Home Legislative Action Congressional Testimony Internal Revenue Service Budget for FY 2011

Internal Revenue Service Budget for FY 2011

3/25/2010

House Ways and Means Subcommittee on Oversight

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Chairman Lewis, Ranking Member Boustany, and distinguished members of the Subcommittee, I would like to thank you for allowing me to provide comments on the Administration’s FY 2011 budget request for the Internal Revenue Service (IRS). As President of the National Treasury Employees Union (NTEU), I have the honor of representing over 150,000 federal workers in 31 agencies, including the men and women at the IRS.

IRS FY 2011 Budget Request

Mr. Chairman, NTEU strongly supports the Administration’s FY 2011 budget request of $12.6 billion for the IRS, a 4 percent increase of $487 million over the FY 2010 level. We believe that the President’s request will allow the IRS to continue helping taxpayers meet their tax obligations while also improving enforcement of the tax law.

We are particularly pleased the Administration’s budget request would provide critical increases for Service enforcement and taxpayer service activities, and would allow the IRS to continue efforts to rebuild its workforce which is still down by almost 20,000 since 1995.

I would also note that in previous years, NTEU has supported the budget recommendations proposed by the IRS Oversight Board which have generally called for additional resources above that requested by the Administration. For FY 2011, the Oversight Board has recommended $13.495 billion in funding for the IRS. While we have not seen the specific details of the Board’s proposal, we would be inclined to support providing additional funding for the IRS above the Administration’s request and look forward to reviewing the Board’s recommendation.

Taxpayer Services

Mr. Chairman, helping taxpayers understand their tax reporting and payment obligations is the foundation of taxpayer compliance. Through a variety of channels, the IRS is able to provide year-round assistance to millions of taxpayers, including outreach and education programs, issuance of tax forms and publications, rulings and regulations, toll-free call centers, the IRS.gov web site, Taxpayer Assistance Centers (TACs), Volunteer Income Tax Assistance (VITA) sites, and Tax Counseling for the Elderly (TCE) sites. These efforts have enabled the IRS continue raising the standard of service to America’s taxpayers and assisted in efforts to improve voluntary compliance.

The IRS’ comprehensive approach to taxpayer service played a critical role in allowing it to deliver a successful 2009 filing season, despite dealing with a number of difficult challenges posed by the residual effects of the 2008 Economic Stimulus Payment program and implementation of the American Reinvestment and Recovery Act. During this time, IRS employees processed more than144 million individual returns and issued 111 million refunds, totaling $339.6 billion; answered almost 39 million calls from taxpayers requesting information on new credits available to them; and helped more than 6.2 million taxpayers at the 401 Taxpayer Assistance Centers located around the country. And while these numbers show that employees providing taxpayer services are helping taxpayers understand and meet their tax responsibilities, more can and should be done.

We were happy to see the Administration’s request of $2.3 billion for taxpayer services acknowledges the good service that IRS employees provided to taxpayers in FY 2009 while also recognizing that additional progress can be made. In particular, we strongly support the $20 million in additional funding to improve telephone level of service.

As you know, demand for telephone service remained extremely high in FY 2009 as taxpayers called to obtain information regarding economic stimulus payments and new Recovery Act credits. The significant increase in call demand stressed existing resources which negatively impacted the level of service. But despite the high call volume, IRS achieved a 70% level of service and maintained account and tax law accuracy rates of over 93%.

NTEU strongly believes providing quality services to taxpayers is an important part of any overall strategy to improve compliance and that the President’s request for taxpayer services will enable the IRS to deliver another successful filing season, improve the responsiveness and accuracy of taxpayer service, and support Service efforts to enhance taxpayer compliance.

Enforcement

Mr. Chairman, NTEU believes a strong enforcement program that respects taxpayer rights, and minimizes taxpayer burden, plays a critical role in IRS’ efforts to enhance voluntary compliance and reduce the tax gap.

That is why NTEU was happy to see the Administration’s budget request would provide a $293 million increase in funding for IRS tax enforcement above the FY 2010 level, including additional resources made available through a program integrity cap adjustment.

A large portion of this increase will be invested in strengthening current Service compliance programs designed to close the tax gap by combating offshore tax evasion, expanding enforcement efforts on noncompliance among corporate and high-income taxpayers, and addressing underreporting of income associated with international activities. These investments are expected to generate $1.9 billion in additional annual enforcement revenue, resulting in a return on investment (ROI) of more than 9 to 1, once new hires reach full potential in FY 2013. This estimate does not account for the deterrent effect of IRS enforcement programs, estimated to be at least three times larger than the direct revenue impact.

Mr. Chairman, NTEU strongly supports targeting additional resources to programs that would help close the tax gap. In addition to generating additional revenue for the federal government, reducing the tax gap will help strengthen public trust in the fairness of the tax system which will positively impact voluntary compliance with tax laws.

Section 1203

Mr. Chairman, while meaningful funding for the IRS is important to operations, NTEU also believes that in order to maximize efficiencies at the IRS, Congress must act to modify Section 1203 of the IRS Restructuring and Reform Act of 1988 (RRA 98). Commonly known as

the “Ten Deadly Sins,” Section 1203 outlines ten infractions for which IRS employees must be fired, including the untimely filing of federal income taxes even when a refund is due. No other federal or congressional employee is subject to similar mandatory termination.

Without question, Section 1203 has had a negative impact on the morale of the IRS workforce and is impeding the ability of the IRS to perform its mission. According to numerous GAO reports, IRS employees greatly fear the threat of being fired under Section 1203. This in turn has had a chilling effect on the ability of IRS employees to do their jobs. In particular, employees specifically attribute the decrease in recommending a seizure of taxpayer’s assets to Section 1203. Clearly, Section 1203 impedes IRS’ enforcement mission and is unfair to the IRS employees who must work under the constant threat of losing their jobs.

NTEU believes mandatory termination for Section 1203 violations is unduly harsh and should not be the only disciplinary action available. We advocate amending RRA 98 to allow for appropriate penalties other than mandatory termination for Section 1203 violations and to allow for independent review of determinations.

To be clear, NTEU does not condone any violation of law or rules of conduct by its members at the IRS or in any other government agency. Violations of some rules clearly warrant termination of employment. However, one group of federal employees should not be singled out and required to be fired for offenses that do not subject other executive, judicial, or legislative branch employees to the same penalty.

Mr. Chairman, the large majority of IRS employees work hard, follow the rules and pay their taxes on time. It is patently unfair to hold those who are charged with enforcing the tax laws to a higher standard than those who write them. NTEU asks for your support for changes to section 1203 of the IRS Reform and Restructuring Act, so that tax fairness applies to all Americans, even those who work at the IRS.

Security at the IRS

Mr. Chairman, in light of recent events, I would also like to reflect for a moment on the issue of safety and security of IRS employees. As you know, on Thursday, February 18, in what authorities believe was an intentional attack, a pilot crashed his small plane into a building housing almost 200 IRS employees in Austin, TX. The attack, in which one IRS employee perished and several others were seriously injured, serves as a grim reminder of the great risk that the men and women of the IRS face each and every day in service of this country. I know the subcommittee joins with NTEU in sending our condolences to the family of the fallen IRS employee and to all those affected by this senseless tragedy.

Mr. Chairman, as the Federal inventory of buildings has steadily increased over the last 30 years, the uniformity and implementation of security standards have varied greatly. Prior to 1995, minimum physical security standards did not exist for nonmilitary federally owned or leased facilities. But even with established minimum safety standards, security at federal facilities can vary greatly from agency to agency and even from building to building.

This is particularly true for agencies like the IRS, which must offer public access to provide customer service. The IRS is widely dispersed with approximately 755 facilities throughout the nation. These facilities can range from one-person offices to large tax return processing campuses with thousands of employees. There are also different tenant sharing arrangements at these facilities, from being housed as an IRS-only office to sharing building space with other Federal agencies and other private companies. In buildings where the IRS is not the lead agency or tenant (i.e., the largest organization in the building) the IRS must propose changes through a building security committee.

NTEU members have consistently voiced concern over the inconsistency of safety and security measures at IRS facilities across the county, in particular, at facilities like Taxpayer Assistance Centers (TACs) which must offer public access in order to provide customer service. In many instances, there is an absence of any type of security presence at these TACs, which has heightened fears among employees that they are particularly vulnerable to threats and attacks.

Unfortunately, IRS has been slow to recognize the importance and necessity of providing a security presence at all IRS facilities. In fact, just recently, in the face of strong opposition by NTEU and our members, the IRS was forced to abandon an initiative to “standardize” its use of contract guards and dogs at various locations across the U.S., which would have resulted in the elimination or reduction of guard service at 42 posts. While NTEU was successful in fighting this planned reduction of guard services, many IRS facilities remain woefully unprotected. According to IRS, of the roughly 755 IRS facilities located nationwide, just 275, or 36%, have some type of security detail. Thus, 480 IRS facilities, roughly 64%, are without any security presence whatsoever. This is clearly unacceptable.

Mr. Chairman, the absence of adequate security at IRS locations is just one of many security related concerns reported by NTEU members in recent years, which also include: IRS taxpayer walk-in centers without metal detectors, or operational, monitored security cameras; insufficient perimeter lighting; inoperable security equipment; parking areas without security camera coverage; security service spread thin by guards required to leave their posts and patrol loading docks during deliveries; security devices ordered but uninstalled due to inadequate funding; malfunctioning security cameras, security gates and magnetometers; IRS walk-in centers with only cipher locks on the front doors; open loading docks without a security presence; excessive waits for security personnel arrival after making an emergency call; security cameras discovered to not have film after a robbery; and inoperable fire alarms.

As you can see, IRS workers’ concerns about the heightened risk of threats and attacks at IRS facilities, in particular, at those which must offer public access in order to provide customer service, are not unfounded.

Mr. Chairman, I would like to state my appreciation to IRS Commissioner Shulman and Treasury Secretary Geithner for their efforts in the aftermath of the Austin IRS attack and I am hopeful that we can build on those efforts to improve worker safety at the IRS.

NTEU Recommendations

In an effort to help IRS minimize the threat of violence against IRS employees as they administer the Internal Revenue Code, NTEU proposes the following recommendations:

(1) IRS undertake a comprehensive review of safety and security measures at all IRS facilities;

(2) ensure IRS employees have access to any and all information on those individuals that could pose a threat; (3) grant law enforcement officer (LEO) status to IRS Revenue Officers.

Comprehensive Review of Safety and Security Measures at all IRS Facilities

In light of recent events and ongoing concerns by IRS employees about their safety and the security of IRS locations, NTEU believes that IRS should immediately undertake a comprehensive review of safety and security measures at all IRS facilities around the country. In particular, IRS should review the current established physical security standards and requirements for the protection of Service facilities and personnel. The review should consider whether or not each facility has, among other things; the proper risk assessment security level designation; sufficient entry control systems, including guard or other armed presence and magnetometers; sufficient perimeter security, exterior lighting, proper designation of restricted areas, and operable security equipment.

We also believe that to the greatest extent possible, IRS should solicit the participation by IRS employees themselves in the review as they may be able to offer a unique perspective on the problems and challenges associated with securing IRS facilities, its employees, as well as the taxpayers who frequent them.

Input from employees on the front lines can be particularly helpful as the security needs at IRS facilities can vary greatly, depending on their mission, size, etc.

As the Internal Revenue Manual notes, in order to ensure that a Post of Duty (POD) is properly protected, careful planning is necessary to ensure that appropriate protective measures are in-place and tailored to the facility’s specific mission, threat, and functional requirements. PODs may vary greatly in size and function, so each requires close examination for tailored security countermeasures. The function of the office, the type of records maintained, the equipment in the POD, the size, population, if visitors frequent the facility, etc., are all determining factors to consider when planning security.

Mr. Chairman, NTEU believes that it is important for IRS employees to feel safe and secure in the workplace as they carry out their duties and stands ready to work with the IRS to ensure the proper safeguards are in place to ensure the safety of IRS employees.

Ensure IRS Employees Have Access to Information

As you may know, the IRS Restructuring and Reform Act of 1998 (RRA 98) required the IRS to stop designating taxpayers as Illegal Tax Protesters (ITP) or any similar designation. This ITP designation was used previously by the IRS to identify individuals and businesses using methods that were not legally valid to protest the tax laws. The designation was also intended to alert employees to be cautious so they would not be drawn into confrontations with potentially

dangerous taxpayers. Congress decided to require IRS to drop the ITP designation over concerns that the label could bias IRS employees and result in unfair treatment of the taxpayer.

While the ITP designation was abolished, RRA 98 did provide IRS the authority to implement additional procedures, such as the maintenance of appropriate records, in connection with this provision so as to ensure IRS employees' safety.

NTEU believes it is critical that IRS ensure that any and all information relevant to employees' safety will always be available to them.

LEO Status for Revenue Officers

NTEU is very concerned about the level of threats and violence against IRS employees, and in particular, against Revenue Officers (ROs), who often must meet with taxpayers on a one-on-one basis in the course of conducting their investigations.

According to the IRS, between 2003 and 2007, RO’s reported more than 480 cases involving Potentially Dangerous Taxpayers (PDTs), a designation assigned to taxpayers who have demonstrated a capacity for violence against employees of the IRS, contractors or their families, and Caution Upon Contacts (CAUs), defined as those incidents that posed a less immediate and less serious threat.

This report comes at a time when the threat of violence against Federal employees is receiving increased attention and anti-government sentiment remains at an all-time high.

But despite these startling figures, ROs are not authorized to carry and or use firearms in performance of their official duties and are forced to request assignment of an armed escort to ensure their own safety. According to TIGTA, it expects the necessity for armed escorts to increase over time as the IRS places additional focus on collection and enforcement activity.

NTEU strongly believes that the high number of threats and assaults recently reported by TIGTA once again illustrates the clear need for RO’s to be granted LEO status. That is why NTEU strongly supports H.R. 673, the “Law Enforcement Officers Equity Act,” which would grant law enforcement retirement benefits to ROs at the IRS. These officers face dangerous situations as they enforce the United States Tax Code and collect delinquent taxes. Most people see these individuals as law enforcement officers, and many have reacted to their inquiries with threats, assaults, and in some cases gunfire. Yet, these men and women are being denied the rights and benefits of their colleagues who are considered to be law enforcement officers.

While some in the government have expressed concern that legislation providing coverage for these officers would have a negative impact on personnel costs for government agencies, this argument is fundamentally flawed. Granting LEO status to ROs will actually decrease personnel costs by increasing morale and officer retention, thus decreasing the costs associated with training new officers.

NTEU asks members on the subcommittee to support this critical legislation that will enhance the safety and security of Revenue Officers as they carry out their tax enforcement mission.

Conclusion

Mr. Chairman, thank you for the opportunity to provide NTEU’s thoughts on the Administration’s FY 2011 budget request for the IRS. We believe that by investing in demonstrably effective enforcement and taxpayer service programs, the Administration’s request will ensure the IRS continues to meet its mission of providing America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.