House Gives Resounding OK to IRS Overhaul

Moving to overhaul the Internal Revenue Service for the first time in decades, the House on Wednesday overwhelmingly approved legislation to establish a new oversight board to help run the agency and strengthen the hand of taxpayers in disputes with the most widely feared--and much maligned--arm of the federal government.

The bill was approved, 426 to 4, in a spectacular display of bipartisanship that reflected the powerful momentum for change created by this fall’s Senate hearings on mismanagement of the IRS and taxpayer abuse by its agents.

Despite the bill’s easy progress through the House, a Senate leader said he would push for key changes in the measure in that chamber. Senate Finance Committee Chairman William V. Roth Jr. (R-Del.) said he wants to significantly strengthen some of the taxpayer protections in the bill, as well as provide additional powers for the oversight board.

“It would not be fair to American taxpayers to rush to pass something and then find that it is inadequate in its solutions,” Roth said after the House vote.

The bill, endorsed by President Clinton last month as congressional support for it snowballed, for the first time would subject the IRS to oversight by a management board dominated by private-sector representatives. It also would shift the burden of proof from the taxpayer to the IRS in civil court cases, make it easier for taxpayers to sue the IRS for damages and increase the interest paid on refunds to taxpayers who have overpaid their taxes.

House Republican leaders portrayed the bill as a capstone of the year’s legislative accomplishments and promised further anti-tax initiatives in the coming election year.

“People are tired of the current tax code,” said House Speaker Newt Gingrich (R-Ga.). “They’re tired of the way the IRS runs it.”

Gingrich said he expects the House to approve a bill today to require the IRS in January to send a survey to all taxpayers, along with their tax forms for 1997, to sound out public opinion about the tax code.

The bill passed Wednesday is based on recommendations from a commission headed by Rep. Rob Portman (R-Ohio) and Sen. Bob Kerrey (D-Neb.). The measure was powered into the political fast lane by recent testimony at a Senate hearing about IRS abuses and mismanagement.

To improve management of the agency, the bill would establish an oversight board of 11 members--composed of eight private citizens appointed by the president, the Treasury secretary, the IRS commissioner and an IRS labor union representative. The board would review and approve the IRS budget, any reorganization proposals for the agency and its long-range strategic plans.

The Clinton administration had long opposed the formation of the oversight board, saying that it would make the IRS less accountable to the Treasury Department and could produce conflicts of interest among the board’s private members, who presumably also would be major taxpayers.

But the administration agreed to back the bill last month after its sponsors deleted a provision that would have given the oversight board the power to hire and fire the IRS commissioner, which now is the president’s prerogative.

Administration officials have continued to raise questions about the provision to shift the burden of proof in civil court disputes from the taxpayer to the IRS. Under present law, taxpayers have to prove the IRS wrong in court. The bill would require the IRS to prove that taxpayers owe more tax. Critics worry that this not only could make it easier for tax evaders to escape punishment but that it could force the IRS to be even more intrusive.

“It could result in the IRS conducting more intrusive examinations and the IRS issuing more subpoenas and more summonses to third parties in search of evidence,” said Rep. Richard E. Neal (D-Mass.).

With Congress scheduled to adjourn for the year later this month, Roth’s desire to alter the bill means that it could not pass the Senate and go to the president until sometime next year.

In a recent interview, Roth said he is concerned that the House bill would not create a sufficiently independent or powerful board to control the IRS.

“We want to make sure that whatever we enact addresses the problems we heard in the hearings,” he said Roth.

In Roth’s view, one of the agency’s major flaws involves the operation of its powerful collection division and he wants the oversight board to have the authority to look into individual allegations of taxpayer abuse, said committee spokeswoman Ginny Flynn.

The board as structured by the House legislation would lack legal authority to review confidential taxpayer records, essentially making it beholden to IRS bureaucrats on the details of a particular case.

Roth also said he is concerned that the House legislation does nothing to redress the lack of due process for individuals when the IRS seizes a taxpayer’s home, bank accounts or other assets. Under current law, IRS agents can seize a home with only the signature of one of 33 district directors.

Additionally, Roth said the House bill may be too narrow in its changes on the burden of proof issue in tax court cases. Although Roth did not specify what he has in mind, that could mean that he wants to shift the burden of proof in IRS audits, as well as court cases.

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