Republican and Democratic leaders in the House and Senate’s main tax-writing committees teamed up to reintroduce bipartisan legislation Thursday to overhaul some key aspects of the way the Internal Revenue Service operates.
The bill, known as the Taxpayer First Act, aims to modernize the IRS and improve taxpayer services when filing taxes, retrieving information, resolving issues, and making payments. The far-reaching package includes more than 45 provisions. For example, the legislation would create an independent office of appeals within the IRS so that taxpayers know they are being treated fairly when resolving a dispute with the agency. Taxpayers would get access to the same information as the IRS during the dispute resolution process.
The bill would also require the IRS to submit to Congress a plan to redesign the structure of the agency to improve efficiency, enhance cybersecurity and better meet taxpayer needs. It would also ensure that, when the IRS performs an audit, actual notice is provided to taxpayers before the agency contacts friends, neighbors, and clients.
The bill would also require the IRS to submit to Congress a comprehensive plan to improve its customer service strategy, based on best practices from the private sector. The legislation would also strengthen IRS accountability by codifying the roles and responsibilities of the IRS chief information officer and requiring annual information technology strategic planning. It would require easier electronic submission of tax forms and supporting documentation.
The bill also aims to strengthen the IRS’s ability to combat identity theft and tax refund fraud by creating a single point of contact for victims of identity theft to help them navigate the bureaucracy and resolve their issues as soon as possible. The bill would codify the Security Summit in which the IRS collaborates with state tax authorities and the tax prep industry on cybersecurity. It would give the IRS the ability to share information with specified members of the Information Sharing and Analysis Center that was created by the Security Summit. To provide taxpayers with better protection against identity theft, the legislation would expand to all taxpayers an IRS program that currently only allows victims of tax ID theft to obtain an identity protection PIN, or IP PIN, to help secure their identity.
The legislation was originally introduced last year soon after passage in December 2017 of the Tax Cuts and Jobs Act. It came after years of work and hearings by the House Ways and Means Committee and the Senate Finance Committee. The House passed the bill last April, but it didn’t make progress in the Senate beyond the Senate Finance Committee (see House approves IRS reform bills).
House Ways and Means Committee Chairman Richard Neal, D-Mass., and Ways and Means Oversight Subcommittee Chairman John Lewis, D-Ga., teamed up with the top Republican on the House Ways and Means Committee, Rep. Kevin Brady, R-Texas, and Oversight Subcommittee ranking member Mike Kelly, R-Pa., in the House in reintroducing the legislation. “The House Ways and Means Committee and the Senate Finance Committee have carefully and thoughtfully developed this legislation over several years, after numerous hearings and roundtables, in a bipartisan, bicameral manner,” they said in a joint statement. “The goal of the legislation is to modernize the IRS, putting taxpayers first. The commonsense provisions in this bill will protect low-income taxpayers, provide sensible enforcement reforms, and ensure the IRS provides taxpayers and small businesses the assistance they deserve.”
Senate Finance Committee Chairman Chuck Grassley, R-Iowa, is teaming up with the top Democrat on the committee, ranking member Ron Wyden, D-Ore., on introducing the legislation in the Senate. “This legislation seeks to modernize the IRS, improve taxpayer services and strengthen taxpayer protections,” said Grassley on the Senate floor Thursday. “The package of IRS reforms we introduce today is the culmination of years of work by both the Senate Finance Committee and the House Ways and Means Committee. It’s truly a bipartisan package that adopts provisions authored by committee members on both sides of the aisle from both the Senate and House.”
He credited former committee chairman Orrin Hatch, R-Utah, with helping craft the legislation before Hatch retired from the Senate last year. “Former Chairman Hatch deserves a lot of credit for working to reach a bipartisan, bicameral agreement at the end of last Congress that is reflected in the legislation we will be introducing this afternoon,” said Grassley. “I know he put a lot of work into trying to get this legislation across the finish line last year. Unfortunately, it wasn’t meant to be due to both political realites and time constraints. However, his work helped us get to where we are today. And our hope is that it will allow us to move quickly this year and finally get these commonsense reforms of the IRS enacted into law.”
The bill would also codify the Volunteer Income Tax Assistance program, giving the IRS up to $30 million to provide matching grants to qualifying tax preparation sites.
“There’s no federal agency Americans interact with more than the IRS, and it’s critical that it be reformed and modernized to better serve taxpayers,” Wyden said. “Our bill would strengthen tax-preparation services for low-income Americans, improve agency technology and better protect taxpayers’ personal data. This legislation has strong bipartisan support and I’m hopeful it will be passed without delay.”
The bill would overhaul the IRS’s enforcement tools to avoid unnecessary seizures of taxpayer assets using civil asset forfeiture. Individual and business taxpayers wouldn’t need to worry about having their assets seized without proper, timely and fair notice under the bill. The legislation would install new safeguards to protect taxpayers against recent IRS enforcement abuses of so-called “structuring laws” in which the IRS moves to seize assets if a taxpayer appears to be trying to circumvent banking secrecy laws by depositing amounts of just under $10,000 in their bank account.
“On several occasions, the IRS used these laws to seize bank accounts of small business owners when no underlying criminal activity was present,” said Grassley. “This included seizing $33,000 from a small business owner who operated a small restaurant in Arnolds Park, Iowa, for nearly 40 years. Provisions in our bill will help ensure these types of abuses never occur again.”
The bill also makes some improvements in the IRS whistleblower program that Grassley has long championed. It would authorize the IRS to communicate with whistleblowers during the processing of their claims, while also protecting taxpayer privacy, and extend anti-retaliation provisions provided under other whistleblower laws.
“Since it was established, the IRS whistleblower program has turned into one of the most effective programs addressing tax evasion – leading to the recovery of more than $5 billion in taxes that otherwise would’ve been lost to fraud,” he said. “Unfortunately, too often IRS whistleblowers continue to be treated like a skunk at a picnic. They often wait for years in the dark with no indication of whether the information they provide will lead to a successful recovery or whether their reward is even being processed. Moreover, they are often putting their careers on the line exposing corporate tax shelters with no protections should their employer decide to retaliate. Provisions in our bill will help to address these issues by authorizing the IRS to communicate with whistleblowers in certain instances while protecting taxpayer privacy. The bill would extend anti-retaliation provisions to IRS whistleblowers that are presently afforded to whistleblowers under other whistleblower laws, such as the False Claims Act and Sarbanes-Oxley.”
The bill would also make some modifications to the IRS private debt collection program which allows some private contractors to collect delinquent taxes on behalf of the IRS. “I’ve long been a proponent of this program as a way to tackle the tax gap and promote tax fairness,” said Grassley. “It works by assigning certain tax debts that the IRS otherwise would not attempt to collect to outside contractors to pursue. Recent quarterly revenue reports demonstrate the program has the potential to bring in hundreds of millions of dollars in revenue on an annual basis. I understand some of my colleagues, particularly on the House Ways and Means Committee, have been concerned that the program has been too heavily focused on lower-income taxpayers. We listened to these concerns and worked to develop a sensible compromise while strengthening the long-term viability of the program.”