Internal Revenue Service: Challenges Remain in Combating Abusive
Tax Schemes (19-NOV-03, GAO-04-50).
Abusive tax avoidance schemes could threaten our tax system's
integrity and fairness if honest taxpayers believe that
significant numbers of individuals are not paying their fair
share of taxes. Abusive schemes encompass such distortions of the
tax system as falsely describing the law (saying, for example,
that the income tax is unconstitutional), misrepresenting facts
(for instance, promoting the deduction of personal expenses as
business expenses), or using trusts or offshore bank accounts to
hide income. As agreed, this report focuses on three objectives.
They are to (1) describe the nature and scope of abusive tax
avoidance schemes as determined by the Internal Revenue Service
(IRS), (2) describe IRS's strategy to combat these schemes and
the performance goals and measures IRS uses to track its major
effort related to them, and (3) describe how IRS determined the
amount and source of staff resources to be devoted to these
schemes in the IRS operating division most directly affected.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-50
ACCNO: A08877
TITLE: Internal Revenue Service: Challenges Remain in Combating
Abusive Tax Schemes
DATE: 11/19/2003
SUBJECT: Fraud
Internal controls
Investigations by federal agencies
Performance measures
Strategic planning
Tax administration
Tax evasion
Tax violations
Taxes
Taxpayers
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GAO-04-50
United States General Accounting Office
GAO
Report to the Chairman and Ranking
Minority Member, Committee on Finance, U.S. Senate
November 2003
INTERNAL REVENUE SERVICE
Challenges Remain in Combating Abusive Tax Schemes
a
GAO-04-50
Highlights of GAO-04-50, a report to the Chairman and Ranking Minority
Member, Committee on Finance, U.S. Senate
Abusive tax avoidance schemes could threaten our tax system's integrity
and fairness if honest taxpayers believe that significant numbers of
individuals are not paying their fair share of taxes. Abusive schemes
encompass such distortions of the tax system as falsely describing the law
(saying, for example, that the income tax is unconstitutional),
misrepresenting facts (for instance, promoting the deduction of personal
expenses as business expenses), or using trusts or offshore bank accounts
to hide income.
As agreed, this report focuses on three objectives. They are to (1)
describe the nature and scope of abusive tax avoidance schemes as
determined by the Internal Revenue Service (IRS), (2) describe IRS's
strategy to combat these schemes and the performance goals and measures
IRS uses to track its major effort related to them, and (3) describe how
IRS determined the amount and source of staff resources to be devoted to
these schemes in the IRS operating division most directly affected.
November 2003
INTERNAL REVENUE SERVICE
Challenges Remain in Combating Abusive Tax Schemes
Abusive schemes vary in nature, and new ones continually emerge, making it
very difficult to measure their extent. IRS has been gathering information
to better define the scope of abusive schemes. In addition to 131,000
participants linked to abusive schemes between October 1, 2001, and
mid-August 2003, IRS officials estimated that several hundred thousand
others likely are engaged in abusive schemes. However, IRS documented this
estimate only when GAO asked. Documentation can help policymakers judge
the appropriateness of IRS resources and strategy in combating the
high-priority abusive scheme problem.
IRS's broad-based strategy for addressing abusive schemes included:
o targeting promoters to head off the proliferation of abusive schemes
and
to identify taxpayers taking advantage of them; o offering inducements
to taxpayers to come forth and disclose their use of questionable offshore
tax practices; and
o using performance indicators to measure outputs and intending to
continue down the path it has started and develop long-term process and
results-oriented performance goals and measures linked to those goals. The
lack of these latter elements impedes gauging IRS's progress in combating
abusive schemes.
Using a systematic agencywide decision-making process, IRS planned to
shift significant resources to support its strategy, but the level of
resources likely to be used in fiscal year 2003 was less than expected due
to overly optimistic workload forecasts caused by inexperience with the
types of cases involved. Future resource usage remains to be seen, given
uncertainty about how much abusive scheme work IRS will have and how long
it will take to close cases. IRS's understanding of how many staff will be
needed to address the problem over what period will continue to evolve as
IRS gains a better understanding of the problem's scope.
Fiscal Year 2003 Examination Full-Time Equivalent Resources Devoted to
Abusive Schemes,GAO recommends that when IRS as Originally Planned and as
Projected If Pace at July 31, 2003 Continued prepares future estimates of
the
size of the abusive scheme
problem, the Commissioner of
Internal Revenue document the
support underlying the estimates.
In written comments on a draft of
this report, the Commissioner
agreed with this recommendation.
www.gao.gov/cgi-bin/getrpt?GAO-04-50.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Michael Brostek at (202)
512-9110 or [email protected].
Contents
Letter 1
Results in Brief 2
Background 4
Nature of Abusive Schemes Varies and Their Scope 5
Is Unknown
IRS Strategy to Combat Abusive Schemes Is
Broad-Based, but Has
No Long-term Performance Goals or Measures Linked
to
Goals 10
IRS Planned Resource Shifts Are Significant, but
Resource Use
Started Slowly and Future Use Remains to Be Seen 15
Conclusions 23
Recommendation to the Commissioner of Internal 24
Revenue
Agency Comments 24
Appendix
Appendix I: Comments from the Internal Revenue Service
Tables Table 1: Table 2:
Table 3:
Table 4:
Table 5:
Descriptions of Abusive Scheme Categories 6
Comparison of Different Estimates of the Number of
Taxpayers Involved in Abusive Schemes 9
Planned Shift in Revenue Agent and Tax Compliance
Officer FTE Positions Devoted to Abusive Scheme Priority
Areas, Fiscal Years 2002-2004 17
Planned and Projected Revenue Agent and Tax
Compliance Officer FTEs Devoted to Abusive Scheme
Priority Areas, Fiscal Year 2003 20
Comparisons of Inventory Developments with Inventory
Expectations 21
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A
United States General Accounting Office Washington, D.C. 20548
November 19, 2003
The Honorable Charles E. Grassley
Chairman
The Honorable Max Baucus
Ranking Minority Member
Committee on Finance
United States Senate
Abusive tax schemes encompass such distortions of the tax system as
falsely describing the law (saying, for example, that the income tax is
unconstitutional), misrepresenting facts (for instance, promoting the
deduction of personal expenses as business expenses), or using trusts or
offshore bank accounts to hide income. During an April 2002 hearing
before the Senate Committee on Finance, we testified about the inexact
process for estimating the extent of abusive schemes used by individual
taxpayers.1 We pointed to Internal Revenue Service (IRS) estimates that
about 740,000 taxpayers had used certain types of abusive schemes in tax
year 2000, and that $20 billion to $40 billion in improper tax avoidance
or
tax credit and refund claims had occurred that IRS had not yet been able
to
identify and address. We noted that abusive schemes could threaten our tax
system's integrity and fairness if honest taxpayers believe that
significant
numbers of individuals are not paying their fair share of taxes.
The estimated 740,000 taxpayers consisted of estimates of the number of
taxpayers in four major scheme areas--about 62,000 with frivolous returns,
105,000 with frivolous refunds, 65,000 using abusive domestic trusts, and
505,000 using offshore schemes. Of the 505,000 taxpayers estimated to use
offshore schemes, IRS estimated 500,000 were abusing offshore credit
cards. In our testimony, we discussed how IRS arrived at its estimates. We
also understand that some of the estimates reflected high-end numbers, for
example, the numbers of taxpayers who were associated with a particular
abusive promoter, but not necessarily reflecting an abusive scheme on
their
tax returns.
The $20 billion to $40 billion estimate of taxes not identified and
addressed
related to offshore schemes. Saying there were no reliable data to predict
1U.S. General Accounting Office, Internal Revenue Service: Enhanced
Efforts to Combat Abusive Tax Schemes-Challenges Remain, GAO-02-618T
(Washington, D.C.: Apr. 11, 2002).
tax implications, IRS derived its estimate based on average dollars in
other parts of the abusive tax scheme program.
As agreed, this report focuses on three objectives. They are to (1)
describe the nature and scope of abusive tax avoidance schemes as
determined by IRS, (2) describe IRS's strategy to combat these schemes and
the performance goals and measures IRS uses to track its major effort
related to them, and (3) describe how IRS determined the amount and source
of staff resources to be devoted to these schemes in the IRS operating
division most directly affected. To do our work, we (1) analyzed IRS and
other scheme reports, publications, data, and other documentation
providing insight into the characteristics, complexity, size, and type of
the problem, (2) reviewed IRS planning documents with information on IRS
strategies, measures, milestones, and resources, (3) compared the contents
of IRS planning documents to Government Performance and Results Act of
19932 (GPRA) criteria on what elements strategic planning should include,
and (4) interviewed agency officials about their views on, among other
things, the problem's nature and scope and IRS's strategy. We did our work
from September 2002 through September 2003 in accordance with generally
accepted government auditing standards.
Results in Brief Abusive schemes vary in nature, and new ones continually
emerge, making it very difficult to measure their extent. IRS has been
gathering information to better define the scope of abusive schemes. In
addition to 131,000 participants who were linked to abusive schemes
between October 1, 2001, and mid-August 2003, IRS officials estimated that
several hundred thousand additional taxpayers likely are engaged in
abusive schemes. Officials have not estimated how many tax dollars might
be involved overall. IRS's estimate of those involved is primarily based
on promoterrelated information developed in the past year and includes
only those offshore credit card cases where IRS believes individuals'
names are likely to be identified. Although they did not originally have
documentation supporting this estimate, upon request, IRS officials
prepared documentation for us showing the estimate's derivation.
Documenting the basis for key program-related numbers ensures that others
can judge their reliability and better understand what may account for
differences in such key numbers over time. IRS continues to believe
abusive schemes
2P.L. 103-62.
represent a significant compliance problem that deserves considerable
attention, and schemes remain a top enforcement priority.
IRS's broad-based strategy for addressing abusive schemes included the
following:
o targeting promoters to head off the proliferation of abusive schemes
and to identify taxpayers taking advantage of them;
o offering inducements to taxpayers to come forth and disclose their use
of questionable offshore tax practices;
o focusing attention on identifying schemes, alerting the public, and
enforcing the law, including partnering with states to share information
on abusive schemes;
o promoting the coordination of efforts throughout IRS; and
o using performance indicators to measure outputs and intending to
continue down the path it has started and develop long-term process and
results-oriented performance goals and measures linked to those goals. The
lack of these latter elements impedes gauging IRS's progress in combating
abusive schemes.
IRS is in the midst of its efforts to implement its abusive scheme
strategy and has had to make decisions about staff allocations and what
can be accomplished on the basis of available information. Using a
systematic agencywide decision-making process, IRS planned to shift
resources, significantly in the case of examination resources, to support
its strategy, but the level of resources used in fiscal year 2003 through
July 31 and likely to be used in fiscal year 2003 as a whole was less than
expected due to overly optimistic workload forecasts caused by
inexperience with the types of cases involved. The extent to which the
caseload and resources will match each other in the future remains to be
seen, given the uncertainty about the volume of additional work and the
rate at which IRS can close abusive scheme examinations. IRS's
understanding of how many staff will be needed to address the program and
how long staff will take to work through the cases will continue to evolve
as IRS gains a better understanding of the scope of abusive schemes.
To ensure that support for future IRS estimates of the size of the abusive
scheme problem exists, we are recommending that IRS document the support
when preparing the estimates.
In written comments, the Commissioner of Internal Revenue agreed with a
draft of this report. He specifically agreed with the recommendation and
said that IRS would establish a methodology for documenting the basis for
the estimates. He also affirmed IRS's intention to establish measurable
process and results-oriented goals and said that developing these measures
is an operational priority for fiscal year 2004.
Background In a June 2002 letter, the Secretary of the Treasury addressed
various questions posed by the then Ranking Member of the Committee on
Finance on IRS actions to address abusive schemes. Treasury's letter
pointed to IRS's Small Business/Self-Employed (SB/SE) Division as having
primary responsibility for abusive schemes marketed to individuals and
small businesses.
Within SB/SE, several units have established combating abusive schemes as
a top priority. The Office of Reporting Enforcement was established in
2002 to increase program oversight and to help information flow among
programs that address abusive schemes. SB/SE's collection component is to
work closely with the examination function to ensure coordination. Its
Taxpayer Education and Communication unit has launched a countermarketing
strategy against abusive tax schemes and their promoters. Its
Communications and Liaison unit is responsible for developing
communication messages and strategies to maintain and enhance ongoing IRS
interaction with internal and external stakeholders.
Other IRS organizations are also involved with abusive schemes. For
instance, Criminal Investigation (CI) works closely with SB/SE and
investigates and pursues promoters and individuals using schemes. The
Office of Chief Counsel provides legal services, such as publishing
guidance, working with examination and collection activities, and pursuing
litigation.
Nature of Abusive Schemes Varies and Their Scope Is Unknown
The nature of abusive tax schemes is both varied and evolving. We
testified last year that as schemes are often hidden, estimates presented
in 2002 of the extent of abusive tax avoidance were inexact at best. IRS
efforts underway to more definitively identify the scope of the problem
revealed that, for the period from October 1, 2001, until mid-August 2003,
131,000 participants were involved in abusive schemes. For the 72,600 of
these participants identified by February 28, 2003, IRS estimated that
about $1.6 billion in taxes were or might be recaptured, with more to be
determined. In addition, on the basis of the number of promoters
identified and the amount of information not yet received or processed,
IRS officials estimated that hundreds of thousands of other taxpayers were
involved in abusive schemes, but they did not prepare supporting
documentation when making the estimate. According to IRS, recent estimates
resulted from knowledge gained over the last year focusing on more
specific information than previously used.
Abusive Schemes Vary and New Ones Continually Emerge
Abusive schemes include various kinds of arrangements designed to
circumvent tax laws or evade taxes. As we testified last year, they can
run from very simple to very complex, from clearly illegal to those
carefully constructed to disguise the illegality of the scheme. Users of
schemes can range from those believing their position is correct to those
who knowingly but willfully file incorrect tax returns.
As shown in table 1, SB/SE sorts abusive schemes into seven categories.
They range from trust arrangements to those claiming no legal basis for
federal income taxes to tax shelters bought by taxpayers that are under
SB/SE's auspices. In the case of the latter, SB/SE is responsible for
investigating abusive shelters used by high-wealth individuals with
complex tax returns and by businesses with assets of less than $10
million.
Table 1: Descriptions of Abusive Scheme Categories
Category of scheme Description of the category
Abusive trust schemes Arrangements featuring layers of trusts, with each
trust distributing income to the next layer to fraudulently reduce taxable
income to nominal amounts Deduction/expense schemes
False representations of facts to claim improper deductions
Refund/credit schemes Schemes involving the creation of credits to
substantially reduce tax or create refunds
Antitax arguments Arguments that entice people to believe collecting
federal income taxes has no legal basis
Exempt organization Schemes using a tax-exempt entity to obtain
unallowable schemes benefits
Tax shelters Very complicated transactions that sophisticated tax
professionals promote, exploiting tax loopholes and reaping large and
unintended tax benefits
Offshore compliance Schemes in which the true ownership of income streams
and
schemes assets is hidden to improperly shield financial activity from the
U.S. tax system
Source: IRS data compiled by GAO.
According to IRS officials, the popularity of schemes can also vary.
Officials have seen a decline in slavery reparation schemes over time, and
they have also become aware of new schemes that abuse corporate "soles"
(one-member religious entities used to claim that income is tax free) and
the disabled access credit (used to reduce taxes or create refunds). One
SB/SE official explained that scheme promoters try to stay in the business
of tax avoidance; when one type of scheme is discovered and addressed,
another scheme will take its place.
Scope of Abusive Schemes Is Unknown
The full scope of the abusive tax scheme problem is unknown because
estimates are difficult to make based on imperfect data. As we testified
last year, estimating the extent of abusive schemes used by individual
taxpayers is at best an inexact process because these schemes are often
hidden.
In fiscal year 2003, SB/SE tried a new approach to improve its information
about the problem and help with its work planning process. The new
approach differed from prior efforts in that it focused on what IRS had
actually found. The effort's aim was to develop an inventory of abusive
schemes and related data in order to develop an overall strategy for
addressing abusive schemes and to enhance the work planning process. In
this context, SB/SE developed a template for organizing information about
known schemes and known investors. The template took the form of a matrix
to be used to compare the risks presented by various schemes along the
lines of factors such as the number of cases available for IRS staff to
review but as yet unstarted, the number of promoters, the amount of money
involved, and the number of taxpayers participating. The matrix organizes
abusive schemes within the seven categories shown above in table 1.
According to a summary of items in the matrix categories and IRS's work
with offshore credit cards covering October 2001 through mid-August 2003,
IRS identified about 131,000 participants in abusive schemes. This number
included 22,000 participants in the offshore credit card area and,
according to SB/SE, reflected the best available data, but not a potential
universe. It updated a previous summary covering October 1, 2001, through
February 2003 that showed 72,600 potential participants. In that summary,
SB/SE noted that recaptured or potentially recaptured taxes from closed or
identified reviews totaled almost $1.6 billion, excluding undetermined
amounts from the credit card work. That summary also included the 22,000
participants in the offshore area, but IRS was not able to update this
figure for its later summary because new credit card information had just
arrived.
IRS used an estimate in its fiscal year 2005 budget presentation of the
number of taxpayers it believes are involved in abusive schemes who are
likely to be identified through its various efforts. IRS estimated that
more than 400,000 taxpayers fall into this category, generally including
the approximately 131,000 participants it had identified as of mid-August
2003. According to IRS officials, this estimate was included in materials
provided to the Department of the Treasury and the Office of Management
and Budget during budget discussions. It was used not as a basis for
requesting resources sufficient to examine the taxpayers, but to show that
the abusive scheme problem was large relative to current resources.
According to IRS officials, this estimate was developed during a series of
meetings, but documentation showing the basis for the estimate was not
prepared at that time.
We are unaware of a specific IRS or other policy that requires
contemporaneous documentation of a figure like the 400,000 estimate of
taxpayers IRS expects to identify as engaged in abusive schemes.
Nevertheless, documenting the basis for key numbers related to an agency's
programmatic efforts is in line with the thrust of management
legislation and IRS's own policies. For example, GPRA stresses not only
that agencies develop measures of program performance, but also that the
measures be valid and reliable. IRS too stresses that program managers
have valid and reliable measures of program performance in its Strategic
Planning, Budgeting, and Performance Management Process. Although the
400,000 estimate is not an IRS program performance measure, it is a
measure that IRS has used in discussions on its fiscal year 2005 budget
needs. Further, Congress has expressed interest in the specific issue of
abusive schemes, including through this review, which has focused in part
on the nature and scope of abusive tax schemes. Documenting the basis for
key program-related numbers ensures that others can judge their
reliability and better understand what may account for differences in such
key numbers over time.
At our request, IRS prepared a document showing how the estimate of over
400,000 was derived. IRS based this estimate to a great extent on the
promoters it had identified, but for which it had not yet received
investor lists. If each investor list contained only the average number of
names identified on the very few lists considered so far, a conservative
assumption according to SB/SE's Deputy Director, Compliance Policy, more
than 300,000 taxpayers would be involved. In addition, although IRS had
not yet processed most of the offshore credit card information it had
received, staff projected that tens of thousands of abusive credit card
users were likely to be identified. According to the same official, IRS
now believes more taxpayers are engaged in various abusive schemes not
involving offshore credit cards than it did last year but fewer than it
believed last year are engaged in schemes involving offshore credit cards
and likely to be identified. Not wanting to overstate the total number of
taxpayers likely to be identified as involved in abusive schemes, IRS
adopted a conservative estimate of more than 400,000, emphasizing to us
that its program is still in the developmental stage and the number is
probably higher. Table 2 compares how the 400,000 relates to the numbers
used in our testimony from last year. Because some of the numbers are
estimates based on limited information and because the specific types of
cases included in the different categories are not always identical, the
comparisons are only a general indication of changes in the potential size
of the scheme categories and the total number of taxpayers involved.
Table 2: Comparison of Different Estimates of the Number of Taxpayers
Involved in Abusive Schemes
Scheme areaa February 2002 estimate October 2003 estimate
Offshore credit cards and other 570,000 More than 400,000
schemes
Frivolous returns 62,000 21,000b
Frivolous refunds 105,000 127,000b
Total 737,000 More than 548,000
Source: Derived by GAO from IRS data.
aThe types of schemes included in the different categories in the two
periods were not consistent, but the differences were small relative to
the total number of taxpayers involved.
bThese numbers are for fiscal year 2002.
IRS has not associated a dollar amount with its estimate of more than
400,000 taxpayers, although it believes the amount is substantial.
According to SB/SE's Deputy Director, Compliance Policy, IRS is trying to
be more data-driven in this area and is not tracking dollars associated
with its projection.
In addition to the estimate of more than 400,000 taxpayers, some IRS units
collected other information regarding abusive schemes that identified the
scope of other pieces of the problem. These pieces are not part of SB/SE's
examination workload planning effort because they do not involve
examinations. IRS's Frivolous Return Program identifies returns and
refunds for taxpayers whose returns either state an argument that IRS can
readily identify as frivolous or have characteristics IRS has identified
as reflecting a frivolous argument. The program stopped about 21,000
frivolous returns (as shown in table 2) and refunds resulting in about
$619 million in protected tax dollars in fiscal year 2002. CI identified
about 127,000 fraudulent refund claims in fiscal year 2002 and stopped
about $379 million in fraudulent refunds.
IRS Strategy to Combat Abusive Schemes Is Broad-Based, but Has No Long-term
Performance Goals or Measures Linked to Goals
IRS's abusive scheme strategy takes a multipart approach to focus
resources on the most egregious promoters of, and participants in,
offshore credit card and other schemes. It entails identifying schemes and
their participants, alerting the public, enforcing the law, and
coordinating efforts internally and throughout IRS. Although IRS planning
documents outline an overall strategy for combating abusive schemes, IRS
has not yet defined long-term performance goals for the effort and the
measures it would use to track progress in achieving those goals. However,
although establishing such goals and measures will be challenging, IRS
intends to establish process and results-oriented goals in the future.3
SB/SE's Strategy Includes Pursuing Egregious Promoters As Well As Offshore
Credit Card and Other Abusers
As outlined in planning documents, the SB/SE strategy to combat abusive
tax schemes focuses on attacking the source of what IRS considers to be
the most egregious abusive noncompliance. The strategy requires using
scarce resources to address three high-priority areas-promoters, offshore
credit card schemes, and other abusive schemes (including offshore schemes
other than credit card schemes)-all under the jurisdiction of a position
established in 2002, the Director of Reporting Enforcement.
Because promoters generate noncompliance by selling tax avoidance schemes
to others, they represent a top priority in the strategy. By pursuing
promoters, IRS may leverage its resources and gain access to lists of
clients who bought the promoters' products. An SB/SE official stated that
the focus is to pursue promoters first to stop the growth of abusive
schemes. IRS can then take enforcement actions against participants in
abusive schemes.
IRS especially targeted abusive schemes involving credit cards issued by
offshore banks. Credit cards allow easy access to income hidden in
accounts in tax haven countries. In October 2000, IRS issued summonses to
two credit card companies to obtain limited information about U.S.
citizens holding credit cards issued by banks in three offshore financial
centers.
3Guidance related to GPRA can provide a framework in developing measurable
goals and outcome-oriented measures. Although GPRA is generally applied to
agencywide strategic plans, its framework is useful to guide any type of
planning. GPRA requires long-term strategic and annual performance goals
and associated measures, preferring measures relating to outcomes
(results) versus outputs (activities). Office of Management and Budget
guidance says that strategic plans set out long-term goals, outlining
planned accomplishments and their implementation schedule.
After lengthy negotiations to address one of the company's concerns and
reach a compromise for compliance, that company provided information in
April 2002. In March and August 2002, IRS issued a second round of
summonses to credit card companies seeking records on cards issued by
banks in 31 offshore financial centers. The scope of records to be
produced under these summonses had to be negotiated, with consideration
given to the burden of requiring full compliance, the balance between the
amount of information to be produced and the time needed to produce it,
and the need to focus as much as possible on probable U.S. taxpayers.
Because IRS could not always identify individuals based on credit card
company information, it also issued summonses to 123 merchants for
additional information that could be used in examinations and criminal
investigations. Analyzing merchant responses was very time consuming,
requiring follow-up for more information, and IRS still needed to work
beyond the merchant information provided to identify taxpayers.
On July 30, 2003, IRS announced that as a result of its credit card
project, it had continuing or completed audits on 2,800 returns, and it
had assessed more than $3 million in taxes. As of early August 2003, IRS
had received records from both rounds of credit card company summonses and
from almost all of the merchant summonses. It needed to go through these
records before it would begin to have a better idea of the size of the
credit card problem, keeping in mind that the merchant summonses related
only to merchants identified by analyzing data produced by one credit card
company responding to the first summons.
In January 2003, IRS began a voluntary compliance initiative to identify
promoters and to return to tax law compliance taxpayers who use offshore
payment cards to hide income. Under the initiative, eligible taxpayers
stepping forward before April 16, 2003, would not pay certain penalties
and would not face criminal prosecution, pending acceptance into the
program. However, they would agree to provide full details on promoters of
offshore arrangements. They would also pay previously owed taxes,
interest, and certain other penalties. In addition to this voluntary
compliance initiative and to the summonses, the Department of the Treasury
has entered into tax information exchange agreements with offshore
financial centers to further improve the federal government's information
collection.4
On July 30, 2003, IRS announced that 1,299 taxpayers stepped forward to
participate in the voluntary compliance initiative, and that analyzing
cases to date revealed 214 new offshore promoters. According to SB/SE's
Deputy Director, Compliance Policy, as of mid-September 2003, the
initiative had led to collecting more than $100 million in tax, a figure
that continues to grow. The 1,299 taxpayers who volunteered is a small
number compared to early reports of the scope of the problem. However,
according to IRS officials, the reality of promoters being identified by
taxpayers gives IRS data on the source of the problem and a wealth of
information that can be used to further investigate abusive schemes. They
said IRS was in the early stages of receiving and following up on
completed packages of information, but it had already received valuable
information on how promoted schemes worked. In addition, instead of
stepping forward, IRS officials say some taxpayers seem to have filed
amended tax returns, bringing themselves into compliance in a different
way. IRS did not yet know the number of amended returns that arrived as a
result of the initiative.
For the abusive schemes shown in table 1, SB/SE's fiscal year 2003 plans
called for developing an inventory of schemes and their status, working
out a more detailed overall strategy, and developing and implementing a
process to oversee and manage IRS's efforts to combat abusive schemes and
promoters. In general, SB/SE officials saw fiscal year 2003 as a
transition year in which to build an infrastructure for full
implementation of a strategy in fiscal year 2004. To develop inventory
information, SB/SE
4Between November 2001 and November 2002, Treasury entered into agreements
with the Cayman Islands, Antigua and Barbuda, The Bahamas, the British
Virgin Islands, the Netherlands Antilles, Guernsey, the Isle of Man, and
Jersey.
has been devising a matrix to assess the risk associated with various
abusive schemes. Although it will not identify the full scope of the
problem, the matrix is intended to help SB/SE management prioritize the
various schemes it encounters and decide how much in resources to allocate
to combat each one.
SB/SE's Strategy Includes Identifying Schemes, Alerting the Public, and
Enforcing the Law
SB/SE's strategy to combat abusive schemes includes actions to identify
schemes, alert the public, and identify and take enforcement action
against promoters and participants. SB/SE identifies promoters and
participants through disclosure initiatives, Internet research,
investigations, and examinations. IRS is also partnering with state tax
agencies to combat abusive schemes. On September 16, 2003, IRS announced
agreements to, among other things, exchange information about abusive
schemes identified at the federal and state levels, have IRS provide leads
on participants in abusive schemes to states for investigation, and
partner on training and other educational activities.
SB/SE's strategy to alert the public includes targeting educational
outreach and countermarketing strategies to address abusive schemes and
their promoters. The division's Taxpayer Education and Communication (TEC)
unit, in conjunction with the Communications and Liaison and Reporting
Enforcement units and others, created toolkits for abusive scheme outreach
and education. The toolkits are for external stakeholders, such as
professional organizations, to educate their members and clients and also
for use as internal guidance.
Enforcement action against promoters and participants can take many forms.
For example, IRS criminal investigations can lead to indictments and
convictions. Similarly, IRS conclusions that injunctions are warranted can
lead to promoters being enjoined from continuing with their promotions. As
of May 2, 2003, IRS had 464 ongoing criminal investigations of scheme
promoters and investors, as opposed to 125 in 2001, and 27 promoter
injunctions granted, compared to 1 about a year earlier. IRS can also
assert civil penalties or use summonses.
SB/SE's Strategy Is Internal coordination is key to SB/SE's approach for
addressing abusive Coordinated within SB/SE schemes. Last year we
testified that SB/SE was reorganizing to place its key and throughout IRS
efforts to combat abusive schemes under one executive and better
integrate them. Now SB/SE's Deputy Director, Compliance Policy, is charged
with coordinating the division's strategy for combating abusive
schemes and working closely with other IRS operating divisions. IRS has
also established coordination groups, namely the Abusive Tax Evasion,
Avoidance Schemes, and Devices Executive Steering Committee and the
Offshore Credit Card Project Oversight Board, both of which include
members from different parts of IRS and operate under the auspices of
IRS's Enforcement Committee chartered in July 2003. Chaired by the Deputy
Commissioner for Services and Enforcement, the Enforcement Committee is to
guide IRS-wide enforcement strategies, focusing on high visibility issues
involving many divisions or potentially having significant compliance
impact.
IRS units coordinate with each other in various ways in planning and
implementing actions to combat abusive schemes. For example, in April
2002, SB/SE established the Lead Development Center (LDC) to centralize
the nationwide receipt of leads on promoters of abusive schemes. Once the
LDC organizes promoter information from both agencywide and external
sources, it coordinates with CI to determine who takes the lead in
promoter cases of interest to SB/SE and CI and at times to work in
parallel investigations. Another example of two divisions partnering with
each other was the plan for SB/SE and the Large and Mid-Size Business
Division to jointly find ways to identify entities used to mask
questionable transactions and address their abuse. As part of this effort,
the two divisions planned to develop and implement a strategy to focus on
highincome taxpayers investing in flow-through entities used to hide
taxable income. The planning documents of different IRS divisions had
crossreferences to the plans and work of other divisions.
SB/SE also coordinates internally and with other units in its efforts to
alert the public. TEC and the SB/SE Communications and Liaison unit
coordinate with SB/SE Compliance and with CI and the Office of Chief
Counsel when doing outreach and education. For instance, Counsel provides
legal assistance with language to try to ensure that public messages are
legally accurate. As another example, Communications and Liaison,
Compliance, CI, and Counsel personnel all provided TEC with input on
components of the toolkits TEC developed.
SB/SE Has No Long-term Although IRS has outlined and begun to implement a
strategy for Performance Goals or combating abusive schemes, it has not
yet defined performance goals for Measures Linked to Goals the effort and
established the measures it would use to track progress in
achieving those goals. Performance goals define what an organization is
trying to achieve over time, preferably focusing on the outcome desired
rather than on activities or outputs. IRS officials recognize that
developing performance goals and associated measures to track progress is
desirable. Although given the substantial difficulty in assessing the
scope of the abusive scheme problem, establishing performance goals and
associated measures will be challenging, IRS intends to establish process
or resultsoriented performance goals in the future.
Using business plans and status reports, SB/SE established some shortterm
goals and measures to track its abusive scheme activity. It established
short-term goals, such as developing alternative treatments and/or a
settlement strategy for offshore credit card cases by November 1, 2002.
(As mentioned earlier, IRS actually began its offshore voluntary
compliance initiative in January 2003.) SB/SE also used measures, such as
the number of approved investigations. Although establishing these goals
and measures represents progress, IRS has not developed long-term process
and resultsoriented performance goals or measures associated with them.
SB/SE officials acknowledged the importance of goals and measures and are
working on improving. As mentioned earlier, one of SB/SE's fiscal year
2003 efforts was to develop a detailed overall strategy for addressing the
abusive schemes described in table 1, including a process to oversee and
manage the area. SB/SE officials said they would devise measures of
compliance success once they have their process in hand and gain
experience. Because the extent of abusive scheme activity is unknown and
success in addressing it is hard to define, efforts to develop long-term
performance goals and associated measures are difficult. However,
consistent with their ongoing efforts to build an infrastructure to
address abusive schemes, SB/SE management officials expressed their
intention to establish process and results-oriented goals and measures in
the future. Progress in developing these elements is crucial to being able
to communicate progress made in combating abusive schemes.
IRS Planned Resource Shifts Are Significant, but Resource Use Started Slowly
and Future Use Remains to Be Seen
IRS has begun shifting, although more slowly than expected, and plans to
continue shifting, significant resources into addressing abusive schemes,
but the potential volume of additional work that may be identified and
inexperience with the rate at which staff can close cases make it unclear
whether the additional resources and the caseloads will match each other.
At the agencywide level, IRS used a systematic decision-making process in
deciding to make these shifts. At the SB/SE level, executives considered
resources available and program priorities in significantly increasing
SB/SE examination staff resources devoted to abusive schemes. In doing so,
they
planned to shift resources out of examining areas such as small
corporations and nonabusive flow-through entities.
Overall Budget Trade-offs IRS decided staffing resource levels to be
devoted to addressing abusive schemes through a systematic planning and
budgeting process, albeit one that used participants' experience and
judgment in the absence of definitive measures of the problem's size.
Early in calendar year 2002, IRS's divisions, including SB/SE, conducted
strategic assessments in which they studied trends, issues, and priorities
affecting their operations. In April 2002, IRS's senior management team,
including the Commissioner, Deputy Commissioner, division heads, and
others, went through two rounds of considering IRS's programs to
prioritize the needs for new or redirected funding for fiscal year 2004.
Of 33 programs considered, abusive schemes received the second most votes.
According to an IRS official, this process also informed how funds already
requested for fiscal year 2003 would actually be spent.
After the senior management team reached consensus, the Commissioner
issued overall planning guidance for fiscal years 2003 and 2004 to reflect
the jointly set strategic direction, and the divisions wrote fiscal year
2003 and 2004 "strategy and program plans" outlining staff resources
needed. Showing its intent to focus resources on detecting noncompliance,
SB/SE's plan cited an increasing number of abusive schemes, an abusive
scheme estimate of up to $40 billion, promoters using the Internet as
their primary way of operating, and the potential for abusive schemes
eroding taxpayers' confidence in the tax system's fairness.
SB/SE Used Priorities to For fiscal years 2003 and 2004, SB/SE
significantly increased the
Plan for Significant examination resources it planned to allocate to new
priorities, including
Resource Shift three of its highest: (1) promoters of abusive schemes, (2)
offshore credit card schemes, and (3) other abusive schemes. As shown in
table 3, the planned level of resources for these three areas almost
quadrupled from 267 full-time equivalents (FTE) in fiscal year 2002 to
1,020 FTEs the next year, and it increased slightly from there to 1,154
FTEs for fiscal year 2004.
Table 3: Planned Shift in Revenue Agent and Tax Compliance Officer FTE
Positions Devoted to Abusive Scheme Priority Areas, Fiscal Years 2002-2004
FY FY FY Percentage increase
Priority area 2002 2003 2004 from FY 2002 to 2004
Promoters of abusive schemes 16 150 154 863%
Offshore credit card schemes 0 561 367 -
Other abusive schemes 251 309 633 152%
Total 267 1,020 1,154 332%
Source: IRS data compiled by GAO.
Note: These FTEs include revenue agents and tax compliance officers, but
not tax examiners who conduct examinations through correspondence. Revenue
agents and tax compliance officers usually have accounting experience and
meet directly with taxpayers during the audit. Correspondence examinations
do not require tax examiners to meet with the taxpayer in person.
SB/SE arrived at its fiscal year 2003 budget estimates for different
categories of abusive schemes in different ways. To estimate the number of
examiner FTEs needed for promoters, it started with the number of approved
promoter investigations and assumed another 35 investigations would be
added each month. It also assumed that each investigation would take 37.5
hours per month for 8 months, for a total of 300 hours.
For offshore credit card schemes, SB/SE estimated a potential number of
participants by extrapolating data from October 2000 summonses to find
potential credit card abusers. It decided how many participants it could
actually examine, which was significantly less than the number of
participants extrapolated, based on the estimated availability of FTEs.
For other abusive schemes, SB/SE estimated a potential number of
participants by using available data on identified schemes and investor
lists. It determined how many hours examining relevant returns would take
by assuming that closing other abusive cases would take certain
percentages of the time needed for nonabusive returns. Although other
abusive schemes evolve and past experience will not necessarily bear out
for the future, for its staff year estimates for other abusive schemes IRS
officials generally had more relevant experience from prior work on
abusive schemes to draw upon than they did for promoter and offshore
credit card staff year estimates.
In determining its budget estimates for all these areas, SB/SE considered
the allocation to other programs. It did this using input from SB/SE
executives and examiners in an iterative process. Given the shifts to
abusive schemes, SB/SE planned to limit the numbers of its traditional
examinations, such as those of small corporations and nonabusive
flowthrough entities. For instance, it scheduled the number of revenue
agent FTEs devoted to nonabusive flow-through entities to decline from 485
to 176 between fiscal years 2002 and 2003, translating to a decrease in
the number of returns examined by revenue agents from 12,318 to 1,078.5
Further, for fiscal year 2003, SB/SE also began directing its most skilled
examination resources away from national programs, such as claims for
refunds and cases with tax returns identified as being most likely to have
their taxes increased upon audit. To cope with this shift in resources
away from certain areas, IRS planned various mitigating efforts, such as
first examining individuals for abusive schemes and then pinpointing
related flow-through and other entities to be audited, rather than first
selecting the entities to audit. We did not assess how the shifts in
resources would affect examination coverage in the areas losing staff or
IRS's plans to mitigate that effect.
In addition to the increased resources for IRS examination priority areas
reflected in table 3, other parts of SB/SE and IRS also used or planned to
use FTEs to address abusive schemes. For instance, within SB/SE, although
the TEC unit did not specifically allocate FTEs for abusive schemes in
fiscal year 2002, it planned to devote 54 FTEs to addressing abusive
schemes in fiscal year 2003 (about 13 had been used as of July 26, 2003)
and asked for another 125 for fiscal year 2004. Similarly, the collection
function went from 0 FTEs in fiscal year 2002 to planning for 73 and 81
FTEs in fiscal years 2003 and 2004, respectively. According to an SB/SE
official in early August 2003, SB/SE did not have reliable information on
how many FTEs the collection function had used to date to address abusive
schemes in fiscal year 2003.
Outside SB/SE, although CI did not budget staff resources specifically for
abusive schemes, it used 120 FTEs in fiscal year 2002 just on abusive
domestic and foreign trusts and expected significant cascading effects on
its scheme work in the form of referrals from other units. For fiscal year
5Nonabusive flow-through entities are entities such as trusts and
partnerships that IRS examines as part of its broad coverage of taxpayers,
even though it has no specific reason to think they are abusive.
2004, it also requested 185 FTEs in addition to the 441 already used to
identify, develop, and analyze potentially fraudulent schemes in its
Questionable Refund Program and its Return Preparer Program. Other SB/SE
and IRS areas devoting FTEs to abusive schemes include the Frivolous
Return Program, SB/SE Communications and Liaison, and the Office of Chief
Counsel.
Resource Use Differed from Expectations, and Future Use Remains to Be Seen
As of July 31, 2003, IRS had used fewer examination resources combating
abusive schemes than it had expected. Although IRS intends to
significantly shift resources to address abusive schemes, how future
resources will actually be used remains to be seen. The future volume of
cases IRS will need to examine and the rate at which IRS will be able to
close examinations are unclear. Instead of using examination resources to
the extent intended to address abusive schemes, it has been able to apply
them to other high-priority programs, such as its Unreported Income
Discriminant Function effort, and if circumstances warranted, it could do
so again in the future.
As shown in table 4, through July 31, 2003, SB/SE was on track to use less
than half of the 1,020 fiscal year 2003 FTEs designated for abusive scheme
priority areas. It was on track to use 10 percent of the revenue agent
FTEs to be devoted to offshore credit card schemes and 30 percent of those
to be devoted to promoters. IRS officials stated that fiscal year 2003 was
a transition year and attributed the slower than expected start to overly
optimistic forecasts for delivering a high level of workable cases to
revenue agents-forecasts made without the experience needed in the
promoter and offshore credit card areas to gain insight into how slowly or
quickly inventory develops. Recent trends of more cases starting per month
indicate that the available workload is growing.
Table 4: Planned and Projected Revenue Agent and Tax Compliance Officer
FTEs Devoted to Abusive Scheme Priority Areas, Fiscal Year 2003
Priority area
Planned FTEs
Projected FTEs if the pace at July 31, 2003 was maintained Projected FTEs
as a percentage of those planned
Promoters of abusive
schemes 150 45
Offshore credit card schemes 561 56
Other abusive schemes
worked by revenue agents 275 352 128
Other abusive schemes
worked by tax compliance
officers 34 17
Total 1,020 470
Source: IRS data compiled by GAO.
Other data illustrate how difficult it is for IRS to reliably estimate the
resources that may be needed to work abusive schemes due to uncertainty
about the volume of cases that it will need to examine and the rate at
which IRS will be able to close examinations. The data indicate that, at
times, the actual number of cases identified and the rate at which cases
were being closed diverged significantly from the estimates used to plan
for fiscal year 2003 FTEs. For example, as shown in table 5, by July 31,
2003, SB/SE did not yet have offshore credit card cases lined up for
examination that would approach the number the budget was intended to
cover, and it had closed only 18 percent of the cases it had anticipated
closing. On the other hand, SB/SE had more cases involving other abusive
schemes in its queue for revenue agents to handle than it had estimated it
could work in fiscal year 2003, but it was closing almost twice as many
cases as expected. Having budgeted FTEs to work 9,060 complete cases
involving other abusive schemes, it had enough resources to begin and/or
complete work in fiscal year 2003 on many of the 20,810 cases it
identified by July 31, 2003. It could complete many of the unfinished
cases in fiscal year 2004, and by that time, have identified new cases to
work.
Table 5: Comparisons of Inventory Developments with Inventory Expectations
Priority area
Number of cases identified by July 31, 2003a Number of equivalent cases
SB/SE estimated it could cover in FY 2003 Rate at which cases expected to
be closed by July 31, 2003 actually were closed by that time
Promoters 535 569 Not available
Offshore credit card
schemes 2,208b 9,455 18%
Other abusive
schemes worked by
revenue agents 20,810 9,060 193%
Other abusive
schemes worked by
tax compliance
officers 2,607 4,570 44%
Source: Calculated by GAO from IRS data.
aThis calculation entailed adding the number of cases that either started
in fiscal year 2003 or were identified to be started but had not yet begun
by July 31, 2003. To this total, we added cases carried over from fiscal
year 2002 into 2003, but adjusted the total to reflect that a portion of
the casework had been completed. For example, if two cases carried into
2003 were half completed, we counted them as one case. We relied on IRS
estimates of case status to make these adjustments. The resulting totals
do not represent cases that IRS could necessarily complete in fiscal year
2003 because, we were told, many cases could take 2 or 3 years.
bSB/SE officials explained that over time IRS would identify additional
tax returns related to the 2,208 offshore credit card cases that had been
identified as of July 31, 2003. SB/SE projected that each offshore credit
card case originally identified would eventually include four tax returns,
on average.
SB/SE officials told us that they accommodated shortfalls in cases or in
budgeted examination resources by shifting examination FTEs among
different types of abusive scheme examinations and to other priority
programs. According to them, the offshore credit card cases did not start
as quickly as anticipated because dealing with the summons process took
longer than expected. However, this delay allowed more SB/SE resources to
be used for other abusive schemes.
Although to date SB/SE officials have acted to accommodate unexpected
differences in the volume of cases and the time needed to work them,
uncertainties affecting future resource levels are perhaps even greater.
There is the potential that the volume of cases could grow significantly,
but it is not clear how much the caseload will grow or how quickly. For
example, in the offshore credit card scheme area, IRS has not yet assessed
how many new cases may be identified from the 214 new offshore promoters
found in its voluntary compliance initiative that closed on April
15, 2003. Also, by early August 2003, IRS had received records from its
second round of credit card summonses, which covered credit card company
records on cards issued by banks in 31 offshore financial centers. Efforts
like these may potentially expand the caseload but by an unknown amount.
To the extent the potential cases expand, IRS's experience so far, as
alluded to earlier, has been that it is taking longer than originally
expected to obtain all of the information needed to actually identify
individuals for potential examination and to make informed choices about
which cases merit examination. IRS found, for example, that the
information from credit card summonses often was insufficient to identify
individuals, and, therefore, it had to issue summonses to merchants as
well to obtain identifying information. Therefore, IRS would be more
likely to be able to handle the examination caseload if the universe of
potential examination cases expands, even fairly significantly, but
developing those cases to the point they can actually be examined
stretches out over time, than if a "workable" caseload materializes
quickly.
The fiscal year 2003 statistics in table 5 also illustrate that the rate
at which identified cases may be closed is highly uncertain. According to
an SB/SE official, SB/SE took its time estimates for working on abusive
scheme cases from its most complex abusive case examinations. SB/SE
officials explained that IRS had very little history to use in estimating
the time needed to process promoter, offshore credit card, and other
abusive scheme cases. The matrix being developed in fiscal year 2003 was
designed to collect information that will help executives assess resources
needed. As SB/SE gains experience with current cases, officials said, the
planning process would become more refined.
Across the spectrum of IRS's responsibilities, IRS works varying amounts
of the identified workload. It has pointed to gaps between what it should
be doing and what it has the capacity to do in areas ranging from
individuals to small and large corporations. IRS will make future
decisions about the portion of abusive scheme cases that it will work as
part of its overall processes for allocating resources among its many
competing priorities.
We have previously raised questions about IRS's ability to shift
compliance resources as planned. We recently testified that many parties
have expressed concern about declining IRS compliance-especially audit-and
collection trends for their potential to undermine taxpayers' motivation
to fulfill their tax obligations.6 Concerned about these trends, IRS has
sought more resources, including increased staffing for compliance and
collections, since fiscal year 2001. Despite receiving requested budget
increases, staffing levels in key occupations were lower in 2002 than in
2000. These declines occurred for reasons such as unbudgeted expenses
consuming budget increases and other operational workload increases.
Conclusions Having designated abusive schemes as a priority enforcement
area, IRS has made progress in developing an agencywide effort to address
schemes. To ensure that these efforts are focused and to support both
congressional and IRS assessments of progress in combating abusive
schemes, IRS officials must follow through on their intention to develop
long-term process and results-oriented performance goals and associated
measures.
Fiscal year 2003 experience, however, illustrates that IRS likely will
need to continually adjust its efforts. Although IRS identified many more
of some types of abusive schemes than it expected it could handle in
fiscal year 2003, the development of a workable inventory of offshore
credit card scheme cases progressed much more slowly than anticipated. On
balance, this likely led to IRS using substantially fewer resources for
abusive scheme work in fiscal year 2003 than anticipated. As with
developing longterm goals and measures, officials recognize that they must
build a better analytic basis for judging the appropriate resources to
assign to pursuing abusive schemes and intend to do so as they better
identify the potential workload and how quickly they can close cases.
Given that abusive schemes are a top priority for IRS and have been the
focus of congressional attention, the potential size of the problem is a
key reference point for policymakers in judging whether IRS has
appropriate resources and an effective strategy over time for combating
the schemes. Although estimating the potential size of the problem is
inherently difficult and must rely on assumptions and officials' judgment,
documenting the basis for the
6U.S. General Accounting Office, Compliance and Collection: Challenges for
IRS in Reversing Trends and Implementing New Initiatives, GAO-03-732T
(Washington, D.C.: May 7, 2003).
estimates can help others judge how to interpret the numbers and use them
to make decisions.
Recommendation to We recommend that the Commissioner of Internal Revenue
document the
support underlying future IRS estimates of the size of the abusive
schemethe Commissioner of problem when IRS prepares the estimates.Internal
Revenue
Agency Comments In written comments, the Commissioner of Internal Revenue
agreed with a draft of this report. He specifically agreed with the
recommendation and said that IRS would establish a methodology for
documenting the basis for the estimates. He noted that the other
information we provided would also help IRS improve its abusive scheme
program for fiscal year 2004 and beyond. In addition, he affirmed IRS's
intention to establish measurable process and results-oriented goals and
said that developing these measures is an operational priority for fiscal
year 2004.
The Commissioner also provided other general comments on our draft report
and an update of activities since the time of our review. For instance, he
said that as a result of LDC improvements, expedited procedures with the
Department of Justice, and many other efforts, IRS recently identified
significant numbers of abusive scheme promoters and participants and
refined its methods to deal with them. In addition, he noted, a key part
of the ongoing, infrastructure-building efforts that we describe was
forming and training 12 cross-functional teams in 2003 to identify
traditional or alternative strategies for addressing individual schemes.
Also, he stated that, as of October 2003, 42 states and the District of
Columbia had signed a memorandum of understanding focusing on exchanging
information with IRS relating to abusive tax avoidance transactions.
Finally, he pointed out that given IRS's inability in 2003 to consistently
identify and deliver abusive scheme cases to be worked in IRS field
offices, IRS policy is to focus on other strategic priorities when it does
not have an abusive scheme case to work.
The full text of the Commissioner's comments is reprinted in appendix I.
As agreed, unless you publicly announce its contents earlier, we plan no
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At that time, we will send copies to the Commissioner of Internal Revenue,
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If you or your staff have any questions about this report, please contact
Signora May on (404) 679-1920 or me on (202) 512-9110. Melissa Hinton and
Lawrence Korb were key contributors to this report.
Michael Brostek Director, Tax Issues
Appendix I
Comments from the Internal Revenue Service
Appendix I
Comments from the Internal Revenue Service
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