Congressional testimony on development of federal tax forms by the Internal Revenue Service.

• Author: Langdon, Larry R.
• Position: By Tax Executives Institute President on August 3, 1989

Congressional Testimony on Development of Federal Tax Forms by the Internal Revenue Service

Mr. Chairman and Members of the Subcommittee: I am Larry R. Langdon, Director, Tax and Logistics for Hewlett-Packard Company. I am here today in my capacity as President of Tax Executives Institute to present the Institute's comments on the development of federal tax forms, schedules, and instructions. I am accompanied by the Institute's Tax Counsel, Timothy McCormally, and together we will endeavor to answer any questions you might have about TEI's position on this very important subject.

1. Introductory Comments:

   Forms as a Measure of

   Administrability

   Mr. Chairman, Tax Executives Institute (TEI) is the principal association of corporate tax executives in North America. Our 4,300 members represent approximately 2,000 of the largest companies in the United States and Canada, and are responsible for coping with the tax laws -- from both a planning and a compliance perspective -- on a day-to-day basis. We are committed to working with government in developing and maintaining a tax system that works -- one that is consistent with solid tax policy and with which the taxpayers can comply.

   TEI is pleased that the Subcommittee has recognized that Congress's role and responsibility does not end with the enactment of tax legislation. We are also pleased that more attention is being paid to how legislation "translates" -- to use the Chairman's word when he announced this hearing -- into the real world. And, if I might extend the analogy, we believe that the tax forms and schedules represent a potent "simultaneous translation" of how well Congress and the Administration do their job in developing tax rules that taxpayers can live with.

   Mr. Chairman, TEI has long maintained that greater emphasis should be placed on the administrability of particular proposals during the legislative process -- and we believe this hearing could serve to underscore the problems that arise when administrative concerns are given short shrift. We believe that if more attention were paid on the front-end to the workload burdens posed by legislative proposals, then less complex and more administrable provisions -- as seen most immediately in the resulting forms, schedules, and instructions -- would be enacted. (1)

   To this end, when the Institute testified before the Subcommittee earlier this year on the Chairman's penalty reform legislation, we recommended that the Internal Revenue Service be asked to testify before the House and Senate tax-writing committees to address the administrability of all proposed tax legislation. The IRS's testimony would be designed to ensure that clear, administrable, and cost-sensitive rules are enacted into law, and we suggested that the testimony specifically address the following issues:

   * the ability of the IRS to administer the provision and the estimated cost to the IRS of doing so; and

   * the ability of taxpayers to comply with the provision and the estimated cost to taxpayers of doing so.

   TEI believes that the IRS's more active participation in the legislative process -- on the sole question of administrability -- is critical to reducing the complexity of the tax laws. Mr. Chairman, we believe this proposal to enhance the administrability of the tax laws could be effectively linked with the Subcommittee's current review of the development of federal tax forms. This is because, although administrability can be measured in many ways, perhaps the most vivid and immediate picture is painted by the forms and schedules required to translate a statutory provision into a set of instructions for taxpayers to use in navigating their way through the maze that the Internal Revenue Code has become.

   Thus, if substantive provisions were not added to the Code until the IRS had an opportunity to develop what the resulting form would look like, perhaps those provisions could be streamlined and made more administrable. Indeed, it is our understanding that on occasion pre-enactment forms have been developed and that some modifications have been made to the relevant statutory provision to simplify the "translation" process. We similarly understand that the IRS has undertaken to develop an "administrability impact statement" in respect of pending legislative proposals.

   Mr. Chairman, we recognize that political and budgetary exigencies frequently operate to deny the tax-writing committees sufficient time to consider the administrative aspects of proposals and that the development of pre-enactment forms as a general matter may prove impossible. We recommend, however, that it become an aspirational goal of the tax-writing committees, as should the IRS's preparation and Congress's review of "administrability impact statements."

2. The Business Taxpayer's Involvement

   with IRS Tax Forms

   Mr. Chairman, TEI members have collectively dealt with virtually every line and box on every tax form and schedule that the Internal Revenue Service has published in respect of business taxpayers. This exposure has made us sensitive to the "translation" problems the Chairman has referred to. Ordinarily, we approach forms matters on a "micro" basis -- analyzing the burdens a particular form will impose, developing detailed procedures for gathering the required information from our company's far-flung affiliates, and then riding herd on our...