One of the most controversial areas in recent years has been the rights of taxpayers amid charges of abuse by the Internal Revenue Service (IRS).(1) Taxpayers have been plagued by everything from rude IRS employees to erroneous assessments.(2) The horror stories taxpayers have recounted before the House of Representatives and the Senate Finance Committee occupied much of the news for weeks and were televised nationally as Congress wrestled with ways to restructure an organization plagued by delay, inefficiency, and abuse.(3)
This problem is not novel.(4) Stories of problems with the IRS have been around for decades.(5) The trend toward reform began in the 1970s when the Problem Resolution Program (PRP) was established.(6) Ten years later, the debate began anew.(7)
Three major bills passed in the last decade have attempted to address these problems. In 1988, Congress passed the first such bill, entitled the Omnibus Taxpayer Bill of Rights (TBOR).(8) Among its other provisions, TBOR strengthened the authority of the taxpayer ombudsman, the precursor to the Taxpayer Advocate.(9) In July 1996, President Clinton signed the second major bill, known as the Taxpayer Bill of Rights (TBOR2).(10) TBOR2 improved a number of procedural rights of taxpayers in dealing with the IRS.(11) In addition, this bill established the national taxpayer advocate (NTA).(12) The final major bill, the 1998 IRS Restructuring and Reform Act (1998 Act),(13) includes a new Taxpayer Bill of Rights (TBOR3)(14) that strengthens the NTA and enables the advocate to bring about substantial reform within the IRS.(15)
Although the establishment of the NTA is an understandable step, the potential for the NTA to foment real change within the agency is limited. As currently established, the NTA is an unnecessary waste of valuable resources and faces a serious conflict between the goals of the office and the desires of the IRS. The main problems with the office are the procedural problem resolution provisions (taxpayer representation) and the substantive reform provisions requiring a report to Congress on the top ten litigation problems per category of taxpayer.
This Note examines these problems in four sections. The first section discusses the history of the NTA and the programs leading up to its creation, including the necessity for some form of taxpayer advocate and an independent reviewing authority for disputes between taxpayers and the IRS. The second section of this Note sets out the current provisions of the 1998 Act dealing with the establishment of the NTA, specifically those new provisions in the 1998 Act that strengthen the office. The third section analyzes the duties of the Taxpayer Advocate, the problems that Congress has yet to address, and advocates a different focus for dealing with taxpayer complaints from a more practical point of view. Finally, this Note concludes that the NTA should be viewed solely as an interim measure and should be charged primarily with the restructuring of the IRS and the retraining of its employees.
THE HISTORY OF THE NTA
In cases involving substantive interpretations of law, the place for a taxpayer to be is in the judicial system.(16) In the case of procedural disputes, however, courts are not the proper place to work out the details.(17) Because no method existed to resolve procedural disputes between the United States taxpayer and the IRS, short of full-blown litigation, many taxpayers were without recourse prior to 1976.(18)
In response to this concern, Congress established the PRP in 1976 to serve as a neutral body within the IRS to investigate problems and complaints, and mediate or recommend solutions.(19) The implementing guidelines of PRP instructed the district directors to set up Program Resolution Offices to be run by a Program Resolution Officer (PRO).(20) PROs lacked the authority to impose final solutions, but they could request that IRS actions be stopped to allow time to investigate the unresolved problems of the taxpayers and recommend possible ways to work out procedural details with the complaining taxpayer.(21) In 1979, the national taxpayer ombudsman was established to head up the PRP.(22) This official reported directly to the IRS Commissioner and was charged with providing greater authority and visibility to the PRP, both inside and outside of the IRS.(23) The ombudsman served as the primary advocate of taxpayers' rights and represented the taxpayers interests when the IRS was making decisions,(24) oversaw investigations by PROs, and administered the PRP's coordination with regular IRS collection officials.(25)
Although the taxpayer ombudsman came from the upper echelons of IRS management,(26) the office was not considered to be sufficiently independent of the IRS.(27) In anticipation of the advent of the NTA, the IRS attempted to increase the powers and responsibilities of the taxpayer ombudsman, perhaps in an effort to avoid any further congressional intervention.(28) This effort, however, proved to be inadequate for Congress, because in 1996 Congress established the NTA, changing the focus of the office of the ombudsman from a neutral arbitrator to an advocate on behalf of the taxpayer.(29) The practical consequence of this new policy was that the NTA would represent taxpayer interests rather than the interests of the IRS.(30) Notwithstanding the substantive change in direction, the advocate still primarily addressed procedural issues.(31)
As Congress continued the debate over additional taxpayer rights, the IRS again attempted to stave off further revisions to the NTA's office by strengthening the powers of the NTA.(32) For the first time, the NTA could mandate certain administrative or procedural changes.(33) Congress, however, thought further reform was warranted and established the Office of the NTA in 1998.(34) The NTA heads the Office of the NTA and oversees the local offices of Taxpayer Advocates.(35)
Under the 1998 Act, former PROs are known as service center taxpayer advocates and a regional taxpayer advocate will head each regional district.(36) The change in focus on the part of the NTA is consistent with the change on the part of the PROs. A separate career path is in the process of being established for those who wish to make a career in the IRS solely within the taxpayer advocate's office.(37)
THE EFFECTS OF THE 1998 ACT ON THE OFFICE OF THE NTA
The 1998 Act strengthens the powers of the NTA's office(38) and addresses many of the concerns expressed about the office in the past.(39) The three main changes involve the appointment of the NTA,(40) increased reporting requirements,(41) and better capabilities to protect the taxpayer.(42)
Appointing the NTA
The statute provides specific eligibility requirements for NTAs. The NTA must have a background in customer service and have experience representing taxpayers.(43) In addition, he must not have been an IRS employee for at least two years prior to the appointment, and must agree not to work for the IRS for five years following the end of the term.(44) Although the IRS Commissioner and the oversight board must be consulted, it is the secretary of the treasury who appoints the NTA.(45)
Provisions on Reporting
By June 30 of each year, the NTA must present a report on the objectives of the Office for the next year to the Committee on Ways and Means for the House of Representatives and to the Committee on Finance for the Senate.(46) By December 31 of each year, the NTA must report on the activities of the Office for the previous year to the Committee on Ways and Means for the House of Representatives and to the Committee on Finance for the Senate.(47) This report must include (1) an identification of the initiatives taken on improving taxpayer services, (2) recommendations received from individuals with the authority to issue taxpayer assistance orders (TAOs), (3) a summary of the twenty problems encountered most by taxpayers, (4) actions that have been taken under these sections and the results, as well as those items on which no action has been taken, (5) an identification of those TAOs that the IRS did not honor, (6) recommendations for administrative and legislative action to resolve problems, (7) an identification of those areas of the tax law that impose significant compliance burdens on taxpayers or the IRS and recommendations for remedies, and (8) the ten most litigated issues between taxpayers and the IRS as well as recommendations for remedying those disputes.(48)
Provisions Aimed at Taxpayer Relief
In addition to more substantial reporting requirements, the Taxpayer Advocate may now issue TAOs(49) to provide relief for beleaguered taxpayers.(50) Only the NTA, the Deputy Commissioner of the IRS, or the IRS Commissioner may rescind a TAO.(51) Current law allows the Taxpayer Advocate to issue a TAO in order to stop, delay, or suspend IRS actions.(52) TAOs may be issued only when a taxpayer suffers or is about to suffer a significant hardship(53) as a result of an IRS action or omission.(54) The authority to issue TAOs has been delegated to regional and service center directors, regional and service center taxpayer advocates, regional commissioners, and the assistant directors.(55)
Lawmakers have embraced this provision. Since the Senate Finance Committee's hearings on the abuses of taxpayers by the IRS, lawmakers have referred a large number of cases to the NTA's office.(56) Specifically, in less than a year, individual members of Congress have referred over two thousand cases to the NTA.(57) Despite this endorsement, a number of the duties awaiting the NTA raise concerns that need to be addressed. Without quick action by lawmakers, the IRS, and the new NTA, this new position that carries with it so many expectations may lose any hope of promulgating real change in the culture of the IRS.
THE FUNDAMENTAL FLAWS IN THE CURRENT POSITION OF THE NTA
The issues plaguing the NTA are both substantive and...