[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

[[Page S4490]]

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.

[[Page S4491]]

  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.

[[Page S4492]]

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.

[[Page S4493]]

  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,

[[Page S4502]]

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

[[Page S4503]]

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

[[Page S4505]]

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.

                          ____________________