[Congressional Record Volume 144, Number 56 (Thursday, May 7, 1998)]
[Senate]
[Pages S4489-S4521]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998
The Senate continued with the consideration of the bill.
Mr. MURKOWSKI addressed the Chair.
The PRESIDING OFFICER. The Senator from Alaska is recognized.
Mr. MURKOWSKI. Mr. President, as a member of the Senate Finance
Committee, I rise in strong support of this legislation which is going
to overhaul the agency that is probably more feared by Americans than
any other single agency--the IRS.
Mr. President, at the Finance Committee hearings that began last
September and ended last week, the American public heard some chilling
testimony--testimony of an agency that is
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simply out of control and an agency that is unaccountable. Some say it
was designed that way. Well, in a democracy, there is no place for the
type of Gestapo tactics that we have seen. We have seen in the hearings
and in the testimony that harassment, retribution, and abuse apparently
have been condoned in some areas of the IRS for some time.
Mr. President, when the GAO attempted to audit the IRS last year, it
found that the systems the IRS had put in place were designed to ensure
that there is no way--no way--for IRS personnel to be held accountable
for their erroneous actions. There is no way to determine how many
times the Internal Revenue Service has made a mistake in sending out a
collection notice, and there is no way to determine how many complaints
have been received. In effect, the managers at the IRS set up the
system so that no one can trace improper behavior. There are no paper
trails, there are no records.
Mr. President, there is simply no accountability. The lack of
accountability and the arrogance among some that pervades the IRS was
best summed up last week when Tommy Henderson, a special agent and
former group manager of the IRS's Criminal Investigation Division
office in Knoxville, testified. He told the committee:
IRS management does what it wants, to whom it wants, when
it wants, how it wants, and with almost complete immunity.
Each district director and chief appears to operate from his
own little kingdom.
Well, there are no kingdoms in this country, Mr. President. Anyone at
the Internal Revenue Service who thinks he or she is above the law
ought to be summarily fired. No one enjoys paying taxes, but no one in
this country should fear the agency that is charged with the collection
of taxes. Yet, we have learned that frightening taxpayers is certainly
a tactic that is often used by the Internal Revenue Service.
Last week, Robert Edwin Davis, a former Deputy Assistant Attorney
General in the Tax Division at the Justice Department, told the
committee that IRS criminal agents use violent and sometimes fearful
tactics against nonviolent taxpayers. He told the committee of a raid
by 10 armed IRS agents on the home of a woman at 7:30 in the morning.
The 10 armed agents came into her house and searched throughout the
house. What were they looking for? Illegal drugs? Firearms? Unreported
cash? No. Well, then, why were 10 armed agents searching her home? They
were trying to appraise the value of the furnishings in the house
because the Internal Revenue Service believed the executor of the
woman's deceased grandmother's estate had undervalued the furnishings
for estate tax purposes. Can you believe that, Mr. President?
The person who ordered that armed raid should have been fired. This
is America, not Nazi Germany.
Mr. President, several current IRS employees had the courage to come
forward during the hearings held in the Finance Committee. I want to
commend Senator Roth for calling those hearings. As a member of that
committee, I was deeply moved by the testimony of the witnesses that he
and the staff had generated.
Again, several current IRS employees did have the courage to come
forward. They described situations where revenue officers, with
management approval, used enforcement to ``punish'' taxpayers instead
of trying to collect the appropriate amount of money for the
Government. One told the committee that IRS officials browse tax data
on potential witnesses in Government tax cases and on the jurors
sitting on those Government tax cases.
We learned last week that one rogue agent, trying to make a
reputation for himself, tried to frame a former Republican leader of
this body, Senator Howard Baker--at that time, he was a sitting Senator
from Tennessee and the majority leader--and when a responsible IRS
manager tried to stop the agent, the agency retaliated, not against the
agent, but against the manager.
Those are the types of actual situations the committee focused on.
Mr. President, lest I be overcritical, I am well aware of the
dedicated people in the Internal Revenue Service who are doing an
appropriate job in carrying out the duties that they must perform in
service to the IRS as well as the country.
Mr. President, Commissioner Ros-sotti has a tough job. If he is going
to change the culture of the IRS, he is going to have to have some new
tools and support by the Congress. This bill will give him some of
those tools that he needs to get that job done. For example, the bill
gives him the authority to fire an IRS employee if he fails to obtain
required approval for seizing a taxpayer's home or business asset.
Further, an IRS agent will be fired for providing a false statement or
destroying documents to conceal mistakes.
The bill creates an independent board to review and recommend changes
to enforcement and collection activities of the IRS. I believe the
committee made a mistake in placing the Treasury Secretary and the IRS
employee representative on this board, and I am disappointed that the
Senate did not remove those two individuals from that board. This
should be a board that is made up of people who can act with real
independence on behalf of honest taxpayers. It should not represent the
interests of the Government or the employees of this agency.
We have set up a truly independent Taxpayer Advocate to resolve
taxpayer disputes with the IRS. This is a much-needed change, since we
learned last year that the current Taxpayer Advocate, in reality, faces
a conflict of interest because the people who rotate through this
office are often called upon to make judgments on the people in the
agency who can promote the individual after he rotates out of the
advocate's office.
Now, in the area of computer-generated property seizures, like we had
in my State of Alaska, some 800 permanent fund dividend seizure notices
that were issued last September should never, ever happen again,
because IRS employees are going to have to have signed approvals before
attempting to seize property.
And for the first time, a taxpayer will be able to appeal seizures
all the way into Tax Court.
We've made sure that IRS won't be able to harass the divorced woman
for her ex-husband's cheating. I want to express my concern that it
appears the Administration does not support the proportional liability
provision we've included for innocent spouses.
Last week, Assistant Secretary for Tax Policy, Donald Lubick was
quoted as saying the Administration cannot support our plan to provide
innocent spouse relief. When I read the story about this comment, I
asked my staff to obtain a copy of Mr. Lubick's speech but was informed
there was no text for the speech. It is my hope that Mr. Lubick was not
speaking for the Administration, since according to one study, there
are 35,000 innocent women who must contend with attempts by IRS to
collect on debts that they are not responsible for.
In addition, we've added a rule suspending interest and penalties
when the IRS does not provide appropriate notice to taxpayers within
one year of filing. This ensures that delays by IRS, which can
sometimes go on for years, will not benefit IRS by stacking penalties
and interest on taxpayers who may have unwittingly made a mistake on
their returns.
Finally, we've changed the burden of proof in cases coming before the
Tax Court. This is a long overdue change. When American citizens go
into a court, they should be presumed innocent, not guilty until they
can prove their innocence. That principle is enshrined in our
Constitution and must apply in tax cases as well as any other cases.
Mr. President, as I said earlier, the culture at the IRS must change.
This bill makes very important changes that should give the American
public more confidence that if they make a mistake on their tax
returns, they will be treated fairly by their government and not
subjected to threats and harassment.
But this bill is just a first step. As I have indicated, there are
certain portions with which I am not satisfied. I think it is incumbent
on the Finance Committee to hold the agency accountable for
implementing what is in this bill. More oversight is needed because it
is only through oversight that we can hold this agency accountable to
the American public.
Mr. President, I thank the Chair. I yield the floor.
Seeing no other Senator, I suggest the absence of a quorum.
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The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. KERREY. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KERREY. Mr. President, I ask unanimous consent to be able to
speak as if in morning business to introduce legislation.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KERREY. I thank the Chair.
(The remarks of Mr. Kerrey and Mr. Kennedy pertaining to the
introduction of S. 2049 are located in today's Record under
``Statements on Introduced Bills and Joint Resolutions.'')
Mr. NICKLES. Mr. President, I wish to thank the Chairman of the
Senate Finance Committee and his staff for working closely with Senator
Baucus, Senator Hutchison, and me on language in this bill to protect
the trade secrets and confidential information of software publishers
and their customers. The Senate IRS bill is far stronger than the House
bill on these issues, and we appreciate the Chairman's efforts. To
ensure fair and adequate implementation of this legislation, I would
like to clarify our intent with regard to some of its provisions.
First, this bill confirms that, in an IRS summons enforcement
proceeding involving software, courts have the authority to issue ``any
order necessary to prevent the disclosure of trade secrets and other
confidential information'' with respect to software. I believe this
authority is inherent in the existing powers of the judiciary in
summons enforcement proceedings, and that our legislation simply
reaffirms this authority with respect to the proceedings involving
software. Mr. President, this clarification would make clear that the
court can also issue orders to protect confidential taxpayer
information associated with the software.
Secondly, the legislation currently provides that ``the Secretary
will make a good faith and significant effort to ascertain the
correctness of an item'' prior to issuance of a summons for software
source code. It is my belief that a good faith and significant effort
requires that the IRS conduct a thorough review of the taxpayer's
books, records, and other data, including the issuance of Information
Document Requests and following-up those requests appropriately. This
clarification would make certain that source code should be summoned as
a last resort only.
Mr. ROTH. Mr. President, I appreciate and concur with the comments of
the Senator from Oklahoma.
Mr. BAUCUS. Mr. President, I too thank the Chairman for his work on
these issues. I am concerned that the Senate bill contains a provision,
Section 7612(b)(3) that makes it easier for the IRS to gain access to
software source code in the event that a taxpayer refuses to provide
his own financial data to the IRS. Since the sofeware publisher can
neither provide this data themselves, nor compel a taxpayer to provide
it, I believe this provision is unnecessary. The bill should not punish
a third-party software company when the IRS fails to use those tools
against an uncooperative taxpayer. I hope the Chairman will reconsider
this issue in conference.
Mrs. HUTCHISON. Mr. President, I agree with my colleagues that the
Senate Finance Chairman has produced an excellent bill which will help
protest software companies and their customers from intrusive IRS
audits.
I would ask the Chairman to consider the issue of whether or not to
extend the same requirements for non-disclosure and non-complete
agreements to IRS employees as this bill requires of outside
consultants.
Mr. ROTH. I thank the Senator from Montana and the Senator from Texas
for their comments, and I will certainly look at these issues as this
legislation moves to conference with the House.
Mr. REED. Mr. President, I rise in support of H.R. 2676, the Internal
Revenue Service Restructuring and Reform Act of 1998. This bill is the
product of an extensive examination of the IRS that began with the June
1997 release of a report by the National Commission on Restructuring
the Internal Revenue Service, and ended with recent Finance Committee
hearings on taxpayer abuse by the Internal Revenue Service (IRS).
I am pleased that H.R. 2676 incorporates a number of key
recommendations from the National Commission's report, such as IRS
restructuring and the establishment of an Oversight Board. I believe
restructuring the IRS will enable the agency to meet the particular
needs of taxpayers such as individuals, small businesses, large
businesses, and tax-exempt organizations, and be more responsive to
each group's particular concerns.
In addition to incorporating recommendations from the Commission
report, the bill includes provisions to address taxpayer abuse and
mismanagement practices by IRS that came to light during the Finance
Committee's hearings. I was, along with most other Americans, very
disturbed by the anecdotes of taxpayer abuse that were presented at the
hearings. To the extent that H.R. 2676 will address these problems, I
am very pleased to support the bill.
Notwithstanding my strong support for many of this bill's provisions,
I do have concerns about its projected cost of $19.3 billion over 10
years. Mr. President, this is triple the cost of the House-passed
version of H.R. 2676. Although the bill includes offsets which purport
to make the bill revenue-neutral, these offsets are a ticking time bomb
that will explode beyond the 10 year budget window. For example, a
provision modifying IRA rollover rules will raise $8 billion between
2003 and 2007. However, this provision will cost the Treasury a yet-to-
be determined amount of revenue after 2007. I find it difficult to vote
on a proposal that we know will be costly in the long-term, without
having a definitive sense of its budgetary impact.
When coupling the rollover provision with provisions included in the
Taxpayer Relief Act that are phased-in through 2007, such as capital
gains tax cuts, ``back loaded'' IRAs, and estate tax cuts, it becomes
clear that there will be significant pressures on the federal budget
after 2007. I believe that these provisions could seriously compromise
maintenance of a balanced budget. In addition, these provisions could
greatly complicate our efforts to address the long-term solvency issues
associated with the Social Security and Medicare Trust Funds.
Finally, Mr. President, I have concerns that the bill could
compromise the ability of the IRS to carry out its core mission--
enforcement of the Internal Revenue Code. For example, the enhanced
appeal provisions in the bill may unintentionally make it easier for
noncompliant taxpayers to avoid paying the appropriate taxes.
Similarly, I am concerned that shifting the burden of proof in certain
circumstances will undermine enforcement efforts and have the
unintended consequence of making audits more intrusive.
Mr. President, while I am supportive of H.R. 2676, I am hopeful that
we can work in Conference to address the concerns that I have raised,
which are share by the Administration. Ultimately, I believe it is
possible to pass a strong IRS restructuring bill that can address
taxpayer concerns, without busting the budget or undermining the
mission of the IRS.
Mrs. BOXER. Mr. President, I support the IRS Restructuring and Reform
Act of 1998. This bill, when fully implemented, will achieve 3
important objectives:
First, it will greatly benefit the American taxpayer who, all too
often, has been the victim of overzealous and rogue IRS agents, has
been caught, through no fault of his own, in a nearly impenetrable
bureaucratic morass, or has received poor and discourteous service from
IRS employees.
Second, the bill will significantly reorganize IRS management and
provide the IRS Commissioner with new authority over IRS employees.
Third, the bill establishes an IRS Oversight Board, comprised of
private citizens, the Secretary of the Treasury and a union
representative, which will oversee the IRS in administration,
management, conduct, and direction. I believe, however, those
provisions which most directly benefit the American taxpayer are the
real crux of this bill.
We need effective reforms which restore public confidence in an
agency which touches the lives of more people in this country than any
other agency.
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I believe the establishment of a ``National Taxpayer Advocate'' will
provide a significant step toward restoring such confidence.
The National Taxpayer Advocate, who will have a background in
customer service and tax law, as well as have experience representing
individual taxpayers, will be one of the most important and critical
links between taxpayers and the IRS. Significantly, the National
Taxpayer Advocate will not be an IRS employee and cannot have been an
IRS employee within two years of his or her appointment. This two year
limitation will help ensure the independence that taxpayers who avail
themselves of the Advocate's Office expect and deserve.
As I travel through my home state of California, the most frequent
complaints I hear from Californians regarding the IRS are: (1) the
difficulty they have receiving assistance resolving problems with the
IRS, and (2) the difficulty they have receiving guidance from the IRS
relative to their specific tax question or concern. I believe the
establishment of a National Taxpayer Advocate, as well as the creation
of a system of local taxpayer advocates, will greatly enhance the
ability of taxpayers, in my home state and around the country, to
receive the assistance and guidance they seek.
Innocent Spouse relief is another provision of the bill that will
directly benefit taxpayers. An ``innocent spouse'' is one--usually a
wife--who signs a joint tax return not knowing that the information
contained therein, provided by the other spouse, is erroneous. While
relief from liability for tax, interest and penalties is currently
available for innocent spouses, that relief is only available in
certain limited and narrow circumstances.
The bill before us, however, would directly impact taxpayers by
modifying current law to permit a spouse to elect to limit his or her
liability for unpaid taxes on a joint return to the spouse's separate
liability amount. I believe this change will greatly enhance the
ability of an innocent spouse to establish his or her innocence.
The final ``taxpayer friendly'' provision of the bill I will mention
is the creation of low-income taxpayer clinics. This provision will
ensure that low-income taxpayers, and taxpayers for whom English is a
second language, receive tax services at a nominal fee. Such clinics
are essential if low-income taxpayers, and taxpayers who have minimal
English proficiency are to be represented in controversies with the
IRS.
This provision is particularly important in my home state. According
to the 1990 Census, California is home to approximately 2.7 million
individuals who speak little or no English. Thus, about 35 percent of
all individuals in the U.S. who are non-English speaking reside in
California--almost twice the percentage of those non-English speaking
persons that reside in Texas and almost three times the number that
reside in New York. In addition, California is home to more
immigrants--2 million--than any state in the country. It is important,
therefore, that we provide these taxpayers with the help they need to
be tax compliant.
Mr. President, taxpayers that come into contact with the IRS, whether
they are merely asking questions or whether they are attempting to
resolve a disputed claim, should be treated in a fair, respectful and
courteous manner. Unfortunately however, we have heard all too often
over the past months, of many instances in which IRS employees treated
taxpayers rudely, abruptly, and yes, at times so abusively that the
offending employee's action could only be called criminal.
While such actions cannot and should not be imputed to all IRS
employees, the overwhelming majority of whom are honest and
hardworking, it is important to weed out any employee, even if it is
only one, who engages in abusive behavior toward law abiding taxpayers.
Taxpayers deserve better.
In closing, Mr. President, I am very pleased to support this bill
today and I hope that it is only the beginning of Congress' commitment
to making the IRS more user friendly, improving the management of the
IRS and streamlining an overly complex tax code.
Mr. KEMPTHORNE. Mr. President, no longer is there any doubt that
Congress must audit the Internal Revenue Service.
The hearings that have recently been held in the Senate Finance
Committee have brought out under the glare of public scrutiny what many
taxpayers already know from personal experience: the IRS needs reform.
We have been made aware of incidents of flagrant, unbridled abuse of
government authority which until now were known only to the victims of
an agency that has expanded far beyond its intended size and scope and
is clearly guilty of violating the public's trust.
While these problems have been successfully highlighted by the
Finance Committee, I would like to take just a moment to reiterate some
of the more glaring examples of IRS abuse:
Former Senate Majority Leader Howard Baker was victimized by an IRS
agent in Tennessee who, in an attempt to advance his own bureaucratic
career, tried to frame Baker of money-laundering and bribery charges.
After the agent was exposed, IRS authorities, rather than engaging in a
reform effort to root out similar abuses in the future, tried to cover
up for the rogue official.
IRS agents, armed with automatic weapons and attack dogs, raided John
Colaprete's business after a former bookkeeper, who had embezzled
$40,000, leveled bizarre and unsubstantiated allegations. Again, the
charges were completely unfounded and none were filed.
Robert Gardner was subjected to a 33 month investigation that
involved the IRS engaging in activities including the seizure of his
office property, feeding lies to a grand jury, and attempts to compel
Mr. Gardner's clients to wear hidden microphones.
I know from personal experience the problems the IRS can pose for
hardworking Americans. For an agency that the American people give a
significant portion of their money over to, customer service is not a
top priority. In February of 1996, for example, Mr. and Mrs. Robert
Wiester of Orofino lost their home and outbuildings when Big Canyon
Creek flooded. On their federal income tax return, they justly claimed
a casualty loss, although their tax preparer put the loss on the wrong
line of their 1040 form. The IRS then refigured their return and,
instead of the $1,206 refund the Wiesters were due, the IRS claimed
that they owed the government $15,885 in tax, interest, and penalties.
Within five months, the IRS contacted Mr. and Mrs. Wiester saying that
a levy was going to be placed on their property. After numerous
fruitless calls to the IRS, the Wiesters contacted my office, and after
I wrote the IRS six times, the Wiesters' problem was finally rectified,
nearly ten months after the simple error on the 1040 form was made.
This type of behavior is no longer acceptable. The Senate will
shortly pass the IRS Restructuring and Reform Act, which will
fundamentally overhaul the agency and make comprehensive, meaningful
steps toward reform. The bill: creates an IRS oversight board to
oversee every aspect of IRS operations; holds IRS employees accountable
for their actions by requiring the agency to terminate employees who
violate rules; suspends interest and penalty payments when the IRS does
not provide appropriate notice to taxpayers; shifts the burden of proof
from the taxpayer to the IRS in legal proceedings; makes it illegal for
Executive Branch officials, such as the President, to audit people;
creates new performance standards for IRS employees so that they are no
longer ranked on collection goals; expands awards for attorney's fees
and civil damages to taxpayers; expands attorney-client privilege to
accountants; and requires a greater notification process for the IRS to
place liens, levies, or seizures on taxpayers's property.
I believe that this legislation is a meaningful step to reform the
tax culture in Washington. Once the new majority took control of
Congress in 1994, a three-step process has been implemented to
fundamentally change the Washington tax culture: (1) Reduce the
collection, (2) reform the collector, and (3) replace the complexity. I
am proud to say that this Congress has passed the largest tax cut in
American history as part of the first balanced budget in a generation.
I have supported all of these measures, and will look forward to
supporting legislation that will substantially ``reform the collector''
and provide the American people with a fair, just, and responsive IRS.
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Mr. ABRAHAM. Mr. President, I rise today in strong support of reforms
to our Internal Revenue Service.
As I'm sure my colleagues are aware, recent Senate Finance Committee
Hearings have brought to our attention the harrowing stories of
American citizens victimized by over-zealous IRS agents.
These agents, often on the flimsiest of evidence, have bent and
sometimes broken rules intended to protect citizens from abuse--rules
that clearly must be strengthened and more effectively enforced in
order to protect Americans' freedom and peace of mind.
In my view, Mr. President, the most harrowing stories related during
Finance Committee hearings are made all the more troublesome because of
clear evidence that they are horrible examples of widespread practices.
As one agent testified last fall, ``Abuses by the IRS * * * are
indicative of a pervasive disregard of law and regulations designed to
achieve production goals for either management or the individual
agent.''
The use of quotas and statistics used as performance standards for
advancement within the IRS pit agents against taxpayers at great risk
to individual liberties and good order.
It is time to put an end to the adversarial relationship between the
IRS and the taxpayer. And there is only one way to properly accomplish
that task: by reforming and restructuring the IRS to make it more
service oriented and to ensure that it no longer disregards the
fundamental rights of American citizens.
I would like today to give special attention to one situation I
believe has caused a great deal of undue hardship to many Americans: I
mean IRS regulations holding innocent people responsible for the tax
liabilities of their ex-spouses.
In this regard, Mr. President, I would like to relate one all-too-
telling anecdote: Elizabeth Cockrell came to this country from Canada
over 10 years ago, when she married an American. Unfortunately, her
marriage, to a stockbroker, lasted only 3 years. Since the marriage
broke up, she has concentrated on raising her child while holding down
a job and strengthening her roots in the community.
Imagine Ms. Cockrell's surprise when, 9 years after she and her
husband had been divorced, the Internal Revenue Service informed her
that she owned it $500,000.
It seems Ms. Cockrell's ex-husband had taken some deductions for tax
shelters that the IRS had disallowed. This made him initially liable
for $100,000. But time had passed and the IRS had been unable to
collect from him. So Ms. Cockrell, who had nothing to do with her
husband's business and did not help figure out the taxes, was now being
hounded for $500,000. Why? Because she signed a joint tax return.
And it turns out that even $500,000 is not enough for the IRS. With
new interest and penalties, the IRS now wants $650,000.
Ms. Cockrell has fought and tried to settle, all to no avail. But she
is not alone.
Take for example the case of Karen Andreasen. Ironically, Ms.
Andreasen was married to a former IRS employee.
Imagine her surprise, after their divorce, when she found out that
her ex-husband, who had handled all of their financial affairs, had
been forging her signature on joint returns.
Imagine her shock and dismay when, even though she had no income for
the years in question, the IRS came after her for her husband's tax
liability. Ms. Andreasen has now been paying off the debt for years,
and still has a tax lien on her house.
Mr. President, cases like these are all too common. The General
Accounting Office estimates that every year 50,000 spouses, 90 percent
of them women, are held liable in the same way as Ms. Cockrell and Ms.
Andreasen.
These women, most of them working moms struggling to make ends meet,
for the most part had nothing to do with the income or accounting over
which the IRS is pursuing them. And, as of now, they have no legal
resource.
The Supreme Court just recently dismissed Ms. Cockrell's legal
appeal, in which she claimed that innocent spouses should not be held
liable for income they did not earn.
We cannot let this decision stand. That is why I support a provision
in this legislation that would say clearly a person can only be held
liable for the income that he or she has earned and failed to properly
report.
Under this provision, every American would remain liable for his or
her own taxes. No tax cheats would be let off the hook. But innocent
parties, men and especially women who had no part in filing any false
claims with the IRS beyond signing their name to a joint return, would
no longer be held liable.
No longer would ex-wives be made to pay for the mistakes and/or
misdeeds of their ex-husbands.
No longer would the IRS be allowed to victimize innocent people
merely on account of a former marriage.
There are hundreds of thousands of women out there just like
Elizabeth Cockrell and Karen Andreasen. They deserve our support and
protection against an over-reaching IRS.
This is a crucial provision, in my view Mr. President. But it is only
one of a number of provisions that must be taken to stop the IRS from
pushing its agents to pursue cases to the detriment of American's
fundamental rights.
It is my hope that all of my colleagues will see the necessity of
protecting the people from federal employees who are hired to provide a
needed service to the public, but who have been given no license to
intimidate or violate their rights.
This legislation is an important step in our attempt to bring the IRS
under control. However, I think it is crucial to note that we will not
be able to put an end to our problems with the IRS unless we reform and
simplify the tax code.
Only by making the code simpler, flatter and more fair can we reduce
the role of the IRS in the taxpaying process. We must keep in mind, in
my view, that many of our current problems are the predictable results
of decades of bad tax policy, and that it is up to us to reverse these
policies as soon as possible.
Mr. President, a recent USA Today poll found that 69 percent of
Americans believe the IRS ``frequently abuses its powers.'' Fully 95
percent believe the tax code isn't working and must be changed. And who
can blame them? The current tax code is 5.5 million words long, it
includes 480 tax forms, and 280 publications explaining those forms.
By instituting fundamental tax reform, establishing one low marginal
rate with fewer loopholes, by designing a tax form the size of a
postcard, we can eliminate the huge IRS bureaucracy and many of the
headaches people experience in filing their taxes every year.
Once we take the necessary steps toward IRS reform included in this
bill, Mr. President, I urge my colleagues to move on to fundamental
reform of our tax code in the name of fairness, of efficiency, and of
the rights of the people of the United States.
Mr. HATCH. Mr. President, today we will cast one the most important
votes of the 105th Congress. We will vote on reforming the Internal
Revenue Service.
Of all the powers bestowed upon a government, the power of taxation
is the one most open to abuse. As the agency responsible for
implementing and enforcing the tax laws that we here in Congress pass,
no other agency touches the lives of American citizens more completely
than the IRS.
I believe that Americans understand and appreciate that they have to
pay taxes. Without their tax dollars, there would be no defense; no
Social Security, Medicare, or Medicaid; no environmental protections;
no assistance for education or job training; no national parks, food
inspection, or funds for highway and bridges.
But, everywhere I go in Utah, I hear from my constituents about their
frustrations. My office receives numerous letters each month detailing
taxpayer interactions with the IRS. It seem that everyone has had, or
knows someone who has had, a bad experience with the IRS.
The stories range from small annoyances such as unanswered phones or
long periods of time spent on hold to shocking abuses such as
unwarranted seizures of assets or criminal investigations being based
on false information for the purpose of personal revenue. It is small
wonder that the taxpayers are scared and frustrated. These stories
illustrate a disturbing trend. They are
[[Page S4494]]
dramatic reminders of the failure of Congress to exercise adequate
oversight over a federal agency.
I have been here long enough to know that we are never going to be
able to achieve a system where people do not get frustrated about
paying their taxes--both the process of paying taxes and the amounts.
Let's face it: paying taxes is not something we will ever enjoy doing.
We must, however achieve a system of collection that is efficient,
fair, and, above all, honest. Unfortunately, throughout the hearings we
have held over the last several months and in the letters my office has
received from constituents from my state of Utah and all over the
country, we know that the current system often fails on these counts.
We have heard several horror stories from taxpayers, innocent
spouses, IRS employees, and those who have been the subjects of
criminal raids and investigations. While these are the minority of the
cases dealt with by the IRS, they still illustrate that serious abuses
are occurring.
We are not taking about appropriate enforcement of the law. We are
talking about heavy-handed abuses of enforcement powers. At best, such
tactics are counterproductive; at worst, it is reprehensible behavior
by big government. It must stop.
The bill before us today gives the IRS Commissioner great flexibility
to carry out a fundamental reorganization of the agency. But, it also
places the IRS under an independent, most private-sector board to
oversee the big picture of operations at the agency. These are two very
important elements to creating a new culture of the IRS: responsible
leadership and accountability.
I commend the new Commissioner for the steps he has taken so far to
rectify these problems at the IRS, and I encourage him to keep going.
And, I hope he will not feel constrained by ``business as usual''
attitudes among those who have an interest in maintaining the current
methods. I hope the new Commissioner will shake any dead wood out of
the tree.
But Mr. Rosotti needs to know that Congress will hold him and the
agency accountable. And, our expectations--and the expectations of the
American people--are not hard to fathom.
We do not expect tax delinquents or cheats to go undetected or
unpenalized. But, we do expect the IRS to enforce our tax laws
appropriately. We expect the IRS to assist taxpayers to understand and
comply with complicated laws and regulations. We expect taxpayers to be
treated courteously . We expect taxpayers' questions to be answered
promptly and their returns processed efficiently. And, we expect any
penalties to fit the crime.
Today, we will vote on a bill that takes a leap forward in
eradicating a culture that has allowed corruption and abuse to occur
over and over again and to taint the efforts of honorable IRS
employees. There has been a lot of talk about changing the IRS into a
service-oriented agency, and the bill before us goes a long way towards
dong just that. We cannot stop there, however.
While customer service is an important part of the equation, we must
go further and address taxpayer rights. The bill before us goes one
more step forward and will reform the penalty system, provide taxpayer
more protections from unwarranted seizures, and make the IRS more
accountable for the actions of its agents.
This bill goes further than the legislation passed by our
counterparts in the House last fall. The Senate legislation expands key
aspects to grant taxpayers additional protections. The Senate bill adds
protections that allow spouses to choose proportional liability, award
attorney's fees in more cases, require that the IRS specify to an
individual the details of any penalty imposed and suspend interest and
some penalties if the IRS does not provide notice of liability within
one year after a return is filed.
The bill would add several provisions dealing with the due process of
taxpayers including a requirement that the IRS notify taxpayers 30 days
before a notice of federal lien, levy, or seizure is filed; a guarantee
that the taxpayer has 30 days to request a hearing by IRS Appeals; and
the opportunity for the taxpayer to petition the Tax Court to contest
the Appeals decision.
The bill also permits an issuer of tax-exempt bonds to appeal the
decision of the IRS through the tax court system. This will help
protect the individual taxpayers from having to go to court on an
individual basis to fight the IRS determination that a bond issue is
not tax-exempt. This is extremely important to those municipalities
that issue these bonds. These bonds are issued for tax-exempt purposes,
such as to construct schools or build hospitals and universities. This
is a good provision to provide an avenue of appeals for these bond
issuers.
The legislation before us today will fundamentally change how the IRS
works. It is a necessary and bold set of initiatives. But, we cannot
just declare victory and bask in the glow of a job well done. We must
remember how we got to this point in the first place.
The IRS was not born evil, and it is not an inherently bad
organization. Rather, it has suffered from decades of neglect and
inadequate oversight. Once we have set the agency on the road to
recovery and given it the tools it needs to move forward, we must
continue to guide it and ensure that the agency continues down the
right road. We must continue to responsibly exercise our oversight
responsibility. We must have continued hearings, reviews, and
cooperation. Left alone, any entity with power and authority will lose
its way. Without continued oversight and cooperation, we will soon see
this debate repeated on the Senate floor.
This legislation can be summed up in one word--accountability. For
too long, the IRS and its employees have operated in an environment
with little or no accountability. This bill changes all that. The
legislation before us makes individual IRS employees accountable for
their actions. It makes management more accountable for the treatment
given taxpayers and other employees. Finally, it makes the agency as a
whole more accountable to the Congress and the American taxpayer.
This debate has focused on the negative--on the abuses and misdeeds
that are the exception and not the rule. Just as a vast majority of the
taxpayers are honestly trying to comply with the tax code, the vast
majority of IRS employees are honest and hard working individuals doing
their best in a very difficult and unpopular job.
Yes, abuses do occur, and we must reform the system to prevent
improper activities. At the same time, we must make sure that we
acknowledge those employees who are doing their jobs with competence
and integrity. These employees are the reason that most taxpayers
today, even if frustrated by the forms and irritated with the amount of
their tax bill, continue to comply.
Is this bill perfect? No. There are some things I would like to see
changed. For example, I have some serious concerns about the creation
of an accountant-client privilege in this context. I am concerned that
we are using the Internal Revenue Code to effectively amend the Federal
Rules of Evidence. We have a clear procedure for amending these rules
already set out. Changing these rules is no simple matter. It should
only be done through careful, deliberate evaluation of the change and
the effect it will have on the judicial system. It should only be done
with input from the Judicial Conference of the United States and
others.
Despite these misgivings, Mr. President, I want to reiterate the
importance of the bill before us today. The IRS touchers more taxpayers
in more aspects of their lives than probably any other agency. It is an
important bill, and we must pass it.
The ultimate goal of reforming the IRS is to protect both the honest
taxpayer trying to comply with our complex tax laws and those honest
employees struggling to enforce an almost incomprehensible set of tax
laws with integrity. The bill before us today makes significant
progress toward that goal.
I want to commend Senator Roth, Senator Moynihan, and my colleagues
on the Finance Committee for seeing this bill through. I urge my
colleagues to support this legislation.
Mr. JEFFORDS. Mr. President, under the leadership of Chairman Roth,
during this Congress the Finance Committee undertook in-depth oversight
of the workings of the Internal Revenue Service. With a week of
hearings last year, followed by more hearings just last
[[Page S4495]]
week, the Senate brought the IRS under scrutiny, and revealed a side of
the agency not seen before.
What the Committee found at these hearings was alarming. We heard
numerous stories of outrageous action by the IRS, including:
a criminal agent who sought to ``make a name'' for himself by
fabricating charges against prominent public officials;
IRS supervisors who gave preferential treatment to taxpayers
represented by former co-workers and to taxpayers represented by
accounting firms where the supervisors hoped to work;
IRS reviewers who reversed auditors' recommended tax increases when
taxpayers had competent, well-heeled representation, but allowed
similar recommendations to go forward when a taxpayer didn't have a
representative;
and IRS agents who conducted armed raids on businesses, even though
there was no reason whatever to suspect violence or resistance.
When an organization has over one hundred thousand employees, I
suppose it is not surprising that some people are going to make
mistakes. However, the abuses that came to light in the Finance
Committee hearings struck a responsive chord with the public. From the
mail and phone calls I received, I worry that the problems we heard
about are not isolated incidents, but are symptomatic of an agency with
real management problems.
The bill adopted by the Finance Committee takes several approaches to
address some of these problems. The measure calls for new ways of
structuring, managing and overseeing the agency. The bill will ease
some of the burdens imposed on taxpayers and gives taxpayers important
new rights and protections to assert in their dealings with the IRS.
The legislation will help assure that taxpayers understand their rights
and that they understand how the tax collection system works. Finally,
it makes continued oversight by Congress easier.
One of the most important aspects of this bill is its provision for
independent review of IRS actions throughout the examination and
collection processes. A recurring complaint heard during the hearings
was that the IRS serves as police, prosecutor, judge and jury. This
legislation attempts to address that problem by calling for increased
review of IRS actions and by erecting walls between the various players
in the tax collection process to assure that those reviews are truly
independent and not merely a rubber-stamp approval.
Under this measure IRS officers will not be able to seize assets
without previous independent review by their supervisors, and taxpayers
can even request additional review of collection efforts. To assure the
independence of the appeals unit reviewing proposed changes to a
person's tax liability, the bill prohibits the appeals officer from
having ex parte contact with the tax examiner who proposed the changes.
When there are allegations of misconduct, the IRS will no longer
investigate itself. Instead, inspections of alleged misconduct will be
performed by the Treasury Department. Together with a newly independent
Taxpayer Advocate, and a new Oversight Board composed primarily of
outsiders, these provisions will assure that actions adverse to
taxpayers are not taken without first having a fresh review by an
unbiased eye.
New taxpayer rights will also ensure that the IRS conducts reviews to
make certain that the positions the agency takes are reasonable. The
bill expands the situations in which taxpayers can recover costs
incurred in defending themselves against the IRS. Under this bill, if
taxpayers hire a lawyer or accountant to represent them before the IRS,
and the agency takes an unjustified position that results in no change
in tax liability, the taxpayer will be able to recover the costs
incurred to fight the IRS, including costs incurred in administrative
proceedings. The bill also provides that if the IRS rejects a
taxpayer's offer to compromise a tax deficiency, continues to pursue
the taxpayer, and ends up recovering less than the taxpayer's offer,
the taxpayer can recover costs incurred after the time of the offer.
The IRS has the power to destroy people's lives. These provisions
will assure that this power is no longer concentrated in the hands of a
single person and make more employees accountable for the agency's
actions. The bill will also help ensure that proposed actions are
reviewed for reasonableness.
IRS employees will be forced to take their new responsibilities
seriously; negligence in the exercise of their duties could be the
basis for a new kind of taxpayer lawsuit.
I want to commend Chairman Roth for his historic hearings on the IRS.
I also want to commend him for not capitulating to calls for quick
action on the House-passed bill, when the Finance Committee hearings
made it apparent that more sweeping changes were needed. I believe that
this bill will go far to restore public confidence in the IRS.
Mr. HELMS. Mr. President, I am grateful to the able Chairman of the
Finance Committee (Mr. Roth), and to the distinguished ranking member
(Mr. Moynihan) for their hard work and perseverance in bringing this
IRS Reform legislation before the full Senate.
For a very long time, it has been obvious that the Internal Revenue
Service has a warped view of its intended role in the lives of
Americans. The IRS exists, of course, not to harass any taxpayer or to
find new and creative ways to abuse its authority, but to serve the
American people who, each year, fill the coffers of the U.S. Treasury.
The recent hearings held by the Finance Committee have made it
crystal clear that the Internal Revenue Service is an abysmal failure
in carrying out its mission. Frankly, I don't know whether to be more
horrified by out-of-control IRS agents pursuing innocent taxpayers out
of personal spite or double-dealing senior IRS managers trying to cover
up such malicious conduct.
It hardly matters which is worse, because even one abuse of taxpayer
rights at and by the IRS is one abuse too many. So I am pleased that
Congress is taking this modest action to make sure the worm turns. For
the first time in a long time, the Senate appears ready to put the
interests of the taxpayer above the demands of the federal bureaucracy
for more and more revenue.
And while I support this measure as a first step in the long road
toward a more respectful treatment of the hapless American taxpayer, I
trust that it is indeed only the beginning, because the root cause of
all of the shenanigans at the IRS is the byzantine complexity of a U.S.
tax code crying out for reform.
Some years ago--in March of 1982, to be exact-- I introduced my
initial proposal for a flat tax on income. This proposal, and other
flat tax proposals that have followed, would eliminate the huge
bureaucracy of the IRS--a bureaucracy whose size and scope make the
abuses uncovered by Senator Roth and the Finance Committee as
predictable as they are inevitable.
I believe in the flat tax, and so do, Mr. President, the American
people. A Money magazine poll released in January of this year
indicated nearly two-thirds of Americans prefer a flat tax to our
current system. I salute my colleagues, especially my distinguished
friend from Alabama (Mr. Shelby), for their courage in continuing to
make the case for tax simplification.
And lest you think I'm overstating the absolute travesty that is the
United State Tax Code, Mr. President, there's something that you
and every other American should read. Dan Mitchell, one of the bright
young economists who works around the corner at The Heritage
Foundation, recently released a paper entitled ``737, 734, 941, 858
Reasons. . . and Still Counting: Why a Flat Tax is Needed to Reform the
IRS.''
Mr. President, I do not exaggerate in saying that the statistics
contained in this paper boggle the mind. Take note with me of just a
couple of examples Mr. Mitchell has compiled to detail the economic
cost of the tax code:
The private sector spends $157 billion dollars to comply with income
tax laws.
The federal government spends $13.7 billion in, yes, taxpayer money
to collect--what else?--taxpayer money.
It takes an estimated 5.4 billion hours for Americans to comply with
federal tax forms. In fact, the IRS itself estimates that it takes
almost 11 hours to fill out a 1040 form.
Then there's the sheer amount of paperwork required every time the
law changes. Mr. Mitchell reports the following:
[[Page S4496]]
There are 5,557,000 words in the income tax laws and regulations.
That's 17,000 pages of paper. And get this: 820 additional pages were
added to the tax code by the 1997 budget act.
The IRS sends out an estimated 8 billion pages of forms and
instructions to taxpayers annually. For my colleagues who are
particularly interested in the environment, they should know that
293,760 trees were needed to supply the paper.
It goes on and on, Mr. President. And I ask unanimous consent that
the full text of Mr. Mitchell's paper be printed in the Record at the
end of my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered. (See
Exhibit 1.)
Mr. HELMS. Mr. President, the pending legislation in the Senate is
obviously not a panacea for everything that is wrong at the Internal
Revenue Service. But, as the saying goes, a journey of a thousand miles
begins with a single step.
I believe this IRS reform bill is that first step, and I hope that
its swift passage by the Senate will help spark the serious debate on
tax policy the American people are waiting for. It is my hope--and my
belief--that the Senate will begin in the very near future to respond
to Americans' desire for real tax relief and real tax simplification.
Exhibit 1
[From the Heritage Foundation Backgrounder, April 15, 1998]
737,734,941,858 Reasons...and Still Counting: Why a Flat Tax is Needed
to Reform the IRS
(By Daniel J. Mitchell)
Last year, The Heritage Foundation released a publication,
``577,951,692,634 Reasons...And Counting: Why a Flat Tax Is
Needed to Reform the IRS.'' Since that time, calls to reform
the Internal Revenue Service have led to unprecedented
hearings in Congress and outcry among the public. In 1997,
however, Congress moved away from reform and approved a tax
bill that adds even more complexity to the tax code. Because
of that bill, as well as Heritage's continued research into
the myriad nooks and crannies of the current tax code,
159,783,249,224 new reasons that the Internal Revenue Code
should be replaced with a flat tax have come to light,
bringing the total number of reasons to 737,734,941,858.
The Internal Revenue Service (IRS) frequently is cited as
the most hated of all government agencies. This aversion goes
well beyond a simple dislike of paying taxes. Many Americans
feel the IRS uses its vast power capriciously to enforce a
tax code that is unfair and incomprehensible. Indeed, a 1997
national voter survey finds that the majority of respondents
would prefer to undergo a root canal than be audited by the
IRS. And a 1990 magazine survey finds that the most
frightening words people could imagine hearing when they
answer the phone are ``This is the IRS calling.'' Although
Americans have every right to be upset by the oppressive tax
system, their anger should not be directed at the IRS. The
vast majority of problems with the current tax system are the
inevitable result of bad tax policy.
The way to reduce the intense popular aversion to the IRS
is to enact a flat tax. By wiping out all the complicated,
obscure, and convoluted provisions of the current tax code, a
flat tax will reduce compliance costs and ease the
uncertainty and anguish that make April 15 everyone's least
favorite day of the year. In the words of former IRS
Commissioner Shirley Peterson, who directed the agency in
1992, ``We have reached the point where further patchwork
will only complicate the problem. It is time to repeal the
Internal Revenue Code and start over.'' As reported in The
Wall Street Journal last year, ``A recent survey of 275 IRS
workers around the nation, done by a national IRS
restructuring commission headed by Senator Kerrey of Nebraska
and Representative Portman of Ohio, found overwhelming
support within the IRS for simplifying the law.''
As the following enumeration demonstrates, almost all the
reasons cited for frustration with the IRS really constitute
arguments against the tax laws approved by politicians over
the past 80 years--and for a fair, simple, flat, tax.
the federal government as a tax goliath
The IRS is not only the most feared of government agencies,
it also is one of the biggest and most expensive. The agency
has more employees than the Central Intelligence Agency,
Federal Bureau of Investigation, and Drug Enforcement Agency
combined, and its budget makes it a bigger consumer of tax
dollars than the Departments of Commerce, State, or the
Interior.
the numbers speak for themselves
New Evidence
12,000 = The number of additional IRS employees needed to
answer phone inquiries from confused taxpayers during tax
filing season. Because taxpayers will need to know only the
amount of their wages and size of their families under a flat
tax, additional personnel are not needed.
$1,000 = The hourly collection quota placed on IRS agents
auditing individual taxpayers in the San Francisco office.
Although collection quotas violate the law, the current
system is so complex that the IRS assumes mistakes will be
found on every return. Errors will be very few under a simple
and transparent flat tax.
62,000,000 = The number of lines of computer code required
by the IRS to manage the current tax code. A simple flat tax
will ease the IRS's ongoing computer problems dramatically.
1,420 = The number of appraisals of works of art that an
IRS panel performed in order to tax the assets of dead
people. Because double taxation under a flat tax does not
exist, the absurdity of having the IRS value art would
disappear with the death (estate) tax.
3,200 = The number of threats and assaults IRS agents
experience over a five-year period. A fair and simple tax
system will reduce taxpayers' frustrations dramatically.
What We Already Knew
136,000=The number of employees at the IRS and elsewhere in
the government who are responsible for administering the tax
laws. Because the number needed is dictated by the complexity
of the tax code, fewer personnel will be needed under a flat
tax, and the downsizing of the IRS will save taxpayers a
significant amount of money.
13,700,000,000=The amount of tax money spent by the IRS and
other government agencies to enforce and oversee the tax
code. Both taxpayers and the economy will benefit from the
spending reductions made possible by a flat tax.
17,000=The number of pages of IRS laws and regulations, not
including tax court decisions and IRS letter rulings. This
page count would be reduced significantly by a flat tax.
5,557,000=The number of words in the income tax laws and
regulations. With a flat tax, there will be no need for a tax
code that is nearly seven times longer than the Bible.
the irs paper machine
With so many employees, so much money, and such a
cumbersome tax code, it should come as no surprise that the
IRS is one of the country's biggest paper-pushers.
New Evidence
820=The number of pages added to the tax code by the 1997
budget act. A flat tax will slash it to a fraction of its
current size.
250=The number of pages needed to explain just one
paragraph in the Internal Revenue Code. A simple flat tax
will avoid needless IRS regulation.
271=The number of new regulations issued by the IRS in
1997. By putting an end to constant social engineering, a
flat tax will halt the IRS's constant rewriting of the tax
rules.
261=The number of pages of regulations needed to clarify
the tax code's ``arms-length standard'' for international
intercompany transactions.
569=The number of tax forms available on the IRS Web site.
Only two postcard-size forms will be necessary under a flat
tax: One for wages, salaries, and pensions, the other for
business income.
What We Already Knew
31=The number of pages of fine print in the instructions
for filing out the ``easy'' 1996 1040EA individual tax form.
By contrast, individuals will need just one page of
instructions to fill out a flat tax postcard.
8,000,000,000=The number of pages in the forms and
instructions the IRS sends out every year. Under a flat tax,
the postcard-sized forms are virtually self-explanatory.
36=The number of times the paperwork the IRS receives would
circle the earth each year. Complexity and paperwork will all
but vanish under a simple flat tax that treats all citizens
equally.
293,760=The number of trees it takes each year to supply
the 8 billion pages of paper used to file income taxes in the
United States. A flat tax using two simple postcards
obviously will be more friendly to the environment.
1,000,000,000=The number of 1099 forms sent out each year
to help the IRS track taxpayers' interest and dividend
income. Under a flat tax, business and capital income taxes
will be collected at the source, thereby eliminating this
paperwork conundrum.
the irs briar patch
Much to the chagrin of taxpayers, the IRS does not focus
solely on generating paperwork. Tasked with enforcing the
cumbersome tax code, the agency has numerous unwelcome
contacts with taxpayers every year.
New Evidence
33,984,689=The number of civil penalties assessed by the
IRS in 1996. Because a flat tax will be so fair and simple,
the IRS will have little reason to go after taxpayers.
10,000=The number of properties seized by the IRS in 1996.
Part of this problems is caused by the government's trying to
take too much money from people, and part is caused by
complexity. A flat tax will reduce the government's take and
eliminate complexity.
750,000=The number of liens issued by the IRS against
taxpayers in 1996. A simple, low flat tax will result in
fewer fights between the government and taxpayers.
2,100,000=The number of IRS audits conducted in 1996.
Without all the complex provisions in the code under a flat
tax, the IRS will have few returns to audit.
85=The percentage of taxpayers selected by the IRS for
random audits who had incomes
[[Page S4497]]
less than $25,000. A complicated tax code benefits the
wealthy, who can fight back. A flat tax will be good news for
those with more modest incomes.
47=The percentage of taxpayers living in just 11 southern
states subject to random audits. Because audits will decline
dramatically under a flat tax, so will discriminatory audit
patterns like this one.
What We Already Knew
10,000,000=The number of corrections notices the IRS sends
out each year. With a simple and fair tax system like a flat
tax, mistakes will become rare.
190,000=The number of disputes between the IRS and
taxpayers in 1990 that required legal action. In a flat tax
environment, there will be few potential areas of
disagreement, and legal action will become scarce.
3,253,000=The number of times the IRS seized bank accounts
or paychecks in 1992.
33,000,000=The number of penalty notices the IRS sent out
in 1994. Because a flat tax will eliminate complex parts of
the tax code, the number of disagreements between taxpayers
and the agency will plummet.
Do as They Say, Not as They Do
The IRS is quite strict with taxpayers who make mistakes,
but the following examples illustrate that it would have a
hard time living up to the standards imposed on taxpayers.
New Evidence
15=The number of years the IRS believes it will need to
modernize its computer system. A simple, flat tax will not
require complex computer systems.
1,000,000=The number of Americans who received tax forms
with erroneous mailing labels in 1998.
20=The percentage error rate at the IRS for processing
paper returns. Even children would be able to process
postcard returns under a flat tax.
6,400=The number of computer tapes and cartridges lost by
the IRS. Once a flat tax is implemented, these tapes and
cartridges could remain lost.
22=The percentage of times reporters for Money magazine
received inaccurate or incomplete information in 1997 when
calling the IRS's toll-free hot line. To file a return under
a flat tax, Americans will need to know only the size of
their families and the amount of their wages, salaries, and
pensions; they will not need to call the IRS.
40=The percentage of times Money magazine reporters
received wrong answers in 1997 in face-to-face visits at IRS
customer service offices. A flat tax will be so simple that
such mistakes will become almost non-existent.
$800,000,000=The estimated cost to update the IRS's
computers for the year 2000. Scrapping the tax code for a
flat tax will allow the government to institute a simpler
computer system.
500,000=The number of address changes made to correct the
master file by IRS employees each year.
78=The percentage of IRS audit assessments on corporations
that eventually are disqualified. A flat tax will replace the
onerous corporate tax with a simple, postcard-based system.
What We Already Knew
8,500,000=The number of times the IRS gave the wrong answer
to taxpayers seeking help to comply with the tax code in 1993
(taxpayers still are held responsible for errors that result
from bad advice from the IRS). A flat tax will be so simple
that taxpayers rarely--if ever--will need to call the IRS.
47=The percentage of calls to the IRS that resulted in
inaccurate information, according to a 1987 General
Accounting Office study. A flat tax will free IRS personnel
from the impossible task of deciphering the convoluted tax
code.
5,000,000=The number of correction notices the IRS sends
out each year that turn out to be wrong. An error rate of 50
percent will be impossible under a flat tax.
40=The percentage of revenue that is returned when
taxpayers challenge penalties. Under a flat tax, penalties
will become rare, so fewer penalties will be assessed
incorrectly.
$500,000,000=The amount of money that taxpayers were
overcharged for penalties in 1993. After a flat tax goes into
effect, such injustice will all but disappear.
3,000,000=The number of women improperly fined each year
because they have divorced or remarried. Taxing income at
the source under a flat tax will eliminate such
travesties.
10,000,000=The number of taxpayers who will receive lower
Social Security benefits because the IRS failed to inform the
Social Security Administration about tax payments. A simple
flat tax is likely to free enough IRS time and resources to
fix this problem.
$200,000,000,000=The amount of misstated taxpayer payments
and refunds on the books of the IRS. The IRS is no more able
to administer tax laws that defy logic than is the average
taxpayer. A flat tax will rectify this problem.
64=The percentage of its own budget for which the IRS could
not account in 1993, according to an audit by the U.S.
General Accounting Office.
$8,000,000,000=The amount the IRS spent to upgrade its
computer system unsuccessfully. Under a flat tax, this money
will be saved because the IRS no longer will need to track an
impossibly complex and unfair tax system.
$23,000,000,000=The total proposed price for the IRS's
computerization and modernization plans by 2008.
being compliant and miserable on april 15
Sending huge amounts of tax money to Washington, DC, is
never pleasant. Having to incur huge compliance costs for the
privilege of paying taxes, however, really rubs salt in the
tax wound.
New Evidence
6,400,000=The number of taxpayers who visited IRS customer
service centers seeking answers to their tax questions in
1996. With a flat tax, few taxpayers will need help.
99,000,000=The number of taxpayers trying to comprehend the
tax system who called IRS hotlines in 1996. So long as a
taxpayer knows his income and the size of his family under a
flat tax, he will have nothing to worry about.
30 years=The number of years a dispute can last between the
IRS and a corporation. Even one-year disputes will be rare
under a flat tax.
8,000,000=The increase in the number of taxpayers who will
be subject to the alternative minimum tax by 2007. This
absurd provision forces taxpayers to calculate their income
two ways and then pay the government the higher of the two
amounts. It will disappear under a flat tax.
$134,347,500,000=The Clinton Administration's estimate of
private-sector compliance costs. If the defenders of the
status quo admit compliance costs are this high, the actual
costs may well be even higher.
653=The number of minutes the IRS estimates it takes to
fill out a 1040 form. A flax tax postcard can be filled out
in five minutes.
72=The number of inches of height of the stack of tax forms
in the Chrysler Corporation's tax return. A postcard return
is only a fraction of one inch in height.
6,000,000=The number of unanswered phone calls made to the
IRS in January and February 1998. Considering that answered
calls frequently result in mistakes, taxpayers who fail to
get through probably should feel lucky.
2,400,000=The number of phone calls to the IRS that
resulted in busy signals in January and February 1998. A busy
signal is better than a wrong answer because the IRS holds
taxpayers liable for mistakes even if they are following IRS
advice.
56=The percentage of calls to the IRS in 1997 that went
unanswered. Again, no answer is better than a wrong answer.
What We Already Knew
$157,000,000,000=The amount spent by the private sector to
comply with income tax laws. Under a flat tax, these costs
will drop by more than 90 percent.
$7,240=The average compliance cost incurred by all but the
biggest 10 percent of corporations for every $1,000 of taxes
paid in 1992. The radical simplification brought about by a
flat tax will be a boon for small businesses that cannot
maintain legal and accounting staffs to comply with the tax
code.
50=The percentage of taxpayers who feel compelled to obtain
assistance in filling out their taxes each year.
5,400,000,000=The number of hours it takes Americans to
comply with federal tax forms. With only two postcard-sized
forms, compliance under a flat tax will require minutes, not
hours.
2,943,000=The number of full-time equivalent jobs spent on
compliance. In the flat tax world, the cost of tax compliance
will fall by more than 90 percent.
$3,055,680,000=The market value of the tax preparation firm
H&R Block, Inc., which opposes a flat tax. The
company's opposition is understandable because a flat tax
will allow anyone to fill out a tax return without paying
an expert.
even experts can't figure out the forms
Jumping through all the tax hoops might not be so painful
if taxpayers at least could be confident that the effort led
to accuracy. The ultimate insult added to their injury,
however, is that even ``expert'' advice is no guarantee of
receiving correct answers to tax code questions.
New Evidence
$24,000,000,000=The difference between what corporations
said they owed and what the IRS said they owed in 1992--a gap
the government admits is due to ambiguity and complexity in
the code. A flat tax will eliminate the confusion embedded in
the current system.
46=The number of wrong answers Money magazine received in
1998 when it asked 46 different tax experts to estimate a
hypothetical family's 1997 tax liability. Professional
assistance will not be necessary with a simple, flat tax.
$34,672=The difference in liability between the highest and
lowest incorrect answers among the 46 professionals who
failed to calculate the tax liability of Money magazine's
hypothetical family. Such responses will be all but
impossible under a flat tax.
$610=The amount the hypothetical family would have overpaid
on its 1997 taxes if it had used the answer that came closest
to the actual tax liability (assuming, of course that Money
magazine's expert had filled out the tax return correctly).
Any mistakes, especially large ones, will be unlikely under a
flat tax.
45=The number of professional tax preparers who came up
with different answers when asked by Money magazine in 1997
to fill out a hypothetical family's 1996 tax return.
[[Page S4498]]
45=The number of professional tax preparers who came up
with wrong answers when asked by Money magazine in 1997 to
fill out a hypothetical family's 1996 tax return.
76=The percentage of professional tax preparers who missed
the right answer by more than $1,000. This kind of result
will be impossible under a flat tax.
$58,116=The difference between the lowest estimate of the
family's tax bill and the highest estimate in Money's survey
of tax professionals. Because the complexities in the tax
code will disappear under a flat tax, mistakes like this
will, too.
$81=The average hourly fee charged by the professional
preparers who came up with the 45 wrong answers. Taxpayers
will pay nothing to calculate their own taxes on postcards
under a flat tax.
What We Already Knew
50=The number of different answers that 50 tax experts gave
Money magazine in 1988 when asked to estimate a hypothetical
family's tax liability. Under a flat tax, taxpayers will not
need to consult tax preparers, much less run the risk of
paying penalties for wrong answers.
50=The number of different answers Money magazine received
in 1989 when it asked 50 different tax experts to estimate a
hypothetical family tax liability.
48=The number of wrong answers Money magazine received in
1990 when it asked 50 different tax experts to estimate a
hypothetical family's tax liability.
49=The number of different answers Money magazine received
in 1991 when it asked 50 different tax experts to estimate a
hypothetical family's tax liability.
50=The number of wrong answers Money magazine received in
1992 when it asked 50 different tax experts to estimate a
hypothetical family's tax liability.
41=The number of wrong answers Money magazine received in
1993 when it asked 50 different tax experts to estimate a
hypothetical family's tax liability (9 of the original
volunteers did not bother even to respond).
the never-ending shell game
The needless complexity of the current tax code helps
explain the reasons that both the IRS and private tax experts
frequently make mistakes. Another reason that taxpayers have
a problem complying with the law is that politicians have
made the tax code a moving target.
New Evidence
824=The number of changes in the tax code accompanying the
1997 tax cut. A flat tax will put an end to constant social
engineering.
285=The number of new sections in the tax code created by
the 1997 budget act. A flat tax will eliminate most of the
tax code.
3,132=The number of pages needed by the Research Institute
of America to explain the changes in the tax law in 1997.
Flat tax postcards needed just one page of instructions.
11,410=The number of tax code subsection changes between
1981 and 1997. A flat tax will eliminate most of those
subsections.
160=The percentage increase in the stock value of tax
preparation firms in the three-month period during and after
enactment of the 1997 budget.
54=The number of lines on the new capital gains form, up
from 23 before the 1997 budget deal. Because double taxation
will end under a flat tax, the capital gains form will
disappear.
What We Already Knew
878 = The number of times major sections of the tax code
were amended between 1955 and 1994. A flat tax will eliminate
today's confusingly complex tax code and replace it with a
simple system that does away with constant tinkering and
social engineering.
100 = The increase in the number of forms between 1984 and
1994. A flat tax will eliminate all 100 forms.
9,455 = The number of tax code subsections changed between
1981 and 1994. Under a flat tax, politicians will not be able
to use the tax code to micromanage economic or social
behavior.
578 = The percentage increase in the number of tax code
sections between 1954 and 1994 that deal with major segments
of tax law. Endless changes in tax law will grind to a halt
under a flat tax.
5,400 = The cumulative number of changes in tax law since
the 1986 Tax Reform Act. Most, if not all, of these changes
add compliance costs to the economy--costs that a flat tax
will reduce substantially or eliminate.
$20,500,000,000 = The amount of lost income the economy
suffered in 1993 as a result of the economic uncertainty in
the business community caused by the constant manipulation of
the tax code. To help prevent politicians from undermining
business planning by constantly changing the tax laws, a flat
tax law should include a supermajority provision blocking
such tax rate increases.
The Augean Stables
The problem is not the IRS, but the politicians who created
the incomprehensible tax code and those who refuse to reform
the system. Politicians also are practically the only people
in the country who benefit from a complex and constantly
changing tax code.
New Evidence
$400,000,000 = The amount of the special tax break for one
corporation inserted in the tax code in 1986 at the urging of
Dan Rostenkowski (D-IL), then chairman of the House Ways and
Means Committee. A flat tax will wipe out provisions for
special-interest groups.
What We Already Knew
$413,072 = The average amount of political action committee
contributions received by members of the House of
Representatives tax-writing committee during the 1994
election cycle. A flat tax will reduce special-interest
corruption and eliminate the ability of politicians to use
the tax code to reward friends and punish enemies.
12,609=The number of special-interest organizations
officially represented by congressional lobbyists. A flat tax
will wipe out all special preferences, loopholes, deductions,
credits, and tax shelters.
$3,200,000,000=The total amount earned by Washington, D.C.,
lobbyists in 1993. By taking away the playing field for
special-interest tinkering, a flat tax will clean up
political pollution.
2=The number of IRS offices in Washington, D.C., made
available to Members of Congress and their staffs. With
someone else doing their taxes--free--it is little wonder
that Members of Congress do not understand the public support
for a flat tax.
Why Johnny Refuses to Pay
There comes a point at which taxpayers simply give up. Some
are driven into the underground economy by the sheer
complexity of the system. Others conclude that an unfair tax
code has no moral legitimacy and simply refuse to comply.
What We Already Knew
$127,000,000,000=The amount of taxes not paid as a result
of tax evasion. A fair, simple, flat tax will reduce tax
evasion.
10,000,000=The number of people who unlawfully do not file
tax returns. By reducing both the tax burden and compliance
costs, a flat tax will bring people out of the underground
economy.
3,500,000=The number of people who do not file who would be
eligible for refunds. Perhaps more than any other number, the
millions of people who fail to file in order to claim their
tax refunds reveals just how intimidating the tax code has
become.
4=The number of times a single dollar of income can be
taxed under the current system, counting the capital gains
tax, corporate income tax, personal income tax, and death
(estate) tax. By eliminating double taxation, a flat tax will
make sure the government treats all income equally and will
end one of the biggest causes of tax evasion and complexity
in the current tax code.
100,000=The number of Internet sites found by one search
engine when queried for the phrase ``tax shelter.'' Because
a flat tax will eliminate all discrimination in the tax code
and allow people to keep a greater share of their income, tax
shelters will almost vanish after reform.
Enough is Enough
The damage caused by the current tax code, both to the
economy and to the body politic, is reaching crisis
proportions. Insulated from the effects of their own
handiwork, however, politicians are very likely to be the
last ones to understand just how indefensible the system has
become. Perhaps these real examples of IRS abuse will help
them to understand the problem:
New Evidence
$3,500=The amount one woman was forced to pay twice, even
though the IRS eventually admitted the debt had been owed--
and paid--by her former husband.
$210,260=The amount the IRS tried to garnish from the wages
of a woman for the back taxes her husband had owed before
their marriage.
$26=The amount the IRS seized from a 6-year-old's bank
account because her parents owed money.
$70,000=The amount demanded by an IRS agent who was
threatening to send a couple to jail in a case that the tax
court subsequently dismissed because the IRS's claim ``was
not reasonable in fact or in law.''
$50,000=The amount the IRS was forced to pay a taxpayer
after engaging in a vendetta against him, including putting
the innocent man in jail for four months.
$6,484,339=The amount demanded by the IRS from the family
of a victim of Pan Am flight 103, based on the assumption of
a future settlement.
$900,000=The amount a small businessman was fined after
being entrapped by his accountant, a paid informer for the
IRS.
$5,300,000=The amount the IRS paid its informants in 1993.
25=The percentage of households with incomes over $50,000
that would pay an inaccurate assessment from the IRS rather
than fight.
What We Already Knew
$46,806=The amount of tax penalty imposed on one taxpayer
in 1993 for an alleged underpayment of 10 cents.
$1,300=The number of IRS employees investigated and/or
disciplined for improperly viewing the tax returns of
friends, neighbors, and others.
$155=The amount of penalty imposed on a tax-payer in 1995
for an alleged underpayment of 1 cent.
50=The percentage of top IRS managers who admitted they
would use their position to intimidate personal enemies.
$14,000=The amount allegedly owed by a day-care center that
was raided by armed agents, who then refused to release the
children until parents pledged to give the government money.
80 = The number of IRS agents referred for criminal
investigation on charges of taking kickbacks for fraudulent
refund checks.
[[Page S4499]]
$3,000,000,000 = The dollar assets of Princeton/Newport, an
investment company that was forced into liquidation after 40
armed federal agents raided the company on suspicion of tax
evasion--only to have the IRS later conclude that Princeton/
Newport actually had overpaid its taxes.
$10,000 = The fine imposed on one taxpayer for using a 12-
pitch typewriter to fill out his tax forms instead of a 10-
pitch typewriter.
109 = The number of envelopes containing unprocessed
information found in the trash at the IRS's Philadelphia
Service Center.
Grand Total: More than 737 billion incredible-but-true
reasons to simplify the tax code with a flat tax.
what these numbers really mean
These horror stories and statistics are not necessarily
evidence that individual IRS agents are bad people, or that
tax administrators want to violate people's rights. Although
examples of unwarranted behavior are included in this
discussion, the key problem they illustrate is that current
tax law is so arbitrary and incomprehensible that even
government agents in charge of enforcing the law cannot make
sense of it.
The only way to address these problems is through
fundamental reform. A flat tax will reduce the power of the
IRS dramatically by eliminating the vast majority of possible
conflicts. In a system in which the only information
individuals are obligated to provide is their total income
and the size of their families, much of the uncertainty and
fear regarding paying taxes will disappear.
Most individuals never have to experience the greater
complexities of paying corporate income taxes; still, they
can appreciate the fact that a flat tax will generate
dramatic savings for business. Under a flat tax, the money
that businesses now spend to comply with the tax code will
become available instead for higher wages and increased
investment, thereby helping the United States to become more
competitive.
Although the key principle of a flat tax is equality, it
turns out that a system based on taxing all income just one
time at one low rate also promotes simplicity. To understand
the reasons that introducing a flat tax would lead to such a
dramatic reduction in both tax code complexity and compliance
costs, consider the following numbers:
0 = The number of taxpayers under a flat tax who will have
to calculate depreciation schedules.
0 = The number of taxpayers under a flat tax who will have
to keep track of itemized deductions.
0 = The number of taxpayers under a flat tax who will need
to reveal their assets to the government.
0 = The number of taxpayers under a flat tax who will lose
their farms or businesses because of the death (estate) tax.
0 = The number of taxpayers under a flat tax who will have
to pay a double tax on their capital gains.
0 = The number of taxpayers under a flat tax who will have
to compute a phase-out of their personal exemption because
their incomes are too high.
0 = The number of taxpayers under a flat tax who will be
subject to the alternative minimum tax--those forced to
calculate their tax bill two different ways and then to pay
the government the greater of the two amounts.
0=The number of taxpayers under a flat tax who will have to
pay taxes on overseas income that already was taxed by the
government of the country in which the income was earned.
0=The number of taxpayers under a flat tax who will have to
pay taxes on dividend income that already was taxed at the
business level.
0=The number of taxpayers under a flat tax who will be
taxed on interest income that already was taxed at the
financial institution level.
conclusion
Those who urge policymakers to ``fix'' the IRS should
realize that condemning the agency itself will not solve the
intractable problems of the current tax code. Furthermore,
enacting a ``taxpayer bill of rights'' will accomplish little
if provisions of the tax code that constitute the underlying
problem are left in place. At least two versions of a
``taxpayer bill of rights'' previously enacted into law have
had little effect.
Americans rapidly are approaching the level of anger toward
unfair, capricious, and oppressive taxation that gave rise to
the American Revolution in 1776. This anger is directed at an
immense and impersonal government agency that often operates
outside the standards it imposes on taxpayers. Americans
should be angry, but not at the IRS: They should direct their
anger toward the Members of Congress responsible for enacting
the laws that created today's tax code.
The only effective way to enhance compliance and slash
compliance costs while protecting the rights and freedoms of
individual taxpayers is to scrap the current system and
replace it with a fair, simple, flat tax.
CONSOLIDATED RETURN REGULATIONS
Mr. DeWine. Mr. President, I would like to take a moment to discuss
an important economic development matter for the people of Ohio.
Currently included in the Internal Revenue Service Restructuring and
Reform Act of 1998 is a technical correction that would attempt to
resolve an apparent conflict that exists between consolidated return
regulations and section 1059 of the Internal Revenue Code of 1986. It
is very important that this area of the tax code and regulations be
clarified so that it does not create an impediment to the expansion of
businesses in the State of Ohio and throughout the country.
While the technical correction that was included in the IRS reform
bill is a good start toward resolving this conflict of the consolidated
return regulations and section 1059, further clarification is needed. I
am hopeful that as the IRS reform bill proceeds to conference that the
conferees will take another look at the technical correction and work
toward correcting this conflict.
Mr. ROTH. I thank the Senator for bringing this to my attention and I
can assure the Senator that we will take a look at this in conference.
Mr. COATS. ``The power to tax involves the power to destroy.''
Mr. President, this famous quote by Chief Justice John Marshall, from
the landmark Supreme Court case McCullough versus Maryland, rings as
true today as it did in 1819. The Internal Revenue Service, through its
unchecked powers of taxation, has been destroying the lives of honest,
hard-working, Americans for many years. This systemic abuse has been
well documented in the recent oversight hearings on the IRS conducted
by the Senate Finance Committee. I rise today to support the IRS Reform
and Restructuring Legislation unanimously approved by the Finance
Committee. This bill will effectively end this agency's reckless
disregard of taxpayer rights.
We have all heard the horror stories of taxpayer mistreatment
inflicted by the IRS. From armed IRS agents raiding innocent taxpayers
homes to Americans being subjected to years of harassment and
unsubstantiated audits. A few years back one such incident of
ineptitude occurred in my own State of Indiana. One of my
constituents--who gave me permission to tell his story, but asked that
I not disclose his name for fear of retribution from the IRS--was
getting ready to buy Christmas dinner for himself and his family. This
gentleman was shocked to learn that he had no money in his bank
account. His entire savings account had been wiped clean by the IRS for
``Back Taxes and Penalties.'' Upon calling the IRS, he was told that
his tax form from 1987 was missing and he had not answered any of the
registered letters sent to him.
Of course, the IRS sent the registered letters to the address he had
lived at in 1987, not his current address--the address from which he
correctly filed his taxes (and got returns) for the five subsequent
years!!!
This outrageous tale of mismanagement does not end there. A few
months later--after some paper shuffling at the IRS--this gentleman was
told that based on the information that he provided the IRS actually
owned him a refund of $1500!!!! However, the statute of limitations on
refunds had run out and he would not be getting his check. My
constituent was not happy with this recent development, but considered
the matter over. Of course, ten days later a check for $1500 arrived on
his doorstep. Only at the IRS!!!!
The stories of abuse and mismanagement have come not only from
taxpayers, but from IRS employees as well. Past IRS employees describe
an agency rife with ineptitude and misconduct. They detail scenarios in
which agents were told to target lower-income individuals or those of
modest education for audits. One agent testified that ``Abuses by the
IRS are indicative of a pervasive disregard of law and regulations
designed to achieve production goals for either management or the
individual agent.'' Further, auditors have testified of favoritism
being extended to wealthy individuals and powerful corporations. It is
obvious that we are dealing with an agency that is out-of-control.
Throughout history, tax collectors that overtaxed or abused taxpayers
were treated with much disdain. In ancient Egypt, a corrupt tax
collector who exploited the poor had his nose cut-off. During the
French Revolution, tax collectors kept their noses, but lost their
heads to the guillotine. But in America, we have a different,
innovative method for treating overzealous tax collectors--we reward
them with promotions and bonuses!! One particular corrupt agent stole
20 cars and was
[[Page S4500]]
able to retire with full benefits!! Other agents and divisions were
evaluated solely on whether they had achieved certain quotas. The
message given from management to the agents was that the ends always
justify the means.
It is disgraceful that an agency of the greatest democracy in the
world could have attributes that would be better associated with a
paramilitary wing of a despotic regime. It is high time we passed this
legislation and urged the new commissioner of the IRS, Mr. Charles
Rossotti, to conduct a thorough house-cleaning.
The IRS exists to serve the American people--not the other way
around. There must be more accountability for the IRS and more
protection for the taxpayer. Efficiency and honesty should be twin
goals for the IRS. H.R. 2676--the Internal Revenue Service
Restructuring and Reform Act of 1998--is a first step towards achieving
this end.
Mr. President, I will end with another quote from a Supreme Court
Justice, Oliver Wendell Holmes, Jr. This quote has substantial meaning
in this debate because it adorns the wall of the IRS building here in
Washington.
``Taxes are what we pay for civilized society.''
If that is in fact the case, it is time we demand that the Internal
Revenue Service act in a civilized manner.
Mrs. FEINSTEIN. Mr. President, I rise in support of the legislation
to reform the Internal Revenue Service. The Finance Committee deserves
tremendous credit for leading the reform effort and conducting hearings
to illustrate the tremendous concerns. The legislation will help
restore public confidence in a very troubled agency.
Last summer, the National Commission on Restructuring the Internal
Revenue Service, under the leadership of Senator Bob Kerry and
Representative Portman, issued its report to reform the agency, The
Finance Committee conducted several days of hearings, receiving
compelling testimony, regarding a variety of concerns with the
activities of the IRS. It's clear that these problems transcend any
single administration, but reflect years of neglect, improper
incentives, inadequate training and mismanagement.
This legislation, along with the appointment of the agency's new
Commissioner, Charles Rossotti, will help provide a ``fresh start'' for
the troubled agency.
I support the legislation, which adopts important reform steps:
Crates an IRS Oversight Board: The bill creates a new entity, the IRS
Oversight Board, drawing on private sector individuals as well as the
Treasury Secretary, the IRS Commissioner and a representative of the
IRS employees. The Commission will have the authority to review and
approve major issues of policy, such as IRS strategic plans, IRS
operations and recommend candidates for important positions, like the
IRS Commissioner and the National Taxpayer Advocate.
Adopt important protection, including more disclosure to taxpayers
and enhanced protection for the ``innocent spouse'': The bill requires
the IRS to better inform taxpayers about their rights, potential
liabilities when filing joint returns, as well as the IRS process for
auditing, appeals, collections and the like. The bill would expand the
protections provide to ``innocent spouses'' who find themselves liable
for taxes, interest, or penalties because of a spouse's action taken
without their knowledge.
End Bureaucratic overlap: The legislation allows the IRS Commissioner
to move forward to eliminate the current national, regional and
district office structure of the IRS. The Commissioner has proposed a
plan to replace the antiquated 1950s structure, with a new management
model, operating to serve specific groups of taxpayers. This can ensure
greater professionalism in the agency and more uniformity across the
nation.
Strengthens and streamlines the Role of the Inspector General: The
bill creates a new office of the Treasury Inspector General for Tax
Administration. Regional and district Inspectors General would report
to the IRS Inspector General, rather than district offices,
strengthening their independence and enhancing their oversight role.
Strengthens the Office of the National Taxpayer Advocate: The bill
strengthens the office of the National Taxpayer Advocate, to represent
the interests of taxpayers in the IRS policy process, proposing
legislation, changes in IRS practice and assisting taxpayers in
resolving problems. The National Taxpayer Advocate is also supplemented
by local taxpayer advocates around the country. These local advocates
will report to the national advocate, rather than local officials,
which might undermine the independence and public credibility of the
local taxpayer advocate.
Prepares for the future: The bill encourages more taxpayers to file
tax returns or tax information electronically, expediting the process
for taxpayers and employers filing payroll tax information.
The bill adopts important reforms. As a previous supporter of efforts
to strengthen taxpayers' rights, I am pleased to extend my support.
I acknowledge the IRS, which includes thousands of diligent,
conscientious employees, has an extraordinarily difficult challenge.
Each year the Service receives: nearly 210 million tax returns in 1997;
collects and accounts for well in excess of one trillion dollars;
generates nearly 90 million refunds; and receives millions of calls,
letters and visits from taxpayers in need of help.
The vast majority of these taxpayers are dealt with fairly and
effectively, but no excuse can be made for some of the experiences and
horror stories described during Finance Committee hearings.
As Senators know, last September, the Finance Committee began to hold
a series of hearings identifying heart-rending stories from taxpayers,
identifying specific tax problems. One of the witnesses, Kristina Lund
of California, described the tax problems linked to IRS enforcement
action following her divorce. Ms. Lund was stuck with the tax bill,
frustrated by an unresponsive IRS, as a tax debt ballooned from $7,000
in 1983, to $16,000, as a result of delayed notification and confusion
between Ms. Lund and her former husband. The burden of correcting the
problems were enormous for Ms. Lund, a newly hired bank employee
earning approximately $15,000, and her 14 year old daughter. This bill
incorporates some reform for the ``innocent spouse,'' preventing more
individuals from falling into Ms. Lund's circumstances. The bill would
expand the protections provided ``innocent spouses'' who find
themselves liable for taxes, interest, or penalties because of actions
by their spouse of which they did not know and had no reason to know.
The bill will ensure that more women are treated fairly.
I am pleased the Senate was able to add, with my support, Senator
Graham's amendment to clarify that coercion or duress cannot void an
innocent spouse's claim for protection. I share Senator Graham's
concern with the bill, which provided that an innocent spouse, who had
knowledge of the under-reported income, was denied ``innocent spouse''
protection. Without the Graham amendment, a spouse could be coerced or
pressured to go along with a tax scam, and suffer the tax consequences
for years. I am pleased we could add the Graham amendment, providing an
extra layer of protection for innocent spouses.
We have heard a great deal of frustration with the IRS, but Congress
deserves its fair share of the blame for taxpayer frustration with the
complex and confusing tax code. Over the years, the IRS Tax Code has
become more complicated, not less so. Despite the best of intentions,
Congress has helped to make the taxpayers and tax collectors
responsibilities more difficult.
The Finance Committee received the testimony of the Certified Public
Accountants, noting that from 1986 to 1997, there have been eight years
with significant changes to the tax laws, including the 1997 Taxpayer
Relief Act. The witnesses noted the Taxpayer Relief Act of 1997, which
I supported, alone contains: 36 retroactive changes; 114 changes that
became effective on August 5, 1997; 69 changes that became effective
January 1, 1998; and 5 changes that became effective on another date.
No wonder taxpayers and tax professionals are so confused and
frustrated!
Congress needs to be certain we are providing the IRS with the
resources needed to get the job done. Tax professionals noted the
Treasury Department
[[Page S4501]]
also has a significant backlog in producing IRS regulations to provide
guidance for taxpayers. Tax complexity increases the IRS' challenge to
administer the tax system fairly, and compounds the taxpayers' problems
in meeting their tax obligations.
Congress also needs to ensure we are providing adequate resources to
the IRS, to permit adequate training and ensure the skills of the IRS
employees are current and up to date. During the hearings, the Finance
Committee listened to the testimony of Darren Larsen, a Southern
California attorney, in which she described conduct that was simply
contrary to federal law. Ms. Larsen described the use of some ``on-the-
job instructors'' who lacked an understanding of some of the legal
fundamentals and passed their errors on to newer revenue officers. I am
sure the vast majority of IRS enforcement officers work diligently to
implement the laws, but even occasional errors are unacceptable.
I am pleased to support the Committee's legislation. However, one
area of reform the Committee declined to implement deals with the
``marriage penalty.'' I will continue to follow the committee's work on
this issue closely, which is an important issue for women.
Marriage penalties arise because a couple filing a ``joint return''
face tax brackets and standard deductions that are less than twice the
level of those for single filers. As a result, the marriage of two
individuals who pay taxes in the same tax bracket, receive a smaller
standard deduction and may be forced into a higher bracket than they
would if they filed their taxes as individuals. While more couples
receive marriage ``bonuses'' than marriage ``penalties,'' the issue
deserves closer review.
Senator Hutchison has introduced S. 1314, legislation to address this
issue, proposing to allow married couples to file ``combined'' returns,
in which family income is allocated to both individuals, taxing each
spouse at the single taxpayer rate. The legislation would allow couples
to file as either joint, single, or head-of-household. This would
eliminate those taxpayers who receive a marriage penalty, while leaving
marriage bonuses in place.
However, by getting rid of the ``marriage penalty,'' Congress could
find itself unfairly increasing taxes for single tax filers. Further,
the proposal could cause substantial revenue losses, perhaps as much as
$40 billion per year, and would complicate the tax system. Taxpayers
would be required to perform tax calculations, both, as an individual
and as a couple, choosing whichever tax was lower. In this legislation
to simplify the tax code, Congress should be very concerned with a
proposal which could require additional steps and additional tax
calculations for taxpayers.
I am interested in the approach taken by S. 1989, legislation
introduced by our colleague, Senator Ford. This approach would widen
the tax brackets and raise the standard deduction for joint filers to a
level twice that of the single tax filer. This approach would also
eliminate the marriage penalty, while providing added tax relief for
families. I am anxious to follow the Committee's progress.
The Senate Finance Committee has taken very important steps to reform
the IRS and I am pleased to support the legislation. I have previously
supported efforts to provide more protection for taxpayers, including
the earlier ``Taxpayer Bill of Rights'' and this bill makes similar
progress. The administration also deserves support and IRS Commissioner
Rossotti also deserve our support. Taxpayers want and deserve better
information and a more fair process. I am pleased to support these
efforts to set a new course for the IRS.
Mr. SMITH of New Hampshire. Mr. President, I rise in support of H.R.
2676, the IRS reform bill that is now under consideration on the floor.
This bill, which is the product of extensive oversight hearings, is
much needed and long overdue. I applaud Chairman Roth and the other
Finance Committee members for reviewing the legislation sent to us by
the House, for their efforts to strengthen the bill, and for their
persistence in moving this bill to the Senate floor.
As taxpayers testified at the Finance Committee hearings, the abuses
fostered by the IRS are intolerable. Innocent taxpayers are suffering
under an out-of-control agency.
We have witnessed this problem in my own state of New Hampshire.
Shirley Barron of Derry, New Hampshire has suffered greatly since her
husband's death in 1996, and she claims that the IRS's collection
tactics are the cause. The Barrons' problems with the IRS began in the
mid-1980s when they lost an $80,000 investment. The couple's accountant
advised them that they could get a tax deduction, but the IRS informed
the Barrons two years later that they had to pay. Mrs. Barron said that
she and her husband were unable to pay the IRS immediately, so interest
and penalties mounted. According to Mrs. Barron, her husband took his
own life just after learning that creditors were to foreclose on the
couple's Derry home because the IRS had placed a lien on it. Even after
Mr. Barron died, the agency continued their collection efforts against
Mrs. Barron: They foreclosed on the family's Cape Cod vacation home,
they took her tax refunds, and they placed claims against the life
insurance of her late husband. The IRS recently agreed to cancel Mrs.
Barron's entire tax debt, thus ending her long ordeal. While this is a
welcome development, it won't bring her husband back. No one should
have to go through an ordeal like that again.
Last week, the Senate Finance Committee heard similarly disturbing
accounts of IRS intimidation from agency employees. Auditors and agents
voiced their frustration with field office managers and high level
management. Some reported that almost no one at the agency listens to
them when they report discrimination or wrongdoing. For example:
Ginger Garvis, a District auditor in New York City, said that she
uncovered a multimillion-dollar tax evasion and money-laundering case
which her supervisors refused to pursue. Ms. Garvis testified that the
IRS often forgives tax debts by large firms with the resources to fight
back in court. Instead, it focuses on smaller companies that cannot
fight back.
Michael Ayala, a thirty-year IRS employee, testified that he has
observed ``a broad range of misconduct by high level managers.'' He
said that ``such abuses are generally known to a large percentage of
the IRS workforce but are perpetuated by management's intimidation and
punishment of anyone within the agency who objects to or reports such
misconduct.''
A former IRS criminal investigation agent, Patricia Gernt, reported
that her supervisors did little or nothing to help her stop another IRS
agent who tried to frame former U.S. Senator Howard Baker.
Perhaps for these reasons, another District auditor in New York City
testified: ``before there is a taxpayer victim there is first an
employee victim.''
Such an atmosphere of fear and intimidation is deplorable and must be
stopped. The American taxpayers deserve better.
H.R. 2676 will help us change the culture at the IRS to which so many
are objecting. This bill establishes many new taxpayer rights; it calls
for the IRS to revise its mission statement to focus on taxpayer
service; and it provides for increased oversight of agency activities
by a citizens' advisory board. At the same time, the bill gives the new
IRS Commissioner, Charles Rossotti, broad flexibility to better manage
the agency.
I urge my colleagues to support this legislation. We have an historic
opportunity to restore accountability to the IRS and change how the
agency functions. Let us seize this opportunity by promptly passing
H.R. 2676.
Thank you, Mr. President.
Mr. CRAIG. Mr. President, I rise in support of the IRS Reform Act. I
would like to begin by congratulating Chairman Roth for holding the
recent IRS hearings. The Finance Committee's historic hearing have made
it possible for us to consider this bill, and they have made the Senate
version of the bill improved and stronger than the House-passed version
of HR 2676.
However, I'm disappointed by the recent remarks by the Minority
Leader, who said the Chairman's hearings were ``sensationalistic.''
These hearing were not ``sensationalistic,'' but were instead about
getting at the truth. They exposed sensationally bad news about how a
powerful arm of government has treated individual taxpayers. Indeed,
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given the stories that emerged, even holding these hearings was a brave
act.
Without these hearings there would have been no appointment of
William Webster to review the IRS Criminal Investigation Division; no
announcement of a special internal task force; the public would not
have known that even a Senate Majority Leader is not protected from
bizarre, apparently criminal, targeting; the bill might not have been
as strong as it is; and, after a brief flurry of attention, the IRS
would assume it was safe to return to business as usual.
There are many causes to the problems that these hearings exposed.
The culture which pervades the IRS is arrogant, powerful, and a law
unto itself--it is unaccountable to anyone else. The tax law, too, is
to blame. After forty years of liberal Congresses encouraging and
empowering the IRS, it seems as if their only goal is to get the money
and that the ends justify the means. We also must not forget that
individual IRS agents also overstep the law. We still want to believe
most IRS employees are conscientious civil servants. However, the
hearings show the IRS has not disciplined its own. In fact, the IRS
culture has rewarded rogue activity, punished whistle blowers, and
carried out retribution against innocent taxpayers. The problem of
``rogue agents'' is really more a problem of a rogue agency. Today, in
law and in practice, drug dealers, child molester, and organized crime
have more legal rights than the average taxpayer whom the IRS suspects
may owe a few dollars in back taxes.
The IRS abuses are part of a bigger problem. There is a culture of
big government, growing like a cancer on the body politic for two
generations, that says the money you earn isn't yours, it's the
government's; that says freedom isn't the individual's unalienable
right, it's the government's to give or take away; that promises
compassion and support, but demands control and dependence. It may all
be relative, but it's becoming more like Big Brother and less like
Uncle Sam.
Now is the time to turn that tide. A Republican Congress has started
already. We enacted the welfare reform law of 1996, which expects
individual responsibility and encourages individual and community
initiative. We also passed the Balanced Budget and Taxpayer Relief Acts
of 1997 which said we will put limits on the appetite of government.
Now we must take the next step with IRS reform. More Americans come
into contact with their government through the IRS than through any
other means. This bill is the first significant step to reminding
everyone that the taxpayer is the boss--not the IRS, not the
government.
But this bill is only the first step. We need continued and increased
oversight of the IRS through more hearings. From calls and letters from
our own constituents, Senators know the first few hearings only
scratched the surface of the tip of the iceberg. Sunlight is the best
protection the people have. We also need to look at more reforms,
especially protecting due process and privacy rights and increasing
accountability for wrongful actions. Continued, aggressive committee
activity are also a must.
The ultimate IRS reform will be abolishing the current tax code and
starting over with a new, fairer system. Later this year we will take
the next step--voting to sunset the tax code. This would underline our
commitment to ending the tax code and the IRS as we know them;
guarantee the American taxpayer we will build a new, fairer system,
from the ground up; and force Congress and the President to come to
terms on creating a new system.
Of course, President Clinton and others will fight to preserve the
status quo. For a while, they tried to block IRS reform, but saw the
American people wouldn't stand for it. Now President Clinton wants to
dress up as First Drum major and get out in front of the parade
Congress started. Mr. President, we welcome your help, however belated,
if it's sincere and substantial. But, Mr. President, at least have the
honesty to say, ``me, too'' instead of, ``my idea.'' President Clinton
and his allies still say sunsetting the tax code would create
uncertainty, but a sunset creates no more uncertainty than the status
quo, which has perpetuated uncertainty for decades with a major new tax
bill about every two years. Opponents don't want major tax reform--they
like the current code and the way it shakes down the taxpayer. They
will use divide and delay tactics, pretending to support reform but
making sure no one proposal breaks out of the pack. But the American
people know better, tax reform will be debated thoroughly across the
country between now and 2000.
Now and in the future, the American people are demanding change. They
want an IRS that is fair, courteous, and respects their rights of due
process and privacy. Congress is committed to creating a new culture at
the IRS, serving the taxpayer, not treating them like a criminal class;
treating taxpayers with respect and dignity; pursuing criminals, not
quotas; and upholding the Constitutional principle of ``presumed
innocent until proven guilty.''
For the future, the American people demand fundamental change--a new
tax code that is simple, fair, efficient, and allows working Americans
and their families to keep more of the fruits of their labors.
Republicans in Congress are committed to creating that completely new
system.
Mr. HAGEL. Mr. President, the time has arrived to put some
accountability and common sense into one of the most out of control
federal agencies in the Federal Government, the Internal Revenue
Service.
Over the past nine months we have heard volumes of testimony
regarding the many problems associated with the Internal Revenue
Service--lack of leadership, an unresponsive agency and abusive
employees. But the most important issue that we must not forget is
accountability. No one is being held accountable at the IRS. This must
change.
If federal agencies and their employees are not held accountable for
their actions, we have lost control. The American people send billions
and billions of dollars of their hard-earned money to Washington, D.C.
each year in taxes, to fund a government that most Americans see as too
big, too intrusive, and unaccountable.
Congress is taking a good first step at bringing accountability to
the IRS through the Internal Revenue Service Restructuring and Reform
Act. This legislation would create an IRS oversight board to oversee
the IRS in every aspect of its administration of the tax laws. The Act
also replaces the many levels of bureaucracy at the IRS--district
offices, regional offices and national office--with offices that are
trained to handle groups with specific concerns--individual taxpayers,
small business, large business and tax-exempt entities.
The Act also creates and enhances many taxpayer rights and
protections. The burden of proof in court proceedings would be reversed
from the taxpayer to the IRS when the taxpayer produces credible
evidence that is relevant. The Act extends the attorney-client
privilege to accountants and other tax practitioners. Finally, the Act
overhauls the ``innocent-spouse'' relief provision. A spouse would be
allowed to limit their tax liability for a joint-return to the spouse's
separate liability attributable to the spouse's income.
These are just a few examples of where and how the IRS Restructuring
and Reform Act will bring the IRS back to reality. If there is
accountability there is control.
Mr. KERRY. Mr. President, I join many of my colleagues in support of
the IRS Restructuring and Reform Act of 1998. This legislation is a
victory for taxpayers, a victory for small businesses, and a victory
for the American family. I applaud the work of my colleagues, Senators
Roth, Bob Kerrey, Grassley, and others, who have demonstrated such
determination, vision and leadership on this issue.
I believe that the average American taxpayer is fundamentally
honorable, willing to play by the rules and carry his or her fair share
of public obligations. Most public servants at the Internal Revenue
Service (IRS) perform their jobs responsibly. But, sadly, there are
exceptions on both sides of this equation, and those exceptions lead to
contentious circumstances which must receive careful IRS management
attention. Regrettably, that has too often not been forthcoming. Along
with most
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Americans, I watched the recent Senate Finance Committee oversight
hearings on the Internal Revenue Service. A number of witnesses told of
economic and emotional hardship at the hands of abusive IRS agents.
Unfortunately, while the facts of a number of these cases were
shocking, the fact that there are such cases was not surprising. During
my 13 years in the Senate, I have assisted many taxpayers in
Massachusetts who have protested similar treatment by IRS employees.
Most recently here the widow of a well-respected lawyer filed suit,
charging that her husband was literally hounded to death by IRS
collection agents. He committed suicide on Cape Cod, leaving behind a
note which complained that the IRS ``sits, does nothing and then
watches you die.''
While we must be careful not to presumptuously conclude that all
problems that arise between the taxpayers and the IRS are the result of
inappropriate actions or demeanor by the IRS and its employees, the
evidence indicates this is the cause with sufficient frequency that the
Congress is compelled to address this problem. It is clear that the
Internal Revenue Service is subject to some difficult challenges. After
downsizing in recent years, the remaining IRS agents are strained as
they try to meet the demands of increased audit and collection work.
The management structure within the IRS has made these problems even
more difficult to solve. Regardless of the reason, the abusive and
humiliating tactics about which we all heard during the Finance
Committee hearings are intolerable and must be stopped. This
legislation is an important step in the process of reinstituting
controls at the IRS that should rectify these problems.
Our system of taxation is based on voluntary compliance. And we have
the best record of paying our taxes in the industrialized world. For at
least part of the last two decades, 95 percent of wage-earners in this
country paid their taxes accurately and on time. And while a recent
study found that nearly 12 percent of our economic output evades
taxation, this number is dwarfed by the noncompliance rates of our
international competitors.
I have previously supported reform efforts that were intended to make
tax collection fairer, and the IRS more accountable. In 1988, I
cosponsored the Taxpayers Bill of Rights which expanded the procedural
and disclosure rights of taxpayers when dealing with the IRS,
prohibited the use of collection results in IRS employee evaluations,
and banned revenue collection quotas. During the 104th Congress, I
cosponsored the Senate version of the Taxpayers Bill of Rights II,
which created the Office of Taxpayer Advocate, allowed installment
payments of tax liabilities of less than $10,000, and imposed
notification and disclosure requirements on the IRS. Last year, we
enacted the Taxpayer Browsing Protection Act, which imposes civil and
criminal penalties on Federal employees who gain unauthorized access to
tax returns and other taxpayer information.
The Internal Revenue Service Restructuring and Reform Act of 1998
before the Senate today will restructure and reorganize the Internal
Revenue Service. It will create a new IRS Oversight Board to review and
approve strategic plans and operational functions which are crucial to
the future of the agency. The Oversight Board, consisting of six
citizens, the Secretary of the Treasury, the Commissioner of the IRS
and a representative of the IRS employees' union, will reestablish
control of the IRS by reviewing operations and ensuring the proper
treatment of taxpayers by the IRS. It will shift the burden of proof
from the taxpayer to the IRS in court if the taxpayer complies with the
Internal Revenue Code and regulations, maintains required records and
cooperates with IRS requests for information.
I do have some concerns that this provision could give comfort to a
small number of Americans who will do anything to avoid paying their
taxes and may make the system of tax collection even more complicated.
But I think the benefits for the great majority of taxpayers who are
trying to do the right thing required support for the bill.
The bill also would allow taxpayers to sue the IRS for up to $100,000
in civil damages caused by negligent disregard of the law. It also
expands the ability of taxpayers to recover costs, including the repeal
of the ceiling on hourly attorneys' fees.
Finally, it expands the protections provided to ``innocent spouses''
who find themselves liable for taxes, interest, or penalties because of
actions by their spouse about which they did not know and had no reason
to know.
This bill makes positive changes that will foster continued growth
and cooperation by the American people. If we were to do nothing, and
the IRS were to continue on its present course, it is likely that there
would be a continued slide in the public's faith in the tax collection
system.
Americans merit an efficient and a respectful government. In the
course of history, we have fought for freedom from despotic
bureaucracies. At the essence of our democracy is our right to alter
any public institution which fails significantly to deal respectfully
and competently with American citizens. I believe the changes this
legislation will make will regain the balance that has been lost in the
relationship of the taxpayers to the IRS while permitting the IRS to do
the difficult job it was created to do. That job is vital to our
government's ability to provide the essential services on which
virtually every American depends to some extent: Social Security
benefits, our armed forces, law enforcement, Medicare and Medicaid, air
traffic control, administration of our national parks and forests, etc.
This is a good bill that will help taxpayers and the IRS. I will
support its passage and implementation and look forward to its results.
Ms. SNOWE. Mr. President, I rise today to speak in favor of the
legislation before the Senate--H.R. 2676, the IRS Restructuring and
Reform Act. I beieve it is vital that this critically-needed
legislation be passed by the Congress and enacted by the President as
rapidly as possible.
Mr. President, Congress has been working to reform many aspects of
the Federal government and its programs over the past several years,
including welfare, Medicare, and telecommunications laws. And now, with
April 15--the deadline for filing tax returns--only a few weeks past, I
can think of no better time for Congress to continue its reform efforts
than with a substantial overhaul of the IRS.
While reforming our tax system is an idea that has been bandied about
for years--and will likely continue to be a topic of great interest in
the months and years ahead--at the very least we have an obligation in
this Congress to address the abuse of our nation's citizens by the
agency that is responsible for enforcing federal tax laws: the Internal
Revenue Service.
Mr. President, the hearings that were conducted in the Senate Finance
Committee over the past nine months have provided a chilling reminder
of how government power can run amok. Tax files are used for
information on boyfriends of IRS employees. IRS managers are trained
that it is permissible to lie or mislead the public. Employees are
evaluated on statistics based on seizures of personal property and
finances. Some business owners are allowed to make monthly payments on
delinquent employment taxes while others are forced into bankruptcy--
the decision is arbitrary and up to IRS management. And IRS agents that
seek to report improper tactics and practices face demotion or outright
replacement.
While I wish that the horror stories told by the Finance Committee
witnesses were isolated incidents, the real-life stories I have heard
from constituents in Maine only reinforce the fact that these problems
are occurring nationwide.
Take for example the family in Lebanon, Maine, who was audited for
the year 1993 after they saw their convenience store, home, and all
their financial records destroyed by a 1994 fire. While they originally
had no problem with the audit and anticipated a relatively brief
process, it is now four years later and the IRS has finally just
completed the 1993 audit. One can only imagine how long--and at what
cost--the 1994 and 1995 audits they are being subjected to will last.
Or consider the story of a sheet metal company employee in Maine who
was taking money on the side for jobs--which meant that his employer
wasn't being paid for the contracts
[[Page S4504]]
that they thought were outstanding. As a result, when it came time for
the business to pay their taxes, they didn't have the funds.
Negotiations between the IRS and the company broke down, one thing
led to another, and the company was behind to the point where the IRS
took everything from the company's bank account. The result: the
company was unable to pay its employees, it was seized by the IRS, and
it was sold at auction to cover the taxes.
Finally there is the waitress who, over the years, didn't pay all the
taxes she should have on the tips she made. She was reported, found
guilty, and it was estimated that she owed more than $100,000 in back
taxes, penalties and interest payments. Fair enough, you might say,
except for one twist: her husband never had a clue that his wife was
cheating the IRS. But he's been paying the price ever since.
He lost his home, his vehicles, and his camp in order to help pay his
wife's debt. In the meantime, they divorced--and to this day the wife
does not work because, if she did, she would still owe the IRS.
Instead, she has remarried and is supported by her new husband, while
the ex-husband remains responsible for the debt he never knew a thing
about.
Now, I'm not saying that the IRS doesn't do a good job in many--if
not most--cases. They have a difficult and unpopular task, and the law
must be enforced. The delays, unfair treatment, and--in some cases--
improper actions that have occurred with the IRS have undoubtedly been
the result of a variety of factors, and the complexity of the tax code
only compounds the problems for taxpayers who must interact with the
IRS.
In fact, to test the difficulty of the current income tax system,
Money magazine had 45 different tax accountants prepare a tax return
for the same family--and the result was 45 different returns that
varied by 160 percent! When considering that there are 555 million
words in the tax code, 480 different tax forms, and IRS employees give
the wrong answers to taxpayers 30 percent of the time, it's no wonder
the expects can't even agree on what a taxpayer owes!
Therefore, although we won't be eliminating the complexity of the tax
code today, I am pleased that the Senate is now considering
comprehensive reform legislation that will attempt to end the abuse of
already confused taxpayers by the IRS, and ensure that the enforcer of
the tax law is no longer one of its greatest abusers.
Mr. President, this legislation--which builds on the restructuring
bill that was overwhelmingly passed by the House of Representatives
this past November--includes a variety of critical reforms that will
dramatically improve the oversight and management of the IRS. And, most
importantly, the bill will make this agency more accountable to the
very individuals they were intended to serve: the American taxpayer.
Specifically, to improve the oversight and administration of the IRS,
this legislation will establish an oversight board including the IRS
Commissioner and six members from the private sector, which would have
broad authority to review and approve strategic plans. In addition, it
will establish local taxpayer advocates in every state, and strengthen
the internal auditing of the agency.
To create a more level playing field between the IRS and taxpayers,
the bill will modify the practice of considering taxpayers guilty until
they prove their innocence by shifting the burden of proof to the IRS
in cases where the taxpayer is cooperative in providing information. It
will also provide for greater taxpayer protection against interest
assessments and penalties.
To streamline congressional oversight of the IRS, it provides a means
for ensuring that the IRS and Congress are aware of the most
complicated aspects of the tax code that are generating the greatest
compliance problems for taxpayers, and provide clear accountability to
specific committees in the Congress.
To be more responsive to taxpayers, this legislation provides
critically needed relief to an ``innocent spouse'' who has no knowledge
of the improper tax filings of his or her husband or wife; ensures that
a taxpayer who has entered into an installment agreement to settle an
outstanding tax bill will no longer be forced to pay ``failure to pay''
penalties during the period of repayment--which has never made any
sense; and gives taxpayers more time to dispute IRS claims.
And finally, to create a better IRS from the inside out, the bill
provides increased flexibility for the IRS to recruit and retain the
best agents possible, while establishing new performance measures that
ensure agents are not ranked based on enforcement results or
collections.
Mr. President, the issue comes down to trust. The people of this
nation must be able to trust that their government will be fair, will
be discreet, will be responsive. Taxpayers should not fear the very
institutions that are supposed to be serving them. We must ensure that
government works for people, not against them. We must end the abuses
at the IRS.
The bill before us today will help restore taxpayer confidence in the
system and rebuild the trust that has been eroded through years of
egregious abuse. I commend the chairman of the Finance Committee for
crafting and championing this legislation, and I urge my colleagues to
join me in supporting it.
Mr. GORTON. Mr. President, like many of my colleagues who have spoken
on the floor this week, I rise in strong support of the IRS
Restructuring and Reform Act of 1998.
The Senate Finance Committee hearings about IRS agents and
supervisors that are completely out-of-control, and who sometimes try
to set up honest taxpayers in order to advance their own careers, has
made it absolutely clear to every American that the structure and
standard operating procedures of the IRS must be corrected--which is
exactly what this comprehensive reform legislation will accomplish.
This bill creates an oversight board consisting of a majority of
private sector members to set IRS policy and strategy, and a new
independent Inspector General for Tax Administration in the Treasury
Department who will be appointed by the President and confirmed by this
Senate. The Taxpayer Advocate position, created in the Taxpayer Bill of
Rights II in 1996, is expanded into a system of local Taxpayer
Advocates that guarantees at least one advocate for each state in the
union.
This legislation reverses the burden of proof from the taxpayer to
the IRS, and allows for the awarding of attorney's fees and civil
damages to taxpayers when they have been wronged by the IRS. Relief is
also provided to ``innocent spouses'' who find themselves liable for
taxes incurred by their spouse during a marriage.
Mr. President, this is by no means a comprehensive list of the
reforms included in this legislation--it would not be possible to
describe them all in the time I have to speak today. It has, in fact,
been calculated that there are over 160 reforms to the IRS included in
this bill--all with the goal of making the IRS more service oriented
and friendly to American taxpayers. It is for the twin goals of IRS
structural reform and the protection of innocent taxpayers that I will
be voting in favor of this legislation.
Before concluding Mr. President, I must state that while I hail the
Senate's consideration and certain passage of this IRS reform
legislation, I believe that it only deals with the symptoms and not
with the fundamental disease. The fundamental disease is the Internal
Revenue Code written by Congress. The current code is so long, so
complicated and so full of loopholes that it is literally out-of-
control.
To deal with the disease, Congress is going to have to deal with the
Code. We must either dramatically simplify it or, and this is my
preferred course of action, we must repeal the Code lock, stock and
barrel and start all over again. We must develop a tax system that is
fair, easy for Americans to understand, requires far less money to
enforce so that we can have a dramatically smaller IRS, and requires
far less money to comply with in fees paid to lawyers and accountants.
I am absolutely convinced fundamental reform of the Code should be
the primary goal of Congress. It is certainly the goal to which I have
dedicated and will continue to dedicate my energy and attention.
Mr. BYRD. Mr. President, we have heard much in recent years of the
horrors and abuses inflicted by the Internal Revenue Service (IRS) on
the
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American taxpayer. I have little cause for doubt, Mr. President, that
there lies a certain degree of verisimilitude in these allegations and,
further, that the pending legislation represents a necessary and
overdue effort to ameliorate these abuses. Certainly, a portion of the
criticism directed at the IRS has been justly earned by the officials
and employees who administer and work at the agency. If but half of the
concerns raised during the Finance Committee's recent hearings on these
IRS abuses are true, there is indeed an immediate and overwhelming need
to reform and restructure the IRS. However, let us remember, Mr.
President, that the task to which the Congress has assigned the IRS has
never been nor will ever be a popular one. The simple fact that few
people enjoy paying taxes leads logically to the presumption that they
will not embrace the very agency charged with collecting their taxes.
Having said that, Mr. President, let me now turn my focus to the bill
before us. As reported to the Senate by the Finance Committee, H.R.
2676, the Internal Revenue Service Restructuring and Reform Act of
1998, would significantly alter the management, oversight, and basic
structure of the IRS as we know it. By creating an IRS Oversight Board,
this legislation aims to provide the strategic oversight and guidance
that has been deficient or lacking at the IRS in previous years. As the
National Commission on Restructuring the Internal Revenue Service
concluded in its report to the Congress last year, the ``problems
throughout the IRS cannot be solved without focus, consistency and
direction from the top. The current structure, which includes Congress,
the President, the Department of the Treasury, and the IRS itself, does
not allow the IRS to set and maintain consistent long-term strategy and
priorities, nor to develop and execute focused plans for improvement.''
Clearly, the drafters of H.R. 2676 have sought to provide the very
``focus,'' ``consistency,'' and ``direction'' that the IRS Commission
concluded was necessary. I hope that the nine-member Board, as
proposed, will be able to carefully and diligently clear a new path on
which the IRS can tread the challenges that the 21st Century will bring
as a more responsive, less intrusive federal agency that works for--not
against--the millions of honest American taxpayers to whom we are all
accountable.
With regard to the composition of this Oversight Board, I voted
against two amendments this morning that would have either directly or
indirectly removed the union representative from this Board because I
believe that such representation is crucial on a Board that will have
so much influence in the actual workings of the IRS and the 100,000-odd
actual workers who carry out its many tasks. I also opposed an
amendment to remove the Treasury Secretary from this Board because I
believe that, for any such Board to be truly taken seriously and
command attention, the chief executive officer of the Treasury
Department--the Secretary--must be able to offer his or her unique
perspective on various IRS issues through a position on the Board.
Furthermore, by serving on this Board, the Treasury Secretary will help
ensure that the recommendations thus produced are not ignored or
disregarded by officials of the IRS.
Mr. President, I also want to convey my support for a number of other
provisions of H.R. 2676. Specifically, I applaud the provisions of the
bill providing for a National Taxpayer Advocate and an independent
Treasury Inspector General for Tax Administration. The former office
should help to better protect the interests of individual taxpayers who
are often outmatched in their disputes with the IRS, while the latter
will ensure that the office with responsibility for overseeing the IRS
is independent of the agency itself. I further support the provisions
of this legislation calling for increased use of electronic filing in
the next ten years--the advent of electric filing technology cannot be
ignored as we seek to find ways to make the IRS more responsive to the
American taxpayer.
Mr. President, the bill contains many other taxpayer protections that
I believe will improve the way the IRS works. However, let me express
my concern about a provision in the funding offset amendment agreed to
by the Senate yesterday, without my support. Last night, the Joint
Committee on Taxation produced calculations predicting that, while this
provision will raise approximately $10 billion in the next ten years
and thus protect this bill from a PAYGO point of order, it will lose a
net $47 billion in revenues over the next twenty years. Clearly, this
is an attempt to back-load the true cost of a tax provision to
circumvent a budgetary point of order, and I hope that it will be
dropped in conference negotiations with the House.
Mr. President, my reservations about this particular provision of
H.R. 2676 notwithstanding, I am prepared to support Senate passage of
this important and much-needed legislation. As the elected officials of
the people of the United States, it is our duty to ensure that the
IRS--the very agency to which we have delegated authority to implement
and enforce our constitutional prerogative to ``lay and collect''
taxes--does not harass, abuse, or otherwise place unnecessary burdens
on the millions of honest, hard-working taxpayers to whom we are each
accountable. This legislation, as a whole, represents a positive step
in the direction of a more responsive, more accountable, and more
efficient Internal Revenue Service that better serves the American
people.
Mr. KERREY. Mr. President, I yield the floor. 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. KERREY. 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. KERREY. Mr. President, I had an amendment earlier that I had
withdrawn that would increase the amount of oversight, or actually
create in statute a requirement for annual hearings by the Finance
Committee, and I would prefer to merely in a colloquy with the chairman
of the Finance Committee get this matter settled without having to put
it into law.
I would like to express again my concern and interest in making
certain that congressional oversight is increased. I think it is a
little bit like preaching to the choir here, asking this particular
chairman to do it, but I would like to declare that I think we should
be having a yearly hearing hosted by the Senate's Finance Committee
with the IRS Commissioner, with the chair of the new oversight board
created in this new law, the National Taxpayer Advocate, and the new
Treasury Inspector General for Tax Administration; as the four
witnesses. The purpose of the hearing would be to review overall
progress by the IRS in serving the needs of taxpayers.
I would simply ask as part of this colloquy whether or not the
chairman would be willing to hold such a hearing on a yearly basis?
Mr. ROTH. I say to the distinguished Senator from Nebraska that one
of my real concerns has been that there has not been adequate oversight
of IRS as well as other agencies. That is one of the things that got me
moving a year ago, because I think, as the Senator, it is critically
important that we assure the agency is functioning as the President and
Congress intend it to function. That has not been the case with IRS.
So I can assure the good Senator that it is my intention to have
continuing oversight hearings. I think it is important now that we are
involved in this massive reorganization opportunity to change culture
that we do have at least once a year, if not more often, the kind of
hearing the Senator is talking about. We are all very pleased to have
this new Commissioner. We think we have an individual with the type of
qualifications and background that will really make a major change. At
the same time, I think it is our responsibility to continue from time
to time to hold hearings to see if progress is being made. So I assure
the Senator that as long as I am chairman of the committee we will
continue to do so.
Mr. KERREY. I thank the distinguished chairman of the Finance
Committee.
Mr. President, I do believe in this kind of oversight where we ask
four key people, three of whom are new creations under this law, to
come and tell the oversight committee how well this
[[Page S4506]]
new law is doing and if there is any additional changes in the law that
are necessary.
Again, I appreciate very much the Senator's comments in this regard
and will, once again, state my appreciation for the Senator's diligence
and perseverance in making certain that IRS does the job the American
taxpayers want it to do.
Mr. ROTH. Let me say, as long as the two of us are members of that
committee, I am sure it will happen.
Mr. KERREY. I thank the Senator.
Mr. GRAMS addressed the Chair.
The PRESIDING OFFICER. The Senator from Minnesota.
Amendment No. 2379
(Purpose: To provide interest payment exemption for disaster victims in
the Presidentially declared disaster areas)
Mr. GRAMS. Mr. President, I would like to send an amendment to the
desk that has been sponsored on our side by Senator Coverdell and also
my colleague from Minnesota, Senator Wellstone, and Senator Boxer of
California. It is my understanding it has been cleared on both sides. I
send the amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Minnesota [Mr. Grams], for himself, Mr.
Coverdell, Mr. Wellstone, and Mrs. Boxer, proposes an
amendment numbered 2379.
Mr. GRAMS. 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:
At the appropriate place, insert the following new section:
SECTION . ABATEMENT OF INTEREST ON UNDERPAYMENTS BY
TAXPAYERS IN PRESIDENTIALLY DECLARED DISASTER
AREAS.
(a) In General.--Section 6404 of the Internal Revenue Code
of 1986 (relating to abatements) is amended by adding at the
end the following:
``(h) Abatement of Interest on Underpayments by Taxpayers
in Presidentially Declared Disaster Areas.--
``(1) In general--If the Secretary extends for any period
the time for filing income tax returns under section 6081 and
the time for paying income tax with respect to such returns
under section 6161 for any taxpayer located in a
Presidentially declared disaster area, the Secretary shall
abate for such period the assessment of any interest
prescribed under section 6601 on such income tax.
``(2) Presidentially declared disaster area.--For purposes
of paragraph (1), the term `Presidentially declared disaster
area' means, with respect to any taxpayer, any area which the
President has determined warrants assistance by the Federal
Government under the Disaster Relief and Emergency Assistance
Act.''.
(b) Effective Date.--The amendment made by this section
shall apply to disasters declared after December 31, 1996,
with respect to taxable years beginning after December 31,
1996.
(c) Emergency Designation.--
(1) For the purposes of section 252(e) of the Balanced
Budget and Emergency Deficit Control Act, Congress designates
the provisions of this section as an emergency requirement.
(2) The amendments made by subsections (a) and (b) of this
section shall only take effect upon the transmittal by the
President to the Congress of a message designating the
provisions of subsections (a) and (b) as an emergency
requirement pursuant to section 252(e) of the Balanced Budget
and Emergency Deficit Control Act.
Mr. GRAMS. Mr. President, I want to say a couple words about the
amendment and then also be joined by my colleague from Minnesota,
Senator Wellstone, on this amendment.
It is very simple. It applies to residents or individuals, or I
should say victims who live in disaster areas, those areas that have
been declared disaster areas by a Presidential decree, either through
flooding or tornadoes or whatever mishap it might be.
The basics of this amendment say that those people who have been
granted an extension to file their income taxes, but under current law
the IRS must still assess an interest payment on those taxes. This is
adding insult to injury. These people who have no opportunity due to no
fault of their own to file their taxes on time have been granted an
extension period to get their taxes filed in good faith, and yet under
current law we come back and say, well, that's fine and dandy, but we
now have to assess you an interest on this. These individuals who are
trying to rebuild and repair their lives need every dollar. Every
dollar counts.
So the basic part of this amendment is very simple. It is that also
we would, along with granting them an extension in order to file their
income taxes, make an exemption for interest on those tax payments as
well. So I hope that the Senate will consider this and give it its full
support.
I would like now to defer to my colleague from Minnesota.
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. WELLSTONE. I thank the Chair.
Mr. President, let me ask unanimous consent that Senator Cleland be
also listed as an original cosponsor.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. WELLSTONE. I am pleased to work with Senator Grams on this
amendment. I thank both the chairman of the committee, Senator Roth,
and Senator Kerrey for all of their help. This is very important to
people. If you visit people in communities that have been devastated by
tornadoes in our State, to be able to have forgiveness of interest on
late payment of taxes is extremely important. It seems to be a little
thing, but it is real important to people in our State.
It has been a pleasure working with Senator Grams on this. I think we
have done well. This will help people in our State. We thank all of our
colleagues for their assistance.
The PRESIDING OFFICER. Is there further debate on the amendment?
Mr. KERREY addressed the Chair.
The PRESIDING OFFICER. The Senator from Nebraska.
Mr. KERREY. Mr. President, this is a good amendment, and I urge its
adoption.
The PRESIDING OFFICER. The Senator from Delaware.
Mr. ROTH. Mr. President, I concur and urge its adoption.
The PRESIDING OFFICER. Is there further debate on the amendment? If
not, the question is on agreeing to the amendment.
The amendment (No. 2379) was agreed to.
Mr. KERREY. Mr. President, 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. ROTH. Mr. President, I make a point of order a quorum is not
present.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. DASCHLE. 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. DASCHLE. Mr. President, I commend both the chairman and the
Democratic manager for their work on this bill over the last couple of
days. I commend them for all that they have done. I think we will see a
very strong vote as final passage is recorded this afternoon. It is
largely to their credit.
I particularly want to commend my colleague Senator Kerrey for the
tremendous job that he has done over the course of now more than 12
months of work in an effort that has led to the point where we will
pass what has been, at times, a very controversial issue. To see the
overwhelming vote today is a tribute to him and to the leadership that
he showed on the Commission and on the floor, and certainly in the
committee.
While I have made no reservations about the difficulty many of us
have with regard to the offset, an offset that I hope can be addressed
in conference, an offset that will cost the Treasury and U.S. taxpayers
some $46 billion--if it is possible to say ``except for that,'' I will
say: Except for that, this legislation is a major accomplishment that
deserves the support on both sides of the aisle.
The other day, I was visiting on the Capitol steps with a group of
high school students from Spearfish, SD. When I told them the Senate
would vote this week on IRS reform, they actually burst into wild
applause. That is not the usual reaction I get when I talk with people
back home about what Congress is up to. So, today they will be pleased
to learn that their cheers were heard and that we are changing the IRS
as we know it.
Fortunately, the students didn't ask about the history of the IRS
reform bill, because they already knew from
[[Page S4507]]
their studies how a bill is supposed to become law. It might have been
difficult to explain why this bill has taken such an unusual route.
We could have and should have passed IRS reform 6 months ago. The
House did. They passed it 426 to 4 last November. The IRS reform
legislation was the last thing we attempted to pass in the Senate last
year and the first bill Democrats tried to pass when we reconvened in
January. But in the last 6 months, between the time the House passed
the bill and now, 120 million Americans filed tax returns without the
benefit of the protections of this bill, 2 million taxpayers received
audit notices, many millions more received collection notices, and not
one of them had the protections of this bill either. That is
unfortunate and, in my view, unnecessary.
But that is behind us. Despite the slow road this bill has traveled,
I am glad that we are finally able to vote on it today. So are those
high school students from Spearfish, whom I talked to out on the
Capitol steps on Tuesday. So are America's 120 million taxpayers.
The bill fundamentally changes the management and operation of the
IRS. I will support this bill because it will make the IRS more
accountable to, and respectful of, taxpayers. It will help transform
the culture of the IRS to make customer service a top priority, the
same as it is in the best-run private businesses.
Charles Rossotti, the new IRS Commissioner, has created a plan to do
all of that. This bill gives him the tools he needs to carry out that
plan and really begin shaking things up within that very troubled
agency. This bill creates an outside board of directors for the IRS,
who will ensure that the agency adopts practices that restore the
balance of power between law-abiding taxpayers and the IRS employees.
It explicitly bans the use of tax collection quotas as a tool for
evaluating the effectiveness both of individual IRS employees and of
whole divisions within the agency. This is a big step in the right
direction. From now on, tax auditors will now be judged by the quality
of the service they provide, not the quantity of money they collect.
Make no mistake, tax cheaters cheat us all, and the IRS should
enforce our laws to the letter. But the sort of heavyhanded tactics
that have been used by the IRS against some private citizens and
businesses should absolutely never be tolerated. Under this bill, they
will not be.
One of the ironies about the 6-month delay is that, while we have
more answers about some things, we are now faced with a bigger question
that didn't exist back in November. Last year, the Congress made a
stand for fiscal responsibility by enacting a plan that would balance
the Federal budget for the first time in 30 years. Speeches extolling
the virtues of fiscal restraint echoed through this Chamber. And I ask
my colleagues, is this bill consistent with the spirit of last year's
historic balanced budget agreement? Is it consistent with our
commitment to use the budget surplus to save Social Security first?
Regrettably, the answer, as I noted a moment ago, is no.
Since this bill left the House, its price tag has more than tripled,
and instead of paying for the added costs, the Senate has chosen, as it
did so often in the days before the balanced Budget Act, to fudge it.
This bill plugs the deficit hole in the first 10 years by creating an
even bigger one--an estimated $46 billion hole in the second 10 years.
As if this were not irresponsible enough, it creates that deficit by
providing a new tax break that can only be used by people making more
than $100,000 a year.
We know from recent experience how hard it is to balance the budget.
We know there is no free lunch. So, who is it that will end up paying
for this smoke-and-mirrors gimmick? The 95 percent of Americans making
less than $100,000 a year? That is who, unfortunately, will be left
paying that bill--the same people who are depending upon these budget
surpluses to preserve their Social Security and Medicare benefits in
the next century. This bill was supposed to be about protecting
taxpayers, not fleecing them when they are not looking or before they
are even born.
I will vote for this bill because the IRS is in dire need of reform.
We have kept the new Commissioner waiting long enough for the authority
he needs to do the job. More to the point, we have kept the American
people waiting long enough for a new and better IRS. But I implore our
conferees, don't ignore the funding problem in this bill. Fix it, so
that the bill provides protection for taxpayers in the fullest sense of
the word.
The American people want us to make the IRS more accountable. This
bill will do that. At the same time, we must remember there is another
important issue the American people want us to address. That is: What
are we going to do to help families earn more money and keep more of
the money they earn? That is why those high school students from
Spearfish cheered. They assumed that, by passing an IRS reform bill, we
are doing something that will improve the financial circumstances of
working families. That is what the people in South Dakota and across
the country really want Congress to do. If we don't do that, any
``bounce'' we get from this bill will be very short-lived.
Last year, we agreed on a 5-year plan to balance the Federal budget
and at the same time invest in the citizens and the future of this
great Nation. We are now in the process of crafting a budget that is
the first real test of our ability to live within that agreement. In
the coming weeks, as we debate the budget, let us keep our word on
education and on child care and on health care. Last year we lightened
the tax load on middle-class families by creating a new $500 child tax
credit and a $1,500 tax credit for college expenses. In the coming
weeks, as we debate the budget, let us further that commitment to tax
fairness, not walk away from it.
This year, for the first time in 30 years, we will actually have a
balanced Federal budget. In the coming weeks, as we debate the budget,
let us remember how hard it has been to eliminate the deficit and what
good has come from this fiscal discipline. Let us do nothing that would
send us back to where we were 5 years ago, when we were looking at
$300-billion-a-year deficits for as far as the eye could see.
The IRS bill is long overdue, but it is only a start. What the
American people also want us to do is, they want us to provide them
with some assurance that if they work hard and play by the rules, they
will be able to make a decent life for themselves and their families.
So let us pass this bill. And, in what little time we have remaining in
this Congress, let us work together to keep the commitment we made last
year to the issues and the matters and the priorities that really can
make a difference in people's lives.
If we do that, the next time one of us is visiting on the steps of
the Capitol with some young people from our State, we will be able to
tell them something else they can cheer a lot about.
Mr. President, I yield the floor.
The PRESIDING OFFICER (Mr. Grassley). The Senator from Nebraska.
Mr. KERREY. Let me congratulate the Democratic leader for an
excellent statement. I couldn't have said it better myself. He is
right; we have an excellent piece of legislation here. The law, as we
are proposing it, will dramatically improve the kind of service that
taxpayers get, make the IRS much more efficient, and give people much
more confidence in Government of, by, and for the people. But it does
have a funding flaw. I intend to vote for this bill myself. I pledge to
do what I can to make certain that we find a correction of that funding
flaw.
Mr. President, 177,000 people, according to the Joint Tax Committee,
will pay $50,000.
These are individuals who are 70 years of age or older who make over
$100,000 in mostly retirement income. So they have to have well over $1
million in liquid assets and earning assets that are producing that
kind of income.
What they are going to do is pay $50,000 per person in order to
convert a current IRA that produces taxable income into an IRA that has
no taxation on that income. What is very likely to happen is they will
have their estates transfer it to their heirs who will not pay tax at
all.
These are not people struggling to save money. There is no social
benefit you can calculate here. As the distinguished Democratic leader
said, it does
[[Page S4508]]
provide $8 billion in the first 3 or 4 years. We are doing it in the
second 5, so there is time to correct this problem.
As you get into the outyears, at the very time we are looking at the
baby boomers retiring, what we are going to do about Medicare and
Social Security, that is going to be the dominant question around here
at that particular time. The cost of this program will widen up $2
billion, $3 billion, $4 billion a year. It is one of the things that
looks good going in, because it looks cost free, but it certainly is
not.
I appreciate very much the distinguished Democratic leader's
statement. It is exactly what we need to be worried about as we head
towards final passage of this legislation.
Mr. NICKLES addressed the Chair.
The PRESIDING OFFICER (Mr. Cochran). The Senator from Oklahoma.
Mr. NICKLES. Mr. President, I rise today in support of this
legislation. I compliment Senator Roth and Senator Moynihan, for having
the most significant oversight hearings that we have had in this
Congress, indeed for the last several Congresses. A lot of us have said
we need to do better oversight, and we talked about it but we didn't do
it. This is the case where the Finance Committee had the first serious
oversight of the IRS in our history. It is long overdue, and it
uncovered a lot of things. It uncovered ugly examples of Government
abuse of power, Government abuse of power which should never have
happened, which was exposed, and I believe with this legislation, we
are going to help correct it and make sure it doesn't happen again.
I compliment Senator Roth and Senator Moynihan for those hearings.
Those hearings were initially held in September, and then we had
follow-up hearings just last month. Each additional set of hearings
kept showing abuses that were even more outlandish than the ones
before, culminated by the fact that one disgruntled IRS agent actually
had tried to set up Senator Howard Baker, and a Congressman and a
district attorney. Unbelievable; unbelievable abuse of power. I
compliment our colleagues for the oversight hearings.
I also compliment Senator Kerrey and Senator Grassley for their work
on a commission that helped give us some material to produce good
reform. We had the hearings, and we also had legislative oversight and
some work done through their commission to produce recommendations for
a positive legislative overhaul. I compliment both Senator Grassley and
Senator Kerrey for their fine work in doing that.
Also, I compliment our colleagues in the House. We had the hearings
in the Senate in September, and our colleagues in the House passed IRS
reform legislation on November 5. I disagree with my colleagues on the
Democratic side who said, ``We should have passed the House bill.''
Senator Roth and some of us said we can do better than the House, and I
think we have. The House bill was a giant step in the right direction,
but we have done a lot more than the House did. The House did not have
legislation to deal with innocent spouse issues, which we also had
hearings on and which showed a lot of innocent spouses were abused by
the IRS system. We are correcting that in this legislation.
We had a hearing in Oklahoma. It was the first IRS field hearing that
we have had. It was one I found very interesting. We had Oklahomans who
testified about some of the problems they had. As a result of their
testimony, we made this legislation better. I will give a couple of
examples.
We had Lisa New, who is a young lady from Guthrie, OK, testify. She
was a pet groomer. She groomed pets. She was a school bus driver, and
she was a single mother. She owed the IRS $4,000 in 1986. She found out
about it and went to the IRS. She said, ``I owe you this money. I would
like to pay it off $100 a month.'' IRS said, ``No, we want it all
immediately.'' She couldn't pay it, so the IRS put a lien on her home.
Her debt to the IRS, as of last month, totaled about $30,000 of
interest and penalties on an original $4,000 debt back in 1986.
In this legislation, we say that penalties and interest will not
accrue to the deficiency if the IRS does not notify the taxpayer within
1 year. We also say the IRS will be required to adopt a liberal
acceptance policy for offers in compromise. They clearly did not do
that in this case. We also say liens would not be allowed if the
original tax debt was less than $5,000. So we make some changes.
We had another case where an individual, whom a lot of people in this
room might recognize--he is somewhat of a well-known Olympic athlete
coach--Steve Nunno. He was coach of the U.S. Olympic gymnastics team,
coach of Shannon Miller, a great all-American coach. He had a problem
with the IRS. His business grew a lot, and he was making quarterly
payments for payroll taxes. Then his business grew some more. Suddenly,
he was supposed to make payroll tax payments monthly. He got a little
bit behind. He recognized that. He said he was willing to work it out,
and he worked it out with an agent. They signed an agreement that if he
makes these payments of so much per month over this period, that would
be acceptable.
Then the IRS changed agents. A new agent came in and said, ``No, we
want to be paid immediately, and if you don't pay up immediately, we're
going to put a padlock on your business and put a lien on your
business.'' He was traveling in Europe with the U.S. Olympians and his
team, and he had an IRS agent threatening to close down his gymnastics
business. It is absolutely absurd. He borrowed the money. He was able
to pay it off.
We put in provisions to make sure that would not happen again. We now
say that a taxpayer will be given the opportunity of a court hearing
before liens, levies or seizures. He is going to have a chance to have
a hearing. He is going to have an appeals process. Not a single agent
is going to be able to come in and say, ``I disagree with you; if you
don't pay up by''--such and such a date--``we are going to padlock your
business.'' We protect that taxpayer. We say the IRS can only seize the
taxpayer's business or home as a last resort.
Unfortunately, we found out in Oklahoma and Arkansas as a result of
our investigation that we had seizure rates in this district about
eight times the national average, and we even found that there were
incentives for employees to close those cases. ``We don't care if you
seize the assets, close those cases,'' and people would receive
financial benefits. We stopped that in this legislation.
We also say that notices to taxpayers must include the name and phone
number of the IRS contact. They will know somebody to call. They are
not going to get the runaround and talk to 15 different agents when
they are trying to deal with a case. We have that in this legislation.
None of that, I might add, was in the House bill. None of it was in
the House bill. I can mention a couple others.
We had Dr. Jim Highfill of Ponca City testify. He is a dentist. He
had IRS agents come into his office and announce that he was under
investigation. We put provisions in this bill that says the IRS will be
reorganized so that small businesses will only work with IRS employees
specializing in small business issues. That will help solve some of
these problems.
We also say IRS employees who disclose taxpayer information, such as
notices of summons, will be subject to termination. The IRS agents came
into his office and said, ``We've got a summons for this dentist,'' in
front of his patients to embarrass him, to intimidate him. We now make
those agents subject to termination.
We found abuse after abuse, and we found IRS agents were not
terminated. I will mention that most of the 102,000 IRS agents and
employees are outstanding civil servants, but some have abused their
power, and they should be terminated for that abuse of power. In almost
every case we listened to, they were not terminated.
We also say that advice from a CPA to a taxpayer will be privileged
the same as advice from a tax attorney. I could go on.
We put a lot of provisions in the Senate bill that were not in the
House bill. We made it better. I wouldn't say it is perfect, but I
think it is a lot better. There was a reason for the Senate to be a
little more deliberate. It was the Senate that had the initial
hearings. The House marked up the bill, and, again, my compliments to
the House. Sometimes they do things a little more
[[Page S4509]]
quickly, but sometimes we do them a little bit better.
This is a more thorough bill. This is a bill that has been researched
better. We are solving more problems for taxpayers in this bill.
Finally, at the hearings that we had in the last couple of weeks, we
heard different cases. In Texas, there was a business that had 32
employees, and 64 IRS agents raided the business. Their intent was to
intimidate and abuse their power.
Or the case in Virginia Beach where an individual had a restaurant, a
dozen or so IRS agents broke into his restaurant, his home, and his
partner's home, broke his door down. They certainly abused their power.
Agents who abuse their power should be terminated.
Or for example the investigation of Senator Baker and others, that
was certainly abuse power. Those people who supervised that IRS agent
are also responsible, not just the bad apple in this case. He was
eventually terminated because he was arrested for having cocaine in his
car, not for the abuse of the investigation of a Senator, a
Congressman, and a district attorney.
So not only should he have been disciplined, but his supervisor who
did not corral him, after some very honest and good employees said,
``Wait a minute; this investigation is going too far,'' and tried to
stop it. Their supervisors did not discipline the person who was
responsible. They should have been terminated. They should have felt
the penalties for not reining in the IRS.
The IRS has been out of control. In many, many cases they abuse their
power. So this bill is going to try to rein in the IRS, make the IRS
more accountable to taxpayers, make sure that they understand the ``S''
in ``Internal Revenue Service'' stands for ``service,'' that they are
servants, that they work for the people, not the other way around, and
that the people who are God-fearing and are willing to pay their taxes
have nothing to fear of the IRS. They may have some disputes because of
the complexity of the law, but if they are willing to pay their fair
share of taxes, they are not trying to cheat the system, they should
not fear the IRS gestapo-type tactics that we have heard about in
recent weeks.
So I again want to compliment Senator Roth and Senator Moynihan,
Senator Grassley, Senator Kerrey, and other people, who have worked to
put together, I think, a very good bill, a positive bill, one that will
be of real benefit to taxpayers and one that we can say, yes, we have
done something positive, and we have worked together to make it happen.
I am pleased that now the President is supporting this bill. I might
mention--I look at a statement from the Washington Post dated October
1, 1997. It says: President Clinton opposes legislative reform of the
IRS saying, ``I believe the IRS is functioning better today than it was
5 years ago.''
He was speaking in reference to the Republican reform proposals. ``We
should not politicize it and we should not do anything that will in any
way call into question whether it is evenhanded or fair in the
future.''
Originally, President Clinton was against this bill. Originally,
Secretary Rubin was against this bill. I am glad they decided they
would support the House bill. I am glad they have decided they would
support the Senate bill. Both are good pieces of legislation. Both need
to pass. Both need to become law.
Mr. President, again, I thank the sponsors and look forward to this
becoming the law of the land. I yield the floor.
Mr. DODD addressed the Chair.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. I gather we are waiting for one of our additional
colleagues to complete one more item on this bill. I want to take the
opportunity, if I can, to join my colleague from Oklahoma in commending
the chairman of the committee--I see him now entering the Chamber
here--and Senator Roth, Senator Moynihan, Senator Kerrey, Senator
Grassley, and others from the Finance Committee who have been involved
in producing this piece of legislation. I think this is going to carry
overwhelmingly, maybe even unanimously. That is something we do not do
that often around here. And that is a tribute to what I think more
Americans want to see, and that is a sense of bipartisanship on issues
like this.
This could have become highly controversial. But the fact that there
has been such comity between the majority and minority I think has
allowed us to produce the kind of legislation that we will be voting on
shortly.
I am going to in a minute ask for the attention of the chairman of
the Finance Committee because I want to raise an issue. And I will
raise it and talk a little bit about it. Maybe he is going to go
through his notes a little bit.
As our colleagues are aware, Senator Bennett of Utah and I are chair
and vice chair of this new special committee on the year 2000 problem,
Mr. President. This is to deal with the computer glitch that now has
received widespread publicity over the last number of weeks and is an
issue that some raised several years ago in this country warning us of
the problem we would face if we did not take care of the problems where
on January 1, 2000, computer programs, instead of reading, ``January 1,
2000,'' would read, ``January 1, 00,'' and that would be computed by
many to be ``1900,'' not ``2000.''
It has been estimated that costs nationally and internationally could
run anywhere from $300 billion to close to $2 trillion for this fix.
Bob Rubin, the Secretary of the Treasury, has indicated that the fix at
that Department alone, excluding, I believe, the Internal Revenue
Service costs, is $1.4 billion just to become compliant with the year
2000 problem by September of next year, which is when the systems ought
to be on line to be tested for 2 or 3 months before January 1, 2000,
occurs.
There is an issue here that I believe the committee has tried to
resolve. And my colleague from Nebraska, I know, is involved in this.
And Senator Moynihan, certainly, who is a member of our special
committee, has also been involved in this. And that is so we don't find
our reform efforts here running into the date problem of January 1,
2000. I would argue that that all of the problems consumers could face
if the IRS were not compliant by January 1, 2000 are just as critical
in many ways as the problems we are addressing today. That effort has
been made in this bill to try to make sure that does not happen. And I
gather further from talking with Senator Bennett of Utah that
provisions would be included that would allow for the Joint Taxation
Committee to analyze what we are doing and that if, through the good
efforts of the committee, it does not quite meet the needs, in
conference we may have to move some dates a little bit.
I am not sure I am stating this very well at all. And I see the
distinguished--either one of my two colleagues might want to respond,
Mr. President.
Mr. KERREY. If the Senator would yield for a statement.
The Senator is exactly right. There is a tremendous problem with this
Y2K issue, and that is going to be felt by taxpayers who are not going
to get returns. They are not going to get refunds and not going to be
able to deal with the IRS because the computers are not going to be
able to function unless the Y2K problem is solved. And there is no
margin for error; you cannot have it 99 percent, you have to have it
100 percent, or there will be far greater problems with the IRS than
anything our oversight hearings and the Restructuring Commission
hearings have identified.
I call to the Senator's attention--in fact, I think I should read it
into the Record. Mr. Rossotti has, by the way, sent the Finance
Committee a letter. Senator Moynihan has an amendment that instructs us
to delay some of the implementation, and I believe he is going to offer
it later, and I think we have agreed to accept that amendment. I am not
sure that solves the problem entirely. We have to talk to Mr. Rossotti
about it. But let me read to the Senator what Mr. Rossotti said today,
the IRS Commissioner said today, to the Ways and Means Committee. He
said:
Finally, the Administration has serious concerns of the IRS
restructuring legislation that require changes to IRS
computer systems in 1998 and 1999. Mandating these changes
according to schedule currently in the bill would make it
virtually impossible for the IRS to ensure that its computer
systems are Year 2000 compliant by January 1, 2000, and would
create a genuine risk of a
[[Page S4510]]
catastrophic failure of the Nation's tax collection system in
the year 2000.
Mr. President, I say to the Senator from Connecticut, my hope is that
the changes that we are going to make in a few minutes, that Senator
Moynihan and Senator Roth and you and Senator Bennett have called to
our attention, I hope that gets the job done.
I think in conference we are going to have to listen to Commissioner
Rossotti very, very carefully, because there is no question, if we do
not get this thing fixed right, the problems that will be created by
not being Y2K compliant will be much, much greater than any of the
problems we currently have with the IRS.
Mr. DODD. I thank immensely my colleague from Nebraska for his
comments. I do not know if I phrased this in the form of a question--
sort of a statement I have made about my concerns about this.
I know the Senator from Delaware, Mr. President, shares these
concerns. And he has been working with Senator Moynihan, his ranking
Democrat on this committee, to try to address this. And maybe he would
care to comment as well as to where we stand with this.
Mr. ROTH. I think, I say to the distinguished Senator, that we are
all very concerned about this problem of the year 2000. We must solve
it. We have no alternative. We have no choice. So we are all going to
work to accomplish that.
At the same time, it is critically important that we move ahead,
bringing about the kind of reforms we have been debating and talking
about this week. Neither one has to take a back seat. We want to move
forward together. I assure you that we have been working with Senator
Moynihan, with Commissioner Rossotti, as well as Joint Taxation. And
Senator Moynihan will be offering an amendment that will address some
of the concerns you are raising.
This is going to be an ongoing process. As time moves on, we may have
to adjust, because we are going to make certain, as the committee with
oversight responsibility, that this agency meets its obligations.
Mr. DODD. Mr. President, I thank my colleague and distinguished
chairman of the committee for that point. I say we have just begun this
special committee's work. We have not even had our first meetings yet.
This body only authorized the expenditure of funds for this committee a
few weeks ago. And there are seven of our colleagues, seven of us, who
will serve on this select committee--four members from the majority and
three from the minority, with Senator Bennett of Utah chairing the
effort.
We think it is an important issue that must be resolved. This
committee obviously has to go forward with its reform package. And I
just wanted to make sure we are on record here as saying this is a very
critical issue, as the Senator from Nebraska has pointed out. This is
one where you can't say we will fix it the second week in January or we
will fix it in February of the year 2000. The IRS will have to be
compliant and the Treasury will have to be compliant or we will have a
huge mess on our hands.
Amendment No. 2380
(Purpose: To provide effective dates which allow the Internal Revenue
Service to implement changes to the tax code and to meet the year 2000
computer conversion deadline)
Mr. DODD. Mr. President, if it is appropriate, I send an amendment to
the desk to be offered by Senator Moynihan, and I will send it on his
behalf. Senator Kerrey and I leave it open for others. Maybe Senator
Roth and Senator Bennett may want to be part of it. I ask for its
immediate consideration.
The PRESIDING OFFICER (Mr. Abraham). The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Connecticut [Mr. Dodd], for Mr. Moynihan,
for himself, Mr. Roth, Mr. Bennett, Mr. Kerrey, and Mr. Dodd,
proposes an amendment numbered 2380.
Mr. DODD. Mr. President, I ask unanimous consent reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
On page 308, line 12, insert ``the 2nd and succeeding''
before ``calendar quarters''.
On page 309, lines 7 and 8, strike ``the date of the
enactment of this Act'' and insert ``December 31, 1999''.
On page 343, line 24, insert:
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act,
except for automated collection system actions initiated
before January 1, 2000.
On page 345, lines 6 and 7, strike ``the date of the
enactment of this Act'' and insert ``December 31, 1999''.
On page 351, lines 13 and 14, strike ``the date of the
enactment of this Act'' and insert ``December 31, 1999''.
On page 357, lines 6 and 7, strike ``the date of the
enactment of this Act'' and insert ``December 31, 1999''.
On page 357, lines 9 and 10, strike ``the date of the
enactment of this Act'' and insert ``December 31, 1999''.
On page 357, lines 16 and 17, and insert:
(B) December 31, 1999.
On page 362, lines 12 and 13, strike ``the 60th day after
the date of the enactment of this Act'' and insert ``December
31, 1999''.
On page 382, line 2, strike ``60 days after the date of the
enactment of this Act'' and insert ``January 1, 2000''.
On page 383, line 14, insert ``, except that the removal of
any designation under subsection (a)(2)(A) shall not be
required to begin before January 1, 1999'' after ``Act''.
Mr. DODD. Mr. President, the distinguished majority and minority have
worked on this over the last number of days. I will let them speak for
themselves as to their endorsement of it.
I appreciate the chairman's efforts in this regard. I am heartened by
his comments that we will have to watch this, our little committee
will, and we will keep the Finance Committee well informed. If we
discover something, we will let you know very promptly if some other
remedial legislative action may be necessary for us to respond to this
issue. This will be true of other committees, as well, I say. This is a
tremendously serious issue.
I see my colleague from Georgia has arrived on the floor, and I know
Members want to move along. I am deeply grateful to the chairman and to
the ranking minority member and to others for allowing us to offer this
amendment. We think it will solve the problem raised here, that will
minimize the dangers to the Treasury Department and the IRS
noncompliance as we push reforms forward and find a crashing of the
system, which, as the Senator from Nebraska has pointed out, would be,
frankly, far more injurious than any of the problems we presently have.
As bad as the current problems are, a total system crash would be an
equally serious problem.
I will also offer some overall remarks about the bill, which the
distinguished manager and others have presented with us this afternoon.
I intend to support it, and I thank them for their efforts. As soon as
I have concluded those remarks, I will yield the floor and allow the
distinguished chairman and ranking member here, and others, to offer
whatever comments they want on this amendment and thank them.
Mr. President, I commend my colleagues on the Senate Finance
Committee, especially Chairman Roth, Senator Moynihan, and Senator
Kerrey of Nebraska for bringing this bill to the floor. It takes an
important step forward in the effort to protect the rights of our
nation's taxpayers.
The IRS is an agency under widespread, deeply felt, and entirely
justified criticism. In my view, the bill before us today is perhaps
one of the most critical the Senate will vote on this session.
It is no secret that the IRS has come under fire lately from
taxpayers who, in their dealings with the agency, have experienced
anger, frustration, and despair.
The hearings conducted by the Senate Finance Committee have
highlighted some of the problems at the IRS, including shoddy
management, poor taxpayer service, and in some cases, reports of
taxpayer abuse by IRS employees.
No one likes to pay taxes, but taxes are a fact of life in a
civilized society. Most Americans accept that fact.
What really gets people, however, is when personnel at the agency
that collects their taxes treats them with disrespect and carelessness.
No one deserves such treatment.
I have heard from many Connecticut constituents about what they feel
is unhelpful, unreasonable, and sometimes downright unpleasant
treatment by officers of the IRS.
I've heard stories from them about calls that aren't answered, and
about calls that are bounced from one person to the next, so that they
never find a
[[Page S4511]]
real answer to their questions, or receive any type of guidance or
support.
I've heard about the nightmare of the IRS losing taxpayer's checks,
and then charging them interest and penalties on the very funds that
the agency lost.
The list goes on and on, Mr. President, and the more people you talk
to, the more nightmares you hear.
Every citizen who pays taxes has a right to be treated fairly, and
treated as innocent until proven liable for failing to meet their legal
responsibilities. Although we have taken several steps in this regard
in the last few years, there is still more that can be done, and that
is why I support the bill before us today.
This legislation aims to transform this agency into an institution
that provides efficient and fair service, yet still has the ability to
effectively collect revenues.
The bill includes a number of important provisions to help America's
taxpayers.
First, the legislation would shift the burden of proof away from the
taxpayer, and expand the ability of taxpayers to recover costs and
litigation fees. These provisions will help ensure that the IRS
exercises appropriate caution and consideration prior to commencing
enforcement action against any taxpayer. For too long we've seen a
``shoot now, ask questions later'' approach to enforcement by the IRS.
These provisions are designed to see that the agency does its homework
before taking any action.
Secondly, it would establish a new IRS Oversight Board made up of six
members from the private sector, the IRS Commissioner, the Secretary of
the Treasury, and a member from an employee organization that
represents a substantial number of IRS employees. This board would,
among other things, review the operations of the IRS to ensure that our
nation's taxpayers are properly treated.
Third, this bill would establish the position of the National
Taxpayer Advocate who would have a background in customer service and
tax law, as well as experience representing individual taxpayers to
further ensure that taxpayers are treated fairly and that their rights
are not violated. In addition, the bill would create a system of local
taxpayer advocates thereby making the IRS more accessible and
responsive to taxpayers on a local level.
Fourth, this legislation would provide so-called innocent spouses
with a measure of relief by allowing taxpayers to elect to limit their
liability to the tax attributable to their income only. I'm sure that
many of my colleagues have heard stories similar to those I've heard in
Connecticut, about people who have become financially wiped out when
they find themselves liable for taxes, interest, and penalties because
of actions by their spouse of which they were unaware. The innocent
spouse provisions wold help prevent such scenarios from occurring in
the future.
Fifth, this bill would require the IRS to provide taxpayers with
better information regarding taxpayer rights, potential liabilities
when filing joint returns, and the appeals and collections process, and
would extend the attorney-client privilege confidentiality to any
individual authorized to practice before the IRS, including certified
public accountants, and enrolled agents and actuaries.
This legislation also includes a number of provisions designed to
give the IRS Commissioner flexibility to make structural and personnel
decisions in order to attract expertise from the private sector,
redesign its salary and incentive structures to reward employees who
meet objectives, and hold non-performing employees accountable.
Furthermore, it requires the IRS to terminate employees for certain
proven violations, chief of which are actions that mistreat taxpayers.
Finally, while this bill gives a degree of flexibility to the IRS to
make reforms internally, it also makes sure that there remains a
measure of Congressional accountability by requiring the IRS
Commissioner to report annually to Congress.
Obviously, Mr. President, the IRS is in need of dire reform and we
must hold it to the highest standards of efficiency and competence.
And, while I acknowledge and applaud the good work Commissioner
Rossotti has already put forth to turn this agency around, it is clear
that there is much left to be done.
The legislation before us today, which enjoys broad, bipartisan
support, is a tremendous step forward in our effort to protect the
rights of our nation's taxpayers, and we owe it to them to pass this
bill favorably. I urge my colleagues to join me in supporting the IRS
Restructuring and Reform Act of 1998.
Mr. MOYNIHAN. Mr. President, January 1, 2000 is just over 600 days
away. The century date change, or Y2K for short, is a matter of large
and serious consequence. In testimony before the Senate Commerce,
Committee, Federal Reserve Board Governor Edward Kelley Jr. estimated
that U.S. businesses will spend at least $50 billion on Y2K conversion,
with the worldwide repair cost potentially exceeding $300 billion.
The century date change is also an issue of surpassing difficulty for
the Internal Revenue Service. IRS Commissioner Charles Rossotti
recently stated in a USA Today interview:
The most compelling thing by far is fixing the computers so
they don't stop working on Jan. 1, 2000. . . . If we don't
fix (them), there will be 90 million people 21 months from
now who won't get refunds. The whole financial system of the
United States will come to a halt. It's very serious. It no
only could happen, it will happen if we don't fix it right.
In testimony before the Finance Committee last year, Linda Willis of
the General Accounting Office suggested that ``the IRS [may be] the
largest civilian year 2000 conversion, at least in the country, and
possibly in the world.'' She also testified that the Y2K problem could
be ``catastrophic'' if not addressed.
The century date change is the highest technology priority at the
IRS; more than 550 employees are at work on Y2K conversion-related
activities. The IRS will spend approximately $1 billion to become Y2K
compliant.
Unfortunately, the IRS has begun to experience complications in its
Y2K conversion efforts. On January 23, the Associated Press reported
that ``about 1,000 taxpayers who were current in their tax installment
agreements were suddenly declared in default,'' caused by ``an attempt
to fix a Year 2000 issue in one of the IRS computers.''
In addition, last year's Taxpayer Relief Act included hundreds of
changes in the tax laws, requiring diversions of scarce IRS computer
programming resources and causing a 3 month delay in the Agency's Y2K
efforts.
The Y2K problem is more complex than it may seem. The IRS computers
are outdated; the reprogramming must be done in obsolete computer
languages that are no longer taught in schools.
Mr. President, it was with these challenges in mind that Senator
Kerrey and I offered this amendment to briefly delay some of the
effective dates in the Finance Committee's IRS Restructuring
legislation in order to allow time for the Y2K conversion to be
completed. This amendment has been drafted based on Commissioner
Rossotti's recommendations, and has been modified after consultations
with the Majority.
The amendment would delay the effective date on a list of provisions
from date of enactment until after the century date change.
Regrettably, we were unable to reach agreement with the majority on
additional effective date delays that Commissioner Rossotti has
recommended. I fear we will come to regret this.
Mr. President I hope that in conference we will examine these
effective dates again, and that we will agree to change those that risk
interfering with Commissioner Rossotti's Y2K conversion program. I
thank the chair and yield the floor.
Mr. ROTH. Mr. President, I rise in order to accept this amendment--
which deals with the effective dates of many of the provisions in the
IRS Restructuring Bill.
As I have stated before, this legislation has three main purposes--
first, to reorganize, restructure, and re-equip the IRS to make it more
customer friendly in its tax-collecting mission; second, to protect
taxpayers from abusive practices and procedures of the IRS. And third,
to deal with the management problem and misconduct of some IRS
employees.
In order to accomplish these goals--to bring about fundamental
reform, we are enacting numerous provisions. Some of those provisions
will require the IRS to undergo significant reprogramming of its
systems; some of
[[Page S4512]]
them can be accomplished with little burden.
I recognize that the IRS needs to continue to function at the same
time that it makes these important changes. The IRS also needs to deal
with massive computer reprogramming brought about by the century date
change--the so called ``year 2000 problem.''
It is not my intention to impose unreasonable effective dates on the
IRS. At the same time, I recognize that sometimes we need to push the
IRS, to prompt it to make changes. We should not simply defer to their
assessment that they will be unable to accomplish the goals we have
set.
On April 23, Commissioner Rossotti expressed his concern that the
effective dates in our bill could severely impact the ability of the
IRS to deal with the year 2000 computer problem. I understood his
position.
Nevertheless, I believed then, and I believe now, that justice
delayed is justice denied. Many of the reforms in our bill are long
overdue. Taxpayers have already been waiting for them for a long time.
Innocent spouses should not have to wait any longer for relief.
Taxpayers in installment agreements should not have to wait any longer
for reduction of their failure to pay penalty. Taxpayers subject to IRS
audits should not have to wait any longer for the IRS to complete its
business.
To find a middle ground, I asked the staff of the Joint Committee on
Taxation to meet with representatives of the IRS in order to discuss
the impact of the effective dates. Joint Tax did so, and on Tuesday,
May 5, they provided Senator Moynihan and me with their
recommendations.
Joint Tax recommended that many of the effective dates remain the
same, but that some others be delayed.
This amendment adopts most of the recommendations made by Joint Tax.
Specifically, the amendment does not delay the effective date for the
major taxpayer protections in the bill.
The amendment does not delay innocent spouse relief--in other words,
as of the date of enactment of this bill, innocent spouses will no
longer suffer under the burden of paying for their spouse's tax fraud.
The amendment also does not delay due process for taxpayers--meaning
that among other things, taxpayers will receive rights of appeal and
rights of notice before their property is seized. These are fundamental
rights that we should get to taxpayers as soon as possible.
The amendment also does not delay what we have referred to as the one
year rule. This means that effective next tax year--1998--taxpayers
will know that the IRS has one year to tell them whether they owe any
additional tax. If the IRS is delinquent, all interest and penalties on
that additional tax will be suspended until the IRS gets its act
together and notifies the taxpayer of the deficiency.
The amendment also does not delay what we refer to as cascading
penalties. That means that taxpayers can designate which period their
deposits are applied to, and can avoid the situation where a taxpayer
is making payments, but nevertheless, accruing penalties even faster.
I have said already, these reforms are long overdue. Our guiding
principle should be rapid relief for American taxpayers--for the
individuals who have suffered long enough because of the practices and
procedures of the IRS. This bill is all about taxpayer protections. We
should deliver those protections to taxpayers as soon as possible.
I note that President Clinton recently stated that these reforms
should be enacted as soon as possible. I assume that he did not mean
that the law should go into effect two years from now.
Mr. President, this bill is also about changing the culture of the
IRS. Under Chairman Rossotti's leadership, that had already begun. We
expect that to continue. The fact that we are accommodating some of the
IRS' requests and delaying certain effective dates should not be taken
as a sign that we are not serious about reforming the agency. On that
subject, let there be no mistake. This bill will bring about
fundamental change at an agency that is in dire need of such change. We
expect the IRS to improve its service--to change its culture--to be
more responsive to taxpayers--at the same time that it implements its
system changes.
For those reasons, Mr. President, I will accept this amendment.
Mr. DODD. I have been informed by my colleague from Utah, Senator
Bennett, chairman of the select committee of the year 2000 problem,
would like to be added as a cosponsor.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KERREY. Mr. President, the amendment is acceptable on this side.
It was Senator Moynihan's amendment initially. I urge its adoption.
Mr. ROTH. Mr. President, I urge the adoption of the amendment.
The PRESIDING OFFICER. The question is on agreeing to the amendment.
The amendment (No. 2380) was agreed to.
Mr. DODD. I move to reconsider the vote.
Mr. KERREY. I move to lay it on the table.
The motion to lay on the table was agreed to.
Mr. ROTH. I ask unanimous consent when Senator Coverdell offers an
amendment regarding random audits, there be 15 minutes equally divided
for debate on the amendment. I further ask unanimous consent following
the expiration or yielding back of time, the Senate proceed to vote on
or in relation to that Coverdell amendment. Further, that no amendments
be in order to the Coverdell amendment prior to the vote.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. COCHRAN. Mr. President, reserving the right to object, does this
proposal preclude the consideration of any further amendments before
third reading?
Mr. ROTH. Senator Collins has an amendment.
Mr. COCHRAN. I withdraw my reservation.
Mr. KERREY. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. KERREY. 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. KERREY. I do not object to the unanimous consent request of the
Senator from Delaware, Mr. Roth.
The PRESIDING OFFICER. Is there objection to the unanimous consent
request?
Without objection, it is so ordered.
The Senator from Georgia is recognized.
Amendment No. 2353
(Purpose: To amend the Internal Revenue Code of 1986 to prohibit the
use of random audits, and for other purposes)
Mr. COVERDELL. I call up amendment 2353, which I believe is at the
desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Georgia [Mr. Coverdell], for himself, Mr. Cochran,
Mr. Frist and Mr. Hagel, proposes an amendment numbered 2353.
Mr. COVERDELL. Mr. President, I ask unanimous consent reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
On page 342, after line 24, add:
SEC. 3418. PROHIBITION OF RANDOM AUDITS.
(a) In General.--Section 7602 (relating to examination of
books and witnesses), as amended by section 3417, is amended
by adding at the end the following new subsection:
``(f) Limitations of Authority To Examine.--
``(1) Identification of purpose and basis for examination
required.--In taking any action under subsection (a), the
Secretary shall identify in plain language the purpose and
the basis for initiating an examination in any notice of such
an examination to any person described in subsection (a).
``(2) Random Audits prohibited.--The Secretary shall not
base, in whole or in part, the initiation of an examination
of a return under subsection (a) on the use of a
statistically random return selection technique from a
population or subpopulation.''
(b) Effective Date.--The amendments made by this section
shall apply to examinations initiated after April 29, 1998.
Mr. COVERDELL. Mr. President, I am going to be brief. This amendment
is designed to end random audits. The IRS said they did not do them. I
was suspicious. GAO says they do.
The GAO tell us 95 percent of the random audits today are focused on
poor
[[Page S4513]]
people, and there are a disproportionate number of them in the South
and in my State. I don't believe it is the American way to have random
audits. There is nothing in the return that suggests anything wrong and
yet, bang, you spin a roulette wheel and out you come and they are in
your face. It is unconscionable that they are in the face of poor
people who are least equipped to deal with it.
The GAO says to end these random audits would deny the Federal
Government a precious $2.8 million. Late this afternoon, the Joint Tax
Committee has said it would cause revenues of $1 billion a year.
This is why people are so upset with this city, the gamesmanship that
has to be played in order to correct something that is absolutely
wrong. The rules are working against me tonight but I will be back.
This GAO report shows conclusively that something needs to be done. We
will have our vote tonight. In deference to everybody's time, I won't
belabor it.
I believe the Senator from Mississippi would like to speak on this
from our time, and I yield to the Senator from Mississippi.
Mr. COCHRAN. Mr. President, when the distinguished Senator from
Georgia brought this problem up and I had a chance to look at some of
the information, the GAO audit showed there are 3,000 audits of this
kind performed each year. Of those audits, the report showed that 47
percent of them took place in Southern States.
I looked further and saw that the GAO found that there were more
random audits that took place in my State of Mississippi than in all of
the States of New England combined. I couldn't believe that. I wondered
why on Earth is that and then we find out that it is the working poor
who are being targeted by these random audits.
The numbers are just startling. Between 1994 and 1996, 94 percent of
random audits were performed on individual taxpayers who earned less
than $25,000 per year. If you think about that, these are people who
probably don't normally retain a lawyer or maybe even a CPA or other
tax advisor in the preparation of their audits.
So what the amendment would do, which I cosponsor with the Senator
from Georgia, is to require the IRS to give notice of why they are
conducting an audit of taxpayers like this. It raises a question of
just obvious unfairness. On its face, it is unfair and it ought to be
changed.
Mr. KERREY. Mr. President, I think the distinguished Senators from
Georgia and Mississippi have identified a problem, a dilemma we all
face from time to time. We sometimes get a score back from Joint Tax
that seems much higher than is logical, and that is what happened in
this case. So there will be a point of order that will have to be urged
against this amendment as a consequence of violating the pay-go
provisions of the Budget Act, section 202.
I regret that because I believe the Senators from Georgia and
Mississippi have identified a legitimate problem. I am frustrated
myself in not being able to deal with it in a more orderly fashion. It
is something the Finance Committee needs to take up and hold hearings
on, ask the IRS to come and tell us what they are doing in this case.
It seems to me that both the Senator from Georgia and the Senator
from Mississippi have identified a problem, and it is very difficult to
defend the IRS behavior in this case. I appreciate them bringing it to
our attention. I regret that you find yourselves, as many of us have
before, in the situation where you get a score back from the Joint Tax
Committee that seems, to say the least, a bit higher and that provokes,
as a consequence, a point of order.
Mr. LOTT addressed the Chair.
The PRESIDING OFFICER. The majority leader is recognized.
Mr. LOTT. Mr. President, I had not intended to speak on this
amendment, but I did want to speak in wrap-up on the bill itself, and
also to notify the Members of what the schedule would be. This seems
like a good time to do all of them because I have been inspired to want
to speak on this amendment.
I want to associate myself with the remarks of the Senator from
Georgia, and especially my colleague from Mississippi. This is totally
outrageous that this kind of random audit is going on, and the people
who are getting the brunt of it are the people at the low end of the
scale, from a poor State like my own State of Mississippi.
As a matter of fact, I believe we first got the inkling that this was
going on at hearings last fall when we had hearings in the Finance
Committee, because I remember being struck by the fact that States like
Mississippi and Idaho were the ones that had a disproportionate share
of these random audits.
I think a great job has been done on this bill, and there has been
bipartisan input. But this is an unfairness that cannot be allowed to
go on. I am going to support this amendment. I realize it is going to
be difficult, under the circumstances. But I plead now with the
chairman and the ranking member to get into this because we cannot
allow this to continue. It is just another example of the type of thing
going on at the IRS that I think Senators and the American people,
frankly, as a group, have been shocked to learn from the hearings that
we had, and as we are finding out more information. I commend the
Senator for his amendment. I call upon the committee to do more on this
and to work to make sure the IRS stops this kind of conduct.
Order of Procedure
Mr. President, for the information of all Senators, so they will have
a feel for what is going to be happening in the next few minutes, I
believe this will be the last vote on an amendment. Shortly, we will be
going to final passage on the IRS restructuring and reform bill--
hopefully, within the next few minutes. That will be the last vote of
the day when we get to final passage. The Senate will be in session
tomorrow for morning business speeches, confirmation of some Executive
Calendar nominations, and the entering into of several time agreements
with respect to energy legislation. However, no votes will occur during
Friday's session of the Senate.
On Monday, May 11, the Senate will consider a conference report,
along with, hopefully, at least three of the so-called high-tech bills.
We are working through the process now to clear those. The three we are
looking at on Monday are the S. 1618, an antislamming bill; S. 1260, a
uniform standards bill; S. 1723, skilled workers legislation. The
Senator in the Chair has been encouraging that. We are ``hotlining'' to
get those clear.
However, because of a particular problem with one of our Senators who
has had a death in the family, we will not have any recorded votes
during Monday's session of the Senate. But there will be business on
probably at least four major items. The Senate will also begin
consideration of Calendar No. 345, S. 1873, the missile defense bill,
which will be offered by the Senator from Mississippi, Senator Cochran.
On Tuesday, the Senate will attempt to reach a time agreement on the
D'Amato bill regarding in-patient health care for breast cancer, and
resume and complete action on any of the high-tech bills not completed
on Monday. Any votes ordered Monday will be postponed, to occur on
Tuesday, May 12, at approximately noon. The latter part of next week,
we expect to call up the DOD authorization bill.
I want to thank my colleagues for their cooperation in lining up this
schedule. Senator Daschle has been very helpful. Also, I thank our
colleagues for the cooperation they have given us on the important
legislation that is before us. I thank Senator Roth for his determined
leadership on this very important effort of reform and restructuring of
the IRS. Others were prepared to rush to judgment, but he said, no,
there is more to be done, there is more to know and more work that we
need to do on this important legislation. He persisted and he was
right. We have learned more and we have a better bill. I appreciate the
cooperation of Senator Moynihan. Senator Kerrey has been very much
involved, and I am glad that we have reached a conclusion. The American
people expect this. There is no issue now. I find, when I go to my
State, or others, nothing gets people more upset than what they have
experienced in dealing with the IRS.
Do they have an important job to do? Yes. Are there a lot of IRS
agents who do good work and don't like the intimidation and threats and
coverups going on there because of the misconduct?
[[Page S4514]]
Yes, there are good people there. But we have to stop the culture of
intimidation, and we have to shift the burden to the IRS, away from the
taxpayer. We have to stop some of the payments that they are having
thrust upon them. We have to stop a system that protects workers at IRS
that misbehave.
I think this bill will be a major step in that direction. It may not
be enough. This may be just the third in the Taxpayer Bill of Rights.
There may have to be a fourth and a fifth. But the Senate, the Congress
cannot let up. So I am pleased that we are going to bring this to a
conclusion this afternoon. I thank all the Senators who have been
involved in this effort.
I yield the floor.
Mr. KERREY. Mr. President, does the Senator from Georgia have any
final statements?
Mr. COVERDELL. No.
Mr. KERREY. According to the Joint Tax, as a consequence of the broad
nature of the prohibition of random audits, I believe this may end up
being the language:
The Secretary shall not use, in whole or in part, in the
initiation and examination of a return, under subsection (a),
the use of a statistically random selection technique for the
population of subpopulation.
Random audits can work. In this case, the Senator from Georgia and
the Senator from Mississippi have identified a problem with random
audits, and the problem is, if you throw them all out, it is a big
cost--Joint Tax says a billion dollars a year. So when all time is
yielded back, I am prepared to make a point of order against the
amendment.
Mr. COVERDELL. Mr. President, let me simply say that the incongruity
cannot be more clear that the agency says it doesn't do random audits;
yet, if they are prohibited, it would cost a billion dollars a year. We
have a problem we have to iron out here. As I said, GAO said it is $2.8
million. In deference to everybody's schedule here, I am prepared to
respond to the motion from the Senator from Nebraska.
Mr. KERREY. Mr. President, to be clear, so Members understand, the
IRS uses random audits for noncompliant taxpayers. We heard this
problem a bit as well during the National Commission on Restructuring.
A lot has to do with the ITC, and the effort we have had underway for
several years is appropriate. But the effort that we have had to go
after fraud under the ITC is producing a tremendous amount of problems.
We regard noncompliance to be noncompliance, whether it is high income,
middle income, or low income. If you have a noncompliant person in ITC,
you are doing a random audit. So I believe that may be the problem.
Again, I pledge to the Senators from Georgia and Mississippi that
this is something our committee needs to follow up on. It needs to
follow up and find out what the details are. As I said, I regret that
at some point, when time is yielded back, I will make a budget point of
order.
Mr. COVERDELL. I yield back all time.
Mr. KERREY. Mr. President, I make a budget point of order that the
amendment violates the pay-go provisions of the budget resolution.
Mr. COVERDELL. Mr. President, I move to waive the point of order and
ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. ROTH. Mr. President, I ask unanimous consent that the pending
motion be laid aside and a vote occur on or in relation to the
amendment at a time to be determined by the majority manager after
notification of the Democratic manager, with no amendments in order.
Mr. COVERDELL. Mr. President, will the Senator explain to me the
consequence of the unanimous consent? In other words, when will the
vote on the motion to waive the point of order occur?
Mr. ROTH. We have one further amendment that I am aware of and some
close-up business. But then we would have the vote on the motion as the
final vote.
Mr. COCHRAN. Mr. President, reserving the right to object.
The PRESIDING OFFICER (Mr. Bennett). The Senator from Mississippi is
recognized.
Mr. COCHRAN. Mr. President, may I ask the manager of the bill whether
or not this unanimous consent request would preclude raising another
amendment other than the one that the distinguished Senator from Maine
is going to raise prior to third reading?
Mr. ROTH. The answer is no.
Mr. COCHRAN. I withdraw my reservation.
Mr. KERREY. Mr. President, may I ask the distinguished Senator from
Mississippi is he referencing an amendment that was included in the
earlier unanimous consent, or is he talking about adding an amendment
that was not included in the unanimous consent.
Mr. COCHRAN. Mr. President, my purpose is to raise an issue that I
gave to the managers of the bill earlier. It relates to an amendment
that I proposed to offer and was hoping that the managers would be able
to accept.
Mr. KERREY. Mr. President, we have a problem here then, because this
would require a unanimous consent to add an additional amendment that
was not on the earlier unanimous consent request.
The PRESIDING OFFICER. There is a unanimous consent request before
the body. The Chair asks if there is objection raised?
Mr. KERREY. Is the unanimous consent request to add an additional
amendment?
Mr. ROTH. No.
The PRESIDING OFFICER. The unanimous consent is to set aside the
motion to waive for the consideration of another amendment prior to the
vote.
Is there objection?
Mr. ROTH. In other words, the purpose is to stack the votes.
Mr. KERREY. I have no objection.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Delaware.
Mr. ROTH. Mr. President, I think the distinguished Senator from Maine
now seeks recognition.
Ms. COLLINS addressed the Chair.
The PRESIDING OFFICER. The Senator from Maine.
Amendment No. 2381
(Purpose: To amend the Internal Revenue Code of 1986 to modify the
reporting requirements in connection with the education tax credit)
Ms. COLLINS. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Maine (Ms. Collins), for herself, and Mr.
DeWine, proposes an amendment numbered 2381.
Ms. COLLINS. 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:
At the end of subtitle H of title III, add the following:
SEC. . REPORTING REQUIREMENTS IN CONNECTION WITH EDUCATION
TAX CREDIT.
(a) Amounts to be Reported.--Subparagraph (C) of section
6050S(b)(2) is amended--
(1) in clause (i), by inserting ``and any grant amount
received by such individual and processed through the
institution during such calendar year'' after ``calendar
year'',
(2) in clause (ii), by inserting ``by the person making
such return'' after ``year'', and
(3) in clause (iii), by inserting ``and'' at the end.
(b) Effective Date.--The amendments made by this section
shall apply to returns required to be filed with respect to
taxable years beginning after December 31, 1998.
Ms. COLLINS. Mr. President, Senator DeWine and I are offering an
amendment to reduce some of the burdensome reporting requirements
placed on educational institutions by the Hope Scholarship and Lifetime
Learning Tax Credits.
These education tax incentives, which Congress created last year, are
of great benefit to students and their families. Unfortunately, our
attempt to expand educational opportunities has had the unintended
effect of imposing a burdensome and costly reporting requirement on our
post-secondary schools.
Beginning with tax year 1998, every college, university, and
proprietary school will have to provide the IRS with an array of
information that will do little, if anything, to assist in tax
collection. Not only will these schools have to report Social Security
numbers and the amount of qualified tuition and aid for each student,
the schools will also have to report to the IRS on the students'
attendance status and program level.
But that is not all, and the reporting requirements do not stop
there, Mr.
[[Page S4515]]
President. The schools will also be required to report either a
taxpayer ID number or Social Security number for the person who will
claim the tax credit--generally a parent or a guardian--for all
students who do not claim the tax credit themselves.
This administrative nightmare translates into real money.
The American Council on Education has estimated that this reporting
requirement will cost our colleges and universities $115 million in
1998 and $136 million in 1999.
Mr. President, I ask unanimous consent that a letter from the
American Council on Education relating to the results of its cost
survey be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
American Council on Education,
Washington, DC, April 22, 1998.
Hon. Susan M. Collins,
U.S. Senate, Washington, DC.
Dear Senator Collins: Thank you for your leadership in
addressing the reporting requirements imposed on colleges and
universities by the education tax provisions established by
the Taxpayer Relief Act of 1997.
The benefits of the Hope and Lifetime Learning tax credits
to individual taxpayers and to the nation's human capital
will be enormous. However, the costs imposed on colleges and
universities to collect and report data to the federal
government on the estimated 25 million individuals who are
eligible for the credits will be exorbitant.
As you may recall, the higher education community formed a
task force comprised of campus officials and staff from nine
associations to analyze and document the full extent of the
burden these regulations pose. Chaired by James E. Morley
Jr., president of the National Association of College and
University Business Officers (NACUBO), this task force asked
institutions to prepare cost estimates for compliance with
the reporting requirements based on a standard template
prepared by NACUBO.
Our initial estimates indicate that the aggregate costs to
colleges and universities of complying with the Taxpayer
Relief Act reporting requirements will be approximately $115
million for tax year 1998 and $136 million for tax year 1999.
The average cost of compliance increases in tax year 1999
because of an increase in the number of students benefiting
from the tax credits.
When broken down on a per student basis, these costs
translate into $3.41 per student record for 1998, and $2.90
per student record for 1999. These costs account for
resources required to obtain student data, file information
returns, integrate student data, respond to questions, and
for 1999, to obtain, process, and maintain information on
individuals certified by students as taxpayers who will claim
a tax credit.
The per student average camouflages the tremendous
variation in compliance costs among the nation's 6,000
institutions of higher education. The per student cost is
estimated to be as low as $1.40 at one research university
and as high as $21.00 at another institution. These
variations are attributable to the number of students
enrolled and the sophistication of campus information
systems. The California Community College system, for
example, which is comprised of 107 colleges and services over
2.4 million students, estimates it will cost $20 million just
to develop a system to comply with the reporting
requirements. Ongoing costs of complying with the
requirements are estimated to be $12.6 million per year.
We will continue to gather information to refine these
estimates in the weeks ahead. Nonetheless, the preliminary
figures highlight the challenges colleges and universities
are confronting as they develop systems to comply with
reporting rewquiremetns introduced by the Taxpayer Relief Act
of 1997.
Thank you again for your leadership and commitment to
reducing this burden. We look forward to continuing to work
closely with you to address this issue.
Sincerely,
Terry W. Hartle,
Senioir Vice President.
Ms. COLLINS. Mr. President, we should not delude ourselves about who
will end up paying the cost and price of these requirements.
Ultimately, the cost of compliance will be shifted from the schools to
the students and their families. As a result, the value of the Hope
Scholarship Program and Lifetime Learning Tax Credit will be
diminished.
Mr. President, the IRS has complained that eliminating these
reporting requirements will be too expensive, essentially arguing that
too many people who are not entitled to claim the exemption will do so.
I find this logic curious because with the other exemptions and credits
in the code, we require the taxpayers to report the necessary
information on their tax returns and maintain records of their expenses
to support any tax credit or deduction that they claim. It seems to me
that the education tax credits should receive the same treatment.
But let's assume that the IRS is correct, Mr. President, and that the
education tax credits should be treated differently--if that is the
case, why should the burden fall on our nation's colleges and
universities?
The fact is that the IRS already collects much of the information
needed to verify the validity of the tax credits.
Mr. President, I would like to ask the chairman of the committee and
the distinguished ranking minority member to join with Senator DeWine
and me in a request to the Joint Committee on Taxation to study this
issue and to look specifically at what the cost would be to the IRS to
develop a system to ensure compliance based on information that already
requires taxpayers to file. For example, taxpayers are already required
to file the name and the Social Security for their dependents. Many
experts maintain that the IRS already has much of the information that
it needs. It simply needs to modify its software to allow it to conduct
matches to verify the information.
Mr. President, it certainly is worth determining whether the cost to
the IRS would be less than or more than the $115 million that it will
cost our universities and colleges each year to comply with the
paperwork associated with these credits.
Mr. President, the rationale for the Hope and Lifetime Learning
credits was to make postsecondary education more affordable, and thus
more accessible to lower- and middle-income families. Unfortunately,
what Congress has given with one hand it has taken away at least in
part with its regulatory hand. It is within our power to fix this
problem. We should do so soon.
Tonight, pending the resolution of the larger issue, we can take one
small step to alleviate some of the burden imposed upon our colleges
and universities. The amendment that Senator DeWine and I are offering
will change the requirement for reporting the tuition and grant aid
pertaining to each student in a manner that will make it somewhat
easier for our postsecondary institutions to comply. The Joint
Committee on Taxation has scored the cost impact of the change as being
negligible, but the revision will help our colleges and universities.
I urge adoption of the amendment. I hope to have the cooperation of
the chairman and ranking minority member in addressing the larger
issue.
Now I would like to yield to my colleague from Ohio and my cosponsor,
Senator DeWine.
Mr. DeWINE addressed the Chair.
The PRESIDING OFFICER. The Senator from Ohio.
Mr. DeWINE. Mr. President, I want to take a minute to speak on behalf
of an amendment that Senator Collins and I have introduced to H.R.
2676, the IRS Reform bill.
Our amendment is common-sense legislation that will repeal certain
reporting requirements placed upon colleges and universities under
Section 6050 S of the Internal Revenue Code.
Here is the problem: Current law relating to the Hope Scholarship and
the Lifetime Learning tax credit requires all colleges and universities
to comply with burdensome and costly regulations. The Taxpayer Relief
Act of 1997 contained a provision requiring colleges, universities and
trade schools to begin issuing annual reports to students and the
Internal Revenue Service detailing the students' tuition payments in
case they apply for the new education tax credits. Preliminary analysis
shows the reporting requirements will cost the 6,000 colleges in
America more than $125 million to implement, and tens of millions of
dollars annually to maintain.
In realistic terms, if the new reporting requirement is not lifted
off the backs of colleges and universities, those schools will be
forced to raise tuition costs to cover the unfunded mandate. In effect,
students and families will not benefit from the passage of the Hope
Scholarship--because the money received from the tax credit will have
to be used to pay the higher tuition.
Mr. President, our amendment is simple, fair legislation that will
greatly benefit any persons who want to obtain an education.
In fact, similar legislation has already been introduced in the House
of Representatives by Congressman Donald Manzullo (R-IL). The House
bill is
[[Page S4516]]
supported by a bipartisan coalition comprised of 89 Members of the
House.
Senator Collins and I originally wanted to introduce the entire text
of our legislation, S. 1724, as an amendment to the IRS Reform bill.
Under current regulations, schools are required to report information
to the IRS on 100 percent of their students, even though only a
minority of students are expected to be eligible for the tax credit. S.
1724 would repeal this requirement. S. 1724 has been endorsed by the
American Association of State Colleges and Universities, the American
Association of Community Colleges, the National Association of State
Universities and Land Grant Colleges, the American Council on
Education, and a bi-partisan group of 19 Senators.
However, because of concerns which have been raised, we have modified
our amendment. While this amendment does eliminate a regulatory burden
placed on universities, it is only one part of what we want to
accomplish. I want to assure everyone that is concerned about the
increasing costs of higher education, that we will continue to fight to
eliminate unnecessary costs.
Mr. President, I ask my colleagues to support our amendment. It is
common-sense, effective legislation. I also want to thank Senator Roth
for his leadership on this issue and I appreciate his work with us on
this amendment.
Mr. President, I ask unanimous consent that letters from Cuyahoga
Community College, Columbus State, North Central Technical College,
Shawnee State University, Cleveland State University, Bowling Green
State University, Belmont Technical College, and the Ohio Association
of Community Colleges in support of our legislation be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Shawnee State University,
Portsmouth, OH, January 29, 1998.
Hon. Mike DeWine,
Russell Senate Building, Washington, DC.
Re Higher Education Reporting Relief Act of 1998.
Dear Senator DeWine: I am writing to you to solicit your
support of the Higher Education Reporting Relief Act of 1998
which Representative Donald A. Manzullo intends to introduce
in Congress. This Act will repeal Section 6050S of the
Internal Revenue Code, which was added last year as part of
the Hope Scholarships and Lifetime Learning tax credits.
While I was very supportive of the Hope Scholarship and
Lifetime Learning tax credit, the burden placed on
universities to report the data required in Section 6050S IRC
to taxpayers and families increases the cost of higher
education, dilutes the benefit, and is unnecessary for the
implementation of these tax benefits.
Most other tax credits and deductions do not place such a
data collection and reporting requirement on the provider of
service. This should be made a ``self-reporting'' requirement
subject to substantiation by records of college attendance
maintained by the taxpayer. For a smaller university like
Shawnee State, this new reporting requirement has a bigger
impact on our operations than some of the larger land grant
institutions.
I urge your support of Representative Manzullo's
legislation to relieve higher education from this burdensome
reporting requirement.
Sincerely yours,
Clive C. Veri,
President.
____
Bowling Green State University,
Bowling Green, Ohio, February 5, 1998.
Hon. R. Michael DeWine,
U.S. Senate, Russell Senate Building, Washington, DC.
Dear Senator DeWine: I am writing to encourage your support
of the ``Higher Education Reporting Relief Act'' being
introduced by Representative Donald A. Manzullo (R-IL). The
purpose of this legislation is to repeal the portion of the
``Taxpayer Relief Act of 1997'' requiring colleges and
universities to submit information to the Internal Revenue
Service (IRS). If passed, the amendment will make individuals
claiming education tax credits responsible for providing
requisite information.
As you may recall, the Lifetime Learning and Hope
Scholarship tax credits represented an important part of the
``Taxpayer Relief Act of 1997.'' However, as a result of this
legislation, there are new reporting requirements for Bowling
Green State University (BGSU) and all institutions of higher
education in Ohio and across the country.
These requirements place schools in an unfamiliar
intermediary position between students, tax filers and the
IRS and require the collection of information that schools
would not otherwise gather. In addition, the new reporting
requirements will cause BGSU to expend thousands of dollars
in both start up and on-going costs to comply. This
expenditure will place a significant burden on an already
limited institutional budget and detract from BGSU's primary
purpose--the education of citizens who seek to better
themselves and our country.
Passage of the Manzullo amendment would move the tax credit
reporting requirements from colleges and universities to
those individuals claiming the tax benefits. This system of
``self-reporting'' requisite information is an approach which
is successful for many other tax benefits. The change will
facilitate enforcement by the IRS, eliminate the need for an
unnecessary new and costly linkage between institutions and
the IRS, and better serve families and students.
Once again, I urge your support of the ``Higher Education
Reporting Relief Act'' which will alleviate a potentially
significant financial and human resource burden on colleges
and universities. Thank you for your interest and attention
to this matter.
Sincerely,
Sidney A. Ribeau,
President.
____
Belmont Technical College,
St. Clairsville, OH, March 18, 1998.
Senator Michael DeWine,
Russell Senate Building, Washington, DC.
Dear Senator DeWine: I recently received notice that you
have introduced legislation to relieve the burden of
potential costs imposed on colleges and universities by the
Hope Scholarship provisions of the Taxpayer Relief Act of
1997. Thank you for your support of this very important
issue. The failure to repeal this requirement will cause many
colleges and universities, including Belmont Technical
College, to cut important services in order to fund this
additional mandate.
Thank you again for your efforts to keep higher education
affordable for the residents of Appalachian Ohio. If I can
provide information to assist with this cause, please contact
me.
Sincerely,
John F. Clymer,
Interim President.
____
Cleveland State University,
Cleveland, OH, February 2, 1998.
Hon. Mike DeWine,
Senate Russell Office Building, Washington, DC.
Dear Senator DeWine: Last July as part of the Taxpayer
Relief Act of 1997, Congress passed a tax credit known as the
Hope Scholarship, for students in their first and second
years of higher education. As it currently stands,
Universities will be required under this law to provide new
and additional information on students to the U.S. Treasury
Department, placing us in the awkward position of middleman
between our students and the IRS.
In addition to the bad will such a requirement would create
between the University and our students, the law is a
expensive unfunded mandate on higher education. As you know,
unfunded mandates drive up tuition and take our attention
from our primary goal of educating our students.
We ask that you support the Higher Education Reporting
Relief Act of 1998, sponsored by Representative Manzullo of
Illinois, which would repeal section 6050S of the Internal
Revenue Code. Section 6050S is the section that would place
us in the position of data provider to the IRS. The Higher
Education Reporting Relief Act of 1998 will make tax returns,
the normal case for other tax benefits.
We will greatly appreciate your support of this effort and
hope you will keep us informed of the progress of the
legislation in Congress. Thank you.
Sincerely,
Thomas A. Lynch,
Special Assistant to the President
for Governmental Relations.
____
Ohio Association of
Community Colleges,
Columbus, OH, March 11, 1998.
Hon. R. Michael DeWine,
U.S. Senate, Washington, DC.
Dear Senator DeWine: Thank you very much for introducing a
bill to repeal the institutional reporting requirements for
the Hope Scholarship and Lifelong Learning Tax Credits. As
you know, the Higher Education Reporting Relief Act (HERRA)
would repeal the requirements, included in the Taxpayer
Relief Act Congress passed last year, that higher education
institutions collect and report information on all eligible
students to the Internal Revenue Service. The bill would
allow taxpayers to claim the education tax credit on their
income tax forms, similar to the way other tax deductions are
now reported. If the IRS questions a taxpayer's return, then
the IRS could audit the taxpayer, as it does now, and require
the taxpayer to produce the relevant documentation (receipts
or canceled tuition payment checks).
Putting the onus on the taxpayer, rather than the
institution, to report on the tax credit would save colleges
millions of dollars, simplify the process for students
seeking to claim the credit, and enable colleges to expend
more funds on programs rather than administrative costs.
Your support of the Higher Education Reporting Relief Act
is greatly appreciated.
Sincerely,
Terry M. Thomas,
Executive Director.
____
Cuyahoga Community College,
Cleveland, OH, March 5, 1998.
Hon. Michael DeWine,
Russell Senate Office Building,
Washington, DC.
Dear Senator DeWine: Thank you for the opportunity for two
of the College's trustees,
[[Page S4517]]
Trustee Chairperson Nadine Feighan and Trustee Stanley
Miller, along with the College's Executive Vice President,
Dr. Frank Reis, to meet with Mr. John Connelly of your
legislative staff on February 24, 1998 to provide you with
some insight into community college priorities within the
second session of the 105th Congress. As you know, community
colleges provide access to a broad spectrum of quality
educational opportunities and life experiences. Consistent
with this role, any proposed legislative language that
promotes the concept of open access, which is the cornerstone
of the community college mission, would be well received by
Cuyahoga Community College and, for that matter, all
community colleges throughout the nation.
Specifically, the priorities that were highlighted during
our recent discussion included the following:
Pell Grants--The Pell Grant is the foundation of federal
student financial aid programs, and is instrumental in
providing access to colleges for needy students. At Cuyahoga
Community College, nearly one-half of all aid ($9.5 million)
provides access for more than 6,000 of our students. We
believe that Pell Grants currently work well for community
college students.
Currently, the Administration is proposing to limit Pell
Grant eligibility to 150 percent of the length of a student's
program. We view this as a flexible access issue particularly
in light of many of our students being part-time requiring
developmental and remedial preparation before engaging in
degree level studies, and as such, we oppose the proposal to
limit eligibility during consideration of the reauthorization
of the Higher Education Act.
Cuyahoga Community College requests a Pell Grant maximum of
greater than $3,100, the amount requested by the
Administration. In response to the question raised by Mr.
Connelly regarding how much more the Pell Grant should be
raised we indicated that our preference would be to see a
$3,200 maximum grant level be implemented.
Vocational Education/Tech Prep--Community colleges are
requesting $120 million (a $17 million increase over FY98)
for the Tech Prep program, which provides for collaboration
between secondary and postsecondary institutions with low-
income students in their vocational education programs.
Currently, CCC is participating in the North Coast Tech Prep
Consortium along with area joint vocational schools. Our
Consortium success has earned it State performance-based
funding of $915,011 for FY99 when it will serve over 940
students. That number is projected to double the number of
students served within the next few years. Not only do we
support the proposed increase but also would like to see the
Tech Prep monies kept separate from other grant monies.
Tax Issues Regarding HOPE and Lifelong Learning Tax
Credits--In general, community colleges are pleased with the
Taxpayer Relief Act that contains a number of tax provisions
that greatly expand student access to the nation's community
colleges. Although Cuyahoga Community College, along with
most of the nation's community colleges, support the HOPE and
Lifelong Learning tax credits, there are concerns regarding
the reporting requirements necessitated by the statute.
Therefore we support H.R. 3127 that was introduced by
Representative Dan Manzullo (R-IL) to repeal the reporting
requirements associated with the credits while maintaining
the financial support those tax credits would provide to
students.
Senate Provision to extend eligibility for Perkins funds to
proprietary schools--Currently, Perkins funds are restricted
to non-profit educational institutions. H.R. 1983 maintains
this restriction. However, S. 1186 would extend eligibility
for Perkins funds to proprietary institutions. Nowhere in
federal workforce education or higher education policy do
for-profit institutions directly receive federal funds. In
addition, expanding the universe of eligible institutions for
limited federal vocation education dollars will drain funding
for long-standing community college vocational education
programs. Currently, Cuyahoga Community College uses its
$180,000 in Perkins funds to serve approximately 175 disabled
vocational students. Therefore the College, as well as the
community colleges across the country, oppose the provision
to extend eligibility for Perkins funds to for-profit
proprietary institutions.
The four summary positions in this letter represent the
priority areas to Cuyahoga Community College. If you should
have any questions regarding any of these positions or for
that matter, the listing of College federal grants requested
provided to your office during our visit, please call either
myself or Dr. Frank Reis, Executive Vice-President, Human
Resources and Administration (216-987-4776). Again, thank you
for your advocacy efforts in the U.S. Senate on behalf of
Cuyahoga Community College as well as the 1,100 community
colleges across the nation.
Sincerely,
Jerry Sue Thornton,
President.
Columbus State Community College,
Columbus, OH, March 6, 1998.
Hon. R. Michael DeWine,
Russell Senate Office Building,
Washington, DC.
Dear Senator DeWine: I want to thank you for taking time
from your busy schedule to meet with Pieter Wykoff and me to
discuss issues regarding the Reauthorization of the Higher
Education Act and the 1999 budget appropriations and tax
issue.
As we mentioned to you, the Pell grants are working well
for our students. However, the new reporting of the Hope
Scholarship tax credit is burdensome, and we do incur costs
to comply with all the reporting requirements. We urge you to
simplify this system as much as possible as it is being
proposed by Rep. Manzullo from Illinois.
Please let me know if there is any information we can
provide you or anything else that Columbus State can do to
facilitate your work. We enjoyed our visit with you and look
forward to seeing you again.
Sincerely,
M. Valeriana Moeller,
President.
____
North Central Technical College,
Mansfield, OH, January 30, 1998.
Senator Mike DeWine,
Russell Senate Building, Washington, DC.
Dear Senator DeWine: As you are aware, with the enactment
of the Hope Scholarship and Lifetime Learning tax credits,
institutions of higher education will be required to provide
extensive and detailed data to the Internal Revenue Service
on all currently enrolled students. While North Central
Technical College is a supporter of these educational tax
credits, the proposed reporting requirements will place an
overwhelming burden on its resources in order to maintain
compliance with the regulations.
Currently, NCTC, like all colleges and universities, is
faced with a myriad of mandated federal and state reporting
requirements. The addition of the Hope Scholarship and
Lifetime Learning tax credit program will only further
stretch already over-extended student and financial
information reporting systems. It would be terribly
unfortunate if colleges and universities were forced to
redirect resources, now aimed at providing direct services to
students, in order to comply with these new regulations.
Given the seriousness of this situation, I am asking that
you support the legislation ``Higher Education Reporting
Relief Act'' to be introduced next week by Representative
Donald A. Manzullo. This legislation will repeal Section
6050S of the Internal Revenue Code, thus alleviating
institutions from the responsibility of being a data provider
for individual students to the IRS.
Please be assured that, whatever the outcome of this
legislation, North Central Technical College will continue to
meet all the reporting requirements that are mandated, while
providing the best possible educational experiences that its
resources allow. However, since education is our purpose and
mission, I hope that the College will be able to direct its
resources to those that deserve them the most, our students.
Your consideration and support in this matter will be
greatly appreciated by the entire College community.
Sincerely,
Dr. Ronald E. Abrams,
President.
Mr. DeWINE. Mr. President, let me briefly state that the amendment
offered by myself and Senator Collins fixes parts of the problem. It
does not fix all of the problem. If we do not deal with the entire
problem, this is something that every Member of the Senate is going to
hear about. It is going to come back and you are going to hear about it
from every college and university in your State. We need to fix the
overall problem.
I appreciate Chairman Roth's willingness to work with us on this.
I urge adoption of this amendment.
The PRESIDING OFFICER. The Senator from Delaware.
Mr. ROTH. Mr. President, if there are no further speakers on this, I
would say that this amendment is acceptable to both sides, and I urge
its adoption.
The PRESIDING OFFICER. Is there further debate on the amendment? If
not, the question is on agreeing to the amendment.
The amendment (No. 2381) was agreed to.
Ms. COLLINS. Mr. President, 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.
Amendment No. 2382
(Purpose: To provide a managers' amendment)
Mr. ROTH. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Delaware [Mr. Roth] proposes an amendment
numbered 2382.
Mr. ROTH. 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 202, between lines 5 and 6, insert the following:
``(iv) Coordination with report of treasury inspector
general for tax administration.--To the extent that
information required to be reported under clause (ii) is also
[[Page S4518]]
required to be reported under paragraph (1) or (2) of
subsection (d) by the Treasury Inspector General for Tax
Administration, the National Taxpayer Advocate shall not
contain such information in the report submitted under such
clause.
On page 204, line 1, strike ``directly''.
On page 206, line 23, strike ``(2)'' and insert ``(3)(A)''.
On page 207, line 9, insert ``by the Internal Revenue
Service or the Inspector General'' before ``during''.
On page 207, line 20, strike ``(B)'' and insert ``(A)''.
On page 207, lines 24 and 25, strike ``not less than 1
percent'' and insert ``a statistically valid sample''.
On page 252, line 25, insert ``or taxpayer representative''
after ``taxpayer''.
On page 253, line 1, insert ``, taxpayer representative,''
after ``taxpayer''.
On page 253, line 5, insert ``or taxpayer representative''
after ``taxpayer''.
On page 253, line 6, insert ``, taxpayer representative''
after ``taxpayer''.
On page 253, line 12, insert ``, taxpayer representative''
after ``taxpayer''.
On page 254, lines 14 and 15, strike ``and their immediate
supervisors''.
On page 254, lines 17 and 18, strike ``individuals
described in paragraph (1)'' and insert ``such employees''.
On page 322, line 11, strike ``subsection'' and insert
``section''.
Mr. ROTH. Mr. President, this amendment consists of a number of
technical changes and has been cleared with the minority. I urge its
adoption.
The PRESIDING OFFICER. Is there further debate? If not, the question
is on agreeing to the amendment.
The amendment (No. 2382) was agreed to.
Amendments Nos. 2383, 2384, and 2385, en bloc
Mr. ROTH. Mr. President, I send three amendments to the desk, one by
Senator Graham of Florida, one by Senator Stevens of Alaska, and one by
Senator Bingaman. I ask unanimous consent that they be considered en
bloc.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
The clerk will report the amendments.
The legislative clerk read as follows:
The Senator from Delaware [Mr. Roth] proposes amendments
numbered 2383 through 2385, 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 are as follows:
amendment no. 2383
(Purpose: To apply the interest netting provision to all Federal taxes
and to open taxable periods occurring before the date of the enactment
of this Act, and for other purposes)
Beginning on page 307, line 6, strike all through page 308,
line 3, and insert:
SEC. 3301. ELIMINATION OF INTEREST RATE DIFFERENTIAL ON
OVERLAPPING PERIODS OF INTEREST ON TAX
OVERPAYMENTS AND UNDERPAYMENTS.
(a) In General.--Section 6621 (relating to determination of
rate of interest) is amended by adding at the end the
following new subsection:
``(d) Elimination of Interest on Overlapping Periods of Tax
Overpayments and Underpayments.--To the extent that, for any
period, interest is payable under subchapter A and allowable
under subchapter B on equivalent underpayments and
overpayments by the same taxpayer of tax imposed by this
title, the net rate of interest under this section on such
amounts shall be zero for such period.''.
(b) Conforming Amendment.--Subsection (f) of section 6601
(relating to satisfaction by credits) is amended by adding at
the end the following new sentence: ``The preceding sentence
shall not apply to the extent that section 6621(d)
applies.''.
(c) Effective Dates.--
(1) In general.--Except as provided under paragraph (2),
the amendments made by this section shall apply to interest
for periods beginning after the date of the enactment of this
Act.
(2) Special rule.--Subject to any applicable statute of
limitation not having expired with regard to either a tax
underpayment or a tax overpayment, the amendments made by
this section shall apply to interest for periods beginning
before the date of the enactment of this Act if the
taxpayer--
(A) reasonably identifies and establishes periods of such
tax overpayments and underpayments for which the zero rate
applies, and
(B) not later than December 31, 1999, requests the
Secretary of the Treasury to apply section 6621(d) of the
Internal Revenue Code of 1986, as added by subsection (a), to
such periods.
SEC. 3301A. PROPERTY SUBJECT TO A LIABILITY TREATED IN SAME
MANNER AS ASSUMPTION OF LIABILITY.
(a) Repeal of Property Subject to a Liability Test.--
(1) Section 357.--Section 357(a) (relating to assumption of
liability) is amended by striking ``, or acquires from the
taxpayer property subject to a liability'' in paragraph (2).
(2) Section 358.--Section 358(d)(1) (relating to assumption
of liability) is amended by striking ``or acquired from the
taxpayer property subject to a liability''.
(3) Section 368.--
(A) Section 368(a)(1)(C) is amended by striking ``, or the
fact that property acquired is subject to a liability,''.
(B) The last sentence of section 368(a)(2)(B) is amended by
striking ``, and the amount of any liability to which any
property acquired from the acquiring corporation is
subject,''.
(b) Clarification of Assumption of Liability.--Section
357(c) is amended by adding at the end the following new
paragraph:
``(4) Determination of amount of liability assumed.--For
purposes of this section, section 358(d), section
368(a)(1)(C), and section 368(a)(2)(B)--
``(A) a liability shall be treated as having been assumed
to the extent, as determined on the basis of facts and
circumstances, the transferor is relieved of such liability
or any portion thereof (including through an indemnity
agreement or other similar arrangement), and
``(B) in the case of the transfer of any property subject
to a nonrecourse liability, unless the facts and
circumstances indicate otherwise, the transferee shall be
treated as assuming with respect to such property a ratable
portion of such liability determined on the basis of the
relative fair market values (determined without regard to
section 7701(g)) of all assets subject to such liability.''
(c) Application to Provisions Other Than Subchapter C.--
(1) Section 584.--Section 584(h)(3) is amended--
(A) by striking ``, and the fact that any property
transferred by the common trust fund is subject to a
liability,'' in subparagraph (A),
(B) by striking clause (ii) of subparagraph (B) and
inserting:
``(ii) Assumed liabilities.--For purposes of clause (i),
the term `assumed liabilities' means any liability of the
common trust fund assumed by any regulated investment company
in connection with the transfer referred to in paragraph
(1)(A).
``(C) Assumption.--For purposes of this paragraph, in
determining the amount of any liability assumed, the rules of
section 357(c)(4) shall apply.''
(2) Section 1031.--The last sentence of section 1031(d) is
amended--
(A) by striking ``assumed a liability of the taxpayer or
acquired from the taxpayer property subject to a liability''
and inserting ``assumed (as determined under section
357(c)(4)) a liability of the taxpayer'', and
(B) by striking ``or acquisition (in the amount of the
liability)''.
(d) Conforming Amendments.--
(1) Section 351(h)(1) is amended by striking ``, or
acquires property subject to a liability,''.
(2) Section 357 is amended by striking ``or acquisition''
each place it appears in subsection (a) or (b).
(3) Section 357(b)(1) is amended by striking ``or
acquired''.
(4) Section 357(c)(1) is amended by striking ``, plus the
amount of the liabilities to which the property is
subject,''.
(5) Section 357(c)(3) is amended by striking ``or to which
the property transferred is subject''.
(6) Section 358(d)(1) is amended by striking ``or
acquisition (in the amount of the liability)''.
(e) Effective Date.--The amendments made by this section
shall apply to transfers after the date of the enactment of
this Act.
Amendment No. 2384
On page 355, insert after line 19 the following:
(d) State Fish and Wildlife Permits.--(1) With respect to
permits issued by a State and required under State law for
the harvest of fish or wildlife in the trade or business of
an individual taxpayer, ``other assets'' as used in section
3445 shall include future income that may be derived by such
taxpayer from the commercial sale of fish or wildlife under
such permit.
(2) The preceding paragraph may not be construed to
invalidate or in any way prejudice any assertion that the
privilege embodied in such permits is not property or a right
to property under the Internal Revenue Code.
Mr. STEVENS. Mr. President, I have a reasonable amendment to this
bill relating to a very unique ``tool of the trade'' in the fishing
industry of Alaska. the bill already would increase the cap for the
value of tools of the trade exempted from IRS levy to $5,000, up from
$1,250.
My amendment addresses a class of tools--State-issued permits that
give their holder the privilege to commercially harvest fish or game in
our State.
The State of Alaska has never conceded that these permits are
property that may be seized by IRS. Yet, the IRS seizes them, without
giving any consideration to the unique circumstances in Alaska,
particularly western Alaska.
In those villages, commercial fishing is the only industry. If you
don't have a fishing job, you do not have a job.
[[Page S4519]]
When a fisherman in that area fails to pay taxes on time, the IRS
never gives any consideration to the fact that without the fishing
permit, the taxpayer would have no way to pay back taxes.
In addition, he or she will then have no way to support their
children, their family, pay child support, or buy heating oil for their
house, or face other problems.
We do have a problem in western Alaska--the IRS estimates that
commercial fishermen owe over $20 million in back taxes. That is not
much, nationally. But as one IRS agent visiting rural Alaska pointed
out, they have in some cases been trying to collect taxes from people
who did not even know the IRS existed.
There are positive changes, in the bill with respect to IRS
collection procedures, but the language and cultural barriers, and
isolation of vast areas of Alaska still lead to results that people in
the rest of the country find hard to believe.
Instead of exempting State permits entirely from IRS levies, I have
accepted a compromise. Under section 3445 of the bill, the IRS will be
required, before seizing the assets of a small business, to first
determine that the business owner's ``other assets'' are not sufficient
to pay the back taxes and expenses of IRS proceedings.
My compromise would require the IRS to consider future income from
State-issued fish and game permits as ``other income'' in its
determination before making a levy on such permits. This means the IRS
must consider whether the future income from the permit would allow the
fishermen to pay the tax debt and procedural expenses before the
maximum time possible for repayment under law has occurred.
In treating these permits as an asset used in a trade or business,
Congress does not intend to determine whether such permits are property
or a right to property. We only mean to say that as long as the IRS
asserts that the permits are property or a right to property, the
holder should have the added protection of having future income
considered.
amendment No. 2385
(Purpose: Relating to the report ont ax complexity and low-income
taxpayer clincs)
On page 375, line 11, strike the period and insert ``,
including volunteer income tax assistance programs, and to
provide funds for training and technical assistance to
support such clinics and programs.''
On page 375, line 22, strike ``or''.
On page 376, line 2, strike the period and insert
``, or''.
On page 376, between lines 2 and 3, insert:
``(III) provides tax preparation assistance and tax
counseling assistance to low income taxpayers, such as
volunteer income tax assistance programs.''
On page 376, line 20, strike ``and''.
On page 376, line 25, strike the period and insert ``and''.
On page 376, after line 25, insert:
``(C) a volunteer income tax assistance program which is
described in section 501(c) and exempt from tax under section
501(a) and which provides tax preparation assistance and tax
counseling assistance to low income taxpayers.''
On page 377, line 9, strike ``$3,000,000'' and insert
``$6,000,000''.
On page 377, line 11, after the end period, insert ``Not
more than 7.5 percent of the amount available shall be
allocated to training and technical assistance programs.''
On page 377, line 15, insert ``, except that larger grants
may be made for training and technical assistance programs''
after ``$100,000''.
On page 378, line 16, insert ``(other than a clinic
described in paragraph (2)(C))'' after ``clinic''.
On page 396, strike lines 18 through 20, and insert
``Finance of the Senate. The report shall include any
recommendations--
(A) for reducing the complexity of the administration of
Federal tax laws, and
(B) for repeal or modification of any provision the
Commissioner believes adds undue and unnecessary complexity
to the administrator of the Federal tax laws.
Mr. ROTH. Mr. President, these amendments have been cleared on both
sides of the aisle. I urge their adoption.
The PRESIDING OFFICER. The question is on agreeing to the amendments.
The amendments (Nos. 2383, 2384, and 2385) were agreed to en bloc.
Mr. McCAIN. Mr. President, 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. ROTH. There are no further amendments.
Mr. President, there are no further amendments.
Amendment No. 2353--Motion to waive the Budget Act
The PRESIDING OFFICER. Under the previous order, the question is on
agreeing to the motion to waive the Budget Act made by the Senator from
Georgia. The yeas and nays have been ordered. The clerk will call the
roll.
Mr. ROTH. Mr. President, I ask unanimous consent that we shorten the
vote to 10 minutes on the second amendment.
The PRESIDING OFFICER. Is there objection? The Chair hears none, and
it is so ordered.
The clerk will call the roll.
The legislative clerk called the roll.
Mr. NICKLES. I announce that the Senator from South Carolina (Mr.
Thurmond) is necessarily absent.
I further announce that, if present and voting, the Senator from
South Carolina (Mr. Thurmond) would vote yea.
Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn), is
necessarily absent. I announce that the Senator from Hawaii (Mr. Akaka)
is absent because of a death in the family.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
who desire to vote?
The yeas and nays resulted--yeas 37, nays 60, as follows:
[Rollcall Vote No. 125 Leg.]
YEAS--37
Abraham
Ashcroft
Bennett
Bond
Brownback
Burns
Campbell
Coats
Cochran
Coverdell
Craig
D'Amato
DeWine
Enzi
Faircloth
Frist
Grams
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Kempthorne
Kyl
Lott
Lugar
Mack
McCain
McConnell
Santorum
Smith (NH)
Smith (OR)
Thomas
Thompson
Warner
NAYS--60
Allard
Baucus
Biden
Bingaman
Boxer
Breaux
Bryan
Bumpers
Byrd
Chafee
Cleland
Collins
Conrad
Daschle
Dodd
Domenici
Dorgan
Durbin
Feingold
Feinstein
Ford
Gorton
Graham
Gramm
Grassley
Harkin
Hollings
Inouye
Jeffords
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Mikulski
Moseley-Braun
Moynihan
Murkowski
Murray
Nickles
Reed
Reid
Robb
Roberts
Rockefeller
Roth
Sarbanes
Sessions
Shelby
Snowe
Specter
Stevens
Torricelli
Wellstone
Wyden
NOT VOTING--3
Akaka
Glenn
Thurmond
The PRESIDING OFFICER. On this vote, the yeas are 37, the nays are
60. Three-fifths of the Senators duly chosen and sworn not having voted
in the affirmative, the motion is rejected. The point of order is
sustained, and the amendment falls.
The amendment of the Senator from Georgia would result in a loss of
$9 billion----
Mr. BYRD. Mr. President, we cannot hear what is being said. The
Senate is not in order.
The PRESIDING OFFICER. The Senate will be in order.
The amendment of the Senator from Georgia would result in a loss of
$9 billion in revenues during the fiscal years covered by the
Concurrent Resolution on the Budget without any offset. Therefore, it
violates the pay-as-you-go provisions contained in section 202 of H.
Con. Res. 67 of the 104th Congress.
(Subsequently the following occurred.)
Change of Vote
Mr. GRAMS. Mr. President, on rollcall vote 125, I was recorded as
voting ``no.'' I voted ``aye.'' I ask unanimous consent the official
Record be directed to accurately reflect my vote. This will in no way
change the outcome of the vote.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The foregoing tally has been changed to reflect the above order.)
The PRESIDING OFFICER. If there be no further amendments to be
proposed, the question is on agreeing to the committee amendment in the
nature of a substitute, as amended.
The committee amendment, as amended, was agreed to.
The PRESIDING OFFICER. The question is on the engrossment of the
[[Page S4520]]
committee amendment, as amended, and third reading of the bill.
The amendment was ordered to be engrossed, and the bill to be read a
third time.
The bill was read a third time.
Mr. GRAMM. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The bill having been read the third time, the
question is, Shall the bill, as amended, pass? The yeas and nays have
been ordered. The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. NICKLES. I announce that the Senator from South Carolina (Mr.
Thurmond), is necessarily absent.
I further announce that, if present and voting, the Senator from
South Carolina (Mr. Thurmond), would vote yea.
Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn), is
necessarily absent.
I also announce that the Senator from Hawaii (Mr. Akaka), is absent
because of a death in family.
The result was announced--yeas 97, nays 0, as follows:
[Rollcall Vote No. 126 Leg.]
YEAS--97
Abraham
Allard
Ashcroft
Baucus
Bennett
Biden
Bingaman
Bond
Boxer
Breaux
Brownback
Bryan
Bumpers
Burns
Byrd
Campbell
Chafee
Cleland
Coats
Cochran
Collins
Conrad
Coverdell
Craig
D'Amato
Daschle
DeWine
Dodd
Domenici
Dorgan
Durbin
Enzi
Faircloth
Feingold
Feinstein
Ford
Frist
Gorton
Graham
Gramm
Grams
Grassley
Gregg
Hagel
Harkin
Hatch
Helms
Hollings
Hutchinson
Hutchison
Inhofe
Inouye
Jeffords
Johnson
Kempthorne
Kennedy
Kerrey
Kerry
Kohl
Kyl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lott
Lugar
Mack
McCain
McConnell
Mikulski
Moseley-Braun
Moynihan
Murkowski
Murray
Nickles
Reed
Reid
Robb
Roberts
Rockefeller
Roth
Santorum
Sarbanes
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Torricelli
Warner
Wellstone
Wyden
NOT VOTING--3
Akaka
Glenn
Thurmond
The bill (H.R. 2676), as amended, was passed, as follows:
The text of H.R. 2676, as amended, will be printed in a future
edition of the Record.
Mr. ROTH. Mr. President, I move to reconsider the vote.
Mr. KERREY. I move to lay it on the table.
The motion to lay on the table was agreed to.
Mr. ROTH. Mr. President, as we bring these deliberations on IRS
restructuring to a close, I want to express my appreciation to everyone
who has strongly supported this necessary legislation. I am
particularly proud of the fact that it was unanimously supported on the
floor of the Senate this evening. I again want to reiterate my belief
that the Internal Revenue Service--with its 102,000 employees--is
filled with hard-working, service-oriented, honorable men and women.
The problem, Mr. President, is that the agency, itself, has too much
power and not enough sunshine.
It is marked by an environment where even a few overly aggressive,
vindictive, arrogant, or power-hungry individuals can get away with
trampling the rights of honest Americans. It is an environment where
honesty can be met by retaliation, where employees are frightened to
come forward to report and correct abuses, and where the taxpayer is
often perceived as the enemy and not the customer.
The legislation we have passed today will go a long way towards
correcting these problems. Will it do everything we would like it to
do? No. There needs to be a cultural shift inside the agency itself.
This legislation will provide a catalyst for that shift. Is this bill
a good start toward long-term reform? Absolutely.
This legislation will allow Commissioner Rossotti to implement the
necessary reforms and restructuring that need to be done to bring the
agency into the 21st century. It is a strong bill, building on what the
House passed last November. It is what the American people need to
strengthen fundamental protections. However, Congress must not see this
as the be-all-and-end-all of offering taxpayers the protection and
service they need when it comes to the IRS.
We need to continue our oversight efforts. We need to make sure that
the provisions we have included in our legislation are taken seriously
by the agency and embraced in the manner in which they are intended.
Mr. President, this thorough and comprehensive piece of legislation
is the product of a collective effort. It represents the best work and
thinking from both sides of the aisle.
I express my sincere appreciation to my colleagues, particularly
Senator Moynihan, as well as Senators Charles Grassley and Bob Kerrey,
both of whom worked on the National Restructuring Commission with
Congressman Rob Portman. I'm grateful to Chairman Archer and those on
the Ways and Means Committee who provided a solid foundation upon which
we built this legislation, and to my colleagues on the Finance
Committee who diligently sat through our extensive oversight and
restructuring hearings and voted this legislation out of committee
unanimously.
I am also grateful to those who have spoken so eloquently as
proponents of this legislation here on the floor.
I also appreciate the hard work our staffs have put in. I'm grateful
to our investigators--Eric Thorson, Debbie McMahon, Kathryn Quinn,
Anita Horn, and Maureen Barry. I'm grateful to Frank Polk, Joan
Woodward, and Mark Patterson, to Tom Roesser, Mark Prater, Sam Olchyk,
Brig Pari, Bill Sweetnam, Jeff Kupfer, Nick Giordano, and Ann Urban. I
also want to thank Jane Butterfield, Mark Blair, and Darcell Savage.
I believe the future will remember the work we have done here. The
history of the Internal Revenue Service is marked by aggressive tax
collecting tactics and consequent Congressional efforts to reform the
agency. Those reforms, however, often did not go far enough, and they
were not accompanied by a dedication to sincere oversight. These
reforms, Mr. President, do go far.
They are the most extensive reforms ever made to balance power and
responsibility inside what can only be characterized as one of
America's most powerful agencies. And, as we have heard over the past
few days here on the floor, this Congress is dedicated to continued
oversight.
In closing, I am pleased to work with Senator Kerrey, the floor
manager for the Democrats. I think it has been a great collective
effort.
Mr. KERREY. ``The barriers are crumbling; the system is working.''
Mr. President, those are the words of David Broder. He wrote them in
a Washington Post op-ed on October 21, 1997 as he commented on the
progress being made on IRS reform.
Mr. Broder was commenting at the time that in an increasingly
partisan climate on Capitol Hill, the work of Representatives Portman,
Cardin, Senator Grassley, and I and how this legislation is moving
along was a classic example of how our democratic system can work and
that by ``beating the odds'' we were on the verge of giving the
Internal Revenue Service ``the shake-up it clearly needs.''
Mr. President, good news comes to the American taxpayers today. The
Senate is about to pass historic IRS reform legislation that will touch
the lives of hundreds of millions of Americans.
This is a long, detailed bill, Mr. President, but I can summarize its
intent in a simple well known phrase: of, by and for the people. That
is the kind of government we have--of, by and for the people. The
premise of our effort from the beginning was that the IRS works for the
taxpayer, not the other way around. The impact, I hope, will be equally
simple. When you call the IRS, you should get a helpful voice, not a
busy signal. That helpful voice should have the resources to help you
answer the simple question: ``How much do I owe?'' If one of the rare
bad apples in the IRS abuses a taxpayer, the Commissioner should be
able to fire him. The vast majority of IRS employees who are capable
and committed public
[[Page S4521]]
servants should be empowered to do their jobs--helping the equally vast
majority of American taxpayers who want to comply with the law to do
so.
This bipartisan, bicameral effort dates back to 1995, when Senator
Shelby and I, in our roles on the Appropriations Committee, wrote
language into the law creating the National Commission on Restructuring
the IRS.
It continued with Representative Rob Portman and Senator Grassley and
I with our work on the commission after we issued our report in June
1997, and moved forward again when we introduced legislation in the
House, with Representative Ben Cardin, and in the Senate by July 1997.
It progressed to Chairman Roth and Senator Moynihan when the Finance
Committee began our hearings in September 1997, as well as with House
Ways and Means Chairman Archer in the House. And along the way we
received the critical support of Speaker Gingrich, Secretary Rubin, the
President and Commissioner Rossotti.
I am proud to have been a part of this effort. We are a nation of
laws, Mr. President. As legislators we are given the charge by the
American people to write effective laws, as well as change those
that are not. While this debate has sometimes been contentious, in the
end the finished product--the law that we will have written--will be an
effective one because in the end Congress's efforts have been about
doing what is right and what is best.
In the beginning, many members of Congress and our commission were
shocked to hear that before these efforts, there had been no real
reform to the IRS in 50 years and no oversight hearings by the Senate
Finance Committee ever.
That was Congress's fault.
During our deliberations in the Senate this week, we have been
mindful of the fact that Congress has had a critical role in allowing
the IRS to become the mess we now have decided to clean up.
We have acknowledged that the IRS is not Sears & Roebuck--and that we
are its Board of Directors. We write the tax laws, we are responsible
for the oversight and we are the ones who can make the necessary
changes.
I am not an IRS apologist. I would not have embarked on this mission
nearly four years ago if I thought all was well with the agency. And
while I always knew the IRS was acting in a damaging fashion toward
American taxpayers and in need of reform, my learning over the years
solidified the notion that the need for reform was dire.
As we move toward enacting this legislation into law, we should be
proud of the fact that we are changing the culture at the IRS so that
the agency will serve taxpayers and not treat them as if it is the
other way around, that we are giving Commissioner Rossotti the
statutory authority he needs to do his job effectively, that we are
creating legislation that will make it easier for all Americans to file
their taxes and get information, that we are going to make sure the IRS
has the ability to do the job Congress has told them to, and that we
are changing the way tax laws are written so that never again will a
provision pass without a cost analysis of compliance and
administration.
Mr. President, more Americans pay taxes than vote. The perception of
how our government treats us--its citizens--is rooted more in our
contact with the IRS than with any other U.S. agency or entity.
How we are treated by the IRS--and our tax laws--effects our
perception of whether or not we believe we have a fair shot at the
American Dream and whether or not we are a government of, by and for
the people.
We have taken great strides today to change that perception.
I thank my colleagues for their efforts on this important and
historic piece of legislation and I am very hopeful we will have a
swift and effective conference with the House so that the President can
sign this bill into law before June 1.
Mr. President, I add my thanks to the Democratic staff and the
Republican staff, all of whom were listed by the distinguished chairman
of the Finance Committee, Senator Roth. It has been a pleasure working
with Senator Roth. I want to also thank Congressman Rob Portman. I
especially thank the ranking Democrat on the Finance Committee, Senator
Moynihan, for giving me the opportunity to manage this bill.
staff of the national commission on restructuring the internal revenue
service
Mr. President, I would like to take a moment to thank the staff of
the National Commission on Restructuring the Internal Revenue Service
for their devotion to the cause of reforming the IRS. We would not have
the strong reform legislation before us today without the hard work and
patience of these individuals. They staffed 12 public hearings, 3 town-
hall meetings, hundreds of hours of closed-door sessions with
Restructuring commissioners, and interviewed many hundreds of present
and former IRS officials, practitioner groups, and average taxpayers.
They drafted and redrafted many times the Commission report, ``A Vision
for a New IRS.''
But, most importantly, they worked with the many staff members and
Members of Congress to help facilitate the bipartisan bill that we are
about to vote on today. The U.S. Senate owes them a debt of gratitude
for their year long effort. They are: Jeffery Trinca, Chief of Staff;
Anita Horn, Deputy Chief of Staff; Douglas Shulman, Senior Policy
Advisor and Chief of Staff from June to September of 1997; Charles
Lacijan, Senior Policy Advisor; Dean Zerbe, Senior Policy Advisor;
Armando Gomez, Chief Counsel; George Guttman, Counsel; Lisa McHenry,
Director of Communications and Research; James Dennis, Counsel; John
Jungers, Research Assistant; Andrew Siracuse, Research Assistant;
Damien McAndrews, Research Assistant; Margie Knowles, Office Manager;
and Janise Haman, Secretary.
Mr. SPECTER addressed the Chair.
The PRESIDING OFFICER. The Senator from Pennsylvania is recognized.
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