[Congressional Record Volume 144, Number 56 (Thursday, May 7, 1998)]
[Senate]
[Pages S4468-S4477]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page S4468]]
     INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998

  The Senate continued with the consideration of the bill.


                           Amendment No. 2368

 (Purpose: To amend the provision regarding offset of past-due legally 
enforceable State income tax obligations against overpayments to apply 
 to debts for which an administrative hearing has determined an amount 
         of State income tax to be due, and for other purposes)

  Mr. KERREY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Nebraska [Mr. Kerrey], for Mr. Grassley, 
     for himself and Mr. Kerrey, proposes an amendment numbered 
     2368.

  Mr. KERREY. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 386, lines 17 and 18, strike ``return for such 
     taxable year'' and insert ``Federal return for such taxable 
     year of the overpayment''.
       On page 387, line 23, insert ``by certified mail with 
     return accept'' after ``notifies''.
       On page 388, strike lines 17 through 25, and insert the 
     following:
       ``(A)(i) which resulted from--
       ``(I) a judgment rendered by a court of competent 
     jurisdiction which has determined an amount of State income 
     tax to be due, or
       ``(II) a determination after an administrative hearing 
     which has determined an amount of State tax to be due, and
       ``(ii) which is no longer subject to judicial review, or
       ``(B) which resulted from a State income tax which has been 
     assessed but not collected, the time for redetermination of 
     which has expired, and which has not been delinquent for more 
     than 10 years.
  Mr. KERREY. Mr. President, this amendment offered by Senator Grassley 
and I will fix a problem having to do with Federal tax refunds and 
State offsets. For those of us that have State income tax, there is a 
problem of some considerable proportion. I thank Chairman Roth for 
being willing to work with Senator Grassley and me on this one. There 
was confusion. We answered incorrectly when the chairman asked us about 
whether or not judicial judgments would solve this. I appreciate very 
much the chairman working with us to accept this amendment.
  Mr. ROTH. Mr. President, I believe the amendment in its present form 
is satisfactory. I did initially have some serious concerns--some 
concern that an innocent taxpayer might find money owed him that would 
be offset by the State under situations where that would not be 
appropriate. But we have worked together and have come up with an 
amendment that takes care of that concern. The majority is willing to 
accept the proposed amendment.
  Mr. KERREY. Mr. President, the distinguished Senator from Iowa, 
Senator Grassley, is not on the floor, but I am certain he is going to 
want to speak on this. However, I think it will be fine if we urge 
adoption of the amendment at this time.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 2368) was agreed to.
  Mr. ROTH. Mr. President, I move to reconsider the vote.
  Mr. KERREY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Ms. MIKULSKI addressed the Chair.
  The PRESIDING OFFICER. The Senator from Maryland is recognized.
  Ms. MIKULSKI. Mr. President, I rise in strong support of the IRS 
Reform and Modernization Act. It is now over six months since the House 
passed this reform measure. I am pleased that at last we are taking 
this bill up here in the Senate, and that we will be voting on this 
today.
  Let me tell you why I think this bill is so important.
  Others have spoken on the new projections that this bill will provide 
for taxpayers. I agree that they are very important.
  As my colleagues have noted, this bill will provide taxpayers with 
important new rights and protections. It shifts the burden of proof in 
many tax court cases from the taxpayer to the Secretary of the 
Treasury. It gives taxpayers an expanded ability to recover costs if 
they win their cases. It protects ``innocent spouses''.
  The bill also will help taxpayers by changing the framework for 
interest and penalties and improving due process in matters regarding 
audits and collections. These are all important reforms. They will help 
ensure fairness for taxpayers.
  Mr. President, I really want to get to the heart of why I am for this 
bill.
  First, the Senate should know that I am very, very proud of the fact 
that the IRS will have its headquarters in Maryland. I want to salute 
the devoted men and women at the IRS who have worked under a very 
difficult set of conditions. They have often worked under a lack of 
leadership and often with a lack of technology. I hope that as we move 
ahead with the IRS reform package, we really remember and reward the 
dedicated and faithful civil servants who follow the laws that Congress 
passes.
  I must tell why I am so enthusiastic about this bill. It provides not 
only a new legislative framework, but a new culture and a new attitude 
at the top that then says to the agent at the grassroots level what is 
expected of him. Let me tell you why I think this new culture and new 
attitude is so important. I believe there is no doubt that the IRS has 
engaged in many inappropriate management practices. I know from my 
conversations with Maryland constituents that too many of them have 
been outright harassed by the IRS.
  I want to talk about two constituencies: the veterans of the State of 
Maryland and the firefighters in Frederick County. I think it is 
outrageous that IRS singled out these veterans of Maryland, and 
actually even stalked them over what they were doing in their VFW halls 
and their American Legion posts. The IRS wanted to penalize them 
because they had a little beer and a little bingo on a Friday night.
  Over the past several years IRS has targeted a number of veterans 
posts in Maryland. Veterans of Foreign Wars and American Legion posts 
have been subjected to audits, harassment and threats. What is their 
crime? They sell drinks and food to their post members and their 
guests; a little bingo and a little beer and a lot of IRS. Let me tell 
you, that has got to end.
  Every member of this Senate has veterans' posts in their state. We 
know that these neighborhood meeting places offer veterans a place for 
fellowship, entertainment and an affordable meal for their families and 
friends. The IRS believes that posts should have to pay taxes on these 
sales. Maryland veterans' posts report that IRS has confiscated their 
sign-in books. People have been subpoenaed. One post, the Dundalk post 
in the State of Maryland, was even threatened the loss of their 
nonprofit status.

  Ladies and gentleman of the Senate, these are the men and women who 
fought to save America, and I am willing to stand up today to save 
America's veterans from the Internal Revenue Service. And that is why I 
am going to be an enthusiastic voter for the final passage of this 
bill.
  What did our veterans have to do? They had to hire attorneys, they 
had to hire CPAs. Amazingly, the American Legion was told by the IRS 
they could not use post funds to provide this legal help. Then instead 
of offering to work cooperatively with the post to help them come into 
compliance, the IRS went after them in the most heavy-handed manner. 
They also said, ``If you go to any Member of your Congress, we will get 
you.'' I am not out to get anybody. But what I am here to be sure of is 
that our Tax Code is a workable one and that the people who work at IRS 
follow the law.
  Let me give you another example--our volunteer firefighters. 
Underline that, Mr. President. Volunteer firefighters, who put 
themselves, their lives on the line to save us and our families.
  One of the ways that they get money to be able to purchase a 
firetruck or other equipment is something called a tip jar. It is just 
a big glass jar which they have in taverns or other places; voluntary 
contributions to help a volunteer fire department. But, oh, no. Along 
comes the IRS and says even though you risk your lives, even

[[Page S4469]]

though you do not have the backing of big city technology, we are going 
to make sure we are going to tax you for what you have done.
  To help the firefighters, the Frederick County Commissioners passed a 
local gaming law making it legal and less bureaucratic for the fire 
company to have tip jars in local taverns. The new law eliminated the 
need for the county tax processors to get involved in a voluntary 
philanthropic activity. But, no, the IRS had other ideas. They had to 
come after our firefighters. They audited the fire company. They 
informed the volunteers that they owed $29,000 in back Federal taxes 
because the money was not funneled through some local tax authority.
  What comes next? Are they going to be after the Girl Scouts when they 
sell their cookies?
  I believe an agency culture that identifies America's veterans and 
America's volunteer firefighters as the enemy is a culture in desperate 
need of change.
  So that is why this bill is important. I believe that we are not only 
changing the law, but it will change the culture of IRS.
  The Oversight Board this bill provides will work to ensure the best 
use of agency resources. It will help the IRS focus its priorities 
where they should be--stopping flagrant tax cheats and tax evaders, not 
going after veterans and volunteers who have made innocent mistakes.
  The National Taxpayer Advocate, and the system of local taxpayers 
advocates will help these groups navigate their way through an often 
intimidating and complex dispute resolution process. The special 
customer group dedicated to working with members of the tax-exempt 
sector will also be a big help. This division will be able to work with 
the non-profits to ensure they understand their responsibilities under 
the law, and to help them comply.
  Mr. President, before closing, I want to pay tribute to the devoted 
men and women who work at the IRS, often under difficult circumstances, 
inadequate and dated technology, and often poor leadership or 
supervision. I believe this bill will help them too. They have chosen 
to devote their careers to our government and to public service. They 
receive little recognition and little thanks. I want them to know I 
value their work. And I am delighted that the Oversight Board will 
include an employee representative. No one knows more about how to 
change the culture of the IRS than the employees themselves. This bill 
recognizes the importance of ensuring that they have a place at the 
table.
  I do want the IRS to focus on collecting the taxes in the most 
efficient way, and I want them to go after tax cheats, tax evaders, and 
drug dealers so that we can use the IRS to stop real crime in our 
country. There is no crime going on in the VFW or in the volunteer fire 
companies of America.
  I know this bill and hopefully now the new Commissioner will interact 
with different customer groups by working with them in a different type 
of way.
  I look forward to the fact that with the new leadership and the new 
legislation that we will really back the dedicated civil servants with 
this new framework and that we will be able to help them. But today I 
vote for reform of IRS. I stand here on the Senate floor in my own 
modest way to fight as hard for the veterans as they have fought for us 
and to stand up for protecting our volunteer firefighters.
  Certainly in the United States of America a little beer and a little 
bingo should not be penalized.
  Mr. President, I yield the floor.
  Mr. FEINGOLD addressed the Chair.
  The PRESIDING OFFICER. The Senator from Wisconsin.
  Mr. FEINGOLD. Thank you, Mr. President.
  Mr. FEINGOLD. Mr. President, as we approach so-called Tax Freedom 
Day, I rise to offer some comments about the IRS Reform measure before 
us, and to address some more general issues on the state of our tax 
code.
  Mr. President, let me begin by especially commending the senior 
Senator from Nebraska, Mr. Kerrey, for his efforts to bring IRS reform 
before the body. His long involvement in this issue, and his unflagging 
efforts to bring these reforms before us deserve our highest praise.
  This bill is very much the product of Senator Kerrey's work, and 
American taxpayers are fortunate to have his gifted advocacy.
  Mr. President, there are many significant reforms included in the 
bill before us, but one that I was especially interested to see 
included mirrors legislation I was pleased to join in introducing with 
the senior Senator from Vermont (Mr. Leahy) .
  Our measure would extend the protections of the Equal Access to 
Justice Act to taxpayers who have had actions brought against them by 
the IRS.
  Mr. President, for those who are not familiar with this important 
Act, it was established in response to the dilemma individuals and 
small businesses face when the government brings an unjustified action 
against them that may be relatively expensive to contest.
  Even though they may feel very strongly that they are right and they 
did nothing wrong, they feel they cannot pay the costs associated with 
it.
  Too often, an individual or a small business may feel forced to forgo 
contesting the government's action, feeling that any potential fine or 
forfeiture would be less expensive than the cost of fighting the 
government in court.
  Mr. President, I saw this long before I entered the political world 
as an attorney representing small business people who faced this 
frustration and feeling that they really couldn't fight the Government 
in these cases because of the problems with fines, and especially 
attorneys' fees.
  Under the Equal Access to Justice Act, those individuals and small 
businesses are entitled to recover their court costs if they are 
successful in fighting the government action.
  Mr. President, as a member of the Wisconsin State Senate, I worked to 
establish an Equal Access to Justice law for Wisconsin, and since 
coming to this body, I have offered measures to further strengthen the 
Federal law in this regard.
  This bill, the IRS bill, is a golden opportunity for us to improve 
this law by including in large part the provisions of the bill Senator 
Leahy and I introduced that would make the IRS have to play by these 
rules as well.
  I also want to thank the managers of the bill for accepting the 
amendment my colleague from Wisconsin, Senator Kohl, and I offered 
regarding the equal employment opportunity problems that were brought 
to our attention by IRS employees in Wisconsin.
  This matter came to the attention of the Finance Committee at a 
recent hearing, and I very much hope the action we are taking in this 
legislation will help resolve those problems.
  Mr. President, the IRS reform bill before us is by and large a good 
response to many of the problems with our current tax collection 
system. The tax collection system is a vitally important issue, and it 
certainly contributes to the larger issue surrounding the Tax Code 
itself. Of course, the problems with the Tax Code are likely to be much 
thornier to address, and as we approach what has been called Tax 
Freedom Day, I want to offer a few comments on the challenges we face 
in taking the next step beyond this bill in reforming the Tax Code 
itself.

  We have all heard about this Tax Freedom Day. There is some dispute 
about when it really is, but it is supposed to be the day by which we 
have worked enough to pay our taxes for the year. The Tax Foundation 
maintains that the date is May 10. Other organizations question that 
and point to other dates. One says Tax Freedom Day is really April 22. 
Looking just at the Federal personal income tax, some say Tax Freedom 
Day for the typical taxpayer is really January 20. So it may be 
interesting to examine all of these estimates and compare the 
differences in the way we calculate Tax Freedom Day. But without trying 
to argue which day is the right day, I think we can at least agree 
there probably is not anyone who, if told their own tax freedom day was 
this Sunday, wouldn't prefer that it was Saturday instead. No one likes 
to pay taxes and everyone would like to pay less than they do now. For 
most people this would be a key part of tax reform, and I think they 
are right.
  Although we may not be voting on a significant overhaul of the Tax 
Code this year, I really hope that serious debate of various tax reform 
proposals

[[Page S4470]]

can begin. This was something that was identified as one of the very 
top four or five priorities after the 1994 election, to have a debate 
about tax reform. But we have never had that debate over the past 4 
years. The work that has gone into the IRS reform bill, and especially 
the leadership of Senator Kerrey, shows how much can be done if this 
body actually works toward reform. And I think the same would be true 
if we really dedicated ourselves to tax reform legislation.
  While we may not be voting on tax reform this year, we are certainly 
likely to be taking actions, including apparently passing tax bills, 
that will have a direct bearing on tax reform when it does finally come 
before us.
  With this in mind as we take actions that are likely to have this 
downstream effect on tax reform, I hope we keep various principles in 
mind. We should promote equity and fairness; we should resist 
complexity; and we should insist on fiscal responsibility.
  An aspect of the current Tax Code that really strains each of these 
principles, and which contributes to our having a later Tax Freedom Day 
for most of us, is, in fact, the huge number of special interest 
provisions that appear throughout the Tax Code. It is riddled with 
them. These provisions, often called tax expenditures, have been 
enacted over the years to help specific groups of taxpayers but they 
have come at a cost. They come at a cost of lost revenue, and that ends 
up being a burden that other taxpayers are left to bear through higher 
taxes.
  While some tax expenditures are justified, many are not. And they can 
combine to produce significant tax avoidance by some of the biggest and 
most profitable financial interests in the world.
  One example related to me recently concerned one of our largest 
automakers, a firm that is obviously one of the largest and most 
successful corporations in our Nation's history. This enormous 
corporation reportedly had billions in U.S. profits for 1995 and 1996. 
But they didn't pay one penny of Federal income tax. In fact, they 
actually got refunds totaling over $1 billion. In a case like this, for 
a company like this, Tax Freedom Day isn't in May or April or March or 
even January 1. It must be last December because they were getting a 
refund. That is a real freedom from taxation.

  This kind of special treatment is, unfortunately, all too common, and 
while Tax Freedom Day may not be in the previous tax year for all of 
these interests as in the example I gave, it is certainly the case that 
while many of us have to work until the flowers are blooming to pay our 
taxes for the year, many special interests get their tax freedom at 
least by Groundhog Day. Thousands and thousands of interests have been 
able to slip special provisions into the Tax Code over the years, 
increasing the tax burden for the rest of us and further complicating 
the Tax Code.
  I am sorry to say that in the past few years Congress has not stopped 
this trend. It has not slowed this trend. Congress has continued down 
this path. On an almost annual basis, Congress passes more and more of 
these special provisions. And these special provisions not only add to 
the Tax Code's complexity while shifting a greater tax burden on the 
rest of us, they actually also undermine our ability to get to that 
genuine tax reform that all of us are talking about. Again, sorry to 
say, although I believe it is correct, last year's so-called tax cut 
bill was a prime example of this sort of abuse.
  First and foremost, it was premature. It was not fiscally 
responsible. Despite all of our recent good economic news and the 
windfalls to the Government's bottom line, according to the most recent 
CBO estimate, we are still nearly $100 billion short of a truly 
balanced budget. We have not balanced our books, unless you are somehow 
willing to again and again, as has been done for far too many years, 
use the Social Security trust fund balances to, in effect, mask the 
currently existing deficit. The real budget is still in deficit, and 
last year's tax cut bill has made it harder to finish our most 
important task, and that is to actually balance the Federal budget.
  Making matters worse, the cost of that tax bill was heavily back 
loaded, putting even more pressure on our budget just when the baby 
boomers begin to retire. That tax bill, of course, added even more 
layers of complexity to a Tax Code that was already thick with it, and 
that complexity was not only to the entire code, it reached down to the 
level of the individual taxpayer. Anyone who had to fill out some of 
the tax forms that were changed because of the 1997 tax bill knows just 
how much more complex taxes became because of last year's legislation.
  Mr. President, I use last year's tax bill as an example only because 
I want to make the point that these problems not only are reason to 
fault that specific legislation, they also, again, undermine our 
ability to get anywhere near genuine tax reform. Tax reform inevitably 
creates winners and losers. But we have a better chance of enacting 
reform if at the time of doing the reform we can increase the number of 
winners and decrease the number of losers by cutting taxes at the same 
time that you enact reform. Do not do the complex and all the things 
that mess it up first and then expect the resources to be available 
when we have to do tax reform. We have to link the effort to simplify 
the Tax Code and give some people tax relief.
  Simply put, if you could lower taxes while you reformed the code, you 
sure would have a better chance of enacting real reform. Unfortunately, 
what last year's tax bill did was commit hundreds of billions of 
dollars that could have gone to help us achieve true tax reform. It 
also, unfortunately, created several new classes of winners under the 
current system, groups that will benefit from the specific provisions 
in the bill. Why do I say ``unfortunately''? Because these winners, and 
these winners were only a very few among us--there were far more losers 
than winners--these few winners now have a bigger stake in the current 
tax system and they will now be less likely to want to give up their 
gains or will again require greater tax cuts to allow us to move to a 
new system. We keep creating our own inertia against reform by giving 
out more of these tax break goodies. And, as the history of our Tax 
Code has shown, special tax provisions lead to even more special tax 
provisions.

  So, as we approach what I hope is a real effort to achieve 
significant tax reform, and as we consider those tax bills that will 
work their way to us prior to that larger debate, I hope we will, 
again, keep three principles in mind: We should use our Tax Code to 
promote equity and fairness, we should resist complexity in the Tax 
Code, and we should insist on fiscal responsibility when we are taking 
actions with respect to the Tax Code. Adhering to these three 
principles will not only result in better tax bills, it will also pave 
the way for truly significant tax reform, tax reform that will move Tax 
Freedom Day back for all American families.
  I yield the floor.
  The PRESIDING OFFICER (Mr. DeWine). The Senator from Nebraska.
  Mr. KERREY. Mr. President, in response to the statement of the 
distinguished Senator from Wisconsin, might I say, first of all, I 
appreciate very much his constructive involvement in this legislation, 
improving it and making it a better piece of legislation. The Senator's 
voice was heard by the Finance Committee on several key points.
  I would like to give some additional information that my colleague 
probably already has, so I am being redundant about it, on this issue 
of tax simplification. Today, it is estimated that taxpayers spend 
about--somewhere, actually, between $70 billion and $100 billion to 
comply with the Tax Code, $70 to $100 billion a year to comply with the 
Tax Code. The IRS budget is about $7 billion, so we spend about $7 
billion on the IRS to have them collect our taxes.
  There is another side to the coin of this complexity. Again, I don't 
want to revisit this education IRA that just passed on the Senate 
floor; I don't want to argue that specific objective. But, in order to 
implement that, the other side of the coin is, the IRS actually becomes 
more invasive. So a lot of the horror stories that we have heard came 
as a consequence of the IRS insisting that the taxpayer do X, Y, and Z. 
They are insisting that they do X, Y, and Z because we passed a law 
here that will require it, a specific one, which is the 64th change in 
the tax law since 1986--64 times. Last year, after

[[Page S4471]]

the Balanced Budget Act of 1997--ask anybody what schedule D looks like 
out there in the country as to capital gains and they will tell you how 
complicated and how costly and how difficult it is to comply.
  On the education piece, the IRS, in order to make certain that the 
taxpayer is following the law, will have to insist that the taxpayer 
produce documents, insist the taxpayer produce receipts to be able to 
demonstrate that the expenditures are going to education-related 
purposes; not only education-related purposes, but purposes that have 
been required by the school in which the child is enrolled. It is going 
to be a very difficult set of compliance requirements, A, that the 
taxpayer is going to have to do, and that the IRS is going to have to 
make certain the taxpayer has done in order to make certain that they 
qualify for this tax credit. In addition to the cost, anywhere from $70 
to $100 billion annually the taxpayers spend to comply, in addition to 
that, there is the other side of the coin, which is the IRS. As a 
consequence of us using income as a basis of determining what the tax 
is going to be, the IRS has to come out and request the receipts and 
the documentation and all sorts of other things. That produces the 
invasive mood that many people on this floor have talked about over and 
over and over as one of the problems with the IRS.
  So I would just say to the Senator from Wisconsin, he is dead right; 
the next debate has to be, How do we organize this Tax Code to begin 
with? I am excited that some of the provisions the Senator has added to 
this bill will increase the likelihood that this debate will go 
forward. The Taxpayer Advocate that is in title I is going to change 
the dynamic, because not only are they a Taxpayer Advocate, they are a 
National Taxpayer Advocate and they will have a tremendous amount of 
independence. They will be a National Taxpayer Advocate in the State of 
Wisconsin, of Nebraska, of Ohio. They will have a separate phone 
number, a separate fax; they will not be operated by the IRS, they will 
be independent. They are told by this law that they are to come back to 
this Congress and say: ``Here are items that are repetitive problems 
with the taxpayer, causing us problems every single year, and they are 
part of the law. We recommend you change the law.''

  Second, as the Senator from Wisconsin knows, because he strengthened 
the provision, the Commissioner of the IRS will be at the table when 
tax laws are written. Unlike the education IRA, unlike the Balanced 
Budget Act last year, where the tax commissioner is silent--the best 
test of this is, ask yourself, when is the last time you heard an IRS 
Commissioner say, ``Mr. President that's a great tax idea but here's 
what it's going to cost the taxpayers to collect''? When is the last 
time you heard the tax commissioner say, ``Senator Blowhard, that's a 
great tax idea, but here is what it's going to cost the taxpayers to 
comply''?
  We, under this law, say to the Commissioner, you are empowered to 
tell the American people and to tell us what it is going to cost and 
we, as well, require, as a result of the simplicity index, some kind of 
evaluation, as we do with regulation, as we do with all regulation--
some kind of evaluation to inform the Congress as to the cost to 
comply.
  Last, I would say one of the reasons that I felt very strongly about 
having an employee representative on this board is that the 
Commissioner is granted, under this legislation, the authority--indeed, 
directed--to reorganize the IRS along functional lines. I can tell you, 
of all the things in this bill, I would put that in the top five things 
that I think taxpayers will notice immediately. Today, what you have is 
a three-tiered system: National, regional, and district organization. 
It is very complicated and very difficult for the taxpayer to figure 
out how this organization occurs. Under the new organization, what you 
will have is taxpayers organized by category: Individual payers, small 
business, large business, and nonprofit, all with special problems, all 
with different needs. The Commissioner has already said that he intends 
to follow up on some of the suggestions the National Restructuring 
Commission made, which is that it may be that for both the individual 
and especially small business, there will be entire categories where 
the Commissioner will say: ``The small business community spends $2 
billion a year complying with this particular provision of the code. We 
generate, with $2 billion worth of cost, nothing. All we have is cost. 
There is no revenue coming in. We recommend that large categories of 
people actually be exempt from having to go through all the compliance 
requirements.''
  I believe what you will see as a consequence of this is a lot of 
exciting changes being proposed by the Commissioner of the IRS to this 
Congress that will enable the taxpayer, with its individual small 
business, large business, or nonprofit, to say, ``I still may not like 
paying my taxes. I still may think they are too high. But it has gotten 
a heck of a lot easier. You have gotten rid of some of the things that 
don't make any sense at all.'' As a consequence, the customer 
satisfaction is going to increase.
  So I applaud the distinguished Senator from Wisconsin. His 
amendments, his suggestions, his input have improved this bill. And I 
especially point out that he is right on target, talking about 
simplification. Not only is there a cost but there is also an invasion 
that occurs as a consequence of the complexity of the code.
  Mr. President, I yield the floor.
  Mr. DOMENICI addressed the Chair.
  The PRESIDING OFFICER. The Senator from New Mexico.
  Mr. DOMENICI. Mr. President, I have two amendments that I understand 
are going to be acceptable, but they are being drafted in a manner to 
comply with the wishes of the committee. I will refer to the two. Then 
I understand that, in due course, the chairman and ranking member will 
be introducing amendments and mine will go in as one of their en bloc 
amendments, but I will have spoken to two of them for just a minute, 
and then for a couple of minutes on the overall bill.

  The first one of my amendments is cosponsored by Senator D'Amato and 
Senator McCain and anybody else who would like to join. I welcome them 
cosponsoring it. The IRS already provides forms and instructions in the 
Spanish language. I commend them for that. Obviously, we are now being 
told that, while the Hispanic population in America is very large, it 
will soon be the largest minority by far. And by middle of the next 
century, one out of every four Americans will be of Hispanic origin--
which will be the largest by far.
  This first amendment, that is currently sponsored by Senators D'Amato 
and McCain, would have the telephone help line mandated to provide 
communications in Spanish to those who can more easily communicate in 
Spanish.
  I indicated that we already have forms in Spanish. I am for English-
plus, in America, which is English--clearly, we should all learn, but I 
think that instead of talking about English only, we should talk about 
plusing it up with other languages. That would mean that English and 
Spanish would be very much appreciated and used in many parts of the 
country as we educate our young people.
  That is one of the amendments. I understand neither the floor manager 
nor the minority opposes this amendment. Again, I ask if anyone would 
like to join in cosponsoring that amendment. It is going to be offered 
by the floor manager as one of the en bloc amendments in the not-too-
distant future here on the floor.
  Second, I don't know how many Senators have participated in making 
enough of their own telephone calls these days to find that large 
institutions have an automated system when you call.
  Let's say you want to call, I say to the occupant of the Chair, Sears 
and Roebuck. Understand, it used to be 25 years ago you would call up 
and say, ``I'd like the sporting department.'' They would say, ``Just a 
moment, sir.'' And the next person answering would be somebody in the 
sporting department.
  If you made that phone call today, the answering voice would likely 
be a recording. ``If you want somebody in the merchandising, punch 1. 
If you want somebody in''--this area-- ``punch 2.'' And when they get 
on, they say, ``If you are looking for this department''--or that 
department--``punch 4.''
  The IRS has a similar system. If you want information on withholding 
press 1; If you want information about filing

[[Page S4472]]

separately press two; If you want information about the new child 
credit press three. Too often, unfortunately, there isn't a number to 
press for the question you want answered. My amendment would correct 
that problem.
  I am told as of yesterday in the State of New Mexico, my home State, 
if you are trying to get a voice to respond to you, believe it or not, 
in the State of New Mexico, if you want a voice to answer you at the 
IRS, it now takes 45 minutes for that event to occur. That means you 
are going through telephones one after the other: Punch this one, then 
you wait and you tell them what you want; punch another one.
  All this amendment says is, if you are going to have these automated 
lines with press 1, press 2, press 3, you have to have one early on in 
the numbering system that says, ``Press if you want to speak to a 
person who can either answer your question or direct you to a person 
who can.''
  I think the American people calling the IRS would be thrilled to 
death if sooner, rather than later, it did not take you 45 minutes of 
going through the press 1, press 3, press 28, and you could press 
something that would give you a live IRS person to talk to you. That is 
the second amendment.
  It is obvious to me that this bill is telling the IRS how to manage 
things, but it is pretty obvious that those of us who have constituents 
and go home and ask our office staff what the constituents are saying, 
they are saying the kind of things that I am telling Senators right now 
really bug them.
  They lose hope when they are 35 minutes on the line and haven't 
gotten a person yet, so they hang up. I don't think we want that. That 
isn't good government.
  I am hopeful that the new management and the person in charge, who is 
a manager and businessman, will not see this as trying to micromanage, 
but sees it is obviously as something they ought to be doing. I don't 
want to take a chance and not put it in this bill and, in 4 years, when 
we have oversight, find we are still where we are.
  These two amendments, in addition to those other provisions crafted 
by the committee make up a good bill. The Committee incorporated a 
number of the recommendations that came from our State as I went 
through my offices asking what kind of things were not working in 
dealing with the IRS.
  Having said that, I would like to speak for a few moments on the 
bill.
  There are more than 168 ways that this bill makes the IRS more 
service oriented, and taxpayer friendly. It cracks down on abuses 
highlighted in the hearings. It corrects some problems called to my 
attention by constituents. Chairman Roth and the Finance Committee 
should be commended for the fine job they did on this bill.
  Often when we pass legislation, I ask the question: Who cares?
  I can assure you that this is one piece of legislation that everyone 
cares about. No agency touches more Americans than the IRS. Yet one out 
of two Americans said they would rather be mugged than be audited by 
the IRS. This bill should reverse that prevailing view.
  Among the key provisions the bill strives for better management; 
better use of technology; reinstatment of a checks and balances system 
so that the IRS will no longer be the judge, jury and excutioner; 
discipline for rogue IRS agents; taxpayer protections including the 
right to a speedier resolution of a dispute with the IRS; fundamental 
due process and a long overdue reorganization. Hopefully, these reforms 
will change the environment and change the culture at the IRS.
  The bill prohibits the IRS from contacting taxpayers directly if they 
are represented by a lawyer or an accountant. The IRS called this 
practice of bypassing the tax professional and visiting the taxpayer at 
work or at dinner ``aggressive collection'' techniques, my constituents 
called it harrassment.
  The bill attempts to make the IRS employees more accountable for 
their actions by putting their jobs on the line when they deal 
abusively with taxpayers.
  The bill requires the IRS to terminate an employee if any of the 
following conduct relating to the employees official duties is proven 
in a final administrative or judicial determination:
  Failure to obtain the required appproval signatures on documents 
authorizing the seizure of a taxpayer's home, personal belongings, or 
business assets.
  Falsifying or destroying documents to conceal mistakes made by the 
employee with respect to a matter involving a taxpayer.
  Assault or battery on a taxpayer or other IRS employee.
  Under the bill, the IRS will no longer be allowed to send out tax 
bills with huge penalties compounded with interest and cascading 
penalties just because the IRS was years behind in its work.
  If the IRS does not provide a notice of additional taxes due (a 
deficiency) within 1 year after a return is timely filed, then interest 
and penalities will not start to be assessed and compounded until 21 
days after demand for payment is made by the IRS. (This excludes 
penalties for failure to file, failure to pay, and fraud) It isn't fair 
for the IRS to wait years before contacting a taxpayer who honestly 
believes he has paid the correct amount, only to deliver to him years 
later a tax bill with interest and penalites that dwarfs the original 
underpayment. I had a constituent who was told he owed an additional 
dollar--one dollar--in taxes but owed more than $2,500 in penalties and 
interest! The IRS agent's response when asked about it was, ``Well, I 
guess we gotch ya good.''
  Small businesses have been the target of some of the worst abuses. I 
will always remember the day a good friend, a restaurant owner in New 
Mexico called my office, justifiably hysterical. The IRS had just 
padlocked her restaurant! What was she to do? What could I do?
  This bill codifies the proposition that all men and women, even if 
they work for the IRS, shall follow fundamental due process 
requirements. Padlocks and raids should be a last resort under this 
bill.
  The bill requires the IRS to provide notice to taxpayers 30 days (90 
days in the case of life insurance) before the IRS files a notice of 
Federal tax lien, levies, or seizes a taxpayer's property.
  The bill gives taxpayers 30 days to request a hearing. No collection 
activity would be allowed until after the hearing.
  The bill requires IRS to notify taxpayers before the IRS contacts or 
summons customers, vendors, and neighbors and other third parties.
  The bill requires the IRS to implement a review process under which 
liens, levies, and seizures would be approved by a supervisor, who 
would review the taxpayer's information, verify that a balance is due, 
and affirm that a lien, levy, or seizure is appropriate under the 
circumstances.
  The bill requires the IRS to provide an accounting and receipt to a 
taxpayer including the amount credited to the taxpayer's account when 
the IRS seizes and sells the taxpayer's property. It seemed ironic that 
an agency that requires a receipt if a taxpayer is claiming a $5 
business lunch wouldn't provide a receipt to a taxpyaer when it seized 
and sold all of a taxpayer's earthly belongings.
  The bill legislates common sense. It prohibits the IRS from seizing a 
personal residence to satisfy unpaid liabilities less than $5,000, and 
provides that a principal residence or business property should be 
seized as a last resort.
  In addition, the bill expands the attorney client privilege to 
acountants and other tax practioners.
  Under this bill, the IRS could no longer insist that a taxpayer waive 
his rights. In particular, the IRS could no longer insist that a 
taxpayer waive the statute of limitations before the IRS would settle a 
case. The bill requires the IRS to provide taxpayers with a notice 
of their rights regarding the waiver of the statute of limitations on 
assessment.

  The bill makes it easier for a taxpayer to settle his or her 
liability with the IRS.
  If the IRS cannot locate the taxpayer's file, the bill prohibits the 
IRS from rejecting the taxpayer's offer-in-compromise based upon doubt 
as to the taxpayer's liability. I have known constitutents who are left 
in an IRS twilight zone because the IRS lost their file. I know of one 
constitutent who had his file lost five times. Fortunately, he kept a 
copy of the file himself, and worked next door to a Kinko's copying 
center.
  This bill allows for a prevailing taxpayer to be reimbursed for his 
or her

[[Page S4473]]

costs and attorney's fees if the IRS is found not to be ``substantially 
justified.'' The substantially justified standard in consistent with 
the little-guy-can-fight-the-federal-government-and-win philosophy. I 
am glad this standard is being expanded, and incorporated into this 
bill. Originally, the notion that a citizen should be able to recoup 
attorney's fees and costs when the federal government was not 
substantially justified was a concept in the Equal Access to Justice 
Act which I authored in the early 1980s. It is historically interesting 
to note, and perhaps prophetic, that the IRS lobbyied very hard to be 
exempt from that law. In fact, the IRS was exempt when the bill was 
first enacted. When the Equal Access to Justice was reauthorized five 
years latter, Senator Grassley and I worked to include the IRS. It was 
a big fight but Congress prevailed and got the IRS under the Equal 
Access to Justice Act's umbrella. The federal government with its deep 
pockets shouldn't be allowed to simply ``outlast'' the average American 
taxpayer. That isn't what our justice system is about.
  The bill also clarifies that attorney fees may be recovered in a 
civil action in which the U.S. is a party for unauthorized browsing or 
disclosure of taxpayer information. I have heard a lot about this abuse 
both from constituents and from the witnesses in the Campaign Finance 
investigation.
  If a taxpayer makes an offer to settle his or her tax bill and the 
IRS rejects it and the IRS ultimately obtains a judgment against the 
taxpayer in the amount equal to, or less than the amount of the 
taxpayer's statutory offer, the IRS must pay the taxpayer's fees and 
costs incurred from the date of the statutory offer. I am pleased this 
provision is included in this bill. The offer and settlement provisions 
are patterned after the Securities Litigation Reform bill which Senator 
Dodd and I authored last Congress.
  I can't believe we have to pass a federal statute to accomplish this 
next task but apparently we do.
  The bill requires all IRS notices and correspondence to include the 
name, phone number and address of an IRS employee the taxpayer should 
contact regarding the notice. To the extent practicable and if 
advantageous to the taxpayer, one IRS employee should be assigned to 
handle a matter until resolved.
  In New Mexico, a notice can come from the Albuquerque, Dallas, 
Phoenix, or Ogden IRS center. Taxpayers are often left with no option 
but to contact my office asking for help in simply identifying who they 
should talk to at the IRS to settle their tax matter. The caseworkers 
are experts, but it would take them two days to track down the right 
IRS office so that the constituent could try and solve their problem. 
It was so commonly befuddling to constituents that my caseworkers asked 
that this identification provision be included in this bill.
  Movie stars, rock singers and hermits like, and need unlisted phone 
numbers. The same is not true for federal agencies. The bill also 
requires the IRS to publish their phone number in the phone book along 
with the address. We have a beautiful new IRS building in Albuqueruque, 
but the only phone number for the IRS is the toll free number that is 
too frequently busy. If you didn't know the IRS building in Albuquerque 
existed, you wouldn't find a clue of its location in the telephone 
book.
  We experienced a lot of complaints about the IRS toll free numbers. I 
am glad that an amendment that I authored to this bill includes a 
provision requiring that automated phone lines include the option to 
talk to a real, knowledgable person who can answer the taxpayers' 
questions. This would be an option in addition to merely listening to a 
recorded message.
  I am pleased that the Senate was willing to accept a Domenici 
amendment, cosponsored by Mr. D'Amato and Mr. McCain that requires IRS 
helplines to include the capability for taxpayers to have their 
questions answered in Spanish.
  In addition, the bill establishes a toll free number for taxpayers to 
register complaints of misconduct by IRS employees and publish the 
number.
  The bill requires the IRS to place a priority on employee training 
and adequately fund employee training programs. The IRS is making 
progress. The accuracy of the advice that taxpayers received when they 
called the IRS was very bad. For example, in 1989, the advice was 
correct only 67 percent of the time. The accuracy has fortunately 
improved. Training is the key.
  The bill requires the Treasury to make matching grants for the 
development expansion or continuation of certain low-income taxpayer 
clinics.
  The bill requires at least one local taxpayer advocate in each state 
who has the authority to issue ``Taxpayer Assistance Order'' when the 
taxpayer Advocate believes it is appropriate.
  Mr. President, many, in fact most, IRS employees work very hard and 
do a good job. Perhaps the best way to reform the IRS is to reform the 
code to make it simpler. The doubling from $100 billion to $195 billion 
of the tax gap--the difference between the amount of taxes owed and the 
amount actually paid--is evidence that the system is breaking down.
  The last point I would like to make is that I was going to offer an 
amendment to provide for a biennial budget and appropriations cycle 
because if Congress took this step, it would give us more time to do 
adequate and more aggressive oversight. If we had biennial budgeting 
the Finance Committee would have more time to focus on keeping an eye 
on the IRS. Senator Moynihan is a distinguished student of history and 
he told the Senate that the IRS was created in 1862, but it wasn't 
until 1997 that the full Finance Committee exercised its oversight 
jurisdiction. Other committees could, likewise, exercise better 
oversight of all federal agencies if we had biennial budgeting. We 
would have better run programs and an opportunity for a truly more 
efficient federal government.
  The Majority Leader has agreed to schedule time for the Senate to 
debate this bill in the near future. I am pleased that we were able to 
reach that agreement. Thank you Mr. President.
  I yield the floor.
  Mr. GRAHAM addressed the Chair.
  The PRESIDING OFFICER. The Senator from Florida.


                           Amendment No. 2369

  (Purpose: To clarify the actual knowledge standard of the innocent 
                           spouse provision)

  Mr. GRAHAM. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Florida [Mr. Graham], for himself, Mr. 
     D'Amato and Mrs. Feinstein, proposes an amendment numbered 
     2369.

  Mr. GRAHAM. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 293, strike lines 3 through 10, and insert:
       ``(C) Election not valid with respect to certain 
     deficiencies.--If the Secretary demonstrates that an 
     individual making an election under this section had actual 
     knowledge, at the time such individual signed the return, of 
     any item giving rise to a deficiency (or portion thereof) 
     which is not allocable to such individual under subsection 
     (c), such election shall not apply to such deficiency (or 
     portion). This subparagraph shall not apply where the 
     individual with actual knowledge establishes that such 
     individual signed the return under duress.

  Mr. GRAHAM. Mr. President, the amendment that I am offering, joined 
by our colleagues, Senator D'Amato and Senator Feinstein, makes two 
modifications to the innocent spouse provision which is in this 
legislation.
  Background: Under the current tax law, if a husband and wife jointly 
sign a return, they are jointly responsible for any deficiency that 
might subsequently be found to have been the result of that filing.
  A typical case is that after a husband and wife have had marital 
discord and are divorced, the husband may have left town and is 
difficult to find, the IRS locates the custodial parent, typically the 
wife, who is more easily accessible, and then she becomes responsible 
for 100 percent of the tax deficiency that was the result of a filing 
while the marriage was in place.
  Under the current law, there is a provision called ``innocent 
spouse'' in which a spouse can theoretically avoid that responsibility. 
I emphasize the word ``theoretically,'' because the testimony we heard 
before the Finance

[[Page S4474]]

Committee was that it is virtually impossible for the standards of that 
innocent spouse provision to be met and that, in fact, there are some 
50,000 women, generally ex-spouses, who are caught up in this 100-
percent responsibility for a tax return.
  In the Finance Committee hearings, we were impressed with a 
recommendation made by the American Bar Association as to a different 
approach to this issue. That approach was essentially an accounting 
approach which said that instead of using joint and several 
responsibility, it would be an individual responsibility.
  If, for instance, the husband was responsible for 60 percent of the 
income, which went into the tax return, and the wife, 40 percent, then 
those percentages would define responsibility in a subsequent 
deficiency.
  That basic approach was adopted by the Finance Committee, but there 
were some exceptions to that filing for proportional responsibility. 
The primary exception was that if the Secretary of the Treasury could 
demonstrate--and the burden is on the Secretary of the Treasury to 
demonstrate--that an individual making this election to be taxed only 
for their proportional share of the deficiency of the return, that if 
they had actual knowledge of the conditions within that return which 
led to this deficiency, then they would be 100 percent responsible. So 
actual knowledge would override the ability to elect only partial 
responsibility.
  This amendment makes two modifications to that provision. The first 
is the question of when is that knowledge relevant. The language that 
we are inserting into the legislation which is currently before the 
Senate is that the actual knowledge has to be ``at the time such 
individual''--that is, the individual who is seeking to pay only a 
proportionate share of a deficiency-- ``signed the return.'' So the key 
question is what did you know at the time you signed the return.
  The second issue is an unfortunate reality where we had testimony 
that some spouses signed the joint return, and may even have had actual 
knowledge of its contents, but did so under duress, including under 
physical duress. So we have provided a second provision which says that 
even if you had actual knowledge at the time you signed the return, 
that you would not be denied the right to apply for this proportioning 
of responsibility if you, the individual, can establish that the return 
was signed under duress.
  The burden of proof is on the taxpayer to establish that even though 
they had actual knowledge of the circumstances in the return that led 
to the deficiency, but still want to secure the benefits of less than 
joint and several responsibility, because they were under duress, 
coerced into signing, it is their responsibility to carry the burden of 
proof that, in fact, those circumstances existed.
  Mr. President, I apologize for having taken the time of the Senate, 
but I thought it was important since this is a very significant part of 
the provision of taxpayer relief which is in this legislation. And it 
is a fairly expensive provision in terms of the potential for lost 
revenue. But that expense is one that we believe is a just expense 
because it will lift from the responsibility of taxpayers who were 
ignorant of circumstances but were entrapped by conditions that were 
often beyond their control and certainly beyond their knowledge and in 
some cases the result of actual duress and coercion, that we should 
recognize that and not require them to be responsible for more than 
their proportional share of the deficiency.
  So, Mr. President, I appreciate the joinder in this amendment by 
Senator D'Amato and Senator Feinstein and ask for the amendment's 
immediate consideration.
  Mr. D'AMATO. Mr. President I am pleased to join my colleague Senator 
Graham on this very important amendment.
  Senator Graham and I recently introduced S. 1682, the Innocent Spouse 
Tax Relief Act of 1998, to bring long overdue relief to innocent 
spouses, predominately women, who become responsible for the tax 
liabilities of their spouses merely because they happened to sign a 
joint return.
  I am pleased that the distinguished Chairman of the Finance Committee 
agrees that the current law innocent spouse provisions are weak at 
best, and needs dramatic change. I commend him for his leadership in 
making that change.
  There were concerns, and rightly so, that some taxpayers may try to 
abuse the innocent spouse rules by knowingly signing false returns, or 
transferring assets for the purpose of avoiding the payment of tax, and 
then claim to be innocent. Obviously, no one would want to open the 
door to that type of fraud. As such, language was included in the bill 
that would prevent an individual from electing the innocent spouse 
provision if they had ``actual knowledge of any item giving rise to a 
deficiency.''
  However, this language raised concern for Senator Graham and myself 
because the IRS or the courts could deny relief to an innocent spouse 
simply because he or she had ``actual knowledge'' after the fact.
  Our amendment will correct what would have been an unintended 
consequence. It will clarify that the ``actual knowledge'' standard be 
based on knowledge of an item at the time the return was signed, and 
that it was not signed under duress.
  I urge my colleagues to vote for this amendment and provide relief to 
the 50,000 innocent spouses each year who are unfairly pursued by the 
IRS.
  Mr. ROTH addressed the Chair.
  The PRESIDING OFFICER (Mr. Sessions). The Senator from Delaware.
  Mr. ROTH. I say to my distinguished friend from Florida that his 
amendment has been cleared on both sides of the aisle. Accordingly, I 
urge its adoption.
  The PRESIDING OFFICER. Is there further debate on the amendment?
  Mr. CONRAD. Mr. President, I just say, we see this amendment as 
valuable on this side, as well. And we have no objection to it.
  The PRESIDING OFFICER. If there is no further debate, without 
objection, the amendment is agreed to.
  The amendment (No. 2369) was agreed to.
  Mr. GRAHAM. I move to reconsider the vote.
  Mr. ROTH. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. GRAHAM. Thank you, Mr. President.


                 Amendments Nos. 2370 and 2371, En Bloc

  Mr. ROTH. Mr. President, I send two amendments to the desk and ask 
unanimous consent that they be considered en bloc.
  The PRESIDING OFFICER. Without objection, they will be considered en 
bloc. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Delaware [Mr. Roth] proposes amendments 
     numbered 2370 and 2371, en bloc.

  Mr. ROTH. Mr. President, I ask unanimous consent that reading of the 
amendments be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendments (Nos. 2370 and 2371), en bloc, are as follows:


                           AMENDMENT NO. 2370

   (Purpose: To require on all IRS telephone helplines an option for 
                  questions to be answered in Spanish)

       On page 381, after line 25, insert:
       (c) Telephone Helpline Options.--The Secretary of the 
     Treasury or the Secretary's delegate shall provide on all 
     telephone helplines of the Internal Revenue Service an option 
     for any taxpayer questions to be answered in Spanish.
       On page 382, strike lines 1 and 2, and insert:
       (e) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, this section shall take effect 60 days after the 
     date of the enactment of this Act.
       (2) Subsection (c).--Subsection (c) shall take effect on 
     January 1, 2000.
                                  ____



                           Amendment No. 2371

 (Purpose: To require on all IRS telephone helplines an option to talk 
      to a live person in addition to hearing a recorded message)

       On page 382, before line 1, insert:
       (d) Telephone Helpline Options.--The Secretary of the 
     Treasury or the Secretary's delegate shall provide on all 
     telephone helplines of the Internal Revenue Service an option 
     for any taxpayer to talk to a live person in addition to 
     hearing a recorded message. The person shall direct phone 
     questions of the taxpayer to other Internal Revenue Service 
     personnel who can provide understandable information to the 
     taxpayer.
       On page 382, after line 2, insert:
       (3) Subsection (d).--Subsection (d) shall take effect on 
     January 1, 2000.

  Mr. ROTH. Mr. President, I point out these two amendments are the 
amendments discussed by my good friend,

[[Page S4475]]

Senator Domenici, the Senator from New Mexico, as modified. And these 
amendments, as modified, have been cleared on both sides of the aisle.
  I urge their adoption.
  Mr. CONRAD. Mr. President, we, too, on this side, agree to these 
amendments, find them useful and constructive.
  The PRESIDING OFFICER. If there is no further debate, without 
objection, the amendments, en bloc, are agreed to.
  The amendments (Nos. 2370 and 2371) were agreed to.
  Mr. ROTH. I move to reconsider the vote.
  Mr. CONRAD. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. ROTH. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. CONRAD. 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. CONRAD. Mr. President, I rise to speak in support of the bill 
before us. The Finance Committee bill is a dramatic improvement over 
the bill that was passed in the other body last year. This legislation 
will make the IRS far more accountable.
  I want to take this moment to thank the chairman of the committee, 
Senator Roth, and thank the ranking member, Senator Moynihan. I also 
thank my colleague, Senator Kerrey, because they have really all 
participated in this effort.
  This is a significant advance. As a former revenue commissioner 
myself, elected in my home State, I can say, based on my own 
experience, that these provisions are going to make a positive 
difference. The bill not only addresses the administrative structure of 
the Internal Revenue Service, but also makes substantive changes in the 
law that will improve taxpayers' rights and protections.
  The Commissioner of the IRS will get new tools to deal quickly and 
firmly with misbehavior by IRS personnel. We certainly heard in the 
Finance Committee's hearings of that kind of misbehavior. We want to 
send a clear and unmistakable signal that those actions and those 
behaviors are unacceptable and will not be permitted to continue.
  Mr. President, taxpayers, under the legislation, will receive greater 
protections, particularly in the areas of innocent spouse relief, 
interest and penalties, and audit and collection activities. These 
areas, too, as we heard repeatedly in the hearings, are areas that 
require improvement. And Congress, too, will share in the increased 
accountability as it will have to assess the complexity of tax law 
changes before they occur.
  Under the legislation, the IRS will undergo restructuring. I think we 
all understand that the fundamental obligation of the IRS is to serve 
the public. And that has been overlooked for too long, at least by 
some. I think we should also readily acknowledge that the vast majority 
of employees of the IRS are honest, are hard working, and have provided 
good service. But it is also clear that the Internal Revenue Service is 
not well structured to meet the requirement to provide the service that 
the public expects.
  Overseeing the IRS should not be a game just for Government insiders. 
That is why the bill mandates an IRS Oversight Board dominated by 
private sector representatives.
  We took a hard look at the offices of the Treasury Inspector General 
and the IRS Chief Inspector--the offices which, under current law, 
carry out the bulk of IRS oversight activities. We concluded that the 
current arrangement is not working. The Office of the Chief Inspector 
does not have the autonomy it needs to perform objective and credible 
oversight. The Treasury Inspector General does not devote enough of its 
resources to IRS oversight.
  Consequently, the bill would establish an independent Inspector 
General within the Treasury Department, which would have as its primary 
responsibility auditing, investigating, and evaluating IRS programs.
  When IRS agents step over the line, the Commissioner has to be able 
to respond swiftly and firmly. This legislation will give the IRS 
Commissioner that authority and that power. The bill requires 
termination for IRS employees who commit gross violations of the law in 
connection with the performance of their official duties.
  There are also other provisions--the innocent spouse protections--
that I think are a real advance for taxpayers in this country. In our 
recent hearings, the Finance Committee heard stories from women who 
were being pursued by the IRS for tax liabilities, often including 
enormous penalties and interest, that arose as a result of the wrongful 
actions of their spouses. These were acts about which the women knew 
nothing. Yet because they were married, they wound up being responsible 
for bills that they had absolutely no idea were being incurred. The 
current law's test for spousal innocence does not work. It needs to be 
simplified, and the bill does just that.
  Interest and penalty reform are also provided for in the legislation. 
If a taxpayer comes to terms with the IRS to pay his or her taxes under 
an installment agreement, current law can still impose a penalty. This 
makes no sense. The legislation we are advancing eliminates this 
irrational penalty for any taxpayer who is, in fact, paying taxes under 
an installment agreement.
  The Finance Committee considered the provision which allows accrual 
of interest and penalties for unpaid taxes even when the taxpayer is 
unaware that there is a tax due. It is only fair that the IRS notify 
taxpayers promptly whenever it detects a deficiency or an amount due. 
Consequently, the bill provides that accrual of interest will be 
suspended if the IRS has not sent a notice of deficiency within a year.
  There are additional audit and collection protections which I think 
taxpayers around the country, when they become more aware of them, will 
applaud. Taxpayers who need to seek outside guidance to comply with the 
tax laws should not have the Internal Revenue Code influencing their 
decision as to the type of tax practitioner they employ. The common law 
privilege of attorney-client confidentiality extends to tax matters 
when a taxpayer goes to an attorney for tax assistance. There is no 
compelling reason why a taxpayer who chooses another option should be 
deprived of that privilege of confidentiality. This bill addresses that 
question.
  The bill would also strengthen the IRS's approval process for liens, 
levies, and seizures by requiring every such action to be approved by 
an agent's supervisor, and only after careful review that verifies the 
amount of the balance due and the appropriateness of the proposed 
enforcement action.
  We also know of taxpayers who had their business assets--and in some 
extreme cases, even their homes--seized, to satisfy relatively small 
tax liabilities. These types of seizures can have a significant impact 
not only on the taxpayer, but on his or her family and on a business' 
employees and customers. So steps have been taken in this legislation 
to prevent those abuses. The IRS must exhaust all other payment options 
before seizing either a taxpayer's principal residence or business.
  The legislation also provides for fuller disclosures to taxpayers. 
The tax return, obviously, is one of the most important legal documents 
an individual ever has to sign. Doing so establishes a variety of 
rights and responsibilities that affect the behavior of the taxpayer 
towards the IRS, and vice versa. Too often the taxpayers are at a 
disadvantage when it comes to knowing about these rights and 
responsibilities. As a result, this legislation imposes a number of new 
requirements on the IRS.

  First, the IRS must alert married taxpayers to the ramifications of 
signing and filing a joint return. Second, the IRS must let taxpayers 
know that they are entitled to be represented, and to have that 
representative present, when the IRS wants to conduct an interview with 
the taxpayer. Third, the IRS must let taxpayers know that, when they 
receive a letter of proposed deficiency, they can request a review of 
that action in the IRS Office of Appeals.
  These are fairminded changes to give taxpayers a fair hearing and a 
fair process. I think these will be welcome changes as we move forward.

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  Now, there is also the question of congressional responsibility, 
because, very frankly, we here in Congress are responsible for the 
complexity of the Tax Code itself. Without question, the single most 
persistent complaint about tax law that I receive is that the tax laws 
are too complex.
  One reason I am in the U.S. Senate is that, when I was tax 
commissioner of the State of North Dakota, I adopted a dramatically 
simplified tax system for our State. I instituted a postcard return. 
You could just take a percentage of the Federal liability and pay that 
to the State of North Dakota and not have to have a separate tax return 
at all. That was well received by the people of North Dakota. It saved 
literally hundreds of thousands of hours of tax preparation time and 
gave us a dramatically simplified tax system. We should strive for that 
magnitude of simplification nationally. We have that opportunity.
  At the very least, we ought to make clear that the Congress has a 
responsibility to simplify this tax system. We all understand that we 
live in a complicated economy, and that creates complicated tax 
situations for more and more taxpayers. This means that any tax system, 
based on income, is going to have a certain amount of irreducible 
complexity. But all too often, we in Congress have changed the Internal 
Revenue Code without even taking the complexity question into 
consideration.
  Consequently, the bill would, for the first time, require a formal 
analysis of the complexity issues related to pending tax legislation. 
Not only will this analysis be an important tool for members of the 
tax-writing committees, but its presence on the public record will 
heighten awareness of pending tax law changes and their possible future 
consequences.
  There are other important provisions that are in this legislation. I 
will not enumerate them all here this afternoon. Suffice it to say, I 
believe the Finance Committee, of which I am a member, has done a good 
job of taking initial steps to dramatically reform the Internal Revenue 
Service. We are going to restructure it. We are going to provide new 
protections to taxpayers so that they are more fairly treated. We are 
going to remind the Internal Revenue Service that they have an 
affirmative obligation to treat our taxpayers with respect.
  Again, I want to conclude by saying the vast majority of people at 
the IRS are responsible, honest, decent and hard working. But we have 
some problems there that very clearly need to be addressed. We need to 
say loudly and clearly that we simply will not accept any mistreatment 
or abuse of America's taxpayers. That is unacceptable. It will not be 
permitted to continue. This legislation is an excellent first step.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BURNS. Mr. President, I rise to withdraw an amendment that I had 
on this bill, but I want to make a short statement. Although this 
amendment will be ruled as not relevant to this piece of legislation, 
it is very relevant to the field of agriculture.
  I have submitted S. 1879, which would make income averaging for 
farmers permanent in the Tax Code.
  Last year, I offered an amendment to the Revenue Reconciliation Act 
of 1997 which extended to farmers the ability to average their income 
over a 3-year period. That amendment was included and made part of the 
U.S. Tax Code, but only after further negotiations will we have to 
extend it beyond 2001 because it sunsets in the year 2001.
  I don't think many of my colleagues really understand what is going 
on in agriculture today. There are a few. If there is one way we can 
affect change regarding farm income, it would be through how we treat 
it regarding taxes. We will consider the agriculture research, and we 
will consider crop insurance later on this month. It is really in the 
best interest of this Government to pass that piece of legislation so 
that it is enforced with this year's crop. It won't be long until we 
are coming into harvest time.
  This business of farming and ranching is difficult at best; we know 
that. There are no monthly checks. There is not much reward in the 
financial field for those who participate in it. And it is not getting 
any easier. Today we are seeing more and more family farms fade from 
the landscape of middle-income America, where this country has been. 
Corporate farms become more and more of a factor every day. Those of us 
who grew up in the farming communities understand the frustrations of 
the business. Of course, we are trying to do something right now at a 
time when just about all parts of agriculture, if you are in the 
business of producing a raw product, are in trouble. We cannot make it 
selling our farm commodities below what they were selling for in 1948 
and still expect to provide the abundance of food that we provide for 
this country.
  I will make one point. It is hard for me to understand, and it is 
hard for our farmers to understand why if you go into a grocery store 
and you look down and find out you are paying $2.75 for a pound of 
Wheaties, and we can't get $2.75 for a 60-pound bushel of wheat. 
America must understand that. And if this is allowed to happen, there 
will be no wheat, because it will just be beyond the cost of production 
to produce it.
  Market forces are funny. Right now, we have a situation in the 
Pacific rim where you have four, maybe five economies that are in 
desperate trouble and could not buy even if they wanted to. When you 
live in a State where the biggest share of your production goes to the 
Pacific rim, that means we are in big trouble.
  Last fall, we had the fiasco in the rail business in Houston. A lot 
of grain didn't get moved, or they took advantage of a higher market 
that cost us a lot of money--out of the control of the farmers. Yet, 
they are the ones that pay the costs.
  So we are going to consider this. And I hope that this will be made 
part of the permanent law of the Tax Code. I would like to get some 
kind of commitment from this committee and the Finance Committee that 
it will be considered because it is very, very important. We had income 
averaging at one time, and we lost it in 1986.
  The bill, last year, received overwhelming support in the U.S. 
Senate, and I understand that it will be ruled irrelevant now by the 
Parliamentarian, so I plan to withdraw the amendment. Before I do, I 
want to emphasize to this body that we have a situation not only in the 
grain industry, but the livestock industry, and it is in areas where 
the producer has little or no control. They are at the end of the line. 
They sell wholesale, they buy retail, they pay the transportation and 
the taxes both ways. We have to do something in the middle to at least 
give them some relief.

  This bill has very little impact on our Federal budget. The American 
people would look at this as an insurance policy. We must pay to insure 
our cars or our lives. How much would you pay to ensure that the 
grocery store is full every time you go there? There are a lot of us 
that know about the front end of the grocery store; very few of us know 
anything about the back end. So I think America has a stake in this--
all the citizens that live in this country.
  I will agree to withdraw the amendment, but I want to reaffirm my 
commitment to the American farmer that this Congress will act, and this 
will become a permanent part of the Tax Code before we end the 105th 
Congress.
  Mr. President, I ask unanimous consent that this amendment be 
withdrawn from consideration. I thank the managers of the bill and 
yield the floor.
  The PRESIDING OFFICER. Without objection, the amendment is withdrawn.
  Mr. ROTH. Mr. President, I ask unanimous consent that when Senator 
Mack offers his amendment, there be 1\1/2\ hours equally divided for 
debate on the amendment; further, that at expiration or yielding back 
of time, the Senate proceed to a vote on or in relation to the Mack 
amendment, and no amendments are in order.
  I further ask as part of the unanimous consent request that Senator 
Mack be permitted to offer his amendment upon the conclusion of the 
statement of the Senator from California.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. FEINSTEIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from California is recognized.
  Mrs. FEINSTEIN. Mr. President, I thank the chairman and the Senator

[[Page S4477]]

from Florida for allowing me a few moments to make a statement.
  I wish to begin by indicating my support for this bill. I believe it 
will be very helpful to every taxpayer throughout the Nation. I am very 
happy to support the bill, Mr. President.
  Mr. President, I ask unanimous consent to speak as in morning 
business for a few minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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