[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
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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
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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
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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.
[[Page S4476]]
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.
____________________