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November 5, 1997
(House)


H.R. 2676 - Internal Revenue Service Restructuring and Reform Act of 1997
(Archer (R) Texas and 43 cosponsors)

The Administration supports House passage of H.R. 2676 as an important step in the process of Internal Revenue Service (IRS) reform that has been ongoing over the past two years. The bill reflects an emerging consensus on the need for additional taxpayer rights, for institutionalized oversight of the IRS, for greater continuity of leadership at the IRS, and for improved access to private sector input on customer service and technology. The Administration worked extensively with the bill's sponsor and other Members to resolve differences contained in earlier versions of IRS reform proposals, and is pleased that H.R. 2676 incorporates many of the Administration proposals regarding:
  • Executive branch accountability under the Constitution, including Presidential appointment and Senate confirmation of the IRS Commissioner, as well as preserving the authority of the Secretary of the Treasury to administer and enforce provisions of internal revenue laws;

  • retention of exclusive responsibility for any and all IRS law enforcement responsibilities with full-time government employees;

  • additional taxpayer rights protections; and

  • expansion of electronic filing.
The Administration's review of the bill is continuing. Based on its initial review, the Administration will continue to work with the Congress to make needed improvements to the bill in the following areas:
  • Personnel Flexibilities. The Administration believes the personnel flexibility provisions need substantial revision to strengthen the IRS' ability to attract and retain the highly skilled and motivated workforce needed to make necessary improvements in information technology, customer service, and overall management.

  • Burden of Proof. The Administration continues to be concerned about this provision and wants to ensure that taxpayers are not provided a disincentive to keep records to support positions on their tax returns. In addition, the Administration is concerned that the provision may have unintended consequences, including making audits more intrusive.

  • Conflicts of Interest. The Administration will work with the Congress to make the changes needed to ensure that the members of the Oversight Board are appropriately covered by conflict of interest laws.

  • Other Concerns. The Administration notes that constitutional concerns have been raised regarding the restriction on the President's appointment authority contained in section 101(a) and the restrictions on Executive authority in section 104. The Administration also has concerns regarding the accountant-client privilege and wants to ensure that bona fide law enforcement needs are not undercut.
Pay-As-You-Go Scoring

H.R. 2676 is subject to the pay-as-you-go requirements of the Omnibus Budget Reconciliation Act of 1990. The Administration's pay-as-you-go estimates for this bill are under development, but very preliminary analysis suggests that the aggregate revenue losses and spending increases may substantially exceed the revenue offset in title V of the bill. The Balanced Budget Act of 1997 reduced the PAYGO balances to zero, and, consequently, any bill that would increase mandatory spending or result in a net revenue loss would contribute to a sequester of mandatory programs as called for in the Budget Enforcement Act. In the case of H.R. 2676, the bill may not contain provisions sufficient to offset the net deficit increases. As a result, if the bill were enacted, any deficit effects could contribute to a sequester of mandatory spending. The Administration supports this bill, but will work with the Congress to ensure that such an unintended sequester does not occur.