RRA 1998 House Ways Report Page 6

Offer in Compromise 

Additional Information:

Taxpayer Relief Act of 1997 p1
Taxpayer Relief Act of 1997 p2
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Revenue Reconciliation Act p1
Revenue Reconciliation Act p2
Revenue Reconciliation Act p3
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Revenue Reconciliation Act p7
Revenue Reconciliation Act p8
Revenue Reconciliation Act p9
Revenue Reconciliation Act p10
RRA 1998 Conference Report p1
RRA 1998 Conference Report p2
RRA 1998 Conference Report p3
RRA 1998 Conference Report p4
RRA 1998 Conference Report p5
RRA 1998 Conference Report p6
RRA 1998 Conference Report p7
Changes in Existing Law
RRA 1998 Senate Report p1
RRA 1998 Senate Report p2
RRA 1998 Senate Report p3
RRA 1998 Senate Report p4
RRA 1998 Senate Report p5
RRA 1998 Senate Report p6
RRA 1998 Senate Report p7
RRA 1998 Senate Report p8
RRA 1998 House Ways Report p1
RRA 1998 House Ways Report p2
RRA 1998 House Ways Report p3
RRA 1998 House Ways Report p4
RRA 1998 House Ways Report p5
RRA 1998 House Ways Report p6
Report on HR 4297
Tax Reform Act of 2005
Tax Relief Act of 2005

[SEC. 7803. OTHER PERSONNEL.

[(a) APPOINTMENT AND SUPERVISION. --The Secretary is authorized to employ such number of persons as the Secretary deems proper for the administration and enforcement of the internal revenue laws, and the Secretary shall issue all necessary directions, instructions, orders, and rules applicable to such persons.

[(b) POSTS OF DUTY OF EMPLOYEES IN FIELD SERVICE OR TRAVELING. --

[(1) DESIGNATION OF POST OF DUTY. --The Secretary shall determine and designate the posts of duty of all such persons engaged in field work or traveling on official business outside of the District of Columbia .

[(2) DETAIL OF PERSONNEL FROM FIELD SERVICE. --The Secretary may order any such person engaged in field work to duty in the District of Columbia , for such periods as the Secretary may prescribe, and to any designated post of duty outside the District of Columbia upon the completion of such duty.

[(c) DELINQUENT INTERNAL REVENUE OFFICERS AND EMPLOYEES. --If any officer or employee of the Treasury Department acting in connection with the internal revenue laws fails to account for and pay over any amount of money or property collected or received by him in connection with the internal revenue laws, the Secretary shall issue notice and demand to such officer or employee for payment of the amount which he failed to account for and pay over, and, upon failure to pay the amount demanded within the time specified in such notice, the amount so demanded shall be deemed imposed upon such officer or employee and assessed upon the date of such notice and demand, and the provisions of chapter 64 and all other provisions of law relating to the collection of assessed taxes shall be applicable in respect of such amount.

[SEC. 7804. EFFECT OF REORGANIZATION PLANS

[(a) APPLICATION. --The provisions of Reorganization Plan Numbered 26 of 1950 and Reorganization Plan Numbered 1 of 1952 shall be applicable to all functions vested by this title, or by any act amending this title (except as otherwise expressly provided in such amending act), in any officer, employee, or agency, of the Department of the Treasury.

[(b) PRESERVATION OF EXISTING RIGHTS AND REMEDIES. --Nothing in Reorganization Plan Numbered 26 of 1950 or Reorganization Plan Numbered 1 of 1952 shall be considered to impair any right or remedy, including trial by jury, to recover any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority, or any sum alleged to have been excessive or in any manner wrongfully collected under the internal revenue laws. For the purpose of any action to recover any such tax, penalty, or sum, all statutes, rules, and regulations referring to the collector of internal revenue, the principal officer for the internal revenue district, or the Secretary, shall be deemed to refer to the officer whose act or acts referred to in the preceding sentence gave rise to such action. The venue of any such action shall be the same as under existing law.]

SEC. 7802. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.

(a) ESTABLISHMENT. --There is established within the Department of the Treasury the Internal Revenue Service Oversight Board (hereafter in this subchapter referred to as the "Oversight Board").

(b) MEMBERSHIP. --

(1) COMPOSITION. --The Oversight Board shall be composed of 11 members, as follows:

(A) 8 members shall be individuals who are not Federal officers or employees and who are appointed by the President, by and with the advice and consent of the Senate.

(B) 1 member shall be the Secretary of the Treasury or, if the Secretary so designates, the Deputy Secretary of the Treasury.

(C) 1 member shall be the Commissioner of Internal Revenue. (D) 1 member shall be an individual who is a representative of an organization that represents a substantial number of Internal Revenue Service employees and who is appointed by the President, by and with the advice and consent of the Senate.

(2) QUALIFICATIONS AND TERMS. --

(A) QUALIFICATIONS. --Members of the Oversight Board described in paragraph (1)(A) shall be appointed solely on the basis of their professional experience and expertise in 1 or more of the following areas:

(i) Management of large service organizations.

(ii) Customer service.

(iii) Federal tax laws, including tax administration and compliance.

(iv) Information technology.

(v) Organization development.

(vi) The needs and concerns of taxpayers. In the aggregate, the members of the Oversight Board described in paragraph (1)(A) should collectively bring to bear expertise in all of the areas described in the preceding sentence.

(B) TERMS. --Each member who is described in paragraph (1)(A) or (D) shall be appointed for a term of 5 years, except that of the members first appointed under paragraph (1)(A) --

(i) 1 member shall be appointed for a term of 1 year,

(ii) 1 member shall be appointed for a term of 2 years,

(iii) 2 members shall be appointed for a term of 3 years, and

(iv) 2 members shall be appointed for a term of 4 years. Such terms shall begin on the date of appointment.

(C) REAPPOINTMENT. --An individual who is described in paragraph (1)(A) may be appointed to no more than two 5-year terms on the Oversight Board.

(D) VACANCY.---Any vacancy on the Oversight Board shall be filled in the same manner as the original appointment. Any member appointed to fill a vacancy occurring before the expiration of the term for which the member's predecessor was appointed shall be appointed for the remainder of that term.

(E) SPECIAL GOVERNMENT EMPLOYEES. --During the entire period that an individual appointed under paragraph

(1)(A) is a member of the Oversight Board, such individual shall be treated as --

(i) serving as a special government employee (as defined in section 202 of title 18, United States Code) and as described in section 207(c)(2) of such title 18, and

(ii) serving as an officer or employee referred to in section 101(f) of the Ethics in Government Act of 1978 for purposes of title I of such Act.

(3) QUORUM. --6 members of the Oversight Board shall constitute a quorum. A majority of members present and voting shall be required for the Oversight Board to take action.

(4) REMOVAL. --

(A) IN GENERAL. --Any member of the Oversight Board may be removed at the will of the President.

(B) SECRETARY AND COMMISSIONER. --An individual described in subparagraph (B) or (C) of paragraph (1) shall be removed upon termination of employment.

(C) REPRESENTATIVE OF INTERNAL REVENUE SERVICE EMPLOYEES. --The member described in paragraph (1)(D) shall be removed upon termination of employment, membership, or other affiliation with the organization described in such paragraph.

(5) CLAIMS. --

(A) IN GENERAL. --Members of the Oversight Board who are described in paragraph (1)(A) or (D) shall have no personal liability under Federal law with respect to any claim arising out of or resulting from an act or omission by such member within the scope of service as a member. The preceding sentence shall not be construed to limit personal liability for criminal acts or omissions, willful or malicious conduct, acts or omissions for private gain, or any other act or omission outside the scope of the service of such member on the Oversight Board.

(B) EFFECT ON OTHER LAW. --This paragraph shall not be construed --

(i) to affect any other immunities and protections that may be available to such member under applicable law with respect to such transactions,

(ii) to affect any other right or remedy against the United States under applicable law, or

(iii) to limit or alter in any way the immunities that are available under applicable law for Federal officers and employees.

(c) GENERAL RESPONSIBILITIES. --

(1) IN GENERAL. --The Oversight Board shall oversee the Internal Revenue Service in its administration, management, conduct, direction, and supervision of the execution and application of the internal revenue laws or related statutes and tax conventions to which the United States is a party.

(2) EXCEPTIONS. --The Oversight Board shall have no responsibilities or authority with respect to --

(A) the development and formulation of Federal tax policy relating to existing or proposed internal revenue laws, related statutes, and tax conventions,

(B) law enforcement activities of the Internal Revenue Service, including compliance activities such as criminal investigations, examinations, and collection activities, or

(C) specific procurement activities of the Internal Revenue Service.

(3) RESTRICTION ON DISCLOSURE OF RETURN INFORMATION TO OVERSIGHT BOARD MEMBERS. --No return, return information, or taxpayer return information (as defined in section 6103(b)) may be disclosed to any member of the Oversight Board described in subsection

(b)(1)(A) or (D). Any request for information not permitted to be disclosed under the preceding sentence, and any contact relating to a specific taxpayer, made by a member of the Oversight Board so described to an officer or employee of the Internal Revenue Service shall be reported by such officer or employee to the Secretary and the Joint Committee on Taxation.

(d) SPECIFIC RESPONSIBILITIES. --The Oversight Board shall have the following specific responsibilities:

(1) STRATEGIC PLANS. --To review and approve strategic plans of the Internal Revenue Service, including the establishment of --

(A) mission and objectives, and standards of performance relative to either, and (B) annual and long-range strategic plans.

(2) OPERATIONAL PLANS. --To review the operational functions of the Internal Revenue Service, including --

(A) plans for modernization of the tax system,

(B) plans for outsourcing or managed competition, and (C) plans for training and education.

(3) MANAGEMENT. --To --

(A) recommend to the President candidates for appointment as the Commissioner of Internal Revenue and recommend to the President the removal of the Commissioner,

(B) review the Commissioner's selection, evaluation, and compensation of senior managers, and

(C) review and approve the Commissioner's plans for any major reorganization of the Internal Revenue Service.

(4) BUDGET. --To --

(A) review and approve the budget request of the Internal Revenue Service prepared by the Commissioner,

(B) submit such budget request to the Secretary of the Treasury, and

(C) ensure that the budget request supports the annual and long-range strategic plans.

The Secretary shall submit the budget request referred to in paragraph (4)(B) for any fiscal year to the President who shall submit such request, without revision, to Congress together with the President's annual budget request for the Internal Revenue Service for such fiscal year.

(e) BOARD PERSONNEL MATTERS. --

(1) COMPENSATION OF MEMBERS. --

(A) IN GENERAL. --Each member of the Oversight Board who is described in subsection (b)(1)(A) shall be compensated at a rate of $30,000 per year. All other members of the Oversight Board shall serve without compensation for such service.

(B) CHAIRPERSON. --In lieu of the amount specified in subparagraph (A), the Chairperson of the Oversight Board shall be compensated at a rate of $50,000.

(2) TRAVEL EXPENSES. --The members of the Oversight Board shall be allowed travel expenses, including per diem in lieu of subsistence, at rates authorized for employees of agencies under subchapter I of chapter 57 of title 5, United States Code, while away from their homes or regular places of business for purposes of attending meetings of the Oversight Board.

(3) STAFF. --At the request of the Chairperson of the Oversight Board, the Commissioner shall detail to the Oversight Board such personnel as may be necessary to enable the Oversight Board to perform its duties. Such detail shall be without interruption or loss of civil service status or privilege.

(4) PROCUREMENT OF TEMPORARY AND INTERMITTENT SERVICES. --The Chairperson of the Oversight Board may procure temporary and intermittent services under section 3109(b) of title 5, United States Code.

(f) ADMINISTRATIVE MATTERS. --

(1) CHAIR. --The members of the Oversight Board shall elect for a 2-year term a chairperson from among the members appointed under subsection (b)(1)(A).

(2) COMMITTEES. --The Oversight Board may establish such committees as the Oversight Board determines appropriate.

(3) MEETINGS. --The Oversight Board shall meet at least once each month and at such other times as the Oversight Board determines appropriate.

(4) REPORTS. --The Oversight Board shall each year report to the President and the Congress with respect to the conduct of its responsibilities under this title.

SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; OTHER OFFICIALS.

(a) COMMISSIONER OF INTERNAL REVENUE. --

(1) APPOINTMENT. --

(A) IN GENERAL. --There shall be in the Department of the Treasury a Commissioner of Internal Revenue who shall be appointed by the President, by and with the advice and consent of the Senate, to a 5-year term. The appointment shall be made without regard to political affiliation or activity.

(B) VACANCY. --Any individual appointed to fill a vacancy in the position of Commissioner occurring before the expiration of the term for which such individual's predecessor was appointed shall be appointed only for the remainder of that term.

(C) REMOVAL. --The Commissioner may be removed at the will of the President.

(2) DUTIES. --The Commissioner shall have such duties and powers as the Secretary may prescribe, including the power to --

(A) administer, manage, conduct, direct, and supervise the execution and application of the internal revenue laws or related statutes and tax conventions to which the United States is a party; and

(B) recommend to the President a candidate for appointment as Chief Counsel for the Internal Revenue Service when a vacancy occurs, and recommend to the President the removal of such Chief Counsel. If the Secretary determines not to delegate a power specified in subparagraph (A) or (B), such determination may not take effect until 30 days after the Secretary notifies the Committees on Ways and Means, Government Reform and Oversight, and Appropriations of the House of Representatives, the Committees on Finance, Government Operations, and Appropriations of the Senate, and the Joint Committee on Taxation.

(3) CONSULTATION WITH BOARD. --The Commissioner shall consult with the Oversight Board on all matters set forth in paragraphs (2) and (3) (other than paragraph (3)(A)) of section 7802(d).

(b) ASSISTANT COMMISSIONER FOR EMPLOYEE PLANS AND EXEMPT ORGANIZATIONS. --There is established within the Internal Revenue Service an office to be known as the "Office of Employee Plans and Exempt Organizations" to be under the supervision and direction of an Assistant Commissioner of Internal Revenue. As head of the Office, the Assistant Commissioner shall be responsible for carrying out such functions as the Secretary may prescribe with respect to organizations exempt from tax under section 501(a) and with respect to plans to which part I of subchapter D of chapter 1 applies (and with respect to organizations designed to be exempt under such section and plans designed to be plans to which such part applies) and other nonqualified deferred compensation arrangements. The Assistant Commissioner shall report annually to the Commissioner with respect to the Assistant Commissioner's responsibilities under this section.

(c) OFFICE OF TAXPAYER ADVOCATE. --

(1) IN GENERAL. --

(A) ESTABLISHMENT. --There is established in the Internal Revenue Service an office to be known as the "Office of the Taxpayer Advocate". Such office shall be under the supervision and direction of an official to be known as the "Taxpayer Advocate" who shall be appointed with the approval of the Oversight Board by the Commissioner of Internal Revenue and shall report directly to the Commissioner. The Taxpayer Advocate shall be entitled to compensation at the same rate as the highest level official reporting directly to the Commissioner of Internal Revenue.

(B) RESTRICTION ON SUBSEQUENT EMPLOYMENT. --An individual who is an officer or employee of the Internal Revenue Service may be appointed as Taxpayer Advocate only if such individual agrees not to accept any employment with the Internal Revenue Service for at least 5 years after ceasing to be the Taxpayer Advocate.

(2) FUNCTIONS OF OFFICE. --

(A) IN GENERAL. --It shall be the function of the Office of Taxpayer Advocate to --

(i) assist taxpayers in resolving problems with the Internal Revenue Service,

(ii) identify areas in which taxpayers have problems in dealings with the Internal Revenue Service,

(iii) to the extent possible, propose changes in the administrative practices of the Internal Revenue Service to mitigate problems identified under clause

(ii), and

(iv) identify potential legislative changes which may be appropriate to mitigate such problems.

(B) ANNUAL REPORTS. --

(i) OBJECTIVES. --Not later than June 30 of each calendar year, the Taxpayer Advocate shall report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the objectives of the Taxpayer Advocate for the fiscal year beginning in such calendar year. Any such report shall contain full and substantive analysis, in addition to statistical information.

(ii) ACTIVITIES. --Not later than December 31 of each calendar year, the Taxpayer Advocate shall report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the activities of the Taxpayer Advocate during the fiscal year ending during such calendar year. Any such report shall contain full and substantive analysis, in addition to statistical information, and shall --

(I) identify the initiatives the Taxpayer Advocate has taken on improving taxpayer services and Internal Revenue Service responsiveness,

(II) contain recommendations received from individuals with the authority to issue Taxpayer Assistance Orders under section 7811,

( III ) contain a summary of at least 20 of the most serious problems encountered by taxpayers, including a description of the nature of such problems,

(IV) contain an inventory of the items described in subclauses (I), (II), and ( III ) for which action has been taken and the result of such action,

(V) contain an inventory of the items described in subclauses (I), (II), and ( III ) for which action remains to be completed and the period during which each item has remained on such inventory,

(VI) contain an inventory of the items described in subclauses (I), (II), and ( III ) for which no action has been taken, the period during which each item has remained on such inventory, the reasons for the inaction, and identify any Internal Revenue Service official who is responsible for such inaction,

( VII ) identify any Taxpayer Assistance Order which was not honored by the Internal Revenue Service in a timely manner, as specified under section 7811(b),

(VIII) contain recommendations for such administrative and legislative action as may be appropriate to resolve problems encountered by taxpayers,

 (IX) identify areas of the tax law that impose significant compliance burdens on taxpayers or the Internal Revenue Service, including specific recommendations for remedying these problems,

(X) in conjunction with the National Director of Appeals, identify the 10 most litigated issues for each category of taxpayers, including recommendations for mitigating such disputes, and

(XI) include such other information as the Taxpayer Advocate may deem advisable.

(iii) REPORT TO BE SUBMITTED DIRECTLY. --Each report required under this subparagraph shall be provided directly to the committees described in clauses (i) and

(ii) without any prior review or comment from the Oversight Board, the Secretary of the Treasury, any other officer or employee of the Department of the Treasury, or the Office of Management and Budget.

(C) OTHER RESPONSIBILITIES. --The Taxpayer Advocate shall --

(i) monitor the coverage and geographic allocation of problem resolution officers, and

(ii) develop guidance to be distributed to all Internal Revenue Service officers and employees outlining the criteria for referral of taxpayer inquiries to problem resolution officers.

(3) RESPONSIBILITIES OF COMMISSIONER. --The Commissioner shall establish procedures requiring a formal response to all recommendations submitted to the Commissioner by the Taxpayer Advocate within 3 months after submission to the Commissioner.

SEC. 7804. OTHER PERSONNEL.

(a) APPOINTMENT AND SUPERVISION. --Unless otherwise prescribed by the Secretary, the Commissioner of Internal Revenue is authorized to employ such number of persons as the Commissioner deems proper for the administration and enforcement of the internal revenue laws, and the Commissioner shall issue all necessary directions, instructions, orders, and rules applicable to such persons.

(b) POSTS OF DUTY OF EMPLOYEES IN FIELD SERVICE OR TRAVELING. --Unless otherwise prescribed by the Secretary --

(1) DESIGNATION OF POST OF DUTY. --The Commissioner shall determine and designate the posts of duty of all such persons engaged in field work or traveling on official business outside of the District of Columbia .

(2) DETAIL OF PERSONNEL FROM FIELD SERVICE. --The Commissioner may order any such person engaged in field work to duty in the District of Columbia , for such periods as the Commissioner may prescribe, and to any designated post of duty outside the District of Columbia upon the completion of such duty.

(c) DELINQUENT INTERNAL REVENUE OFFICERS AND EMPLOYEES. --If any officer or employee of the Treasury Department acting in connection with the internal revenue laws fails to account for and pay over any amount of money or property collected or received by him in connection with the internal revenue laws, the Secretary shall issue notice and demand to such officer or employee for payment of the amount which he failed to account for and pay over, and, upon failure to pay the amount demanded within the time specified in such notice, the amount so demanded shall be deemed imposed upon such officer or employee and assessed upon the date of such notice and demand, and the provisions of chapter 64 and all other provisions of law relating to the collection of assessed taxes shall be applicable in respect of such amount.

SEC. 7805. RULES AND REGULATIONS.

(a) ***

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(d) MANNER OF MAKING ELECTIONS PRESCRIBED BY SECRETARY. --Except to the extent otherwise provided by this title, any election under this title shall be made at such time and in such manner as the Secretary shall [by regulations or forms] prescribe.

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SEC. 7811. TAXPAYER ASSISTANCE ORDERS.

(a) AUTHORITY TO ISSUE. --[Upon application]

(1) IN GENERAL. --Upon application filed by a taxpayer with the Office of the Taxpayer Advocate (in such form, manner, and at such time as the Secretary shall by regulations prescribe), the Taxpayer Advocate may issue a Taxpayer Assistance Order if, in the determination of the Taxpayer Advocate, the taxpayer is suffering or about to suffer a significant hardship as a result of the manner in which the internal revenue laws are being administered by the Secretary.

(2) ISSUANCE OF TAXPAYER ASSISTANCE ORDERS. --For purposes of determining whether to issue a taxpayer assistance order, the Taxpayer Advocate shall consider the following factors, among others:

(A) Whether there is an immediate threat of adverse action.

(B) Whether there has been an unreasonable delay in resolving taxpayer account problems.

(C) Whether the taxpayer will have to pay significant costs (including fees for professional representation) if relief is not granted.

(D) Whether the taxpayer will suffer irreparable injury, or a long-term adverse impact, if relief is not granted.

(3) STANDARD WHERE ADMINISTRATIVE GUIDANCE NOT FOLLOWED. --In cases where any Internal Revenue Service employee is not following applicable published administrative guidance (including the Internal Revenue Manual), the Taxpayer Advocate shall construe the factors taken into account in determining whether to issue a taxpayer assistance order in the manner most favorable to the taxpayer.

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CHAPTER 92 --POWERS AND DUTIES OF JOINT COMMITTEE

Sec. 8021. Powers.

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Sec. 8024. Tax complexity analysis.

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SEC. 8021. POWERS.

(a) ***

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(e) INVESTIGATIONS. --The Joint Committee shall review all requests (other than requests by the chairman or ranking member of a Committee or Subcommittee) for investigations of the Internal Revenue Service by the General Accounting Office, and approve such requests when appropriate, with a view towards eliminating overlapping investigations, ensuring that the General Accounting Office has the capacity to handle the investigation, and ensuring that investigations focus on areas of primary importance to tax administration.

(f) RELATING TO JOINT HEARINGS. --

(1) IN GENERAL. --The Chief of Staff, and such other staff as are appointed pursuant to section 8004, shall provide such assistance as is required for joint hearings described in paragraph (2).

(2) JOINT HEARINGS. --On or before April 1 of each calendar year after 1997, there shall be a joint hearing of two members of the majority and one member of the minority from each of the Committees on Finance, Appropriations, and Government Affairs of the Senate, and the Committees on Ways and Means, Appropriations, and Government Reform and Oversight of the House of Representatives, to review the strategic plans and budget for the Internal Revenue Service. After the conclusion of the annual filing season, there shall be a second annual joint hearing to review the other matters outlined in section 8022(3)(C).

SEC. 8022. DUTIES.

It shall be the duty of the Joint Committee --

(1) ***

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[(3) REPORTS. --To report, from time to time, to the Committee on Finance and the Committee on Ways and Means, and, in its discretion, to the Senate or the House of Representatives, or both, the results of its investigations, together with such recommendations as it may deem advisable.]

(3) REPORTS. --

(A) To report, from time to time, to the Committee on Finance and the Committee on Ways and Means, and, in its discretion, to the Senate or House of Representatives, or both, the results of its investigations, together with such recommendations as it may deem advisable.

(B) To report, annually, to the Committee on Finance and the Committee on Ways and Means on the overall state of the Federal tax system, together with recommendations with respect to possible simplification proposals and other matters relating to the administration of the Federal tax system as it may deem advisable.

(C) To report, annually, to the Committees on Finance, Appropriations, and Government Affairs of the Senate, and to the Committees on Ways and Means, Appropriations, and Government Reform and Oversight of the House of Representatives, with respect to --

(i) strategic and business plans for the Internal Revenue Service;

(ii) progress of the Internal Revenue Service in meeting its objectives;

(iii) the budget for the Internal Revenue Service and whether it supports its objectives;

(iv) progress of the Internal Revenue Service in improving taxpayer service and compliance;

(v) progress of the Internal Revenue Service on technology modernization; and

(vi) the annual filing season.

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SEC. 8024. TAX COMPLEXITY ANALYSIS.

(a) IN GENERAL. --If --

(1) legislation is reported by the Committee on Finance of the Senate, the Committee on Ways and Means of the House of Representatives, or any committee of conference, and

(2) such legislation includes any provision amending the Internal Revenue Code of 1986, the report or statement accompanying such legislation shall contain a Tax Complexity Analysis prepared by the staff of the Joint Committee on Taxation.

(b) CONTENT OF COMPLEXITY ANALYSIS. --Each Tax Complexity Analysis shall identify the provisions, if any, adding significant complexity or providing significant simplification, as determined by the staff of the Joint Committee on Taxation, and shall include the basis for such determination.

(c) LEGISLATION SUBJECT TO POINT OF ORDER. --It shall not be in order in the Senate or the House of Representatives to consider any legislation described in subsection (a) required to be accompanied by a Tax Complexity Analysis that does not contain a Tax Complexity Analysis.

(d) RESPONSIBILITIES OF THE COMMISSIONER. --The Commissioner shall provide the Joint Committee on Taxation with such information as is necessary to prepare Tax Complexity Analyses.

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TITLE 5, UNITED STATES CODE

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PART III --EMPLOYEES

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Subpart D --Pay and Allowances

CHAPTER 51 --CLASSIFICATION

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§5109. Positions classified by statute

(a) ***

(b) The position held by the employee appointed under section [7802(b)] 7803(b) of the Internal Revenue Code of 1954 shall be considered a position classified above GS-15 pursuant to section 5108.

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PART III --EMPLOYEES

Subpart A --General Provisions

Chap.                               Sec.                               

21. Definitions                     2101                               

93. Personnel Flexibilities                                            

 Relating to the Internal Revenue                                       

 Service                             9301                               

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Subpart I --Miscellaneous

CHAPTER 93 --PERSONNEL FLEXIBILITIES RELATING TO THE INTERNAL REVENUE SERVICE

Sec.

9301. General requirements.

9302. Flexibilities relating to performance management.

9303. Staffing flexibilities.

9304. Flexibilities relating to demonstration projects.

§9301. General requirements

(a) CONFORMANCE WITH MERIT SYSTEM PRINCIPLES, ETC. --Any flexibilities under this chapter shall be exercised in a manner consistent with --

(1) chapter 23, relating to merit system principles and prohibited personnel practices; and

(2) provisions of this title (outside of this subpart) relating to preference eligibles.

(b) REQUIREMENT RELATING TO UNITS REPRESENTED BY LABOR ORGANIZATIONS. --

(1) WRITTEN AGREEMENT REQUIRED. --Employees within a unit with respect to which a labor organization is accorded exclusive recognition under chapter 71 shall not be subject to the exercise of any flexibility under section 9302, 9303, or 9304, unless there is a written agreement between the Internal Revenue Service and the organization permitting such exercise.

(2) DEFINITION OF A WRITTEN AGREEMENT. --In order to satisfy paragraph (1), a written agreement --

(A) need not be a collective bargaining agreement within the meaning of section 7103(8); and

(B) may not be an agreement imposed by the Federal Service Impasses Panel under section 7119.

§9302. Flexibilities relating to performance management

(a) IN GENERAL. --The Commissioner of Internal Revenue shall, within a year after the date of the enactment of this chapter, establish a performance management system which --

(1) subject to section 9301(b), shall cover all employees of the Internal Revenue Service other than --

(A) the members of the Internal Revenue Service Oversight Board;

(B) the Commissioner of Internal Revenue; and

(C) the Chief Counsel for the Internal Revenue Service;

(2) shall maintain individual accountability by --

(A) establishing standards of performance which --

(i) shall permit the accurate evaluation of each employee's performance on the basis of the individual and organizational performance requirements applicable with respect to the evaluation period involved, taking into account individual contributions toward the attainment of any goals or objectives under paragraph (3);

(ii) shall be communicated to an employee before the start of any period with respect to which the performance of such employee is to be evaluated using such standards; and

(iii) shall include at least 2 standards of performance, the lowest of which shall denote the retention standard and shall be equivalent to fully successful performance;

(B) providing for periodic performance evaluations to determine whether employees are meeting all applicable retention standards; and

(C) using the results of such employee's performance evaluation as a basis for adjustments in pay and other appropriate personnel actions; and

(3) shall provide for (A) establishing goals or objectives for individual, group, or organizational performance (or any combination thereof), consistent with Internal Revenue Service performance planning procedures, including those established under the Government Performance and Results Act of 1993, the Information Technology Management Reform Act of 1996, Revenue Procedure 64-22 (as in effect on July 30, 1997), and taxpayer service surveys, (B) communicating such goals or objectives to employees, and (C) using such goals or objectives to make performance distinctions among employees or groups of employees.

For purposes of this title, performance of an employee during any period in which such employee is subject to standards of performance under paragraph (2) shall be considered to be "unacceptable" if the performance of such employee during such period fails to meet any retention standard.

(b) AWARDS. --

(1) FOR SUPERIOR ACCOMPLISHMENTS. --In the case of a proposed award based on the efforts of an employee or former employee of the Internal Revenue Service, any approval required under the provisions of section 4502(b) shall be considered to have been granted if the Office of Personnel Management does not disapprove the proposed award within 60 days after receiving the appropriate certification described in such provisions.

(2) FOR EMPLOYEES WHO REPORT DIRECTLY TO THE COMMISSIONER. --

(A) IN GENERAL. --In the case of an employee of the Internal Revenue Service who reports directly to the Commissioner of Internal Revenue, a cash award in an amount up to 50 percent of such employee's annual rate of basic pay may be made if the Commissioner finds such an award to be warranted based on such employee's performance.

(B) NATURE OF AN AWARD. --A cash award under this paragraph shall not be considered to be part of basic pay.

(C) TAX ENFORCEMENT RESULTS. --A cash award under this paragraph may not be based solely on tax enforcement results.

(D) ELIGIBLE EMPLOYEES. --Whether or not an employee is an employee who reports directly to the Commissioner of Internal Revenue shall, for purposes of this paragraph, be determined under regulations which the Commissioner shall prescribe, except that in no event shall more than 8 employees be eligible for a cash award under this paragraph in any calendar year.

(E) LIMITATION ON COMPENSATION. --For purposes of applying section 5307 to an employee in connection with any calendar year to which an award made under this paragraph to such employee is attributable, subsection

(a)(1) of such section shall be applied by substituting "to equal or exceed the annual rate of compensation for the Vice President for such calendar year" for "to exceed the annual rate of basic pay payable for level I of the Executive Schedule, as of the end of such calendar year.".

(F) APPROVAL REQUIRED. --An award under this paragraph may not be made unless --

(i) the Commissioner of Internal Revenue certifies to the Office of Personnel Management that such award is warranted; and

(ii) the Office approves, or does not disapprove, the proposed award within 60 days after the date on which it is so certified.

(3) BASED ON SAVINGS. --

(A) IN GENERAL. --The Commissioner of Internal Revenue may authorize the payment of cash awards to employees based on documented financial savings achieved by a group or organization which such employees comprise, if such payments are made pursuant to a plan which --

(i) specifies minimum levels of service and quality to be maintained while achieving such financial savings; and

(ii) is in conformance with criteria prescribed by the Office of Personnel Management.

(B) FUNDING. --A cash award under this paragraph may be paid from the fund or appropriation available to the activity primarily benefiting or the various activities benefiting.

(C) TAX ENFORCEMENT RESULTS. --A cash award under this paragraph may not be based solely on tax enforcement results.

(c) OTHER PROVISIONS. --

(1) NOTICE PROVISIONS. --In applying sections 4303(b)(1)(A) and 7513(b)(1) to employees of the Internal Revenue Service, "15 days" shall be substituted for "30 days".

(2) APPEALS. --Notwithstanding the second sentence of section 5335(c), an employee of the Internal Revenue Service shall not have a right to appeal the denial of a periodic step increase under section 5335 to the Merit Systems Protection Board.

§9303. Staffing flexibilities

(a) ELIGIBILITY TO COMPETE FOR A PERMANENT APPOINTMENT IN THE COMPETITIVE SERVICE. --

(1) ELIGIBILITY OF QUALIFIED VETERANS. --

(A) IN GENERAL. --No veteran described in subparagraph (B) shall be denied the opportunity to compete for an announced vacant competitive service position within the Internal Revenue Service by reason of --

(i) not having acquired competitive status; or

(ii) not being an employee of that agency.

(B) DESCRIPTION. --An individual shall, for purposes of a position for which such individual is applying, be considered a veteran described in this subparagraph if such individual --

(i) is either a preference eligible, or an individual (other than a preference eligible) who has been separated from the armed forces under honorable conditions after at least 3 years of active service; and

(ii) meets the minimum qualification requirements for the position sought.

(2) ELIGIBILITY OF CERTAIN TEMPORARY EMPLOYEES. --

(A) IN GENERAL. --No temporary employee described in subparagraph (B) shall be denied the opportunity to compete for an announced vacant competitive service position within the Internal Revenue Service by reason of not having acquired competitive status.

(B) DESCRIPTION. --An individual shall, for purposes of a position for which such individual is applying, be considered a temporary employee described in this subparagraph if --

(i) such individual is then currently serving as a temporary employee in the Internal Revenue Service;

(ii) such individual has completed at least 2 years of current continuous service in the competitive service under 1 or more term appointments, each of which was made under competitive procedures prescribed for permanent appointments;

(iii) such individual's performance under each term appointment referred to in clause (ii) met all applicable retention standards; and

(iv) such individual meets the minimum qualification requirements for the position sought.

(b) RATING SYSTEMS. --

(1) IN GENERAL. --Notwithstanding subchapter I of chapter 33, the Commissioner of Internal Revenue may establish category rating systems for evaluating job applicants for positions in the competitive service, under which qualified candidates are divided into 2 or more quality categories on the basis of relative degrees of merit, rather than assigned individual numerical ratings. Each applicant who meets the minimum qualification requirements for the position to be filled shall be assigned to an appropriate category based on an evaluation of the applicant's knowledge, skills, and abilities relative to those needed for successful performance in the job to be filled.

(2) TREATMENT OF PREFERENCE ELIGIBLES. --Within each quality category established under paragraph (1), preference eligibles shall be listed ahead of individuals who are not preference eligibles. For other than scientific and professional positions at or higher than GS-9 (or equivalent), preference eligibles who have a compensable service-connected disability of 10 percent or more, and who meet the minimum qualification standards, shall be listed in the highest quality category.

(3) SELECTION PROCESS. --An appointing authority may select any applicant from the highest quality category or, if fewer than 3 candidates have been assigned to the highest quality category, from a merged category consisting of the highest and second highest quality categories. Notwithstanding the preceding sentence, the appointing authority may not pass over a preference eligible in the same or a higher category from which selection is made, unless the requirements of section 3317(b) or 3318(b), as applicable, are satisfied, except that in no event may certification of a preference eligible under this subsection be discontinued by the Internal Revenue Service under section 3317(b) before the end of the 6-month period beginning on the date of such employee's first certification.

(c) INVOLUNTARY REASSIGNMENTS AND REMOVALS OF CAREER APPOINTEES IN THE SENIOR EXECUTIVE SERVICE. --Neither section 3395(e)(1) nor section 3592(b)(1) shall apply with respect to the Internal Revenue Service.

(d) PROBATIONARY PERIODS. --Notwithstanding any other provision of law or regulation, the Commissioner of Internal Revenue may establish a period of probation under section 3321 of up to 3 years for any position if, as determined by the Commissioner, a shorter period would be insufficient for the incumbent to demonstrate complete proficiency in such position.

(e) PROVISIONS THAT REMAIN APPLICABLE. --No provision of this section exempts the Internal Revenue Service from --

(1) any employment priorities established under direction of the President for the placement of surplus or displaced employees; or

(2) its obligations under any court order or decree relating to the employment practices of the Internal Revenue Service.

§9304. Flexibilities relating to demonstration projects

(a) AUTHORITY TO CONDUCT. --The Commissioner of Internal Revenue may, in accordance with this section, conduct 1 or more demonstration projects to improve personnel management; provide increased individual accountability; eliminate obstacles to the removal of or imposing any disciplinary action with respect to poor performers, subject to the requirements of due process; expedite appeals from adverse actions or performance-based actions; and promote pay based on performance.

(b) GENERAL REQUIREMENTS. --Except as provided in subsection (c), each demonstration project under this section shall comply with the provisions of section 4703.

(c) SPECIAL RULES. --For purposes of any demonstration project under this section --

(1) AUTHORITY OF COMMISSIONER. --The Commissioner of Internal Revenue shall exercise the authority provided to the Office of Personnel Management under section 4703.

(2) PROVISIONS NOT APPLICABLE. --The following provisions of section 4703 shall not apply:

(A) Paragraphs (3) through (6) of subsection (b).

(B) Paragraphs (1), (2)(B)(ii), and (4) of subsection (c).

(C) Subsections (d) through (g).

(d) NOTIFICATION REQUIRED TO BE GIVEN. --

(1) TO EMPLOYEES. --The Commissioner of Internal Revenue shall notify employees likely to be affected by a project proposed under this section at least 90 days in advance of the date such project is to take effect.

(2) TO CONGRESS AND OPM. --The Commissioner of Internal Revenue shall, with respect to each demonstration project under this section, provide each House of Congress and the Office of Personnel Management with a report, at least 30 days in advance of the date such project is to take effect, setting forth the final version of the plan for such project. Such report shall, with respect to the project to which it relates, include the information specified in section 4703(b)(1).

(e) LIMITATIONS. --No demonstration project under this section may --

(1) provide for a waiver of any regulation prescribed under any provision of law referred to in paragraph (2)(B)(i) or (3) of section 4703(c);

(2) provide for a waiver of subchapter V of chapter 63 or subpart G of part III (or any regulations prescribed under such subchapter or subpart);

(3) provide for a waiver of any law or regulation relating to preference eligibles as defined in section 2108 or subchapter II or III of chapter 73 (or any regulations prescribed thereunder);

(4) permit collective bargaining over pay or benefits, or require collective bargaining over any matter which would not be required under section 7106; or

(5) include a system for measuring performance that provides for only 1 level of performance at or above the level of fully successful or better.

(f) PERMISSIBLE PROJECTS. --Notwithstanding any other provision of law, a demonstration project under this section --

(1) may establish alternative means of resolving any dispute within the jurisdiction of the Equal Employment Opportunity Commission, the Merit Systems Protection Board, the Federal Labor Relations Authority, or the Federal Service Impasses Panel; and

(2) may permit the Internal Revenue Service to adopt any alternative dispute resolution procedure that a private entity may lawfully adopt.

(g) CONSULTATION AND COORDINATION. --The Commissioner of Internal Revenue shall consult with the Director of the Office of Personnel Management in the development and implementation of each demonstration project under this section and shall submit such reports to the Director as the Director may require. The Director or the Commissioner of Internal Revenue may terminate a demonstration project under this section if either of them determines that the project creates a substantial hardship on, or is not in the best interests of, the public, the Federal Government, employees, or qualified applicants for employment with the Internal Revenue Service.

(h) TERMINATION. --Each demonstration project under this section shall terminate before the end of the 5-year period beginning on the date on which the project takes effect, except that any such project may continue beyond the end of such period, for not to exceed 2 years, if the Commissioner of Internal Revenue, with the concurrence of the Director, determines such extension is necessary to validate the results of the project. Not later than 6 months before the end of the 5-year period and any extension under the preceding sentence, the Commissioner of Internal Revenue shall, with respect to the demonstration project involved, submit a legislative proposal to the Congress if the Commissioner determines that such project should be made permanent, in whole or in part.

*******

VII. CORRESPONDENCE FROM OTHER COMMITTEES

A. CORRESPONDENCE FROM COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

The following correspondence was received from Representative Dan Burton, Chairman, Committee on Government Reform and Oversight, regarding the bill, H.R. 2676:

HOUSE OF REPRESENTATIVES, COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,

Washington , DC , October 31, 1997.

Hon. BILL ARCHER,

Chairman, Committee on Ways and Means, Washington , DC .

DEAR MR. CHAIRMAN: After several months of negotiation with the interested parties, the Committee on Government Reform and Oversight agrees to the provisions of H.R. 2676, a bill to restructure and reform the Internal Revenue Service. The Government Reform and Oversight Committee does not object to the current legislation, and therefore does not intend to exercise its jurisdiction over H.R. 2676.

The Committee initially had concerns about the Freedom of Information Act and civil service related provisions included within the original text. Through negotiation, we were able to draft language in these areas that protects the interests of taxpayers and institutes employee performance measures that provide the IRS Commissioner with the tools necessary to make it easier to fire poor performers and people who engage in misconduct. I would particularly like to thank Rep. Rob Portman, the sponsor of H.R. 2292, and the National Commission on Restructuring the Internal Revenue Service in helping with our efforts.

As you know, House Rule X, Establishment and Jurisdiction of Standing Committees", grants the Government Reform and Oversight Committee jurisdiction over legislation related to government information management and the civil service. Although the Committee will not mark up H.R. 2676, this does not in any way waive this Committee's jurisdiction over the bill or related legislation, nor over the general subject matters contained in the bill which fall within this Committee's jurisdiction. Further, I request that members of the Government Reform and Oversight Committee be appointed to serve on any conference committee appointed with respect to this legislation.

I look forward to working with you on this and other issues throughout the 105th Congress.

Sincerely,

DAN BURTON, Chairman.

B. CORRESPONDENCE FROM COMMITTEE ON RULES

The following correspondence was received from Representative Gerald B. Solomon, Chairman, Committee on Rules, regarding the bill, H.R. 2676:

HOUSE OF REPRESENTATIVES,

COMMITTEE ON RULES,

Washington , DC , October 28, 1997. Hon. BILL ARCHER,

Chairman, Committee on Ways and Means,

Washington , DC .

DEAR MR. CHAIRMAN: I am writing concerning H.R. 2676, The Internal Revenue Service Restructuring and Reform Act of 1997, which your committee ordered reported on October 22 by a vote of 33-4.

This legislation contains provisions in Title IV, Congressional Accountability for the Internal Revenue Service, which fall within the jurisdiction of the Committee on Rules.

The Committee on Rules does not intend to consider this bill as a matter of original jurisdiction. It is the intention of the Committee to address several concerns with the proposed language in Title IV during the Rules Committee's consideration of an appropriate rule for this legislation.

I reserve jurisdiction of the Committee on Rules over all bills relating to the rules, joint rules, and the order of business of the House. It would also be my intention to be represented on the conference committee on this bill. Thank you for your consideration.

Sincerely,

GERALD B. SOLOMON, Chairman.

VIII. ADDITIONAL VIEWS

We provide the following additional views and comments regarding H.R. 2676, the Internal Revenue Service Restructuring and Reform Act of 1997. Importantly, this legislation would restructure the Internal Revenue Service to provide better oversight, greater continuity of leadership, improved access to expert advice from the private sector, additional management flexibility, incentives for expansion of electronic tax filing, taxpayer of safeguards in dealing with the IRS, and increased Congressional accountability.

We support the important goals of this legislation and have worked on several of its components over the last several years. In addition, we are pleased to have participated, on a bipartisan basis, in incorporating significant improvements to this bill from its original form.

Over the past year, there has been much heated debate over the provisions of various IRS reform bills. We believe that the debate was necessary and resulted in many IRS reforms which we support. Importantly, expressing our differences in opinion confirms our belief that the legislative process can work effectively, to the benefit of the public, where there is a true commitment to bipartisanship and cooperation.

There has long been agreement on the need for fundamental reform of the IRS. In fact, even back when the Members of the National Commission on Restructuring the Internal Revenue Service were discussing which recommendations to make to the Congress, there was uniform agreement that fundamental reform of the IRS was in order, and a consensus on the dozens of specific reform measures the Congress should be asked to adopt. The Democratic Members of the Committee on Ways and Means have continued to support wholeheartedly the vast majority of recommendations put forward by the National Commission, which were reflected in both H.R. 2428, to improve the operations and governance of the Internal Revenue Service, introduced on September 8, 1997, and H.R. 2292, the Internal Revenue Service Restructuring and Reform Act, introduced on July 30, 1997.

H.R. 2292, as introduced on governance

There were several aspects of H.R. 2292, legislation introduced originally by Rep. Rob Portman and others in response to the National Commission's report, which caused us great concern and to which we strongly objected. That bill, which was the subject of numerous Committee and Subcommittee hearings while it was pending before the Committee for over three months, remained unchanged by its sponsors before the Committee markup. After much bipartisan discussion and debate, a clean new version of the bill, H.R. 2676, which reflected responses to many of our concerns, was introduced and became the focus of the Committee's action. (During this period, many of us sponsored an alternative bill, H.R. 2428, which was supported by the Administration, to improve the structure of IRS management, operations, and oversight).

Our major concern with the original IRS reform bill was that it failed to insure (1) effective and constitutional governance of the IRS, and (2) full accountability of the IRS to the public (directly and through their elected officials.) The original bill would have established an IRS Board of Directors, consisting primarily of private-sector appointees, with significant powers and authority to run the IRS. For example, the bill would have the private-sector Board members the authority to hire and fire the IRS Commissioner and would have eliminated the current Internal Revenue Code rules that place the IRS Commissioner under the control of the Secretary of the Treasury (and ultimately the President). Such an approach would not have solved any problem that has been enumerated by the National Commission or any abuse highlighted by recent Senate Committee on Finance hearings. Rather, such proposals would have made it more difficult for the IRS to function effectively in its efforts to collect Federal revenues and provide taxpayer services.

We believe that handing overall control of the IRS to a board composed primarily of private citizens (taxpayers themselves) would have reduced significantly the accountability of the IRS to the taxpaying public. In our view, the Constitution requires that the IRS Commissioner be appointed, hired, and, if necessary, fired by the President. The public expects the IRS Commissioner to be accountable to them through their elected representatives. Further, we believe that efforts to increase the IRS's accountability should not blur or eliminate the existing chain of command that runs from the IRS Commissioner, through the Secretary of the Treasury, and ultimately to the President.

Moreover, we believe that turning effective control of the IRS over to a part-time board, dominated by private sector individuals, raises significant conflict-of-interest problems. Such conflict of interest, whether real or perceived, undoubtedly would undermine further the public's support for our voluntary Federal income tax system. Accordingly, we believe that it would be inappropriate to grant --to a relatively small groups of private interests --autonomy and broad powers to run the IRS, while they serve as part-time public servants with full-time obligations to private sector employers or private interest clients.

Bipartisan negotiations and agreement on governance

Because of our strong commitment to an IRS that works fairly for taxpayers and effectively in collecting the country's tax revenues, we entered into intense bipartisan negotiations with numerous Members of this Committee, the House Leadership, and the Administration to improve the original legislation. As a result, several critically important improvements were made to H.R. 2292. While each of us would have made additional modifications, an acceptable compromise was reached.

Under the revised bill adopted by the Committee, the President --not a Board of private-sector individuals --would have the authority to appoint, hire, and fire the IRS Commissioner. As under current law, this Nation's highest-elected official would remain ultimately responsible for the actions of the IRS and the decisions of its commissioner.

Also, under the revised bill, the lines of authority from the Secretary of the Treasury to the IRS Commissioner have been defined clearly. Overall management of the IRS, including tax policy, tax administration, and tax law enforcement activities, would continue to be coordinated through Treasury, as would overall responsibility for oversight and management of the IRS.

Once these two fundamental concerns of ours were addressed, we joined our colleagues in supporting H.R. 2676.

As H.R. 2676 moves forward in the House, we note that the bill grants the newly-create IRS Oversight Board members authority to review and approve the strategic plans of the IRS, authority to review and approve the Commissioner's annual budget, and authority to review and approve the Commissioner's plans for major reorganization of the IRS. While many of us are not in favor of transferring even this much power to an independent body, we believe that, on the whole, it constitutes an acceptable compromise. Unfortunately, the bill is not clear about what happens to our tax administration system under these new Board authorities if a consensus is not reached among the Board members of the IRS Commissioner and Treasury Secretary disagree with the views of the private-sector individuals. We intend to continue to work on resolution of these issues in the coming months before a final IRS reform bill is enacted into law.

Electronic filing of tax returns

H.R. 2676 contains important provisions to enhance the electronic filing of tax returns and other documents with the IRS. These provisions were developed by the Subcommittee on Oversight, on a bipartisan basis, for inclusion in the revised IRS reform bill. The two underlying IRS reform bills, H.R. 2428 and H.R. 2292 contained provisions to improve electronic tax filing and served as the basis for the Subcommittee's recommendations. We believe that these statutory changes are critical to bringing the IRS into the modern age of technology and strongly support the goal of having 80 percent of all tax returns filed electronically within the next ten years.

Taxpayer rights 3

Of great significance to taxpayers nationwide are the provisions in the bill, as approved by the Committee, to provide taxpayers with new statutory protections and other assistance to millions of Americans in their dealings with the IRS. Again, these provisions were developed by the Subcommittee on Oversight, on a bipartisan basis, for inclusion in the revised IRS reform bill. The Subcommittee's recommendations reflect a combination of proposals from H.R. 2292, proposals advanced by the Department of the Treasury, and new initiatives identified during the Subcommittee's hearings on taxpayer rights.

Of particular importance are the provisions to expand "innocent spouse" tax relief and provide tax refund relief to taxpayers during periods of disability. Also, contained in the bill are provisions to expand relief for taxpayers through issuance of "taxpayer assistance orders" by the Taxpayer Advocate, grants for low-income tax clinics, and penalty relief for taxpayers in installment agreements with the IRS.

However, we continue to have serious concerns about the provision in the bill that shifts the burden of proof from taxpayers to the IRS in certain court proceedings with respect to factual issues. This provision was not considered by the Subcommittee on Oversight, nor was it a recommendation of the National Commission.

We are concerned that the provision may have unintended negative consequences for both taxpayers and the tax administrative system. Currently, as a result of long-standing judicial decisions, a taxpayer in civil tax matters is generally required to maintain records substantiating the calculation of his or her income tax liability. The courts created this rule to facilitate the finding of fact, and thus the burden of proof is placed on the taxpayer simply because the taxpayer controls the underlying facts and the records. We are concerned that at least 15 percent of the revenue loss (and we believe more) attributable to the provision is due to anticipated additional taxpayer noncompliance. Further, we are not persuaded by the view of the Chief of Staff of the Joint Committee on Taxation, as stated at the markup, that, while the proposal will not do anything for most taxpayers, the public will find great comfort in knowing that the burden shifts to the IRS for some taxpayers in litigation. We similarly are concerned that shifting the burden of proof could result in the necessity of more intrusive and aggressive IRS examinations, more third-party summonses, and more thorough discovery. Also, this provision could assist aggressive taxpayers avoid taxation, or induce some taxpayers not to keep records at all. We believe that the tax laws should make it easier for taxpayers to deal with the IRS. However, we do not think the laws should make it easier for someone to evade taxes. The vast majority of citizens who obey the law deserve more. We intend to work toward improving the burden-of-proof provision in this bill in order to insure that it does not increase noncompliance and does not serve as an incentive for taxpayers to cease retention of appropriate records.

Finally, it would be wrong not to point out the Internal Revenue Service's many substantial accomplishments. As we work to reform the IRS, it is understandable that we focus on the agency's failings. However, it is easy in such circumstances to lose our sense of perspective about this much-disparaged but indispensable government agency. In such times, we must recognize the difficulty of the mission that the IRS undertakes --and the success that it has had in carrying out that mission. The IRS processes roughly 200 million forms each year and collects nearly one and a half trillion dollars annually from over 100 million Americans --all with relatively few complaints. That is by no means a small accomplishment. We are proud that this Nation has a very high voluntary compliance rate --one that is the envy of the world. We must not forget that the vast majority of IRS employees are dedicated, hard-working civil servants who want to do a good job.

CHARLES B. RANGEL,

BARBARA B. KENNELLY,

SANDER LEVIN,

RICHARD E. NEAL,

WILLIAM J. JEFFERSON,

WILLIAM J. COYNE,

XAVIER BECERRA,

MICHAEL R. MCNULTY,

KAREN L. THURMAN.

ADDITIONAL VIEWS OF HON. BENJAMIN CARDIN AND HON. JOHN

TANNER

H.R. 2676, the Internal Revenue Service Restructuring Act of 1997, represents strong, bipartisan legislation to reform the Internal Revenue Service. The bill builds on the recommendations of the National Commission on Restructuring the IRS. Under the leadership of our colleague Rob Portman and Sen. Bob Kerrey, the National Commission undertook a year-long study of the IRS, and has made a tremendous difference already in raising the level of concern and awareness of the problems that plague the agency.

We are very proud to have joined Rep. Portman in cosponsoring H.R. 2292, which has had strong bipartisan support in this House. H.R. 2676 takes that very good bill and makes it even better. We are especially pleased with two changes in the bill. First, it restores the appointment of the Commissioner to the President, and second, it clarifies the lines of authority from the Secretary of the Treasury to the Commissioner. With the support of the Clinton Administration, this bill is poised to move very quickly through the House.

The problems in the management and culture of the IRS are not a new revelation to anyone on this committee. While recent publicity has brought new media attention to these issues, those of us on this committee know that the problems are of long duration.

While these problems are stubborn and deeply-rooted, they are not beyond our reach. The legislation before us marks the first fundamental reform of the IRS in nearly half a century. It will bring a new structure to the IRS, a structure that is designed to change the way the IRS treats its customers, the American taxpayers.

The litany of problems at the IRS is familiar to all of us --billions of dollars squandered on a bungled computer modernization effort, telephones unanswered, taxpayers too often treated with disrespect or suspicion, an agency that is unable to balance its own books. These problems have not emerged recently --they are not the legacy of one administration, but of decades.

In fact, this administration, and particularly this Treasury Secretary, have been more attentive to the problems of the IRS and more dedicated in seeking solutions than any in recent years. Secretary Rubin has made important changes in the management of the IRS, and those efforts have begun to show results.

But much more remains to be done, and it is not realistic to expect that IRS reform can be accomplished without legislation and without bringing new expertise to the management of the Service. The solution proposed in this bill is the creation of an Oversight Board that will bring private sector expertise in the areas where the IRS needs it most. The creation of this Board, with real authority to approve the strategic plans, major reorganizations, and the budgets of the IRS, is the crucial element in bringing real reform to this troubled agency.

The Board members, appointed by the President and confirmed by the Senate, will work with the Secretary and the Commissioner to help reform the IRS in the areas of customer service, information technology, organizational development, and meeting the needs and concerns of taxpayers. The Oversight Board will bring the expertise the IRS lacks, and it will have the authority to help turn this agency around.

Under this bill, the Commissioner's budget, as approved by the Board, will be forwarded to the Congress along with the president's budget for the entire government. The Board-approved budget will not have legal force --Congress will still control the purse strings. But the Board's budget will give us a clear view of the needs and requirements of the IRS, and will be tremendously helpful as we implement the reforms of the agency.

Just as it is not realistic to expect that IRS reform can be accomplished without a new management structure, it is not realistic to expect the Oversight Board to do this work along. IRS reform will require a committed partnership between the Board, the Secretary, and the Commissioner, as well as the more constructive involvement from those of us here in Congress.

Legislative oversight of the IRS is too unfocused, too scattered, with too many masters and not enough coordination among committees. The bill masters and not enough coordination among committees. The bill attempts to bring some order and structure to the current system.

In addition to the governance and oversight provisions, the bill contains a new set of provisions to be added to the Taxpayer Bill of Rights. These provisions, when they are enacted, will mark the third TBOR. The provisions address many problems that taxpayers have encountered in dealing with the IRS, and their enactment will help solve those problems.

We would add, however, that the broader objective of this bill must be to change the culture of the IRS to make it a taxpayer-friendly organization to that future Taxpayer Bills of Rights will not be necessary.

The Internal Revenue Service is charged with the vital task of collecting the revenue needed to fund the basic and essential operations of government. When the IRS is mismanaged in ways that create fear and anxiety among taxpayers, the result is to undermine the confidence of the American people in their government. The purpose of this legislation is to reform the IRS so that we can begin to restore that badly damaged confidence.

BEN CARDIN.

JOHN TANNER.

ADDITIONAL VIEWS OF HON. XAVIER BECERRA

The Pharisee stood and prayed thus with himself, "God, I thank thee that I am not like other men, extortioners, unjust, adulterers, or even like this tax collector."

-- Luke , Ch. 8, v. 11

Taxes are what we pay for civilized society.

--Justice Oliver Wendell Holmes

No one likes paying taxes; however, an effective tax system is fundamental to the health and stability of our nation. Reconciling these competing principles is a difficult balancing act that necessitates respect for both individual taxpayers and the Treasury (i.e. taxpayers collectively). In many respects, the Internal Revenue Service Restructuring and Reform Act of 1997 achieves the goal of transforming the IRS into a world class service agency. Unfortunately, it contains several troublesome provisions.

It is encouraging that both Republican and Democratic tax writers, in conjunction with the Administration, have committed themselves to reforming and improving the IRS. It would have been all too simple for either side to not engage in the difficult policy deliberations, and score political points by bashing the IRS. In today's world of sound-bite politics, that party would have scored easy points at the expense of America 's taxpayers.

I remain vitally committed to the process of bringing many of these overdue reforms to the IRS. The Internal Revenue Service Restructuring and Reform Act is a workable bill, but several important changes can and should be made to it before it is signed into law by the President. I am hopeful that these changes will be made.

Shifting of the burden of proof

Section 301 of the Committee-passed bill contains a provision that, on a superficial reading, seems rather innocuous: shifting the burden of proof in civil tax cases from the taxpayer to the Internal Revenue Service. While this makes for good bumper sticker politics, it is bad tax policy, and poses the specter of a more, not less, intrusive tax collection agency.

Taxpayers have the burden of proof under current law in civil tax cases because they possess the relevant records and documents. It is a relatively simple matter for them to come forward with those records and disprove IRS's position in a tax dispute. Section 301 may provide an incentive for aggressive taxpayers, seeking the benefit of the burden shift, not to settle their disputes at the administrative level and litigate their disputes in court. Some taxpayers might be tempted not to keep records at all, effectively making it impossible for the IRS to verify whether a taxpayer's position is justified. In fact, the Joint Committee on Taxation has estimated that shifting the burden of proof will lead to a significant amount of reduced taxpayer compliance.

The overwhelming majority of tax experts reject this provision as unwise and unworkable. To quote at length from a former Republican Commissioner of the Internal Revenue Service, Fred Goldberg:

Most of us believe that the IRS is far too intrusive today, and that tax administration is far too cumbersome, contentious, and burdensome. Well, as the saying goes, "you ain't seen nothing yet." Change the burden of proof and IRS tactics of today will seem like child's play. Of necessity, the IRS would be forced to resort to far more aggressive techniques in auditing taxpayers and developing cases. Summonses, including third party summonses, would become routine. Expanded record-keeping requirements and increased litigation over discovery issues would be standard fare. In addition, the number of revenue agents and audits of taxpayers would likely increase dramatically. In the world of tax administration, it's hard to imagine a more well-intentioned idea that would have more undesirable consequences.

This is a frightening vision of the future of the IRS which runs counter to the spirit behind the Internal Revenue Restructuring and Reform Act. For that simple reason, it is imperative that the burden of proof provision be removed from the bill.

Board member's conflicts of interest

Another important area in which the Internal Revenue Restructuring and Reform Act should be improved is in its conflict of interest rules for the private-sector members of the newly minted IRS Oversight Board. The American people deserve a tax collection agency with the highest ethical standards; even the mere appearance of impropriety cannot be tolerated. In that vein, section 104 of this legislation contains a prohibition on executive branch interference in the collection and audit practices of the IRS. Quite simply, politics should not play a role in the important business of collecting the revenue necessary to fund the functions of government. I would note as an aside that there has been no credible allegations that this has been a problem at the IRS since the early 1970s; nevertheless, this is a meritorious provision which I support.

Unfortunately, similar rigorous standards of conduct were not imposed for the IRS Oversight Board members. The Ways and Means Committee failed to adopt an amendment offered by my fellow Californian, Rep. Stark. The Stark amendment would have prohibited Board members from representing clients in tax matters before the IRS or in court while a member of the Board and for a limited time thereafter. This proposal simply recognizes the impropriety --or, more importantly, the appearance of impropriety --of those charged with governing the IRS having an interest, or representing a party in a tax controversy, before the IRS. As most working Americans probably can attest (or guess), it would be difficult to be an impartial judge in a case involving your boss. While I have every confidence in the honesty and integrity of future Board members, the defeat of the Stark amendment opens the possibility for improper dealing, threatening to erode the public's confidence in the integrity of our nation's tax collection system and, by extension, our high voluntary taxpayer compliance rate.

Disclosure of audit selection criteria

I am troubled by section 353 of the Internal Revenue Service Restructuring and Reform Act, which calls upon the Treasury Secretary to reveal the procedures by which returns are selected for audit by the IRS. Audits are an unfortunate --but necessary --element of our tax collection system; an element that recognizes that a not inconsequential minority of taxpayers do not fully comply with our nation's tax laws, and thereby force the vast majority of honest taxpayers to shoulder a greater load.

Section 353 contains a caveat that "[s]uch statement shall not include any information the disclosure of which would be detrimental to law enforcement." The provision would have been strengthened by the further recognition that such disclosure by the Treasury should not lead to a reduction involuntary tax compliance.

Joint committee on taxation approval of GAO studies

The Internal Revenue Service Restructuring and Reform Act contains many worthy provisions designed to streamline Congressional oversight of the IRS. All too often in the past, the IRS has had to answer to too many parties, draining valuable agency resources from the important business of collecting the proper amount of revenues while treating taxpayers with the respect and courtesy they deserve. The more that Congress speaks with one voice, the more the Service will be able to better prioritize its mission.

At the same time, oversight of the Executive branch is one of Congress's most important Constitutional functions. Great care must be taken in retooling these procedures. Accordingly, I believe that one of these oversight provisions in the IRS restructuring bill should be modified. Section 401 of the legislation requires the Joint Committee on Taxation (JCT) to approve all Congressional requests of the General Accounting Office (GAO) to conduct investigations into the IRS, except in the case of Chairman and Ranking Members of all Congressional Committees and Subcommittees. I would note that if this provision were law today, neither of the principal House sponsors of the instant legislation --Reps. Portman and Cardin --would be able to secure a GAO report on the IRS without JCT approval. Quite simply, I do not believe that members of Congressional committees with substantive jurisdiction over the nation's tax laws should be denied access to GAO's resources.

Conclusion

American taxpayers deserve a world class tax agency. There is no dispute on that point. The dispute arises in how to achieve that laudatory goal. In many respects, the Internal Revenue Service Restructuring and Reform Act accomplishes its purpose. However, the bill has a few serious defects --most notably, the provision shifting the burden of proof --that may lead to a more intrusive IRS, which is exactly the wrong direction to take our nation's tax collection agency. I trust that these problems can be worked out in the bill as it makes its way through the legislative process.

XAVIER BECERRA.

IX. DISSENTING VIEWS