House tax writers release bipartisan IRS reform bill

Tax Hot Topics newsletter Two tax writers from the House Ways and Means Committee have released the Taxpayer First Act, which seeks to reform the IRS through information technology modernization, improved service, and an independent Appeals Division, among other things.

Ways and Means Committee Oversight Subcommittee Chair Lynn Jenkins, R-Kan., and subcommittee Ranking Member John Lewis, D-Ga., said in a summary of the discussion draft that the bill is the product of three years of hearings and roundtables. While the proposed legislation stands little chance of passing in this Congress, it will likely serve as a basis for future reform legislation.

The bill seeks to create an independent Office of Appeals that would generally allow all taxpayers to appeal decisions made by the Examination Division. In particular, the legislation would also require the IRS to explain in detail why a taxpayer’s case may not be eligible for referral to Appeals if the decision is because of an interest in sound tax administration. That portion of the legislation appears to be a specific response to Section 3.03 of Rev. Proc. 2016-22, which gives the IRS the ability to prevent a docketed case, or an issue that has not been designated for litigation, from being referred to Appeals if the referral would not be in the interest of sound tax administration.

In addition to the changes to Appeals, the legislation contains provisions that seek to benefit low-income taxpayers, such as the codification of the Free File Program, the elimination of an application fee for an offer-in-compromise, the requirement to provide more information to taxpayers about low-income tax clinics and the closure of Taxpayer Assistance Centers.

The legislation also makes various changes to how the IRS may seize certain assets of taxpayers, as well as the procedures for issuing third-party summonses, establishing an income threshold for referral to private debt collection programs, and clarifies the equitable relief provision from joint liability with respect to innocent spouses.

The proposal also seeks to ensure better safeguarding of taxpayer information to prevent identity theft and fraud, and to provide better assistance to victims of stolen identity refund fraud.

With respect to the actual reorganization of the IRS, the legislation would change the title of “Commissioner of Internal Revenue” to “Administrator of the Internal Revenue Service,” which, according to the summary of the bill, would emphasize the IRS’s role in administering the tax code. The legislation would also strengthen the role of the National Taxpayer Advocate, while eliminating the IRS Oversight Board, and also mandates that the IRS come up with a plan for its own reorganization, subject to the approval of Congress.

The legislation also contains various proposals to modernize the IRS, such as:

  • Better management of IRS information technology
  • The development of online taxpayer accounts
  • Creation of an internet platform for Form 1099 filings
  • Expanded electronic filing of returns
  • Payment of tax by debit or credit cards

There is not a strong likelihood that this legislation will be passed in 2018. There are no major legislative vehicles remaining for Congress to pass until the end of September, when the government funding is set to expire. Even then, Congress will be focusing on the November elections, and so it is unlikely that significant legislation will pass alongside a government funding bill. Nonetheless, the proposal is a bipartisan effort—no small feat in today’s political climate, and so future legislation will more than likely be based off this proposal.

Dustin Stamper
Washington National Tax Office
T +1 202 861 4144

Shamik Trivedi
Senior Manager
Washington National Tax Office
T +1 202 521 1511

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