U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

61–935 PDF 2010

H.R. 4735, A BILL TO AMEND TITLE 5, UNITED

STATES CODE, TO PROVIDE THAT PERSONS

HAVING SERIOUSLY DELINQUENT TAX DEBTS

SHALL BE INELIGIBLE FOR FEDERAL EMPLOYMENT

HEARING

BEFORE THE

SUBCOMMITTEE ON FEDERAL WORKFORCE,

POSTAL SERVICE, AND THE DISTRICT

OF COLUMBIA

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

SECOND SESSION

ON

H.R. 4735

TO AMEND TITLE 5, UNITED STATES CODE, TO PROVIDE THAT PERSONS HAVING SERIOUSLY DELINQUENT TAX DEBTS SHALL BE INELIGIBLE FOR FEDERAL EMPLOYMENT

MARCH 17, 2010

Serial No. 111–86

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

EDOLPHUS TOWNS, New York, Chairman

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

MARCY KAPTUR, Ohio

ELEANOR HOLMES NORTON, District of

Columbia

PATRICK J. KENNEDY, Rhode Island

DANNY K. DAVIS, Illinois

CHRIS VAN HOLLEN, Maryland

HENRY CUELLAR, Texas

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

PETER WELCH, Vermont

BILL FOSTER, Illinois

JACKIE SPEIER, California

STEVE DRIEHAUS, Ohio

JUDY CHU, California

DARRELL E. ISSA, California

DAN BURTON, Indiana

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

BRIAN P. BILBRAY, California

JIM JORDAN, Ohio

JEFF FLAKE, Arizona

JEFF FORTENBERRY, Nebraska

JASON CHAFFETZ, Utah

AARON SCHOCK, Illinois

BLAINE LUETKEMEYER, Missouri

ANH ‘‘JOSPEH’’ CAO, Louisiana

RON STROMAN, Staff Director

MICHAEL MCCARTHY, Deputy Staff Director

CARLA HULTBERG, Chief Clerk

LARRY BRADY, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on March 17, 2010 ............................................................................ 1

Text of H.R. 4735 ..................................................................................................... 6

Statement of:

Kelley, Colleen, national president, National Treasury Employees Union;

J. Ward Morrow, assistant general counsel for legislation, American

Federation of Government Employees, AFL–CIO; Richard Oppedisano,

national secretary, Federal Managers Association; and Christopher

Rizek, general counsel, Caplin & Drysdale, Chartered ............................. 113

Kelley, Colleen ........................................................................................... 113

Morrow, J. Ward ........................................................................................ 121

Oppedisano, Richard ................................................................................. 130

Rizek, Christopher ............................................................................................ 139

Tucker, Beth, Wage and Investment Deputy Commissioner for Support,

Internal Revenue Service ............................................................................. 13

Letters, statements, etc., submitted for the record by:

Chaffetz, Hon. Jason, a Representative in Congress from the State of

Utah, employee tax compliance analysis .................................................... 102

Kelley, Colleen, national president, National Treasury Employees Union,

prepared statement of ................................................................................... 115

Lynch, Hon. Stephen F., a Representative in Congress from the State

of Massachusetts:

National Taxpayer Advocate 2009 Annual Report ........................................ 21

Prepared statement of ............................................................................... 4

Morrow, J. Ward, assistant general counsel for legislation, American

Federation of Government Employees, AFL–CIO, prepared statement

of ..................................................................................................................... 123

Oppedisano, Richard, national secretary, Federal Managers Association,

prepared statement of ................................................................................... 132

Rizek, Christopher, general counsel, Caplin & Drysdale, Chartered, prepared statement of ........................................................................................ 141

Tucker, Beth, Wage and Investment Deputy Commissioner for Support,

Internal Revenue Service, prepared statement of ...................................... 15

(1)

H.R. 4735, A BILL TO AMEND TITLE 5, UNITED

STATES CODE, TO PROVIDE THAT PERSONS

HAVING SERIOUSLY DELINQUENT TAX

DEBTS SHALL BE INELIGIBLE FOR FEDERAL EMPLOYMENT

WEDNESDAY, MARCH 17, 2010

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL

SERVICE, AND THE DISTRICT OF COLUMBIA, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 2:08 p.m. in room

2154, Rayburn House Office Building, Hon. Stephen F. Lynch

(chairman of the subcommittee) presiding.

Present: Representatives Lynch, Norton, Cummings, Connolly,

Chaffetz, and Issa.

Mr. LYNCH. Good afternoon. The Subcommitee on the Federal

Work Force, Postal Service, and the District Columbia hearing will

now come to order. I want to welcome our ranking member, Mr.

Chaffetz, and members of the subcommittee, all of our hearing witnesses, and all of those in attendance. The purpose of today’s hearing is to examine H.R. 4735, a bill to amend Title 5 of the United

States Code to provide that persons having seriously delinquent tax

debt shall be ineligible for Federal employment.

The Chair, the ranking member, and the subcommittee members

will each have 5 minutes to make opening statements, and all

Members will have 3 days to submit statements for the record.

Mr. LYNCH. Again, thank you all for being here. The subcommittee convenes today to examine and discuss H.R. 4735, which was

introduced by my friend, the subcommittee’s ranking member, Representative Jason Chaffetz, on March 3, 2010.

In short, H.R. 4735 prohibits individuals who have a lien placed

against their property by the IRS from being hired for Federal civilian service, and also requires any Federal employee subject to an

IRS lien to be immediately terminated from employment.

While the equitable and robust enforcement of our tax laws is

commendable, there are serious weaknesses in H.R. 4735 which

call its objective and its efficacy into question. Under current executive branch regulations on standards of ethical conduct for employees, the Office of Government Ethics requires that Federal

workers, ‘‘Satisfy in good faith their obligation as citizens, including all just financial obligations, especially those such as Federal,

state, or local taxes that are imposed by law.’’

2

In short, this means that a condition of employment there exists

an expectation and a requirement that Federal employees demonstrate the highest degree of integrity in tax matters by both filing as well as paying their tax obligations. In furtherance of this

policy, there are currently enhanced statutory provisions to allow

the IRS to garnish wages of Federal employees at rates of

recoupment that are in excess of those required of non-government

workers.

While the U.S. Tax Code may be complex, the weaknesses of

H.R. 4735 are not. Simply stated, H.R. 4735 defines the offending

status as, ‘‘a seriously delinquent tax debt,’’ as the existence of a

lien against that employee’s property. Pursuant to H.R. 4735, the

existence of an IRS lien amounts to a legal fact requiring termination or prohibition of hiring, and against which no rights of due

process exist to challenge the validity or the amount of that lien

before an impartial third party.

Of course, it may argued that the Federal employee may challenge the validity and the amount of the lien from her place in the

unemployment line after her termination, if she has sufficient resources to do so. However, the unemployed Federal worker is put

at a marked disadvantage and has far less opportunity to challenge

the IRS decision that is afforded to the individual taxpayers generally.

Moreover, if it is indeed the objective of this legislation to recoup

taxes by Federal employees, one may reasonably ask would it not

be easier and more profitable to attach and garnish the wages of

an employee who works for the Federal Government than to terminate him or her.

Last, while H.R. 4735 exempts military personnel who owe large

amounts of delinquencies, it ignores the fact that there are thousands of State Department, Treasury Department, Department of

Agriculture, Drug Enforcement Administration, FBI, CIA, and Department of Justice employees who are also serving in hardship assignments who could be subject to termination under this bill. Just

as with our military families, those civilian Federal assignments

have put extreme financial pressure on these workers and their

families.

While I understand and in some ways agree with the gentleman’s interest in promoting the importance of tax compliance, I

simply find myself unable to support the approach he is suggesting,

as outlined in H.R. 4735. In fact, the measure if enacted as written

might actually diminish the likelihood that the IRS will recoup any

tax debt by leaving the delinquent taxpayer unemployed and therefore unable to generate any income to satisfy the debt through an

installment program or a Federal levy.

In closing, it is my hope that these issues and questions concerning the IRS’s collection procedures and potential costs and impact

of H.R. 4735 will be elaborated on further by today’s witnesses. To

that end, I thank each of you for joining us today, and I look forward to your testimony.

I will now recognize our ranking member, the sponsor of H.R.

4735, the gentleman from Utah, Mr. Chaffetz, for 5 minutes.

Mr. CHAFFETZ. Top of the morning to you, Chairman, and thank

you for the hearing in such a timely manner. I do truly appreciate

3

it. I would like to ask unanimous consent to enter three documents

into the record. One is the so-called FERTI report, the Federal Employee Retiree Delinquency Initiative, as well as the TIGTA, Treasury Inspector General Tax Administration, document, as well as

President Obama’s remarks regarding paying of taxes for contractors that was made on January 20th of this year.

Mr. LYNCH. Hearing no objection, those records are entered into

the record.

[The prepared statement of Hon. Stephen F. Lynch and the text

of H.R. 4735 follow:]

4

5

6

7

8

9

Mr. CHAFFETZ. Thank you. I would also like to note for the

record that Mr. Christopher Rizek of Caplin & Drysdale, is one of

our witnesses today. Today is the first time that I have met Mr.

Rizek, but it should be noted that my campaign has used Caplin

& Drysdale for some minor campaign issues. I have had no interaction, nor did I have any interaction on the selection of this witness, but I do think it is proper to note that for the record.

Mr. LYNCH. We will not hold it against him.

Mr. CHAFFETZ. Thank you. At the heart of this matter is an issue

of fairness. And I happen to concur 100 percent with President

Obama, and I am going to read a few comments that he made on

January 20th on the signing of a memorandum blocking tax delinquent applicants from obtaining government contracts. From President Obama, ‘‘All across this country, there are people who meet

their obligations each and every day. You do your jobs. You support

your families. You pay your taxes you owe because it is a fundamental responsibility of citizenship. And yet somehow it has become standard practice in Washington to give contracts to companies that don’t pay their taxes.’’

Further, he went on to say, ‘‘The status quo then is inefficient

and it is wasteful. But the larger and more fundamental point is

that it is wrong. It is simply wrong for companies to take taxpayer

dollars and not be taxpayers themselves. So we need to insist on

the same sense of responsibility in Washington that so many of you

strive to uphold in your own lives, in your own families, in your

own business.’’

That principle is true for contractors, and I think that same principle should be true for Federal employees. The language that has

been presented in this document in much was lifted, if you will, or

patterned after H.R. 572, which I have asked to be joined on as a

co-sponsor. I think it is a good piece of legislation. I am proud to

be a Republican joining on as a co-sponsor of this Democratic initiative. I think it is right. I support it. And I think we should hope

and expect that it would pass.

My simple point that I am trying to make is that the same principle for contractors should be true for Federal employees. Now the

overwhelming majority of Federal employees do the right thing.

They pay their taxes. They work hard. They contribute to the good

of the United States of America. But we have a few bad apples.

And as lawmakers, we have a duty and responsibility to hold them

to a high standard. Many would argue, including me, we should

hold them to a little bit higher standard. If you are going to have

the privilege of working for the United States of America, I think

you have a duty and obligation to pay your taxes.

Now if somebody is trying to do the right thing, the intention is

not to just simply lob off their head and ruin their lives. There are

two fundamental and distinct outs, if you will, in this bill, that I

do take issue with what has been said previously and characterizations of this bill I think are inaccurate. There are exceptions to

when you would be terminated.

No. 1, a debt that is being paid in a timely manner pursuant to

an agreement. So if you are trying to dig out from under a rock,

you are trying to make good, if you are trying to actually do the

right thing, and you are on a payment plan, of course it would not

10

be in the best interest of the United States of America or for that

person individually for them to be fired. So if you are doing the

right thing and you are trying to pay your obligation and you have

a payment plan in place, there is no reason to terminate that employment.

The second part is a debt with respect to which a collection due

process hearing is requested or pending—there is some language in

between there—but if you have a request for a hearing, or if you

have a hearing pending, again under this law, under this bill, there

would be no reason and no way for your employment to be terminated. I think that is fair.

I am obviously very open to suggestions. But, Mr. Chairman, at

the core of what I am trying to convey here, is that it is a principle

that the President has articulated I agree with. Most people are

not going to be affected by this. If you pay your taxes, there will

not be a problem. But if you are a Federal employee, and you are

not paying your taxes, and you are not on a plan to do so, then I

think you should be fired.

Thank you, Mr. Chairman.

Mr. LYNCH. I thank the gentleman, and the Chair recognizes

from the gentle lady from the District of Columbia. Ms. Eleanor

Holmes Norton, for 5 minutes.

Ms. NORTON. Thank you, Mr. Chairman. I think we have more

to be thankful to you today that you called this hearing, given the

markup out of which this hearing developed. I want to say Happy

St. Patrick’s Day to all. I claim admission, not necessarily by heritage, but I have a son born on St. Patrick’s Day.

When we agree on basic principles, that ought to be the first

thing we say. And I believe that the overriding principle at the

markup that all agreed upon was that if you were getting paid out

of a pot of the taxpayers, you ought to pay in to your taxes. Nobody

likes to pay taxes, but there is something very one-sided about depending on the taxpayers of the taxpayers of the United States and

being unwilling to do your share.

With that understanding, we quickly found ourselves plunged

into factors about which there was no information. To be sure, who

could disagree that depending on the circumstances—and by the

way, there was very little information on what kind of circumstances should obtain, but depending on the circumstances, everybody who works for the Federal Government gets paid out of

that pot and should have paid the taxes before dipping into that

pot for your own wages.

But it was Chairman Lynch who had done so much homework

that he saved us from the law of unintended consequences. We

were put to the test of whether we should vote for a bill where a

hearing had been proved necessary by the abundance of questions

coming from members of the committee. I was particularly concerned because we were dealing with two rarified of sections of

Federal law. One is the unendingly complex and specialized civil

service law that is administered by OPM. The other is an even

more specialized set of law and regulations, and that is the tax

code itself.

So anybody who wants to jump off the cliff without a hearing on

what is going to happen to somebody, whether he keeps his job or

11

not, without knowing the consequences in both those sets of law is,

it seems to me, immediately engaged in a project that could result

in unfairness that he never intended. The least we can do when

there are questions raised that were as abundant and as meritous

as the questions that obtained on that day just perhaps 2 weeks

ago is to do what the chairman—who was perhaps chiefly instrumental in laying on the table some of what many of us did not

know.

Let us settle those matters. This is not something that will bury

the country if we have a hearing first. Here we will call and put

our side to have a hearing in our own subcommittee. What could

be more to our advantage than that? And I am very pleased that

Mr. Chaffetz, who raised the issue for contractors, those who raised

the issue for Federal employees are now able so quickly after those

questions came to the fore to have a hearing which I believe will

satisfy all concerned.

Thank you, Mr. Chairman, again, particularly for your interventions at the time of the markup.

Mr. LYNCH. I thank the gentle lady. The Chair now recognizes

the ranking member for the full committee, Mr. Issa, for 5 minutes.

Mr. ISSA. Thank you, Mr. Chairman, and thank you for holding

this important hearing. I might note that this hearing today is on

H.R. 4735. Since it was not noticed that way, I would like to suggest that we hold a similar hearing on H.R. 572. As the chairman

may know, H.R. 572, the bill that prompted this, never had a hearing.

One of the challenges I think that the chairman and myself as

ranking member faced in the markup was that we had not vetted

many of the issues that were brought up related, particularly by

the majority, related to the Federal employees. The amazing thing,

of course, is every time somebody on either side of the aisle says

‘‘Federal worker,’’ we immediately realize that what is good for the

goose is good for the gander.

A Federal worker and a Federal contractor have many similarities. Since I served on the House Select Intelligence Committee, I

was very exposed to the fact that we have a huge amount of what

are contract status employees in the clandestine world, but they

are really a company of one. And under the H.R. 572, they would

find themselves, if you will, if you were a CIA contractor of one,

you would find yourself fired over, without protection, under H.R.

572—you would find yourself fired without protection on exactly

what the gentle lady from the District of Columbia and others have

said we want to have as protections not currently in this bill.

So, Mr. Chairman, I hope today as we go through this hearing,

that all of us will have both sides of our brain on, the one that says

‘‘contractor,’’ and the one that says ‘‘person,’’ because ultimately a

great many of our contractors are either individuals or very small

groups who enjoy all the same problems and burdens that Federal

employees have. Additionally, as it was noted in the markup, Federal workers most often run into tax problems because they have

small businesses or their family has small businesses, or something

outside of their direct Federal employment.

I believe that if we on a bipartisan basis work together here at

the subcommittee, and then at the full committee, we can find a

12

harmonized bill, one that provides appropriately near or absolute

protections for the contractor, thinking in terms often of a contractor of one, and for the private person. The due process that we ask

for a Federal worker to have is very appropriate, and making sure

that we never have a situation in which a person finds themselves

willing to catch up over time on their taxes, on a voluntary or an

agreed basis, but at the same time wanting the opportunity to dispute taxes they believe they do not owe, and to have all of the normal due process, while still enjoying a paycheck.

So I would join with the gentle lady from the District of Columbia and say, when we leave this, we have to leave understanding

that a large company or a small company that has a dispute with

the IRS should not find themselves out of a contract and thus unable to afford their own defense. Well, in fact, if they are given the

opportunity to go through the process, they may well be vindicated.

Certainly for a private individual who is a Federal employee, the

same is true, and probably more obvious.

So as we go through the hearing today, which I appreciate us

having, hopefully we are looking in terms of harmonization of two

sets of Federal workers, the individual Federal worker, and the

Federal worker under contract. And although they are hugely different in many ways, they are from a standpoint of not paying

their taxes ultimately the same. They can only pay their taxes if

they have income. We only want to make sure that they are in the

process of leading to paying their fair taxes. And as long as they

are, I would assume that the chairman and myself are in total

agreement we would want them to continue being vendors or employees of the Federal Government, as long as in fact they are

making a good faith effort to either pay their taxes or to dispute

them, as all of us have a right to do.

I thank the gentleman and yield back.

Mr. LYNCH. I thank the gentleman. It is the custom of this subcommittee to swear all witnesses who are to offer testimony. So,

Ms. Tucker, could I ask you to please rise and raise your right

hand.

[Witness sworn.]

Mr. LYNCH. The record will indicate that the witness has answered in the affirmative. I would like to just offer a brief introduction of Ms. Tucker. Ms. Beth Tucker is currently the Wage and Investment Deputy Commissioner for Support for the Internal Revenue Service. In this position, Ms. Tucker has oversight over all

wage and investment support organizations, including electronic

tax administration and refundable credit strategy and finance,

business modernization, communications liaison, and equal employment opportunity and diversity. Welcome, Ms. Tucker. I would like

to offer you the chance to submit an opening statement for 5 minutes.

Could you please pull that mic very close to you? It does not

work very well. Let us just see if it is on. I am not sure.

Ms. TUCKER. I think that is better.

Mr. LYNCH. There you go. Thank you.

13

STATEMENT OF BETH TUCKER, WAGE AND INVESTMENT DEPUTY COMMISSIONER FOR SUPPORT, INTERNAL REVENUE

SERVICE

Ms. TUCKER. Chairman Lynch, Ranking Member Chaffetz, and

members of the subcommittee, I am pleased to appear before you

this afternoon to discuss the IRS collection procedures as they relate to Federal employees. Today’s hearing was called to examine

H.R. 4735 that would make persons with seriously delinquent tax

debt ineligible for Federal employment. However, I am not here to

comment on that legislation, but rather to discuss our tax collection

process.

Mr. Chairman, the collection process is the same for all individuals. There are no special rules for Federal employees. If the taxpayer does not respond to the first or subsequent IRS notices of

late payment, the account becomes delinquent, and the IRS will try

to resolve the issue with the taxpayer over the telephone or in person. There are a number of payment options for those who cannot

pay their taxes on time, such as extension of time to pay, installment agreements, or offer in compromise.

If a delinquent taxpayer does not cooperate, than the IRS may

take and force collection action. Enforcement action can include

serving a notice of levy to attach taxpayer’s income or assets, such

as bank accounts. A levy is a legal seizure of the taxpayer’s property to satisfy a tax debt, and in some cases can include the seizure

and sale of real or personal property.

The IRS may also file a notice of Federal tax lien to secure the

government’s interest in the property the taxpayer owns, while establishing priority as a creditor. However, as discussed in greater

detail in my written testimony, IRS seeks to provide the taxpayer

an opportunity to pay the tax debt voluntarily, making arrangements to pay or supply information to show that the payment

would create a hardship. Enforced collection actions are taken only

after repeated attempts to contact the taxpayer. The taxpayer can

also request a hearing with our Office of Appeals, and has the right

to appeal certain other collection actions.

The Federal Employee Retiree Delinquency Initiative [FERTI],

promotes Federal tax compliance among current and retired Federal employees. Each year the IRS sends letters to the human capital offices of Federal civilian agencies and departments participating in the data matching program to provide current information

on previous year’s delinquency rates and request the agency’s support in promoting tax compliance within their work force.

The letters also raise awareness about the importance of timely

and accurate returns, reporting all income, having the proper

amount withheld, providing all required information and good recordkeeping. The IRS is also providing Federal agencies the tools

they need to communicate with their work forces about the importance of tax compliance.

We have drafted generic materials for all agencies, and at the request of HUD just this year, tailored them to those employees

struggling to pay their taxes. We have also provided links to IRS

communication products, YouTube videos, public service announcements that HUD can use to communicate with their employees on

14

the Internet and through their own internal communication

venues.

The IRS has also made these outreach and education materials

accessible to a broader audience, ensuring them with 90 other Federal agencies. We will begin a more comprehensive and aggressive

outreach campaign this fall based on the lessons we have learned

this year.

Mr. Chairman, thank you for the opportunity to testify today. We

believe that IRS rules and procedures, along with the current tax

law and regulations, allow for Federal employees to rectify their

tax obligations. I would now be happy to answer any questions you

might have.

[The prepared statement of Ms. Tucker follows:]

15

16

17

18

19

20

Mr. LYNCH. Thank you. Just for the record, I would like to get

unanimous consent to submit into the record the National Taxpayer Advocate 2009 Annual Report. It reads ‘‘2009 Annual Report,’’ but it is actually submitted December 2009, so it is a fairly

recent report.

[The information referred to follows:]

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

Mr. LYNCH. Ms. Tucker, according to the National Taxpayer Advocate, they list serious problems with the IRS in terms of the taxpayer’s position. And it is not meant to be critical of you, it is just

red flags that the National Taxpayer Advocate raises. The most serious problem that they cite is the sheer complexity, as the gentleman from California remarked, the sheer complexity of the tax

code, and the number of disputes and difficulties that taxpayers

have in just complying.

The second most serious issue that they raise here in the National Taxpayer Advocate is the fact of automatic liens, automatic

liens against taxpayers without personally dealing with the individual taxpayer. Are they off-base here, or are those valid, serious

concerns?

Ms. TUCKER. Chairman Lynch, I guess first let me address the

observation about complexity of the tax code. I think for any of us

that have looked at all of those different volumes, obviously it could

use may be a little streamlining. I think you have also heard our

Commissioner talk about the fact that he supports simplification.

I do think, as a former enforcement employee myself, we do see

situations where the complexity of the tax code does have an obvious effect on people’s ability to voluntarily comply. So that is an

area we would seek your support as well, since as you know, IRS

administers the tax code that Congress passes to us.

The other thing that I would say—you know, I laid out our collection procedures in my written testimony. And we believe that

the process we go through, from the establishment the tax delinquency through the first, second, third, fourth notice, where we are

communicating with the taxpayer, and then also giving that taxpayer the opportunity to work with us on a levy if there is a source

to levy. You know, we believe that we are following due process

and communicating clearly prior to the filing of that lien.

This is an area that we have ongoing discussion with the Taxpayer Advocate about as well. But to the question of——

Mr. LYNCH. Is it a problem? They seem to be saying it is your

second most serious problem from a taxpayer standpoint, that the

automatic liens——

Ms. TUCKER. But I think the——

Mr. LYNCH. The automated lien process is——

Ms. TUCKER. The point I would make is we have to go through

the due process prior to the filing of the lien.

Mr. LYNCH. Now when you say ‘‘due process,’’ that is you reviewing your own decisions, right?

Ms. TUCKER. That is the collection process where at the time a

delinquency or balance due is established, then we go through

a——

Mr. LYNCH. Established by the IRS.

Ms. TUCKER. Correct.

Mr. LYNCH. But this is all—you know, I am a taxpayer. You tell

me I owe X amount of money. I appeal back to you, though. It is

not to a third party. You are reviewing your own decision. I still

say you are wrong.

Ms. TUCKER. Right.

Mr. LYNCH. You say you are right. That is the appeal process.

Ms. TUCKER. Yes.

89

Mr. LYNCH. So it is not like there is a third party coming in here

and saying, OK, here is the IRS over here, I want to be impartial.

You are actually your own decisions when these notices keep going

out. There is no neutral third party here that is reviewing this decision. This is not a judicial review. This is you reviewing your own

situation.

Ms. TUCKER. Correct.

Mr. LYNCH. I think that is what they are getting at from the

Taxpayer Advocate’s point of you that the second most serious

problem here is the automatic lien issuance. And it gives me great

pause when I now see a situation where an employee, a Federal

employee, is going to get a lien, and then also that is going to be

it for that person.

Ms. TUCKER. But just to clarify, I mean, the taxpayer, whether

a Federal employee or a private citizen, does have the ability to appeal the lien.

Mr. LYNCH. To you.

Ms. TUCKER. To the Internal Revenue Service——

Mr. LYNCH. Right. That is what I am getting at. The first time

that they get a third party to look at this is tax court. And under

Mr. Chaffetz’s scenario, that Federal employee would be fighting it

from the unemployment line. That is my problem with this. I do

not think that is a fair opportunity when you are fighting, you

know, a tax lien from the unemployment line. And I think there

is a distinct difference between the contractor situation—and we

have contractors of all sizes. And the problem with trying to address that situation is difficult as well. But, you know, for the most

part, these large contractors and medium-sized contractors, if they

do not get a government contract, they are still a contractor with

1,000 other opportunities.

The comparison here with one Federal employee who has one job

and gets fired from their one job, and now is in the unemployment

line, I think that person is in a much more vulnerable position.

But let me ask you, I have been told—we met with the IRS 2

weeks ago when this issue came up, and we were told that in some

cases garnishment works very well with the employees, and there

are a lot of people under the FERTI that are actually counted as

delinquent who are actually in garnishment. Their wages are being

garnished by the IRS.

I am also told that in conjunction with that, oftentimes the IRS

will file a lien just in case that person comes into money, they sell

their home, and it protects the position of the taxpayer. So you get

garnishment coming out every week, but in the event that person

comes into money or sells their residence and now has liquid assets

that you can attach, the lien is in place so that you can grab that

money when it becomes available.

But under this scenario, if that person was in garnishment, and

then had the lien put on to protect the taxpayer’s position, that

person would be terminated. And I am just wondering if you think

that will increase our ability to recover back taxes from these employees or decrease it?

Ms. TUCKER. To talk about our current process, you are absolutely correct in your information, that for Federal employees that

are in the FERTI program now, that the ability to put them on a

90

track to compliance exists in our current system by the levy program. So when we have the information that says there is a Federal employee that is delinquent—let me stress again we are talking about under a 3 percent of the Federal work force—then because we have a good levy source, then we attach to that. However,

if that wage levy will not full pay the account within the collection

statute, you are absolutely correct. I mean, the Federal law states

that we would then file a lien to protect the government’s interest

should some funds come into play.

Mr. LYNCH. And we would have to fire the employee. So all right.

Thank you. I yield 5 minutes to the gentleman from Utah, Mr.

Chaffetz.

Mr. CHAFFETZ. I will try to frame my question here by also noting that there are two places within this piece of legislation that

is very specific to the idea and the notion that if they are on a payment plan in a timely manner, and No. 2, as another opportunity,

if they have a debt with respect to which the collection due process

hearing is requested or pending, that employee would not be fired.

Mr. LYNCH. Would the gentleman yield?

Mr. CHAFFETZ. Sure.

Mr. LYNCH. Garnishment is not an agreement under the Tax

Code you do not cover a garnishment in your bill.

Mr. CHAFFETZ. I use the exact same language from Bill 572 in

H.R. 4735. I do recognize and understand——

Mr. LYNCH. We would not garnish a contractor.

Mr. CHAFFETZ. The language that is being used is, I believe,

exact—there are obviously differences in other parts of the bill.

And if there are technical changes that need to happen in accordance with that, I am totally open to it. But to repeatedly state, as

if it were a fact, that the person would automatically be terminated

under this bill I think is mischaracterization of what I intended to

do and of what is literally written in what is a page and a half bill.

So my question, which I know I need to get to at some point, has

to do with the time that transpires through this process. Some

characterizations at the markup were such that the IRS just wakes

up one morning, and the employee think he is good and fine, and

shows up 1 day, and the next thing you know not only does he have

an IRS problem, but he is also fired from his job.

I recognize the variance in how wide the cases and situations

are. But can you give us a general sense of how much time transpires between the first time this taxpayer knows that they have

some sort of issue with the IRS and the final determination as to

whether or not that taxpayer is actually delinquent? And I know

that is a complicated answer, and we have a very short amount of

time. But I would appreciate you taking a stab at it.

Ms. TUCKER. Now let me see if I can lay this out. So once the

delinquency is established, the balance due then we begin the notice process that I referenced earlier. So IRS begins a series of four

contacts with the taxpayer, where we are mailing them the notice,

saying here is your balance due, please contact us; we want to

work this out; here are your options.

From that point in time, from that first notice, a time elapses,

generally 5 weeks between the notices, where the notices progress

to say, please contact us; here is your balance due; we need talk

91

to you; please work it out with us, all the way through to the

fourth notice. The fourth notice is then the point in time where we

have exhausted all of the processes and we begin to look for the

levy source to begin to do the garnishment.

I think it is important to note that a large percentage of taxpayers, whether it is the civilian taxpayer or even a government

employee, a large number of folks during that four-notice process

voluntarily come in before we get to a levy or a lien situation and

say, let me work an installment agreement, which that is exactly

how we want the process to work.

Mr. CHAFFETZ. So that range of time is——

Ms. TUCKER. Roughly, I would say 41⁄2 to 5 months of contact

with the taxpayer saying, here is your balance due; please try to

get this worked out with this before we go to the levy action.

Mr. CHAFFETZ. OK. And at what point can the IRS file a notice

of Federal tax lien?

Ms. TUCKER. You know, at the point in time—and I will give you

the simplest scenario. When we get to the end of the four notices,

then we look at the balance due. In the case of the Federal work

force, because we do have a levy source, we immediately go to the

15 percent levy. If that 15 percent levy will pay off the balance due

before the collection statute expires, we let that full pay.

However, if that wage levy is not going to full pay before the collection statute, we have a couple of options. We can pull that 15

percent levy back and go for a full wage levy. We can begin to levy

other bank accounts. If that is not going to satisfy the obligation,

then at that point we could also file a Federal tax lien to protect

the government’s interest.

Mr. CHAFFETZ. Do you know off the top of your head how long

a period that levy can be in place?

Ms. TUCKER. Well, you know, I think a lot of it is dependent on

the amount of the deficiency.

Mr. CHAFFETZ. Right.

Ms. TUCKER. And if we can work that out before the collection

statute expires. But if we can see readily that it will not, then we

would file the lien.

Mr. CHAFFETZ. OK. Thank you, Mr. Chairman.

Mr. LYNCH. Thank you. The Chair now recognizes the gentle lady

from the District of Columbia for 5 minutes.

Ms. NORTON. Thank you very much, Mr. Chairman. I just want

to note for the record, especially in light of the Ranking Member

Chaffetz’s notion about sauce for the goose and sauce for the gander, about which I would not differ, that Mr. Chaffetz offered the

bill. There were not particular questions raised about the contractor side. It was only when we got to the employee side that a flurry

of questions began to be raised.

I would note also for the record, Mr. Chairman, that a hearing

has been held and the Congress passed a bill that would enforce

the very matter that Mr. Chaffetz has before us. It is called the

Contractor Tax Enforcement Act. It would prohibit delinquent Federal tax debtors from being eligible for contract with Federal agencies.

The problem is we passed in the House, but as is the case usually, they did not get to the Senate, which is why we are here now,

92

and I think in agreement that we should have both sides of the

coin involved.

How many employees have been fired at the IRS for delinquent

tax?

Ms. TUCKER. As you may know, IRS has a stringent employee

tax compliance program that we have had in place for many years.

We take our tax obligation as tax administrators very seriously.

Since the inception of RA–98, which placed an even higher standard on IRS employees, we have had 448 removals.

Ms. NORTON. Now what percentage of the work force would that

amount to?

Ms. TUCKER. Well, at any given time, we have roughly on board

100,000 employees. And so if you look at the 448 over the life, it

is a very——

Ms. NORTON. Tiny percent. And I take it that this—now we are

talking about mandatory termination, are we not, even for minor

infractions of the code? And are not we talking about that as the

only disciplinary action that is available?

Ms. TUCKER. Actually, under the Employee Tax Compliance Program, our overall broader program that was in place even before

Section 1203, which is the harsher interpretation, we do have processes where if there is an identification that maybe an employee

has something questionable on their return, it is researched by our

own employee tax compliance unit. If it is not—and a large number

in fact, 75 percent, of those are resolved just in communications

with——

Ms. NORTON. What percentage was that again?

Ms. TUCKER. 75 percent are resolved with no finding between the

employee and our employee tax compliance unit.

Ms. NORTON. Now this policy was adopted, I take it, because of

the specialized nature of the IRS in collecting taxes and the embarrassment to the agency and to the government if people collect

taxes that have not paid their own taxes.

Ms. TUCKER. I think that is a fair statement, that our employee

tax compliance program, the original longstanding program even in

advance of 1203, was intended because we do have a higher standard because of the nature of our work.

Ms. NORTON. Understood. On page 1 of your prepared testimony,

you speak of a number of payment options for taxpayers who cannot pay their taxes on time. And you speak of them—many of us

are familiar with them—extension of time to pay, installment

agreement, delaying collection, or offer of compromise. Are these

options available to IRS employees?

Ms. TUCKER. IRS employees obviously have the option for installment agreements. The other thing that—you know, to walk you on

through the 1203 provision, which is the provision we talked about

that resulted in the 488 removals, the way 1203 reads, if we have

employees with the willful failure to file or a willful understatement of Federal tax, that is what triggers the removal. So the payment issue——

Ms. NORTON. Oh, willful is a very important word there.

Ms. TUCKER. Right.

Ms. NORTON. Indeed, it is the operative word.

93

Ms. TUCKER. But, no. Our employees do have the option of working out installment——

Ms. NORTON. So, for example, the average American can file on

time, let us say, by or before April 15th, file for an extension for

the rest of it and pay what he can pay at that time. An IRS employee could do the very same thing.

Ms. TUCKER. Yeah.

Ms. NORTON. Finally, do you think that—you have testified that

IRS, of course, has a very special place, and the policy applies, I

take it, only to the IRS for that reason. Should this policy of mandatory firing apply to every agency, even agencies that have nothing to do with tax collection?

Ms. TUCKER. No. As I have stated earlier, you know, as IRS administers of the Tax Code, we are really not here to comment on

the merits of the legislation. But I would say, obviously, we believe

that every American should file and pay their fair share.

Ms. NORTON. But you are unwilling to say——

Ms. TUCKER. But we all say——

Ms. NORTON [continuing]. That the mandatory firing notion—you

are unwilling to say that should be applied governmentwide without other options available?

Ms. TUCKER. What we want to say is we believe our current collection process allows for us to deal with all taxpayers, including

Federal employees, to reach resolution of——

Ms. NORTON. You are not here arguing that the present policy

in place for the IRS should put in place for every agency, yes or

no.

Ms. TUCKER. No.

Ms. NORTON. Thank you.

Mr. LYNCH. Thank you. The Chair now recognizes the gentleman

from California for 5 minutes.

Mr. ISSA. Thank you, Mr. Chairman. Ms. Tucker, is the IRS arbitrary and capricious?

Ms. TUCKER. I would think not.

Mr. ISSA. Heavy-handed?

Ms. TUCKER. I would hope note.

Mr. ISSA. Do you deal with corporations, LLCs, partnerships, or

individuals in a substantially different way as to your collection

policy?

Ms. TUCKER. Our collection policy applies across the spectrum,

but obviously, you know, as we are dealing with individual taxpayers that maybe do not have full understanding of the process,

yeah, we do spend additional talking with them, trying to explain

the options as opposed maybe to a large corporate taxpayer that is

heavily represented.

Mr. ISSA. So you provide more overhead, more counsel, more help

to the small and individual because they need it, where a larger

corporation tends to be much more of a business-to-business type

of——

Ms. TUCKER. But at the same time, I mean, if anyone needs help

understanding the collection process, obviously that is what we are

here for.

Mr. ISSA. So the contractor who has a concession at Camp Pendleton who is making hummus and baba ghanoush and Middle

94

Eastern sandwiches for my Marines, her and her husband, they are

unincorporated, they are a little shop that has this long line of Marines wanting to get good Middle Eastern food that—they do not

miss the Middle East, but they miss the food. She is going to be

treated the same as the Federal worker that works on the base, the

civilian employee, right?

Ms. TUCKER. The same process for notices, communication before

we would move to a levy.

Mr. ISSA. OK. Well, I would like to get under something—and I

do not want to cross over your comfort zone from how you want to

explain policy, but we have two pieces of legislation here that we

are really dealing with, 572 and 4735. One is dealing with the individual, the other is aimed at contractors. Each of them presumes

that we need to fire that entity if they do not comply. It sounds

to me—and correct me if I missed something in your earlier explanation—you have all the tools you need to at the end of the day

collect from somebody just easily if they have assets if they are an

individual or a contractor. Is that correct?

Ms. TUCKER. Let me just, if I could, clarify one point.

Mr. ISSA. Sure, of course.

Ms. TUCKER. You know, the levy process—we go through the four

notices, and then we place a levy. It is obviously—we look at all

of the available sources, but the wage levy in the case of the Federal employees, I mean, we know where the employees work. But

in your situation that you described for someone maybe that is a

contractor, we would do the same thing. We would still go in search

of levy sources.

Mr. ISSA. Right. But uniquely, the IRS has the right to pierce the

corporate veil to anyone, whether they are an owner of a business

or simply somebody who preferred other creditors over the IRS. In

other words, someone that writes a payroll check and signs it and

knowingly does not have the taxes paid, you can go right around

the corporation and you can go after them personally. Is not that

true?

Ms. TUCKER. That is correct.

Mr. ISSA. That is sort of unique to the—and since you came from

the enforcement side. So I am going to ask you not a conclusion,

but a bit of a rhetorical question. We have two pieces of legislation.

They both presume that only by firing a contractor or only by firing

an employee can we get their attention to pay their bill. Is not it

sort of a reasonable conclusion that both of these probably should

be scraped in favor of you have the ability to do it, you are doing

your job. The awareness of this large number of Federal employees—and I am not trying to undercut my colleague here.

But we have these billions of dollars that have not been paid by

Federal employees. But they are basically all in the process of

being collected by you, and ultimately you will eventually collect

from them. And then if we have a contractor who has a tax dispute

and loses, or does not take their payroll deductions and turn it in,

whatever it is, you also have all the tools you need.

So I do not want to reach a complete conclusion because it would

not be fair to you, but are not both of these bills sort of preempting

the eventuality of your collecting them, meaning if we keep the

contractor on, you are going to collect the money from them. If we

95

keep the employee on, you are going to collect the money from

them, and you are going to give them the due process since you

told me you are not arbitrary and capricious—you are going to give

them the due process that Congress has decided that you have.

You know, the chairman probably was not on the committee, and

neither was I, that gave you all those authorities. But the amazing

thing is we gave you all these authorities, including the right to

pierce the corporate veil, to lien against individuals and so on. Is

there sort of a question here that both of these bills seek to do the

same thing against two different groups over whom you have the

same reasonable authority and you treat them the same?

Ms. TUCKER. You know, I think the short answer to your question is do we apply the same collection processes to all groups. Yes.

I think where the distinction comes in, you know, the availability

of access to funds could be different because if we have a wage levy

source, that is much easier to attach to.

Mr. ISSA. OK. Well, of course, a government contract is a pretty

good revenue source, too. One final exit question, if I could, Mr.

Chairman, in your opinion—and I realize this may not be the opinion of the IRS—if one or both of these pieces of legislation in some

format—you understand the spirit of the legislation even if the details are not worked out—if one or both of these were passed,

would it substantially help you in the process of collecting revenue

or making revenue out of taxes in arrears?

Ms. TUCKER. You know, if I understand both provisions, our collection process does not necessarily change because we would still

continue to go through our first, second, third, fourth notice.

Mr. ISSA. Well, actually, the question was more if we fire the contractor and/or the employee, does either of those actions help you

in the collection of taxes.

Ms. TUCKER. You know, the point would be even if someone was

removed, we would continue to look at all available levy sources

and attach bank accounts or whatever income source there might

be.

Mr. ISSA. So nothing is better by firing them, and then we could

debate whether or not if they lose their salary or they lose their

contract it would be worse. OK. My time is more than expired. I

appreciate your indulgence, and I appreciate yours, Mr. Chairman.

I yield back.

Mr. LYNCH. I am absolutely happy to do that. Mr. Connolly from

Virginia is recognized for 5 minutes.

Mr. CONNOLLY. Thank you, Mr. Chairman, and welcome, Ms.

Tucker. And I am going to plead with you to speak into that mic.

I cannot hear you.

Ms. TUCKER. OK. Oh, I am sorry.

Mr. CONNOLLY. Is not there a fundamental difference between a

situation where a contractor is seeking to get a contract, and we

say, well, as a precondition of that, you cannot be seriously delinquent in your taxes versus a Federal employee who may be found

to be delinquent in his or her taxes. A, there is a difference in

terms of their status. And B, is not there a difference in the remedies available to the Federal Government in both cases?

Ms. TUCKER. From the remedy standpoint, I am not understanding the question.

96

Mr. CONNOLLY. Ms. Tucker, I cannot hear a word you are saying.

Ms. TUCKER. I am sorry. It may be my southern accent perhaps.

Mr. CONNOLLY. No. I promise you that.

Ms. TUCKER. Can you hear me now?

Mr. CONNOLLY. Yes. It is speaking into the mic.

Ms. TUCKER. All right. No. My question was I am not sure what

distinction you are asking me to comment on. So I am sorry. Maybe

I did not understand the question.

Mr. CONNOLLY. Well, if I am a contractor seeking money from

the Federal Government, and I say, well, in order to qualify for

that, you cannot be delinquent, seriously delinquent, in your taxes,

that is a precondition for getting something.

Ms. TUCKER. Correct.

Mr. CONNOLLY. If I am already a Federal employee, and for

whatever reason I find myself in a situation where I am behind in

paying my taxes, the Federal Government has a whole different set

of remedies for dealing with me than a prospective Federal contractor. Is that not true?

Ms. TUCKER. That is correct.

Mr. CONNOLLY. Right. Now tell me about this program FERTI.

FERTI only applies to Federal employees.

Ms. TUCKER. Correct.

Mr. CONNOLLY. So it is a unique remedy unique to the Federal

work force.

Ms. TUCKER. Correct.

Mr. CONNOLLY. Is it available to corporations of Federal contractors?

Ms. TUCKER. Well, the FERTI program is unique in that is how

we track Federal employee delinquencies.

Mr. CONNOLLY. Right. But what I am getting at, Ms. Tucker—

excuse me. If I am a Federal contractor, not a Federal employee,

does FERTI track me?

Ms. TUCKER. No.

Mr. CONNOLLY. No. So is there already in place something that

clearly distinguishes a Federal employee from a Federal contractor.

Ms. TUCKER. Correct.

Mr. CONNOLLY. Because I thought I heard my good friend from

California just now trying to conflate contractors with employees.

We ought not to impose those on either one of those categories because it is self-defeating. And I guess I am suggesting, based on

your testimony, they are quite different categories. They are different—we have different statuses here, and we have different remedies available to us. And in the case of the legislation proposed

by my friend from Utah, it seems to me it is a remedy in search

of a problem because we already have in place for Federal employees lots of tools for knowing who you are and knowing how much

you owe, if you owe anything. Is that not correct?

Ms. TUCKER. That is correct.

Mr. CONNOLLY. Is it also not true that when FERTI was deployed, most recently we found in 2008 a total of $3 billion in delinquent taxes in some status of delinquency owed to the Federal Government from the Federal work force.

Ms. TUCKER. That is correct.

97

Mr. CONNOLLY. And that almost half of that, 1.3 billion, was in

fact owed by military retirees.

Ms. TUCKER. That is correct.

Mr. CONNOLLY. Well, would we fire military retirees? Let me ask

you a question. What is the IRS, or what your understanding is,

of ‘‘seriously delinquent.’’

Ms. TUCKER. You know, the ‘‘seriously delinquent,’’ is not a designation that we typically use. But for understanding of this hearing, we understood that meant——

Mr. CONNOLLY. Would you repeat? I am sorry. I cannot hear you.

Ms. TUCKER. The term ‘‘seriously delinquent’’ is not part of our

nomenclature at IRS, but——

Mr. CONNOLLY. So here we have some legislation without a definition, so you would have to come up with a definition if we made

this law.

Ms. TUCKER. Well, I think the discussion points that we looked

at was your definition of ‘‘seriously delinquent’’ would be the actual

filing of a lien. But obviously, many of our accounts move into the

collection cycle. We could in theory file a lien when there is an active levy in place just because there was the potential to further

protect the government interest.

Mr. CONNOLLY. My final question, because my time is going to

be up, and I am going to abide by the 5-minute rule—would you

say that it might be self-defeating, with the best of intentions, if

we fire people who owe us taxes? Their ability to pay what they

owe would be severely impaired.

Ms. TUCKER. You know, we see this a lot, even in the public sector in general, that absolutely if someone is not employed, it does

not impact their ability to pay their taxes.

Mr. CONNOLLY. Thank you. My time is up.

Mr. LYNCH. I thank the gentleman. The Chair now recognizes

the gentleman from Maryland, Mr. Cummings, for 5 minutes.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. And, Ms.

Tucker, thank you very much for being with us. I wanted to just

go back to my colleague’s question with regard to seriously delinquent. I want to just try to figure out some things here. You said

that is a term that you all do not use?

Ms. TUCKER. No. The term ‘‘seriously delinquent,’’ we understood

that to be the definition of the filing of the lien for purposes of the

legislation.

Mr. CUMMINGS. I am sure we have a number of people who may

file, not just Federal employees, but others will file on April 15th,

and in the situation that we find ourselves today, and in my district, and all over the country, you have people who maybe in January, there were two breadwinners, and now there is only one. So

they file on April 15th. They owe money, they owe money. They

had not anticipated that they would be losing half the income, and

so they do not have the money to pay.

Some of them may be losing their homes at the same time. And

so what would a person like that do? I mean, if you were advising

them, what would you—maybe you would tell them to file on time.

Ms. TUCKER. Correct.

Mr. CUMMINGS. So we will start with that. Now what else would

you tell them to do?

98

Ms. TUCKER. You know, this is actually a topic that is fairly common now. And in fact, I believe it was just last week our Commissioner issued a press release talking about all of the assistance options we have for folks that are unemployed or dealing with financial difficulties right now. And within that information, I mean, we

have created a whole host of new outreach materials trying to tell

people, you know, there are assistance options available.

So once folks file, and their situation has changed, as you explained, we ask that they contact us and let us work with them to

see, do they have the ability to pay, do they have appropriate income levels for us to work out some kind of installment agreement.

Do they have a hardship that makes that account currently noncollectible, where we all agree that this is not something that you

have the ability to pay right now, and we will actually suspend the

collection action.

The other tool we have is an offer in compromise, where the taxpayer may say, look, this is what I have. This is the availability

of my assets, and can we settle or compromise that tax debt for a

lesser amount? So to your point, absolutely, we try to work with

folks based on changes in their financial situation to find a resolution to that collection issue.

Mr. CUMMINGS. And when you find—you know, and I talk about

people in this situation because, you know, some people think that

there are folks who just do not want to pay the taxes. But I guess

you are beginning to find—and I guess the IRS is beginning to prepare for people who may want to pay, but just do not know what

to do because they just do not have the resources. And these are

people who may have had—and correct me if I am wrong—all the

way up to now a consistent pattern of paying their taxes and paying them on time and doing—just good American citizens.

Ms. TUCKER. Absolutely. I think the heartening thing is the majority of taxpayers, they do file and pay on time. That is one of the

foundations of a voluntary tax system, that the majority of folks do

come in and file and pay. The other thing that we see—and actually, in some ways, the Federal work force is a microcosm of the

entire population. We do see Federal employees, much like folks in

the public sector, that have life events, whether it is the spouse losing a job, an illness, that does result in folks running into some difficulties, saying I need a little help. I need some time to pay, or

my situation is such I am not going to be able to pay for the foreseeable future. And we do everything we can to work with folks to

try and resolve that.

Mr. CUMMINGS. Now let us say a person is trying to do that.

They have cooperated. They have requested some leeway to pay.

What kind of status do you—what do you call that? I mean, you

do not call it ‘‘seriously delinquent.’’ But what might you call that?

Ms. TUCKER. So that—and by the way, that is a great question.

I was trying to figure out how to work that into my testimony. You

know, if someone is under a good payment agreement, in our mind,

they are compliant. I mean, they have acknowledged their tax liability, and they are saying here is what I am doing to get current

with that. So we look at that as someone in good standing. We

have worked an agreement with them. They are putting it off, or

they are in good standing if we say at this point in time you have

99

a hardship, you do not have ability to pay, but then at the point

in time we see income being generated again, in other words, they

are receiving a W2, then we will go back and say, hey, your situation has changed, let us talk.

Mr. CUMMINGS. The document that you talked about just a

minute ago, the one that you said where you are laying out all of

the options and everything, how is that circulated? And the reason

why I am asking this series of questions is because I just want us

to be cognizant of the fact that we got some people going through

some difficulties. There may be people that may not know about

the things you just said. But then they fall into this seriously delinquent situation, and then the next thing you know, they have lost

their job. Then they cannot pay.

Ms. TUCKER. Right.

Mr. CUMMINGS. But I want to make sure that we are—and I am

very glad, by the way, to hear the IRS doing that. That is a good

thing. But I was just wondering—so you think that is a good option, the things that you just laid out there?

Ms. TUCKER. Absolutely. The other thing that we are very focused on is using a lot of non-traditional ways to get that information out. So in addition to the regular ways, the posting on our Web

site, we are reaching out to community coalitions. We are reaching

out to the State unemployment. Say folks might actually be coming

into file unemployment. We are reaching out to other Federal assistance links where people might be coming in, you know, to get

other types of assistance.

But obviously, the additional help in getting the word out, we

would appreciate.

Mr. CUMMINGS. And actually, I see that my time is up. But it

would be also helpful—and I know you are probably already doing

this—if you reach out to Members of Congress so we can have that

on our Web sites to help our constituents.

Ms. TUCKER. Absolutely. If we have not done that, we will do

that immediately.

Mr. CUMMINGS. Thank you very much.

Mr. LYNCH. Thanks, gentleman. I yield myself 5 minutes. I realize that this is a technicality, but lawmaking is all technicality. I

have gone over the bill, and the sections that provide an exception

to termination, a debt that is being paid in a timely manner under

6159 of 7122 of the code, or a debt with respect to collections under

section 6330 or 6015, none of that, none of those sections, covers

garnishment. So as written, this would require the termination of

a person who was having their wages garnished because none of

these exceptions covers a person who is having their wages garnished. That is just one point. It is a point of law, but it is a point

nonetheless.

Second, I know you have said previously that we treat everybody

the same—I thought Mr. Connolly raised a great point, that we

track Federal employees. And I know you have your hands full

doing that. I also want to point out that H.R. 572, which deals with

contractors, has a waiver from debarment that can be considered.

There is no such waiver of termination in H.R. 4735.

Let me turn to the practicality issue, though. Right now, you do

this for IRS employees, right?

100

Ms. TUCKER. Yes, sir.

Mr. LYNCH. How many folks do you have over there the IRS?

Ms. TUCKER. Right now, because it is filing season, we are running, I think, roughly around 90,000 employees.

Mr. LYNCH. 90,000?

Ms. TUCKER. Yes, sir.

Mr. LYNCH. OK. H.R. 4735, my friend Mr. Chaffetz’s bill, would

require us to do the same thing you are doing, tracking employees,

for every Federal employee, every Federal retiree, every Postal employee, and every applicant for a Federal position. Now forget applicants for Federal positions for a minute. But I did the math

here. Five million people. Five million people, plus all the people

who apply for a position with the Federal Government, you would

need to vet them. Let us forget the privacy issues here for a second.

You would need to track the tax status of every single person.

What does it cost you now to do 100,000? We are going to expand

this by 70 times. Multiply by 70 what you are doing now for the

IRS under this bill.

Ms. TUCKER. You know, of course, there are a lot of unknowns

about, as you mentioned, the disclosure issues.

Mr. LYNCH. Could you speak into that mic a little bit? Thank

you.

Ms. TUCKER. Sorry. You know, our current process for our employees is a direct data match. How we see this a little bit differently, it would almost be like the tax checks that we do for some

other Federal agencies right now, where they have to secure consent from the taxpayer. And so, for example, some of the government loans that are given, they will ask for a consent to be filed

by the individual that is supplying. We do the check, have they

filed, have they paid, and we send it back to that agency.

So that was the closet program that we currently administer.

Mr. LYNCH. Yeah.

Ms. TUCKER. That program—our guesstimate is that it is roughly $2.25 per transaction. So we had looked at the fact that there is

roughly 9 million current Federal employees and retirees. And so

if you assume the $2.25 per duration of a transcript—and this is

very rough, very ballpark—you know, we are talking about $22

million if it was administered with the consent-based program, only

giving a transcript back to the agency.

Mr. LYNCH. So you think you would be able to investigate the tax

status of every single Federal employee and every single applicant

for a Federal position?

Ms. TUCKER. No. What we would be able to do under the existing

system is much like we do for other Federal——

Mr. LYNCH. Can you do this with existing staff?

Ms. TUCKER. Oh, absolutely not.

Mr. LYNCH. Well, $22 million is not a big number. I am just asking you physically. You are not scaring me with $22 million to investigate 9 million Federal employees. And I am asking you, if that

is all it is, that is a pretty reasonable request, putting all those

other issues aside. What would you need to do, the manpower——

Ms. TUCKER. I do not think we know, Chairman Lynch. The figure that I cited is based on the fee that we charge right for generating a transcript, which is actually—you know, we are then countVerDate 11-MAY-2000 14:30 Dec 10, 2010 Jkt 000000 PO 00000 Frm 00104 Fmt 6633 Sfmt 6633 U:\DOCS\61935.TXT KATIE PsN: KATIE
101

ing on the agency that we give that transcript back to to be able

to interpret what it means, which I think that would be a concern

as well.

Mr. LYNCH. OK. My time has expired. I am going to let that go.

The Chair recognizes the gentleman from Utah, Mr. Chaffetz, for

5 minutes.

Mr. CHAFFETZ. Thank you, Mr. Chairman. No doubt we have a

multibillion dollar problem, and we are just trying to make it better.

My understanding is that wage garnishment is a levy, not a lien.

Would that be accurate? Wage garnishment. If we were garnishing

an employee’s wages, that is a levy. It is not necessarily a lien

against them. Is that accurate?

Ms. TUCKER. A garnishment is part of the levy program.

Mr. CHAFFETZ. So it is actually not a lien.

Mr. LYNCH. She did not say that.

Mr. CHAFFETZ. Well, the language is pretty clear about a lien as

opposed to a levy, but—and I do think we owe an obligation to—

and again, there are different people in different categories. Certainly I think it is prudent—and I am in, I think, total agreement

with the President’s philosophy and principle here that we ought

to be looking closely at applicants. And again, I would go back to

the quote, and given the essence of the time, I would just encourage people to look at the President’s comments of January 20th.

And I am somewhat mystified by the so-called logic that says, well,

of course they have more ability to pay if the government is paying

them more money. The same is true with the Federal employee.

The same would be true with the contractor. Of course if we gave

the contractor a multimillion contract or whatever it might be, they

are probably going to have more ability to pay.

But I do not think that logic holds water. It does not for contractors, and I do not think it does for Federal employees. When you

have millions upon millions of people who are doing the honest

thing, the right thing, I think we have a higher obligation to those

people.

I understand the concerns and the questions about seriously delinquent. I guess my—and I think that is a valid thing that we

should continue to flush out, which should be also for H.R. 4735,

as well as H.R. 572, because everybody wants to get this right and

not have to do a fix. And I really do appreciate the hearing because

I think we are actually making a lot of progress here, and I do appreciate it.

I would ask unanimous consent to enter into the record this employee tax compliance analysis that was done.

[The information referred to follows:]

102

103

104

105

106

Mr. CHAFFETZ. It basically says that before—sorry, let me get

this right here. The Internal Revenue Service Restructuring and

Reform Act of 1998—you know, there are multiple factors. And I

am not trying to oversimplify this. But I do want to highlight the

fact that between 1993 and 2007, in the IRS employees, before they

had this new program, there was a high of 19,163 people that were

having tax compliance issues at the IRS, and reached a low of

8,298 in 2005.

I recognize that the stats within this chart are—you do not necessarily have them right in front of you, and they are somewhat

complicated. But I would like to enter it into the record because I

think what you will see is the Restructuring and Reform Act of

1998—that statistical average of the number of IRS employees

complying, not falling into this category of having delinquent taxes,

is significantly lower, in fact 39 percent lower, than before it was

in there.

I for one do not find that there is a coincidence on the fact that,

yeah, there are more difficult consequences. Consequently, you got

a lot of people’s attention. And a lot of people said, wow, I got to

take this seriously. I think that is a benefit on not only the contractor side. I think that is a benefit on the Federal employee side.

And I do think, Mr. Chairman, that there is something—and I

am running out of time here. This idea that somebody is trying to

do the right thing, somebody is trying to dig out from the hole that

they are in—but the IRS maybe in the code does not have enough

time. I think we should look at maybe extending that time. If

somebody is willing to take a good portion of their paycheck, and

they have a wife and kids, and they have—I am totally open to extending the amount of time because if the IRS is testifying here

today—is saying, look, there are some people, when you cap it out

at 15 percent, you look at the number of years, and we come out

with a formula, that does not meet the obligation. We are going to

have to do something more drastic.

Given the economic times that we are in, I think we need to

relook at that formula because I want to be compassionate. If somebody is doing the right thing, I will bend over backward to help

them. It is the people that are cheating the system that I want to

fire.

But I think if the IRS is being held to a standard where that formula is just not working because we do not have time, then let us

introduce some legislation in a bipartisan and extend that period

of time so they can continue to pay off their debt over a longer period of time, and we do not ever have to get to the point where we

have to put a lien on somebody. That is the last thing we want to

do.

With that I will yield back. Thanks for my time.

Mr. LYNCH. I thank the gentleman. If I could just respond. If the

gentleman’s bill lays out the definition of ‘‘seriously delinquent tax

debt,’’ and establishes that when a lien is issued, pursuant to that,

that person will be terminated, but as he says, it provides two exceptions. None of those exceptions addresses the tax code with respect to garnishment. It is just the way the law works.

He has cited specific sections, none of which deals with garnishment. Now it could be cured. I admit, it can be cured. But I am

107

just saying, the way the bill is currently written, it does not provide an exception for a person whose wages are being garnished.

That is all I am trying to maintain.

The Chair recognizes the gentle lady from the District of Columbia, Ms. Eleanor Holmes Norton for 5 minutes.

Ms. NORTON. Very important distinction you have raised, Mr.

Chairman, because the government is getting its money if garnishment is occurring.

I was pleased that the ranking member did indicate flexibilities,

not only in light of the present economy, but in light of the fact we

are talking about individuals whose circumstances we cannot know

very much about because they are bound.

I think what is most important for me is to use what we have

in place as the; I should say about what we have in place as the

only program in place now in which Federal employees do get some

sanctions. And if the IRS has been doing that for reasons Ms.

Tucker has testified that have to do with its specialized nature, I

would think we want to make clear before we spread that to annuitants across the more than 2 or 3 million employees in annuitants

who have nothing to do with the code, we want to be very clear

about the distinctions, and to apply what we have learned from

what amounts to a pilot project, because it does inform us.

As to contractors, I do want to say that Ranking Member Issa

is fond of using the very smallest contractor, and of course that

person is like you and me, and he might be selling paper clips to

the government. OK. That is not what the average taxpayer has in

mind when they hear a contractor is not paying his income tax.

And we might want to look at the difference between large and medium-sized contracts and the very small contractors that are indeed

akin to individuals.

On garnishment, at the IRS, are you fired if your wages are

being garnished?

Ms. TUCKER. You know, I am not—let me think through how our

1203 works. The automatic removal, the 1203 statute that we have

talked about, is for willful failure to file, and then willful understatement. So no, if your wages are being levied, garnished, that

is not a removable.

Ms. NORTON. You are talking about the IRS——

Ms. TUCKER. At the IRS.

Ms. NORTON. This is a distinction that I ask us to keep in mind,

that even at the IRS, if the government is getting its money, then

the notion that has been raised here, how are you going to pay if

you get fired, begins to disappear. And even at the IRS, there has

been some understanding that the government is getting its money.

And willfulness, of course, has been taken care of.

Now one of the problems that came up—garnishment has importance for us to bring out here because there is a great distinction

between the government getting nothing and garnishing your

wages, and you are getting it. And that IRS employee can remained employed.

But we had a lot of trouble at our hearing on this lien business.

And I know why we had it, because under the code, if the lien is

filed, then courts have held you could proceed immediately. And we

108

had lots of trouble in understanding whether at the IRS or otherwise the government would proceed immediately.

You testified that the lien is to protect the government’s right.

Ms. TUCKER. Uh-huh.

Ms. NORTON. Now that may be before you know if it is willful,

for example. Can you establish that if a lien is filed that even at

the IRS there would not be an automatic firing of the employee?

Ms. TUCKER. The lien is filed to protect the government from——

Ms. NORTON. And only for that purpose.

Ms. TUCKER. And at the point in time we were looking at the collection statute. So even if someone is one a wage levy or we are

levying bank accounts or other income streams, if it looks that the

sources will not full pay the debt before the collection statute runs,

then they put the lien in place to protect the government’s interests.

Ms. NORTON. This is very important. If we understood—if there

were regulations where we understood that the lien was—if I can

use an old-fashioned term—comes at the end of the exhaustion of

remedies, it would make some of us feel more comfortable than

what we understand the code means by lien. And what the courts

have said—a lien is there; I do not have to do anything else. Again,

regulations could clear that up. It seems to me before we even considered going to the rest of the workplace, we would have to understand that.

I would like to give an example. A lot of folks file but they want

to contest or dispute. Now you could be with the IRS if you wanted

to do that, too. If you do not believe that you owe the government

the money, are you required to pay it, even if you are contesting?

Ms. TUCKER. No.

Ms. NORTON. And are willing to pay it if you, ‘‘lose?’’ Are you required to put that money up front?

Ms. TUCKER. The thing that is in my written testimony, it talks

about the four notice process.

Ms. NORTON. The what?

Ms. TUCKER. In my written testimony, it talks about our four notices. Then it talks about the point in time when we begin the levy

or lien procedures. The taxpayers always have the opportunity to

appeal. And I think to Chairman Lynch’s point. It is an appeal

process within the——

Ms. NORTON. But I am talking about paying. You know, they say

I owe $2,000. I say I owe $1,000. I got to pay the $2,000 and then

come back or lose my job at the IRS?

Ms. TUCKER. No. So you are talking about IRS process.

Ms. NORTON. I am, because I am learning from the IRS what to

do with other employees.

Ms. TUCKER. You know, we will have to get back with you on

that one as far as the extra process of the lien filing with our employee because I want to make sure I give you the right answer.

So can submit that for the record?

Ms. NORTON. I would ask you would within 30 day get to the

chairman what to do when you may think that you are being overcharged by the IRS, and you do not have the money. Your accountant says, look, pay what you can, what you believe you owe, but

be on notice you may have to pay more if you lose the appeal. I

109

am concerned with whether you have to pay up front, Mr. Chairman, or whether you get garnished or get your lien right there.

Ms. TUCKER. And we will be glad to provide that.

Ms. NORTON. Thank you very much.

Mr. LYNCH. Thank you. I guess, I do not want to beat this lien

thing any more, but in my earlier discussions with the IRS they

said that they use sort of a belt-and-suspenders approach when

there is that tax delinquency out there.

So they may have, they may have approaches, such as garnishment and other things, that they are trying to work. But in many

cases I was told, just to be sure that the taxpayer is protected, that

lien goes in place. And the taxpayer advocate was saying that it is

almost like a mantra; it is an automatic thing that is done over at

the IRS, that we put the lien in place to protect the taxpayer’s position. Is that true, or is that not true?

Ms. TUCKER. It is true. To go back to the notice process, I mean,

we do not go out and file a lien automatically. We look at the fournotice process, we get to the end of the time. We begin hopefully

discussion with the taxpayer, because at that point we are still

hoping they will come in with a voluntary installment agreement.

As we look, then, to say do we need to start filing the levies, and

we look at the levy sources. If it does not appear that those levy

sources can full pay within the collection statute period, or if we

have better reasons to think well, gee, the taxpayer is going to

begin discharging himself of their property, then we will put a lien

in place to protect the government’s interest, while we continue to

either pursue the other levy sources.

And the reality is—and I do not have the data with me, we can

get this back to you—the number of Federal tax liens filed in the

scope of our overall collection program is, it is truly not a huge

number compared to the collection interactions we engage in.

Mr. LYNCH. OK. So you get more from non-lien activity than you

do lien activity.

I know this is a big ask, and I am willing to give you 2 weeks

to come back with this. But I would like to, you know, we are talking about, in this bill, investigating the tax status of every single

Federal employee, every single retiree, every single person at the

Post Office, every single person that applies for a Federal position.

I happen to think that the cost of that will be staggering, in

terms of if you are going to do it right, apart from the privacy

issues. Can you get me a number, in terms of how many, I want

to know how many new employees you are going to have to hire

to run that program. And you know, the training costs, the hiring

costs, office space, equipment, full-time equivalencies required, and

any other, any other costs that you might, you might have in implementing that. Because I seem to think it is going to be more

than $22 million, you know, especially with all the work you have

to do right now.

But I really want to see that. And if you could break it out so

that we do the Federal employees’ costs, and then applicants for

Federal positions, so we can figure out——

Ms. TUCKER. One of my colleagues, Chairman Lynch, is pointing out that the cost that we talked about, the $22 million, that is just

for pure generation of the straight transcript. And so——

110

Mr. LYNCH. Yes, it did not sound to be that much in depth. We

are talking about making sure that these people are in compliance.

Ms. TUCKER. Right.

Mr. LYNCH. I want to know every single Federal employee,

whether they are in compliance with the Tax Code. And if they are

filing jointly, I need to know if their spouse is compliant or behind.

And the same thing with every single person at the U.S. Postal

Service. And I need to know every single person that applies for

a government position, in the Federal Government. And if they are

filing jointly, I need to know what their spouse is doing, OK?

So if you can just spit out that number and tell me what the cost

is there, because boy, we are going to get to the bottom of this and

find out who these people are that are not paying their taxes. It

may cost us more than we bring in, but by God, we are going to

get to the bottom of this.

Mr. CHAFFETZ. Mr. Chairman, if I may.

Mr. LYNCH. Sure, I will yield.

Mr. CHAFFETZ. My understanding is we have a spreadsheet, broken out by departments with very specific numbers, down to the

dollar for each department, and where they are at, and what percentage of compliance. I would hope that is not going to be a major

exercise.

If you came up, and you said, for instance, that the balance

owed, let us take here Administrative Office of the U.S. Courts,

$9,549,207, and at a delinquency rate of 2.24 percent. The calculation of that number would be rather simple.

I think obviously, moving forward on this, the scoring of any

types of things would obviously be part of the equation in passing

any sort of legislation. And I think it is a very fair question.

I do see the Office of Personnel Management actually having to

deal more with this than necessarily the IRS. I mean, I think part

of the principle is here that we are going to deal with Federal employees and Federal contractors and the general public in an equal

footing.

But there is going to be a burden, if you will, of the Office of Personnel Management. It is going to have to actually implement this,

and put it into their programs and disseminate that out. I think

that is a legitimate cost. But I think that, at least from I am just

thinking off the top of my head, I did not know you were going to

ask that, they are the ones that are probably going to have more

of an impact than necessarily the IRS. Because they have policies

and procedures they have to deal with. They deal with millions of

people.

Ms. TUCKER. If I might, though, the data that we report through

FERDI, because we are talking about very serious consequences as

far as have you filed or have you paid, our data is from a snapshot

in time; typically, on September 30.

Mr. CHAFFETZ. Right.

Ms. TUCKER. To do the complete tax check, much like we do for

other agencies where it is not just for providing the transcript, for

someone to interpret, to look at a transcript and say did you file

and pay. A more comprehensive tax check, where we actually go in,

we analyze the transcript, IRS is doing the analysis, and we write

111

back to the agency saying—and I will pick on my colleague, Mr.

Williams over there.

If we were to actually have to write back to Mr. Williams’s employer and say we have completed a tax check on Mr. Williams for

the period of time X, Y, and Z, then we will be spending additional

resources to say yes, he filed on time, but by the way, he owed

$200, but he is under a good installment agreement. Then we

would also, if he was not under an installment agreement, we

would be obliged to say he filed, but he is in, he is currently not

in compliance with collection.

So there would be, I think to clarify your point, Chairman Lynch,

the giving of a transcript to another agency, for them then to interpret what it means is the $2.25 cost I talked about, where we are

just producing a transcript.

To do what I believe you are asking, where you would want us

to do the analysis and do an individualized report on each Federal

employee, that would have a far greater impact on our resources

and ability to do that I think in a manner that would be fair to

the Federal employees we were reporting on.

Mr. CHAFFETZ. Mr. Chair, if I can just——

Mr. LYNCH. Sure, go ahead.

Mr. CHAFFETZ. And I appreciate your generosity here. I think

privacy is of the utmost concern. The only people that should be

classified in this are people that have a lien. And that is a much

significantly smaller population than doing something on each and

every single employee.

Certainly doing a brief background check to make sure that a

prospective employee does not have a lien is something that I do

think we should engage with. But you know, again, I just want to,

for the record, I want to make sure that we are also looking into

concerns of privacy.

Mr. LYNCH. Let me just claim some time here. We cannot do—

and Ms. Tucker, you can help me with this. I do not believe we can

do a snapshot in time of people who are, and have a vetting of people who are applying for a Federal position. It does not work that

way. They are not known entities; they are new entities.

You would need to do what you are asking for in this legislation

is to determine the tax compliance on one tax compliance status of

that applicant, just as you are asking for the same information for

every Federal employee and every U.S. Postal Service employee.

Mr. CHAFFETZ. We are simply trying to ask whether or not they

have a lien. Do they have a lien, do they not have a lien.

And my understanding is a lien becomes a public document.

These other interactions that they are having with the IRS are confidential in nature, and should remain so.

Mr. LYNCH. But you are missing the point here. In order to fire

a person who has a lien, you have to do a, you know, today they

have no lien, next month they have a lien.

In order to catch that—you are asking that when people have a

lien, they get fired. And so you need to track that employee so you

know when they have a lien, they get fired.

Ms. TUCKER. Maybe I came up with the super statute, because

I do not think I put this into my testimony. So for 2008 or basically

any other years, just to give you a percentage notion of how many

112

of the folks that are in FERDI actually really moved to a lien status, it is roughly only 12 percent. Most of the folks that we are

identifying through FERDI, we move them into compliance, full

compliance, through the wage levy or levy of other sources. So I

just thought that was important for you to understand.

Mr. LYNCH. That is on that one date, the snapshot in time that

you took, right?

Ms. TUCKER. Correct. So——

Mr. LYNCH. Not tracking these people all the way through the

system.

Ms. TUCKER. No, sir.

Mr. LYNCH. OK. All right. Ms. Tucker, I think you have suffered

enough, but let me just ask——

Ms. TUCKER. It has been a pleasure. Just like with everybody at

work. [Laughter.]

Mr. LYNCH. Yes, I am sure. If there are no further questions, I

would like to just allow Ms. Tucker to go. And we thank you for

your willingness to come before the committee and help us with our

work. Thank you very much. Have a good day.

Ms. TUCKER. Sure, my pleasure.

Mr. LYNCH. Thank you.

Ms. TUCKER. Thank you.

[Pause.]

Mr. LYNCH. I would like to welcome our next panel of witnesses.

[Recess.]

Mr. LYNCH. Be seated. Welcome. Before we swear our witnesses,

I will first offer some brief introductions.

President Colleen Kelley is the President of the National Treasury Employees Union. Welcome back.

The Nation’s largest Federal independent Federal sector union

representing employees in 31 different government agencies. Ms.

Kelley, a former IRS Revenue Agent, was first elected to the

union’s top post in August 1999.

Mr. J. Ward Morrow is an assistant general counsel for legislation for the American Federation of Government Employees, the

AFL–CIO. Before joining AFGE, Mr. Morrow served as an assistant

State’s attorney for Baltimore City, and special assistant U.S. attorney.

Mr. Richard Oppedisano was elected national secretary of the

Federal Managers Association in March 2004, a position he has

held since that time. Prior to his retirement from the Civil Service

in 2004, Mr. Oppedisano served as Operations Officer and Chief of

Staff in the Office of the Commander at the U.S. Army Watervliet

Arsenal in Watervliet, NY.

Mr. Christopher Rizek is a member in Caplin & Drysdale’s

Washington, DC, office, where he represents taxpayers and all

types of Federal, civil, and criminal tax controversy matters; and

also guides clients through IRS audits, prepares administrative

claims, and litigates tax and tax-related cases. Welcome to you all.

Let us see, why do not I do this first, and we will get you all

sworn in. And then we can allow you to offer your opening statements. Could I ask you all to rise and raise your right hands?

[Witnesses sworn.]

113

Mr. LYNCH. The Chair now recognizes President Kelley for 5

minutes.

STATEMENTS OF COLLEEN KELLEY, NATIONAL PRESIDENT,

NATIONAL TREASURY EMPLOYEES UNION; J. WARD MORROW, ASSISTANT GENERAL COUNSEL FOR LEGISLATION,

AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES,

AFL–CIO; RICHARD OPPEDISANO, NATIONAL SECRETARY,

FEDERAL MANAGERS ASSOCIATION; AND CHRISTOPHER

RIZEK, GENERAL COUNSEL, CAPLIN & DRYSDALE, CHARTERED

STATEMENT OF COLLEEN KELLY

Ms. KELLEY. Thank you very much, Chairman Lynch, Ranking

Member Chaffetz, and distinguished members of the subcommittee.

I appreciate the opportunity on behalf of the National Treasury

Employees Union to provide comments on H.R. 4735, which would

require the Federal Government to fire workers who have Federal

tax liabilities, and prohibit job applicants with serious delinquencies from being hired.

NTE firmly believes that each and every Federal employee

should pay their taxes in a timely manner. But we believe this legislation would deprive them of the right of due process afforded to

other taxpayers.

Furthermore, we believe that terminating their employment or

preventing them from obtaining gainful employment would only

serve to worsen that financial situation, and lessen their ability to

repay any taxes owed, or to be compliant in the future.

Under H.R. 4735, a prospective or current Federal employee

would be prohibited from Federal employment based on the

issuance of a lien, which has been discussed in great detail, which

is not a final determination of tax liability. When the IRS files a

notice of Federal tax lien to secure the government’s interest as a

creditor in competition with other creditors in certain situations,

such as bankruptcy proceedings or sales of real estate, a taxpayer

has a right to challenge the issuance of a lien.

H.R. 4735 does not include any minimum tax delinquency

threshold that would trigger the mandatory termination provisions.

I would note that H.R. 572, the Contractor Tax Delinquency legislation that is also under consideration by the subcommittee, would

only prohibit the awarding of contracts or grants that are in excess

of $100,000.

We also have a number of concerns about how the process for determining the eligibility of an applicant for Federal employment

with a tax debt would work.

In particular, as has been discussed, who would be responsible

for investigating an applicant’s tax situation, and making the determination of whether or not they are eligible for Federal employment? Where would the funds come from? And would an applicant

have a right to respond to any problems that are found?

There are laws and regulations in place that address tax debts

owed by Federal employees. Under 5 U.S.C. 2635, agencies can

take disciplinary action against employees for failure to satisfy

their just financial obligations, including their obligation to pay

114

Federal, State, and local taxes. These disciplinary actions can

range from counseling to removal.

In addition, in 1997 Congress enacted legislation authorizing the

establishment of the Federal Payment Levy Program, which the

IRS discussed in detail, allowing the 15 percent levy of certain Federal payments made to delinquent taxpayers. This list of Federal

payments, as we have heard, does include Federal employment retirement annuities and Federal salaries.

This has been a very successful program, especially with regard

to withholding payments from Federal salaries. NTEU has experience with mandatory termination rules for tax infractions. Commonly known as the 10 deadly sins, Section 1203, which has been

discussed, of the IRS Restructuring and Reform Act, outlines 10 infractions for which IRS employees must be fired. One of the 10 infractions is the untimely filing of Federal income taxes, even when

a refund is due.

N.T.E.U believes mandatory termination for even minor tax infractions is unduly harsh, and should not be the only disciplinary

action available. The system in place at the IRS takes away discretion from managers, and requires large amounts of resources to administer.

Mr. Chairman, as I have said throughout my testimony, I believe

that everyone should pay the taxes that they owe. There are penalties under the Tax Code for those that do not, and there are processes for recouping tax debts from Federal employees that are very

effective. Requiring the firing of Federal employees that owe back

taxes, and creating a huge new program to check the tax status

and lien status of all Federal job applicants, is not the best way

to address this problem.

Some may owe taxes because of the actions of a spouse, a previous failed business enterprise, or financial hardship and illness.

Denying them Federal employment that they are otherwise qualified for will certainly be unfair in some situations, and in many situations will lead to a higher likelihood that the government will

never receive the taxes that it is owed.

Thank you again for this hearing, and I welcome the opportunity

to answer any questions.

[The prepared statement of Ms. Kelley follows:]

115

116

117

118

119

120

121

Mr. LYNCH. Thank you. Mr. Morrow, you are now recognized for

5 minutes.

STATEMENT OF J. WARD MORROW

Mr. MORROW. Mr. Chairman and subcommittee members, my

name is J. Ward Morrow. I serve as assistant general counsel for

American Federation of Government Employees. We represent

more than 600,000 Federal and District of Columbia workers.

I am pleased to appear before you to discuss the issues related

to H.R. 4735.

AFGE does not support singling out of Federal employees who

face tax problems. Federal employees are patriots who are engaged

in public service so that they can contribute to helping other fellow

Americans. Many civilian employees of the Department of Defense

serve in supporting roles for deployed military personnel.

Others honorably serve our country in the Department of Homeland Security. Others care for wounded veterans. But all Federal

employees serve the citizens of the United States.

Sometimes people end up in disputes with the IRS because their

tax situation is complicated, by a divorce, death of a loved one, or

other difficult circumstances. Each situation must be reviewed on

a case-by-case basis.

Currently Federal employees may be disciplined, up to and including termination, for tax misconduct. The Merit Systems Protection Board has upheld adverse actions for tax impropriety against

even non-Treasury employees where they have found a nexus to

Federal employment.

For example, in the James A. Mitchell v. United States Postal

Service, 32–MSPR–362–1987, the U.S. Merit Systems Protection

Board upheld an Administrative Law Judge’s finding of the nexus

between conduct and the efficiency of the Service.

Some circumstances, such as employment that required a security clearance, or perhaps a suitability determination, a serious delinquency may result in the termination of an employee due to the

nature of that type of employment.

We believe agencies currently have sufficient authority in these

areas to make such determinations in appropriate circumstances.

The matter of a lien being imposed may not be a sign that an employee is in a deliberate default.

It is vital that Federal employees be afforded all of their due

process rights that Title 5 allows. Some situations may be far more

intentional and severe than others. Some situations may be appropriate for a lesser penalty or other type of outcome. It is also possible in this day and age for a situation such as identity theft to

take place, or other type of error that the agency may make. In

those cases the Federal employee may be incorrectly or unfairly

identified as being seriously delinquent in their tax payments.

We believe Federal employees must be given sufficient opportunity and due process to show that they are not seriously delinquent, as defined by this legislation; and/or that termination is not

the appropriate penalty in specific circumstances.

We can only speculate as to the variety of situations, particularly

in this economy, that might exist, so we can be clear that a oneVerDate 11-MAY-2000 14:30 Dec 10, 2010 Jkt 000000 PO 00000 Frm 00125 Fmt 6633 Sfmt 6633 U:\DOCS\61935.TXT KATIE PsN: KATIE
122

size-fits-all penalty will not be able to be fairly accommodating all

of these possible situations.

AFGE does applaud the goal of getting all Americans to pay their

legally required amount of taxes. In many, but not all, instances,

we believe the goal is best accomplished by having an employee

who is in default to continuing employment, so there is a better opportunity of payment. It stands to reason that if an individual is

unemployed, they will be in default for a far longer period of time,

and have less incentive to pay any payments.

We believe any legislation needs to provide for the possibility and

the type of construction manner for encouraging employees, where

appropriate, to remain employed; and to get an employee who is in

default to pay their taxes. To erect a permanent barrier to any Federal employment for someone who is seeking to be employed, and

in good faith desires to make payments once employed, would be

counter to the desire to get the debt paid.

Since each situation is different and want different factors to be

examined, it makes more sense to have a process that encourages

payment, rather than one that may frustrate payment.

In the exercise of their rights, Federal employees might be able

to show that in fact they are being incorrectly or unfairly treated.

They deserve this opportunity, rather than a rigid penalty, it is fair

to look at each situation individually for a system that fails to give

Federal employees a proper process to vindicate themselves.

Based on the unique needs of the Federal Government, we believe that there may be circumstances where the specialized talents

of an employee might be necessary, even where a tax debt might

exist. We believe such situations, which we might now not even be

able to articulate, may exist and could require the employment or

continued employment of certain individuals for a period of time.

Any law will need to have this type of legitimate need of government service provision to provide the adequate flexibility for government operations.

Currently the IRS has a variety of powers with which to enforce

the tax laws. We defer to them as to the variety of provisions that

currently exist. We would note that they do have criminal and civil

provisions to deal with those who deliberately and intentionally fail

to pay their legitimate taxes.

The agency is given discretion as to how to seek those enforcement provisions, and by the very nature of criminal enforcement,

the agency has provisions to deal with the most severe and intentional violation.

AFGE recognizes the legislation would attempt to allow for a situation—if I may finish my statement, Mr. Chairman—when agreement may be entered into by the IRS. This legislation, though, does

fail to include those who may be making attempts to pay, but either have not or cannot agree to the terms required for an agreement acceptable to the IRS.

Again, we state a case-by-case review is more appropriate to

these types of circumstances.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Morrow follows:]

123

124

125

126

127

128

129

130

Mr. LYNCH. Thank you, sir. Mr. Oppedisano, you are now recognized for 5 minutes.

STATEMENT OF RICHARD OPPEDISANO

Mr. OPPEDISANO. Chairman Lynch, Ranking Member Chaffetz,

and members of the subcommittee. As Federal managers and

stakeholders in this legislation, we are——

Mr. LYNCH. Mr. Oppedisano, I am not sure if your mic is working.

Mr. OPPEDISANO. The light is on. Can you hear me better now?

Mr. LYNCH. All right, thank you, sir.

Mr. OPPEDISANO. As Federal managers and stakeholders in this

legislation we are discussing today, we appreciate the opportunity

to appear before you.

The Federal Government’s most important resources is its work

force. Federal employees serve alongside their military counterparts on the ground in Iraq and other conflicts abroad. They are

on the cutting edge of disease research, energy initiatives, and

many social programs that deliver needed services to millions of

Americans. They are doctors, engineers, law enforcement officers

working to secure our nation’s borders.

Despite their dedication to advancing the nation’s interests, Federal employees continue to serve as a punching bag for the press,

and this mentality has crept its way onto Capitol Hill. As we debate H.R. 4735, it is critical that Members of Congress isolate this

issue from other topics challenging the Federal work force.

We are here today to discuss Federal employees who have been

seriously delinquent on their tax obligations. We are not here today

to discuss Federal salaries, turnover rates, or a multitude of other

issues that may deserve debate at some other time.

When public figures lump these issues together, the result is a

firestorm of anti-Civil-Service zeal that detracts from the debate at

hand.

Legislation introduced by Ranking Member Chaffetz would bar

Federal employees facing serious delinquent tax debt from serving

in the government. Let us look at the facts.

In 2008, Federal employees, Federal retirees, active-duty military

and retired military owed $3 billion in unpaid taxes. In terms of

dollars, military retirees owed the most, with over $1.3 billion in

unpaid taxes; 97,000 active Federal employees account for $962

million of the $3 billion owed. This represents less than 5 percent

of the Federal work force.

Of the individuals this legislation would affect those only that

are seriously delinquent. It is our belief that very few fall within

this category. However, we must carefully examine what seriously

delinquent means.

According to the legislation, it would affect any employee who

has a lien filed against his or her property in order to recover unpaid taxes. First and foremost, as taxpayers ourselves, FMA members in no way, shape, or form support the action of Federal employees who neglect to pay their taxes in a timely manner. It is extremely distressing to hear stories of government employees who

receive a Federal salary, while refusing to follow tax laws.

131

While there are many circumstances that justify filing for reconsideration, those who purposely bypass the requirements to fulfill

their tax obligation should be held accountable. When these individuals are civil servants, their conduct can cast a dark shadow

over their fellow co-workers.

FMA has several concerns with both the intent and practical application of H.R. 4735. It is believed that Federal employees should

be held to the same standards as the rest of the American population, receiving no special treatment, while also avoiding the bull’s

eye that so often falls on their backs.

Approving this bill would severely jeopardize the ability of the

IRS agents to direct Federal employees down the path to tax settlement; instead, resorting to termination. FMA is concerned that

H.R. 4735 may restrict Federal employees’ ability to dispute their

tax obligations, while stifling the IRS from pursuing payment

through established channels.

We are also concerned that this legislation could relate to an ongoing tax dispute that is not resolved as of the filing of the lien.

Additionally, if a lien has been filed, yet the IRS is unsuccessful

in its attempt to collect payment, and the employee is terminated,

one must question how the now-former employee is going to repay

what is owed, while not collecting a paycheck. Ultimately, the government would still be unable to recoup payment from this individual.

We believe this legislation seeks to create a system where there

is always an easy answer to an individual case requiring unique

existing exemptions exist. Our tax system does not exist in a vacuum. IRS agents are successful because they are trained to evaluate

each case based on its own set of circumstances.

While there are certainly individuals who not only refuse to pay

taxes, this legislation may impact a greater audience than intended. It is extremely difficult, and perhaps impossible, to judge

an individual’s intent when it comes to the filing of a failure to file

taxes. Deliberate or fraudulent non-payment is vastly different

than a technical mistake, yet both may lead to a drawn-out appeal

process resulting in identical determinations.

Under H.R. 4735, the employee who makes an innocent mistake

could be deemed seriously delinquent and unfairly penalized.

In conclusion, there is no doubt that this issue warrants discussion and debate. But we at FMA believe the solution of the problems may be realized through greater oversight and enforcement of

tax laws currently in place. If these laws are deemed too lenient,

new tax rules and regulations that do not isolate Federal employees from the rest of the American public should be required.

No one should be allowed to evade paying taxes that are owed

according to law, a point we can all agree upon. Singling out our

nation’s civil servants, however, is not the answer.

Thank you again for this opportunity to express our views, and

I am happy to answer any questions you may have.

[The prepared statement of Mr. Oppedisano follows:]

132

133

134

135

136

137

138

139

Mr. LYNCH. Thank you, sir. Mr. Rizek, you are now recognized

for 5 minutes.

STATEMENT OF CHRISTOPHER RIZEK

Mr. RIZEK. Mr. Chairman and members of the subcommittee,

thank you for inviting me to testify before you regarding H.R. 4735.

By way of background, I am a member of the Law Firm of Caplin

& Drysdale, and also with Professor Norton, who is leaving, an adjunct professor over at Georgetown University Law Center, where

I teach tax administrative practices.

Mr. LYNCH. Mr. Rizek, I am sorry, we are having a problem with

the microphones. Could you please pull that closer, please?

Mr. RIZEK. I never have that problem, usually.

Mr. LYNCH. There you go. Good man, thank you.

Mr. RIZEK. Where I teach tax administration practices and procedure. I think I was asked to appear on this panel to provide some

technical and tax procedural advice, and I hope I can help you with

that. I disclaim any expertise in Federal employment or government contracting law, however.

I begin with the proposition which I do not think anyone, including my fellow panelists, can seriously oppose; that Federal employees are responsible for meeting their Federal tax obligations, just

like any other taxpayers in the United States.

However, I would argue that Federal Civil Service employees

bear a special responsibility to the public to meet their tax obligations, for several reasons.

First, when anyone cheats, it undermines the perception of fairness that is essential to our voluntary self-reporting system. Federal employees being particularly visible beneficiaries of government support are also thus particularly visible when they fail to

comply with the tax laws. Such non-compliance encourages more.

As the founder of my law firm, Mortimer Caplin, once said, large

and continued avoidance of taxes on the part of some has a steadily

demoralizing effect on the compliance of others.

It is a symbolic breach of public trust when Federal employees

are non-compliant. We of course expect our civil servants to comply

with all the laws, but it is especially galling when they are paid

by our tax dollars, and yet cheat on their taxes, and thus fail to

contribute to the general welfare themselves.

That is, as I put it in my written statement, doubly insulting to

millions of hardworking and compliant taxpayers. And I would add,

I am a former Federal employee myself, twice, and I felt a special

obligation to uphold the laws of the United States both times.

For these reasons I support the idea of making Federal employees subject to special employment sanctions if they fail to comply

with the tax laws. And to the extent that idea is embodied in H.R.

4735, I support it.

However, as I describe in my written statement, I believe there

are a number of significant technical changes in the bill that are

necessary before it is enacted. Most importantly, as we have discussed, reliance on the filing of a Federal tax lien for the definition

of a seriously delinquent tax debt is far too uncertain a standard

to which to tie a taxpayer’s potential for future or continuing Federal employment.

140

I recognize that standard is drawn from H.R. 572, regarding Federal contractors. I would be prepared to answer questions about the

parallels and differences between those two provisions.

But in her year-end 2009 report to Congress, the National Taxpayer Advocate Report you cited, Chairman Lynch, was particularly critical of the IRS’s lien-filing methodology, describing it with

adjectives such as arbitrary and inconsistent.

Notice of a Federal tax lien can legally be filed immediately upon

failure to pay. And Yetta and I and I think most people would not

consider that to be a seriously delinquent tax debt.

Conversely, I have had many situations where tax debts have

gone for very long periods of time, which have never had a notice

of Federal tax lien filed. The purpose of the notice of Federal tax

lien is just to protect the priority of the Federal tax lien, and I

would be happy to talk to the panel about that.

The one single benefit of the notice of Federal tax lien is that it

is public; and thus, it would not require amendment of the Internal

Revenue Code’s confidentiality provision, Section 6103. But that

does beg the question of how the agency is supposed to know of an

employee seriously in delinquent tax debt.

I would note that H.R. 542 debars applicants for awards or applicants for employment, or applicants for grants, and requires them

to certify and obtain a waiver of the confidentiality before applying

for a Federal grant, and obtaining one. I think something similar

in this regard might be beneficial.

There are a number of other technical issues discussed in my

statement, but I want to mention only one. The Restructuring Act,

the IRS Restructuring Act of 1998, on which I worked when I was

in the Treasury Department in 1998, contained a similar provision

applicable solely to IRS employees.

I believe that the severity of the only sanction available, termination or non-eligibility for employment, has contributed to that

provision being used very rarely. I think Ms. Tucker testified that

it was roughly 475 over the last 11 years.

I would like to think that IRS employees are also particularly

tax-compliant, and perhaps the FERDI data does demonstrate that.

But I would suggest that other sanctions, such as disciplinary action or ineligibility for promotion or salary increases might be considered.

In short, I commend the members of the subcommittee for seeking to address an important and symbolic area of non-compliance

with our tax laws, and I generally support the concept of making

such non-compliant grounds for sanction, or even termination, of

Federal employees.

I have a number of technical concerns about the specific language of H.R. 4735, however, and I would be happy to discuss them

further with the members or staff of the subcommittee.

[The prepared statement of Mr. Rizek follows:]

141

142

143

144

145

146

147

148

149

150

151

Mr. LYNCH. Thank you, sir. I have a quick question. We have

votes on the floor, but I did want to ask—perhaps Mr. Oppedisano

and Ms. Kelley might be able to answer this best, but Mr. Morrow,

obviously, it deals with the workload that would be required to do

a tax-compliance assessment on every single Federal employee and

every single Post Office employee, and all these applicants for Federal jobs.

You know, in talking to Ms. Tucker earlier, I think we might

want to rename this bill the Jobs Bill, given the number of people

it might hire. So that might be a good thing. I will have to rethink

my opposition.

But do you have, you know, just a sense of what this would require, No. 1? And No. 2, especially with the hiring process, and Mr.

Oppedisano, as a representative of the Federal Managers Association, I hear a lot of complaints about the time that it takes to hire

folks. We just went through that yesterday at another hearing,

where we had, we had a change in the approach in one of our agencies in hiring more people after a layoff was, well, a downsizing

was reversed.

Could you comment on that, on the workload on the IRS to do

this vetting for all these employees? And also, the effect that it

might have on the ability of us to hire people quickly, and not have

these interminable delays, where we have these vacancies for

months and months and months, and falling behind on the work

that needs to be done.

Ms. KELLEY. I think the workload would be huge. And it will be

interesting when IRS, in accordance with your question, thinks

through everything that really would need to be done, and what

that would mean for the current Federal employees and retirees.

When you add on top of that the applicants, one of the things

that struck me listening to the prior conversation was, I know—

and you can confirm this with the IRS—but the IRS last year, just

in 1 year, received 600,000 applications for vacancies in the IRS.

That is just the IRS.

Mr. LYNCH. OK.

Ms. KELLEY. So when I think of that number——

Mr. LYNCH. Do you know how many positions were up? Because

I know we just had, we have a new, I think we are hiring 20,000.

Ms. KELLEY. I believe last year the number they reported was

they hired 18,000, and received 600,000 applications.

Mr. LYNCH. Wow, OK.

Ms. KELLEY. So you know, when I think about that in terms of

across government, I cannot even begin to come up with the number of dollars or staffing that would be needed. But it would be

huge, it would absolutely be huge. And it would absolutely add

onto the time for hiring, which of course everyone is so focused on,

acknowledging it needs to be cut, not increased.

So there are no systems in place that would automatically do it

today, so there would have to be new systems and new resources.

Mr. OPPEDISANO. No disrespect to Mrs. Tucker, but I think her

figures were a little bit on the low side. And I think your question

was an excellent one, as far as identifying all of the costs that

would be involved.

152

Also, on my resume I was also the Chief of Recruitment and

Placement at my site for 13 years. I did recruitment for the Federal

Government in the Department of Army for 13 years. Average

timeframe for hiring someone from start—and this is after we got

out, after we received all the internal paperwork processed to go

out to do the recruiting action—80 days. In my opinion, this would

at least double that amount of time.

Our problem is young people today do not want to wait around

for 6 months to say whether or not they are going to have a job.

We need to be able to have the ability to make sure that we hire

these folks, and have the ability to hire these folks, pretty darn

quick. Or else they are going to go someplace else to go to work.

So to answer your question, in my opinion, it would at least double that timeframe.

Mr. LYNCH. Well, Mr. Morrow.

Mr. MORROW. And if I may, I listened to that question. And I

think Ms. Tucker in some ways can only look at it from the perspective of her agency. Just keep in mind that with each agency

that they do this with, you are going to have to have somebody

doing due diligence at the agency, instead of doing their regular

work.

And I do not know what the cost of that is going to be for all,

you know, the number of people across DHS, DOD, for every mechanic that they are going to need to process this form on. And

then they have to fire that individual. The work is not going to get

done. You might have passports not getting stamped, you are going

to have tanks not getting fixed. So they have to wait and go

through the recruitment process. And again, somebody is going to

have to do that, and there is a cost to that.

So the cost is not simply just to the IRS to do a computer printout. There is a personnel cost to each and every agency to do the

due diligence, and to send the letters, and to do the whatever needs

to be done, the processing to get the employee out the door. And

then you are going to have that same cost getting employees back

in the door if, in some situations, you can even find a qualified employee, who then would have to go through this yet additional burden.

So I mean, I think the costs are going to be far higher, and

maybe you would have to ask almost each agency what it would

cost to have every one of these people replaced.

Mr. LYNCH. Very good. Thank you. What I would like to do is

yield 5 minutes to the ranking member, Mr. Chaffetz.

Mr. CHAFFETZ. Thank you. Just to followup on your doubling of

the time, where in the world did you come up with 80 days?

Mr. OPPEDISANO. Where did I come up with——

Mr. CHAFFETZ. Yes.

Mr. OPPEDISANO. We actually tracked, in the Department of

Army—these figures are available at the Department of Army. We

actually tracked the timeframes for filling a vacancy once a 52,

which is a personnel action for retirement——

Mr. CHAFFETZ. Oh, I believe the 80 days. What I am saying is

you suggest that with this piece of legislation it would double the

time. I want to know where and on what basis you suggest that

153

it is going to take 80 days to find out whether or not a person has

a lien against them.

Mr. OPPEDISANO. I said in my opinion it would take an

additional——

Mr. CHAFFETZ. I know. I want to know where you got, what you

base that on.

Mr. OPPEDISANO. No. 1, as the gentleman from the AFGE just

said, there is a staff requirement——

Mr. CHAFFETZ. No, I just want to hear what you have to say.

Mr. OPPEDISANO. There are staff requirements that are required

that are a part of all of this. You have to call the employee in, you

have to do all the additional paperwork. And then maybe you have

to go back to the stats again, to go back to the beginning of the

process, due to the fact that person may not have been qualified,

or may have disgusted and just have walked away, and did not

want to seek Federal employment any more.

Mr. CHAFFETZ. I understand.

Mr. OPPEDISANO. So my estimate would be that it would probably double the process.

Mr. CHAFFETZ. If you would like to provide additional information, I would love to see it. Because I think your——

Mr. OPPEDISANO. It is my personal opinion.

Mr. CHAFFETZ. That is just an irrational number that is just

plucked out of the air for your own personal convenience. There is

no way——

Mr. OPPEDISANO. That is my personal opinion.

Mr. CHAFFETZ. And if you want to provide additional information, I would love to see it. I do not think it is substantiated or

based on anything. Other than trying to scare people that it is

going to take so much additional time.

Mr. OPPEDISANO. My statement back to you would be until this

law, if it ever did become law, and in fact we would have to wait

and see what happens.

He asked my opinion as to how much longer——

Mr. CHAFFETZ. I am just asking what you based it on. And I do

not see anything——

Mr. OPPEDISANO. Based on the fact that if, in fact, something

happens where we have to restart the process again; if it takes 80

days under the normal process that we have to restart the process,

why, we would have to restart the process.

What happens if that individual turns around and either has an

action taken against him, or walks away from the process for whatever reason? You would start your recruitment action again.

Mr. CHAFFETZ. You made your point, I made my point. Do you

believe that there is any additional special responsibility for somebody who is a Federal employee? Above and beyond maybe what

is happening in the private sector?

Mr. OPPEDISANO. No more so than any other American citizen.

Mr. CHAFFETZ. And do you believe that there is a significant difference between contractors and Federal employees?

Mr. OPPEDISANO. I think there is a significant difference between

contractors and Federal employees. Federal employees——

154

Mr. CHAFFETZ. In terms of obligation. Do you think that contractors have a higher obligation and threshold than, say, Federal employees?

Mr. OPPEDISANO. I would say no, they do not have a higher obligation.

Mr. CHAFFETZ. OK.

Mr. OPPEDISANO. What I would say——

Mr. CHAFFETZ. Thank you, thank you.

Mr. RIZEK. I just want to add in response, I have no idea how

long it would take. But I do have a data point, which is a different

data point than Mr. Oppedisano.

Almost everyone who ever applies for a mortgage in the United

States these days has to offer a consent to the mortgage company

to, for the mortgage company to check with the IRS to make sure

that they are current in their tax obligations. Now, that can be a

very limited consent, just to see if they have filed or have any outstanding tax debt. But there are millions of mortgages executed

each year, and they IRS turns those around very quickly.

Mr. CHAFFETZ. Thank you. This idea, Mr. Morrow, the idea

that—well, let me do this. My time is coming to a close.

Ms. NORTON [presiding]. Mr. Chaffetz, particularly since there

are five votes, if you would like to take more time and do all of

your questions now.

Mr. CHAFFETZ. Thank you, I appreciate it. My apologies, but we

have like zero time on the clock, and we have votes on the floor.

So thank you all very much. We appreciate it. If there are additional questions or comments you would like to make as you kind

of think things through, I am very open to this. I just want to do

the right thing. And I personally, as I said many times here before,

the overwhelming majority of people, they do the right thing. We

ought to pat them on the back and congratulate them for that.

But for that small number of people who are skirting the system,

just like President Obama has pointed out, I, too, want to point

out. And I think we need to have more serious consequences.

So I thank you again for your time. And thank you.

Ms. NORTON. Thank you, Mr. Chaffetz. I just want to say to

those who remain that when we get through with health care reform, we can get on to other legislation. We hope that the witnesses will abide the fact that even this Member will have to be

excused to go vote on the floor, in exchange for the substantial Federal income taxes paid by the residents of the District of Columbia

without a vote on final passage.

I am grateful that the House, in its wisdom, has given me the

vote in the committee as a whole. And of course, I vote in this committee and chair a subcommittee.

But on legislation such as that coming before the House now, the

House is able to leave me as the majority of the hearing, with what

remains of it. And I am pleased to play that role temporarily.

I very much appreciate the testimony we have received. It is important to hear from the agency. But that would be a very onesided notion without hearing from those who are also affected.

Let me ask you, Ms. Kelley—could I have—and Mr. Morrow, perhaps all of you. But Ms. Kelley is particularly able to answer this

question because of her affiliation with the IRS.

155

First let us establish, when did this rule, unique rule for IRS employees become effective?

Ms. KELLEY. It was part of RRA–98, so it was passed in 1998.

Ms. NORTON. So that would be 1998. Did it come up because

there had been a significant number of IRS employees who somehow the agency had found that—this matter, of course, is usually

private between the employee and the IRS.

I am trying to understand what led to this special rule for IRS

employees, what prompted it, what its derivation was.

Ms. KELLEY. In fact, the history of it is that the IRS did not even

request that Congress provide them with Section 1203 as part of

RRA–98. It was not initiated by the IRS. It was added on the Senate floor. And it is nothing that the IRS ever supported.

So from the beginning——

Ms. NORTON. The agency itself never had an opportunity for a

hearing before this was passed on the Senate floor?

Ms. KELLEY. In fact, they said it was not necessary. Yes, that is

true.

Ms. NORTON. Thank you, Ms. Kelley. I mean, we are somehow

led to believe that when something happens of this kind——

Mr. RIZEK. If I may——

Ms. NORTON. Would you—yes.

Mr. RIZEK. The rest of the provisions in Section 1203 that Ms.

Kelley is referring to were perceived as taxpayer protection provisions, and they were introduced as sort of a taxpayer——

Ms. NORTON. The rest of the provisions, meaning what?

Mr. RIZEK. Those two provisions were inserted there, I think,

just because they were making a list of things for which they

thought IRS employees should be terminated.

Ms. NORTON. The other provisions had to do with taxpayer protection.

Mr. RIZEK. For the most part, correct.

Ms. NORTON. Was this perceived of as a taxpayer protection?

Was this conceived as a taxpayer protection?

Mr. RIZEK. Section 1203 was.

Ms. NORTON. Ms. Kelley.

Ms. KELLEY. But again, this was not supported even by the IRS

that it be added. And I would also add, in the last 6 years, including under the prior administration, from 2003 through 2009, the

last administration has proposed, in each of its budget proposals,

that this Section of 1203 requiring termination of IRS employees

for tax issues should be eliminated, and that provision should not

be in place.

Ms. NORTON. Ms. Kelley, somebody has that in his testimony. I

noted that for the first time. Who had this in his testimony, was

it you? That the last administration——

Ms. KELLEY. That was me, yes.

Ms. NORTON. Yes. Itself had proposed——

Ms. KELLEY. Yes, six times.

Ms. NORTON [continuing]. Elimination of this, and replaced by

what?

Ms. KELLEY. That it just was not necessary. To eliminate the

mandatory termination provisions for tax issues. Recognizing that

there were already processes in place to deal with them.

156

The IRS dealt with, as you heard Ms. Tucker testify, they dealt

with tax issues very seriously in the IRS long before RRA–98.

Ms. NORTON. Using what sorts of procedures?

Ms. KELLEY. Using their personnel procedures. It was, they did

an education process and explained the obligation of the higher

standard for administering the tax system. Employees knew that

when they were hired; they knew they could face disciplinary action. And it could have been up to and including removal. Sometimes perhaps it was, you know, suspensions or other penalties, to

make clear that they were not in compliance. And of course, the

goal was to get them in compliance.

So the IRS enforced all of that, but with an understanding that

they could apply the appropriate penalty, rather than this mandatory termination that was part of 1203.

Ms. NORTON. Which all goes to show what we almost went

through in this very committee, by pasting something onto legislation when there has been no hearing. Almost inevitably there are

unintended consequences, even if you later do it. You need to know

what you are doing.

Ms. KELLEY. That is right.

Ms. NORTON. The other remedies—I just may followup with Ms.

Kelley, and then, of course, you will go next. But Mr. Morrow indicated the Merit Systems Protection Board, when it gets bad

enough, in your testimony—the page is not numbered—where if it

gets bad enough, it can go—and you even cite a case—before the

Merit Systems Protection Board for tax liability.

Sorry, who else wishes to speak on that matter?

Mr. OPPEDISANO. Ms. Norton, I need to get some clarification, because I am not an IRS employee. But I understand that the rule

on the IRS for the firing for non-tax payment is not for all of the

employees of the IRS. It is just for specific employees who are the

tax compliance end of it. It is not for managerial, supervision, or

clerical.

Ms. KELLEY. Actually, that is not true. It applies to all employees, including clerical.

Mr. OPPEDISANO. OK.

Ms. KELLEY. It has been applied to grade 4s and 5s.

Mr. RIZEK. But it does not apply to non-payment. It only applies

to willful failure to file or willful understatement of a liability.

Ms. NORTON. I am struck by the issue that the chairman raised

about hiring. Now, as I understand it, the number of, and I do not

know how many, but many who wish to be employed are now subjected to credit checks. And of course, a lot of employers do this,

where they pull up the credit report. Is that not the case for Federal employees, Mr. Morrow, Ms. Kelley?

Ms. KELLEY. I do not know if it is routine. I know it is done in

many cases, but I do not know.

Mr. MORROW. That would be my answer. I think you would have

to ask the agency.

Certainly in situations for law enforcement officers, where suitability or national security certifications are needed, it would be.

But for some positions it might not be. OPM might know the answer to that.

157

Ms. NORTON. This is all very serious, because all of us can perceive of employees at certain levels doing certain kinds of work

where you would want no taint on the employee’s record. Ms.

Kelley has testified if you are a clerk, you are subject to the same

sanctions, automatic firing, as I suppose somebody, until you get to

the Commissioner, who can only be fired for cause. A very specific

procedure.

We also heard testimony that, as it turns out, a very small number have been fired, rather quintessentially small. Does that indicate that the IRS has, in fact, operated with some degree of flexibility, even with respect to its own employees, rather than automatic

firing for so-called willful? And that it looks at what is willful and

not willful, etc?

We are trying to find here, I am trying to find here in this set

of questions what I can about application of this automatic firing,

that any of you may understand from the way it plays out in the

field among employees.

Ms. KELLEY. I would say it is two things. And one is the communication and education system that the IRS engages in with employees. I mean, from day one on the job.

And then there is annually a reminder of their obligation, of assistance that is available, of, you know, what it is that they need

to do if they do not have the money to pay. I mean, it is a nonstop reminder of their obligation and communication.

So my bet is that much——

Ms. NORTON. You know, if a lien occurs, for example, there was

great discussion in this committee about what can occur anywhere

when there is a lien, that is it. Many employers—and I still am not

clear, particularly for the IRS—if a lien showed up, whether that

would be automatically a trigger for firing by the IRS? Or whether,

in fact, a lien could result in some of the procedures you have outlined for example, Ms. Kelley.

Ms. KELLEY. Well, in the, if a lien were filed on an IRS employee,

they would be looked at very, very closely to determine why. And

then in the end, they would get down to this willful question.

First and foremost, what they want, and should want, is every

employee to be in compliance; to, you know, be current in their tax

filings and in their tax payments, or to be on some kind of a payment plan.

If they were in a lien situation, that could raise a series of questions about failure to pay. And it really would depend on the specifics of the situation. And the IRS looks at them. They take them

very seriously, and they look at them very closely.

And I would not attribute the low number of firings that seem,

you know, that were reported, that everyone has categorized as low

that Ms. Tucker reported, as meaning that the IRS does not take

this seriously. It is, they focus on the willful, because that is what

1203 says.

But as I said, before there was ever 1203, the IRS dealt with

these issues as they always should. I mean, they took it seriously,

and they had raised the bar. It was a much higher standard.

So in a lot of ways, 1203 really got in the way of them doing

what they were trying to do, because they were exercising judgVerDate 11-MAY-2000 14:30 Dec 10, 2010 Jkt 000000 PO 00000 Frm 00161 Fmt 6633 Sfmt 6633 U:\DOCS\61935.TXT KATIE PsN: KATIE
158

ment on the specific circumstances in a case. Which I think is what

we would all agree should happen.

Mr. RIZEK. The standards were intentionally set quite high in

Section 1203, to require termination, since that was the only sanction permitted under the provision, only in egregious cases. So they

required a final determination, it requires that the conduct be willful, and it requires that it not be due to reasonable cause or neglect.

Those are all terms of art within the Tax Law, that the tax employees of the IRS would clearly understand.

Ms. KELLEY. But I would add that there have been problems

with it, because willful, what you see as willful can be different

than what I see as willful. And it is then the Commissioner’s decision. Only the Commissioner can make the decision to not terminate under Section 1203, based on the willful determination.

So it is not a, you know, a test that is pure, and that everyone

agrees on in every case.

Ms. NORTON. So you would not say that the IRS has unfairly,

strictly given its opposition in the first place, to the new 1998 procedure; you would not say that they unfairly applied it.

Ms. KELLEY. I would say they worked very hard to put a new

process in place, which they had to do. They had to create this

panel to make recommendations to the Commissioner. And they

worked very hard to put a fair process in place.

That being said, there have still been a number of situations

where we disagree that it was willful. But I would say in general,

they worked very hard to put a fair process in place to apply 1203,

yes.

Ms. NORTON. Well, what are the issues—Chairman Lynch raised

this until we had to have this hearing, frankly—about the effect of

the lien? Because he raises it knowing full well that a lien is a lien,

and you can have steps before you decide to enforce a lien. But you

could enforce it once that lien is, is there.

And from your testimony, given willful and the rest of it, I gather

that even at the IRS, the lien, despite its protection of the United

States, if it chooses to use it, does not automatically attribute I see

a lien, your job is gone. That is even at the IRS, much less, I suppose, elsewhere.

At the IRS, a lien shows up. I have not had the opportunity to

say anything about it, but it is on the books. If I worked for almost

anybody, they had a piece of paper which they could enforce. I wonder if it is the testimony of all of you that even at the IRS, one

would have to look at things like willful, etc.

Mr. RIZEK. It is certainly the case that the mere filing of a Federal tax lien against an IRS employee is not grounds for termination under Section 1203.

If, however, the lien has arisen because of willful failure to file,

they did not file a return at all, or——

Ms. NORTON. But see, you may not know——

Mr. RIZEK [continuing]. Willful understatement——

Ms. NORTON. The employee may not have had the opportunity to

address willfulness.

Mr. RIZEK. Well, they will always know whether they had filed

or not.

159

Ms. NORTON. Yes, by that point.

Mr. RIZEK. OK. So if a Federal tax lien arises because the IRS

prepares a substitute return, and files a Federal tax lien pursuant

to that, the taxpayer has plenty of notice about that.

Ms. NORTON. Of course.

Mr. RIZEK. Now, that does not presume that they willfully failed

to file; they would, of course, have to do an investigation of the sort

Ms. Kelley described.

Ms. NORTON. Yes. An application, it does not appear that the IRS

would simply jump on the lien, although that is far along in the

process.

Ms. KELLEY. No, I was going to suggest actually you might want

to pose this question to the IRS.

Ms. NORTON. I tried to get it from—she seemed to step away

from automatic firing, you know, by looking at willfulness and the

rest of it.

Ms. KELLEY. Right.

Ms. NORTON. And I am trying to find out in practice, since the

lien troubled many of us because of its legal effects, and its immediate legal effect if the entities choose to pursue it. We were concerned with particularly going through other Federal employees as

to whether or not the government would say I have a lien, I have

not got—I have a lot of work. I now if I try to enforce, maybe I will

get the attention. The IRS could do that.

And my question is, would it really do that, especially in light

of the fact it did not even think that this process was necessary in

order for it to get compliance with its own employees?

Ms. KELLEY. Well, the Employee Tax Compliance Program was

in place even before 1203, and it continues today.

When those notices are sent, the four notices that they talked

about saying that you are delinquent, at some point—and this is

probably what the IRS needs to answer, because I am not sure as

to where, at what point in the four notices, and then the levy, and

then the lien, is the manager given the information and told to deal

with the employee; to let the employee know that, you know, this

is—because I can tell you, I do not think the IRS would move slowly if they had information that an IRS employee had a lien filed

against them. I think the manager would be calling that employee

into their office yesterday.

But I do not know exactly at what point. The manager at some

point gets involved. And that could be a question for the IRS. Because I do not think they would ever be surprised that a lien was

coming to an IRS employee, because they follow it really closely

through this Employee Tax Compliance Program.

Ms. NORTON. So all this reference of the IRS notice probably well

in advance of the lien, and they are trying to counsel with the employee ahead of time. Now, imagine that happening across the entire government and the annuitants. And we are going to counsel

you, we are going to deal with you. So we have serious concerns

about how practical any of this is.

I have a question. This is from the testimony of Mr. Oppedisano.

You indicate near the end of your testimony an expansion of authority to garnish wages should be considered, I take it as an alternative to looking at the, at——

160

Mr. OPPEDISANO. The lien process.

Ms. NORTON [continuing]. What the bill proposes.

Mr. OPPEDISANO. Yes.

Ms. NORTON. And why would an expansion be necessary?

Mr. OPPEDISANO. First of all, we do not think expansion would

be necessary, because the provisions of the law are already there.

But if, in fact, in order to be able to get around this legislation, if,

in fact, additional IRS rules, laws, or regulations could be implemented that would help the Federal employer, all American taxpayers, to be able to resolve their issues a little bit more judiciously.

Ms. Norton, I would just like to say one thing. Before we came

into this room today, I had, one of our members came up to me.

And she is a single parent. And a few years back she had a difficult

situation, and she had to make, she negotiated with the IRS a payment plan.

What happened was the IRS failed to process the payment plan,

the payment book to her, and she never got it. She ended up getting a lien applied against her.

If this law, if this legislation action was in fact law, she would

have had to have been fired. And that is what we are really

against.

Ms. NORTON. Did she work for the IRS?

Mr. OPPEDISANO. If she worked for any Federal agency.

Ms. NORTON. Well, no, this automatic firing is IRS employees.

Mr. OPPEDISANO. No, I said if this legislation is passed as written.

Ms. NORTON. All right, all right. That is some of the practical realities of enforcement have come out only in this hearing. These

were hardly raised when Members at the markup began to raise

some of the obvious legal questions.

I have another question for which I think we would need far

greater information before proceeding on this bill.

There is some very scary and bad figures cited about the billions

of dollars owed by Federal employees. I do not know what in the

world that means. Owed when? Subject to, subject to an employee,

subject to contesting? Owed at what point in time? You know, no

one has indicated what that means.

Does that really mean, then, that people are carrying around

years of Federal liability while drawing a paycheck from the Federal Government? Mr. Rizek.

Mr. RIZEK. Yes, it does. It means that the tax liability has been

assessed, which is a formal act entering the liability on the books

of the United States and making the taxpayer liable for it.

The taxpayer has an opportunity to contest it both before that

and after that. But if it is assessed and not paid, it is carried in

that account.

Ms. NORTON. The operative word, Mr. Rizek, is not paid. For example, I suppose the example that you have just given, Mr.

Oppedisano. She is owed that amount until it is paid. Until it is

paid, it is slated as—I do not know if, in calculating these billions

of dollars owed, every month they look and see how much of it has

been paid. They look at when the liability was assessed, and these

employees owed it. Now they have worked out a payment plan, and

161

I do not have any reason to believe that somebody is keeping track

of how much they pay down until they finally do not have any tax

liability. Ms. Kelley.

Ms. KELLEY. I think you are right on the mark with that. Again,

I would, at the risk of suggesting questions you ask the IRS, I am

going to do that again. Because this is the way I understand this.

They take this snapshot on September 30th each year, of dollars

owed. So that it is a moving target; for sure, it changes. But on

September 30th that is the money owed.

But included in there, if I were to owe $2,000, and I am on a 15

percent levy of my wages, I owed $2,000 on September 30th. That

$2,000 is in there, even though they are taking out 15 percent

every pay period.

So the next September 30th, whatever they took out of my pay,

it would be decreased, the amount owed. But I am paying that

amount, but it is included in the billions that you are citing.

So, you know, you could look at it at first blush and say it is

owed, and nobody is doing anything about paying. And that is not

the case. Because everyone who is on a 15 percent garnishment of

their wages, those dollars are still in there, are being carried as

due.

But again, the IRS would really be the ones to clarify that, but

that is how I understand it.

Ms. NORTON. And a question like that has to be submitted for

the record. You know, at what point do you assess. And if anything,

they probably just add ont.

Ms. KELLEY. Well, the next September 30TH——

Ms. NORTON. They add on to this year what you had last year.

Ms. KELLEY. The next September 30th anyone new would be

added, and then any money that was withheld from my garnishment would come out.

Ms. NORTON. That would come out, if it was garnished.

Ms. KELLEY. That would come out, because it is not owed any

more. But the $1,700 I still owe is still there. It was $2,000, and

now it is, yes.

Ms. NORTON. Perhaps there is a distinction between IRS employees and others, I am not sure, especially since the IRS opposed the

very process that has served as a pilot program for what some now

want to do to every Federal employee.

Given the fact that neither this administration or the last administration felt, has felt that the fair and reasonable thing to do is

to apply such a process, I have my serious doubts about why anybody would want to proceed after what we have learned today.

And the reason I have doubts is because of how I think every

hearing should be structured. It is the obligation of an agency head

to come and defend the agency’s practices. You have learned nothing about the agency’s practices until, as I say to my own staff on

the committee I chair, until you have heard from some real people.

You represent the real people who would be at the other end of

the spread, of the IRS procedure across the government. I do not

speak for any other member of this committee. But speaking for

myself, having heard realistically how this would apply, now knowing that looking at two administrations who do not share much in

162

common, neither believe that the present policy at the IRS should

be in effect.

I do not see, given your testimony, given what appear to be the

thoughtful deliberations of two very different administrations, why

this subcommittee, in the face of the most expert testimony we can

find, would proceed to spread a bad practice across the Federal

work force.

I know I speak on behalf of the chairman when I say at least this

much: We have benefited tremendously from your testimony, and

we greatly appreciate your coming to testify before us today.

The hearing is adjourned.

[Whereupon, at 4:44 p.m., the subcommittee was adjourned.]

Æ