[Congressional Record Volume 143, Number 156 (Saturday, November 8, 1997)]
[Senate]
[Pages S12097-S12103]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     IRS RESTRUCTURING ACT OF 1997

  Mr. REID. Will the Senator from Nebraska yield for a question?
  Mr. KERREY. Sure.
  Mr. REID. Will the Senator restate the unanimous-consent request he 
had that was objected to?
  Mr. KERREY. I asked the Senate to grant unanimous consent to proceed 
immediately to H.R. 2676, which is the IRS Restructuring Act of 1997 
that was received from the House on Wednesday, that the bill be read a 
third time and passed and the motion to reconsider be laid on the 
table.
  Mr. REID. I ask my friend, is that the same bill that passed the 
House of Representatives by a vote of 424 to 4?
  Mr. KERREY. That is correct. Actually, I believe it is 426 to 4.
  Mr. REID. Yes, 426 to 4. I ask my friend from Nebraska, is that the 
bill that created a new citizens oversight board?
  Mr. KERREY. That is correct. It creates a public board that would for 
the first time have oversight of the IRS, have the power to develop a 
strategic plan, and make budget recommendations to the Secretary of the 
Treasury.
  Mrs. BOXER. Mr. President, the Senate is not in order.
  The PRESIDING OFFICER. The Senate will be in order.
  Mr. REID. I ask my friend, is this the same bill that when the IRS is 
proven to have done something wrong, the person who is wronged can 
collect attorney's fees from the Internal Revenue Service?
  Mr. KERREY. That is correct. A taxpayer under this legislation, under 
this new law, would have the power to collect attorney's fees and to 
collect up to $100,000 if the IRS was held to be negligent.
  Mr. REID. Is it true that this also creates a toll-free number for 
people to register complaints against the IRS?
  Mr. KERREY. That is correct. It does create a toll-free number and 
powerful new incentives to move to electronic filing.
  Mr. REID. I ask my friend, is this the same bill that creates a 
taxpayers' advocate office?
  Mr. KERREY. That is correct. A new public board, in fact, would make 
the hiring decision and create an independent taxpayer advocate. The 
current advocate, as you know, is an employee of the IRS and, as a 
consequence, although he has done a good job, in many ways has a 
conflict of interest because his performance is being judged by IRS 
managers.
  Mr. REID. I also ask my friend, is it also true in tax cases that the 
burden of proof shifts? As I understand--and I am asking this question 
of my friend from Nebraska--it is my impression now that the burden of 
proof to prove yourself, in effect, innocent is upon the taxpayer. Is 
that the way the law is now?
  Mr. KERREY. That is correct.
  Mr. REID. Would this law change that?
  Mr. KERREY. This law would change it when it reached the tax court. 
In those cases where the taxpayer reached the tax court, the 
presumption would not be on the taxpayers to prove that they are 
innocent.
  Mr. REID. I ask my friend also, during the time that the Finance 
Committee held their hearing and during the time that the commission 
met, is it true that there was evidence which came up to show that the 
IRS did have quotas for advancing people in the IRS hierarchy? And is 
it true that was against the law? It is against the law.
  Mr. KERREY. That is true. In fact, the 3 days of hearings that the 
Senate Finance Committee held under the leadership of Chairman Roth 
clearly exposed incidents out there in violation of the law where 
audits are done, where collection efforts are made based on quotas, 
based upon goals to try to go out and get individuals, regardless of 
whether or not there was additional tax actually being owed. In 
addition, I would say to my friend from Nevada, the current law allows 
the IRS to keep confidential and private all audit criteria.
  Citizens may be surprised to know this, but if you ask the IRS today, 
``What are your audit criteria? On what basis do you evaluate the 
taxpayers of Iowa or Delaware or Nebraska or Vermont or Mississippi? 
How do you evaluate your audits? How do you decide on what basis you 
are going to proceed on an audit?'' the IRS will say to you, ``You 
don't have a right to know. We won't disclose that information.'' The 
only available information has been obtained through a woman at the 
University of Syracuse through a Freedom of Information Act request for 
that information. If you look at audit data she has collected, you see 
broad variations, broad variations from State to State. In one State 
there will be very high percentages of audits; in another, very low 
percentages of audits. It is very inconsistent and subjective. Under 
this law, the audit standards and the criteria for audit would have to 
be made public. It would, as well, create a mechanism for expedited 
answers of Freedom of Information Act requests.
  Mr. REID. I say to my friend, if we do not pass this legislation, 
now, early in November, until we come back late in January, it is my 
understanding there will be about 1.5 million Americans who will have 
dealings with the Internal Revenue Service where they are being 
questioned as to whether or not their tax burden is appropriate. Could 
we avoid that for at least a significant number of these people if we 
passed this legislation?
  Mr. KERREY. The answer is absolutely yes. Indeed, I said the House 
passed this bill 426 to 4 on Wednesday. I came to the floor and asked 
unanimous consent to take it up on Thursday, did so again on Friday, 
and did so again on Saturday. I say to those who are wondering what is 
the impact of this, what is the impact of delay, the Senator is exactly 
right. The Senator is exactly right. There are 135,000 notices every 
single day. Every single day, 135,000 notices are sent to the taxpayers 
of the United States of America. What do those notices say? They say: 
You owe us more money.
  Talk to somebody--I urge my colleagues, particularly on the other 
side of the aisle--talk to taxpayers who get one of these notices. Ask 
them how much power they have. Ask them how they feel when they receive 
one these letters. Ask them what kind of access they have to the IRS 
under the current law. And they will tell you it's a terrifying moment 
when you receive that letter. You either pay it or you know you are 
going to spend an awful lot of money and an awful lot of time to 
dispute the dollar amount that the IRS says that you owe.
  In addition, every single day, 250,000 Americans call the IRS. A 
quarter of them can't even get through. And of the ones that get 
through, 25 percent get the wrong answer. It is one of the reasons, 
when we did our poll----

[[Page S12098]]

  Mr. LEAHY. May we have order in the Senate?
  The PRESIDING OFFICER. The Senate will be in order.
  Mr. KERREY. Unlike this remarkable poll, and I have to say I hope my 
colleagues on the other side of the aisle will object if Speaker 
Gingrich tries to allocate somewhere between $30 and $100 million of 
taxpayer money for a 14-question poll, among which questions are: Do 
you think taxes are fair or unfair?
  Whatever you think about this piece of legislation--do it next year 
or do it now, on behalf of the taxpayers--I will guarantee if the IRS 
was spending $100 million which could go to taxpayer service, which 
could go to lots of other things, to do a 14-question poll mailed out 
to 80 million taxpayers, made available in every single post office, 
mailed out to every single provider, and then, guess what, then you 
mail it back, the taxpayer does, to the General Accounting Office to be 
compiled--you are not going to have 250,000 phone calls every single 
day. You are going to have another 100,000 phone calls from taxpayers 
who are going to say, ``What the heck does this mean?'' They are going 
to call their service centers.
  So, while we are all sitting here saying we want the IRS to operate 
better, we have under consideration a poll that is going to make it 
more difficult for the IRS to do their job because you are going to 
have another 100,000 phone calls or so coming into the IRS office by 
confused taxpayers wondering what this is all about.

  Between the time that this piece of legislation was passed by the 
House--and it is right down here at desk. All we have to do is ask 
unanimous consent to take this up. All the Republicans have to do is 
not object, allow the bill to be taken up. There have been 270,000 
citizens between the time it got to that desk and right now--270,000 
citizens got notices in the mail that they owe taxes. And another half 
a million who have called the IRS, trying to get a question answered.
  Mr. REID. I ask another question to my friend. Isn't it true that the 
employees of the Internal Revenue Service, these people who work very 
hard every day--not the bosses, but the employees of the Internal 
Revenue Service--favor this legislation?
  Mr. KERREY. Yes. In fact, not only does the National Federation of 
Independent Businessmen support this legislation, not only do most of 
the providers organizations that help taxpayers fill out their forms, 
but the head of the National Treasury Employees Union supports this 
legislation and has indicated that he wants to get it passed in a 
hurry.
  Former Secretary of Treasury Baker and Brady and current Secretary of 
Treasury Rubin support this legislation. The previous IRS Commissioner, 
Peggy Richardson, supports this legislation, as does previous 
Commissioner Fred Goldberg, who is a member of the Commission.
  You are absolutely right. The employees themselves are saying give 
the Commissioner the authority. When Mr. Rossotti came before the 
Finance Committee, everybody was very impressed that the President 
would send up an individual who had experience in the private sector. 
Mr. Rossotti said, ``I am going to manage this agency.''
  I said to him, ``You know, Mr. Rossotti, you are going to get over 
there and you will have a lot of responsibility but you don't have any 
authority. You can't even bring on the senior management, you can't 
provide the private-sector incentives you are describing out there. You 
have six legislative committees, three in the House and three in the 
Senate, with jurisdiction over you. You get through this next filing 
season with no problems and life is going to be good for you, but just 
have a little glitch between now and then and you are going to find out 
people are going to call you up in a hurry and blame you for all the 
things that you have no authority to do.''
  So I hope my colleagues on the other side will look at this 
legislation. The chairman has indicated he has objections, he would 
like to add some additional things. Most of the things he wants to add 
I support. I would like to get it done. He wants to hold hearings next 
year and do it. But these changes, for gosh shakes--if you look at the 
law as passed by the House, right down here at the desk, you scratch 
your head and say: For gosh sakes, that's common sense. We ought to 
already allow it.
  So, on behalf of the taxpayers who get notices and will be calling 
the IRS every single day between now and the next year, I hope, between 
now and the next days, we can pass it. We could conference this thing 
in record time.
  Mr. REID. It is my understanding that everyone on this side of the 
aisle, all Democrats, support this legislation moving forward 
immediately; is that true?
  Mr. KERREY. Not only is that true but my guess is, if it were to be 
taken up, if no objection were placed against this unanimous-consent 
request, my guess is on final passage you would get 100 votes.
  Mr. REID. So it's fair to say that virtually everybody in this 
Chamber, Democrats and Republicans, support this legislation?
  Mr. KERREY. I think it is fair to say that. There are some who will 
say I want the board to have more authority, a few odds and ends done, 
but I don't think anybody in the Chamber would object to changing the 
law to give the Commissioner the authority to manage this agency or do 
all the other things the distinguished Senator from Nevada has 
identified on behalf of taxpayers, like providing a public statement of 
the basis of audits--I don't think anybody could object to doing that. 
And anybody looking at it, I think, would say, ``Gee, that is not going 
to make things worse. That's going to make things an awful lot better 
for those taxpayers getting notices and those taxpayers calling the 
IRS.''

  Mr. REID. I finally say to my friend from Nebraska that this 
legislation is good legislation. I am happy to be an original cosponsor 
of it. It is something the American people want and this Senate should 
deliver it. The House has already passed this legislation. Would the 
Senator agree?
  Mr. KERREY. I completely agree with the distinguished Senator from 
Nevada on that point. Again, as long as we are in session, I intend to 
continue to come to the floor and ask unanimous consent to take this 
legislation up. Not because I think it is controversial, but because I 
think it is not controversial. We are hammering out in back-rooms all 
over this Capitol all kinds of deals to try to get fast track, to try 
to get things that are extremely controversial. This one is not. It has 
extremely broad support, a large margin of victory when it passed: 426 
to 4 in the House. It is going to conference very easily. I have been 
down here three times. I will continue to come down here and ask 
unanimous consent to proceed immediately to consideration of this 
legislation.
  Mr. BUMPERS. Will the Senator yield for a couple of comments and then 
a question?
  Mr. KERREY. I will be happy to.
  Mr. BUMPERS. First of all, when I was Governor of my State, one of 
the first orders I issued was that any employee of the Arkansas Revenue 
Department would be summarily fired if it was found that that employee, 
without provocation, was rude to a taxpayer. And within 3 weeks we 
fired one employee, and it had an unbelievable impact on the conduct of 
everybody else. We had very little trouble out of the revenue 
department during my 4 years as Governor.
  No. 2, insofar as the Speaker's proposal to spend a minimum of $30 
million doing a survey, sending out a questionnaire to the taxpayers of 
this country asking how do you feel about your taxes and how do you 
feel about the IRS, I can save him that $30 million. I already know the 
answer. Every Member of this body knows the answer to that question. 
People think they are overtaxed and they think the IRS is filled with a 
bunch of arrogant bureaucrats whose whole purpose in life is to make 
people miserable.
  Finally, my question concerns this matter of attorney fees. Could you 
tell us what the criteria is in tax court? Let me walk through a case.
  Let's say the IRS sends you a notice and says we have determined in 
looking over your tax return that you owe us an additional $5,000, and 
here is why. And you write back and say I disagree. At that point, the 
burden is on you to prove that you don't owe $5,000, and under this 
bill the burden will remain on you to prove that you don't owe $5,000.
  If the IRS feels that they have won the argument, that you in fact do 
owe

[[Page S12099]]

$5,000, and they refuse to relent, the normal method for you to 
challenge that is for you to pay the $5,000 and then go to tax court to 
recover it. Is that a fair statement?
  Mr. KERREY. That is correct.
  Mr. REID. That's true.
  Mr. BUMPERS. My question is, if you do recover the $5,000 in tax 
court, are you automatically entitled to attorney's fees under this 
bill?
  Mr. KERREY. You would be entitled to attorney's fees under this bill, 
yes.
  Mr. BUMPERS. Let me ask you this question. Let's say we have a 
criminal case where the IRS charges you with tax evasion, that is, 
deliberately defrauding the Federal Government by evading or cheating 
on your income tax return. Then the U.S. attorney's office will indict 
you and haul you into court for a criminal trial.
  At that point the IRS, of course, does have to sustain the burden, is 
that not correct?

  Mr. KERREY. That is correct.
  Mr. BUMPERS. Now, assuming that the IRS does not get a conviction in 
that case, then is the taxpayer entitled to attorney fees?
  Mr. KERREY. I actually do not have an answer to your question, as to 
whether or not that is the case.
  Mr. BUMPERS. I don't know the answer either. I think under existing 
law, and certainly under the Hyde amendment, you would be entitled to 
attorney fees if you were--I forget the exact language, something to 
the effect that if you have been frivolously or vexatiously charged and 
tried, you are entitled to attorney fees. But there is an existing 
statute which provides attorney fees if the court decides that this 
case should never have been brought, and several other criteria.
  But I just wondered if this bill changed any of that regarding 
criminal trials.
  Mr. KERREY. I don't have an answer, specifically, to your question. I 
can say that one of the things that we have done with this legislation 
is to make the taxpayer advocate more independent. Very often that is 
what is missing. Let's say that you are one of the 135,000, or you are 
one of the 270,000 since we have asked for this bill to be taken up, 
who get a notice and you disagree with that notice. There is a dispute 
resolution officer who works for the taxpayer advocate that you can 
call up. You can say, ``Look, I have a dispute here. I think it is 
unfair. I would like to come in and talk to you.'' There is a mechanism 
under the Taxpayer Bill of Rights II to do that. And what we do is make 
that taxpayer advocate even more independent.
  Very often what happens is the law requires the revenue agent to 
collect, even though the revenue agents say this doesn't make any 
sense. There is no mechanism that enables the revenue agent to be 
overruled. What we do is, by giving that taxpayer advocate more 
independence and more power and more authority to overrule, I think we 
are going to reduce substantially the number of cases where a person 
looks at it and says, ``My gosh, why would you spend a quarter of a 
million dollars to collect 100 bucks, or something like that?'' These 
are cases that come all the time into our offices, and under the 
current law we are simply not able to do anything.
  Mr. BUMPERS. Senator, if I could just make one last comment. This is 
not in defense of the IRS, just simply an observation. The truth of the 
matter is a lot of people resent the taxes they have to pay. That is a 
given. My salary is paid by the taxpayers, but every April 15 I get a 
little vexed, just like every other taxpayer does, about what I have to 
pay. But having said that, I think it would be remiss if we didn't 
point out that we lose $100 billion a year in taxes to the Federal 
Treasury by people who defraud the system, the underground economy.
  Consider the fact that 1997, this year, the people of this country 
will pay about $650 billion in personal income tax.
  The corporate tax, as you know, yields much less than that. But just 
take the personal income tax. If we are losing $100 billion from people 
who absolutely refuse to live by the law--and that is who IRS ought to 
be after, of course--that is one of the reasons the rest of us have to 
pay more, because a lot of people don't.
  I just wanted to make that point and to say I think the IRS generally 
tries its best to collect the appropriate amount of taxes. The thing 
that gets all of us in more trouble than anything else is when honest, 
hard-working people are pilloried by a bureaucratic agent or auditor 
from the IRS. The agent may be right. It is usually not so much a 
question of whether the agent is right or not; it is their conduct that 
is offensive to people, and that is one of the reasons their public 
relations is so poor.
  Mr. KERREY. I appreciate both the Senators' questions and statements. 
As a former Governor, I have commented right from the beginning that he 
could fire anybody who was a discourteous employee.
  Let me say again, for the record, we have a remarkable system of tax 
collection in the United States that is largely voluntary. One of the 
disturbing things about the current trend is we have gone from 93 
percent voluntary compliance down to 83 percent in the last 30 years. 
That means 83 percent of our taxpayers voluntarily comply, and they are 
paying higher taxes as a result of the 17 percent who don't.
  There is a need to make certain there is a sufficient amount of law 
enforcement out there. The dilemma, though, is the current law, and I 
underscore this because we are a nation of laws, after all. The IRS is 
not a corporation. It is created by law, and it operates under law. 
Nobody doubts if their workload went up as a result of the balanced 
budget agreement we just passed. There is significant new complexity in 
there of, what, four or five different rates you are paying for capital 
gains.
  Mr. BUMPERS. I think an additional 800 pages in the code.
  Mr. KERREY. An additional 800 pages in the code. Lord knows, this is 
good news to them compared to some years we don't pass a tax bill until 
about now, until they are almost always into their filing season.
  What we have to understand, what citizens need to understand is the 
IRS is managed according to law. So title I of this bill that is 
sitting down here at this desk passed 421 to 4 in the House. Title I of 
this bill deals with management and accountability. Who could possibly 
object to passing a piece of legislation that would give the 
Commissioner of the IRS the management authority to do what you just 
described?
  If the President of the United States calls up the Tax Commissioner, 
who he just appointed and we just confirmed, and says, ``I just heard 
Senator Bumpers on the floor say something really pretty smart, 
unusual. He said that when he was Governor of Arkansas, he told his 
revenue commissioner that anybody who is discourteous is going to be 
fired. I want you to do that.''
  Do you know what Mr. Rossotti would say? ``That is a great idea, Mr. 
President, but the law doesn't give me that authority. I can't even 
hire my senior people. I can't manage this agency.'' The law doesn't 
give him that authority. It is not a corporation, it is a creature of 
law, and we have written this law so as to confine and make it 
difficult for the Commissioner to do the job.
  You would think the question the Senator from Nevada asked earlier, 
if he is going to have this new authority to hire and fire, certainly 
the employees must be against that. Absolutely not. The Treasury 
Employees Union supports this legislation. Why? They know the 
Commissioner can't manage the agency. They know the new provisions not 
only to manage the agency but to provide accountability and oversight, 
both with a new public board and with a restructured legislative 
oversight process, is necessary, is needed, in order to get shared 
consensus on what the strategic plan is going to be.
  That is what has been failing over the years. That is what has been 
missing over the years. By the way, I have only been here 8 years, but 
I have never heard a Commissioner get up during the middle of a tax 
debate and say, ``Gee, Mr. President, that's a great tax idea you 
have,'' or ``Senator'' whoever, ``that's a great tax idea you have, but 
this is what it is going to cost the taxpayer to comply.''
  The taxpayers already spend $200 billion a year--$200 billion a 
year--just to fill out the forms. You say everybody in this body ought 
to be for simplification. I think the tax bill passed 90-some to 8. I 
know I voted for it. I think the

[[Page S12100]]

distinguished Senator from Arkansas did not, so he can reclaim the 
floor and tell me what a fool I was, talking about simplification out 
of one side of my mouth and out of the other side of my mouth I voted 
for something that creates complexity.
  For the first time, we give the Commissioner the authority to be at 
the table when tax law is written for the taxpayer and say, ``This is 
what it is going to cost the taxpayer, this is what they are going to 
have to do to comply, Mr. President, or Mr. Chairman, of whatever.''
  We would give under this law the Commissioner not just the authority 
to manage, not just a restructured public board that would give the 
citizens a view of what is going on inside this agency and 
restructuring Congress so there is more consistent oversight.
  The wonderful hearings the Finance Committee had, I was shocked to 
find out that was the first time in 20 years where the full committee 
had hearings of that kind. Some people criticize us saying we bash the 
IRS. I guess once every 20 years is all we are supposed to do.
  The law is what dictates what the IRS can and cannot do. The law 
does. We can't bash the employees, the managers of the IRS on the one 
hand while on the other hand we refuse to take up a piece of 
legislation that would give the Commissioner the authority to do 
everything that we say we want the Commissioner to do.
  So, as I said, it has been since Wednesday that the bill got down 
there. I have done this now three times on 3 straight days, and in that 
time, a quarter of a million taxpayers have received notices in the 
mail: ``Dear Mr. and Mrs. Smith, you owe us X amount of dollars.'' 
Another half a million people have called up their IRS service center 
or their IRS office and tried to get a question answered and haven't 
been able to do so.
  Again, I underscore, I hope my colleagues on both sides of the aisle 
understand that the Speaker may be successful in getting $30 million, 
up to $100 million of taxpayer money allocated to do a 14-question 
poll. If you look at these questions, you would say, ``My gosh, we can 
answer those questions without spending $30 to $80 million of 
taxpayers' money to get answers that are so obvious it is embarrassing 
to even ask them, even if it were for free.''
  Mr. LEAHY. Will the Senator yield without losing his right to floor?
  Mr. KERREY. I will be pleased to yield.
  Mr. LEAHY. Mr. President, is the Senator aware that you can do a 
nationwide poll within 3 to 4 percentage points for under $50,000? Is 
that not correct?
  Mr. KERREY. Indeed, the restructuring commission did a poll for 
$20,000.
  Mr. LEAHY. Mr. President, I wonder if the Senator is aware that we 
seem to go off on things that are not very urgent, whereas we don't 
take time for things that are urgent.
  For example, the nomination of Bill Lann Lee. All the members of the 
Judiciary Committee on this side of the aisle have asked the chairman 
for another hearing on Bill Lann Lee, because it is obvious from the 
debate we had on Thursday in the committee that misstatements of facts 
have been used, distortion of his record have been used. We find that 
people supposedly opposing Bill Lann Lee, in fact, support him. We find 
the cases in which he was involved were misconstrued.
  So I just mention this, if we want to do something worthwhile, then I 
hope the Judiciary Committee and the chairman will stop refusing to 
have another hearing and will listen to all of us who have asked for 
another hearing out of fairness to a man who has been much maligned.
  I thank the distinguished Senator from Nebraska and yield back to him 
to answer the question.
  Mr. KERREY. What was the question again?
  Mr. President, I hope that in the next day or two, while we are 
deliberating in this world's greatest deliberative body, resolving all 
the terrible conflicts we have on a variety of things, I hope we are 
able to get consideration of this legislation. I believe it will pass 
almost unanimously, if not unanimously, in the Senate. I believe it 
could be conferenced very, very quickly with the House and be on to the 
President.
  I think all of us, once it is passed and signed by the President, 
will feel glad that we changed the law to give the Commissioner the 
kind of authority that the Commissioner is going to need to manage this 
rather difficult and troubled agency.
  I thank, again, my very patient chairman for waiting for this 
opportunity to respond. I appreciate, again, his leadership in 
conducting 3 days of public hearings, piercing the 6103 veil to be able 
to see inside this agency even further than what the restructuring 
commission did. I yield the floor.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. ROTH. Mr. President, this is the third day in a row that the 
Senator from Nebraska, Senator Kerrey, has asked for a unanimous-
consent agreement to pass the House IRS restructuring bill. And for the 
third day in a row, I have, again, objected.
  Moving this bill today by unanimous consent is the politically 
expedient thing to do. It is the easy thing to do, and if we approve 
this legislation now, we could all go home and try to convince our 
constituents that we solved all the problems with the IRS and they 
wouldn't have to worry again.
  But this would not be true. This bill, while it is a good start, does 
not address the very egregious problems that the Senate Finance 
Committee exposed in our September hearings. The most significant 
reform in this bill is the creation of an oversight board. But, Mr. 
President, the board does not have the power to look at audit and 
collection issues where the most help is needed for the taxpayer. It 
falls short on many accountability issues that were raised at our 
hearings, basic issues such as requiring employees to sign 
correspondence to taxpayers. It does not alter the power that agents 
have to abusively slap liens and levies on taxpayers. It does not 
ensure taxpayers their due-process rights.

  Those are only a few of the missing links. The restructuring 
commission and the Ways and Means Committee did good work, but what 
they have done is only a beginning. We need to go further.
  Some have said let's pass this now and then come back and do more 
next year. Well, Mr. President, we know where that will lead. If we 
pass this reform legislation, legislation that even Senator Kerrey 
admits has important omissions, those who are not anxious to pass it 
will rise up and cry that we have already passed reform legislation. 
When we attempt to strengthen it, they will say that we need no further 
reform or that we must give this effort a few years to see that it 
works. The truth is, we will basically get only one real chance to 
reform the IRS, and for the taxpayer, we must get it right. I yield the 
floor.
  Ms. MOSELEY-BRAUN addressed the Chair.
  Mr. KERREY. I want to respond, and then I will get out of here.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. KERREY. Mr. President, again, I want to praise the chairman of 
the Finance Committee for the hearings and the chance given to this. I 
respectfully disagree. I don't think we will just get one bite of the 
apple. I believe Majority Leader Lott and the Speaker are committed to 
going further. Both of them have talked especially about the need to 
simplify the Tax Code. I would be surprised if either one of them would 
object to some of the additional things that Chairman Roth has 
indicated that he wants to address.
  I just say very respectfully on behalf of the taxpayers who are not 
going to have an agency that is managed well, this is not just a public 
board. Title I does change the way that oversight occurs, both on the 
legislative and on the executive side. There is no question that that 
change is important. But I believe that the most important piece of 
this legislation is giving the Commissioner the authority under the law 
to manage the agency. That is the most important thing that is missing 
today.
  Second, I think it is not a small item to say that for the first 
time, the American people will have an agency that will be required 
under the law to provide them the audit standards. Why

[[Page S12101]]

do you audit a certain way in Nebraska, a certain way in Iowa and a 
certain way in all the other States?
  What is the basis of the audits?
  Today, the IRS, under the law--they don't withhold it because they 
are being ornery or don't withhold it because they just don't want to 
give it to us. The law says: Do not give it. The law says: Do not 
provide it publicly.
  It is not a small item to provide to the taxpayers public 
information, to give them a window on why audits are done, and what is 
the standard to which audits occur. It is not a small item to shift to 
the taxpayer additional power and give the taxpayer advocate the kind 
of independence that the taxpayers themselves have asked for over and 
over and over.
  We had 12 days of public hearings. The congressionally mandated 
restructuring commission that Congressman Portman and I chaired, during 
that we heard over and over and over that the No. 1 problem is the 
law--the law in regards to complexity, the law in regards to power, the 
law in regards to oversight, the law in regards to management.
  This process started clear back in 1995 when we discovered that 
through a GAO audit that nearly $3.5 billion of the taxpayer money had 
been wasted on a taxpayer modernization system. Why? Because the IRS 
and the Congress don't have a mechanism where they can reach consensus 
on a strategic plan. And without a strategic plan, no matter what you 
did with technology, you are apt to spend money incorrectly.
  So this process began over 2 years ago and has deliberated that 
entire time. And I have to say, I am not going to go home--if this 
piece of legislation were to be enacted--and I intend to come down 
again and ask unanimous consent so that it can be taken up. It is lying 
right there at the table. It is not one of these controversial things 
that we are debating, trying to get done, so we can get out of here. 
This one is going to pass with a big margin.
  I don't have to go home and say it solves every problem. I don't have 
go home and say we have solved every education problem because we just 
passed Labor-HHS. We know there is still work to be done next year. We 
know there is still work to be done in the defense authorization bill. 
We didn't hold it up because we said, ``Gosh, we've got to solve every 
problem before we enact this legislation.'' We understand--I hope we 
understand that our best course is to try to make incremental progress, 
do those things where Republicans and Democrats know that change in the 
law will improve the operation of some agency of Government.
  Ms. MOSELEY-BRAUN. Will the Senator yield for a question?
  Mr. KERREY. I will be pleased to.
  Ms. MOSELEY-BRAUN. Is the Senator aware of any voices in opposition 
or people who are not anxious to pass this bill? It passed 
overwhelmingly in the House. And it is my understanding and impression 
from this Chamber that just about everybody wants to have an 
opportunity to pass this legislation or to vote on IRS reform sooner 
rather than later.
  Is the Senator aware of any group or organizations or individuals who 
have reached out and said, ``No, no, we don't want to reform the IRS''?
  Mr. KERREY. No. Indeed, it is endorsed by almost every organization 
outside of the Government that has contact with the IRS. The National 
Federation of Independent Businessmen supports this legislation, as 
well as the National Treasury Employees Union supports this 
legislation. The accountants support the legislation. The enrolled 
agents support the legislation. I mean, groups that deal daily with the 
IRS are asking the Congress to change the law.
  There have been objections raised that it doesn't do something in 
addition; but, again, we can do all of that. We do not have to get 
every single thing done in order to change the law if we know that the 
change in the law will improve the operational efficiency of some 
agency of Government, especially one that sends out 135,000 notices 
every single day to taxpayers that they owe additional money.
  Ms. MOSELEY-BRAUN. Am I correct in my impression that even the 
Treasury Department has endorsed or embraced the recommendations of the 
Commission that are represented in this IRS restructuring bill?
  Mr. KERREY. The Treasury Department and the administration support 
the bill that is lying right down there, that if there was no objection 
we would take up immediately here and pass in the Senate as well. Not 
only does the Treasury support it, but former Treasury Secretary Brady, 
former Treasury Secretary Baker, former Commissioner Richardson, and 
former Commissioner Goldberg.
  I mean, everybody that has looked at the law, they can say it could 
go further, do additional things, but nobody has lodged an argument 
that says the changes in this law would not stand a very good chance of 
improving the operational efficiency experienced by taxpayers who 
receive notices every day and by taxpayers who have questions and call 
up the IRS and try to get those questions answered.
  Ms. MOSELEY-BRAUN. We have on average in my State of Illinois, 33,457 
tax returns that will be audited in the next year. I know there are 
30,000 such audits pending in my home State. And it just seems to me 
that to the extent that this legislation provides some relief to 
taxpayers, and justice to taxpayers, that the delay that is being 
suggested here in passing the legislation denies them that justice. And 
that expression ``justice delayed is justice denied''--that we really 
do put in jeopardy the rights that we, I think, all recognize that 
people ought to have as citizens of this great country.
  Mr. KERREY. Right.
  Ms. MOSELEY-BRAUN. In relation to what is supposed to be a service 
for Internal Revenue, that justice that is due those taxpayers may well 
be denied by virtue of the delay in calling up this legislation.
  Mr. KERREY. I could not agree with you more. There are actually 
800,000 notices every single year of audits--excuse me, every month 
that goes out to----
  Ms. MOSELEY-BRAUN. That is 800,000?
  Mr. KERREY. Yes, 800,000 a month of contacts to the IRS or audits or 
matters that are almost as serious as an audit that goes out to some 
taxpayers. There is no question, if we take this bill up that is lying 
right down there now that passed 421-4--probably pass here 100-0--there 
is no question that all of those taxpayers would have more power.
  They may still not like the outcome. They may have to pay more taxes, 
and not like it, but they would have a lot more power, a much more 
efficient agency, and a much more happy ending as a consequence.
  There are things that the IRS does that they ought not be required 
under the law to do, that nobody says they ought to be doing. Though I 
say again, the chairman of the Finance Committee, Senator Roth of 
Delaware, has quite accurately said, there are additional things we 
could do. But, for gosh sakes, given the burden the taxpayers have, 
given the difficulty they have, and given the broad support, after 12 
public hearings, and after thousands of meetings with IRS employees and 
provider groups in the private sector, private sector companies that 
are offering competitive services, other nations' governments that have 
had similar problems that have gone through the similar process of 
trying to improve the operation of their tax collection agency--this is 
not something that was put together in a couple weeks' time in response 
to a problem identified.
  This has been something that has been debated well over a year and 
has broad bipartisan support and would unquestionably, for every 
taxpayer out there that might receive an audit or might receive a 
collection notice or might have to call the IRS and get a question 
answered--every single one of them would benefit if we could just pass 
this law.
  Ms. MOSELEY-BRAUN. I serve, along with the Senator from Nebraska and 
the Senator from Florida, on the Finance Committee. I was just 
delighted that the chairman convened the hearings on the IRS abuses. We 
heard any number of horror stories in those hearings. It is my 
understanding that under this legislation a taxpayer who had gone 
through an audit or set of investigations or prosecutions, that came 
out on the other end of the process absolved of any error of even 
wrongdoing, that that taxpayer would be able to, at least, recoup not 
all but

[[Page S12102]]

some of the expenses associated with defending the integrity of their 
voluntary compliance with the Tax Code.

  Mr. KERREY. That is correct. They would get their attorney fees paid 
up; and if there was negligence, up to $100,000. And we establish 
assistance centers out there for the first time for taxpayers who are 
struggling to get questions answered.
  Ms. MOSELEY-BRAUN. For those taxpayers where it might be just a 
mistake--their Social Security number got mixed up or the name was not 
right, whatever--those assistance centers would then provide them with 
an opportunity again to have a better relationship with the service 
that the IRS is supposed to provide.
  Mr. KERREY. That is correct. One of the things that this law does in 
title II is deal with a new trend that all of us understand, which is 
electronic commerce. We see a lot of electronic commerce developing out 
there in the private sector. The IRS has been struggling to get 
electronic filing up and online.
  The significance of it is that when you file electronically, the 
error rate is less than 1 percent. Error is real money. You make a 
mistake on the Government side with a tax claim, and it could end up in 
court for years and years and years and cost the taxpayer and the 
Government tremendous amounts of money. So errors are real money. In 
the paper world, the rate of error is 25 percent.
  So we provide both incentives and resources to get to a much higher 
number of electronic filings which I think for taxpayers who pay to run 
the IRS, as well as taxpayers who are sending their money, is a 
tremendously important change in the law.
  Ms. MOSELEY-BRAUN. Is it the Senator's impression that, along with 
putting some real teeth into taxpayer rights, that this legislation 
provides--and, again, we could do more in other legislation--but this 
legislation puts real teeth in taxpayer rights, and that it might also 
have a beneficial effect in terms of the culture or the climate of the 
IRS?
  For example, we heard in the hearings that they had quotas. They were 
not official quotas but unofficial quotas. That this might affect the 
culture in the way that the IRS viewed its mission and viewed its 
responsibility to taxpayers. Is it the Senator's impression that this 
legislation will help move that culture in the direction of a service 
that is more understanding of its obligations and responsibilities to 
the American people?
  Mr. KERREY. No question.
  The PRESIDING OFFICER. The 10 minutes have expired. The Senator from 
Illinois had 10 minutes, and it has expired. We are in morning 
business.
  Ms. MOSELEY-BRAUN. I did not ask for time.
  The PRESIDING OFFICER. There was a request.
  Ms. MOSELEY-BRAUN. For me?
  The PRESIDING OFFICER. In morning business.
  Ms. MOSELEY-BRAUN. No, sir. I am in the process of questioning the 
Senator who has--I asked the Senator to yield for questions. I asked my 
last question. If he would answer it. I was not speaking in morning 
business under the 10-minute rule.
  Mr. KERREY. The Senator is right. You are absolutely right. The 
culture, though, is not going to change at the IRS until we give the 
IRS Commissioner the management authority the manager needs to be able 
to run the agency with performance that is based upon something other 
than these quotas that have been set up. Although it has been a 
relatively small number of instances where we identified them, it 
still--relatively small--it is one too many.
  Ms. MOSELEY-BRAUN. Mr. President, I stand before you today in support 
of Senator Bob Kerrey's request to pass IRS reform legislation before 
Congress begins recess.
  I along with all of the Senate Democrats have signed onto a letter 
urging Senator Lott to bring up legislation to reform the IRS this 
year. I support IRS reform and believe that there should be no further 
delay in beginning the process of change. I am a cosponsor of S. 1096, 
the IRS Restructuring and Reform Act of 1997, and believe that the 
Senate should act on the House-passed version H.R. 2676. There are 35 
Members of the Senate that are cosponsors of this bill and of those, 14 
Members are on the Senate Finance Committee.
  The House of Representatives has already acted on November 5, 1997, 
by a vote of 425 to 4 to overwhelmingly pass H.R. 2676, the legislation 
that would overhaul the way the IRS operates. We should too.
  It has been 40 years since Congress and the President have considered 
significant reforms to the Internal Revenue Service. With this bill, 
there is a historic opportunity to overhaul the IRS and transform it 
into an efficient, modern, and responsive agency. The IRS interacts 
with more citizens than any other Government agency or private sector 
business in America and collects 95 percent of the revenue needed to 
fund the Federal Government. Congress and the President owe it to the 
American public to seize this opportunity and pass this legislation as 
soon as possible.
  S. 1096 was introduced in the Senate on July 31, 1997, by Senator 
Kerrey and Senator Grassley. The Senate Finance Committee has had 4 
months to take up this legislation and did not. Why?
  Congress created the National Commission on Restructuring the 
Internal Revenue Service on September 30, 1996, which studied the IRS 
for a year. Seventeen Commission members and professional staff: Five 
appointed by the President, four appointed by the majority leader of 
the Senate, two appointed by the minority leader of the Senate, four 
members appointed by the Speaker of the House of Representatives, and 
two members appointed by the minority leader of the House of 
Representatives, examined and thoroughly developed a comprehensive 
report on changes needed to overhaul the IRS.
  The Commission received extensive input from American taxpayers and 
experts on the IRS and tax system, holding 12 days of public hearings 
and spending hundreds of hours in private sessions with public and 
private sector experts, academics, and citizen's groups to review the 
IRS operations and services. In addition to holding three field 
hearings in Cincinnati, Omaha, and Des Moines, the Commission met 
privately with over 500 individuals, including senior-level and 
frontline IRS employees across the country.
  All of the members of the Commission examined and analyzed the 
problems with the IRS and drafted a report called ``A Vision for a New 
IRS.'' This report provides recommendations that will help restore the 
public's faith in the American Tax system.
  H.R. 2676 and S. 1096 implements the recommendations of the year-long 
bipartisan National Commission on Restructuring the IRS. It provides 
better management and new protections and rights to taxpayers along 
with the following list of significant changes:
  This legislation establishes an Internal Revenue Service Oversight 
Board that has 11 members including 8 people from the private sector, 
the Secretary, the Commissioner, and a Treasury union member.
  In this bill, the IRS Commissioner will be appointed by the President 
with recommendations from the Board. Only the President will be able to 
remove the IRS Commissioner however, the Board can make a 
recommendation to the President for the Commissioner's removal.
  This bill shifts the burden of proof from the taxpayer to the IRS.
  It creates a taxpayer complaint and information audit system.
  And, it brings outside expertise into the agency, so that 
mismanagement will end and taxpayers will not have to deal with 
bureaucratic redtape.
  It provides significant expansion of innocent spouse relief--
Eliminates requirements to limit an innocent spouse from liability for 
a tax delinquency of their responsible spouse. Allows a court to give 
proportional relief to an innocent spouse based upon a spouse's limited 
knowledge and responsibility.
  Extends the attorney client privilege to accountants.
  Expands the court's authority to award costs and fees. This 
legislation will change the date a taxpayer can begin to be compensated 
for administrative costs to the date they received their first letter 
of proposed deficiency from the IRS. This allows the taxpayer to 
receive reimbursements for the costs of defending the audit as well as 
the court proceedings.

[[Page S12103]]

  No single recommendation in the bill will totally fix the IRS, but 
taken as a whole, this package sets the stage for an IRS that is fair, 
efficient, and friendly.
  Despite the extraordinary agreement in the House of Representatives 
on H.R. 2676 and agreement from President Clinton that he would sign 
the bill. Senator Roth, the Chairman of the Finance Committee believes 
he must spend more time and build on the House bill and act on 
legislation next year. This is not prudent. Americans want action now. 
The new Commissioner of the IRS Charles Rossotti will be sworn in next 
week and we should start him on the right track with a new vision for 
the IRS. Why put off until tomorrow, what we can do today. Senator Bob 
Kerrey of Nebraska has requested unanimous consent that the House IRS 
restructuring bill, H.R. 2676, be approved by the full Senate. I agree 
and believe we should act now to stop the IRS abuses today.
  Mr. GRASSLEY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Iowa.

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