[Congressional Record Volume 144, Number 54 (Tuesday, May 5, 1998)]
[Senate]
[Pages S4237-S4244]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998

  The PRESIDING OFFICER. Under the previous order, the Senate will 
resume consideration of H.R. 2676, which the clerk will report.
  The bill clerk read as follows:

       A 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 PRESIDING OFFICER. The time until 12:30 p.m. shall be for debate 
only, unless the managers' amendment is offered.
  Mr. ROTH addressed the Chair.
  The PRESIDING OFFICER. The Senator from Delaware is recognized.
  Mr. ROTH. Mr. President, I urge my colleagues to come down to debate 
this important piece of legislation. A number of individuals have 
indicated they want the opportunity to discuss this legislation, the 
restructuring of IRS. We do have an hour and a half available for any 
Senators who want to come down and give their comments with respect to 
this legislation. This is their opportunity, and I urge that they do so 
immediately.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. KERREY. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Brownback). Without objection, it is so 
ordered.
  Mr. KERREY. Mr. President, the Internal Revenue Service Reform and 
Restructuring Act of 1998 will touch the lives of hundreds of millions 
of Americans.
  More Americans pay taxes than vote. The perception of how our 
government treats us--its citizens--is rooted more in our contact with 
the IRS than with any other U.S. agency or entity.
  How we are treated by the IRS--and our tax laws--effects our 
perception of whether or not we believe we have a fair shot at the 
American Dream and whether or not we are a government of, by and for 
the people.
  During our deliberations this week, we must be mindful of Congress's 
complicity in allowing the IRS to become what it has become. The IRS is 
not Sears & Roebuck--we are its Board of Directors. We write the tax 
laws, we are responsible for the oversight and it was on our watch that 
the IRS became the mess we now try to clean up.
  Mr. President, I remind my colleagues that Congress has changed the 
tax code 63 times since 1986, and these changes have created a tax code 
that costs the American taxpayers $75 billion a year to comply. We do 
so without considering the cost for the IRS to administer it, and 
without considering the cost for taxpayers to comply. If you doubt that 
we have made things difficult I challenge you to take a look at this 
year's Schedule D on capital gains and losses. A few years back Dave 
Barry noted that we were making progress in our mission to ``develop a 
tax form so scary that merely reading it will cause the ordinary 
taxpayer's brain to explode.'' He cited Schedule J, Form 118 ``Separate 
Limitation Loss Allocations and Other Adjustments Necessary to 
Determine Numerators of Limitation Fractions, Year-End 
Recharacterization Balances and Overall Foreign Loss Account 
Balances.'' If that is not complicated enough, I'd suggest he go back 
and take a look at this year's Schedule D.
  The American public knows that Congress plays a leading role in all 
of this. In a recent poll, 72 percent of Americans blamed Congress for 
the ills of the IRS, and not the IRS itself.
  According to a special Harris Poll conducted on April 15th, ``[t]ax 
evasion is believed by most people to be more widespread than 
harassment by the IRS.'' The poll also found that by a margin of 50 to 
33 percent, Americans believe more people ``get away with not paying 
all the taxes they should'' than pay ``all their taxes and are unfairly 
harassed by the IRS.'' Willful noncompliance with our tax laws cost

[[Page S4238]]

those of us who do comply an estimated $100 billion annually. IRS 
Commissioner Rossotti testified last week that taxpayer noncompliance 
costs the individual American taxpayer $1,600 annually.
  Today 85 percent of Americans comply with our tax laws willfully, 
without incident. If we do not adequately address the issue of 
noncompliance, we will be sending the wrong message.
  It is our responsibility to not only change the culture at the IRS so 
that those who do comply are treated fairly and with respect, but we 
must also change the law to allow Commissioner Rossotti the authority 
to make the changes he needs to and to provide the IRS with the proper 
resources to catch those who choose to break the law.
  I urge my colleagues to consider the overall importance of the bill 
before us this week. What we do will have a profound impact on the IRS, 
how Congress writes tax law and how Americans perceive this body and 
our government.
  Let us move forward, swiftly and in a cooperative manner, and give 
the IRS the overhaul it needs, provide the congressional oversight that 
is required, the IRS Commissioner the statutory authority he lacks, and 
the taxpayers the relief they deserve.
  Mr. President, I know from the hearings in the Finance Committee held 
by the distinguished chairman, Senator Roth, last September, and over 
the last several weeks--very, very needed and very, very worthwhile 
oversight hearings--that among other things which were focused on in 
those hearings were the actions taken by the Criminal Investigation 
Division. I know that there were an awful lot of citizens--in fact, 
every single member of the Finance Committee--who were outraged 
listening to some of the stories told about how the strong arm of the 
law was used to go after not necessarily innocent but certainly 
taxpayers that were not a threat to the life and limb of their 
neighbors. There was a substantial amount of force used in all of the 
cases. I don't pass judgment as to whether or not the IRS was right in 
the claim itself. But there is no question that there are times when 
the IRS uses more force than is necessary to carry out its function 
under the Criminal Investigative Division.
  We hope that the changes in our law and instructions to Commissioner 
Rossotti will enable us to reduce and eliminate that kind of excessive 
use of force. Mr. Rossotti himself has indicated that he is going to 
ask former FBI Director William Webster to evaluate the Criminal 
Investigation Division and come up with a set of protocols that will 
enable them to eliminate the times when they use unnecessary force to 
enforce the law.
  Let me caution Members who are outraged to be careful when they come 
and propose amendments to that particular section of this law. The 
caution needs to be based upon our desire, I hope, to keep the streets 
safe for Americans. It is my judgment that mission No. 1 for a 
government is to protect its citizens. We don't have public safety if 
we do not have citizens feeling safe when they are walking the streets, 
or when they are engaging in commercial transactions. If that doesn't 
occur, we have anarchy, and citizens not only are going to be quite 
concerned but they are apt to throw all of us out of office.
  All of us know that a combination of events has reduced crime across 
the Nation. Americans like that. They want to feel safe. They don't 
want to feel they are at risk, having people preying on them for a 
variety of reasons.
  The IRS is an important part of our effort to get that done. All 
Members who are concerned about the Criminal Investigation Division and 
who may have some changes they want to make in that division, I am 
likely to support those if it will reduce the incidents of force being 
used against citizens who pose no threat but will oppose those that I 
fear will make it easier for drug dealers, money launderers, and other 
sorts of criminals who are preying on the American people. If Members 
come to the floor and want to weaken the capacity of the Criminal 
Investigation Division to keep Americans safe, I will introduce into 
the Record, as I did in the hearings, 14 examples, and more if 
necessary, to show this body what the Criminal Investigation Division 
is doing to keep Americans safe. If there is somebody out in America 
who is a drug dealer or a money launderer, they don't have on their 
forehead ``drug dealer'' or ``money launderer.'' They are apt to look 
normal. One of the things we very often fail to do is get both sides of 
the story when we hear stories of abuse.
  I could bring every single person who is in Nebraska's prison system 
in front of any committee here in Washington, DC, and every single one 
of them will tell you the government abused their rights. There is 
nobody who is guilty in our prisons. They are all innocent. They are 
all abused by the government in some way, shape or form.
  So let's be careful as we evaluate the Criminal Investigation 
Division. We have Mr. Webster who has been assigned by Mr. Rossotti to 
examine their procedure and protocol, but let's be careful that we 
don't change the law to make it easier for people to prey on Americans 
to get their job done.
  All of us understand there is an amendment to the Constitution, the 
fourth amendment, that provides us protections against unreasonable 
searches and seizures. I am encouraged that many who have been silent 
on this protection that is guaranteed to all citizens are now starting 
to understand that it can be a substantial problem to infringe upon 
that fourth amendment right. But if a law enforcement entity has 
probable cause and gets an arrest warrant as a consequence of having 
probable cause that somebody is violating the law--a drug dealer, money 
launderer, and so forth--again, walk down the street. These people 
don't stand out for you and say, well, there's somebody who is a threat 
to our society. If they have probable cause, if they believe it is 
necessary to get a search warrant, they don't call that person up and 
say, hey, Jim, next Wednesday I am going to be over to get the 
evidence, because they know that unless they have the element of 
surprise, the evidence is going to be destroyed.
  I believe the legislation before the body today, the variety of 
things that are being done, will substantially improve the operation of 
the IRS and will give the American people better service, will shift 
more power to the taxpayer. In title I, there is a section I may end up 
reading on this floor. I am a cosponsor of the bill. It was originally 
introduced by John Breaux.
  The Taxpayer Advocate will be much more independent, have much more 
power, and I guarantee you that the taxpayers will know the 
independence that the Taxpayer Advocate has; that he will be required 
annually to come to us and say, here are provisions of the Tax Code 
that are causing the IRS special problems. These are problems and 
difficulties that we are facing as a result of the laws that you all 
pass and make recommendations for changing those laws. So that, again, 
the goal ought to be to write the law so that the IRS presumes all 
Americans are law-abiding citizens willing to voluntarily comply. They 
just want to know the size of their tax bill so they can pay it but 
reserve the authority and power of the IRS to go after individuals who 
either intentionally do not want to comply or, worse, are criminals who 
are preying on innocent Americans in a variety of different ways.

  I hope during the deliberations we will have a constructive debate. I 
know we are waiting for the caucuses to find out what Members are going 
to do with both nongermane amendments as well as germane amendments 
that could kill the bill. I say, again, the importance of this cannot 
be overstated. The citizens' confidence in Government of, by, and for 
the people is at stake. We now have a declining number of Americans who 
believe the IRS is getting the job done. It is one of the least popular 
agencies at the Federal level. We have a significant role in creating 
that unpopularity because we wrote the law to begin with. The law that 
governs the IRS has not been rewritten since 1952. It is long since 
passed the time it was necessary to rewrite those laws.
  I thank Senators Roth, Moynihan, Grassley, Congressman Portman, 
Congressman Cardin, and many others who have been involved in this from 
the very beginning. It started way back in 1995 when Senator Shelby, 
the distinguished manager, and I were managing an appropriations bill. 
We had attempted to fence an appropriation dealing with tax systems 
modernization in 1994. It failed. We got it fenced

[[Page S4239]]

in 1995. We didn't believe it was enough. We saw the taxpayer money 
being wasted. We created in the appropriations bill the National 
Commission for Restructuring the IRS. That Commission deliberated with 
Congressman Portman and 16 other people for well over a year. Senator 
Roth, last year, picked the ball up and had wonderful oversight 
hearings, and did so again this year.
  It is time to get the bill passed. The House bill passed 426 to 4 
last September. The bill that is before us today is a substantial 
improvement over that bill in what the House has done. I say on behalf 
of 200 million Americans who pay their taxes every single year, let's 
get this thing done as quickly as possible so they can have these new 
powers that they will have under the law and so the IRS Commissioner 
has the power and authority he needs to manage this agency.
  Mr. President, I yield the floor and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. BREAUX. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Hutchinson). Without objection, it is so 
ordered.
  Mr. BREAUX. Are we on the bill or are we in morning business, Mr. 
President?
  The PRESIDING OFFICER. We are on H.R. 2676, the IRS reform bill.
  Mr. BREAUX. I thank the Chair.
  I rise in support of the legislation and say to all of my colleagues, 
and to the American public as well, it is very good news that we are 
now at the point of not talking about it as much as we are actually 
trying to do something to fix the problem. The problem I speak of is 
the information that Congress and the Senate have received over the 
past several weeks regarding what I will argue are fundamental abuses 
within the Internal Revenue Service and how they treat many American 
citizens.

  The hearings the Finance Committee held really brought out some very 
disturbing facts and information about the interaction of the Internal 
Revenue Service with average Americans. We have a tax system in this 
country with which most people completely and totally comply. We have 
one of the highest rates of compliance of any free nation anywhere in 
the world. It is something of which we can be very proud.
  Also, it is interesting to note--and maybe people don't realize--that 
less than 2 percent of American taxpayers are audited each year, 
substantially less than 2 percent as a matter of fact, which means most 
Americans file their tax returns, pay what they owe during the year, 
and at the end of the year that is it in terms of their dealings with 
the Internal Revenue Service. But still, in all, it seems there is a 
very disturbing feeling by most Americans that the Internal Revenue 
Service, an agency of our own Government, is not only on their side but 
actually is against their basic interests in how they deal with their 
own Government. I know that for a fact. I even feel somewhat 
intimidated by calling the agency myself on behalf of a constituent. 
The response seems to come back: How dare you call us. We are the IRS 
and you have no business making an inquiry.
  The other story that goes around is people have pointed out one of 
the greatest lies ever told is: I'm from the Government and I'm here to 
help you.
  It is like someone who gets a letter from the Internal Revenue 
Service; generally it evokes a tremendous amount of fear from the 
average citizens in this country when they get such a letter. It is 
always the butt of so many evening television shows, jokes about people 
actually having a fear of their own Government and an actual fear of 
the agents of our own Government, who are Federal employees, who 
actually work for the citizens of this country.
  I think the hearings show this is a feeling among far too many people 
in this country. What we are doing is bringing legislation to the floor 
to try to correct some of those abuses and make it work more on behalf 
of American citizens instead of against American citizens.
  A couple of weeks ago, I was back in Louisiana and someone from my 
State said, ``What do you have coming up this week?'' I said, ``We are 
going to have more hearings on the Internal Revenue Service.'' And my 
constituent said in response, ``My God, you have had enough hearings. 
When are you going to do something about fixing the problem? We know 
there is a problem; when are you going to fix it? Are you going to 
spend the whole year talking about it? We got the message; there is a 
problem. The question is, What is Congress going to do to attempt to 
fix the problem?''
  I am pleased to report that is why we are on the floor of the U.S. 
Senate today with legislation that has been reported out in a 
bipartisan fashion. Under the leadership of the distinguished chairman, 
Senator Roth, and the ranking Democrat, Senator Moynihan, we have 
brought this piece of legislation to the floor. I want to particularly 
commend Senator Kerrey from Nebraska, who has been on the floor this 
morning and yesterday outlining this legislation. He chaired a 
commission which really did a great deal of work prior to the Congress 
bringing up this legislative proposal. His work as commission chairman 
really was the genesis for bringing about this real effort to reform 
the Internal Revenue Service.
  Some would say, ``Just throw it out, scratch it, do away with it.'' 
That is all fine and good. I can give a great speech anywhere in the 
country talking about abolishing the IRS. But also, it is important to 
find out, what are you replacing it with? What type of agency do you 
have to collect the revenues to run the Government?
  I think people legitimately are concerned. They want the services of 
Government. They want the highway trust fund to work. They want the 
highway program to work. They want Medicare and they want the Medicaid 
programs to work. They want education to work. They want the services 
of Government, but in order to have that, you have to have some 
mechanism to collect taxes in a fair manner. We should do everything we 
can to make the system more fair and make it more simple than it is, 
but eventually we are going to have to have some agency that is going 
to participate in helping collect those taxes under a fair system.
  I think what we do today is to try to improve that system. We say we 
are going to make it work better, we are going to attempt to eliminate 
the abuses in the system and abuses by people who work for the Internal 
Revenue Service.
  I would like to concentrate just on one feature of the bill that is 
now before the Senate, and that is something that I have worked on 
hard--in fact, introduced a separate bill on, to create a National 
Taxpayer Advocate to help taxpayers when they have problems with the 
Internal Revenue Service.

  Back in 1996, in the Taxpayers' Bill of Rights, we established this 
Taxpayer Advocate. The concept was not very complicated. It was, when 
people have a problem with the Internal Revenue Service, they generally 
are at the mercy of the system. The Government has literally thousands 
of attorneys and tax attorneys and prosecutors to go after individuals, 
but the individual citizens don't have anyone to represent their 
interests in dealing with the Internal Revenue Service. The National 
Taxpayer Advocate concept was to have someone who was on the side of 
the taxpayers, to help the taxpayers put together what they need to 
show what they have done was entirely honest and appropriate.
  The National Taxpayer Advocate did establish this position of a 
Taxpayer Advocate Office, and the function was to assist the taxpayers 
in resolving their problems and to identify areas in which taxpayers 
have problems in dealings with IRS, and also propose any administrative 
changes that would help make the system more fair, and identify any 
legislative recommendations that we in Congress could institute to make 
it more fair and easier for the average taxpayer.
  The problem with the old law in 1996 was that the Taxpayer Advocate 
designated authority, under these assistance programs, to the local and 
regional resolution officers who worked for the Internal Revenue 
Service. This really undermined the independence of the Taxpayer 
Advocate. It is very important, if you are going to have people who 
help the taxpayer, that they should not be totally dictated to by the

[[Page S4240]]

Internal Revenue Service itself. It was something that, while it had 
the right intention, did not work as it should.
  This legislation contains several very important changes. I am very 
pleased to report to our other colleagues that this legislation 
corrects some of the problems with the original Taxpayer Advocate 
Office. We are going to make it more independent, which it has to be in 
order to work. We are going to make it more accountable to the 
taxpayers of this country, who are the people they are there to serve, 
and make it easier for them to resolve disputes between the taxpayer 
and the Internal Revenue Service.
  The bill, in doing that, replaces the present law's problem 
resolution system with a system of local taxpayer advocates who report 
directly to the National Taxpayer Advocate Office and who will be 
employees of the Taxpayer Advocate Office, independent from the 
Internal Revenue Service's examination, collection, and appeals 
function. In other words, they will be working directly for the 
Taxpayer Advocate Office and will be independent of the IRS examination 
and collection offices and appeals office.
  The National Taxpayer Advocate has a responsibility to evaluate and 
take personnel actions with respect to any local taxpayer advocate or 
any employee in the Office of the National Taxpayer Advocate. And to 
further ensure their independence, the National Taxpayer Advocate may 
not have been an officer or employee of the Internal Revenue Service 
during the 2-year period ending with their appointment and will not be 
able to accept employment with the IRS for at least 5 years after 
ceasing to be the National Taxpayer Advocate. That means the people who 
are going to be running this office cannot just have come out of the 
Internal Revenue Service, where their loyalties would be legitimately 
questioned. And they have to agree they will not go to work for the 
Internal Revenue Service for at least 5 years after they leave this 
position.

  So what we are creating, I think, is a truly independent National 
Taxpayer Advocate Office, to be on the side of the taxpayer for a 
change instead of being on the side of the Government, saying they are 
going to represent the interests of the taxpayer. There is a conflict 
there. If you are going to have adequate representation for the 
individual taxpayer, the person cannot be an IRS employee; they have a 
different obligation of what they are trying to do.
  So this Taxpayer Advocate Office will not be able to be a previous 
IRS employee and not be able to go to work right after giving up the 
job as a National Taxpayer Advocate. I think that feature is very, very 
important, because if you were still an employee of the IRS directly 
under their responsibility, it simply would not work. If you just came 
out of the IRS, it would not work. And if you knew you were going to go 
to work for the IRS as soon as you finished the job as a National 
Taxpayer Advocate, then you would be looking over your shoulder to make 
sure you didn't make them mad or unhappy in what you did in 
representing America's taxpayers.
  That conflict has been eliminated by what we have in the legislation 
which is now before the Senate. The whole concept is to have a truly 
independent National Taxpayer Advocate whose one focus will be making 
sure that taxpayers have good representation, are fairly treated, and 
have someone, for a change, who is really on their side when they have 
a conflict with the Internal Revenue Service.
  It is interesting to note that we go further in this legislation and 
say that at the initial meeting with any taxpayers seeking assistance 
with the Office of Taxpayer Advocate, that the local taxpayer advocate 
is required to notify that taxpayer that they operate independently of 
the IRS office and that they report directly to Congress through the 
National Taxpayer Advocate. At the discretion of the local taxpayer 
advocate, he shall not disclose to any IRS employee any contact with or 
any information that they provide to the taxpayer.
  We are really trying to build some walls between the IRS and the 
Taxpayer Advocate and their work with the taxpayers, the American 
citizens of this country, to make sure that they, the taxpayers, know 
the person they are dealing with is independent, has their interests at 
heart, and doesn't have to go report to the Internal Revenue Service 
district director about what he or she has discussed or talked about 
with the taxpayer who is seeking assistance.
  In addition, each local office of the Taxpayer Advocate is to 
maintain separate phones, separate faxes, and other electronic 
communications access, and a separate post office address. We are 
really trying to make it as separate and independent as we possibly 
can, so that when the average person gets that letter talking about an 
audit or a question that they have, they know there will be someplace 
they can go without having to incur the expense of hiring outside CPAs 
or outside attorneys and pay them sometimes very high fees just to have 
someone help them with their problem. There will be someplace they can 
go, which will be independent of the IRS, which will have as their 
first, second, third, and last mission to help that taxpayer. They can 
be comfortable there will not be communication or sharing of 
information of their discussions with the Taxpayer Advocate with the 
Internal Revenue Service.
  I think this is a very important part of the bill that is before the 
Senate today. Other features in the bill are equally as important, 
certainly, and I think in the end will go a very long way to assuring 
the American taxpayers that they have a system that is not out to get 
them, that is not out to intimidate them, that is not out to embarrass 
them; that if they are honest taxpayers, they will be treated honestly 
and will be treated fairly and, if they have a problem, there will be 
someplace they can go to get honest information and help and assistance 
that is not directed by the Internal Revenue Service but is being 
directed by the Office of the Taxpayer Advocate. That is now part of 
this bill, and I think it is a very important part of it as well.
  With that, Mr. President, I yield the floor, as I see other Members 
who are waiting to speak.
  Mr. KERREY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. KERREY. Mr. President, I compliment the Senator from Louisiana. I 
have done it a couple of times previously. I was pleased to be able to 
cosponsor his legislation having to do with strengthening the Taxpayer 
Advocate in this bill. If we can keep the nongermane amendments off and 
stick to the business of changing the law to give the taxpayers this 
new authority and power with this one provision, the Taxpayer Advocate, 
it will be noticed immediately.
  This Taxpayer Advocate will be truly independent, with separate phone 
numbers, separate faxes, a separate operation, with the capacity to 
organize taxpayer advocates in each of the 50 States, to operate 
independently, not only settling problems that taxpayers have but 
bringing to Congress' attention repetitive problems that they identify 
that they think need to be solved by us either changing the law or 
changing some other procedures.
  We have had the Taxpayer Advocate created before under the Taxpayer 
Bill of Rights II, when it was created. The change from Taxpayer 
Advocate to National Taxpayer Advocate is not by accident. I hope 
colleagues have a chance to look at this particular section of the bill 
as they consider how we are going to proceed this week. Look at the 
language in this particular section and ask yourself the question: Do I 
want to give the taxpayers in my State this kind of Taxpayer Advocate, 
this kind of power, this kind of representation? Do I think that they 
will appreciate the changes they will see in the way IRS operates and 
the kind of service they get from that IRS? I think Senators will look 
at that and say, ``My gosh, I don't want to slow this bill down. We 
need to get this thing done. We have waited long enough. We need to get 
this bill done so these new powers can be felt by the taxpayers in my 
State.''
  Again, I appreciate very much what the Senator from Louisiana has 
done. This is one of the most important sections of this bill. It is 
not in the House bill. Senator Roth, the chairman of our committee, 
talked many times about the need to make certain we took the House bill 
and made it as strong as we could. I was constantly pressing that

[[Page S4241]]

we move in an expeditious fashion. This is one of several examples 
where the House bill has been substantially improved.
  I hope colleagues, as they look at this bill, will remember we are 
trying to give the taxpayers in all the States in this Nation new 
power, new authority, and an IRS that will much better serve their 
needs in a much more courteous and expeditious fashion.

  I yield the floor.
  Mr. GRAHAM addressed the Chair.
  The PRESIDING OFFICER. The Senator from Florida.
  Mr. GRAHAM. Mr. President, I appreciate the fact that the leader is 
bringing to the floor this week the Internal Revenue Service reform 
bill and giving the Senate the opportunity to act expeditiously on this 
matter. It is my hope that as soon as we act, there will be a prompt 
conference committee with the House, which has already passed analogous 
although not as comprehensive legislation, so that soon the American 
people will have the benefit of the reforms that are contained in this 
legislation.
  We did not get to this point easily. I compliment particularly 
Senators Bob Kerrey and Charles Grassley, who served on the commission 
that reviewed the IRS from which many of the ideas contained in this 
legislation have emanated. I congratulate Senators Roth and Moynihan of 
the Finance Committee for having led us to this point. And I 
congratulate new Commissioner Rossotti of the IRS, who has brought a 
fire, an energy, to reform the agency from the inside that has 
facilitated the consideration of these structural changes that will be 
contained in this legislation.


                         Privilege of the Floor

  Mr. GRAHAM. Mr. President, before I proceed further, I ask unanimous 
consent that Kate Mahar, Ed Moore, and Maribel Garcia-Romero of my 
staff be allowed the privilege of the floor for the pendency of the 
debate on the IRS reform bill.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRAHAM. Thank you, Mr. President.
  Mr. President, first, I will comment on some provisions which will be 
in the Senate bill that I have had a particular interest in and then to 
alert the Senate to an amendment I will be offering, possibly with 
others, when we reach the consideration of this bill.
  This bill follows many months of investigations and hearings by the 
Finance Committee, both in Washington and throughout the Nation. It 
follows a process in which the committee has first tried to do a 
careful diagnosis of what was the problem and then consider the 
options, the prescriptions that might deal with that problem, and then 
incorporate into this legislation that prescription which was 
considered to be the most appropriate.
  I compliment the people who have participated in this process. 
Specifically, I held a hearing in January in Orlando, FL, where a 
number of Floridians had the opportunity to participate in this 
thoughtful process of diagnosis and prescription. I know that Senator 
Nickles held a similar hearing in Oklahoma. Other Senators communicated 
with their constituents through various forums. So this is, in a real 
sense, a product of the people of America.
  Let me review some of the diagnoses and the pathologies in the IRS 
that surfaced. One of those was the need to help taxpayers resolve 
their debts. What was discovered was that many taxpayers want to 
resolve their IRS debts but the Code imposes so many penalties that 
once a liability is established, it is very difficult to satisfy that 
debt.
  As an example, a Floridian, Carl Junstrom of Tampa, over 10 years 
ago, because of misinterpreted advice of an IRS agent, ended up being 
responsible for $25,000 in taxes. He entered into an agreement with the 
IRS under which he paid $181 a month towards that debt owed. After 
having faithfully met that monthly obligation for almost a decade, and 
having paid $28,000 towards an original $25,000 indebtedness, Mr. 
Junstrom was informed that he still owed $26,000.
  How is that possible? The answer is, because the penalty clock kept 
running during the pendency of this agreement and, therefore, although 
he thought he was paying off his indebtedness and, in fact, paid $3,000 
more than he originally owed, because of accumulated penalties during 
that same 10-year period, he ended up owing more than he had at the 
beginning of the process.
  What is the remedy? This bill includes a provision that encourages 
the IRS and the taxpayers to engage in installment agreements by, one, 
assuring the availability of payment plans for taxpayers with 
liabilities of $10,000 or less and, two, eliminating the failure-to-pay 
penalty for periods where the taxpayer is making payments pursuant to 
an installment agreement.
  In the case of Mr. Junstrom, the penalty clock would have stopped as 
long as he was making his $181-a-month payments.
  Another remedy is to adopt proposals to eliminate the differential 
between the interest rate the IRS charges individuals and the rate that 
the IRS pays taxpayers. Previously, there had been a higher interest 
charged to the taxpayers on a deficit than the interest which the 
taxpayer would receive if it was found that they were owed a refund. 
That differential is eliminated in this legislation.
  A second problem identified was protecting the innocent taxpayer. 
What is the problem? One example of the problem is that many 
individuals filing joint returns find out subsequent to filing those 
joint returns that their spouse has understated income or overstated 
deductions. Although the individual may have had little or no income 
and little or no knowledge of this, the IRS holds that person 
responsible for 100 percent of the taxes attributable to the individual 
spouse's action. This typically surfaces after there has been a divorce 
and one spouse, often the husband, has left town. The wife, who usually 
has custodial responsibility for the children, is still there and is 
accessible, so she becomes the target for the IRS collection activity. 
About 50,000 women a year are in that category which is generically 
referred to as the ``innocent spouse.'' An example is Karen Andreasen, 
a Floridian. Her signature was forged on a joint return, but she ended 
up being held liable for her ex-husband's debts.
  The remedy? The remedy incorporates legislation which Senator D'Amato 
and others, including myself, have introduced as discrete legislation. 
This generally would adopt an approach recommended by the American Bar 
Association which essentially says that each spouse is to pay his or 
her share of the tax liability in proportion to what he or she 
contributed to the original tax return. If, for example, the return 
represented income that was 80 percent the husband's earning and 20 
percent wife's earning, in a subsequent dispute the wife would be 
limited to a responsibility of 20 percent of any deficiency. That is a 
very important provision in this legislation, which will have an 
immediate benefit, because this legislation applies this new standard 
retroactively to existing open cases for many tens of thousands of 
spouses caught in this vice.
  Another issue that surfaced was assisting taxpayers in their 
negotiations with the IRS. What is the problem? The problem is that 
many taxpayers, especially small businesses and moderate-income 
families, find themselves unable to negotiate with an agency which has 
the power to seize, levy and garnish wages. An example, Betty Bryant of 
Miami, Florida started a small business to supplement her income as a 
State employee. She actually overpaid her taxes but filled out the form 
incorrectly and ended up with wages being garnished while this matter 
was in controversy. Another example, Thomas Jones, submitted an offer-
in-compromise to the IRS. The offer was rejected even though the IRS 
admitted they couldn't find his file. They rejected his offer even 
though they didn't have the information upon which to make an 
intelligent judgment as to whether the offer was appropriate or not. He 
also was not apprised of his right to appeal the rejection of his 
offer.
  What is the remedy? The Finance Committee includes proposals to 
require a review of any IRS decision to reject an offer-in-compromise 
by collection. This will assure that there will be some independent 
party reviewing the offer in compromise. Moreover, the bill requires 
that the taxpayer be notified of this right.

[[Page S4242]]

  In addition, the bill requires the IRS to suspend collection efforts 
if the taxpayer appeals the rejection of an offer-in-compromise.
  The committee also approved proposals to expand the IRS Alternative 
Dispute Resolution Program. In many jurisdictions, the development of 
alternative dispute resolution procedures has provided a significant 
and frequently much more efficient alternative to traditional 
litigation. This proposal would build upon a pilot program initiated by 
the IRS pursuant to the Alternative Dispute Resolution Act of 1996. It 
would allow third-party mediation of cases of tax disputes. It would 
also establish a pilot program for the use of arbitration in tax 
disputes.

  The legislation also provides a proposal to require acceptance of an 
offer-in-compromise if the IRS has lost the taxpayer's file.
  Another area where Senators found deficiencies in the IRS is customer 
service. What is the problem? Many taxpayers feel they are treated as 
criminals rather than as customers. The IRS is often unreachable and 
difficult to pin down on advice they give to taxpayers on how to 
properly fill out a return. Jim Stamps of Jacksonville provided 
testimony that it had taken him 4 years to get a letter stating that he 
had paid off all the taxes that he owed. Without that letter, many 
opportunities that were available to him personally and in business 
were frustrated.
  Mr. Junstrom, who I mentioned earlier, the man who had the $25,000 
bill, paid $28,000 but still owed $26,000, and had requested the IRS to 
sit down with him to explain what he owed. He never was afforded that 
opportunity and continued to receive confusing and conflicting notices.
  What is the remedy? The bill reported out of the committee includes a 
requirement that the IRS evaluate employees on their customer service 
as well as on their collection ability. The Finance Committee heard 
testimony indicating that in the past not only was there almost a total 
focus of evaluation based on how much money an agent collected, but 
that those standards became numeric, and if you didn't meet the 
standard of collections, then you received a downgrade on your 
evaluation.
  This legislation repeats and expands upon a directive that Senator 
Grassley wrote into the Taxpayer Bill of Rights that made it illegal to 
evaluate an IRS employee based on a numerical standard of how much was 
collected. But this legislation goes beyond that and says that employee 
evaluation will give emphasis to their customer service as well as 
their other responsibilities.
  The IRS reform bill will also increase accessibility by a very simple 
thing--pick up the telephone book today and look under U.S. Government 
in virtually any community in America and then look under IRS. One 
thing you will see is an 800 number as to where to call to get service. 
There are two things that you typically do not see. First, you may not 
find a local telephone number that you can call in the event that the 
800 number is busy, which happens frequently, particularly during 
periods just before April the 15th. Second, what you don't see is an 
address so that the taxpayer who wants to go down and actually meet 
face to face with a human being to review their problem will know where 
to call and where to go. This legislation will require the IRS publish 
both its local telephone number and its local address.
  The legislation requires the IRS to issue annual statements to 
taxpayers who have entered into installment agreements, like Mr. 
Junstrom. The statement would include amounts paid, remaining balance, 
and projected pay-off time so that the taxpayer will be in regular 
knowledge of where he or she stands with the IRS.
  None of us purports that this legislation will solve all of the 
problems and all the taxpayer complaints with the IRS. And we should 
resist the temptation to oversell this legislation. The IRS will have 
to take many administrative actions to implement these laws and 
undertake other reforms to achieve that goal. Fortunately, I believe 
the IRS is moving expeditiously to become a more user-friendly agency. 
It is dealing with a culture which in the past has focused inside the 
agency, what was to the convenience of the agency, like not publishing 
the address so that taxpayers wouldn't come down to the IRS office and 
ask a lot of questions, to an agency that is moving to a culture of 
being consumer friendly and saying: Here is where we are, come down and 
we seriously want to render service to the taxpayer.

  Commissioner Rossotti has implemented a broad range of reforms and 
has undertaken investigations to get to the bottom of other allegations 
that have been made about the agency's activities. The IRS has extended 
its hours, implemented problem resolution days, and has stopped 
evaluating collection agents based on the numerical amount of taxes 
they collect. This legislation will continue that effort. Mr. 
President, all of what I have just said is in the bill that we will 
soon be considering, and I recommend that bill and these provisions to 
my colleagues.
  Let me now turn to a provision that is not currently in the bill. It 
is my intention to offer an amendment to ensure that the new IRS 
Oversight Board will have at least one member with expertise on small 
business issues.
  One of the recurring themes of the hearings that we have had is the 
concentration of problems between taxpayers and the IRS, especially 
when that taxpayer was a small businessman or woman--an individual who 
frequently is relatively new to business, learning what the difference 
was between an expense deductible item and an item that had to be 
amortized over time, a person who frequently did not have access to or 
could not afford expert professional advice, but a person who was 
trying to comply with their legal responsibilities.
  These are not evaders of taxation, they are people who need help, and 
up-to-date information, in order to meet their responsibilities.
  We are creating in this legislation an oversight board. That 
oversight board is intended to provide a new window of enlightenment, 
in both directions, from the public to the IRS, and from the IRS back 
to the public. Under legislation crafted in the Finance Committee, the 
current board would be composed of 9 individuals. Those 9 individuals 
will include the Secretary of the Treasury, the IRS Commissioner, and a 
representative of the IRS employees. In addition to those 3 named 
individuals, there will be 6 Presidential appointees. Each of these 6 
must possess expertise in at least one of the following areas: 
Management of large service organizations, customer service, Federal 
tax laws, information technology, organization development, and the 
needs and concerns of taxpayers.
  Missing from this list is any specific requirement for expertise in 
small business issues--an omission that I consider to be glaring given 
the fact that small businesses are the backbone of the American economy 
and such a large target of concern for IRS activities.
  I believe that at least one of the members of the IRS oversight board 
should have practical experience in small business issues.
  Let me outline the reasons why I feel so strongly about this, and why 
I will be introducing an amendment to make this part of the IRS reform 
legislation.
  Small businesses have more difficulty dealing with the complex 
Internal Revenue Code. Small businesses have relatively less time, 
money, and expertise than large corporations. They need an IRS that is 
sensitive to these limitations.
  Let me explain how I came to this conclusion with a specific example 
that relates to this bill.
  In January of this year, I hosted a Retirement Security Summit at the 
University of South Florida in Tampa. One session of that Retirement 
Security Summit specifically focused on the issue of small businesses 
and their pension plans.
  Delegates, small business owners and their representatives discussed 
their frustrations and their experiences with the IRS. They told me 
that many small businesses do not offer retirement plans for their 
employees because they fear the draconian penalties that the IRS can 
impose for inadvertent violations of complex pension laws.
  Mr. President, this is a very serious issue of security for tens of 
millions of Americans who work for small businesses, the fastest-
growing sector of

[[Page S4243]]

our economy, but whose employers do not provide pension and retirement 
programs.
  We identified that one of the reasons for that unwillingness to 
provide these programs is the concern of the consequences of subsequent 
IRS enforcement if the small business finds itself in some technical 
violation.
  Several of my Senate colleagues and I began to consider whether 
congressional action would help solve this problem. We drafted 
legislation to provide that companies that correct errors prior to 
audit would not be subject to sanction. But before we offered the 
proposal as an amendment to the IRS Reform bill, we wrote to the IRS 
commissioner, Mr. Rossotti, and asked him if the IRS proposed to change 
the imposition of penalties for inadvertent errors.
  Commissioner Rossotti responded immediately, in a matter of days, and 
committed to expanding existing self-correction programs and allow 
taxpayers to rely on those self-correction programs. We were pleased 
with the quick action of the commissioner in issuing Revenue Procedure 
98-22, which many small businesses have characterized as a common 
sense, reasonable solution to their problem.
  That process made me realize how difficult it is for many small 
businesses to comply not only with the complexities of tax laws as they 
relate to pension plans, but the whole array of rules that the Internal 
Revenue Code has spawned. It made me further realize that the IRS needs 
to be sensitive to small businesses when it issues regulations and 
enforces the tax laws.
  Small business owners often have fewer resources, but must still 
comply with the same complicated Tax Code as large businesses. Small 
businesses cannot afford to hire full-time lawyers and accountants to 
monitor the Tax Code for changes that may apply to them. And small 
businesses should not have to wait for Congress to be able to change 
the law where solutions can be found by administrative action.
  The myriad of challenges that small businesses face have been 
reflected in the hearings the Finance Committee has held this year on 
IRS reform. Many of the taxpayers who have testified so persuasively 
about mistreatment at the hands of IRS agents have been small business 
owners.
  In my opinion, by adding a small business person to the IRS oversight 
board, we will be able to provide for a more prompt, more sensitive 
understanding of the needs of small businesses and the ability of IRS 
to respond internally.
  Even the IRS has acknowledged the unique needs of small businesses. 
In testimony before the Senate Finance Committee on January 28 of this 
year, Commissioner Rossotti proposed reorganizing the IRS into 4 
units--each charged with end-to-end responsibility for serving a 
particular group of taxpayers. He proposed dedicating one of those four 
working units to small businesses.
  Mr. President, it is for those reasons that it is my intention, with 
other Members of the Senate, to offer an amendment to this bill, when 
it is before the Senate, to include a representative of small business 
as one of the 6 presidential appointees to the IRS oversight board. I 
believe this would be of substantial benefit to the enforcement of our 
tax laws as they relate to the special needs of small businesses.
  Mr. President, before I conclude, I want to acknowledge the efforts 
of Senator Kit Bond, who chairs the Small Business Committee. He has 
included a similar provision in legislation that he will be 
introducing.
  Should the requirement that the oversight board have small business 
expertise not be incorporated in the bill through Senator Bond's 
amendment, I will urge adoption of this targeted amendment that I will 
intend to offer.
  The amendment is simple, fair, and essential if we are to bolster our 
Nation's small businesses. Mr. President, I urge my colleagues to 
support legislation to include small business on the IRS oversight 
board. I ask the managers to let us know when it would be appropriate 
to introduce this amendment.
  Mr. President, I appreciate this opportunity to discuss the process 
by which the items in the IRS reform bill have been developed. It has 
been thoughtful and it has received the strong, steady support of our 
chairman, Senator Roth, and has led to a set of reforms that I believe 
the Senate will be very much carrying out the wishes of the American 
people in adopting.
  With respect to small business, Commissioner Rossotti stated:

       Another very important group of taxpayers are small 
     businesses, including sole proprietors and small business 
     corporations. There are about 25 million filers in this 
     category. Compared to other individual taxpayers, this group 
     has much more frequent and complex filing requirements and 
     pays much more directly to the IRS, including tax deposits, 
     quarterly employment returns, and many other types of income 
     tax returns and schedules. Providing good service to this 
     group of taxpayers is more difficult than wage and investment 
     filers, and compliance and collection problems are also much 
     greater. Small start-up businesses in particular need special 
     help. By dedicating a fully responsible unit to providing all 
     IRS services for the self-employed and small business, this 
     unit will be able to work closely with industry associations, 
     small business groups and preparers to solve problems for the 
     benefit of all.

  Commissioner Rossotti is right. The IRS needs to focus resources on 
helping small businesses, and that focus needs to be reflected on the 
Oversight Board.
  The amendment that I propose to offer is also needed because small 
businesses play such a central role in our nation s economic strength. 
The numbers tell the story:
  Small Business Administration figures indicate that of the 5,369,068 
employer firms in 1995, 78.8% had fewer than 10 employees, and 99.7% 
had fewer than 500 employees.
  Employers with fewer than 500 employees increased from 4,941,821 in 
1988 to 5,261,967 in 1994, a 6.5% increase.
  The number of small business owners (as measured by business tax 
returns) in the United States increased by 57% since 1982.
  According to the Small Business Administration, America's small 
businesses created 11,827,000 jobs from 1992 to 1996. This number 
represents the vast majority of all new jobs created during that 
period.
  Small microbusinesses with 1-4 employees generated about 50% of all 
the net new jobs from 1992-1996, while firms with 5-19 employees 
created another 27% of new employment opportunities.
  The fastest growing of small-business-dominated industries during the 
past several years include restaurants, outpatient care facilities, 
offices of physicians, special trade construction contractors, computer 
and data processing services, and credit reporting and collection.
  Ninety-four percent of high technology firms have less than 500 
employees; 73% have fewer than 20 employees.
  In my home state of Florida, the productivity of small business is 
astounding.
  In 1996, Florida had 348,000 businesses with employees. 99% of all 
businesses with employees had less than 500 workers.
  The state also had 412,000 self-employed persons in 1996, for an 
estimated total of 760,000 businesses.
  In Florida, small businesses created 1,081,000 or the 1,194,000 net 
new jobs from 1992 to 1996. Very small businesses (less than 20 
employees) created 71.7% of the small business growth with 775,000 new 
jobs. These numbers reflect the importance of small businesses as job 
creators.
  Recent IRS statistics reflect the rapid growth of small businesses. 
They indicate that net income reported by sole proprietors has doubled 
in the last decade.
  It is because of these reasons and trends that I urge my colleagues 
to support this effort to give small businesses a voice on the IRS 
Oversight Board.
  Mr. President, I want to acknowledge the efforts of Senator Kit Bond, 
Chairman of the Small Business Committee, in this area. He included a 
similar provision in his IRS Reform bill.
  Should the requirement that the Oversight Board have small business 
expertise not be adopted via a broader amendment, I will urge the 
adoption of this targeted amendment.
  The amendment I propose is simple, fair, and essential if we are to 
bolster our nation's small businesses. I urge my colleagues to support 
it--and ask the managers to let us know when it is appropriate to 
introduce the amendment. The amendment that I propose to offer will 
extend its benefits in a very significant way to the most important 
part of the American economy, the small business community of this 
Nation.

[[Page S4244]]

  Thank you, Mr. President.
  Mr. ROTH. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Sessions). The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. ABRAHAM. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. ABRAHAM. Mr. President, I ask unanimous consent that I be 
permitted to speak as in morning business for the purpose of 
introducing a piece of legislation in conjunction with Senator Allard, 
who will be soon joining me to speak.
  The PRESIDING OFFICER. Does the Senator have a time limit on that?
  Mr. ABRAHAM. I would like to speak for up to 10 minutes, to be 
followed by Senator Allard for up to 10 minutes.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  Mr. ABRAHAM. Mr. President, I also seek unanimous consent that at the 
conclusion of Senator Allard's remarks the Senate stand in recess for 
purposes of conducting the weekly policy luncheons.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Michigan is recognized.
  Mr. ABRAHAM. I thank the Chair.
  (The remarks of Mr. Abraham and Mr. Allard pertaining to the 
introduction of S. 2033 are located in today's Record under 
``Statements on Introduced Bills and Joint Resolutions.'')

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