TEI's testimony before the IRS Oversight Board: January 26, 2004.

• Position: Tax Executives Institute

On January 26, 2004, TEI Executive Director Timothy J. McCormally testified before the IRS Oversight Board on key challenges facing the Internal Revenue Service. The testimony was prepared under the aegis of the Institute's IRS Administrative Affairs Committee, whose chair is Paul O'Connor of Millipore Corp.

Good afternoon. I am Timothy McCormally, Executive Director of Tax Executives Institute, the preeminent association of business tax professionals. I am accompanied by the Institute's General Counsel and Director of Tax Affairs, Fred Murray. The Institute is pleased to participate in today's hearing of the IRS Oversight Board.

Background

Tax Executives Institute was established in 1944 to serve the professional needs of in-house tax practitioners. Today, the Institute has 53 chapters in the United States, Canada, and Europe. Our 5,400 members are accountants, attorneys, and other business professionals who work for 2,800 of the leading companies in North America and Europe; they are responsible for conducting the tax affairs of their companies and ensuring their compliance with the tax laws. Hence, TEI represents the business community as a whole, and our members deal with the tax code in all its complexity, as well as with the Internal Revenue Service, on almost a daily basis. TEI is dedicated to the development and effective implementation of sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike.

The companies that employ TEI's members have almost without exception been assigned to the IRS's Large and Mid-Size Business (LMSB) Division. The largest 1,600 taxpayers within LMSB are subject to ongoing audits as part of the Coordinated Industry Cases (CIC) program. The Institute's testimony is largely based upon our experience with this segment of IRS operations. TEI has long supported adequate funding for the IRS, particularly in respect of training. We are pleased to offer our views on the investment in human resources within LMSB and, more generally, on the overall direction of the IRS.

Increased Demand, Decreased Resources

Effective management of human resources is not a new challenge, but it is one that is garnering more attention and importance as the government's workforce ages. The Office of Management and Budget recently announced that all federal agencies will be required to include in their fiscal year 2005 budgets and annual performance plans specific activities relating to training, development, and staffing to ensure leadership continuity. The Office of Personnel Management has also established a goal to ensure continuity of leadership and knowledge through succession planning and professional development programs in 25 percent of federal agencies by July 2004.

The IRS Oversight Board's 2003 report to Congress also focused on personnel issues. The Board observed an increased demand for IRS services and a decreased level of resources. Specifically, the Board documented a 16-percent increase in the IRS's workload between 1992 and 2002 and, during the same period, a 16-percent decrease in the number of full time equivalent employees (from 115,205 to 96,714). The Board explained that the result of these trends is a huge gap between what taxpayers need and what the IRS can deliver to...