[Congressional Record Volume 144, Number 51 (Thursday, April 30, 1998)]
[Senate]
[Pages S3949-S3952]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   CBO COST ESTIMATE FOR THE IRS RESTRUCTURING AND REFORM ACT OF 1998

 Mr. ROTH. Mr. President, on April 22, 1998, the Finance 
Committee filed Report 105-174 to accompany H.R. 2676. At the time the 
report was filed, the required Congressional Budget Office statement 
was not available.
  I ask that the Congressional Budget Office statement that I have 
recently received be printed in the Record.

[[Page S3950]]

  The material follows:

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                   Washington, DC, April 30, 1998.
     Hon. William V. Roth, Jr.,
     Chairman, Committee on Finance,
     U.S. Senate,
     Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed cost estimate for H.R. 2676, the 
     Internal Revenue Service Restructuring and Reform Act of 
     1998.
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contacts are John R. 
     Righter (for federal costs), who can be reached at 226-2860, 
     Marc Nicole (for the impact on state and local governments), 
     who can be reached at 225-3220, and Matthew Eyles (for the 
     impact on the private sector), who can be reached at 226-
     2469.
           Sincerely,
                                                  June E. O'Neill,
                                                         Director.
       Enclosure.

       CONGRESSIONAL BUDGET OFFICE COST ESTIMATE, APRIL 30, 1998

  H.R. 2676: Internal Revenue Service Restructuring and Reform Act of 
1998 (As Reported by the Senate Committee on Finance on April 22, 1998)


                                summary

       H.R. 2676 would make a number of changes to the management 
     and oversight of the Internal Revenue Service (IRS), add or 
     amend more than 70 taxpayer rights, and require the IRS to 
     implement several changes designed to increase the number of 
     forms filed electronically by taxpayers. The Joint Committee 
     on Taxation (JCT) estimates that this act would increase 
     governmental receipts (revenues) by $582 million in fiscal 
     year 1998 and would decrease receipts by a net amount of 
     about $1 billion over the 1998-2003 period. (The act would 
     result in higher receipts for the first three years, but 
     would lead to a gradually increasing loss of receipts in each 
     year after 2000.) Over the 1998-2007 period, JCT estimates 
     that enacting this legislation would decrease governmental 
     receipts by about $9 billion.
       In addition, CBO estimates that enacting H.R. 2676 would 
     increase direct spending by $7 million in fiscal year 1998, 
     about $330 million over the 1998-2003 period, and about $750 
     million over the 1998-2008 period. Because enacting this 
     legislation would affect both direct spending and receipts, 
     pay-as-you-go procedures would apply. H.R. 2676 also would 
     affect discretionary spending, subject to the availability of 
     funds. At this time, CBO cannot estimate the act's total 
     effect on discretionary spending because the extent and 
     results of efforts by the Treasury and the IRS under current 
     law to increase the availability and use of electronic filing 
     by taxpayers are very uncertain, because the Administration 
     has already begun implementing many of the act's procedures, 
     and because we have not had sufficient time to fully review 
     the more than 70 provisions that would affect taxpayer 
     rights. The increase in discretionary spending necessary to 
     implement H.R. 2676 could be substantial. JCT has determined 
     that H.R. 2676 contains five new private-sector mandates as 
     defined in the Unfunded Mandates Reform Act of 1995 (UMRA). 
     Title V of H.R. 2676, Revenue Provisions, contains all five 
     mandates. JCT estimates that the cost to the private sector 
     to comply with the new mandates would be $7.1 billion over 
     the 1998-2003 period, which is equal to the increase in tax 
     revenue from provisions that would impose the mandates. 
     The act contains no intergovernmental mandates as defined 
     in UMRA and would impose no costs on state, local, or 
     tribal governments.


                    DESCRIPTION OF MAJOR PROVISIONS

       H.R. 2676 would make a number of changes to the management 
     and oversight of the IRS and to the rights of taxpayers. 
     Specifically, the act would: establish a nine-member Internal 
     Revenue Service Oversight Board within the Department of the 
     Treasury to oversee the service's management, planning, 
     budgeting, and operations; provide the IRS with the 
     flexibility to reorganize its organizational structure and 
     many of its personnel policies; eliminate the IRS Office of 
     the Chief Inspector and transfer most of its responsibilities 
     and resources to a new, independent Treasury Inspector 
     General for Tax Administration within the Department of the 
     Treasury; require the IRS to begin developing a paperless tax 
     return system and authorize it to offer certain incentives to 
     encourage taxpayers to file tax returns electronically; 
     require the IRS, subject to the proper safeguards, to create 
     a system under which taxpayers could review their own IRS 
     files electronically by calendar year 2007; add or amend more 
     than 70 provisions affecting taxpayer rights, including 
     shifting the burden from the taxpayer to the IRS in certain 
     court cases, making it easier for taxpayers to recover court 
     costs and to sue the IRS for civil damages, increasing the 
     amount of interest paid by the federal government to 
     noncorporate taxpayers for overpayments of taxes, suspending 
     the time limit for disabled individuals to file for a refund, 
     and requiring that the IRS provide additional notification to 
     taxpayers of certain rights and deadlines; impose several new 
     reporting requirements on the IRS and JCT; clarify employer 
     deductions for vacation pay and add other measures to raise 
     governmental receipts and partially offset the cost of other 
     provisions; and make numerous technical corrections to the 
     Taxpayer Relief Act of 1997.


                ESTIMATED COST TO THE FEDERAL GOVERNMENT

       The estimated budgetary impact of H.R. 2676 is shown in 
     Table 1. The costs of this act fall within budget function 
     800 (general government).

                              TABLE 1--ESTIMATED COST TO THE FEDERAL GOVERNMENT \1\
                                     [By fiscal year in millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                        1998         1999         2000         2001         2002         2003
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES
 
Estimated Revenues................          582          814          654         -663       -1,052       -1,328
 
                                           CHANGES IN DIRECT SPENDING
 
Estimated Budget Authority........            7           55           62           66           69           73
Estimated Outlays.................            7           55           63           66           69           73
----------------------------------------------------------------------------------------------------------------
\1\ Implementing the act would also require increases in spending subject to appropriation, but CBO cannot
  estimate these costs at this time.

       In addition to the above effects, the act also would impose 
     costs on the IRS and JCT, subject to the availability of 
     funds, to carry out various requirements. Those increases--
     for the IRS only--would probably be substantial, but CBO 
     cannot estimate the act's likely effect on discretionary 
     spending at this time. The major provisions that could affect 
     discretionary spending are discussed in detail below.


                           BASIS OF ESTIMATE

       For purposes of this estimate, CBO assumes that H.R. 2676 
     will be enacted by July 1, 1998.
     Revenues
       H.R. 2676 would make numerous changes to the Internal 
     Revenue Code. The major provisions affecting receipts are 
     summarized in Table 2.

                                     TABLE 2.--ESTIMATED CHANGES IN REVENUES
                                    [By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                   1998       1999       2000       2001       2002       2003
----------------------------------------------------------------------------------------------------------------
Clarify Deduction for Accrued Vacation Pay....        603      1,141      1,160        141        148        156
Modify Foreign Tax Credit Carryover Rules.....         76        525        468        441        416        390
Make Certain Trade Receivables Ineligible for          33        317        500        333        117         70
 Mark-to-Market Treatment.....................
Suspend Accrual of Interest and Penalties When          0          0       -438       -529       -596       -636
 IRS Fails to Contact Individual Taxpayer.....
Innocent Spouse Relief........................        -58       -350       -288       -273       -346       -480
Eliminate Penalties on Unpaid Taxes During            -29       -272       -287       -302       -317       -338
 Period of Installment Agreements.............
Burden of Proof...............................         -1       -221       -232       -243       -256       -269
Mitigate Penalty for Failure to Deposit                 0        -47        -64        -64        -65        -66
 Payroll Taxes................................
Software Trade Secrets Protection.............          0        -26        -32        -39        -45        -53
All Other Provisions Affecting Revenues.......        -42       -253       -133       -128       -108       -102
      Total Estimated Revenues................        582        814        654       -663     -1,052     -1,328
----------------------------------------------------------------------------------------------------------------

     Direct Spending
       Increase in the Interest Rate IRS Pays Certain Taxpayers on 
     Overpayments. Most of the projected increase in direct 
     spending would result from the provision that would increase 
     by 1 percentage point the amount paid by the federal 
     government to noncorporate taxpayers who overpay their taxes. 
     Based on our estimate of the amount of annual overpayments by 
     taxpayers of individual income, estate, and gift taxes, CBO 
     estimates that increasing the rate of interest by 1 percent

[[Page S3951]]

     would increase direct spending by $7 million in fiscal year 
     1998, by $310 million over the 1998-2003 period, and by about 
     $700 million over the 1998-2008 period.
       Taxpayer Bill of Rights. The act would increase the amount 
     of penalties (payments covering attorneys' fees and 
     administrative costs) and civil damages that courts could 
     award to taxpayers in certain cases brought against the 
     federal government. For penalties, H.R. 2676 would: (1) 
     lengthen the period of time over which taxpayers who 
     substantially prevail against the IRS could recover 
     administrative costs, (2) remove the hourly rate caps 
     limiting the amount of reasonable fees that attorneys can 
     collect in such cases, (3) permit the award of reasonable 
     attorneys' fees to pro bono attorneys, and (4) allow 
     taxpayers to recover reasonable costs and attorneys' fees in 
     cases where an offer to settle the case is made, the IRS 
     rejects the offer, and the IRS later obtains a judgment 
     against the taxpayer in an amount that is equal to or less 
     than the taxpayer's offer.
       For civil damages, that act would: (1) provide for the 
     payment of up to $100,000 in civil damages to taxpayers in 
     cases where a court finds that officers or employees of the 
     IRS negligently disregarded provisions of the Internal 
     Revenue Code or regulations, (2) provide for the payment of 
     up to $1 million in civil damages to taxpayers in cases where 
     an office or employee of the IRS willfully violates certain 
     provisions of the Bankruptcy Code, and (2) allow individuals 
     other than the taxpayer to sue for civil damages as a result 
     of unauthorized collection actions. Courts could award the 
     damages only after the taxpayer had exhausted all 
     administrative remedies at the IRS. Under current law, 
     taxpayers may receive payments for damages in cases where a 
     court finds that an IRS officer or employee has recklessly or 
     intentionally disregarded provisions of the Internal Revenue 
     Code. The government would pay the additional penalties and 
     damages from the permanent, indefinite appropriation for 
     claims and judgments.
       Although considerable uncertainty exists as to how the 
     courts would determine and award penalties and damages under 
     H.R. 2676, CBO estimates that the provisions would increase 
     direct spending by $23 million over the 1998-2003 period and 
     by $56 million over the 1998-2008 period. This estimate 
     assumes that broadening and increasing the amount of 
     allowable penalties and lowering the standard for civil 
     damages would result in awards of additional penalties and 
     damages to taxpayers by the courts. Because the provisions 
     affecting penalties would not take effect until 180 days 
     after enactment and because the provisions affecting damages 
     would apply to new actions and would require taxpayers to 
     first exhaust administrative remedies, CBO expects that these 
     provisions initially would have no significant impact on 
     direct spending, but would result in a steady increase in 
     penalties and damages awarded beginning in 1999. On average, 
     we estimate that they would increase direct spending by about 
     $4 million annually over the 1998-2003 period.
     Spending Subject to Appropriation
       Electronic Filing. The act's biggest potential impact on 
     discretionary spending involves its requirements to increase 
     the availability and use of electronic filing. H.R. 2676 
     would generally require the IRS to study and implement 
     several major changes to the way taxpayers file their returns 
     each year. Specifically, the act would: (1) require the 
     Secretary of the Treasury to develop a strategic plan to 
     eliminate barriers and provide incentives to increase the 
     number of returns filed electronically to at least 80 
     percent of all returns, (2) beginning in fiscal year 2000, 
     extend the due date for electronic filers of information 
     returns from February 28 to March 31, (3) require the 
     Treasury to develop procedures for accepting signature 
     information from electronic filers in a digital or other 
     electronic form, (4) require the Treasury to develop 
     procedures for implementing a return-free tax system 
     beginning with tax years that begin after 2007, and (5) 
     provided the necessary safeguards are in place, require 
     the Treasury to develop procedures to enable taxpayers to 
     review their account information electronically by 2007.
       The Treasury is already developing or studying most of 
     these proposals. For instance, according to the Department of 
     the Treasury, the IRS currently is using some signature 
     alternatives and studying others. The Treasury also has 
     already awarded a contract to design and develop a large 
     educational campaign to encourage taxpayers to file 
     electronically. In addition, the IRS is implementing new 
     payment methods and preparing its systems to accept new forms 
     that should reduce the amount of paper filed by taxpayers 
     each year. Finally, the Treasury is studying alternatives for 
     allowing taxpayers to eventually review account information 
     electronically. This, even though CBO expects that 
     implementing the act's procedures would increase costs for 
     the Treasury subject to the availability of funds, we cannot 
     estimate the amount that such costs would increase. The 
     amount of the costs would depend, in part, on the overall 
     effort at the IRS to modernize its information systems, for 
     which the Congress has appropriated about $4 billion over the 
     last decade.
       In general, receiving and processing forms electronically 
     should reduce costs of the IRS in the long run. The IRS has 
     estimated that it costs at least two and one-half times more 
     to process such forms by paper, since the data must be input 
     manually into IRS's systems, the error rate in processing 
     such forms is significantly higher, and the papers require 
     handling and storage. Thus, if enacting H.R. 2676 results in 
     an increase in the number of taxpayers that file 
     electronically with the IRS each year--in fiscal year 1997, 
     19.1 million of the estimated 120 million individual income 
     tax returns were filed with the IRS by computer or phone--
     then the act should eventually reduce the government's annual 
     costs to process tax information.
       IRS Oversight Board. H.R. 2676 would establish a nine-
     member management board within the Department of the Treasury 
     to oversee the management and operations of the IRS. Its 
     responsibilities would include reviewing and approving the 
     agency's strategic plans and annual budget request. The board 
     would consist of six members from outside the federal 
     government, the Secretary of the Treasury, a union 
     representative, and the IRS Commissioner. The act would 
     compensate the nonfederal members at a rate of $30,000 per 
     year, except for the chair, who would receive an annual 
     salary of $50,000. The members also could receive 
     reimbursement for any travel expenses incurred in 
     performing official board work. In addition, the act would 
     allow the board to hire permanent staff. The board would 
     be required to meet at least once a quarter. Upon 
     enactment, the President would have six months to submit 
     nominations to the Senate.
       Based on the act's requirements and specifications for 
     compensation, CBO estimates that the board would cost less 
     than $500,000 in fiscal years 1998 and 1999 and between 
     $500,000 and $1 million in each of fiscal years 2000 through 
     2003. That estimate assumes the board would not meet until 
     the beginning of fiscal year 1999.
       IRS Management and Personnel Flexibilities. The act would 
     allow the IRS to change its organizational structure and 
     would provide it with significant flexibility in how it 
     compensates, trains, and organizes its workforce. In January, 
     the Commissioner announced plans to reorganize the agency 
     along customer service lines. Because the act would simply 
     allow the IRS to carry out the reorganization plans that are 
     already under development, that provision would impose no 
     additional costs on the IRS. In the case of the personnel 
     flexibilities, the additional costs would likely be 
     significant, although it is difficult to predict how much the 
     IRS would employ such flexibilities and whether the 
     Commissioner could reach agreement with the employees' union, 
     as required by the legislation, regarding measures that would 
     affect its members.
       CBO estimates that the measures allowing the IRS to 
     increase pay and other forms of compensation could increase 
     annual payroll costs of the IRS by at least several million 
     dollars. In addition, providing the IRS with the authority to 
     offer buyouts without necessarily reducing the total number 
     of positions through calendar year 2002 also could increase 
     its personnel costs by tens of millions of dollars over the 
     1998-2003 period.
       Treasury Inspector General for Tax Administration. The 
     legislation would eliminate the IRS Office of the Chief 
     Inspector and transfer most of its responsibilities and 
     resources to a new, independent Treasury Inspector General 
     (IG) for Tax Administration within the Department of the 
     Treasury. The new I.G. for Tax Administration would assume 
     responsibility for the duties currently assigned to the 
     Treasury (IG) with respect to the IRS and for the duties 
     currently delegated to the IRS Office of the Chief Inspector. 
     CBO estimates that this provision would have no significant 
     budgetary effect.
       Taxpayer Bill of Rights. H.R. 2676 would add or amend more 
     than 70 taxpayer rights. In most cases, the new rights would 
     result in minimal additional costs for the IRS to write 
     regulations and procedures, provide additional information to 
     taxpayers, and create or amend tax forms and other tax-
     related documents, although the sheer magnitude of the number 
     of such changes would likely result in a significant increase 
     in administrative costs, particularly if the changes would 
     require a significant computer reprogramming effort on the 
     part of the IRS. Similarly, the totality of such changes 
     could result in a substantial increase in the workload of 
     the offices of Appeals and Taxpayer Advocate at the IRS. 
     CBO, however, has not had sufficient time to review these 
     provisions and estimate their impact.
       Complexity Analyses and Studies. H.R. 2676 would expand the 
     responsibilities of the JCT. It would require JCT to prepare 
     a detailed ``Tax Complexity Analysis'' for proposed 
     legislation amending tax laws and to conduct two studies 
     within one year from the date of enactment. The act also 
     would require the IRS to report annually to the House 
     Committee on Ways and Means and the Senate Committee on 
     Finance regarding sources of complexity in the administration 
     of federal tax laws and the Department of the Treasury to 
     conduct the same pair of studies required of JCT.
       CBO estimates that implementing H.R. 2676 would cost JCT 
     less than $500,000 a year, assuming appropriation of the 
     necessary amounts. Depending upon the amount and nature of 
     tax legislation considered by the Congress, analyzing the 
     complexity of legislative initiatives could increase this 
     cost somewhat. In addition, CBO estimates that requiring the 
     IRS to report annually on the complexity of tax laws would 
     cost less than $500,000 a year. Finally, CBO estimates that 
     the two reporting requirements would cost the Treasury less 
     than $500,000 over fiscal

[[Page S3952]]

     years 1998 and 1999. (The Administration is already planning 
     to conduct at least one of the studies.)


                      pay-as-you-go considerations

       The Balanced Budget and Emergency Deficit Control Act of 
     1985 specifies procedures for legislation affecting direct 
     spending and receipts. The projected changes in direct 
     spending and receipts are shown in the following table for 
     fiscal years 1998 through 2008. For purposes of enforcing 
     pay-as-you-go procedures, however, only the effects in the 
     current year, the budget year, and the succeeding four years 
     are counted.

                                              TABLE 3.--SUMMARY OF EFFECTS ON DIRECT SPENDING AND RECEIPTS
                                                        [By fiscal year, in millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    1998       1999       2000       2001       2002       2003       2004       2005       2006       2007       2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays.............          7         55         63         66         69         73         77         80         84         88         92
Changes in receipts............        582        814        654       -663     -1,052     -1,328     -1,713     -1,908     -2,080     -2,269         NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
N.A.=Not available (JCT has estimated revenue effects through 2007 only.)

        ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

       H.R. 2676 contains no intergovernmental mandates as defined 
     in UMRA and would impose no costs on state, local, or tribal 
     governments. The bill would allow the IRS to collect and 
     remit (from overpayments) certain past-due income tax 
     obligations owed to state governments and would authorize 
     grants for low-income taxpayer clinics operated by 
     institutions of higher education (public or private) and tax-
     exempt organizations.


                 ESTIMATED IMPACT ON THE PRIVATE SECTOR

       JCT has determined that H.R. 2676 contains five new 
     private-sector mandates, as defined in UMRA. Title V of the 
     act, Revenue Provisions, contains all five mandates. JCT 
     estimates that the cost to the private sector to comply with 
     the new mandates would be $7.1 billion over the 1998-2003 
     period, which is equal to the increase in tax revenue from 
     provisions that would impose the mandates.
       First, the provision clarifying the deduction for deferred 
     compensation is estimated by JCT to increase tax revenue by 
     $3.3 billion over fiscal years 1998 through 2003. Second, the 
     act would change the carryback period and carryforward period 
     for foreign tax credits, which is estimated to increase tax 
     revenue by $2.3 billion between 1998 and 2003. Third, H.R. 
     2676 would freeze the grandfathered status of stapled or 
     paired-share real estate investment trusts (REITs). As a 
     result of the proposed freeze, JCT estimates that tax revenue 
     would increase by $34 million over the 1998-2003 period. 
     Fourth, the act would make certain trade receivables 
     ineligible for mark-to-market treatment, which is estimated 
     to increase tax revenue by $1.4 billion over the six-year 
     period. Finally, H.R. 2676 would add vaccines against 
     rotavirus to the list of taxable vaccines, thus increasing 
     tax revenue by an estimated $15 million over fiscal years 
     1998 through 2003.


                    COMPARISON WITH OTHER ESTIMATES

       The committee report filed on April 22, 1998, included an 
     estimate by JCT that enacting H.R. 2676 would increase direct 
     spending by $409 million over the 1998-2002 period and by 
     $989 million over the 1998-2007 period. According to JCT, 
     that estimate would result from enacting three provisions 
     affecting taxpayer rights: (1) increasing by 1 percent the 
     interest rate paid by the government to noncorporate 
     taxpayers who overpay their taxes, (2) expanding the court's 
     authority to award taxpayers costs and certain fees, and (3) 
     adding or increasing civil damages for certain collection 
     actions by the IRS.
       By comparison, CBO estimates that enacting the three 
     provisions would increase direct spending by $260 million 
     over the 1998-2002 period and by $662 million over the 1998-
     2007 period. In total, CBO's estimate of the increase in 
     direct spending is about $150 million lower than JCT's over 
     the 1998-2002 period and about $330 million lower over the 
     1998-2007 period. The difference between JCT and CBO 
     estimates results from three factors. First, according to 
     JCT, part of its estimated increase in direct spending 
     includes effects on revenues (about $110 million over the 
     1998-2002 period and about $220 million over the 1998-2007 
     period). Second, JCT and CBO have different estimates of the 
     extent to which the provision expanding the court's authority 
     to award taxpayers costs and certain fees would increase 
     payments from the Claims and Judgment Fund. JCT estimates an 
     additional $55 million in such payments over the 1998-2002 
     period and about an additional $150 million over the 1998-
     2007 period. Finally, JCT and CBO make different assumptions 
     as to the taxes that would be affected by the provision 
     increasing the rate of interest on overpayments. CBO assumes 
     that the provision would apply to estate and gift tax 
     overpayments in addition to individual income tax payments, 
     which increased our estimate of direct spending by about $20 
     million over the 1998-2002 period and by about $40 million 
     over the 1998-2007 period.


                         previous cbo estimate

       On October 31, 1997, CBO prepared a cost estimate for H.R. 
     2676, the Internal Revenue Service Restructuring and Reform 
     Act of 1997, as ordered reported by the House Committee on 
     Ways and Means on October 22, 1997. For the House version of 
     H.R. 2676, JCT estimated that the legislation would have no 
     net effect on governmental receipts over the 1998-2002 period 
     and would decrease them by $2.9 billion over the 1998-2007 
     period.
       The Senate version of H.R. 2676 includes several additional 
     measures that would add to the government's revenues, but 
     also includes a more extensive set of new and revised 
     taxpayer rights. In total, JCT estimates that the Senate 
     version would bring in about $0.3 billion more in revenues 
     over the 1998-2002 period, but would decrease governmental 
     receipts by about $6 billion more over the 1998-2007 period.
       CBO estimated that enacting the House-reported version of 
     H.R. 2676 would increase direct spending by $5 million in 
     fiscal year 1998, $25 million over the 1998-2002 period, and 
     $50 million over the 1998-2007 period. CBO's estimate of the 
     increase in direct spending for the Senate version of H.R. 
     2676 is higher, mostly because we reestimated and 
     reclassified the budgetary effects of several provisions 
     included by JCT as decreases in governmental receipts for the 
     House version of H.R. 2676. Thus, the increase in direct 
     spending estimated by CBO for the Senate version is more than 
     offset by a corresponding reduction in JCT's estimate of 
     reduced governmental receipts. The increase in the rate of 
     interest on taxpayer overpayments is the main provision 
     projected to cause an increase in direct spending in this 
     estimate rather than a decrease in governmental receipts, as 
     was reported for the House version.
       In addition, the House version would have required that the 
     Secretary make $3 million in annual grants to low-income 
     taxpayer clinics, whereas the Senate version would make such 
     payments subject to appropriation. Finally, this estimate 
     reflects a slight, upward revision in the annual estimate of 
     new payments from the Claims and Judgment Fund for penalties 
     and civil damages. In total, our estimate for the Senate 
     version of H.R. 2676 reflects an increase in direct spending 
     over the 1998-2007 period that is about $610 million higher 
     than the estimate for the House version.
       Estimate prepared by: Federal Costs: John R. Righter (226-
     2860); Impact on State, Local, and Tribal Governments: Marc 
     Nicole (225-3220); and Impact on the Private Sector: Matthew 
     Eyles (226-2649).
       Estimate approved by: Robert A. Sunshine, Deputy Assistant 
     Director for Budget Analysis.

                          ____________________