Proposed legislation to restructure the Internal Revenue Service: September 17, 1997.

• Author: Cherecwich, Jr., Paul
• Position: Transcript

On September 17, 1997, TEI President Paul Cherecwich, Jr., testified before the House Committee on Ways and Means concerning proposals to restructure the Internal Revenue Service. The September 17 hearing focused on issues of Executive Branch governance and congressional oversight of the tax agency. Mr. Cherecwich's written statement is set forth below. The Institute's previous statements on restructuring the IRS are set forth in the November-December 1996 and July-August 1997 issues of The Tax Executive. For additional coverage of this issue, please see Mr. Cherecwich's "President's Corner" column.

Good morning. I am Paul Cherecwich, Jr., Vice President-Taxes and Tax Counsel for Thiokol Corporation in Ogden, Utah. I appear before you today as the president of Tax Executives Institute, the largest group of in-house tax professionals in North America. The Institute is pleased to submit these comments on proposals to restructure the Internal Revenue Service -- H.R. 2292 and S. 1087, which have been styled The IRS Restructuring and Reform Act of 1997 and embody the findings and recommendations of the National Commission on Restructuring the Internal Revenue Service, as well as the Clinton Administration's own proposals to enhance the management and oversight of the IRS, which have been set forth in H.R. 2427, The IRS Improvement Act.

1. Background

   Tax Executives Institute is the professional association of corporate tax executives. Our 5,000 members are accountants, attorneys, and other business professionals who work for the largest 2,700 companies in North America; they are responsible for conducting the tax affairs of their companies and of ensuring their compliance with the tax laws. Hence, TEI members deal with the tax laws and with the Internal Revenue Service on almost a daily a basis. (Most of the companies represented by our members are part of the IRS's Coordinated Examination Program, pursuant to which they are audited on an ongoing basis.) They also have day-to-day dealings with senior corporate management and corporate boards of directors, and accordingly, know firsthand the strengths and weaknesses of the corporate governance model. TEI believes that the professional training and experience of our members enable the Institute to bring an important, and balanced, perspective to the issues involved in efforts to restructure and reform the Internal Revenue Service.

2. Setting the Tone for a Constructive Debate

   At the outset, TEI commends the members of the National Commission on Restructuring the Internal Revenue Service and the Commission's staff for their efforts in identifying issues of concern, seeking out the views of interested parties, and crafting proposed solutions. We also commend the members of Congress who have cosponsored H.R. 2292 and S. 1087, which contain an integrated set of proposals to improve the management and administration of the IRS. Even though TEI disagrees with certain provisions of these bills, the Institute is convinced that the proposed legislation holds great promise. Finally, we commend the members of the Clinton Administration (and the Treasury Department in particular), the sponsors of H.R. 2427, and commentators in the private sector, who have offered constructive comments on the Commission's proposals. We pledge our support for efforts to refine the proposals and to enact a meaningful set of reforms.

   As the legislative process moves forward, TEI believes it is imperative that all parties -- Congress, the Administration, members of the Commission, and stakeholders in the private sector -- acknowledge that consensus has already been attained on a wide variety of issues. More fundamentally, except in a few, isolated quarters, everyone agrees that we cannot stay where we are: The need to effect significant changes at and in respect of the Internal Revenue Service in order to bring greater continuity, accountability, and expertise to the management and oversight of the IRS cannot be denied.

   Change, however, should not be embraced merely for its own sake. Moreover, care must be exercised to ensure that whatever changes are adopted, especially in the management structure of the IRS, do not impede the agency's ability to do its job -- collecting the revenue necessary to run the government in the manner that Congress decides and the American people demand -- today and into the future. TEI recognizes that there are sharply divergent views on how best to provide effective oversight of the IRS, and we agree it would be unwise to minimize or paper-over the differences in philosophy that animate the ongoing debate. We nevertheless believe that it is time to tone down the rhetoric and focus on the substance of the various proposals. Hence, we urge the advocates of wholesale change, as well as those supporters of the current system, to check their contempt for one another's views at the door. The key is not -- or should not be -- "whose proposal wins" but rather which proposal (or combination of proposals) holds the most promise for improving the management of the IRS and restoring rationality to the critically important roles of Administration and congressional oversight. TEI remains confident that common ground can, and will, be found.

   TEI is especially pleased that nearly all parties recognize that there is no single solution to what ails the IRS. What is needed is a balanced, integrated approach. One change -- say, the appointment of a board of directors -- will not transform the agency unless it is effectively coupled with others, including coordinated and streamlined oversight, stronger leadership by the Commissioner and senior IRS management, an increased focus on customer service, and the assurance of balanced, effective performance measures. Indeed, one of TEI's primary concerns is that the establishment of an oversight board (whatever its composition) not become merely the insertion of yet another layer of bureaucracy into the IRS; by itself, such a board will not make the agency more responsive and may even impede the government's ability to improve the development and administration of our tax laws. In tandem with other changes, however, enhanced Executive Branch oversight of the IRS can increase management...