Providing the IRS with adequate funding.

July 21, 2000

On July 21, 2000, TEI sent the following letter to the Honorable Dennis Hastert, Speaker of the U.S. House of Representatives. Copies of TEI's letter, which was signed by the Institute's President, Charles W. Shewbridge, III of the Atlanta Chapter, were sent to members of the Republican and Democratic Leadership.

Tax Executives Institute urges the House of Representatives to restore full funding to the Internal Revenue Service's fiscal year 2001 appropriations. The House Appropriations Subcommittee on Treasury, Postal Service, and General Government recently voted that the IRS be funded at $466 million less than requested by the Administration. TEI submits that the additional funds are sorely needed to continue the IRS's modernization by investing in information systems and technology.

As the preeminent association of business tax executives, Tax Executives Institute knows how critical it is to invest in and plan for the future. Two years ago, Congress took the decisive step of mandating an extensive restructuring 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.

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. 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 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 an increase in funding to $8.966 billion. In his testimony earlier this year before the Oversight Subcommittee of the House Ways and Means Committee, 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 House Appropriations Subcommittee recently recommended that the IRS 2001 budget be decreased by 5.2 percent, which would require a reduction of more than 2,000 full-time employees. The Subcommittee cut the IRS's request for funding for its information systems by $95.4 million and denied the full $71.7 million request for information technology investment. TEI respectfully suggests that such action is short sighted and counterproductive. The reorganization is an ongoing project that needs sufficient time and money to work. The IRS is at a critical juncture in its efforts. If the IRS is to succeed in reinventing itself as a modern, customer-focused agency, it must have adequate funding for its service initiatives. To succeed, it must be permitted to update and modernize its technology. Jacob Lew, Director of the Office of Management and the Budget, recently noted that the funds are necessary "to carry through on the bipartisan commitment to improve the ability of the IRS to serve its customers and administer the tax code in an fair and efficient manner." TEI wholeheartedly agrees.

The funding level requested by the 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].