H.R. 2490: IRS appropriations for fiscal year 2000.

July 28, 1999

On July 28, 1999, Tax Executives Institute submitted the following comments to the House and Senate conferees regarding H.R. 2490, the IRS appropriations bill for fiscal year 2000. The Institute's comments took the form of a letter from TEl President Lester D. Ezrati of Hewlett-Packard Company.

On behalf of Tax Executives Institute, I am writing to urge the House and Senate Conferees to ensure that the Internal Revenue Service receives adequate funding in the pending appropriations bill. Regrettably, the House-- passed version of H.R. 2490 would short-sightedly deny the IRS critical funding to perform its mission. As the preeminent association of business tax executives, TEI members know how critical it is to invest in and plan for the future. Last year Congress took an important step in reforming and restructuring the Internal Revenue Service and insisting that the agency use business models to become more customer focused. Unless the House-imposed cuts are restored, the Nation may be unable to reap the ongoing benefits of IRS reform.

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 make the IRS run more like a business.

Last week, the House of Representatives voted to cut $240 million from the Treasury Department's 2000 budget, including $135 million in funding for the Internal Revenue Service. This decision, which was contrary to the recommendation of the Appropriations Subcommittee on Treasury, Postal Service, and General Government (although supported by the full Committee), passed by a single vote. To our mind's eye, that vote threatens to undermine what Congress worked so hard to achieve in enacting the Internal Revenue Service Restructuring and Reform Act of 1998. That landmark legislation signalled Congress's desire to recreate a tax authority that would better serve the American people by becoming more customer focused. If the leaders of the IRS 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.

In a letter dated July 15, 1999, IRS Commissioner Rossotti warned that "[w]hile I can appreciate the new budget constraints under which the [Appropriations] Committee must operate, I am gravely concerned that a cut of $135 million will seriously jeopardize the IRS's ability to implement its reform effort mandated by the Restructuring Act." Among other things, the decrease in funding could delay the implementation of important taxpayer rights initiatives, impair the creation of operating units to assist specialized groups of taxpayers, and reduce funding for electronic tax administration. While these cuts may not directly affect TEI's membership, the Institute shares the Commissioner's concern that they will harm tax administration.

In its report two years ago giving impetus to IRS reform, the National Commission on Restructuring the Internal Revenue Service stressed the need for stable funding of the agency, recommending that funding be maintained at the current level for at least three years. TEI endorsed that view. The funding level recommended by the House Subcommittee and approved by the full Senate will permit the IRS to fund all programs and activities at their current level. Congressman Portman, a co-chair of the restructuring commission, noted recently that it was time for Congress to put its money where its mouth is. TEI agrees. The $135 million should be fully restored.