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Grassley Declares Tax Debt Collection Bill 'Dead On Arrival' In Senate

by Mike Godfrey, Tax-News.com, Washington

12 October 2007


Sen. Chuck Grassley has assured opponents of a House of Representatives bill to terminate the IRS's outsourcing of tax debt collection to private companies, which also contains tax provisions punishing Americans who renounce their citizenship, that the legislation will be "dead on arrival" when it reaches the Senate.

On Wednesday, the House passed the Tax Collection Responsibility Act by a vote of 232 to 173. The bill's principal provisions would repeal the Internal Revenue Service’s authority to contract out tax collection to private collection agencies.

Opponents of the outsourcing program contend that it violates taxpayer privacy rights, and is more expensive to administer than keeping debt collection in-house at the IRS.

Rep. Sander Levin (D-MI), a co-sponsor of the bill commented: “The outsourcing of tax collection has led to widespread harassment of taxpayers and now the IRS admits that allowing private companies collect these tax debts is far more expensive than having IRS employees do the work. We need to restore accountability and professionalism to the basic government task of collecting taxes.”

Rep. Jim McCrery of Louisiana, the top Republican on the Ways and Means Committee, argued that private debt collection agencies were better equipped to pursue the relatively small individual income tax debts. He stated that of the 90,000 cases referred to the private agencies, nearly 7,300 cases have resulted in full payment, and more than 2,600 taxpayers have entered into installment agreements.

The bill now moves on to the Senate, but as far as Grassley is concerned:

"It attempts to stop a program that’s brand new, yet already working. It’s helping to close the tax gap, which key members of the other party say is a priority."

He continued: "Using private companies to contact delinquent taxpayers and urge them to pay frees up IRS employees for complex investigative cases that require the specialized knowledge of people who know the tax code inside and out."

Grassley was also highly critical of little-known provisions in the bill that would increase penalties for failure to provide 1099 information returns, and would repeal the suspension of interest and penalties on certain tax deficiencies, for example, due to negligence, where the IRS has notified a taxpayer after 36 months. The bill also proposes to revise rules on expatriation by imposing an immediate tax on individuals that renounce their US citizenship, and would mark-to-market gains on the property of expatriating individuals.

“Opponents raise the fear of rogue private operators treading all over taxpayers’ rights. But the program has multiple layers of scrutiny to make sure taxpayers’ rights are fully protected. Ironically, one of the means of paying for the loss of revenue to the Treasury in the House bill would tread on taxpayer rights’ left and right," Grassley stated.

"The House bill would allow the IRS to impose penalties and interest indefinitely on a taxpayer even if the person has not received formal notice from the agency. If that’s not anti-taxpayer, I don’t know what is," he concluded.


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