FULL TEXT: FORMER IRS COMMISSIONERS PROTEST TAXPAYER BILL OF RIGHTS PLAN.
FULL TEXT: FORMER IRS COMMISSIONERS PROTEST TAXPAYER BILL OF RIGHTS PLAN.
- AuthorsGibbs, Lawrence B.
- Institutional AuthorsGibbs, Lawrence B.
- Index Termstax administrationTAMRA 88
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 92-6575
- Tax Analysts Electronic Citation92 TNT 150-32
=============== SUMMARY ===============
The full text is available of a July 15 letter from eight former IRS commissioners to the House and Senate taxwriting committees on the Taxpayer Bill of Rights.
=============== FULL TEXT ===============
July 15, 1992
The Honorable Dan Rostenkowski
Chair, House Ways and Means Committee
House of Representatives
Rayburn 2111
Washington, DC 20515
The Honorable Lloyd Bentsen
Chair, Senate Finance Committee
United States Senate
Hart 703
Washington, DC 20510
Dear Sirs:
As former Commissioners of Internal Revenue for the past thirty years, we express our concern and strong opposition to certain provisions contained in Title V of H.R. 11 which we believe would seriously and adversely affect tax administration.
Each of us has worked with you or your predecessors in attempting to assure that the Internal Revenue Service ("Service") met its obligation to fully and fairly collect the proper amount of tax owed to the Federal government. In addition, each of us has represented taxpayers in dealing with the Service before and/or after serving as Commissioner. We therefore recognize, as we know you do, the difficulties that the Service faces in collecting the amount of tax properly owed and at the same time doing so in a fair, even- handed and professional manner.
We take seriously the importance of balancing the authorities needed by the Service to discharge its obligations with the rights of individual taxpayers in their dealings with the Service. You well know, and we recognize, that such balancing of the authority needed by the service to properly perform its duties with the rights of individual taxpayers is often as difficult as it is important. And this is particularly true at the present time in light of the government's need for revenue, the complexity of our Federal tax laws, and the increasing lack of confidence and respect of our citizenry in governmental authority.
In view of these competing considerations, we have considered carefully the provisions of Title V of H.R. 11. Some of the provisions may be helpful, but we have substantial concerns about the impact of other provisions on our Federal tax system. There are three provisions that we feel so strongly about for the reasons indicated below that we urge you to reconsider and delete them from the legislation that you presently are considering.
1. PERSONAL LIABILITY OF SERVICE EMPLOYEES. Section 5704 of H.R. 11 would impose personal liability on Service employees in certain circumstances. Presently, if a taxpayer is the "prevailing party" in tax litigation, then under certain circumstances a court can require the Federal government to reimburse the taxpayer for certain litigation costs. Under the pending proposal, the court could require a Service employee PERSONALLY to reimburse such costs if the court determined that the proceeding resulted from any arbitrary, capricious or malicious act of the employees, and, in such event, the employee would not be permitted to recover such costs from the Federal government.
This proposal has been criticized publicly by the Taxation Section of the American Bar Association and the Tax Section of the New York State Bar Association. We concur with their criticisms and opposition.
We do not condone the arbitrary, capricious or malicious actions by Service employees in dealing with taxpayers. We believe, however, that present law and procedures provide an aggrieved taxpayer with substantial remedies to redress such conduct, including the Service's Office of the Taxpayer Ombudsman, the Problem Resolution Program, and the Office of the Chief Inspector, as well as the Treasury Department's Inspector General and the provisions of Section 7433 of the Code permitting a taxpayer to bring a civil action against the United States for damages sustained in connection with the collection of Federal tax due to the reckless or intentional disregard of Federal law by a Service employee. Likewise, there are substantial and serious disciplinary measures available to properly punish any employee who might engage in such unauthorized behavior.
Our collective experience in the public and private sectors suggests that although there are instances of inappropriate conduct by Service employees, they tend to be relatively isolated and unusual. It is further our collective experience that although most taxpayers make an honest attempt to cooperate with Service employees in determining their tax obligations, over the last thirty years we also have seen increasingly aggressive behavior by some taxpayers in dealing with Service employees, including a limited but significant number of instances in which certain taxpayers intentionally harassed or attempted to intimidate Service employees. IRS examination, collection and enforcement activities are inherently adversarial in nature; and, in such context, we submit that it may be difficult to delineate adversarial conduct from arbitrary, capricious and malicious behavior.
We believe that the proposal is unwise. We believe that it is likely to cause Service employees to be less willing to deal effectively with uncooperative, aggressive taxpayers because of the employees' concern about potential harassment and possible personal liability in such event. We further believe that such concerns will adversely impact upon the Service's ability to recruit and retain compliance personnel. As you know, similar concerns traditionally have resulted in the grant of general immunity to Federal employees acting in their official capacities.
It is, therefore, our judgment that in balancing the authority needed by Service employees with the rights of individual taxpayers, this proposal is inappropriate and should be rejected, and we urge you to do so.
2. POLITICAL APPOINTMENT OF OMBUDSMAN. Presently, there is a Taxpayer Ombudsman on the staff of the Commissioner of Internal Revenue who is appointed by the Commissioner and who oversees the Service's Problem Resolution Program ("PRP"). Section 5001 of H.R. 11 would replace the Ombudsman with a "Taxpayer Advocate" who would be appointed by the President and confirmed by the Senate and who would supervise all of the PRP personnel.
As you may know, the idea of an Ombudsman was developed by Commissioners Alexander and Kurtz. Most of the undersigned, therefore, have worked directly with the Ombudsman and PRP and all of us enthusiastically support the goals and activities of the Ombudsman and PRP. Each of us believes that the pending proposal is likely to substantially and adversely affect the goals and activities of the Ombudsman and PRP programs, and we therefore oppose the proposal.
Our collective experience indicates that the role and importance of the Ombudsman and PRP programs are increasing. We believe that among the keys to the continued effectiveness of these programs is the need to institutionalize the attitudes and objectives of the Ombudsman and PRP throughout the policies, procedures and personnel of all of the Service functions. Presently, the long-term goal of the Ombudsman and the PRP employees is to so institutionalize their attitudes and objectives across the Service that all of the Service employees will share such attitudes and objectives.
In our opinion, the proposal in H.R. 11 would do just the opposite. By creating a new office headed by an independent Presidential Appointee and given a function independent of the organization, the proposal separates PRP. In any large organization, once a program is separate, it is almost impossible to institutionalize the attitudes and objectives of the program. If the present proposal is enacted to statutorily mandate the Presidential appointment of a Taxpayer Advocate to whom the PRP program will be responsible, we believe that the detriments resulting from such change will more than offset any intended benefits.
We are particularly concerned that such change may politicize the Ombudsman and thereby render the Ombudsman less effective in leading and managing PRP. As you may know, the Ombudsman presently is involved personally on a daily basis in numerous audit, collection and other enforcement activities affecting specific taxpayers. Often, taxpayers or their representatives request the involvement of the Ombudsman. History has taught all of us, and particularly those who are signatories, of the dangers inherent in the involvement of political appointees in such activities on a day-to-day basis at the request of taxpayers. We oppose and urge you to reject this proposal.
3. RETROACTIVITY OF TREASURY REGULATIONS. Presently, Treasury and IRS officials have discretion about the extent to which regulations can be promulgated retroactively. Under Section 5803 of H.R. 11, proposed and temporary regulations could not be applied retroactively to periods preceding the date of publication unless Congress so provided or unless necessary to "prevent abuse of the statute to which the regulation relates" or "correct a procedural defect in the issuance of any prior regulation".
All of us as former Commissioners, and certainly as practitioners, support the notion that regulations should be issued promptly after legislation is enacted in order to provide affected parties with appropriate guidance and also to avoid the problems which retroactivity creates. However, because of the volume and complexity of tax legislation so frequently passed by Congress over the last thirty years, in our experience it has been increasingly difficult (maybe impossible) for the Treasury Department and the Service to issue regulations as promptly as desirable and needed. Further, it is our collective experience that, under our government of checks and balances, it is often easier for taxpayers and their representatives to block or defer the issuance of regulations than it is for the Service to issue them timely, particularly those regulations that are perceived to affect the interests of taxpayers adversely.
Each of us has had to deal with the delicate and difficult decision as to whether and to what extent a regulation should be retroactive or prospective. Each of us has had to deal with a variety of different situations in which retroactivity, rather than prospectivity, was called for or required. We do not believe that the exceptions in the proposal to permit retroactivity are sufficient to cover the myriad of situations and conditions in which the issue arises. Indeed, in light of these circumstances, we seriously doubt the wisdom of attempting to prescribe in advance when regulations should be promulgated retroactively or prospectively. We believe that flexibility to respond to the exigencies of the particular situation is critically important, and that that is fundamentally what is involved in the present provisions of Section 7805(b) of the Code.
In balancing the needs of the Service with the rights of the taxpayers, we believe that the present flexibility should be continued. Courts have fashioned numerous remedies to permit taxpayers to overturn or circumvent regulations in appropriate circumstances. Over the last thirty years the courts consistently have demonstrated a willingness to uphold taxpayers' actions despite contrary provisions of the regulations when the court determines that the taxpayer has substantially complied with his or her tax obligations or that the Service has abused its discretion in formulating or administering its regulations. See, e.g., Fred J. Sperapani, 42 T.C. 308, 333 (1964); Columbia Iron & Metal Company, 61 T.C. 5, 10 (1973); Jaquelin E. Taylor, 67 T.C. 1071, 1079 (1977); Chester Matheson, 74 T.C. 836, 841 (1980); Young v. Commissioner, 783 F.2d 1201, 1205 (5th Cir. 1986); Woodbury v. Commissioner, 900 F.2d 1457, 1460 (10th Cir. 1990); White Rubber Corporation v. United States, 781 F. Supp. 507, 511 (N.D. Ohio 1991).
For the reasons noted, we oppose the proposal and encourage you to reject it.
If you or your staffs would like to confer with us as a group or individually, we would be pleased to assist you.
Mortimer H. Caplin, Former Sheldon S. Cohen, Former
Commissioner 1961-1964 Commissioner 1965-1969
Randolph W. Thrower, Former Johnnie M. Walters, Former
Commissioner 1969-1971 Commissioner 1971-1973
Donald C. Alexander, Former Jerome Kurtz, Former
Commissioner 1973-1977 Commissioner 1977-1980
Roscoe L. Egger, Jr., Former Lawrence B. Gibbs, Former
Commissioner 1981-1986 Commissioner 1986-1989
cc: The Honorable Bob Packwood
Ranking Minority Member
Senate Finance Committee
259 Russell Senate Office Building
Washington, DC 20510
Honorable Bill Archer
Ranking Minority Member
Committee on Ways and Means
1236 Longworth House Office Building
Washington, DC 20515
The Honorable Shirley Peterson
Commissioner of Internal Revenue
Internal Revenue Service
1111 Constitution Avenue, NW, Room 3000
Washington, DC 20224
The Honorable Fred T. Goldberg, Jr.
Assistant Secretary (Tax Policy)
Department of the Treasury
1500 Pennsylvania Avenue, NW, Room 3120
Washington, DC 20220
The Honorable Abraham N. M. Shashy
Chief Counsel
Internal Revenue Service
1111 Constitution Avenue, NW, Room 3026
Washington, DC 20224
Harry L. Gutman, Esquire
Chief of Staff
Joint Committee on Taxation
1015 Longworth House Office Building
Washington, DC 20515
- AuthorsGibbs, Lawrence B.
- Institutional AuthorsGibbs, Lawrence B.
- Index Termstax administrationTAMRA 88
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 92-6575
- Tax Analysts Electronic Citation92 TNT 150-32