IRS Admits It Ranked Staff Members by Aggressiveness

The Internal Revenue Service admitted Tuesday that it ranked employees on their aggressiveness in collecting delinquent taxes and conducting seizures of property, violating laws intended to protect Americans from overzealous tax enforcement.

In releasing the results of an internal investigation, IRS Commissioner Charles O. Rossotti said the agency “has failed to strike the proper balance between providing customer service and fair enforcement of the tax law.” He pledged to take a series of steps to end the practices.

The use of quotas and statistics to evaluate IRS employees is explicitly banned by federal law, based on concerns that such measures would foster abusive tax-collection practices. But the investigation found that the IRS has used statistics to evaluate the performance of employees and supervisors. It also ranked the tax collections of its district offices.

The probe is the first time the IRS has examined its district operations across the country on the issue of statistical rankings, and it confirms the findings of a preliminary audit disclosed last month that uncovered serious problems in its district office in Oklahoma.

Allegations that the IRS was violating the law and its own internal policies were first raised last year at Senate Finance Committee hearings held by Sen. William V. Roth Jr. (R-Del.).

Anonymous IRS agents, testifying behind a screen, said at the hearing that they were coming under increasing pressure to browbeat and abuse taxpayers to inflate their office’s national rankings. IRS officials said they were not previously aware of such allegations and vowed to investigate the charges.

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The IRS report released Tuesday corroborated those allegations, finding that the IRS has erected a system that focused on capturing delinquent tax dollars with scant regard to whether taxpayers are treated fairly or their rights are protected.

In a misguided push to increase the agency’s productivity, the IRS “has created an environment that has placed some taxpayers at risk of abridgment of their rights,” according to the investigation report, which was conducted by the IRS’ inspection division.

Indeed, one group of aggressive IRS employees was lauded by management for its high number of property seizures, the investigation found. In another instance, a calendar was distributed within the IRS that detailed the daily intake of delinquent tax dollars by a group of revenue officers.

In 1997, the IRS collected nearly $4 billion in delinquent taxes, issuing 370,000 liens, 690,000 levies and 10,000 property seizures. The collection activities were identified in the Senate hearings as one of the principal areas of taxpayer abuse.

The use of statistics and quotas in government has a long, tarnished reputation, starting with the use of traffic-violation quotas by some police departments. But the IRS’ sweeping powers has raised particular concerns about overzealous enforcement, and Congress specifically outlawed the use of statistical rankings to evaluate employees in the Taxpayer Bill of Rights in 1988.

The investigation focused on 12 of the IRS’ 33 district offices, finding that improper--and in some cases illegal--use of statistics rankings were used in every office.

The investigation included the Northern California district, but not the Los Angeles or Orange County districts. District offices conduct audits and collect delinquent taxes, but they do not process income tax returns. The report did not breakdown where the legal violations occurred.

The report found that the IRS encouraged sharing and exchanging of statistical rankings among the agency’s supervisors “in violation of the law.” The report also shows that IRS regional officials encouraged the use of statistical rankings of districts and groups within districts, documenting specific examples in memos from recent years.

The report found that 52 employees over a two-year period were evaluated on the basis of enforcement statistics--a rate of about 3% of the personnel evaluations. But in the case of managers, 38% of the evaluations were evaluated on that basis.

Rossotti said Tuesday that the IRS would issue new guidelines on statistics and that he would establish a panel to review specific violations of the law and discipline employees as the investigation continues. Rossotti and other IRS officials have previously declared an end to the use of all statistical rankings.

A spokeswoman for Roth said the IRS report “shows what we have been saying all along, that the use of enforcement statistics is widespread throughout the agency.”

Roth is planning to conduct additional hearings this year as part of legislation to reform the IRS. The House has already passed such a bill, but Roth said he wants to go much further in reforming the agency.