Proposed legislation to restructure and reform the IRS.

On April 13, 1998, Tax Executives Institute submitted the following comments to the Senate Committee on Finance, supplementing the Institute's testimony at a January 29, 1998, hearing on proposals to restructure and reform the Internal Revenue Service. The comments took the form of a letter from TEI President Paul Cherecwich, Jr. to Senator William V. Roth, Chairman of the Finance Committee, and respond to a series of questions submitted by the Chairman following the hearing. Mr. Cherecwich's January testimony is reprinted in the January-February 1998 issue of The Tax Executive.

Mr. Chairman, TEI wishes to take this opportunity to commend the Senate Finance Committee on its efforts to restructure the IRS. The Nation will be well served by IRS that is better managed and subject to more consistent oversight, by both the Executive Branch and Congress, and by stronger taxpayer protections. Although TEI has residual concerns about the bill that the Finance Committee recently approved (and hopes that further changes will be made during the debate in the Senate and the deliberations of the House-Senate conference), we wish to underscore our strong belief that restructuring legislation should be enacted sooner rather than later. The keys to giving the American people the tax system they deserve are to remain focused on the future, to resist the temptation to micro-manage the IRS's day-to-day activities, and to complete the legislation as soon as possible so the IRS can get on with its work. Hence, although we appreciate the political and legislative exigencies might prompt various amendments to the restructuring bill, we urge Congress not to let the process of reforming and restructuring the IRS get bogged down.

Tax Executives Institute appreciates this opportunity to present its views on the proposals to restructure and reform the IRS. Questions about the Institute's views should be directed to Michael J. Murphy, TEI's Executive Director, or Timothy J. McCormally, the Institute's General Counsel and Director of Tax Affairs. Both can be reached at (202) 638-5601.

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 2,800 companies in North America; they are responsible for conducting the tax affairs of their companies and for ensuring their compliance with the tax laws. TEI members deal with the tax laws and with the Internal Revenue Service on almost a daily a basis, and the Institute 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 IRS.

Strengthening Oversight

1. One of the most important lessons learned for the Committee's oversight hearings last September is the need for greater oversight of the IRS. The Congress needs to do more oversight -- which we intend to do. But also there must be more oversight of the IRS in the Executive Branch. There are, at least, two ways we can improve that oversight. The first is to vest significant oversight responsibility with the Oversight Board that is created in the House-passed bill. The second way is to substantially increase the power of the Treasury Inspector General. What are your views on both of these ideas?

   Tax Executives Institute believes that the House-passed version of the IRS Restructuring Bill strikes the proper balance in respect of enhancing Executive Branch oversight of the Internal Revenue Service. Although we agree that a strong inspection function is critical to an effective IRS, we also agree that an Oversight Board should be established that oversees the IRS in the administration, management, conduct, direction, and supervision of the execution and application of the tax laws. The Board should be more than an advisory body (such as the current Commissioner's Advisory Group). It should be involved in (1) reviewing and approving the IRS's strategic plans (including the establishment of its mission, objectives, and standards of performance), (2) reviewing operational functions of the IRS (including plans for modernization of the tax system, training, and education), (3) providing for review of the Commissioner's selection, evaluation, and compensation of senior managers, and (4) reviewing and approving the Commissioner's plans for major reorganizations. The Board should also review and approve the budget request prepared by the Commissioner (to ensure that it supports the IRS's annual and long-range strategic plans). In general, however, TEI does not believe the Board should become involved in day-to-day decision-making at the IRS.

   TEI also believes that, regardless of whether the inspection function is part of the IRS or the Treasury Department, the Commissioner should be able to call upon, and use, Inspection personnel as a resource in identifying and resolving problems. The Institute is aware of no friction between the Treasury Inspector General and the IRS's...