Comments on IRS funding.

May 22, 2000

On May 22, 2000, Tax Executives Institute submitted the following letter from TEI President Charles W. Shewbridge, III to Congressman Amo Houghton, Chairman of the Oversight Subcommittee of the House Committee on Ways and Means, concerning the 2001FY budget for the Internal Revenue Service.

On behalf of Tax Executives Institute, I urge the Oversight Subcommittee of the House Ways and Means Committee to ensure that the Internal Revenue Service receives adequate funding for its fiscal year 2001 operations.

As the preeminent association of business tax executives, TEI members know how critical it is to invest in and plan for the future. Two years ago, Congress took the decisive step of mandating an extensive reorganization of the IRS. This change does not come without cost. It is now time to appropriate the funds necessary to fulfill the promises of the IRS Restructuring and Reform Act. It is also important to move forward with the IRS's technological modernization.

TEI's 5,000 members are accountants, attorneys, and other business professionals who work for the largest 2,800 companies in the United States and Canada; they are responsible for conducting the tax affairs of their companies and ensuring their compliance with the tax laws. TEI is dedicated to the development and effective implementation of sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike. The Institute is committed to maintaining a system that works -- one that builds upon the principle of voluntary compliance and is consistent with sound tax policy, one that taxpayers can comply with, and one in which the IRS can effectively perform its audit function without unduly burdening taxpayers.

Equally important, the companies represented by TEI's membership know that to be successful, they must plan ahead and ensure that adequate resources are devoted to employee training, customer service, and other core functions. As a group, they applauded Congress's decision to manage the IRS more like a business.

If the leaders of the IRS -- including Larry Langdon, a former TEI president, who now serves as Commissioner of the IRS's new Large and Mid-Size Business Division -- are to rebuild the agency's credibility and effectiveness, the agency must be assured that the programs needed to implement its mission will be fully and consistently funded. For fiscal year 2001, the IRS has requested funding of $8.841 billion, $769 million more than the final FY 2000 budget. In his testimony before the Oversight Subcommittee last month, IRS Commissioner Rossotti explained that the increased funding is necessary to "deliver on the [Revenue Reconciliation Act of 1998] mandates, manage organizational modernization, and invest in critically needed information technology." The additional funds will also be used to resume funding the IRS's Information Technology Investment Account (ITIA), which was not done in FY2000.

The General Accounting Office recently issued a report recommending that Congress deny the IRS the increased funding and staffing for its customer service initiatives, as well as delay any new deposits to the ITIA account. TEI respectfully suggests that such action would be short sighted, and we say this even though we are ourselves concerned about many aspects of the Administration's corporate tax shelter initiatives. The reorganization is an ongoing project that needs sufficient time and money to work. The IRS is at a critical juncture in these efforts. Much has been written about the decreased audit coverage and the decline in collections. If the IRS is to succeed in reinventing itself as a modern, customer-focused agency, it must have adequate funding for its service initiatives. In addition, it is crucial that the IRS be permitted to update and modernize its technology.

The funding level requested by the Clinton Administration would permit the IRS to improve its service to taxpayers, continue its technology modernization effort, and, as the Commissioner stated, "produce visible, tangible changes in service, compliance, and productivity that America's taxpayers expect and deserve." TEI recommends that the request be granted.

If you have any questions, please do not hesitate to contact me, at [phone], or Michael J. Murphy, TEI's Executive Director, at [phone].