[Congressional Record Volume 155, Number 38 (Wednesday, March 4, 2009)]
[Senate]
[Pages S2725-S2728]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   PRIVATE DEBT COLLECTION AMENDMENT

  Mr. GRASSLEY. Mr. President, I rise for the purpose of discussing an 
amendment that was filed yesterday that I hope I get an opportunity to 
offer. I am going to touch on these points, but I thought I would 
highlight a couple points about this amendment.
  First of all, there is bipartisan agreement in this body there is a 
$290 billion tax gap--``tax gap'' meaning taxes that are owed but not 
collected. There is also an understanding that is not written that the 
IRS is not going to go after taxes unpaid, through their own employees, 
of under $25,000 a year. There is a feeling by some people in the IRS 
there ought to be more employees hired to go after the tax gap, but 
even if those additional employees are hired, they still will not go 
after those under $25,000.
  Now, we have a program in place I wish to defend in my remarks. That 
program in place is the IRS contracting with private collection 
agencies to go after the money that is owed for those under $25,000; 
and to make the point, that program is working. But the bill before us, 
the Omnibus appropriations bill, contains a provision that would 
essentially kill the IRS private debt collection program, which the 
Senate, working through the Senate Finance Committee I serve on, only 
authorized a short period of 4 years ago. The IRS implemented that 
program only 2 years ago.
  This program, which has never been fully operational in its brief 2-
year period, allows the Internal Revenue Service to use private 
collection agencies to collect money owed to the Government. The 
program has many critics, and once again they are seeking to destroy 
the program before we have a chance to gauge how effective the program 
is.
  Before I discuss the merits of the program, I wish to note that an 
appropriations bill is not the proper vehicle to nullify tax policy. 
The private debt collection program was created in a tax bill within 
the jurisdiction of our Finance Committee, and further legislation 
affecting the program should be done through the committee where the 
expertise is, the Finance Committee. Whether you would agree with the 
program, I think everyone could agree on the importance of the 
committee structure that we use in the Senate. In other words, a 
committee of jurisdiction where the expertise is ought to work to 
change a program if it needs to be changed or if it needs to be done 
away with, as basically the appropriations bill would do. I would 
assume members of the Appropriations Committee would not want--would 
not want--those of us on the Finance Committee making decisions against 
the expertise of the Appropriations Committee.
  The IRS private debt collection program facilitates the collection of 
tax debts the IRS would not otherwise pursue. These liabilities amount 
to billions of dollars a year.
  A Government Accountability Office report issued in June of 2008 
reported the unpaid tax debt as of fiscal year 2007 to be about $290 
billion, of which almost $185 billion was classified as nonpotentially 
collectible inventory and $25.5 billion was deemed potentially 
collectible but not in active collection status. The private debt 
collection agencies are only permitted to pursue debts taxpayers have 
conceded they owe.
  Opposition to this program is surprising, since the Internal Revenue 
Service program is intended to run like similar programs at other 
agencies. In other words, the Department of Education uses private 
collection agencies to pursue delinquent student loans. The Treasury 
Department, which houses the Internal Revenue Service, also houses the 
Financial Management Service, and, ironically, the Treasury Department 
uses private debt collection agencies to collect small business loans.
  So if it is OK for one branch of the Treasury Department to do that, 
why isn't it OK for the Internal Revenue Service to go after taxes owed 
but not paid? The only reason I can think of that private debt 
collection is so controversial at the Internal Revenue Service is 
simply the opposition to the program from the National Treasury

[[Page S2726]]

Employees Union. The National Treasury Employees Union is comprised 
primarily of Internal Revenue Service employees, and according to that 
union's Web site, is the largest Federal sector union in the entire 
country.
  The other Government agencies that use private debt collectors do not 
have as powerful a union fighting for more Government jobs. Yet this 
program does not threaten the jobs of revenue agents already working at 
the IRS. The tax debts the private collection agencies are targeting 
are debts the Internal Revenue Service is not even pursuing, and likely 
would not pursue even if additional revenue agents were hired.
  In May 2007, Acting Commissioner Kevin Brown--now this is a 
Commissioner of the Internal Revenue Service--when testifying before a 
subcommittee of the House Ways and Means Committee, confirmed that the 
Internal Revenue Service would not otherwise pursue these debts, even 
if the IRS were given additional resources. So the bottom line is this: 
There are no IRS jobs on the line. Rather, the National Treasury 
Employees Union believes the IRS should be hiring more union employees 
to do collections work.
  In contrast, I believe if the IRS is going to hire more workers, it 
should be agents to do more exams--work that private contractors cannot 
do. Former IRS Commissioner Mark Everson stated in a letter to me on 
April 11, 2007, that a full-time revenue agent auditing individual tax 
returns historically brings in nearly $700,000 annually.
  Mr. President, I ask unanimous consent that Commissioner Everson's 
letter be printed in the Record, as well as a followup letter I wrote 
to Treasury Secretary Paulson on this issue.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                       Department of the Treasury,


                                     Internal Revenue Service,

                                   Washington, DC, April 11, 2007.
     Hon. Charles E. Grassley,
     Ranking Member, Committee on Finance,
     U.S. Senate, Washington, DC.
       Dear Senator Grassley: This letter follows-up on a matter 
     that has been an ongoing concern to both the Internal Revenue 
     Service (IRS) and you for several years now, and that you 
     raised in a meeting with IRS senior executives on January 30, 
     2007. Specifically, you asked for information on the use of 
     official time by representatives of the National Treasury 
     Employees Union (NTEU).
       Reducing the use of official time by NTEU representatives 
     has been a significant point of negotiations between the IRS 
     and NTEU for several years. Over time, the IRS has 
     established greater controls over time granted to union 
     officials to perform representational duties.
       As illustrated by the enclosed chart, from 2002 through 
     2006, total annual NTEU time spent on union related 
     activities has decreased approximately 14 percent, from 
     729,988 hours to 630,539 hours. Per your request at the 
     January 30, 2007, meeting to quantify the data in terms of 
     full time equivalents (FTEs), this represents a reduction 
     from approximately 350 to 302 FTEs. To further quantify this 
     in terms of resource and revenue trade-offs, as you 
     requested, historically a full-time SB/SE revenue agent 
     auditing individual tax returns brings in nearly $700,000 
     annually.
       While progress has been made, the IRS recognizes that more 
     needs to be done. The recent IRS-NTEU mid-term negotiations 
     in 2006 produced a broad range of means for achieving 
     operational efficiencies. These include simple time-
     efficiencies such as increasing the number of meetings 
     conducted by phone and requiring stewards within the 
     commuting area to attend in-person meetings. Other measures 
     include establishing an annual cap of 850 hours of 
     representational time for the vast majority of stewards, 
     reducing the grievance procedure for performance appraisals 
     and mass grievances from a multi-step to a one-step process, 
     and streamlining NTEU's participation on various committees.
       Reducing the amount of official time continues to be a 
     priority and we will seek significant additional improvements 
     in our upcoming contract negotiations. Please contact me 
     should you require additional information or a member of your 
     staff may call Robert Buggs, Chief Human Capital Officer. at 
     202-622-7676,
           Sincerely,
     Mark W. Everson.
                                  ____

                                                      U.S. Senate,


                                         Committee on Finance,

                                     Washington, DC, May 15, 2007.
     Hon. Henry Paulson,
     Secretary,
     Department of Treasury,
     Washington, DC.
       Dear Mr. Secretary: I am writing to you regarding an 
     ongoing concern that I have with respect to the amount of 
     official Internal Revenue Service (IRS) time used by 
     representatives of the National Treasury Employees Union 
     (NTEU). As you are aware, I have been a strong advocate of 
     using IRS resources in the most productive manner possible.
       Based on information former Commissioner Everson provided 
     to me in a letter dated April 11, 2007, total NTEU time spent 
     on union related activities for 2006 equated to 302 full time 
     equivalents (FTEs). In terms of resource and revenue trade-
     offs, the letter referenced a historical figure of a full-
     time SR/SE revenue agent auditing individual tax returns 
     bringing in nearly $700,000 annually. Thus, according to IRS 
     figures, total NTEU time for 2006 represents approximately 
     $211,400,000 additional direct revenue that could have 
     potentially been brought into the United States Treasury. 
     This figure does not account for any increase in revenue that 
     would be gained indirectly through the increased audit 
     activity. At a time when this Committee is increasingly 
     looking at new methods of closing the tax gap, it is 
     imperative that we first ensure that the IRS is effectively 
     using its existing resources.
       At the Senate Finance Committee's tax gap hearing on April 
     18, 2007, former Commissioner Everson stated that the IRS was 
     in the process of trying to renegotiate the NTEU agreement, 
     which would include a renegotiation of union activity time, 
     Former Commissioner Everson also stated that the amount of 
     time devoted to union activities is proportionately higher at 
     the IRS than it is in comparison to other departments and 
     agencies within the government. Without getting into whether 
     taxpayers should even be funding union activity, please 
     provide me with an analysis of IRS union activity time versus 
     union time for other governmental departments and agencies. 
     Please also quantify this analysis in terms of FTEs and the 
     number of agency or department employees who are represented 
     by the union. What is being done in the renegotiation process 
     to bring the IRS-NTEU agreement at least more in line with 
     practices elsewhere in the government?
       Thank you for your time and attention to this matter. I 
     would appreciate your response by May 25, 2007.
           Cordially yours,
                                              Charles E. Grassley,
                                                   Ranking Member.

  Mr. GRASSLEY. For me, this proves the IRS would be better off hiring 
more examination agencies than debt collectors. In addition to the 
National Treasury Employees Union's failure to discuss the success of 
private debt collection programs at other Federal agencies--I mentioned 
them, Education and one other branch of the Treasury Department--the 
National Treasury Employees Union also conveniently fails to mention 
that the private collection agencies hired by the IRS have consistently 
scored customer satisfaction ratings above 95 percent, while the IRS 
collection employees appear to be scoring at less than 65 percent.
  The National Treasury Employees Union also fails to mention the 
amount of employee time devoted to union activities is proportionately 
higher at the Internal Revenue Service than it is in comparison to 
other Federal Departments and agencies. Commissioner Everson testified 
to this at the Senate Finance Committee tax gap hearing held on April 
18, 2007. Just think, then, of the additional revenue IRS could be 
collecting if union employees were actually doing the job they were 
paid to do instead of spending taxpayers' dollars to lobby Congress to 
do away with a program that is collecting money owed under $25,000 a 
year that would not otherwise be collected. Of course, they do not like 
that program.
  Since the omnibus provision prohibiting the IRS from using 2009 
appropriations to fund the program office may actually kill the 
program, I have this amendment before the Senate. I mean, at least it 
is filed. It is not before us yet. I would not support a government 
program that is unsuccessful, and this private debt collection program 
is no different. However, we do not have enough information to know 
whether this program is effective, and, given the success of such 
programs at other agencies, I believe it can be successful at the 
Internal Revenue Service. It surely is successful at the Education 
Department.
  Last week, I, along with Senator Harkin, my colleague from Iowa, and 
Mr. Schumer, the senior Senator from New York--the three of us--sent a 
letter to Treasury Secretary Geithner and IRS Commissioner Shulman 
asking for more information so we can actually make an informed 
decision on the effectiveness of the private debt collection program.
  The letter asks for, among other things, additional information to 
measure the cost-effectiveness of the program, information to gauge the 
results of the collection agencies, and more information on the use of 
collection

[[Page S2727]]

agencies by other Government agencies. So all my colleagues are able to 
read the letter, I ask unanimous consent that letter be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                  U.S. Senate,

                                Washington, DC, February 26, 2009.
     Hon. Timothy F. Geithner,
     Secretary of the Treasury,
     Washington, DC.
     Hon. Douglas H. Shulman,
     Commissioner of Internal Revenue,
     Washington, DC.
       Dear Secretary Geithner and Commissioner Shulman: We are 
     writing regarding the private debt collection program (PDC) 
     that is being implemented by the Internal Revenue Service 
     (IRS) and has been in place since 2006. We are aware that 
     many critics believe that the program does not operate 
     effectively, and they lead an annual effort to strip the IRS 
     of all authority to implement it. But we do not believe that 
     the necessary data has been collected and disseminated that 
     would allow an informed decision to be made about the 
     program's long-term effectiveness.
       Make no mistake: If the program is genuinely unsuccessful, 
     we would be among the first to concur that it should be 
     terminated. However, we remain very concerned that IRS will 
     terminate the PDC program before a complete and thorough 
     accounting of the program is conducted. For example, while 
     some are critical of the effectiveness and efficiency of the 
     PDC program, we have yet to see solid, reliable numbers. 
     Criticism of the program's return on investment do not 
     account for its start-up or investment costs, and ignore the 
     fact that the program has not been fully operational for any 
     of its two years.
       We appreciate that the IRS has decided to use an 
     independent third party to study the effectiveness of the 
     program, and its report may be issued as early as next week. 
     But it is not clear that the new study will discuss ways to 
     increase the efficiency and effectiveness of the PDC program 
     or explain why similar programs at other federal agencies 
     appear to be successful. For example, the Department of 
     Education uses PCAs to collect student loan debt, and the 
     Department of Treasury Financial Management Service uses them 
     to collect small business loans, farm loans, and other 
     similar debt owed to the federal government, and these 
     programs appear to work well with little controversy.
       Given the amount of uncollected tax debt, a program that 
     was allowed to operate at full capacity would have the 
     potential to be successful, yet the current program has only 
     operated in fits and starts. In fact, during the past fifteen 
     years, the Government Accountability Office (GAO) and the 
     Treasury Inspector General for Tax Administration (TIGTA) 
     have issued numerous reports discussing the IRS's problems in 
     collecting delinquent debt. A list of these reports is 
     attached. Some of the key findings include:
       In its May 1993 report, New Delinquent Tax Collection 
     Methods for IRS, the GAO highlighted the complexity of the 
     IRS's collection process. GAO presented a number of options 
     to improve the IRS's delinquent debt process, including 
     establishing early telephone contact with debtors and 
     utilizing private collection agencies. So there is a long 
     track record indicating that a well-run PDC program could 
     be successful.
       In its June 2007 report, Tax Debt Collection: IRS Has a 
     Complex Process to Attempt to Collect Billions of Dollars in 
     Unpaid Taxes, the GAO description of the IRS's collection 
     process indicates that IRS has not experienced significant 
     improvement in its collection function since 1993. The report 
     also states that the total unpaid tax debt as of fiscal year 
     2007 was $290.1 billion, of which $184.8 billion was 
     classified as non-potentially collectible inventory and $25.5 
     billion was deemed potentially collectible, but not in active 
     collection status. This would seem to be further 
     justification for a viable PDC program.
       In its December 2008 report, Tax Administration: IRS's 2008 
     Filing Season Generally Successful Despite Challenges, 
     Although IRS Could Expand Enforcement During Returns 
     Processing, the GAO notes that, because collections staff was 
     reassigned to answer telephone calls regarding stimulus 
     payments, the IRS reported $655 million in forgone revenue 
     through August 2008 alone, which means that the number for 
     the whole calendar year will likely be greater. If the IRS 
     viewed the PDC program as part of its larger collection 
     program, rather than a stand-alone program, PCAs may have 
     been able to complete the work of the collections staff that 
     had been temporarily reassigned.
       It is important for critics of the program to recognize 
     that the IRS's PDC program is designed to go after tax debts 
     that have been conceded by taxpayers, but not paid. What's 
     more, even if the IRS enforcement budget were significantly 
     increased, the accounts turned over to PDC are those that 
     would still likely be ignored by IRS collection agents. In 
     his May 2007 testimony before the Committee on Ways and 
     Means, Subcommittee on Oversight, Acting Commissioner Kevin 
     Brown, confirmed that IRS would not otherwise pursue these 
     debts even if IRS were given additional resources.
       We remain cautiously optimistic that a PDC program could be 
     successful in helping to close the tax gap, but only if it is 
     allowed to operate at full capacity. Only after that point 
     could a determination be made about whether the program is 
     meeting its objectives. We are hopeful that the report being 
     prepared will provide answers to the following questions. If 
     not, we hope that you will take the time to let us know the 
     following key information before the IRS makes any final 
     decision about the PDC program:
       The primary argument for terminating the IRS PDC program is 
     that it is not cost effective. In order to better understand 
     the program's revenues and costs, we would like a monthly 
     accounting of all funds expended on the program since its 
     inception, including a breakdown of all costs for IRS 
     personnel involved in administering the program (salary 
     levels, positions descriptions, etc.), as well as costs 
     associated with technology and travel.
       We would also like to know the number of cases placed with 
     the private agencies since the program began, including the 
     number of cases for which the amount was collected in full, 
     the number of resulting installment agreements, and the 
     number of cases recalled and reasons for recall. We would 
     also like an accounting of the commissions earned by the PCAs 
     since the program started.
       Some taxpayers choose to ignore the IRS's many letters and 
     respond to the IRS only after it notifies them that their 
     cases will be referred to a PCA. In these cases, where the 
     IRS benefits from the use of the PCA's names, we would like 
     to know why the PCAs are not compensated when those taxpayers 
     settle those debts.
       We would also like for you to describe how IRS's collection 
     process and procedure differs from the process and procedure 
     used by PCAs in collecting IRS debts, including the IRS's 
     ability to make outbound phone calls, negotiate or settle tax 
     debts, and impose liens and levies.
       Another criticism of the program is that the IRS has run 
     out of cases that can be assigned to the current PCAs, which 
     is why other PCAs have not been added. However, the exclusion 
     list, which was not determined by statute but by the IRS, 
     appears fairly extensive. In addition, as noted above, the 
     GAO's June 2008 report indicates that, as of fiscal year 
     2007, there was at least $25.5 of potentially collectible 
     inventory that IRS was not actively pursuing. We would like 
     to know how each of the exclusion criteria was determined.
       Tables 5, 6 and 7 of the GAO's June 2008 provide a 
     breakdown of the total delinquent debt for fiscal years 2002 
     through 2007. Please update these tables to add numbers for 
     fiscal year 2008 and provide a breakdown of this amount by 
     the exclusion criteria. We would also like to know why all 
     potentially collectible inventory is not in active collection 
     status and cannot be assigned to PCAs.
       We would also like to know whether Treasury or any other 
     agency has studied the cost effectiveness of the use of PCAs 
     by Treasury or other federal agencies. If such studies are 
     available, we would like to see them.
       Finally, you may be aware that there are almost 200 jobs in 
     both Iowa and New York that will be lost if the IRS PDC 
     program is terminated prematurely. Given the current economic 
     crisis, such job losses should not be forced to occur before 
     a full accounting of the program's success is made available 
     and/or the program is allowed to operate as originally 
     intended. The recently enacted Economic Recovery Act, which 
     will further strain IRS resources, is an additional reason 
     why the PCAs should be allowed to operate until the success 
     or failure of the program can be definitively determined.
       If you have any questions regarding the above, please do 
     not hesitate to contact our staff. We also ask that you brief 
     our staff on the forthcoming study before the study is 
     finalized and made public.
           Sincerely,
     Chuck Grassley,
       U.S. Senator.
     Charles E. Schumer,
       U.S. Senator.
     Tom Harkin,
       U.S. Senator.

      REPORTS & TESTIMONIES RELATING TO IRS COLLECTION ACTIVITIES

       Ways & Means Committee, May 2007 Hearing, http://
waysandmeans.house.gov/
hearings.asp?formmode=detail&hearing=562.


                                  GAO

       May 1993, GAO/GGD-93-97, New Delinquent Tax Collection 
     Method for IRS, http://
archive.gao.gov/t2pbat5/149340.pdf.
       April 1996, GAO/TT-GGD-96-1, W&M Oversight Testimony Tax 
     Administration: IRS Tax Debt Collection Practices, http://
www.gao.gov/archive/1996/gg96112t.pdf.
       May 2004, GAO-04-492, IRS Is Addressing Critical Factors 
     for Success for Contracting Out but Will Need to Study Best 
     Use of Resources.
       September 2006, GAO-06-1065, IRS Needs to Complete Steps to 
     Help Ensure Contracting Out Achieves Desired Results and Best 
     Use of Federal Resources.
       June 2008, GAO-08-728, IRS Has a Complex Process to Attempt 
     to Collect Billions of Dollars in Unpaid Tax Debts.
       December 2008, GAO-09-146, Tax Administration: IRS's 2008 
     Filing Season Generally Successful Despite Challenges, 
     although IRS Could Expand Enforcement During Returns 
     Processing.


                                 TIGTA

       March 2007, 2007-30-066, The Private Debt Collection 
     Program Was Effectively Developed and Implemented, but Some 
     Follow-up Actions Are Still Necessary.

[[Page S2728]]

       December 2007, 2008-10-054, Invoice Audit of Fees Paid 
     Under the Private Debt Collection Initiative.
       March 2008, 2008-20-078, Private Collection Agencies 
     Adequately Protected Taxpayer Data.
       April 2008, 2008-30-095, Trends in Compliance Activities 
     Through Fiscal Year 2007.
  Mr. GRASSLEY. It boils down to the fact that we should have a chance 
to obtain and review this information before killing a program that is 
going after money owed--$25,000 or less--from people who have said they 
acknowledge they owe it, that IRS employees would not go after. This 
affects jobs in a couple States, and I wish to say that when we are 
having a program--as the stimulus bill did--to keep people from being 
laid off and to have people being hired, you would at least think we 
would not think about eliminating jobs in a couple States. I was a 
supporter of this program before any contracts were awarded. As I said, 
I will not support the program if it does not prove effective.
  Given the propensity to spend the Government seems to be afflicted 
with, there is going to be a hunger for new sources of revenue which is 
going to be controversial. What should not be controversial is that we 
need to collect taxes currently owed in the most effective and most 
efficient way possible and particularly not ignore a policy of not 
going after money under $25,000. Since the private debt collection 
program will accomplish that, I urge support for this amendment when it 
comes up.
  I yield the floor.

                          ____________________