Comments on operation of Taxpayer Advocate's office: March 27, 2002.

On March 27, 2002, TEI President Robert L. Ashby sent the following letter to Steve H. Nickles, Chair of the Committee on Personnel and Organization of the IRS Oversight Board, on the organization and operation of the IRS Office of Taxpayer Advocate.

Tax Executives institute is pleased to respond to your February 28, 2002, request; for our views on the organization and operation of the IRS Office of the Taxpayer Advocate.

TEI's 5,200 members are accountants, attorneys, and other business professionals who work for the largest 2,800 companies in the United States, Canada, and Europe; they are responsible for conducting the tax affairs of their companies and ensuring their compliance with the tax laws. The companies that employ TEI's members have almost without exception been assigned to the IRS's Large and Mid-Size Business (LMSB) Division. The largest 1,600 taxpayers within LMSB are subject to continual audits as part of the IRS's Coordinated Industry Cases (CIC) program. Companies that are under continual audit do not routinely seek assistance from the Office of Taxpayer Advocate to resolve particular problems. Instead, they work through the LMSB Team Manager assigned to their case or a designated Service Center representative. In addition, the Taxpayer Advocate has not previously focused on or provided resources to business taxpayers, particularly larger ones. That is not to say, however, that large corporations could not make effective use of the Taxpayer Advocate's assistance. Further, TEI members and other representatives of the large business community could provide the Taxpayer Advocate with assistance in identifying areas of the law requiring attention.

Each year, the National Taxpayer Advocate submits a report to Congress on the most significant problems faced by taxpayers. In 2000, the Advocate recommended the repeal of the alternative minimum tax for corporate and individual taxpayers. In 2001, however, the recommendation was limited to the repeal of the individual AMT. National Taxpayer Advocate Nina Olson explained that the change was made because corporate interests "have better spokespersons" for their interests and her office was created to focus on individuals and smaller businesses. Taxpayer Advocate Olson Hopes Congress Passes Recommended Tax Code Reforms, BNA Daily Tax Report (No. 3) at (Jan. 4, 2002). Although TEI appreciates the special role the Taxpayer Advocate has in respect of smaller, often unrepresented taxpayers, we are disappointed that the office views its role as so limited.

The IRS Restructuring and Reform Act of 1998 established the Office of the Taxpayer Advocate as an independent entity within the IRS. Section 7803(c)(1) of the Internal Revenue Code provides that the functions of the office are to assist taxpayers in resolving problems with the IRS, identify areas in which taxpayers have problems dealing with the IRS, and propose administrative and legislative changes to mitigate those problems. The key for Taxpayer Advocate intervention and assistance to a taxpayer is that the taxpayer's problem has not been resolved through normal channels.

Although Congress primarily intended the Office of Taxpayer Advocate to focus on individual and small business taxpayers, its statutory authority was not limited solely to assisting those groups. Prior to the establishment of the current office, the IRS had a problem resolution program to assist taxpayers in dealing with the IRS. All taxpayers--large and small--benefitted from the use of this program. Although effective in handling cases that had become bogged down in the IRS's normal procedures, the program suffered from the perception that it lacked independence within the IRS. For this reason, Congress determined to establish a more independent function. Nothing in the statute or its legislative history suggests, however, that the new office is not to assist all taxpayers.

The Office of Taxpayer Advocate has a vital role to play in encouraging the simplification of the tax laws. It can voice a clarion call to Congress that change is needed. We urge the Board to encourage the office to use its resources to identify systemic solutions and resolve problems for all taxpayers.

If you have any questions, please do not hesitate to contact me, at 615.432.4621, or Fred F. Murray, TEI's General Counsel and Director of Tax Affairs, at 202.638.5601.