Responding to a wave of complaints, Congress early today completed action on a wide-ranging taxpayer “bill of rights,” giving citizens additional time before the IRS can seize bank accounts and other assets and barring collection quotas for agents.
The taxpayer protections were contained in the technical tax corrections bill. A diverse group of organizations backed the measure, including the U.S. Chamber of Commerce, the American Civil Liberties Union, the National Urban League and the National Council of La Raza. Both presidential candidates, George Bush and Michael S. Dukakis, also spoke out for the plan.
“It’s kind of a good feeling, taking something that was dismissed as a non-issue two years ago and moving it to a point where both guys endorse it,” said Sen. David Pryor (D-Ark.), the legislation’s author, whose public hearings on IRS abuses helped generate widespread support in Congress.
“We have received hundreds and hundreds of letters” complaining about IRS treatment, said Pryor, who heads an IRS oversight committee.
The bill was designed as a needed counterbalance for the increased emphasis by the government on improving IRS collections. In recent years, beset by the huge budget deficit, Congress has beefed up IRS staffing, added new penalties and expanded enforcement authority in an effort to curb fraud and scrape up more tax revenue for federal programs.
Taxpayers have complained that in investigating tax underpayments, the agency often has been arbitrary and too severe in penalizing honest mistakes. In one case cited by Pryor, the IRS assessed a small business $400 for an underpayment of only 2 cents.
Under the new measure, the IRS would have to give a taxpayer 30 days notice before seizing assets. Currently, the agency can act after only 10 days, not enough time for many taxpayers to negotiate a settlement or raise the money to satisfy the claim, Pryor said.
The IRS policy manual forbids the use of tax collection quotas as standards for promotion of agents, but Pryor’s investigation disclosed that some agency managers still rated employees on the basis of taxes collected and assets seized. “The guy in the next office who is the overseer wants to know how many dollars they’ve collected,” he said, increasing the potential for abuses.
The new law would make such practices illegal and would require district IRS directors to sign affidavits periodically stating that they do not link raises and promotions to quotas.
In another provision, special IRS ombudsmen assigned to help taxpayers would be given the legal authority to halt the seizure of assets, or intervene and stop other collection efforts. “The ombudsman would be given full legal authority to yell ‘Stop!’ ” said David Burton, manager of the U.S. Chamber of Commerce tax policy center.
“This is very important to our members, particularly to small members, " said Burton. The IRS, he said, “has a seeming inability to enforce the law without abusing innocent taxpayers.”
The measure was approved despite heavy lobbying by the IRS, which insisted it could handle problems without congressional intervention. When the legislation began making headway in Congress, IRS Commissioner Lawrence B. Gibbs gave expanded powers to agency ombudsmen, including the ability to intervene in collection actions.
But members of Congress insisted that the reforms must be enacted into law. “The ombudsman program is better under Commissioner Gibbs than it ever has been, but what happens when Larry Gibbs leaves?” Pryor said during an interview.
The new law would give taxpayers the right for the first time to sue the government for damages caused by illegal actions by the IRS. The taxpayer could recover attorney fees and the financial losses suffered if an IRS employee “carelessly, recklessly, or intentionally” violated the tax law or IRS regulations.
Advocates said they hope the bill of rights will place more of the burden of proof in tax disputes on the IRS rather than taxpayers. Agents must be more careful and reasonable in preparing their claims against taxpayers, they said.
“The public wants the tax collection process to be fairer and to have taxpayers on a more equal footing with the IRS, which has more power than any other government agency,” said David Keating, executive vice president of the 150,000-member National Taxpayers Union, which pushed the legislation.
The bill’s supporters are “an unlikely coalition,” acknowledged Wade Henderson, associate director of the Washington office of the American Civil Liberties Union. “We came together out of a recognition that taxpayers are at a substantial disadvantage in the protection of their basic rights when dealing with the IRS.”