and inserting ``(and transfers to the Mass Transit Account)
resulting
[[Page H10020]]
from the amendments made by subsections (a) and (b) of
section 901 of'', and
(2) by inserting before the period ``and deposits in the
Highway Trust Fund (and transfers to the Mass Transit
Account) shall be treated as made when they would have been
required to be made without regard to section 901(e) of the
Taxpayer Relief Act of 1997''.
(b) Amendment Related to Section 907 of 1997 Act.--
Paragraph (2) of section 9503(e) of the 1986 Code is amended
by striking the last sentence and inserting the following new
sentence: ``For purposes of the preceding sentence, the term
`mass transit portion' means, for any fuel with respect to
which tax was imposed under section 4041 or 4081 and
otherwise deposited into the Highway Trust Fund, the amount
determined at the rate of--
``(A) except as otherwise provided in this sentence, 2.86
cents per gallon,
``(B) 1.77 cents per gallon in the case of any partially
exempt methanol or ethanol fuel (as defined in section
4041(m)) none of the alcohol in which consists of ethanol,
``(C) 1.86 cents per gallon in the case of liquefied
natural gas,
``(D) 2.13 cents per gallon in the case of liquefied
petroleum gas, and
``(E) 9.71 cents per MCF (determined at standard
temperature and pressure) in the case of compressed natural
gas.''
(c) Amendment Related to Section 976 of 1997 Act.--Section
6103(d)(5) of the 1986 Code is amended by striking ``section
967 of the Taxpayer Relief Act of 1997.'' and inserting
``section 976 of the Taxpayer Relief Act of 1997. Subsections
(a)(2) and (p)(4) and sections 7213 and 7213A shall not apply
with respect to disclosures or inspections made pursuant to
this paragraph.''
SEC. 609. AMENDMENTS RELATED TO TITLE X OF 1997 ACT.
(a) Amendments Related to Section 1001 of 1997 Act.--
(1) Paragraph (2) of section 1259(b) of the 1986 Code is
amended--
(A) by striking ``debt'' each place it appears in clauses
(i) and (ii) of subparagraph (A) and inserting ``position'',
(B) by striking ``and'' at the end of subparagraph (A), and
(C) by redesignating subparagraph (B) as subparagraph (C)
and by inserting after subparagraph (A) the following new
subparagraph:
``(B) any hedge with respect to a position described in
subparagraph (A), and''.
(2) Section 1259(d)(1) of the 1986 Code is amended by
inserting ``(including cash)'' after ``property''.
(3) Subparagraph (D) of section 475(f)(1) of the 1986 Code
is amended by adding at the end the following new sentence:
``Subsection (d)(3) shall not apply under the preceding
sentence for purposes of applying sections 1402 and 7704.''
(4) Subparagraph (C) of section 1001(d)(3) of the 1997 Act
is amended by striking ``within the 30-day period beginning
on'' and inserting ``before the close of the 30th day
after''.
(b) Amendments Related to Section 1012 of 1997 Act.--
(1) Paragraph (1) of section 1012(d) of the 1997 Act is
amended by striking ``1997, pursuant'' and inserting ``1997;
except that the amendment made by subsection (a) shall apply
to such distributions only if pursuant''.
(2) Subparagraph (A) of section 355(e)(3) of the 1986 Code
is amended--
(A) by striking ``shall not be treated as described in''
and inserting ``shall not be taken into account in
applying'', and
(B) by striking clause (iv) and inserting the following new
clause:
``(iv) The acquisition of stock in the distributing
corporation or any controlled corporation to the extent that
the percentage of stock owned directly or indirectly in such
corporation by each person owning stock in such corporation
immediately before the acquisition does not decrease.''
(c) Amendments Related to Section 1014 of 1997 Act.--
(1) Paragraph (1) of section 351(g) of the 1986 Code is
amended by adding ``and'' at the end of subparagraph (A) and
by striking subparagraphs (B) and (C) and inserting the
following new subparagraph:
``(B) if (and only if) the transferor receives stock other
than nonqualified preferred stock--
``(i) subsection (b) shall apply to such transferor, and
``(ii) such nonqualified preferred stock shall be treated
as other property for purposes of applying subsection (b).''
(2) Clause (ii) of section 354(a)(2)(C) of 1986 Code is
amended by adding at the end the following new subclause:
``(III) Extension of statute of limitations.--The statutory
period for the assessment of any deficiency attributable to a
corporation failing to be a family-owned corporation shall
not expire before the expiration of 3 years after the date
the Secretary is notified by the corporation (in such manner
as the Secretary may prescribe) of such failure, and such
deficiency may be assessed before the expiration of such 3-
year period notwithstanding the provisions of any other law
or rule of law which would otherwise prevent such
assessment.''
(d) Amendment Related to Section 1024 of 1997 Act.--Section
6331(h)(1) of the 1986 Code is amended by striking ``The
effect of a levy'' and inserting ``If the Secretary approves
a levy under this subsection, the effect of such levy''.
(e) Amendments Related to Section 1031 of 1997 Act.--
(1) Subsection (l) of section 4041 of the 1986 Code is
amended by striking ``subsection (e) or (f)'' and inserting
``subsection (f) or (g)''.
(2) Subsection (b) of section 9502 of the 1986 Code is
amended by moving the sentence added at the end of paragraph
(1) to the end of such subsection.
(3) Subsection (c) of section 6421 of the 1986 Code is
amended--
(A) by striking ``(2)(A)'' and inserting ``(2)'', and
(B) by adding at the end the following sentence:
``Subsection (a) shall not apply to gasoline to which this
subsection applies.''
(f) Amendments Related to Section 1032 of 1997 Act.--
(1) Section 1032(a) of the 1997 Act is amended by striking
``Subsection (a) of section 4083'' and inserting ``Paragraph
(1) of section 4083(a)''.
(2) Section 1032(e)(12)(A) of the 1997 Act shall be applied
as if ``gasoline, diesel fuel,'' were the material proposed
to be stricken.
(3) Paragraph (1) of section 4101(e) of the 1986 Code is
amended by striking ``dyed diesel fuel and kerosene'' and
inserting ``such fuel in a dyed form''.
(g) Amendment Related to Section 1055 of 1997 Act.--Section
6611(g)(1) of the 1986 Code is amended by striking ``(e), and
(h)'' and inserting ``and (e)''.
(h) Amendment Related to Section 1083 of 1997 Act.--Section
1083(a)(2) of the 1997 Act is amended--
(1) by striking ``21'' and inserting ``20'', and
(2) by striking ``22'' and inserting ``21''.
(i) Amendment Related to Section 1084 of 1997 Act.--
(1) Paragraph (3) of section 264(a) of the 1986 Code is
amended by striking ``subsection (c)'' and inserting
``subsection (d)''.
(2) Paragraph (4) of section 264(a) of the 1986 Code is
amended by striking ``subsection (d)'' and inserting
``subsection (e)''.
(3) Paragraph (4) of section 264(f) of the 1986 Code is
amended by adding at the end the following new subparagraph:
``(E) Master contracts.--If coverage for each insured under
a master contract is treated as a separate contract for
purposes of sections 817(h), 7702, and 7702A, coverage for
each such insured shall be treated as a separate contract for
purposes of subparagraph (A). For purposes of the preceding
sentence, the term `master contract' shall not include any
group life insurance contract (as defined in section
848(e)(2)).''
(4)(A) Clause (iv) of section 264(f)(5)(A) of the 1986 Code
is amended by striking the second sentence.
(B) Subparagraph (B) of section 6724(d)(1) of the 1986 Code
is amended by striking ``or'' at the end of clause (xv), by
striking the period at the end of clause (xvi) and inserting
``, or'', and by adding at the end the following new clause:
``(xvii) section 264(f)(5)(A)(iv) (relating to reporting
with respect to certain life insurance and annuity
contracts).''
(C) Paragraph (2) of section 6724(d) of the 1986 Code is
amended by striking ``or'' at the end of subparagraph (Y), by
striking the period at the end of subparagraph (Z) and
inserting ``or'', and by adding at the end the following new
subparagraph:
``(AA) section 264(f)(5)(A)(iv) (relating to reporting with
respect to certain life insurance and annuity contracts).''
(j) Amendment Related to Section 1085 of 1997 Act.--
Paragraph (5) of section 32(c) of the 1986 Code is amended--
(1) by inserting before the period at the end of
subparagraph (A) ``and increased by the amounts described in
subparagraph (C)'',
(2) by adding ``or'' at the end of clause (iii) of
subparagraph (B), and
(3) by striking all that follows subclause (II) of
subparagraph (B)(iv) and inserting the following:
``(III) other trades or businesses.
For purposes of clause (iv), there shall not be taken into
account items which are attributable to a trade or business
which consists of the performance of services by the taxpayer
as an employee.
``(C) Certain amounts included.--An amount is described in
this subparagraph if it is--
``(i) interest received or accrued during the taxable year
which is exempt from tax imposed by this chapter, or
``(ii) amounts received as a pension or annuity, and any
distributions or payments received from an individual
retirement plan, by the taxpayer during the taxable year to
the extent not included in gross income.
Clause (ii) shall not include any amount which is not
includible in gross income by reason of section 402(c),
403(a)(4), 403(b), 408(d) (3), (4), or (5), or 457(e)(10).''
(k) Amendment Related to Section 1088 of 1997 Act.--Section
1088(b)(2)(C) of the 1997 Act is amended by inserting ``more
than 1 year'' before ``after''.
(l) Amendment Related to Section 1089 of 1997 Act.--
Paragraphs (1)(C) and (2)(C) of section 664(d) of the 1986
Code are each amended by adding ``, and'' at the end.
SEC. 610. AMENDMENTS RELATED TO TITLE XI OF 1997 ACT.
(a) Amendment Related to Section 1103 of 1997 Act.--The
paragraph (3) of section 59(a) added by section 1103 of the
1997 Act is redesignated as paragraph (4).
(b) Amendment Related to Section 1121 of 1997 Act.--Section
1298(a)(2)(B) of the 1986 Code is amended by adding at the
end the following new sentence: ``Section 1297(e)
[[Page H10021]]
shall not apply in determining whether a corporation is a
passive foreign investment company for purposes of this
subparagraph.''
(c) Amendment Related to Section 1122 of 1997 Act.--Section
672(f)(3)(B) of the 1986 Code is amended by striking
``section 1296'' and inserting ``section 1297''.
(d) Amendment Related to Section 1123 of 1997 Act.--The
subsection (e) of section 1297 of the 1986 Code added by
section 1123 of the 1997 Act is redesignated as subsection
(f).
(e) Amendment Related to Section 1144 of 1997 Act.--
Paragraphs (1) and (2) of section 1144(c) of the 1997 Act are
each amended by striking ``6038B(b)'' and inserting
``6038B(c) (as redesignated by subsection (b))''.
SEC. 611. AMENDMENTS RELATED TO TITLE XII OF 1997 ACT.
(a) Amendment Related to Section 1204 of 1997 Act.--The
last sentence of section 162(a) of the 1986 Code is amended
by striking ``investigate'' and all that follows and
inserting ``investigate or prosecute, or provide support
services for the investigation or prosecution of, a Federal
crime.''
(b) Amendments Related to Section 1205 of 1997 Act.--
(1) Section 6311(e)(1) of the 1986 Code is amended by
striking ``section 6103(k)(8)'' and inserting ``section
6103(k)(9)''.
(2) Paragraph (8) of section 6103(k) of the 1986 Code (as
added by section 1205(c)(1) of the 1997 Act) is redesignated
as paragraph (9).
(3) The heading for section 7431(g) of the 1986 Code is
amended by striking ``(8)'' and inserting ``(9)''.
(4) Section 1205(c)(3) of the 1997 Act shall be applied as
if it read as follows:
``(3) Section 6103(p)(3)(A), as amended by section
1026(b)(1)(A), is amended by striking ``or (8)'' and
inserting ``(8), or (9)''.
(5) Section 1213(b) of the 1997 Act is amended by striking
``section 6724(d)(1)(A)'' and inserting ``section
6724(d)(1)''.
(c) Amendment Related to Section 1226 of 1997 Act.--Section
1226 of the 1997 Act is amended by striking ``ending on or''
and inserting ``beginning''.
(d) Amendment Related to Section 1285 of 1997 Act.--Section
7430(b) of the 1986 Code is amended by redesignating
paragraph (5) as paragraph (4).
SEC. 612. AMENDMENTS RELATED TO TITLE XIII OF 1997 ACT.
(a) Section 646 of the 1986 Code is redesignated as section
645.
(b) The item relating to section 646 in the table of
sections for subpart A of part I of subchapter J of chapter 1
of the 1986 Code is amended by striking ``Sec. 646'' and
inserting ``Sec. 645''.
(c) Paragraph (1) of section 2652(b) of the 1986 Code is
amended by striking ``section 646'' and inserting ``section
645''.
(d) Paragraph (3) of section 1(g) of the 1986 Code is
amended by striking subparagraph (C) and by redesignating
subparagraph (D) as subparagraph (C).
(e) Section 641 of the 1986 Code is amended by striking
subsection (c) and by redesignating subsection (d) as
subsection (c).
(f) Paragraph (4) of section 1361(e) of the 1986 Code is
amended by striking ``section 641(d)'' and inserting
``section 641(c)''.
(g) Subparagraph (A) of section 6103(e)(1) of the 1986 Code
is amended by striking clause (ii) and by redesignating
clauses (iii) and (iv) as clauses (ii) and (iii),
respectively.
SEC. 613. AMENDMENTS RELATED TO TITLE XIV OF 1997 ACT.
(a) Amendment Related to Section 1434 of 1997 Act.--
Paragraph (2) of section 4052(f) of the 1986 Code is amended
by striking ``this section'' and inserting ``such
section''.
(b) Amendment Related to Section 1436 of 1997 Act.--
Paragraph (2) of section 4091(a) of the 1986 Code is amended
by inserting ``or on which tax has been credited or
refunded'' after ``such paragraph''.
SEC. 614. AMENDMENTS RELATED TO TITLE XV OF 1997 ACT.
(a) Amendment Related to Section 1501 of 1997 Act.--The
paragraph (8) of section 408(p) of the 1986 Code added by
section 1501(b) of the 1997 Act is redesignated as paragraph
(9).
(b) Amendment Related to Section 1505 of 1997 Act.--Section
1505(d)(2) of the 1997 Act is amended by striking ``(b)(12)''
and inserting ``(b)(12)(A)(i)''.
(c) Amendment Related to Section 1531 of 1997 Act.--
Subsection (f) of section 9811 of the 1986 Code (as added by
section 1531 of the 1997 Act) is redesignated as subsection
(e).
SEC. 615. AMENDMENTS RELATED TO TITLE XVI.
(a) Amendments Related to Section 1601(d) of 1997 Act.--
(1) Amendments related to section 1601(d)(1)--
(A) Section 408(p)(2)(D)(i) of the 1986 Code is amended by
striking ``or (B)'' in the last sentence.
(B) Section 408(p) of the 1986 Code is amended by adding at
the end the following:
``(10) Special rules for acquisitions, dispositions, and
similar transactions.--
``(A) In general.--An employer which fails to meet any
applicable requirement by reason of an acquisition,
disposition, or similar transaction shall not be treated as
failing to meet such requirement during the transition period
if--
``(i) the employer satisfies requirements similar to the
requirements of section 410(b)(6)(C)(i)(II), and
``(ii) the qualified salary reduction arrangement
maintained by the employer would satisfy the requirements of
this subsection after the transaction if the employer which
maintained the arrangement before the transaction had
remained a separate employer.
``(B) Applicable requirement.--For purposes of this
paragraph, the term `applicable requirement' means--
``(i) the requirement under paragraph (2)(A)(i) that an
employer be an eligible employer,
``(ii) the requirement under paragraph (2)(D) that an
arrangement be the only plan of an employer, and
``(iii) the participation requirements under paragraph (4).
``(C) Transition period.--For purposes of this paragraph,
the term `transition period' means the period beginning on
the date of any transaction described in subparagraph (A) and
ending on the last day of the second calendar year following
the calendar year in which such transaction occurs.''
(C) Section 408(p)(2) of the 1986 Code is amended--
(i) by striking ``the preceding sentence shall apply only
in accordance with rules similar to the rules of section
410(b)(6)(C)(i)'' in the last sentence of subparagraph
(C)(i)(II) and inserting ``the preceding sentence shall not
apply'', and
(ii) by striking clause (iii) of subparagraph (D).
(2) Amendment to section 1601(d)(4).--Section 1601(d)(4)(A)
of the 1997 Act is amended--
(A) by striking ``Section 403(b)(11)'' and inserting
``Paragraphs (7)(A)(ii) and (11) of section 403(b)'', and
(B) by striking ``403(b)(1)'' in clause (ii) and inserting
``403(b)(10)''.
(b) Amendment Related to Section 1601(f)(4) of 1997 Act.--
Subsection (d) of section 6427 of the 1986 Code is amended--
(1) by striking ``Helicopters'' in the heading and
inserting ``Other Aircraft Uses'', and
(2) by inserting ``or a fixed-wing aircraft'' after
``helicopter''.
SEC. 616. AMENDMENT RELATED TO OMNIBUS BUDGET RECONCILIATION
ACT OF 1993.
(a) In General.--Section 196(c) of the 1986 Code is amended
by striking ``and'' at the end of paragraph (6), by striking
the period at the end of paragraph (7), and insert ``, and'',
and by adding at the end the following new paragraph:
``(8) the employer social security credit determined under
section 45B(a).''
(b) Effective Date.--The amendment made by this section
shall take effect as if included in the amendments made by
section 13443 of the Revenue Reconciliation Act of 1993.
SEC. 617. AMENDMENT RELATED TO TAX REFORM ACT OF 1984.
(a) In General.--Paragraph (3) of section 136(c) of the Tax
Reform Act of 1984 is amended by adding at the end the
following flush sentence:
``The treatment under the preceding sentence shall apply to
each period after June 30, 1983, during which such members
are stapled entities, whether or not such members are stapled
entities for all periods after June 30, 1983.''
(b) Effective Date.--The amendment made by subsection (a)
shall take effect as if included in the Tax Reform Act of
1984 as of the date of the enactment of such Act.
SEC. 618. AMENDMENT RELATED TO TAX REFORM ACT OF 1986.
(a) In General.--Section 6401(b)(1) of the 1986 Code is
amended by striking ``and D'' and inserting ``D, and G''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect as if included in the amendments made by
section 701(b) of the Tax Reform Act of 1986.
SEC. 619. MISCELLANEOUS CLERICAL AND DEADWOOD CHANGES.
(a)(1) Section 6421 of the 1986 Code is amended by
redesignating subsections (j) and (k) as subsections (i) and
(j), respectively.
(2) Subsection (b) of section 34 of the 1986 Code is
amended by striking ``section 6421(j)'' and inserting
``section 6421(i)''.
(3) Subsections (a) and (b) of section 6421 of the 1986
Code are each amended by striking ``subsection (j)'' and
inserting ``subsection (i)''.
(b) Sections 4092(b) and 6427(q)(2) of the 1986 Code are
each amended by striking ``section 4041(c)(4)'' and inserting
``section 4041(c)(2)''.
(c) Sections 4221(c) and 4222(d) of the 1986 Code are each
amended by striking ``4053(a)(6)'' and inserting ``4053(6)''.
(d) Paragraph (5) of section 6416(b) of the 1986 Code is
amended by striking ``section 4216(e)(1)'' each place it
appears and inserting ``section 4216(d)(1)''.
(e) Paragraph (3) of section 6427(f) of the 1986 Code is
amended by striking ``, (e),''.
(f)(1) Section 6427 of the 1986 Code, as amended by
paragraph (2), is amended by redesignating subsections (n),
(p), (q), and (r) as subsections (m), (n), (o), and (p),
respectively.
(2) Paragraphs (1) and (2)(A) of section 6427(i) of the
1986 Code are each amended by striking ``(q)'' and inserting
``(o)''.
(g) Subsection (e) of section 9502 of the 1986 Code is
amended to read as follows:
``(e) Certain Taxes on Alcohol Mixtures To Remain in
General Fund.--For purposes of this section, the amounts
which would (but for this subsection) be required to be
appropriated under subparagraphs (A), (C), and (D) of
subsection (b)(1) shall be reduced by--
``(1) 0.6 cent per gallon in the case of taxes imposed on
any mixture at least 10 percent of which is alcohol (as
defined in section 4081(c)(3)) if any portion of such alcohol
is ethanol, and
[[Page H10022]]
``(2) 0.67 cent per gallon in the case of fuel used in
producing a mixture described in paragraph (1).''
(h)(1) Clause (i) of section 9503(c)(2)(A) of the 1986 Code
is amended by adding ``and'' at the end of subclause (II), by
striking subclause (III), and by redesignating subclause (IV)
as subclause (III).
(2) Clause (ii) of such section is amended by striking
``gasoline, special fuels, and lubricating oil'' each place
it appears and inserting ``fuel''.
(i) The amendments made by this section shall take effect
on the date of the enactment of this Act.
SEC. 620. EFFECTIVE DATE.
Except as otherwise provided in this title, the amendments
made by this title shall take effect as if included in the
provisions of the Taxpayer Relief Act of 1997 to which they
relate.
The SPEAKER pro tempore. The gentleman from Kentucky [Mr. Bunning]
and the gentleman from New York [Mr. Rangel] each will control 1 hour.
The Chair recognizes the gentleman from Kentucky [Mr. Bunning].
General Leave
Mr. BUNNING. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days within which to revise and extend their
remarks and include extraneous material on H.R. 2676.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Kentucky?
There was no objection.
Mr. BUNNING. Mr. Speaker, I yield myself 2 minutes.
Mr. Speaker, I rise in support of the IRS reform bill. It is no
secret the IRS is out of control. When agents testified before Congress
in hoods out of fear of reprisal, and when honest taxpayers are hounded
into bankruptcy, it is time for the Congress to step in and say, enough
is enough.
The bill before us today puts some commonsense boundaries around the
IRS. By setting up an oversight board of private sector experts, we
force this service to move forward into the 21st century. Considering
how the IRS has wasted billions on modernizing its computers, and that
the year 2000 computer disaster creeps closer every day, the oversight
board is incredibly important.
By forcing the IRS, and not the taxpayer, to carry the burden of
proof in disputes, we protect legal, law-abiding citizens and end
harassing and frivolous claims by maverick agents. By strengthening the
confidentiality rules, we make it easier for taxpayers to get
professional advice about their returns without having to worry about
being tripped up by legal tricks.
Mr. Speaker, I think many people have forgotten that the ``S'' in IRS
stands for ``service,'' government servicing the taxpayers, not the
other way around. By passing this bill today, we remind the IRS of its
proper role, and about just who is in charge in America: The taxpayer.
Mr. Speaker, I urge support of the bill, and I reserve the balance of
my time.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in support of H.R. 2676. I rise in strong support
because of the bipartisan nature of the solution of a very serious
problem that our Nation faces with the Internal Revenue Service. I do
not think anyone can deny that we are basically dealing with a group of
dedicated people that do a very difficult job, but a very complex Tax
Code that we have given to them. Yet, out of all of this, for whatever
reasons, we were able to see vividly during the Senate hearings how
certain people in that Service, probably because of lack of direction
and governance, were abusing American taxpayers.
Prior to this time there is no question that people in the tax-
writing committee, which has the responsibility for oversight, was
moving towards reform. But it was the restructuring commission that the
gentleman from California [Mr. Matsui] and the gentleman from Maryland
[Mr. Cardin] and the gentleman from Ohio [Mr. Portman] sat on that
actually wrestled with it, took testimony, and came up with ways in
which we could enjoy the expertise of the private sector and bring some
balance, not only in terms of technology, but in terms of better
protecting the taxpayer.
Mr. Speaker, the gentleman from California [Mr. Matsui] was replaced
by Congressman Cohen, and they were able to work together with the
administration and come up with a bill. There are some that have said
that the administration came to this reform position screaming and
scratching and crying, but the truth of the matter is there were many
objections in the bill, and these corrections were made by Republicans
and Democrats. We come forth with a bill that is not only workable, but
desired today.
Let me say on this House floor, which I have said about the chairman,
the gentleman from Texas [Mr. Archer] before, that Chairman Archer had
the opportunity to bring that same type of a show to the House of
Representatives, to bring a response to an emotional situation, which
indeed Members of Congress and the whole country saw.
Instead of doing that, he allowed Members working on this bill to
work their will in a bipartisan way and made contributions to perfect
the bill, and worked to bring together Democrats and Republicans, not
with a workable bill, but with a desired bill. I think it is not only a
credit to him, but a credit to the full committee, that we send notice
to the Internal Revenue Service that we expect better performance, we
expect to provide the oversight, but we do not expect to do it at the
expense of the individual workers who are dedicated.
So I support this, and I particularly want to pay tribute to the
gentleman from Maryland [Mr. Cardin] and the gentleman from Ohio [Mr.
Portman], who worked with the administration and the leadership in the
House, as well as the Committee on Ways and Means, to bring a bill to
the floor that hardly has controversy.
Mr. Speaker, I reserve the balance of my time.
Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, the bill we vote on today will give David, the taxpayer,
a bigger slingshot to use against the IRS Goliath. But as proud as I am
of this bill, it is just the beginning. Reforming the IRS is a very
important first step, but the real culprit behind the scenes is the
complexities of the current Internal Revenue Code.
What America needs is a new tax system, one that is fairer, simpler,
less intrusive, less costly, and one that creates more economic growth
for the American people, because that is what determines the size of
the paychecks that families receive in this country. That is the
American dream.
Actually, I should say, not just less intrusive. We should have a Tax
Code that gets the IRS completely and totally out of the lives of every
individual American. I believe we must rip the income tax out by its
roots and throw it away, so it can never grow back.
As helpful as this legislation will be to taxpayers struggling with
the IRS, I personally will not be satisfied until the tax system itself
is repealed. But until that great day comes, this bill will be a
valuable helping hand to millions of taxpayers who need and deserve a
stronger slingshot.
This bill does three things to protect taxpayers in their dealings
with the IRS: No. 1, in America, criminals are innocent until proven
guilty, but taxpayers do not receive the same benefit of the doubt.
This legislation shifts the burden of proof in court proceedings from
the taxpayer to the IRS. No longer will taxpayers have to prove beyond
the burden of credible evidence that they are innocent. As a result,
taxpayers will benefit from more favorable settlements, even before
they ever get to court.
The gentleman from Ohio [Mr. Traficant], like Paul Revere riding in
the night, he was the one to first sound the alarm about the burden of
proof. Now change is coming, and the gentleman from Ohio [Mr.
Traficant] deserves our thanks.
No. 2, we create 28 new taxpayer rights, including the right to sue
the IRS for damages caused by negligence of the IRS employees in the
collection process. We make it easier for a taxpayer to recover legal
fees and costs when the IRS is wrong. We pay 4 million taxpayers higher
refunds when the IRS holds up their check, plus we protect thousands of
innocent spouses, often divorced women, so they are less likely to be
punished by the IRS for mistakes made on their joint returns by their
former spouses.
We, for the first time, make the IRS responsible for any rules that
they give in writing to taxpayers. Taxpayers now
[[Page H10023]]
will be able to rely on anything in writing that they receive from the
IRS.
We remove any suspicion that politics will be allowed to enter audit
decisions, because we make it a felony for any Cabinet-level official,
including the President and the Vice President, to direct the IRS to
audit or terminate an audit for any particular taxpayer.
No. 3, if the Department of the Treasury could have fixed the IRS,
they would have done so a long time ago. So our bill creates an
independent oversight board that includes nongovernmental experts who
can bring new thinking and a more taxpayer-oriented culture to the IRS.
Like a breath of fresh air, this board will have real power and
authority to change the direction of the IRS. No more will we be told,
you appropriated $4 billion for a new computer system, but it does not
work. That is intolerable.
Mr. Speaker, the protections provided in this bill go a long way to
helping solve peoples' worst problems with the IRS, but as long as our
Nation taxes its citizens on the basis of income, it will be impossible
to completely fix the IRS. This bill is a strong helping hand, and it
is long overdue, but the mission will not be complete until the
taxpayers are protected and the IRS becomes nonexistent in the
individual lives of all Americans. I look forward to that day.
Mr. Speaker, I reserve the balance of my time.
Mr. RANGEL. Mr. Speaker, I yield 5 minutes to the gentleman from
Maryland [Mr. Cardin].
Mr. CARDIN. Mr. Speaker, I rise in strong support of H.R. 2676, the
Internal Revenue Service Restructuring Act of 1997. This bipartisan
legislation to reform the IRS builds on work of the National Commission
on Restructuring the IRS, which was chaired by our colleague, the
gentleman from Ohio, [Mr. Rob Portman], and Senator Kerrey.
I particularly want to congratulate the gentleman from Ohio, [Mr. Rob
Portman], for the leadership he has shown throughout this period in
keeping us focused on our objective to bring about a bill that could
not only pass, but be signed into law. He did a great job, and I
congratulate him on that effort. I am very proud to have joined the
gentleman from Ohio in cosponsoring H.R. 2292, which has a strong
bipartisan support in this House.
Chairman Archer and the Committee on Ways and Means took a very good
bill and made it better. With the strong support in this House and from
the President, this bill should be quickly enacted.
I also want to acknowledge the work the gentleman from New York [Mr.
Rangel] and the gentleman from Pennsylvania [Mr. Coyne] did on our side
of the aisle, keeping us focused on getting a bill that could enjoy
bipartisan support.
I thank the gentlewoman from Connecticut [Mrs. Johnson], the chairman
of the Oversight Committee, for the role that she played. I appreciate
the role Mr. Kies in the staff did in keeping us focused on getting our
job done. There is a lot of credit that should be shared in this
legislation.
The legislation before us marks the first fundamental reform in the
IRS in nearly a half a century. The problems of the IRS are familiar:
billions of dollars squandered on a bungled computer modernization
effort, telephones unanswered, taxpayers too often treated with
disrespect or suspicion.
These problems have not emerged recently. They are not the legacy of
one administration, but of decades. These are not the problems of
individual employees. In fact, the employees of the IRS have come
forward to help us understand the problem, and they have helped us
craft a solution today.
This administration, and particularly Secretary Rubin, have been more
attentive to the problems of the IRS and more dedicated to seeking
solutions than any in recent years. Secretary Rubin has made important
changes in the management of the IRS, and those efforts have begun to
show results. But much more remains to be done.
Congressional action is needed in order to ensure that the reforms of
the IRS do not depend on any particular individual or administration.
The solution proposed in this bill is the creation of an oversight
board that will bring private sector expertise in the areas where the
IRS needs it the most. The creation of this board, with a real role in
the planning and oversight of the strategic plans for major
reorganizations in the budget of the IRS, is the most important element
in bringing reform to this troubled agency. The board is a permanent
entity that will provide continuing oversight for the IRS.
{time} 1200
IRS reform requires not just a new management structure involving a
partnership between the board, the Secretary, and the Commissioner, it
will also require improved performance by those of us in Congress. Over
the long run, we cannot build an IRS that serves the American people
unless we write a Tax Code that the IRS can explain and the people can
understand.
This bill takes the first step toward tax reform. The bill does not
reform our Tax Code but reforms the way we collect revenues. Reform of
the practices of the IRS will make it easier for us to concentrate on
the underlying problems in the Tax Code itself.
Our tax system is based on voluntary compliance. More than 80 percent
of Americans pay their taxes without dispute. An IRS that can answer
taxpayer phone calls and provide accurate, reliable information will
help us increase voluntary compliance. For the overwhelming majority of
Americans who abide by the law and pay their taxes, the IRS should
stand for information, respect, and service. Abuse of collection
practices must become a thing of the past. At the same time, the IRS
must become a more efficient agency in enforcing laws against those who
seek to escape their legal obligations.
Mr. Speaker, the IRS is charged with the vital task of collecting
revenues needed to fund the basic and essential operations of
Government. When the IRS is mismanaged in the way that it creates fear
and anxiety among taxpayers, the result is to undermine the confidence
of the American people in their Government. The purpose of this
legislation is to reform the IRS so that we can begin to restore that
badly damaged confidence.
Today, this body will act in time for the next tax season. The
legislation has the support of the administration. I hope the other
body will follow the leadership of this House and enact meaningful IRS
reform in order to help the taxpayers of this Nation.
Mr. Speaker, I rise in strong support of H.R. 2676, the Internal
Revenue Service Restructuring Act of 1997. This bipartisan legislation
to reform the Internal Revenue Service builds on the recommendations of
the National Commission on Restructuring the IRS, which was chaired by
our colleague, Representative Portman and Senator Kerrey.
I am very proud to have joined Representative Portman in cosponsoring
H.R. 2292, which has had strong bipartisan support in this House.
Chairman Archer and the Ways and Means Committee took that very good
bill and made it better. With strong support in this House and from the
President, this bill should move quickly to enactment.
The legislation before us marks the first fundamental reform of the
IRS in nearly half a century. It will bring a new structure to the IRS,
a structure that is designed to change the way the IRS treats its
customers, the American taxpayers.
The problems at the IRS are familiar--billions of dollars squandered
on a bungled computer modernization effort, telephones unanswered,
taxpayers too often treated with disrespect or suspicion. These
problems have not emerged recently--they are not the legacy of one
administration, but of decades. These are not the problems of
individual employees. In fact, the employees of the IRS have come
forward to help us understand the problem, and they have helped us
craft the solution today.
This administration, and particularly Secretary Rubin, has been more
attentive to the problems of the IRS and more dedicated in seeking
solutions than any in recent years. Secretary Rubin has made important
changes in the management of the IRS, and those efforts have begun to
show results.
But much more remains to be done. Congressional action is needed in
order to ensure that reform at the IRS does not depend on any
particular individual or administration.
The solution proposed in this bill is the creation of an oversight
board that will bring private sector expertise in the areas where the
IRS needs it most. The creation of this board, with a real role in the
planning and oversight of the strategic plans, major reorganizations,
and the budgets of the IRS, is a most important element in bringing
reform to this troubled agency. The board is a permanent entity that
will provide continuing oversight of the IRS.
[[Page H10024]]
IRS reform requires not just a new management structure, involving a
partnership between the board, the Secretary, and the Commissioner. It
will also require improved performance by those of us in Congress.
Legislative oversight of the IRS is too unfocused, with too many
masters and not enough coordination among committees. The bill attempts
to bring some order and structure to the current system. Over the long
run, we can't build an IRS that serves the American people unless we
write a Tax Code that the IRS can explain and the people can
understand.
This bill takes the first step toward tax reform. The bill does not
reform our Tax Code, but it reforms the way we collect revenues. Reform
of the practices of the IRS will make it easier for us to concentrate
on the underlying problems in the Tax Code itself.
A big part of the problem with the IRS is the agency's inability to
provide taxpayers with accurate information regarding their tax status.
This simply has to stop, and this bill will help.
Our tax system is based on voluntary compliance. More than 80 percent
of Americans pay their taxes without dispute. An IRS that can answer
taxpayer's phone calls, and provide accurate, reliable information,
will help increase voluntary compliance.
For the overwhelming majority of Americans, who abide by the law and
pay their taxes, the IRS should stand for ``Information, Respect, and
Service.'' Abusive collection practices must become a thing of the
past. At the same time, the IRS must become a more effective agency at
enforcing the law against those who seek to escape their legal
obligations.
In addition to the governance and oversight provisions, the bill
contains a new set of provisions to be added to the Taxpayer Bill of
Rights. The provisions address many problems that taxpayers have
encountered in dealing with the IRS, and their enactment will help
solve those problems.
I would add, however, that the broader objective of this bill must be
to change the culture of the IRS to make it a taxpayer-friendly
organization so that future Taxpayer Bills of Rights will not be
necessary.
Mr. Speaker, the Internal Revenue Service is charged with the vital
task of collecting the revenue needed to fund the basic and essential
operations of Government. When the IRS is mismanaged in ways that
create fear and anxiety among taxpayers, the result is to undermine the
confidence of the American people in their Government. The purpose of
this legislation is to reform the IRS so that we can begin to restore
that badly damaged confidence.
Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentlewoman from
Ohio [Ms. Pryce].
Ms. PRYCE of Ohio. Mr. Speaker, I thank the chairman for yielding me
this time.
I rise in strong support of this bill. I congratulate the chairman,
and I congratulate also my colleague, the gentleman from Ohio [Mr.
Portman], for all the hard work and dedication that he has brought to
this issue and, with him, the gentleman from Ohio [Mr. Traficant] who
has long championed this cause and kept our feet to the fire.
It should not be difficult to convince any of my colleagues in this
body that the IRS needs to be reformed. Each and every one of us
provides case work to our constituents, and we have all heard the
numerous, tragic horror stories about how the IRS has unfairly treated
honest, hard-working taxpayers. I could go on and on and enumerate
those stories, but I do not have to; we have all heard the same ones.
Mr. Speaker, no one here is claiming that H.R. 2676 is a panacea for
our ailing tax system. It does not abolish the IRS or scrap the Tax
Code, as many of our constituents would like. But until we do that, and
we will do that, this bill takes a step toward installing a modicum of
fairness into a system for those who are simply forced to comply with
the Tax Code's painful provisions.
Mr. ARCHER. Mr. Speaker, I yield such time as he may consume to the
gentleman from Michigan [Mr. Camp].
(Mr. CAMP asked and was given permission to revise and extend his
remarks.)
Mr. CAMP. Mr. Speaker, I rise in strong support of H.R. 2676, the
Internal Revenue Service Restructuring and Reform Act of 1997. Our bill
boils down to one simple fact--the taxpayer should be treated like a
customer, not a criminal. Shouldn't a customer be able to expect an
answer from a telephone hotline? Well, the General Accounting Office
found that in 1996, only 21 percent of calls to the IRS were even
answered. One-half of the 22 percent error rate on paper 1040 forms is
due to IRS employee error--IRS employees inputting the wrong numbers
and data. If the IRS were a private company, it would have gone
bankrupt years ago. H.R. 2676 is an important first step in reforming
our tax system. It focuses on three things: first, we shift the burden
of proof to the IRS. In the United States, you're considered innocent
until proven guilty. But not with the IRS--the taxpayer bears the
burden of proving himself innocent. Our bill changes that.
Second, we give taxpayers the right to sue the IRS for damages caused
by negligence, and other important rights like protections for an
innocent spouse whose ex-husband or ex-wife engaged in tax abuse.
Finally, we bring new thinking and a more customer-oriented culture to
the IRS, with a private board to give direction and leadership to the
IRS.
The bill we are debating today is the first step. The bigger problem
is a tax code gone wild, full of complexity and ambiguity. That tax
code, with over 17,000 pages of IRS laws and regulations, leads to many
of the problems the IRS faces today. With 480 tax forms and 280 forms
to explain the forms, its no wonder the taxpayer is often confused.
Businesses spend on average each year 3.6 billion manhours filling out
and complying with tax forms. American individuals spend 1.8 billion
hours filling out tax forms. That is simply unacceptable. I look
forward to continuing our work of reforming our tax system.
Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentlewoman from
Texas [Ms. Granger].
Ms. GRANGER. Mr. Speaker, I rise today in strong support of the IRS
Restructuring and Reform Act of 1997. This simple proposal will help
make the IRS more efficient in its operations and more accountable to
its boss, the people.
Recent hearings in the Senate have only confirmed what millions of
Americans have always known, the IRS is outdated, out of touch, and out
of control. Today we can bring to a vote two simple changes to the way
the IRS does business. These are not radical changes. They are
reasonable steps toward accountability and fairness.
First, this bill will put an oversight board of citizens in charge of
reviewing the IRS. In our system of checks and balances, this is a much
needed and long overdue check on the IRS.
Second, this bill will bring the IRS into the American way of dealing
with the American people. We all know that our criminal justice system
tries to ensure fairness by represuming that the accused are innocent
until proven guilty, so why is it the IRS files charges against you or
your company, you are considered guilty until proven innocent? In other
words, a common criminal is presumed innocent until proven guilty when
he has his day in court but the rest of us are guilty until proven
innocent in Tax Court. Today we can change this, Mr. Speaker. Let us
give the taxpayers the benefit of the doubt and the tax collectors the
burden of proof.
Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentleman from
Pennsylvania [Mr. English], a respected member of the Committee on Ways
and Means.
Mr. ENGLISH of Pennsylvania. Mr. Speaker, I thank the chairman for
yielding me the time.
It is stunning, but the IRS is the only place in the American system
of law where a citizen is guilty until proven innocent. Traditionally,
the taxpayer, when notified by the IRS that his tax payments failed, in
their view, to satisfy his tax obligation, carried the burden of proof
in demonstrating that his tax payment is accurate. The presumption is
for the IRS and against the taxpayer. In my view, this is just plain
wrong.
This legislation addresses that issue. This legislation, which is
based on the recommendations of the Committee on Ways and Means,
Subcommittee on Oversight, creates 28 new taxpayer rights essential to
restoring to the individuals a sense of fairness in their dealings with
the IRS. In my view, the most important of these is a shift in the
burden of proof from the taxpayer to the IRS in any court proceedings
where factual information is disputed.
Let me be clear about this. The taxpayer is still required to
cooperate. The taxpayer is still required to provide the information
which is in the taxpayer's control. But those taxpayers who do
cooperate and who provide all the necessary information see a shift
back in an appropriate way in the burden of proof. From my standpoint,
this will dramatically restore fairness in this situation.
Also, H.R. 2676 creates an independent citizen board to hold the IRS
accountable for change. The IRS sees a
[[Page H10025]]
variety of new taxpayer rights, including a right to sue the IRS for
negligence, a right to know when you are being audited and why, and
expanded rights for citizen spouses.
This legislation is so important to move us forward to change the
system, to change the IRS in a way that I think is very fundamental. I
support this legislation. I am excited about it. I appreciate the
chance, Mr. Speaker, to rise in support of it.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Texas [Mr. Green].
(Mr. GREEN asked and was given permission to revise and extend his
remarks.)
Mr. GREEN. Mr. Speaker, I thank my ranking member of the Committee on
Ways and Means, not only for the time this morning but also for the
effort on this piece of legislation. I know it is a very bipartisan
piece of legislation because about 2 weeks ago the President agreed to
sign onto it. Even before that, there were a lot of Democrats who were
interested in the issue, particularly shifting of the burden of proof,
cosponsors of a bill by a Democratic Member, our colleague, the
gentleman from Ohio [Mr. Traficant].
The bill is a good effort because, one, it transfers the burden of
proof to the IRS and again makes it fair for the taxpayer that they
would know, going into the Tax Court, that the IRS has to show that
someone is actually violating the law on taxes.
Also, I think it is important because the President will continue the
appointment of the commissioner. Even though we have an advisory board
with some authority, we need to have an elected official. With the
President being the one that does it with authority over the IRS, we do
not need to delegate that to an appointed board because so often in any
level of government, whether it be Federal, State, or even local
government, the elected official needs to have the final version, the
buck stops at the office of the President. And I think this is good
because it leaves that authority in appointing the IRS commissioner
with the White House and with the person, whoever the President may be.
That is important.
I think because of the hearings in the Senate last week or over the
last 2 weeks, again, it is not something new. I know the gentleman from
Texas [Mr. Archer] knows it, a long time member of the Committee on
Ways and Means, knows that this issue will, if we address it today, 2
years from now we may have to do it again. That is the way Government
works. We try and correct problems now, and we will fix them again if
we have to, whether it be next year or the year after.
That is why Congress is in session, to correct problems for the
people that we represent. That is why I think this bill is a good bill.
I hope we can pass it both through the House and Senate and get it
signed by the President.
Mr. PORTMAN. Mr. Speaker, I yield 1 minute to the gentleman from
South Dakota [Mr. Thune].
Mr. THUNE. Mr. Speaker, I want to thank the chairman of the full
committee and the gentleman from Ohio [Mr. Portman] for the hard work
that they have done on this important issue.
When this first started being debated, a lot of the liberal cynics
out there said that it is just one of those things that the Republican
leadership is doing to drum up support among their base. Then they
started hearing the stories, and as more and more of the stories
unfolded, people started believing we have a problem in this country
with respect to the IRS.
This is a first bold, dramatic step, I think, in what I hope will be
a long journey that will end up with reforming the Tax Code, which is
at the crux of what our problem is in this country. But this proposal
today makes important reforms that, for the first time in 45 years, we
are doing something to reform the IRS and giving citizens, the people
who have to pay the taxes, more input into this process.
I think it is an important, as I said, first step which allows for
more input at the grass roots level for the people who have to abide by
the tax laws that we make in this country. I hope it will be the first
step in what will be a long journey toward reforming the Tax Code in
this country. I am delighted to see the bipartisan support for this. I
think that we will pass it with a huge vote and hopefully get on with
the business of reforming the Tax Code.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Rhode Island [Mr. Weygand].
(Mr. WEYGAND asked and was given permission to revise and extend his
remarks.)
Mr. WEYGAND. Mr. Speaker, I want to thank our ranking member, the
gentleman from New York [Mr. Rangel], and the gentleman from Ohio [Mr.
Portman], and the chairman of the Committee on Ways and Means for
bringing this before us.
As a Democrat and as a former small business owner, I can tell my
colleagues, the people that are out there for this kind of reform are
begging for this reform. This is a wonderful, very prospective, very
proactive kind of legislation that will help many people.
I remember many of my colleagues in the small business community
talking about the problems they had with the IRS. These are people that
are solid citizens, people that are paying their taxes and that, when
an IRS agent walks into their office, all of a sudden they become
guilty without ever having a chance to prove their innocence. They have
to go out there and actually reverse what we have considered for many
years the basics of the United States justice system, and that is, you
are innocent until proven guilty.
One small business owner came to me and said, an agent came into my
office one day unannounced, requested of me to write out a check for
$2,000, wanted a copy of the form that I filed with the IRS. And I
grabbed all my papers, I put them all together, and I felt awkward in
front of all my employees, he said, I had to go down to the IRS office.
When I got down there, I showed them a copy of the form that I had
filed on time, I showed them a copy of the check that I had paid with
their stamp on the back side, yet they went through that entire record.
I felt like a criminal when I was simply just trying to do business the
proper way and pay my taxes on time.
This bill will change that. This will make sure that the honest
citizen, the citizen that is out there, is going to have a fair chance.
It will not give up any of the rights that they presently have under
the present jurist system, and it will give them the kind of reform
that we need, not because we are Democrats or Republicans but because
we are honest people that believe in paying our taxes, but we also
believe we should have a fair shake.
I applaud the ranking member. I applaud the chairman. This is long
overdue. This is something we all should support. I encourage the
support of all my colleagues.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Georgia [Mr. Collins], a colleague of mine on the Committee on Ways and
Means.
{time} 1215
Mr. COLLINS. Mr. Speaker, I thank my colleague the gentleman from
Ohio [Mr. Portman] for yielding me this time and for his hard work in
this area of restructuring the IRS.
Since being in Congress for the last 5 years, I have had a lot of
inquiries from constituencies about problems they have had and told me
about experiences they have had with IRS. Just recently, I held a
townhall meeting in Columbus, GA, where we invited in some of the
constituency to talk about some of their personal experiences and also
to have some input and ideas as to how they felt like the IRS could
better handle their situation.
It was a very enlightening townhall meeting, one of the best we ever
held. But it was also one that did not come to bash the IRS, it just
came with ideas and experiences and some suggestions. We even had an
accountant in that talked about the IRS, and not in a bad way, but in a
way that he felt would be constructive as we put together this bill to
restructure the IRS.
Also, he mentioned the complexity of tax codes and how the complexity
of the tax codes also is causing a lot of problems, not only for our
constituency, but also for the Service itself that has to administer
the collection of funds that we use to operate this Government.
We are taking this from the top down, looking at the management of
the IRS and how the management is structured. Hopefully, that will have
a
[[Page H10026]]
change in attitude all the way through the Service, all the way down to
those who answer the telephone, oftentimes after going through long
steps of different types of answering services to get to a real live
person to talk to.
But we have hopes that that attitude will change and that our
constituency will be better handled and better served through our
representatives at the IRS. Also, as mentioned by several people who
were not at the meeting but have spoken to me personally about the IRS
and about the employee and the attitude and structure comes the
suggestion that we also need to look at how we hire, the hiring
practices at the IRS, as well as other areas of the Government, and
that we hire people who are competent, who are dedicated to serving the
individuals in the constituency and not just hiring people to fill
slots.
I fully support restructuring the IRS.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Pennsylvania [Mr. Coyne], who served on the IRS restructuring
committee. He has made such a great contribution to getting this bill
to the floor.
(Mr. COYNE asked and was given permission to revise and extend his
remarks.)
Mr. COYNE. Mr. Speaker, I rise today in support of this legislation,
which will make important reforms in the operation and management of
the Internal Revenue Service.
There is broad consensus on the need for significant changes in the
IRS operation and management. The vast majority of the provisions of
the McCrery-Portman-Cardin bill are noncontroversial. There has been
disagreement, however, about one provision in an earlier version of
this bill, and that is whether an oversight board composed primarily of
private sector appointees should be given substantial control over the
agency and the IRS Commissioner, himself or herself.
Negotiations between the administration and Congress over the past
few months produced a compromise in which the President retained the
authority to appoint and fire the IRS Commissioner and in which the
oversight board and the administration would each submit an IRS budget
to Congress.
As a result of these changes, H.R. 2676 was reported out of the
Committee on Ways and Means with broad bipartisan support. I want to
commend Secretary Rubin and the members of the Committee on Ways and
Means for all of their hard work on legislation over the past few
months.
I believe that this bill, if enacted, taxpayers will experience a
fairer, more efficient and more responsive IRS in the coming years. I
urge support for H.R. 2676.
Mr. Speaker, I rise today in support of this legislation, which will
make important reforms in the operation and management of the Internal
Revenue Service.
When I was appointed to the National Commission on Restructuring the
IRS, I was well aware of the problems at this agency. As a member of
the House and Ways and Means Committee, I had sat through many hearings
on IRS reform over the years. There was, in fact, a very broad
consensus among Ways and Means Committee members and members of the IRS
Restructuring Commission on the need for significant changes in IRS
operations and management.
We all agreed on the need for greater flexibility linked with greater
accountability, as well as greater reliance on outside sources of
expertise and technological know-how. The vast majority of the
Commission's recommendations reflected this broad consensus.
There was disagreement among Commission members, however, about one
recommendation in particular--whether an oversight board composed
primarily of private sector appointees should be given substantial
control over the agency and the IRS Commissioner. The majority of
Commission members supported creating a board of directors that would
have the authority to hire and fire the IRS Commissioner, and which
would approve the agency's budget and strategic plans. A number of
Commission members, myself included, thought that such a change would
have the unintended effect of actually reducing the accountability of
the IRS. We also believed that investing the authority over the IRS
budget and strategic planning in a board dominated by private sector
individuals could raise serious questions about conflicts of interest
between board members public responsibilities and their private sector
employers' interests.
As the legislation introduced by Senator Kerrey and Representative
Portman, which reflected the Commission's recommendations, was
considered by the Ways and Means Committee, public discussion of this
bill focused on this one controversial provision in the bill--the issue
of what authority the oversight board should have. The vast majority of
the provisions in the Kerrey-Portman bill were noncontroversial.
Negotiations between the administration and Congress on the powers of
the oversight board continued almost until the Ways and Means Committee
markup of this bill began, but these negotiations eventually produced a
compromise in which the President retained the authority to appoint and
fire the IRS Commissioner, and in which the oversight board and the
administration would each submit an IRS budget to Congress. As a result
of these changes, H.R. 2676 was reported out of the Ways and Means
Committee with broad bipartisan support.
I believe that enactment of this legislation will improve IRS
operations and management significantly. The bill contains a number of
important provisions, including language expanding congressional
oversight and measures intended to promote electronic filing of tax
returns over the next 10 years. The bill also includes a taxpayers'
bill of rights section which contains a number of provisions to prevent
or discourage abusive behavior by IRS employees, to clarify and codify
the protections available to taxpayers in proceedings with the IRS, and
to provide relief for innocent spouses of tax cheats.
In closing I want to make one additional point. In the course of
debate over this legislation, many Members have succumbed to the
temptation to bash the IRS. I think that such attacks are unfair,
inappropriate, and irresponsible. Clearly, there have been problems at
this agency, but it is important to point out that the IRS
Restructuring Commission found no evidence suggesting that those
abusive practices were widespread--or even very common.
The IRS is responsible for enforcing the compliance of more than 100
million taxpayers with a complex Tax Code. The agency processes over
200 million forms a year and administers gross receipts of roughly
$1\1/2\ trillion. The congressional hearings on IRS abuses produced
2,000 claims of IRS excesses nationwide. While no abuse is acceptable,
I think that we need to look at these cases in the context of the
agency's overall performance, which is impressive. Our income tax
system relies on voluntary compliance. Our compliance rate is over 80
percent. We have the lowest effective tax rate of any of the major
industrialized nations. I think that those facts should be considered
as well.
Finally, to the extent that the IRS went too far in certain cases in
seeking to maximize revenue, we should not place all of the blame on
the IRS. Congress has, in no small way, pressured the IRS to maximize
revenues--and Congress has insisted that IRS adopt the types of
performance measures that apparently drove IRS field offices to excess
in certain circumstances. In the end, Congress must tell the IRS how it
should balance the often competing concerns of productivity and
fairness.
I want to commend Secretary Rubin and Representatives Portman,
Johnson, and Rangel for all of their hard work on this legislation over
the last few months. I believe that if this bill is enacted, taxpayers
will experience a fairer, more efficient, and more responsive IRS in
the coming years.
I urge my colleagues to support H.R. 2676.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Louisiana [Mr. McCrery], a member of the Committee on Ways and Means.
(Mr. McCRERY asked and was given permission to revise and extend his
remarks.)
Mr. McCRERY. Mr. Speaker, I rise today to do two things. No. 1,
praise the IRS Reform Act that we will pass today; and No. 2, tell my
colleagues and the country that, while this is certainly a good bill,
it will offer only slight relief from the burden that the real culprit,
our Tax Code, places on our people and their work.
First the praise. This is indeed an excellent piece of legislation
constructed by two of the most able members of the Committee on Ways
and Means, the gentleman from Ohio [Mr. Portman] and the gentleman from
Maryland [Mr. Cardin], and the gentleman from Texas [Mr. Archer], our
excellent chairman.
This legislation will make the IRS more accountable by creating an
independent oversight board. It would also establish several important
taxpayer rights, such as the ability to sue for legal fees when the IRS
is wrong and shift the burden of proof in tax court from the taxpayer
to the IRS. Finally, this legislation includes measures to ease the
transition to electronic filing of taxes, thus relieving some of the
burden on small businesses.
[[Page H10027]]
Mr. Speaker, the admonition is that this is not enough. As long as we
have the complex Tax Code that we have, no amount of IRS reform will be
sufficient to relieve the costly burden of compliance. Let me share
with my colleagues a few numbers.
Thirty-six. That is the number of times the paperwork received each
year by the IRS would circle the Earth. Five and a half million. That
is the number of words in our Tax Code and the regulations. It is
nearly seven times longer than the Bible. Five billion, 400 million.
The number of hours Americans spent complying with Federal tax forms.
One hundred fifty-seven billion. That is the number of dollars spent by
the private sector to comply with income tax laws.
Mr. Speaker, I am glad we are going to pass this badly needed IRS
reform bill. It is a great piece of legislation. But, Mr. Speaker, we
ought not to leave here today thinking that we have done all that needs
to be done to relieve our citizens of the crushing burden our current
tax system places on them. That burden will not be lifted until we
throw the Tax Code in the trash can and start all over, until we create
a fairer, simpler tax system for everyone.
Mr. RANGEL. Mr. Speaker, I yield myself 30 seconds to respond to the
previous speaker.
I want to agree with him that this Tax Code that we have is very
complicated, and I think that not only taxpayers, but people on both
sides of the aisle would like to do something with it. But he should be
reminded that, for the last 3 years, his party really has been in
charge of the Tax Code. So I hope he is proud of what they have
produced during these 3 years. And every Democrat would like to join
with him in trying to reform it.
Mr. Speaker, I yield to the gentleman from Tennessee [Mr. Tanner].
(Mr. TANNER asked and was given permission to revise and extend his
remarks.)
Mr. TANNER. Mr. Speaker, I want to thank the gentleman from Texas
[Mr. Archer] and the gentleman from New York [Mr. Rangel] and the
gentleman from Ohio [Mr. Portman] and the gentleman from Maryland [Mr.
Cardin] and others who worked so long, and I want to thank the
gentlewoman from Washington [Ms. Dunn] in a few minutes.
But let me just say at the outset that the tax man has been and will
continue to be an easy target since Biblical times. The fact is that
the function of the IRS is necessary. Its sole purpose is to collect
taxes. No one likes to pay taxes, so their anger is projected upon
those who do the collecting.
We have to have taxes to fund the vital and necessary functions of
the Government, defense, interstate highways, food inspection, public
health, FAA, and other missions that only the Government can and must
do for all of us. We cannot change the function or the nature of the
work the IRS performs, but we can change the approach.
The IRS has not been reformed in over 40 years. Currently, it seems
to many of us, that the emphasis of the IRS is on collection at all
costs by any means necessary. As a result, the IRS is antiquated, less
responsive, more aggressive with a persona akin to private-sector
collection agencies. The IRS needs a makeover to reshape their image,
and they need fresh, new, innovative ideas and new vision. We seek to
do that today.
We need to transform the IRS from a collection agency to a taxpayer
customer-oriented agency which values individual taxpayers and citizens
and treats them with respect and dignity and not just as a number.
To accomplish this, many of us believe we need to look to the private
sector for vision and direction. This bill accomplishes that objective.
Also, included in the measures are an expanded taxpayers bill of
rights, which the gentlewoman from Washington [Ms. Dunn] and I
introduced to end fishing expeditions, curb IRS summons authority to
provide greater protection for taxpayer information, and to require the
IRS to demonstrate just cause to pursue an audit.
Mr. Speaker, I urge support for H.R. 2676.
Mr. PORTMAN. Mr. Speaker, I yield 30 seconds to my friend, the
gentleman from Louisiana [Mr. McCrery].
Mr. McCRERY. Mr. Speaker, I just want to use 30 seconds to respond to
my friend the gentleman from New York [Mr. Rangel], who pointed out
that Republicans have been in control for the last 3 years.
That is true. Democrats were in control for 40 years prior to that,
and most of the complexity was built under their tenure. However, I do
hope that the gentleman from New York [Mr. Rangel] will join with me
and others who agree that the Tax Code is too complex and promote
overall tax reform for this country. It is in all of our interests to
do that.
Mr. RANGEL. Mr. Speaker, I yield myself 30 seconds.
We are trying desperately hard to keep partisanship out of this. But
if it is going to take my colleagues 37 more years to simplify the tax
system, then I do not think the taxpayers are going to get much relief.
It just seems to me that it should not take 3 years to get what we
would want done and it would be more like 3 months. So let us say next
year we are going to do it, we are going to come up with something and
in a bipartisan way work together with the way the gentleman from Ohio
[Mr. Portman] has found so easy to work with we Democrats on this bill.
Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from North
Carolina [Mr. Etheridge].
Mr. ETHERIDGE. Mr. Speaker, I thank my friend the gentleman from New
York [Mr. Rangel] for yielding me the time.
I rise today in support of this bill to reform the IRS service. I
want to thank my friend the gentleman from New York [Mr. Rangel], the
gentleman from Maryland [Mr. Cardin] and the gentleman from Texas [Mr.
Archer] for their leadership in this important issue.
When the people of the Second District of North Carolina sent me to
this body, they wanted an advocate, someone who would stand up for them
in the people's House. And I am pleased to support this piece of
legislation on behalf of the people of my district. Working families in
North Carolina and across this country face enough challenges in their
lives without the added burden of the things we have heard about in
recent months of certain members of the IRS who are out of control. If
a criminal has a right to be presumed innocent before the courts, so
should the American taxpayers.
The Congress has taken a strong bipartisan step forward in working
for American families and can do it by enacting the first comprehensive
reform of the IRS since 1952. The IRS reform bill, H.R. 2676, is based
on an aggressive 3-point plan, which shifts the burden of proof from
the taxpayer to the IRS, creates 28 new taxpayer rights, and overhauls
the management of the agency through the creation of an independent
board.
Mr. Speaker, I would urge Members on both sides of the aisle to move
forward for the hard-working families of America.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Washington [Ms. Dunn], who added some valuable provisions in the
taxpayer rights section of this legislation.
Ms. DUNN. Mr. Speaker, I must say we are delighted that in only 3
years of holding the majority, we have been able to put together a
bipartisan piece of legislation that shows real listening to our
constituents and results in upgrading and making much more positive the
IRS.
Throughout my tenure in Congress, I have heard from thousands of
constituents who have talked to me about numerous problems they have
had with our system of taxation and particularly with the IRS. The
theme has been the intrusive and sometimes abusive interference of the
Internal Revenue System when taxpayers were only trying to be honest.
One of my constituents, Mr. Speaker, was told by the IRS that his
wife was dead even though he produced his wife and her doctor before a
local IRS agent. Another constituent, a local businessman, was forced
to undergo a costly, long-lasting audit by the IRS because of a
supposed discrepancy of 65 cents, only to find out that the IRS was
wrong.
This agency operates too often, Mr. Speaker, under the belief that
taxpayers are trying to cheat the Government. The bill that we propose
today is the first step in providing citizens
[[Page H10028]]
greater tax fairness, protections from the abuse of the IRS. Our bill
includes provisions proposed by the gentleman from Tennessee [Mr.
Tanner] and myself for an increased confidentiality protection for
taxpayers and for the tax advice that they receive from their advisers.
Currently, the IRS can subpoena even the thought process of a taxpayer
unless that taxpayer is represented by an attorney.
Our bill also reins in the lifestyle audits that can currently be
initiated by something as simple as a new car in the driveway unless
there is reasonable indication of unreported income. So no more fishing
expeditions.
Mr. Speaker, while the language in the bill is not as broad as we
proposed, and in our particular proposals the gentleman from Tennessee
[Mr. Tanner] and I will continue through this bill into the next year
to ensure that every taxpayer is afforded confidentiality protections
currently enjoyed by only those who can afford attorneys and those who
through this new legislation can afford an accountant.
We intend to make it clear to the IRS and the courts that Congress
does intend for them to be limited to the scope of their information
gathering ability. I encourage support of this bill.
{time} 1230
Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from Ohio
[Mr. Strickland].
Mr. STRICKLAND. Mr. Speaker, I was walking down the sidewalk in a
small town in my district recently, and an older woman in a wheelchair
called to me. I went over and sat down and talked with her for a while.
During the course of that conversation, she said to me, ``Congressman,
I wish you would just chew up the IRS and spit it out.'' I asked that
sweet, gentle, older woman why she felt as strongly as she did, and she
said, ``I believe the IRS contributed to my husband's death because
they hounded him,'' and she said, ``It didn't bother me as much as him
because I'm a tough old bird.''
I walked away thinking that it is sad that any American would ever
feel that way about an agency of our Government. And so I came to the
floor today mostly to say thank you to my Ohio colleague [Mr. Portman]
for all the work he has done on this. I know many have worked on this
legislation. This may be the most significant piece of legislation
directly affecting the lives of American citizens that this Congress
deals with.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
California [Mr. Herger], a member of the Committee on Ways and Means.
Mr. HERGER. Mr. Speaker, today I rise in strong support of H.R. 2676,
the IRS Restructuring and Reform Act. In town hall meetings throughout
my northern California congressional district and wherever I go, I hear
from taxpayers who are fed up with IRS abuses and who are demanding
Congress to take steps to reform this agency. Today we move forward
with strong bipartisan legislation that will not only reform the way
the IRS does business, but will also restructure the agency to help
assure that taxpayers are better protected from IRS abuses in the
future.
This legislation makes a number of important changes. First, it
shifts the burden of proof from the taxpayer to the IRS in disputed tax
cases that reach U.S. Tax Court. No longer will taxpayers be considered
guilty until they are able to prove themselves innocent.
Second, this bill expands taxpayer rights by providing citizens 28
new legal protections against the IRS. When taken together, these 28
new taxpayer rights will shift the IRS's primary focus from heavy
enforcement to customer service.
Finally, this bill will establish a more accountable IRS oversight
structure. This new board, which will bring to the IRS outside
expertise, will assist in fundamentally changing the culture and
management of the IRS.
The gentleman from Texas [Mr. Archer], the gentleman from Ohio [Mr.
Portman] and the gentleman from Maryland [Mr. Cardin] are to be
commended for their efforts on IRS reform. I would urge my colleagues
to support this common-sense yet long overdue legislation.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Wisconsin [Mr. Kleczka], a member of the Committee on Ways and Means.
Mr. KLECZKA. Mr. Speaker, I thank the gentleman from New York for
yielding me this time to speak on the IRS Restructuring and Reform Act
of 1997. As a member of the Committee on Ways and Means, I was pleased
that we were able to formulate a bipartisan bill that will benefit all
American taxpayers.
I must say that I have had several conversations with the gentleman
from Maryland [Mr. Cardin] and also the gentleman from Ohio [Mr.
Portman] on the bill, and I was quite surprised that we were able to
work together to come to this day.
One of the most difficult hurdles in formulating the legislation was
determining the structure and responsibilities of the oversight board.
I had strong reservations and concerns about the IRS Restructuring
Committee's recommendation that the board made up of private
individuals have the power to hire and to fire the IRS commissioner.
Fortunately, a workable compromise was made that gives the oversight
board significant input into the workings of the IRS, but keeps the
appointment of the Commissioner in the hands of the President.
This bill also contains some important provisions protecting the
rights of taxpayers. For example, innocent spouses will now have an
easier time of attaining this protective status. In addition, attorney/
client confidentiality privileges are being extended to protect
taxpayers who choose to confide with their certified tax preparer,
their certified public accountant. Finally the burden of proof for
taxpayers who cooperate in IRS proceedings will now fall to the IRS
should the case go to court.
These are some of the changes that should make dealing with the IRS
much easier. Today we are moving forward with the legislation that
sends a strong message to all our constituents. We have heard your
frustrations with the IRS, and we are taking actions to right these
wrongs.
Mr. PORTMAN. Mr. Speaker, I enjoyed working with the gentleman. We
did have a lot of good, constructive conversations, and the gentleman
helped to make it a better bill.
Mr. Speaker, I yield such time as he may consume to the gentleman
from Texas [Mr. Paul].
(Mr. PAUL asked and was given permission to revise and extend his
remarks.)
Mr. PAUL. Mr. Speaker, I rise in support of this legislation. It is a
step in the right direction. Get rid of the Code, get rid of the IRS,
and get rid of the income tax.
Mr. Speaker, I rise in tepid support of H.R. 2676, the Internal
Revenue Service Restructuring and Reform Act of 1997. As most recently
evidenced by Senate hearings, taxpayers across the country are
clamoring for real reform. Yet, instead of delivering genuine reform,
the Congress delivers an Oversight Board made up, in part, of experts
from the fields of management, customer service, Federal tax laws, and
information technology--in other words, more guards to oversee the
watchdogs.
I can support this bill because it partially shifts the burden of
proving guilt from the taxpayer to the Government. Innocent until
proven guilty is a tenet that permeates any free society but has
somehow been ignored with respect to the Internal Revenue Service's
imposition of criminal penalties. Additionally, this bill makes
political audits by executive branch officials felonies punishable by
fine and/or imprisonment.
While these small steps are laudable, in light of the massive nature
of the problem, the complexity of the Tax Code, and the oppressive
nature of the excessive taxation under which we are currently so
heavenly burdened, this bill is but token reform. The current taxation
problem is rooted in the excessive spending by Government resulting
from a bad case of congressional activism under which the legislative
body has repeatedly overstepped it's article I, section 8,
constitutional powers.
No one likes to pay taxes--almost. The large majority of people in
any society enjoy the benefits that come to them through Government
programs, yet, essentially no one likes to have their taxes increased,
believing they are always on the short end of receiving benefits in
return. And this of course is true. The most people never get back what
is taken from them in the form of taxes.
Oliver Wendell Holmes, however, was different. He claimed he likes to
pay taxes saying: ``I like to pay taxes. With them I buy
civilization.'' In a more famous quote, Holmes said:
[[Page H10029]]
``Taxes are what we pay for civilized society.'' A more accurate
statement might be that taxes, especially if collected with the tactics
of the IRS, are what permits Governments to act in a most uncivilized
manner.
Teddy Roosevelt, during the Progressive era, 1902, appointed Oliver
Wendell Holmes, Chief Justice of the Supreme Court, a time during which
the ground work was laid for the modern welfare state later promoted by
Teddy's cousin FDR. And it was not too many years after the appointment
of Oliver Wendell Holmes to the Supreme Court that these progressive
ideas led to the establishment of the income tax, the IRS, and an
equally threatening organization, the Federal Reserve.
Frank Chadorow had a much better understanding of what the income tax
meant. ``Income taxation is in principle the worst of all forms of
taxation because it begins by asserting the prior right of the state to
all wealth.'' This principle can be applied to almost all taxes. A tax
on inheritance could be considered even worse since we accumulate
property and capital often with after taxed money. Since all taxes are
essentially a tax on productive effort, whether it be corporate tax or
even a sales tax, this principle is certainly accurate when the
revenues are used for redistributive purposes.
I see nothing wrong with the slogan ``taxation is theft,'' when the
revenues are used to transfer wealth or privilege from one group or
person to another. In spite of all the talk in recent months regarding
the method of taxation and the abuse by the IRS these basic principles
are not being discussed. There has been too much emphasis placed on the
taxing process rather than the philosophical principles that not only
endorse but encourage an abusive tax system.
The recent Senate hearings on IRS procedures however were very
beneficial in that they were reported by the major media and confirmed
what most Americans suspected. Probably the most outrageous
confirmation was that IRS agents did confess to a deliberate policy
directed toward the weak and the poor to intimidate and make examples
of them. Agents testified that the wealthy and the sophisticated were
generally left alone because they were more capable of defending their
rights. This is an outrage that should not be forgotten and should be
used as a strong motivation to eventually do something about our tax
system.
The fact the some citizens have even committed suicide over the
pressure of facing the tax collectors is something that should not ever
happen in the civilized society that Holmes claimed we were paying for.
Thousands of Americans are quite willing to pay the penalties and
excess tax without challenging the Government even when they know they
are right because the emotional and financial penalty of fighting the
IRS is too great.
For the last four decades it has become known to most Americans that
both Republican and Democratic administrations have been willing to use
the IRS, and for that matter other regulatory agencies, to punish their
political enemies. It seems that the current administration has refined
this technique to near perfection. It has been quite willing to attack,
through the Tax Code, those foundations and groups that oppose
Clinton's policies while ignoring the friendly ones.
If we indeed lived in a truly civilized society individuals would be
willing to come forth and reveal the Government's atrocities against
its own people instead of choosing to hide their identity. The fact
that IRS agents are hidden behind screens makes one think that they
believe they belong to an organization such as the Mafia and if
discovered they themselves would become a victim. It reminds me of the
horrible pictures that we see of our FBI, BATF, and DEA agents making
questionable raids on private citizens with stocking caps over their
heads. In a civilized and free society, Government agents would act as
our servants and not convey an appearance of a criminal element. But,
nearly two decades ago Milton Friedman asked ``When you sit across the
table from a representative of the IRS who is auditing your tax return,
which one of you is the master and which the servant?''
In light of recent revelations the administration was quick to defend
the IRS and explain the need for a strong collection agency. What else
could we expect? However, even the administration senses that the
public is on the verge of revolt and quickly added that certain reforms
would be necessary. Reforms suggested by the administration included an
advisory board, of course without clout, as well as making sure the IRS
offices were kept open for longer periods of time including Saturdays.
The advisory board would be used to advocate suspensions of seizure of
property when appropriate. Sure. When an agency of Government is acting
outside the law, i.e., the Constitution, while continuously making
numerous errors, then expanding their hours seems to me to only
compound our problem, not reduce them. Though I'm sure some Americans
will see this as a positive for the administration, hardly will this do
anything to help the problem.
Even the Republican proposal to have a private board with more clout
doesn't address the real problem. And another Taxpayer's Bill of Rights
won't help either. If a private board is being appointed, what would
keep the establishment from appointing friendly people to the board? I
can't see where this would be any different from the IRS being
supervised by political hacks from the Treasury Department. This whole
notion that better service can be given to the taxpayer is a bit
preposterous. The fact that we call this the Internal Revenue Service
is an obvious misnomer. How can an agency of Government that sets out
to confiscate our wealth provide a service to us? It is just as
preposterous to refer to victims as customers. Taxpayers are no more
customers of an organization providing a service than the man in the
moon. This type of wording is nothing more than the newspeak of which
Orwell wrote. So far the reforms advocated by the administration and
the Congress will do nothing to solve our long-term problems.
Other more serious reforms have been suggested, such as eliminating
the current Tax Code and replacing it with a flat tax or a national
sales tax. Both of these proposals come up far short of dealing with
the real problem. Supporters of both proposals never touch the problem
of the Social Security, Medicare, flat tax of 17 percent which not only
is here to stay but will surely rise. Since these programs are sacred
no one can suggest that something should be done about them. But in
reality, as I have mentioned before, the Social Security and Medicare
tax is an income tax that is used for general revenues as the trust
funds are nonexistent.
When one adds the tax that the employer and the employees pays, which
is the real labor cost, each individual is paying 17 percent of their
income up to $65,000, which is a truly regressive income tax. If a flat
tax of 17 percent is added we are immediately at 34 percent and rising.
With a flat tax this high and with removal of tax exemptions for
everything, and especially our donations as well as our interest on our
houses, we are actually setting the stage for a much higher tax rate
which will make no one happy. Sure, there might be a little less
difficulty figuring out the code, a cost in and of itself, but if one
can save some money by having a complex code this could actually be
better than a simple code where we are forced to divvy up more to the
welfare state. Besides, the flat tax that is proposed has exemptions
for low income so immediately it is a flat tax after a certain amount
thus it is in reality a graduated tax. Businesses would still have to
deduct the expense of doing business prior to reporting their profits.
A national sales tax has also been bantered around as an alternative
to the income tax. Where it too has some advantages, reducing the
effects of the complicated Tax Code and making filling out our tax
returns easier, it also has many short-comings. First, nobody knows
precisely what rate would be require to pay all the bills. Some have
suggested 15 percent, others believe it will be over 30 percent, which
I am inclined to believe. The reason it's impossible to calculate is
that at a certain level of taxation there will be a motivation to avoid
the sales tax by expanding the underground economy.
The argument is made that the sale tax is a good way to collect
revenue because those who are ducking taxes like the drug dealers and
other criminals will be forced to pay the sales tax when they buy
luxury items. There is nothing automatic about that assumption.
Besides, IRS agents, who may be called something else, will be required
to monitor every small business and every small profession to make sure
that the revenues are collected and deposited in the Treasury. I can
imagine that many small businesses and entrepreneurs working at home
will have every bit as many records to fill out as they do now with
their tax return. Obviously, reforming the tax collecting system to
make productive Americans happy is much more difficult than meets the
eye. Many Americans and Washington politicians are overly optimistic
about changing the method of collection as the solution to the problems
we face with our over exuberant revenuers.
Changing the collecting system, if the goal is to pay the bills and
avoid a deficit, does nothing to solve the real problem of
disenchantment with Government and the disgust with high taxes as well
as with the prodding Federal bureaucrats who invade every aspect of our
lives.
What is really upsetting most productive Americans is the fact that
they have to work until July 3, before they get to keep any of their
earnings for themselves. It's ironic that July 4th is our first day of
independence from all taxation. This does not even take into
consideration the inflation tax, i.e., the loss of value of our
purchasing power, as our Government continues to diminish the value of
the dollar.
The inflation tax is something that is much more difficult to
understand and yet is the tax of last resort of all authoritarian
governments.
[[Page H10030]]
We are now at the point where the American people are starting to rebel
against any increase in taxation. In spite of the fact that we cannot
pay our bills we were actually able, for political reasons, to make a
token cut in some taxes last summer. This sill not prevent our
Government, acting through the Federal Reserve, from creating new
credit when necessary thus diminishing the value of the money already
held. On this tax, however, because it's difficult to see and the
victims harder to find, the measurement is elusive. For this reason I
am predicting that when push comes to shove with the budget it will be
the ultimate tax used on the American people in an effort to continue
to finance the welfare/warfare state. The real tragedy of this is that
perceptions of the value of the dollar make it almost impossible to
predict who the victims are going to be and when the value of the
dollar will suddenly change. For instance it was quite clear when the
recent devaluation hit the Mexican Peso it occurred suddenly and
sharply and the victims were the middle-class and the poor throughout
the country. But it was not gradual, steady and logical because the
inflation tax frequently comes in sudden bursts.
The attention that token reforms are getting today, whether it be
reforming the current system and devising a friendlier IRS or talking
about a flat tax or a sales tax, actually is more of a distraction than
a constructive debate. I am not saying this is intentionally done or of
no value but I think that is the result of the current discussion.
The reason for this is that fundamentally and foremost it's not a tax
problem we face. The basic problem confronting us as a country is a
spending problem. Concentrating only on taxes, which is okay to a
degree, avoids the subject of the size of government and the reason why
the Government spends so much of the Nation's output. If we concentrate
only on taxes and we avoid the subject of the role of Government and
why the Government wants more of our money, we cannot and will not
solve the problem. The goal ought to be to shrink the size of
government and lower taxes. As bad as the income tax is on principle,
an income tax of 3 percent on all money earned would not cause a tax
revolt and most Americans would voluntarily pay their taxes. Even a
national sales tax of 5 percent would not prompt a hue and cry over the
tax system. The problem, of course, is that the Government is spending
way too much money and there is no serious effort to cut back.
Recent budgetary efforts in Washington indicates that there's not
much chance that the current Congress is going to do anything about
cutting back. The welfare state is alive and well. Even the National
Endowment for the Arts could not be cut, Clinton's health program is
being implemented by the Republican Congress, public housing money is
increasing, and just recently, in our Education Committee, a Republican
proposal supported by Democrats to increase national educational
expenditure for the purpose of promoting charter schools was easily
passed, although it authorized a new $100 million program.
As long as this attitude prevails on the spending side, Saturday
morning hours for the IRS and keeping telephone lines open 24 hours or
having a review panel or instituting a sales tax or a flax tax will do
nothing other than delay the serious discussion about reducing the role
of government in our lives, in our economy and in the world at large.
Supply side economics pushed by many during the 1980's argued
strenuously for lower tax rates with which I agreed. But the goal of
the supply siders was merely to stimulate the economy so that higher
revenues would flow to Washington--a bad motivation. It is possible
that with lower tax rate the economy would pick up but if the result
was higher tax revenues, these revenues should be used to further cut
taxes not increase expenditures. At the same time the supply siders
were pushing the lower tax rates for the purpose of increasing
revenues, they were advocating higher and higher budgets for the IRS to
enhance the ability of the tax collectors. The Reagan administration
was quite receptive to this principle believing that if a $1 billion in
additional funds was given to the IRS it promised to produce $17
billion more in revenues through the process of harassment,
intimidation and audit. Even this year the Treasury bill appropriation,
which contained the pay raise for the Members of Congress, had an
increase in the IRS budget of 9 percent giving them an increase of more
than a half billion dollars to do exactly what they have been doing for
decades. So, in the middle of the hearings on the Hill revealing the
outrageous tactics of the IRS, and at the same time the politicians
were propagandizing for tax reform, the large majority of Democrats and
Republicans were voting for a huge increase in the IRS budget to
continue the very process they were publicly condemning.
Today the atmosphere in Washington can be described as deceptively
optimistic. Many of those who were preaching cutbacks and austerity a
few years ago are claiming great victories with the accomplishment of a
balanced budget. This budget is not balanced regardless of what the
politicians are saying. Last year's national debt went up nearly $200
billion when the funds taken from the trust funds are considered.
Members are actually sitting around figuring out how to spend the
excess they expect over the next several years. What they don't
understand is that their projections of our future spending habits, the
tax revenues, interest rates, and the state of the economy are unknown
to them and quite frankly are going to be a lot different than their
optimistic projections.
All taxes are extracted from the productive effort of the people.
Whether the tax comes through an income tax, a sales tax, an
inheritance tax, a school tax, property tax, or whatever, this is the
method whereby the state confiscates the productive effort from the
people. Governments produce nothing. All governments can do is use
force to redistribute wealth and pay off their political cronies. The
name of the game is power. Power is achieved by the politicians through
the control of people's income through a taxing system as well as
manipulating the value of money. As Chief Justice John Marshall said:
``The power to tax is the power to destroy.'' It is not just a
coincidence that those who introduced us to the welfare state, the
Progressives of the early 20th century, believed both in the power to
tax as well as the power to inflate.
In our relatively free society where productive efforts still exist
and a profit motive remains, big government programs can be tolerated
and funded for long periods of time. But as time goes on the productive
ability of corporations and individuals is diminished as are all our
freedoms for personal freedom cannot long exist without economic
freedom. Today, we are living under conditions which encourage the
export of capital and the exporting of jobs while encouraging the
immigration of individuals who will do quite well living off our
welfare state. In spite of the euphoria now being expressed in
Washington, at the height of our so-called recovery, the conditions are
set for soon recognizing that productive efforts are being impeded by
our tax and regulatory system and there has been absolutely no serious
intent to change our spending habits. The welfare/warfare state is
moving briskly along and is being encouraged by the deceptive
pronouncements that our budget is balanced and all we need to do is
change the method by which we collect revenues.
We do not have a technical problem or an IRS code problem. We have a
problem in defining the proper role for government. As long as the
majority of the American people still believe it's in their best
interests to have a government that redistributes wealth and polices
the world, this crisis will continue to build. A proper sized
government would require minimal taxes and would be designed for the
protection of liberty and equal justice for all. We have come a long
way from those intentions of the Founders of this country, but we'll
soon face a crisis of confidence and be forced once again to decide for
ourselves just what kind of government we want and how much government
will tolerate. Let's hope and pray that those of us who believe in
limited government and maximum individual freedom will use the events
of the coming years to promote the cause of liberty and not just tinker
with the Tax Code. When that day comes the big tax debates will
probably be; should we have a 5-percent import tax or a 10-percent
import tax and we will not be dealing with a Federal income tax nor a
Federal sales tax at all. Moreover, we will not be concerning ourselves
with triffling reforms of a revenue agency which harasses our people
and eats out our substance. Let us hasten that day.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Arizona [Mr. Hayworth], a member of the Committee on Ways and Means.
Mr. HAYWORTH. I thank the gentleman from Ohio for yielding me this
time.
Mr. Speaker, I have heard from many of my constituents, but this
morning I heard from an Arizonan who made an indelible impression and
really brought a face to this debate, Mr. Speaker. His name is Bob
Brockamp. Bob's grandfather, Stan McGill, at age 93 several years ago
made a mistake in writing a check to the Internal Revenue Service. He
meant to write a check, Mr. Speaker, for $700. He added an extra zero.
$7,000. Other merchants and other entities with whom Mr. McGill had
dealt understood that he was having problems. Indeed, he was in the
stages of Alzheimer's disease, and they would say, ``Obviously there's
been a mistake in his remittance, we're sending back a significant
portion of that money.'' Just about every business he dealt with caught
that mistake, but the IRS, when it received a check for $7,000, kept
the money.
Mr. McGill passed away. Bob's mom received basically a threat from
the Internal Revenue Service. Even though
[[Page H10031]]
her late father had paid $7,000 more than he owed, the Internal Revenue
Service said to Mrs. Brockamp that his estate owed $1,000, and she
should pay it if she wanted to keep her home and personal property.
The Brockamps tried to fight this in court. They took it all the way
to the Supreme Court. The Supreme Court ruled 9 to 0, ``Gee, Brockamps,
you might be right on this morally, but you're incorrect legally
because the statute of limitations has run out.''
Mr. Speaker, one of the many great things we do in today's
legislation is to change the statute of limitations, indeed to remove
the statute of limitations or suspend that statute for those taxpayers
who are mentally and/or physically disabled and unable to understand
what they were doing. Sadly, it will not help Stan McGill, but it will
help thousands of senior Americans across the country. Support this
legislation. Let us make a move positively for America.
Mr. RANGEL. Mr. Speaker, we would not be talking about burden of
proof if it were not for the tenacity of the gentleman from Ohio [Mr.
Traficant]. Mr. Speaker, I yield 3 minutes to the gentleman from Ohio.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Ohio [Mr. Traficant].
The SPEAKER pro tempore (Mr. Pease). The gentleman from Ohio [Mr.
Traficant] is recognized for 5 minutes.
Mr. TRAFICANT. Mr. Speaker, I want to commend the Republican Party,
the gentleman from Texas [Mr. Archer], the gentleman from Georgia [Mr.
Gingrich], the gentleman from Ohio [Mr. Portman], and also along with
the gentleman from New York [Mr. Rangel] and the gentleman from
Maryland [Mr. Cardin] for this great bill. This is a great day. I want
to also commend the Republican Party for beginning the dialog to change
the Tax Code.
By the way, I would like to see us reduce income taxes in half and
couple it with a small sales tax, require a two-thirds vote to increase
it, and exemptions for poor people.
But let me say this today. In America, an American citizen accused
shall be considered innocent until proven guilty, and the accuser shall
carry the burden of proof in that matter. Where, ladies and gentlemen,
in God's name have the bureaucrats been able to seduce Congress over
the years to change that provision? If it is good enough for mass
murderers, it should be good enough for Mom and Dad, our taxpayers.
I come to the floor here today because I know the White House has not
signed off on this last provision. The Secretary of the Treasury
questions its revenue impact, and the other body still has some
reservations. I want the gentleman from New York [Mr. Rangel] to
imagine if we could travel back in time with all this technology, that
Members of Congress decided to go to Philadelphia and look into the
Founders. Mr. Madison leans over to Mr. Jefferson, he says, ``Great
stuff here, isn't it, Tom?'' And Jefferson says, ``Great day. Aptly
named the Bill of Rights, Mr. Madison. Do you agree, Ben?''
Ben Franklin says, ``Hey, don't let it be written that Ben Franklin's
not for this.'' Freedom of religion, freedom of speech, trial by a jury
of our peers, no search warrant without seizure. A great day. ``Do you
agree, Mr. Hancock?''
``I think it's great, but I think we should run it by George. Mr.
Washington?''
``Fellows, this is great, but what is it going to cost? What are the
revenue impacts? We better hire some accountants and score it.''
Unbelievable. We know George Washington never said that. The House of
Representatives must insist today to put the Bill of Rights back in the
Tax Code of the United States of America because if it was up to the
IRS, they would score the Bill of Rights, and, by God, we would not
have it.
Those IRS workers are not demons. We have created a monster. Most of
them are good people. But in America the people govern. It is time to
take our Government back. Today's vote is the most important vote we
will cast in that whole process.
I thank the gentleman from Ohio [Mr. Portman] for working hard to
include my provision in this bill. I want to thank the gentleman from
Georgia [Mr. Linder], the gentleman from Georgia [Mr. Collins], the
gentlewoman from Washington [Ms. Dunn], all of you.
Let me say this before I close out. I am not on a first-name basis
with anybody at the White House, but I will make a house call over this
provision that I have worked for for 10 years. Some 98 percent of the
American people understood it and supported it.
I am glad to see there is no partisanship here today. The gentleman
from New York [Mr. Rangel], one of the most qualified Democrats we have
ever had on Ways and Means, was not in the position to take a stand on
the Traficant provision. But I am going to compliment the Republican
Party here today for swallowing hard and including my provision. I know
it was not easy. I know there are still some words in there that I am
not totally crazy about, and they know that as well. But we can ratchet
down the beginning, and I am hoping that next year after a track record
of the burden of proof language change, you will consider two things
from Jim Traficant: Cleaning up that language on burden of proof which
can be improved; and, second of all, dealing more specifically with the
seizure practices of the IRS and look at the Traficant provision that
says before they can seize your property, they must have judicial
consent, you must have a notice of a hearing, and you shall be present
and allowed to be represented at such hearing.
But let me tell you what. No one is going to be totally satisfied
with anything. I am satisfied today. I am satisfied today that the
Republican Party included a Democrat provision that, by God, I could
not get heard on my own side of the aisle. I compliment you, I thank
you, and let me say this. Keep the burden-of-proof provision in that
final bill.
Mr. PORTMAN. Mr. Speaker, I once again want to commend the gentleman
for his persistence and for his patience and for his strong support now
of the legislation, a 10-year crusade.
Mr. Speaker, I yield 2 minutes to the gentleman from Minnesota [Mr.
Ramstad], a member of the Committee on Ways and Means.
Mr. RAMSTAD. Mr. Speaker, I thank the gentleman for yielding me this
time.
Mr. Speaker, as a cosponsor of this important legislation to provide
a sweeping overhaul of the IRS, I appreciated the opportunity to work
in a bipartisan, pragmatic and collaborative way with the gentleman
from Ohio [Mr. Portman], the gentleman from New York [Mr. Rangel], the
gentleman from Maryland [Mr. Cardin], the gentleman from Texas [Mr.
Archer] and other members of the Committee on Ways and Means.
{time} 1245
We promised, Mr. Speaker, tax relief for the American people, and we
delivered. We also promised a major overhaul of the IRS, and today we
must deliver again.
Mr. Speaker, this first comprehensive reform of the Internal Revenue
Service in over 45 years is long overdue. I have heard from countless
constituents about IRS abuses like most of my colleagues have about
unfair and selective audits, arbitrary rulings, communications couched
in gobbledygook and legalese. Mr. Speaker, these kinds of abuses of the
American taxpayers must stop now. We must never forget we work for the
taxpayers of the United States of America, and this legislation will
make a big difference to the taxpayers of this country.
It is high time we change the IRS from an adversarial organization to
a consumer-friendly, service-oriented organization. Let us pass this
important bipartisan IRS reform bill today. Let us pass these 28 new
rights for taxpayers. Let us overhaul the management of the IRS and
hold the IRS accountable. Let us shift the burden of proof, as the
gentleman from Ohio [Mr. Traficant] has so eloquently called for for 10
years. Let us shift the burden of proof in tax cases from the taxpayer
to the Government. Mr. Speaker, the taxpayers of America deserve
nothing less.
Mr. RANGEL. Mr. Speaker, I yield 2 \1/2\ minutes to the gentlewoman
from Florida [Mrs. Thurman].
Mrs. THURMAN. Mr. Speaker, I thank the ranking member, the gentleman
from New York [Mr. Rangel], for yielding this time to me. I want to
[[Page H10032]]
express my strong support for this legislation.
The oversight committee conducted a series of hearings on the
problems facing the IRS and the American taxpayers who must deal with
the IRS. The committee took seriously the negative experiences of
taxpayers before drafting this bill.
The goal of this bill is that IRS operate efficiently while treating
all Americans with the respect they deserve. This bill will ensure that
incidents of harassment and intimidation against law-abiding taxpayers
become a thing of the past.
Some of the provisions of H.R. 2676 codify reforms already
implemented by the administration. Others come from the bipartisan
National Commission on Restructuring the IRS. All of these are
necessary. The taxpayer bill of rights language will protect innocent
spouses from having to pay tax penalties for the action of their
spouses. The bill also provides civil damages to the taxpayer when IRS
employees negligently disregard the law. The bill shifts the burden of
proof onto the IRS in Tax Court cases when the taxpayer has cooperated
fully with reasonable requests for information. This is long overdue.
These are real and not just cosmetic reforms. The IRS needs to do a
better job of educating the people of the availability of taxpayer
services.
As Members of Congress, we all try to help our constituents who have
tax problems. In Florida, we have used an excellent taxpayer advocate
in the IRS Jacksonville office. She has been able to resolve many
longstanding tax problems of the people of Florida's Fifth District. I
encourage taxpayers to contact their advocates. They might be able to
quickly resolve some of their tax problems, and it is time to move
forward.
I also want to remind my colleagues and the taxpayers that on
Saturday, November 15, the IRS will hold the first of its monthly
problem-solving days in each of its 33 district offices. This day will
give taxpayers and practitioners the opportunity to resolve problem tax
cases.
The IRS is encouraging, and I think this is important, is encouraging
taxpayers to contact the IRS as soon as possible to schedule an
appointment in the nearest district office. I hope that taxpayers with
outstanding problems will take advantage of this.
Mr. Speaker, H.R. 2676 represents an important step in returning
government to the people it represents. I urge the support of this
bipartisan bill.
Mr. PORTMAN. Mr. Speaker, I yield 3 minutes to the gentlewoman from
Connecticut [Mrs. Johnson], the chair of the Subcommittee on Oversight
of the Committee on Ways and Means, who played a very important role in
electronic filing, taxpayer rights, and many other provisions of this
legislation.
Mrs. JOHNSON of Connecticut. Mr. Speaker, I rise in strong support of
this legislation, and I want to commend my colleague, the gentleman
from Ohio [Mr. Portman], for his leadership of what was a yearlong
process of analyzing the serious problems plaguing the IRS and taking
responsibility for developing solutions to those problems as the House
chair of the Reform Commission. I commend him as well for his careful
stewardship of the commission's report, educating Members on its
substance, being open to rethinking some of its difficult issues, and,
as a member of my subcommittee, working with us to strengthen and
enlarge the taxpayers' rights.
Today we will adopt the most dramatic reform of the IRS since 1952.
The three-point plan will overhaul the tax-writing process to help
simplify the Code and protect taxpayers. It will create an independent
oversight board to bring private sector expertise to the table to
modernize the IRS's technology and create a customer service culture
that can provide timely and accurate answers to questions and assist
taxpayers with problems.
Third, it will create 28 new taxpayer rights, including the right to
sue the IRS for damages resulting from the IRS's negligence, shifting
the burden of proof to the IRS in the Tax Court, and for the first time
taxpayers will be able to report abusive agent behavior to the IRS
without fear of retaliation. Letters threatening an audit if someone
does not participate in some voluntary program will end, and for the
first time taxpayers will be given an explanation of the reasons for an
audit and their rights in that process.
This should end politically inspired activities, it should end costly
multiyear audits, even in cases where the person audited has been found
to be owed money by the Government, and for the first time 30,000
innocent spouses will be saved $30 million in taxes because they will
not have to pay taxes owed by their former spouses, not by them. Too
often the deadbeat dad not paying child support or taxes gets off while
the innocent spouse is dunned by the IRS because she is available and
she is responsible.
The 28 taxpayer protections will protect taxpayers forcefully and
fairly, and I am proud of the work of my subcommittee in shaping these
recommendations and in strengthening the taxpayers' protections.
I urge support of this bill as it represents a giant step forward,
but I urge the committee to move forward with tax simplification which
is the route of reform.
Mr. RANGEL. Mr. Speaker, I yield 4\1/2\ minutes to the gentleman from
Maryland [Mr. Hoyer] to express his views. Whenever anyone talks about
improving how we collect taxes, his name, whether it was a Republican
or Democratic President, was always there. He has worked very hard in
not only trying to improve the present system but trying to improve the
present piece of legislation.
Mr. PORTMAN. Mr. Speaker, I yield 1 minute to the gentleman from
Maryland [Mr. Hoyer].
Mr. HOYER. Mr. Speaker, I thank the gentleman from New York for his
comments.
As a preface, I have served on the Subcommittee on Treasury, Postal
Service, and General Government since January 1983. It is the
responsibility of that subcommittee to oversee the Internal Revenue
Service's budget and its management practices.
In the last three terms of Congress under Democratic and Republican
leadership, our subcommittee has raised very substantial questions, and
we have worked with the distinguished gentlewoman from Connecticut on
those issues and the distinguished staff of her subcommittee who has
done such an outstanding job.
I want to say to the gentleman from Ohio [Mr. Portman] and to Senator
Kerrey, as they know, that I think their efforts have produced a good
work product. I think the commission raised many appropriate questions
and recommended some very solid solutions. Having said that, I want to
preface my remarks by saying that I ask no colleague to follow me in
either adopting my premises or my vote, not one, because I understand
the power of the rhetoric that precedes this bill to reform the IRS.
There have been a lot of columns written on this issue. Jim Glassman,
not an apologist for Democratic policies, says do not reform the IRS,
and he says Republicans talk grandly about simplification but this year
passed legislation adding 285 new sections and 824 amendments to the
tax law.
Mortimer Caplin, a distinguished former IRS commissioner, said this:
The proposed overall design by the Restructuring Commission
and its statutory offspring is deeply flawed. It would
obscure the core focus of the IRS, blur the lines of
authority, and hamstring efficiency.
The good news, my colleagues, is that under Secretary Rubin and
Deputy Secretary Summers, for the first time since I have been on the
Appropriations Committee, there has been a focus on management issues
in addition to tax policy issues. As a result, very substantial things
are happening at the IRS.
We are starting to get a handle on tax systems modernization, which
was a disaster under the Reagan administration, under the Bush
administration, and under the early Clinton administration, because the
IRS clearly did not get a handle on its information systems technology.
The good news is, we are now doing just that. We have an outstanding
person that was recruited specifically to take on this task.
The Senate just a few days ago confirmed Mr. Charles Rossotti as the
new Commissioner of the IRS. He is the former president of the American
Management Systems, Inc., a firm of 7,000 people in northern Virginia.
He has been doing exactly what IRS needs to
[[Page H10033]]
do, in the private sector: Handling information and providing quick,
user-friendly responses in an efficient manner. This administration has
moved to make sure that the IRS makes many of the changes proposed by
the restructuring commission.
Now, having said that, the administration, myself, and others raised
very substantial questions about the bill that was originally
introduced.
I might say tangentially, there has been no speaker raising any
questions prior to me about the problems with this legislation.
However, numerous responsible, thoughtful, conservative observers have
said that this is not the way to go.
On its surface the legislation which we consider today is about IRS
reform. The proponents claim that it will be the answer to all of our
concerns about an agency which has admittedly failed to manage its
operations well.
However, too many of my colleagues believe that the simple creation
of a private sector oversight board will lead to a more user-friendly
and responsive IRS.
I would argue that the net effect of H.R. 2676 will be nothing more
than phony tax populism as described by Gloria Borger of U.S. News.
And while there are many provisions in this bill which I support, I
think the empowerment of a private sector board, with far-ranging
powers, will do little more than add just another layer of bureaucracy.
The taxpayer bill of rights title is necessary to provide much needed
relief to innocent spouses and those who, because they are ill, are not
able to file for a tax refund in a timely manner.
There are also provisions in the bill which I support that are
designed to increase electronic filing.
However, the bill creates an unnecessary and more complicated
organizational structure at the IRS, which I believe will have the
overall effect of less accountability.
While there is no doubt a role for private sector advice and
expertise, what the IRS needs is more accountability, not less.
H.R. 2676 would place management in the hands of people who, however
well-meaning, are loyal and accountable to the firms and businesses
that employ them.
And while IRS bashing may be both fun and easy, I would suggest that
if we are truly attempting to make the IRS more user friendly, we ought
to take a closer look at the tax writers, not the tax collectors.
As the national commission on restructuring the IRS concluded,
Congress' attempt to micro-manage the IRS and its frequent changes of
the Tax Code, have undermined the ability of the IRS to manage
efficiently in the long or short term.
No matter how many managerial changes we make, it will not make the
IRS more user friendly. We ought to focus on improving education and
services for taxpayers, better training for IRS employees, modernizing
computers, and simplifying the overall Tax Code.
Let's not hamstring the Commissioner's ability to enact real IRS
reform by fooling ourselves into believing that adding another layer of
bureaucracy in the chain of command is going to solve IRS' problems.
Let's build upon the progress started by Secretary Rubin and ensure
that we enter the 21st century with an IRS that is customer-friendly,
technologically-advanced, and governed ``by the people, for the
people.''
Let us not delegate authority of the IRS to private interests who
could easily undermine public confidence in the Agency and dramatically
decrease voluntary tax compliance.
Are we all against the outrageous actions of the IRS? Absolutely.
Should we take every action possible to eliminate the abuse of citizens
that has occurred by IRS personnel or any other person in government?
Absolutely.
{time} 1300
But let me point out to my colleagues, that as Charles Krauthammer
wrote so compellingly just a few days ago, ``The IRS does not write the
rules it must enforce. Congress and the President do, and the rules are
now an insane 9,451 pages long. The Tax Code is so extraordinarily
complicated that no taxpayer can ever be sure he has fully complied
with the law.''
That is the difficulty the IRS has in implementing the Code, and your
commission said so. Your commission said one of the problems IRS has is
that the Congress has not given them stable and steady funding levels.
Your commission also said that there was not a systemic problem, and I
appreciated those honest remarks.
I would hope, Mr. Speaker, that as we vote on this legislation, and
clearly it will pass with over 400 votes so that we can all go home and
say we are for IRS reform. My colleagues recognize that if one is not
for IRS reform on appropriation bills and on tax bills, it will not
happen. We will not be able to hide behind this vote.
I will look forward to the conference committee. In my opinion, the
chairman of the Committee on Finance wants to go in exactly the wrong
direction, as reported today in the papers, exactly the wrong
direction, and that is what I fear. I would hope that we would look
carefully at the product of the conference committee and ensure
ourselves that we are in fact doing the right thing for the taxpayers
of America.
Mr. PORTMAN. Mr. Speaker, I yield myself just 30 seconds to respond
briefly, and then I would like to yield to the gentleman from Missouri.
But with regard to the gentleman's comments, again I appreciate the
supportive words he said. I would ask him again to read the
legislation, because he has misstated what the oversight board's
responsibilities are. They do not come up with the budget for the IRS,
the Congress still does that of course ultimately, but in fact the
Treasury Department will send its own budget. We do get an
informational budget which I think is going to be very important,
particularly to the appropriators.
Second, he talks about an additional layer of bureaucracy. What we
are doing here is we are providing oversight that does not currently
exist. We are filling a void; it is not an additional layer of
bureaucracy.
Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from Missouri
[Mr. Hulshof], a member of the Committee on Ways and Means, who has
improved this legislation.
Mr. HULSHOF. Mr. Speaker, I accept the invitation of the preceding
speaker to go beyond the rhetoric and talk about the outrages.
Mr. Speaker, let not my words today be an indictment against the
hard-working men and women that are our tax collectors that are trying
to do the best job they can. But as a Member of the House Committee on
Ways and Means, particularly the Subcommittee on Oversight, we have the
responsibility of looking at the inner workings of the Internal Revenue
Service, and here are some of the examples we have seen already this
calendar year. Earlier this year, we learned that over 100 IRS agents
conducted unauthorized inspections of individual taxpayer records.
Example No. 2: The IRS delayed its notification to business owners of
a new requirement to electronically file payroll taxes, and then the
agency threatened these same business owners with severe sanctions for
noncompliance.
Example No. 3: The error and fraud rate in one program alone, the
earned income credit, is nearly 21 percent. Five billion dollars were
erroneously paid out of tax money last year alone.
If these examples of mismanagement are not troubling enough, they
pale in comparison to a recent Associated Press story that hit the
newspapers in Missouri, and that is that the IRS is now targeting the
victims of the great flood of 1993 with audits of these individual
taxpayers who cannot document their losses because receipts were washed
away in the flood.
Now, Mr. Speaker, the next time that the rivers in this country run
high, Americans should not have to look after their family heirlooms,
their prized possessions, their loved ones, and their tax records.
Clearly, the time has come to institute bold management reforms.
I agree with the preceding speaker, the gentleman from Maryland [Mr.
Hoyer]. We also have to begin to talk about fundamental reform of the
tax system. We have to talk about a fundamental discourse about how to
change and simplify the Tax Code. But this legislation will begin to
implement that taxpayer service. Shifting
[[Page H10034]]
the focus from audit quotas and collection goals to taxpayer service,
to enhance taxpayer rights, allow individuals to collect attorney's
fees when the IRS is wrong.
It is time to return the word ``service'' to the Internal Revenue
Service. This restructuring bill does that, and I urge its support.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Mississippi [Mr. Taylor].
Mr. TAYLOR of Mississippi. Mr. Speaker, I thank the gentleman for
yielding me this time.
I would also like to thank the gentleman from Ohio [Mr. Portman] for
bringing this to the floor, and above all, I would like to thank the
gentleman from Ohio [Mr. Traficant]. It is said that Moses, after first
freeing his people from the Pharaoh, and then wandering for 40 years in
the desert, never got to see the promised land. That is sort of how the
gentleman from Ohio [Mr. Traficant] must feel after his 10 years of
trying to get this done.
Mr. Speaker, I agree with the gentleman from Ohio. Had the Democratic
leadership done its job and allowed this to come to the floor when the
Democrats controlled the House and allowed the gentleman from Georgia
[Mr. Deal] to bring his welfare reform bill to the floor when the
Democrats still controlled this House, we would probably still be in
the majority.
But having said that, let me compliment all of the people that worked
to make this possible, because it is right under American law that a
person is innocent until proven guilty, and therefore, it should only
be that a taxpayer is innocent of breaking the law until the tax court
proves him guilty.
Second, I think it is very important that those people, and I have
had a very close friend contact me and say that he thinks the only
reason he was audited was because he helped me in one of my campaigns.
That is wrong. If that is what really happened, it is wrong, and the
people who did that should be punished. This bill would provide a
$5,000 fine and up to 5 years in jail to any executive branch employee
who is convicted of using undue influence over an IRS audit.
Third, I hope that this is just the beginning of true tax reform in
this country. I say to my colleagues today, or actually this Friday is
the day that the apprentice welders at the shipyards back home get
their first paycheck, they will pay more in income taxes than all of
the cruise ships who do more than $9 billion worth of business in
American ports will pay collectively. They use our ports, they use our
firemen, our police, our Corps of Engineers to dredge the channel, our
Coast Guard to rescue them when they have trouble at sea. They pay
nothing in corporate income taxes.
So it is simply not fair to allow that to happen. We need to follow
up this great first step with the closing of the loopholes that allow
the big guys to get off scot-free.
Mr. PORTER. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from
Florida [Mr. Miller].
Mr. MILLER of Florida. Mr. Speaker, I thank the gentleman for
yielding me this time.
This is a good time to be talking about this issue as the President
has come out supporting this issue. It is kind of surprising that the
President is sporting this issue, but on Monday of this week he talks
about how selfish the taxpayers are to want to cut taxes. So at least
he will say let us reform the legislation, even though he does not like
the idea of cutting taxes.
While I support this bill, I have concern that the bill does little
to mitigate the impact of the bureaucratic unions on the restructuring
efforts. In 1996, Congress made serious attempts to downsize and reform
the IRS. These efforts, however, were hampered by the union that
represents the IRS employees. As pointed out in a Washington Post
article, the union was more concerned with keeping their dues than
helping Congress and their union Members make the IRS operate better.
I am also disturbed about the abuse of official time that has taken
place at the IRS. Official time is, ``authorized paid time off for
Federal employees to engage in union activities.'' In layman's terms,
that is union work at taxpayers' expense.
Although there may be some legitimate functions for using official
time, the amount is skyrocketing at the IRS. Last year alone, the
employees logged in over 718,000 hours; 718,000 hours paid by the
taxpayers for official time to do union work. This is a 55-percent
increase since 1993.
I realize the Chairman's limitations in addressing these issues, but
want to bring them to their attention and appreciate the interest in
addressing this issue in the future. I applaud this bill and believe it
is a big win for the rights of hard-working taxpayers.
Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from
Missouri [Mr. Gephardt], the Democratic leader. It should be noted that
he was the first to reach out to the gentleman from Ohio [Mr. Portman]
and the Republican leadership to make certain that this did not become
a partisan issue.
(Mr. GEPHARDT asked and was given permission to revise and extend his
remarks.)
Mr. GEPHARDT. Mr. Speaker, I would like to commend the gentleman from
Ohio [Mr. Portman], who worked so hard to bring this legislation
together and brought together the bipartisan bill. I would like to
commend the gentleman from New York [Mr. Rangel], and the gentleman
from Maryland [Mr. Cardin], who worked so hard on our side, with the
gentleman from Ohio, [Mr. Portman] and others to do this, and this
truly is a bipartisan bill.
I strongly support this bill to reform the Internal Revenue Service.
In my view, we are taking an important step to increase the
accountability of the IRS and to shift the balance of power back toward
the taxpayer. But it is important to remember that this bill is not the
end game in our battle to make the tax system fairer.
Let us make sure that this bipartisan step taken today will not fall
prey to partisan fodder for next year's campaign. House Republicans, I
hope, will pressure their Senate leaders to pass this bill. Let us get
it in place before the tax season so that people can benefit
immediately.
Over the last several weeks we saw the abuses which took place at the
IRS, abuses which caused Americans to become even more outraged by our
system of taxation. There have been countless numbers of stories about
abuses of the enforcement power of the IRS. However, one incident which
took place in my hometown of St. Louis, I think sums up what is wrong
and what this bill begins to address.
In 1993, Missouri suffered from record flooding which destroyed
thousands of homes and belongings. There was a designation of a Federal
disaster, and we made special arrangements for individuals to deduct
their losses suffered from the flood. Amazingly, 3 years after the
natural disaster took place, there was a manmade disaster which
revisited the flood's victims.
The IRS challenged over 200 households about the value of the loss
they claimed. Taxpayers were asked to prove the market value of lost
assets when they had their records wiped out by the flood itself. A
woman who lost her mobile home was forced to pay $10,000 in back taxes
from this incident.
Now, this is not a case of IRS agents who have run amok, this is a
case where common sense, good common sense and fairness was not
applied. People who were allegedly victims of a disaster were
victimized once again by their own Government. This bill will help
eliminate horror stories like this from being repeated.
This is just the beginning to a critical process of radically
overwhelming our entire tax system. We also need to restore some sanity
to the process of filing and preparing taxes. We need to take the major
step of abolishing the Tax Code itself and then writing and rewriting a
Tax Code that allows people to make decisions based on their families'
best interest, a Tax Code that eliminates gimmicks and loopholes that
only benefit the wealthiest taxpayers.
One thing is for certain. Democrats are going to fight for the
working men and women of this country to get a system that works for
them. The American people have had enough of a tax system that is
secretive, adversarial, and unfair. Let us start making change happen.
Let us make it fair today for working people, and let us start today
and let us get our friends in the other body to follow the lead of this
bipartisan group to make historic change in our Tax Code.
[[Page H10035]]
Mr. PORTER. Mr. Speaker, I yield 1 minute to the gentleman from
Pennsylvania [Mr. Fox].
Mr. FOX of Pennsylvania. Mr. Speaker, I thank the gentleman for
yielding me this time.
Many individuals have experienced enforcement powers of the IRS at
their worst. Reports by GAO uncovered tales told by many taxpayers of
unfair, unruly, and sometimes illegal treatment by IRS employees toward
taxpayers demanding additional taxes and even seizing property for
payment of taxes that could not effectively be challenged without
substantial investment of time and money on the part of the taxpayer.
Thankfully, beginning in 1996, the gentleman from Ohio, [Mr.
Portman], and the gentleman from Nebraska Senator Bob Kerrey, were
appointed to cochair a bipartisan commission to study and make
recommendations to Congress about suitable reforms. H.R. 2676 is a
result of that commission.
I can say to my colleagues, this bill will prohibit specific
Government officials from requesting that the IRS conduct or suspend an
audit, stop fishing expeditions by the IRS, require probable cause for
IRS investigations, direct the Treasury to study the implementation of
a paper-free tax system, extend confidentiality privileges, provide
statutory rules governing innocent spouse relief, change the burden of
proof to the IRS and not the taxpayer, and finally, an oversight board.
All of this makes this bill one worthy of passage in a bipartisan
fashion.
{time} 1315
Mr. RANGEL. Mr. Speaker, I yield 3\1/2\ minutes to the gentleman from
Massachusetts [Mr. Neal], a member of the Committee on Ways and Means.
Mr. NEAL of Massachusetts. Mr. Speaker, I thank the gentleman for
yielding me this time.
Mr. Speaker, while I rise in support of the Internal Revenue Service
Restructuring and Reform Act of 1997, I also want to temper my support
with a couple of warnings. While this legislation would restructure the
Internal Revenue Service to provide better oversight, greater
continuity of leadership, improved access to expert advice from the
private sector, and additional management flexibility, I also think
that there are potential difficulties on the horizon.
There has long been an agreement on the need for fundamental reform
of the IRS, and I certainly commend the work of the National Commission
on Restructuring the IRS. I support a majority of the recommendations
made by the National Commission, and I am certainly pleased that
further improvements have been made to the additional legislation
introduced by the gentleman from Ohio [Mr. Portman] and the gentleman
from Maryland [Mr. Cardin]. They have worked diligently to modify their
original bills to reflect the concerns of many of us on the Committee
on Ways and Means concerning governance.
I believe that the Constitution requires that the IRS Commissioner be
appointed, hired, and, if necessary, fired by the President. The
legislation today before us keeps the President ultimately responsible
for the actions of the IRS and the decisions of its Commissioner. The
Department of Treasury would still have a role in the oversight and
management of the IRS. A key component of the bill is taxpayer rights.
These provisions will provide new protections and assistance to
millions of taxpayers. I support the overall goals of this legislation.
Let me relate two concerns. First, I am concerned about the authority
given to a newly created oversight board. This oversight board has the
authority to review and approve strategic plans of the IRS, and review
and approve the Commissioner's plans for major reorganization. Under
this bill, eight private sector individuals would have this authority.
The bill is not clear on what happens to our tax administration
system under these new board authorities if a consensus is not reached
among the board members, or if the IRS Commissioner and Treasury
Secretary disagree with the views of private sector individuals.
Second, I am concerned about the provision in the shift of burden of
proof. This bill provides for the burden of proof to be raised to the
Secretary of the Treasury in any court proceeding with respect to
factual issues if the taxpayer asserts a reasonable dispute with
respect to the taxpayer's income liability.
The shift in the burden of proof could result in unintended
consequences. It could result in the IRS conducting more intrusive
examinations, and the IRS issuing more subpoenas and more summonses to
third parties in search of evidence. This provision could induce
taxpayers simply not to keep records.
Our tax system is voluntary, and we have an overall compliance rate
of 85 percent, the envy of much of the industrialized world. The
individual nonbusiness compliance rate is 97.5 percent. The individual
business compliance rate is 70 percent, and the shift of burden of
proof could indeed, if we are not careful, make it worse.
Mr. Speaker, the IRS conducts more than 2 million audits each year,
but only about 30,000 cases reach court annually. This provision could
have more far-reaching consequences. It could help aggressive taxpayers
avoid taxation. We should make it easier for taxpayers to deal with the
IRS, but I do not think we should make it easier for taxpayers to evade
taxes. This provision needs to be improved, because those who
voluntarily comply with our tax system simply deserve more.
Mr. PORTMAN. Mr. Speaker, I yield 3 minutes to the gentleman from
Nevada [Mr. Ensign], a very valued member of the Committee on Ways and
Means.
Mr. RANGEL. Mr. Speaker, I yield 30 seconds to the gentleman from
Nevada [Mr. Ensign].
The SPEAKER pro tempore. The gentleman from Nevada [Mr. Ensign] is
recognized for 3\1/2\ minutes.
(Mr. ENSIGN asked and was given permission to revise and extend his
remarks.)
Mr. ENSIGN. Mr. Speaker, this bill that we have before us today is
brought forth in a bipartisan fashion. I would like to recognize my
colleagues on the Committee on Ways and Means, the gentleman from Ohio
[Mr. Portman] and the gentleman from Maryland [Mr. Cardin]. They have
done outstanding work. This is a very good bill, and I think we are
hearing a lot of reasons why this is a good bill today. But the
American people have been way ahead of the Congress for many, many
years. They have recognized how intrusive the IRS has been.
In my city of Las Vegas, the IRS is viewed almost like the KGB or
Gestapo was once viewed in other countries. This is not necessarily the
fault of individual IRS employees. This is the fault of the U.S.
Congress and the Presidents of past, who have passed an incredibly
complex Tax Code.
Former Representative Sam Gibbons said, in a retreat that we had a
couple of years ago, that there was no single Member of Congress more
responsible than he himself was for messing up our Tax Code. That was
because every single time that they tried to reform the Tax Code,
because of all the special interest groups that we have up here, it
gets more complex. And the more complex it is, the more incentive there
is for the IRS to do some of the shenanigans that they do.
I said before that the American people are way ahead of the Congress.
The American people are demanding not tax reform, but tax replacement.
Every place I go around my district, people are saying, we have to
lower the tax rates. As we are replacing the Tax Code, we have to
address this issue. That issue is the issue of fairness. We have to
define exactly what fair is.
During hearings in front of the Committee on Ways and Means a couple
of years ago, I asked Jack Kemp, the gentleman from Texas, [Mr. Dick
Armey] and the gentleman from Missouri, [Mr. Dick Gephardt] what their
definition was. Jack Kemp and the gentleman from Texas, [Mr. Dick
Armey], said, when everybody is treated the same. The definition of the
gentleman from Missouri, [Mr. Dick Gephardt] was, based on your ability
to pay.
That means if somebody works twice as hard, you have a farmer over
here who works twice as many hours a week, happens to make twice as
much money because they work twice as hard, they should be penalized by
paying a higher tax rate than the farmer over here who does not work
quite as hard.
Mr. Speaker, we need to have a fair Tax Code in America that does not
penalize people who work harder, who
[[Page H10036]]
make the sacrifices necessary to be successful. In America we have been
about rewarding success in the past. Let us get back to where success
is treated in a manner that we want more people to try to achieve it,
like we do in school. We do not penalize people for getting A's in
school. We should not penalize people for wanting to be entrepreneurs,
for wanting to create jobs in America, for wanting to be successful
themselves.
This is the fundamental issue that we have to get to, not only today,
by reforming the way the IRS works, but truly to get to overall tax
replacement with a fair, simple, lower tax rate and tax system.
Mr. RANGEL. Mr. Speaker, will the gentleman yield?
Mr. ENSIGN. I yield to the gentleman from New York.
Mr. RANGEL. Mr. Speaker, I would ask one question, which is,
basically, how long would the gentleman say, as a new member of the
committee, it would take to draft this legislation to bring it to the
committee and to pass this new tax that the gentleman wants? How long
would it take to do it?
Mr. ENSIGN. Mr. Speaker, as we have seen going through the committee,
the administration is against replacing the income tax as we know it,
based on their testimony from the Committee on Ways and Means.
Mr. RANGEL. Mr. Speaker, I would like to reword my question. Forget
the administration. The gentleman is in the majority. He has the
majority of the votes. How long would it take for him to get a bill
passed?
Mr. Speaker, I yield 2 minutes to the gentlewoman from Connecticut
[Mrs. Kennelly], a member of the committee.
Mrs. KENNELLY of Connecticut. Mr. Speaker, I rise in support of this
IRS reform. Let there be no doubt that IRS abuses will not be
tolerated. Many of the unfortunate situations that were brought forth
by the Senate hearings are already improper or illegal under the law,
and obviously should not be tolerated.
There also, unfortunately, was something we found out that happened,
that there was some kind of pervasive atmosphere in some of the offices
that tied advancement to collection. As a result, throughout the
offices, if you did not collect, you did not get advanced. This moved
on to the point that common courtesy and common sense were forgotten.
This also cannot be tolerated. I think these hearings have brought this
forth.
Having said that, I do also want to mention that there are many,
many, many thousands of people working for the IRS that were carrying
out their duties in a courteous and common-sense manner. We should
recognize that. However, the bureaucracy absolutely should know that
their day is over.
I would also like to point out that in all of the debate of this
issue, one fact has been obscured, that the enhanced taxpayers' bill of
rights has always enjoyed broad support in a bipartisan manner. In
fact, the very first Taxpayer bill of rights was enacted some years
ago, and I believe this should be an ongoing process.
Finally, I believe the legislation is significantly improved over the
earlier versions, and all members of the Committee on Ways and Means
worked on this. But I believe it can require further improvement,
particularly in the area of burden of proof and conflict of interest.
For instance, in committee the gentleman from California [Mr. Stark]
offered an amendment to preclude IRS board members from representing
clients before the IRS. Unfortunately, this amendment did not pass. I
think as Members look at this, as other Members in the body look at
this, this could be remedied, because this obviously will cause
conflict down the line.
I support this, and am glad this bill has been improved. It certainly
was needed, and I hope everybody listened and learned from the lessons
of the Senate hearings.
Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I would like to say that this is an historic moment. We
are considering landmark legislation today. It is the first time in 45
years that we have attempted as a Congress to enact fundamental reforms
at the IRS.
I want to start by thanking the gentleman from Texas, Mr. Bill
Archer, chairman of the Committee on Ways and Means, not just on behalf
of me, but really on behalf of the millions of Americans who will be
positively affected by this legislation, the taxpayers. For the past
year and a half he has consistently supported this reform effort;
first, the bipartisan National Commission on Restructuring the IRS that
I cochaired, and then the legislation that came out of that Commission.
It was the gentleman from Texas, Mr. Bill Archer who made this the
Committee on Ways and Means' top priority for the fall. It was he who
moved it expeditiously for the floor. We would not be here having this
debate today if it were not for his support.
I also want to thank my cosponsor, the gentleman from Maryland, Mr.
Ben Cardin. He worked with me on this legislation long before it was
fashionable on his side of the aisle. He looked at the legislation
carefully, independently. He judged the bill on its merits, rather than
listening to, frankly, the critics in the administration and others. He
actually took the time to study it himself. He stood up for what he
believed in. As a result, he improved the final product.
I want to commend the gentleman from New York, Mr. Charlie Rangel,
senior Democrat on the Committee on Ways and Means, who I think today
as I have heard him talk has just joined the Scrap the Code Tour. But
the gentleman from New York, Mr. Charlie Rangel, played a very
important role as a bridge between the Congress and the Clinton
administration.
This is a very comprehensive and ambitious package of reforms.
Members have heard a lot of people talk about it. As such, it is the
product of a lot of hard work by a lot of good people: Members and
staff of the IRS Subcommittee on Oversight, chaired by the gentlewoman
from Connecticut, Mrs. Nancy Johnson, who did a tremendous job on
taxpayer rights, electronic filing and other committee issues; the full
Committee on Ways and Means staff, many of whom are here today; the
Joint Tax Committee staff, Ken Kies and others; the Government Reform
and Oversight Committee had jurisdiction over this, and they helped us
on this.
Regarding the Committee on Appropriations, the gentleman from
Maryland, Mr. Steny Hoyer, talked earlier about the appropriators. The
gentleman from Arizona, Mr. Jim Kolbe, and the gentleman from Maryland,
Mr. Steny Hoyer, had a lot of input into this process, as did their
staffs; and finally, the Committee on the Budget and the Committee on
Rules. Both of those committees also had jurisdiction over parts of
this comprehensive legislation.
Also, I give thanks to the many outside groups who spent a lot of
time working on this legislation and gave us valuable input. Then, when
we had a good package together, they went out and sold it to their
members, the people at the grass roots. The National Taxpayers Union,
Americans for Tax Reform, the NFIB, the Chamber, Citizens Against
Government Waste, and yes, the tax preparer community again gave us
valuable input and helped us to put that together. They work closely
with the taxpayers and the IRS every day. They know this will help.
That is why they are supporting it.
Special thanks to people who were there from the beginning, to each
member of the National Commission on Restructuring the IRS, including
my cochair, of course, Senator Bob Kerrey of Nebraska; but also our
colleague Senator Chuck Grassley of Iowa, and the gentleman from
Pennsylvania, Mr. Bill Coyne; the Commission staff; and finally, to my
own personal staff, who have gone well beyond the call of duty.
The Commission conducted a year-long audit of the IRS and made
specific legislative recommendations for change. It was successful, I
think, for two reasons. First, we kept politics out of it. In fact, we
brought expertise in. The people who were represented on the Commission
brought the kind of expertise to bear that we needed to solve the real
problems at the IRS.
Commission members not only included a former IRS Commissioner, the
heads of the New York and California State tax systems, but also a
small businessman, a representative of the
[[Page H10037]]
people who work at the IRS, technology experts, taxpayer advocates.
And the Commission did its homework. We conducted 15 days of hearings
in and out of Washington, interviewed all the senior level IRS
managers, and for the first time ever actually conducted interviews
with 300 on-line IRS employees to find out from them what the problems
were. Finally, we listened carefully to the concerns and stories of the
taxpayers who foot the bill.
After our year-long audit, we ended up with more than 50 specific
reform recommendations for the most comprehensive overhaul of the
agency since 1952. The IRS Restructuring and Reform Act before us today
takes these recommendations and, I think, improves on them. Others have
given a good overview of the bill. Let me just touch on a view of the
points.
{time} 1330
First, while this effort focuses on making the tax collection system
work much better, not the Internal Revenue Code itself, the commission
found, as many of my colleagues have discussed today, that we also need
to simplify our Tax Code. We take the first step in doing that in this
legislation.
We do so by putting in place new legislative incentives for tax
simplification as compared to every other incentive around here which
is for more complexity. We also force the IRS to be at the table to
tell us what a great-sounding new tax legislative proposal is going to
result in, in terms of new tax schedules, time for the taxpayer to fill
them out, and work for the IRS.
The bill also targets Congress by consolidating and streamlining
congressional oversight. There are now seven committees that give the
IRS advice. We streamline it, and we force these committees to come
together and to send a clear and consistent and single message to the
Internal Revenue Service from Capitol Hill.
The overall thrust of this bill is to make service to the taxpayer,
not heavy handed enforcement, but service to the taxpayer the top
priority of the IRS. It does so in a number of ways. Importantly, it
dramatically increases IRS accountability for getting the job done by
establishing a more effective IRS oversight body.
You have heard other Members talk about the oversight board today.
The important thing is that it brings expertise to the IRS that is
absolutely needed and is not there now. Second, it provides continuity,
stability of leadership, so that over time we actually have changes
that are going to work for the taxpayers so we are not up here 3 or 4
or 5 years from now discussing the same problems.
With this input from nongovernmental experts to hold the IRS
responsible for answering the phones, getting the computers to work,
ensuring that IRS employees are trained, and, yes, treating taxpayers
more courteously, with more respect, we will have a new IRS.
Much of the media attention has focused on the oversight board, what
is often overlooked, is that we actually give the IRS commissioner more
power, more tools to be able to manage the agency, to get the job done
day-to-day.
We give the commissioner a 5-year term so the commissioner's
responsibilities go beyond any single administration. We also give the
commissioner the ability to bring in his or her own team of senior
managers. Charles Rossotti was just confirmed by the Senate this week.
I think he will be a good IRS commissioner. He brings management
experience and information technology experience that is badly needed.
We need to give him these tools because without them, frankly, he is
going to have a very difficult job doing what he wants to do, which is
to turn the IRS around and make it a taxpayer service organization.
Taxpayer rights. If Members saw the Senate Committee on Finance
hearings, they know that we do need new rights in legislation for
taxpayers. The bill provides us 28 specific new taxpayer rights, like
allowing taxpayers to recover damages when the IRS does something
wrongful, like the burden of proof shift we have heard about from the
gentleman from Ohio [Mr. Traficant] and others, like protecting
innocent spouses from IRS harassment. All of these are extremely
important. They compliment the other provisions of the bill.
Very importantly, this legislation also creates a new system within
the IRS to evaluate employees. Again, it has been overlooked by many,
but this is one of the most fundamental changes in terms of changing
the culture at the IRS. The new system would evaluate employees and
managers not on the amount of money, taxes, they collect, but on the
degree to which they are providing good service to the taxpayer.
It also puts in place unprecedented personnel flexibility to allow
IRS managers to promote folks who are doing a good job within the
agency and, yes, to fire the bad apples at the agency. This is called
reinventing government. We are not just talking about it today, we are
actually passing legislation to do so. Again, along with the other
reforms, this is what is going to change the culture at the IRS.
There are many other key provisions in this legislation: Establishing
new financial accountability to force the IRS to balance its own books;
knocking down barriers to electronic filing, which is a win-win for the
taxpayer and the IRS; and, finally, making the taxpayer advocate truly
independent so that that taxpayer advocate is indeed an independent
advocate for the taxpayer.
Taken as a whole, these legislative changes, this whole package, will
create a new IRS that treats the taxpayer with respect, gives the
taxpayer the service they deserve. We have to remember, this troubled
agency touches more Americans than any other Federal entity. Today, all
of us as taxpayers are the real winners.
Mr. Speaker, I reserve the balance of my time.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
I would like to take some time to again congratulate the gentleman
that just spoke, not just because of the expertise that he brought in
perfecting a bill, but his ability to reach across the aisle to make it
very easy for the members of the committee to at least take a look at
what he is talking about.
I notice a provision that is very close to the gentleman, and that is
the tax complexity analysis that he spoke about in the well. I would
like to yield to the gentleman to respond. If this was an existing law,
how would this apply to the bill that was reported out of our
committee?
Mr. PORTMAN. Mr. Speaker, will the gentleman yield?
Mr. RANGEL. I yield to the gentleman from Ohio.
Mr. PORTMAN. Mr. Speaker, I think if this had been in place, we would
have had a better tax bill enacted this summer by the U.S. Congress. I
think we would have known more about what the complexities are, not
just for the taxpayer but for the tax collection agency.
Mr. RANGEL. Well, I do not want to get involved in how the bill came
to the floor, but the gentleman is asking the people that are
responsible for doing what we tell them to do. We are the ones that
made their job difficult, and the gentleman and I agree on that, and so
does the chairman. We have beat up on them because they did it poorly,
but it was our complex legislation that they had to administer.
The gentleman and I are now seeking to improve the Code after, as the
mumblers would say on the floor, after 37 years of Democratic fiascoes.
We have had a similar extension of 3 years of Republican fiascoes. Now
we are saying, let us clean it up. I share with the gentleman that
unless we attempt to do this in a bipartisan way, it will be America
that loses.
I just want to compliment the gentleman for the direction that he is
going. I hope when we say we have to work together to scrap the Code,
as the gentleman likes to say, or to pull up the IRS by the roots, that
we are talking about pulling up this Tax Code by the roots and
replacing it with something that is fair and equitable. We cannot agree
unless we see what the gentleman is talking about. For 3 years, I have
not seen it. But I look forward to working with the gentleman, hoping
that the other side, while they are talking about scrapping, pulling
up, and getting rid of, would give us something to work with.
Mr. Speaker, I yield 2 minutes to the gentleman from Michigan [Mr.
Levin], a distinguished member of the Committee on Ways and Means.
[[Page H10038]]
(Mr. LEVIN asked and was given permission to revise and extend his
remarks.)
Mr. LEVIN. Mr. Speaker, I thank the gentleman for yielding me the
time.
I rise in support of this bill. It is a positive step in the
direction of restoring and increasing confidence in a system that
relies on taxpayer compliance to be successful. It addresses the
responsibility that both the Congress and the administration must play
in improving the accountability and customer service of an agency, as
said here, that touches the lives of nearly all Americans.
The bill contains a number of provisions which will reform the IRS.
It will improve the use of technology at the IRS by enhancing the
electronic filing of tax returns and other documents. It is
unacceptable in this day and age that the IRS does not have the most
up-to-date computer technology.
It will expand taxpayer relief for the innocent spouse and provide
tax refund relief to taxpayers during periods of disability. It will
also expand relief to taxpayers through taxpayer assistance orders,
grants for low-income clinics, and penalty relief for those who have
installment agreements with the IRS. The revised bill also retains the
accountability of the administration over the IRS by retaining the
President's authority to hire and fire the IRS commissioner.
This bill is an important step in addressing critical management and
oversight issues at the IRS, but it is not a panacea. There remain some
issues in this legislation that we need to continue to work on. I have
met with IRS officials in Michigan to discuss problems, and I intend to
continue to do so.
We do need to look at the Tax Code itself and debate differences of
opinion about how to improve it. In doing so, the aim must be to
benefit the citizens that we represent, not to jockey for position at
the next election.
Mr. PORTMAN. Mr. Speaker, I yield 5 minutes to the gentleman from
Florida [Mr. Shaw], chairman of a subcommittee of the Committee on Ways
and Means and former CPA and recovering lawyer, who added a great deal
to this legislation.
Mr. SHAW. Mr. Speaker, I thank the gentlemen for yielding me this
time.
I would like to congratulate the gentleman and the gentleman from
Maryland [Mr. Cardin], the gentleman from Texas [Mr. Archer], and the
gentleman from New York [Mr. Rangel] for getting together and bringing
such a wonderful bill that is long past due to the floor of this
Congress.
I think perhaps the most shivering words that anybody can hear is the
knock on the door or the phone call or the letter that starts out, I am
from the IRS, because of the complexity of the Tax Code and the
problems involved in filing one's own return.
Not too many years ago, I think it was just 2 years ago, an
accounting problem was given to the top accounting firms in the United
States and asked them to take this example and, from this, to devise an
income tax return and to figure the tax liability from that set of
circumstances that were given. Out of the many tax preparers that
participated in this experiment, not one of them came up with the same
tax liability. It was not even close. It was thousands and thousands of
dollars apart. It just shows the tremendous complexities of the Tax
Code and the problems that they have.
During the debate on the floor, I know it has been going back and
forth as to the complexities that were put into the Tax Code and
whether the Democrats or Republicans did it. I do not think that makes
any difference. It is this Congress that is bringing about the
correction and is bringing it about in a bipartisan way, as a
beginning, I would say, as a beginning.
Under the new rules that we have imposed upon ourselves, when we give
somebody a tax break, we have got to work in revenue somewhere else in
the Code. What has this developed over the years? It has developed a
patchwork quilt. It has provided for us a real mess that is going to
take a lot of effort, a lot of bipartisan effort, to straighten out.
The only way to do it is to try to get together and to at least get
some bipartisan support. It is not going to be complete. There will be
a lot of controversy when it finally goes. But this Code has to be
ripped up by the roots.
Now, this is going to balance the playing field as far as the
Internal Revenue Service for the taxpayers. This is tremendously
important. The Internal Revenue Service should be more of a service
rather than a policeman in watching over the taxpayers.
But in doing this, it is just basic fairness. We do not want to give
the police in this country a criminal code that is so complicated that
they do not know how to administer it or to enforce it, but yet we have
done this with the IRS. To make it worse, we have provided that the
taxpayer has no privacy or right of confidentiality with their CPA.
In this regard, I think it is most important that when somebody is
talking to their tax preparer, when they are going over all their books
and records, that they know that their tax preparer is not going to be
called in and questioned because he has no particular rights of
confidentiality. This particular bill will correct this situation and
let the taxpayer have confidence, the same confidence that he has in
dealing with his lawyer, and that is only fair.
I think one of the other big things in this bill that other Members
have talked about today but is tremendously important, it puts the
burden of proof on the IRS instead of the taxpayer.
I remember in studying the Tax Code as a student in college and at
law school that it always was confusing to me how we could have this
sense of justice where a taxpayer has to prove his innocence as far as
the amount of taxes that are owed in order to prove his case and the
IRS really does not have to prove anything. This is bringing about
fairness, and for the first time the burden of proof will be on the
IRS.
This is a tremendous bill. This is a first step. I want to say, it is
only a first step in ripping out the entire Code to reform the Code and
perhaps even give us the opportunity, the historic opportunity, to
take, eliminate the income tax as we know it today and, in its place,
put another type of revenue collection for the Federal Government that
will be fairer, easier to administer, and much easier and fairer in
being able to enforce by the Federal Government.
Again, my compliments for all of those who put this bill in place. It
certainly is, I think, a very, very good day in the history of the U.S.
House of Representatives.
{time} 1345
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, let me associate myself with the remarks of the
gentleman from Florida [Mr. Shaw] that we have in a bipartisan way
moved forward in trying to correct the abuses and better the collection
of taxes. I do not see anything in this bill that deals with the
simplification, even though there is hope that this bipartisan spirit
will continue.
I have been invited to join this Scrap the Code trip, and I accept.
Let us scrap it. But I think they ought to, anyone that is going to
join with them in this effort, to at least talk about what they are
going to replace it with. There are just as many different views on
their side as there is on our side. But I do not think it is fair to
the American people, as political as it may sound, to promise them that
they are getting rid of this complex Tax Code, which none of us are
proud of, and not tell them what they are replacing it with.
Mr. PORTMAN. Mr. Speaker, will the gentleman yield?
Mr. RANGEL. I yield to the gentleman from Ohio.
Mr. PORTMAN. Mr. Speaker, the gentleman from New York [Mr. Rangel]
just said that there is nothing in this legislation with regard to
simplification. As the gentleman from New York [Mr. Rangel] is aware,
there is for the first time ever in this legislation the requirement
that my colleague or I or anybody else who has a new tax idea has to
subject it to this simplification analysis. And if we do not do that,
my colleague or I or any other Member can raise a point of order on the
floor of the House.
This is not the flat tax. It is not the sales tax. It is not
scrapping the code and starting over. But it is a first small, baby
step in the right direction, because every incentive now, as my
colleague knows, goes the other way, and he talked about it earlier.
[[Page H10039]]
Mr. RANGEL. When this reaches the President's desk, let us, my
colleague and I, talk about that provision.
Mr. Speaker, I yield 2 minutes to the gentleman from North Carolina
[Mr. Price].
Mr. PRICE of North Carolina. Mr. Speaker, like other Members, I have
helped many, many constituents resolve disputes with the Internal
Revenue Service.
In one case earlier this year, a Raleigh man trying to make good on
his back taxes was not told that he had the option of setting up a
payment plan. Instead, the IRS placed a lien on his bank account. In
another case, a woman who had set up a payment plan and made every
payment on time received notice that her plan had been canceled and her
entire balance was due within 2 weeks.
Fortunately, I was able to help these constituents. But not every
taxpayer is able to come to their Member of Congress. We need to fix
the system for everybody. We need to restructure the IRS. We need to do
away with tax collection quotas. We need to revise rigid rules. And we
need to set customer service oriented collection policies that are
geared toward assisting taxpayers in complying with the law rather than
punishing them.
H.R. 2676 is based on the recommendations of the bipartisan National
Commission on Restructuring the IRS. It will strengthen taxpayer rights
and modernize the administration of the IRS. The new IRS Oversight
Board, made up of a majority of private sector professionals, will have
the authority to eliminate collection quotas and measure performance by
the quality of service that agents provide.
Mr. Speaker, passage of H.R. 2676 will restructure the IRS and pave
the way for further reform and simplification of the Tax Code. I urge
my colleagues to vote for this long overdue legislation.
Mr. PORTMAN. Mr. Speaker, I yield 1 minute to the gentleman from
Montana [Mr. Hill].
Mr. HILL. Mr. Speaker, I rise in strong support of the Portman-
McCrery reform of the IRS.
Mr. Speaker, nothing evokes greater fear in the heart of taxpayers,
in the hearts of small business owners than does a notice from the IRS.
Men and women who obey the law, follow the rules, and respect their
responsibilities to collect and report and pay taxes have great fear of
the IRS.
Why is it that law-abiding people fear this organization? Well, the
reason is, what we saw in the Senate hearings just a few days ago,
reported abuses by the employees in the IRS and abuses in terms of how
the IRS is oriented toward dealing with the public. We do not need
hearings in the House of Representatives to know that the IRS is
frequently causing great conflict for taxpayers.
H.R. 2676 is a good start because it focuses on serving the public
and serving taxpayers rather than enforcement. It changes performance
standards so people are rated on the basis of how well they serve the
public rather than how strictly they enforce the law. It creates an
oversight board of citizens. It creates a taxpayers' advocate. It
creates accountability, Mr. Speaker. And that is why I support the
measure.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Texas [Ms. Jackson-Lee].
[Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the gentleman from New
York [Mr. Rangel] for yielding me the time, and I thank the committee
for its leadership.
The discussion that we have had on the floor today emphasizes that we
have come now full circle to recognize that concerns by citizens about
the IRS are well-founded. Although we pay tribute to those hard-working
Internal Revenue Service employees that work day after day doing their
job, it is important that we now in a bipartisan manner reform the IRS.
I think that is important.
This is not a Republican piece of legislation. It is not a Democratic
piece of legislation. In fact, I would like to see more things being
done. But I am here to generally speak to the fact that we are, at
least, doing something. And I will continue to review H.R. 2676, along
with its many amendments, to determine its adaptability to the concerns
that I have.
First of all, I held a hearing with constituents in my district in
Houston where they testified to many examples of problems with the IRS.
The story of a doctor who was obviously not leaving town, and who
attempted to resolve his problems with the IRS; when an IRS agent came
into his office to physically remove him from his medical practice
while he was attending to his patients and then to further close down
his doors. What about the law enforcement officer, wounded and injured
and in his hospital bed, only to find out that his house had been
foreclosed on and other tragic situations happening while he was
recuperating from a job injury. These are the kinds of grievances that
we face all the time.
I am delighted that we are looking at opportunities, for example, to
move the burden of proof so that taxpayers in IRS court cases are
considered innocent until being proven guilty. I am interested, of
course, in the oversight board. I think that has great possibilities.
And certainly I am concerned about the fairness of IRS audits. The
common law privilege of attorney-client privilege for those authorized
to practice before the IRS will now be afforded, as it should be to
persons--tax advisors--representing taxpayers before the IRS. It will
also end the use and abuse of summons by the IRS in looking for
documents. A spouse who may be innocent for the mistakes of another
spouse in preparing a tax return will also now be afforded tax relief.
Let me conclude, Mr. Speaker, by explaining parts of IRS reform
legislation, the Taxpayers Justice Act of 1997, that I intend to offer
in the legislation. It provides for a true taxpayer's citizen's
advocate located in IRS regions throughout the Nation, serving as a
watchdog over the IRS. Additional provisions relating to eliminating
discrimination in the workplace and solving unfair tax burdens put on
the divorced spouse.
Mr. Speaker, I include the following for the Record:
Mr. Speaker, I rise today in support of reforming the Internal
Revenue Service to make it more efficient, accountable, modern and
taxpayer friendly. This is the call from the constituents of the 18th
Congressional District in Texas that I heard when I recently held a
town hall forum on IRS abuses of taxpayers.
The stories of coercion, corruption and scare tactics of IRS agents
that I heard were more than enough for me to prepare for introduction
of my own IRS reform bill. Entitled the ``Taxpayer Justice Act of
1997'' it has many of the provisions that are being offered today in
this comprehensive reform bill.
My bill called for civil and criminal penalties if there is a finding
of abuse of taxpayer's rights. Therefore, I can endorse the opening up
of the Government for civil liability for taxpayer abuse. This bill
would extend the liability of the government for IRS abuse caused by
those who may negligently diregard our tax laws. This is a safeguard
that I know taxpayers are demanding and one that I strongly support.
The establishment of an independent oversight board by the President
is another provision in my bill as well. There is no doubt that such
oversight of the administrative functions of the IRS is necessary after
the disclosure of the atrocities that I heard and the stories that came
forward from the citizens in Houston. There were, in fact, cases of
possible suicide over the tactics that were used and it is time to end
such abuses. The oversight board will have the responsibility to review
and advise the Secretary of the Treasury about customer service
measures that will make sense. Such oversight is necessary if we are to
make the IRS more efficient.
Shifting the burden of proof to the IRS is another practical measure
that makes good sense and one that is in my bill as well. In every
other proceeding where the government is moving against a citizen in a
court of law, the government bears the burden of proving the facts. It
is high time that the IRS come in line with this time-honored tradition
of the government bearing the burden of proving any factual issue it is
asserting in a court of law.
This burden of proof will be enforced after the taxpayer has fully
cooperated with the IRS with respect to the factual issue. A taxpayer
would be required to provide access to the information, witnesses and
documents within the control of the taxpayer. This makes the proceeding
more in line with every other court proceeding and makes it fair.
This bill would also correct meaningful measures that will insure
taxpayer fairness in IRS audits and collection activities. The common
law privilege of attorney-client privilege for those tax advisors
authorized to practice
[[Page H10040]]
before the IRS will now be afforded as it should be. It would also end
the use and abuse of summons by the IRS in looking for documents. Under
this bill the IRS would be required to make reasonable inquiries and
could not issue a summons until it has used other reasonable methods to
ascertain where the information it is seeking may be.
The bill also provides for making more information available to the
taxpayers. It requires the IRS to print and make available to taxpayers
explanations that make sense and clarify a variety of complicated
matters. Married taxpayers will be alerted to liabilities that they
would be jointly liable for even though only one spouse earned the
income.
A spouse who may be innocent for the mistakes of another spouse in
preparing a tax return will also now be afforded relief from tax
liability, interest and penalties. Now a spouse who has nothing to do
with the preparation of the return is fully liable for the mistakes.
This wrong and would be corrected by this bill.
Again, Mr. Speaker, it is high time that we have the IRS reform that
the American people have been calling for. I support this bill and urge
my colleagues to vote for it.
Mr. PORTMAN. Mr. Speaker, I ask the gentleman from New York [Mr.
Rangel] if he has any additional speakers?
Mr. RANGEL. Mr. Speaker, I have no speakers at this time.
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