By Aaron Lorenzo
April 9, 2018
A bill to remake some IRS operations is getting largely positive reviews so far, mostly because the proposed changes are more incremental than sweeping.
The revenue agency already has a full plate putting new tax cuts, H.R. 1 (115), in place this year, something stakeholders have stressed in conversations with Congress. Recently released draft legislation to alter or reinforce a range of IRS administrative functions indicates the message was received.
"I think that's a very sensible approach," said former IRS Commissioner Mark Everson, now vice chairman at alliantgroup LP.
Rather than mandate a wholesale overhaul across the IRS, which Congress did 20 years ago, much of the draft bill from Reps. Lynn Jenkins (R-Kan.) and John Lewis (D-Ga.) would legally cement some current practices at the revenue agency.
For example, part of its service section would make permanent the IRS' decade-old arrangement with certified volunteers to help taxpayers with special needs file their returns. Known as the Volunteer Income Tax Assistance program, it benefits the poor, people with disabilities and English-language difficulties and other underserved groups.
Other elements in that section address similar services already built into the IRS, including codifying its free-file program and letting IRS employees do more to promote low-income taxpayer assistance centers.
For low-income taxpayers delinquent on their tax obligations, the draft bill's enforcement section would adopt limits proposed by the National Taxpayer Advocate preventing those with incomes below 250 percent of the federal poverty level from being referred to private debt collectors.
Another enforcement provision would rein in asset seizures by the IRS, which are triggered by large cash deposits at banks that are required to report transactions that could involve structured payments used in illicit finance.
But the IRS has by and large altered its seizure procedures in the wake of congressional hearings and bipartisan bills meant to curb wrongful freezing of the accounts of taxpayers not involved in structured deposits.
Language in the draft bill's security section on cooperation with state officials and private-sector businesses has mostly gotten applause. It would solidify existing IRS agreements on information sharing with those partners to help combat identity theft and tax return fraud.
In addition, the legislation proposes to assign each ID theft victim a single point of contact at the IRS to handle his or her case, though such a setup could prove expensive.
Stringing together elements like these meant to reshape taxpayer interactions with the IRS — ideally improving the experience — helps keep the draft away from controversy.
"I don't know that I see anything here that's a real showstopper," said Floyd Williams, senior tax counsel at Public Strategies Washington Inc., who previously served as the IRS director of legislative affairs for 16 years.
However, he cautioned that putting existing IRS procedures into law could limit the agency's flexibility.
For instance, the draft bill would set up an independent appeals office at the IRS, since lawmakers say the process that exists now has limited taxpayers' access to administrative reviews. But elevating it could handcuff the agency's capacity to handle some cases differently than others, said Williams.
In addition, drawing bright lines in multiple agency functions could slow officials or agents in the field from being nimble, he said.
"In general, it's best if the IRS is already doing something not to put it into statutory format," he said.
From the IRS' perspective, another concern in the draft is wording that would limit the agency's ability to use outside attorneys, a practice that grew controversial in an IRS case against Microsoft Corp. The bill would restrict non-IRS employees from examining books, papers, records and other data as part of an examination, except for providing expert evaluation and assistance to the agency.
Some tax experts also said that lawmakers missed some opportunities for other improvements at the agency.
The bill doesn't include authority for the IRS to offer higher-than-normal compensation for information technology personnel, for example, which the IRS has had in the past to attract private-sector talent since government salaries are typically lower.
Known as streamlined critical pay, Everson said it proved helpful in beefing up systems-driven operations during his tenure leading the IRS from 2003-2007. But it wasn't written into the draft's section on modernization, which largely proposes other upgrades to the IRS' notoriously outdated IT infrastructure.
Williams said streamlined critical pay could require involvement from congressional appropriators.
Nor would the draft require minimum standards for tax preparers. James Adelman, president of the National Association of Enrolled Agents, said preparers should have to prove certain proficiencies by passing a one-time competency test and meeting continuing education requirements.
"Numerous studies have found that non-credentialed tax return preparers routinely prepare inaccurate returns, which has the effect of harming taxpayers, the public [treasury], or both," National Taxpayer Advocate Nina Olson wrote in a report to Congress this year, echoing past comments she's made.
But that idea has been sunk on Capitol Hill in the past, so it was intentionally left out keep the draft generally non-controversial, said a Ways and Means Committee staffer.
On Friday, however, the American Institute of CPAs sent a letter to Lewis and Jenkins saying the legislation should include a "focused and well-defined approach to the regulation of tax return preparers." The group has battled the IRS over the issue in the past.
AICPA also wants lawmakers to set up a "Practitioner Services" division at the IRS to centralize the agency's work with tax professionals.
Jenkins and Lewis, the respective chairwoman and top Democrat on the Ways and Means Oversight Subcommittee, took public feedback through last week on their proposal.
Trade associations, individual tax practitioners and a handful of taxpayers put in their two cents.
One provision that isn't sitting well with some would change the title of the top job at the IRS from "commissioner" to "administrator."
Other federal agencies are run by appointees under the title of administrator, but it would be silly for the IRS chief, Everson said. The top U.S. revenue collector has been designated commissioner since the Civil War, when President Abraham Lincoln appointed George Boutwell the first commissioner of Internal Revenue.
"Once you've been the commissioner of the IRS, you can't shake that title," Everson said. "They can do their best to change it, but it's not going to work."