[Congressional Record (Bound Edition), Volume 150 (2004), Part 4]
[Extensions of Remarks]
[Page 4567]
[From the U.S. Government Publishing Office, www.gpo.gov]




               LOW-INCOME TAXPAYER PROTECTION ACT OF 2004

                                 ______
                                 

                          HON. XAVIER BECERRA

                             of california

                    in the house of representatives

                       Wednesday, March 17, 2004

  Mr. BECERRA. Mr. Speaker, today I am proud to introduce companion 
legislation to S. 685, a bill sponsored by Senator Jeff Bingaman (D-NM) 
and Senator Daniel Akaka (D-HI) to assist low-income taxpayers in 
preparing and filing their tax returns and to protect taxpayers from 
unscrupulous refund anticipation loan providers. In particular, the 
provisions of this legislation will benefit taxpayers eligible for the 
Earned Income Tax Credit (EITC) who must fill out dauntingly complex 
forms--the EITC instructions run 53 pages alone--and, because of the 
dearth of free tax preparation services to help navigate the process, 
are heavy users of commercial tax preparers.
  The problems addressed by the Low-Income Taxpayer Protection Act of 
2004 have been ignored for too long. The National Taxpayer Advocate's 
FY2002 Annual Report to Congress notes that in 2000, only 1 percent of 
filers with incomes below the EITC income limit received free tax 
preparation assistance from either the IRS Taxpayer Assistance Centers 
or volunteer sites affiliated with the IRS. The remaining low-income 
filers who had their forms filed for them used a commercial preparer. 
While many commercial preparers provide a very valuable, necessary 
service, the work of these men and women is too often overshadowed by 
those who peddle refund anticipation loans (RALs)--usurious short-term 
loans secured by the taxpayer's tax refund, including the EITC. In 
fact, it is estimated that 53 percent of EITC recipients who went to a 
paid tax preparer ended up with a RAL.
  According to a report prepared by the Consumer Federation of America 
and the National Consumer Law Center and entitled ``All Drain, No 
Gain,'' refund anticipation loan fees cost consumers about $1.14 
billion in 2002, up almost $200 million from the year before. 
Additional fees for electronic filing, ``document preparation,'' and 
``applications'' added another $406 million to the total. Our 
constituents who can afford it the least are suffering a $1.5 billion 
drain on their tax refunds.
  Mr. Speaker, let me take a moment to break down these estimates from 
the cumulative to the individual using an analysis found in ``All 
Drain, No Gain.'' Based upon the prices for RALs in 2004, a consumer 
might pay the following in order to get a $2,100 RAL--the average 
refund--from a commercial tax preparation chain this year: (1) A loan 
fee of $99.95, which includes a $24.95 fee supposedly for the ``dummy'' 
bank account used to receive the consumer's tax refund from the IRS to 
repay the RAL; and (2) a system administration fee that averages $32 
per loan. Combine that with tax preparation fees, which average about 
$120, and the total is about $250. The effective APR on this RAL would 
be 182 percent.
  The Office of the Taxpayer Advocate acknowledges that there are 
several factors that drive low-income taxpayers to pay for tax 
preparation, including: (1) Inconvenient location or hours of VITA 
sites; (2) lack of bank accounts for direct deposit of refunds; (3) 
need or desire for immediate cash; and (4) inability to prepare one's 
own taxes due to limited language, literacy, or computer skills.
  This bill takes a two-pronged approach aimed at curtailing the drain 
on the EITC program by first regulating income tax preparers and refund 
anticipation loan providers and, secondly, creating IRS-administered 
grant programs for free tax preparation for low-income taxpayers and to 
help individuals establish a bank account for the first time.
  I encourage all of my colleagues to support this legislation.

                          ____________________