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[Senate Report 113-272]
[From the U.S. Government Publishing Office]

                                                   Calendar No. 596
113th Congress   }                                    {      Report
                                 SENATE
 2d Session      }                                    {     113-272
                                                                
_______________________________________________________________________

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

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                S. 1045

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

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

               November 13, 2014.--Ordered to be printed
                                _____
                                
                    U.S. GOVERNMENT PRINTING OFFICE 

49-010                     WASHINGTON : 2014           
         
         
         
         
               
               
               
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                  THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin             KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota

                  Gabrielle A. Batkin, Staff Director
               John P. Kilvington, Deputy Staff Director
                    Mary Beth Schultz, Chief Counsel
       Lawrence B. Novey, Chief Counsel for Governmental Affairs
               Keith B. Ashdown, Minority Staff Director
         Christopher J. Barkley, Minority Deputy Staff Director
               Andrew C. Dockham, Minority Chief Counsel
       Joelle Cannon, Legislative Aide, Office of Senator Coburn
                     Laura W. Kilbride, Chief Clerk
                     
                     
                     
                     
                                                       Calendar No. 596
113th Congress    }                                      {       Report
                                 SENATE
 2d Session       }                                      {      113-272

======================================================================

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

                                _______
                                

               November 13, 2014.--Ordered to be printed

                                _______
                                

  Mr. Carper, from the Committee on Homeland Security and Government 
                    Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 1045]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 1045), to amend 
title 5, United States Code, to provide that persons having 
seriously delinquent tax debts shall be ineligible for Federal 
employment, having considered the same, reports favorably 
thereon with amendment in the nature of a substitute and 
recommends that the bill, as amended, do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................3
 IV. Section-by-Section Analysis of the Bill, as Reported.............4
  V. Evaluation of Regulatory Impact..................................4
 VI. Congressional Budget Office Estimate.............................5
VII. Changes in Existing Law..........................................6

                         I. Purpose and Summary

    S. 1045 would make most individuals with seriously 
delinquent federal tax debt--generally defined as a tax debt 
for which the government has filed a public lien--ineligible to 
work for the federal government.

              II. Background and Need for the Legislation

    With most federal salaries generally derived from taxes 
paid by the American people, federal workers have a special 
responsibility to meet their tax obligations. The vast majority 
of federal workers do just that. However, some do not. 
According to the Internal Revenue Service's (IRS's) annual 
Federal Employee/Retiree Delinquency Initiative (FERDI) report 
for 2013, 116,169 civilian federal employees owed 
$1,084,201,015 in federal back taxes in 2013.\1\ This figure 
represents a delinquency rate of 4.07%.\2\
---------------------------------------------------------------------------
    \1\See Internal Revenue Service, Federal Employee/Retiree 
Delinquency Initiative (FERDI) Report, 2013. 
    \2\Ibid. Further, a July 2014 report by the Government 
Accountability Office (GAO)--``Tax Debts Owed by DoD Employees and 
Contractors''--revealed that about 83,000 Department of Defense (DOD) 
military and civilian employees and contractors who had been determined 
eligible for secret, top secret, or sensitive compartmented information 
clearances had unpaid federal tax debt totaling more than $730 million 
as of June 30, 2012. Of these, about 44,500 were DOD employees, though 
the report does not indicate how many of them were military (who would 
not be covered under this bill) and how many civilian (who could be 
covered under this bill, if they have seriously delinquent tax debt and 
meet other conditions). GAO, ``Security Clearances: Tax Debts Owed by 
DOD Employees and Contractors,'' GAO-14-686R, July 28, 2014, at pages 
10, 16 of the enclosure, http://www.gao.gov/products/GAO-14-686R.
---------------------------------------------------------------------------
    Currently, employees of the Internal Revenue Service can be 
terminated for having seriously delinquent tax debt.\3\ S. 1045 
requires all agencies to adopt this common-sense approach by 
requiring that they notify employees with seriously delinquent 
tax debt that they must immediately repay the debt or enter a 
repayment program. If within 150 days of receiving the notice, 
the employees have not repaid the debt, entered a repayment 
program, or otherwise offered evidence to the agency that their 
tax debt is not seriously delinquent, the agency will terminate 
their employment. In a case where employment is terminated 
under the legislation for these reasons, the employee may apply 
for review of the proposed termination under an applicable 
procedure, appeal, or grievance process to which the employee 
would be entitled generally in the case of a proposed 
termination of the individual's employment.
---------------------------------------------------------------------------
    \3\PL 105-206, section 1203.
---------------------------------------------------------------------------
    The bill also provides for an exemption, so that, if an 
individual's employment would otherwise need to be terminated, 
the head of the employing agency may determine, in his or her 
discretion that the individual's continued service is in the 
best interests of the United States. The making or not making 
of such a determination would not be subject to review.
    S. 1045 also prohibits anyone with seriously delinquent tax 
debt from entering the federal workforce. The legislation 
requires agencies to ensure that job applicants certify, under 
penalty of perjury, that they do not owe seriously delinquent 
tax debt as of the date that the certification is made. S. 1045 
prohibits the agency from hiring an applicant who does not make 
that certification.
    Each agency will also offer a process under which a job 
applicant who is denied employment under the legislation may 
appeal to bring to the agency's attention any factual errors 
made in determining that the applicant did not make the 
required certification. S. 1045 allows each agency to decide 
what kind of review to make available for this purpose, and the 
Office of Personnel Management could, under its general 
authority, consider whether it would be desirable for the 
Director to establish any government-wide guidance or 
standards.
    While S. 1045 aims to bring about greater tax compliance 
among the federal workforce, it also recognizes unforeseen 
circumstances or financial hardship can happen to even the most 
law abiding citizens. S. 1045 defines ``seriously delinquent'' 
very specifically. An employee does not owe ``seriously 
delinquent'' tax debt if he or she is in the process of 
repaying the debt in a timely manner, or if a hearing or appeal 
is pending or ongoing. In addition, if a levy has been issued 
on the tax debt or if a financial hardship exemption has been 
granted, the tax debt is not ``seriously delinquent''.
    The Committee notes that the House of Representatives 
considered similar legislation, H.R. 249, in April of 2013. 
Although a majority of members voted in favor of the 
legislation, the bill did not pass the House, because it was 
considered on the suspension calendar, where a two-thirds vote 
is required. The vote was 250 in favor and 159 against, which 
was 23 yea votes less than the necessary two-thirds.\4\
---------------------------------------------------------------------------
    \4\See 159 Congressional Record H2012 (daily edition April 15, 
2013).
---------------------------------------------------------------------------
    Opponents argued that the legislation was unwarranted, 
citing that the tax delinquency rate for federal employees is 
less than half that of the general public, mechanisms already 
exist to collect back taxes from federal employees and to 
discipline those who do not pay, and termination of 
individuals' employment may make it more difficult to collect 
unpaid taxes from them.\5\
---------------------------------------------------------------------------
    \5\See 159 Congressional Record H2004-H2010 (daily edition April 
15, 2013). See also, Kelley, Colleen, National Treasury Employees 
Union, Letter to Congressional Representatives, April 8, 2013, http://
www.secunion.org/files/LtrtoHouseonHR249492013.pdf.
---------------------------------------------------------------------------
    This Committee, however, contends legislation to further 
push higher tax compliance rates for federal employees is 
needed. The over a billion dollars in tax debt owed by federal 
employees is not an insignificant sum and demands attention. 
The Committee wants to make clear that individuals who choose 
not to pay their federal tax debt, after being given numerous 
options to do so, should not be rewarded with federal 
employment. Federal salaries are derived from federal taxes, 
and it is incumbent on those in federal service to set an 
example.
    Further, S. 1045 provides a number of due process 
provisions and exemptions for financial hardship, making sure 
to focus on the seriously tax delinquent federal employees who 
chronically refuse to pay what they owe.

                        III. Legislative History

    On May 23, 2013, Senator Coburn introduced S. 1045, with 
Senator Pryor as a cosponsor. The bill was referred to the 
Committee on Homeland Security and Governmental Affairs.
    The Committee considered S. 1045 at a business meeting on 
May 21, 2014. Senators Coburn and Pryor offered a substitute 
amendment which differentiated processes for current and 
prospective federal employees, requiring prospective employees 
to certify they do not possess seriously delinquent tax debt. 
For current employees, the substitute amendment includes 
specific timelines for agencies and employees to act, and 
includes specific exemptions and due process provisions for 
employees or prospective employees against whom adverse action 
is taken. The Committee adopted the substitute and then ordered 
the bill, as amended, favorably reported, both by voice vote. 
Senators Carper, Pryor, Landrieu, McCaskill, Tester, Begich, 
Coburn, Johnson, Portman, and Enzi were present for both votes.

        IV. Section-by-Section Analysis of the Bill, as Reported

    Section 1(a) adds a new Subchapter VIII to Chapter 73 of 
title 5 and defines the terms ``agency'', ``Code'', ``Federal 
employee, and ``seriously delinquent tax debt''. ``Seriously 
delinquent tax debt'' is defined as any tax debt owed for which 
a public lien has been filed, with certain exceptions. Those 
exceptions include a debt that is being repaid through an 
arranged repayment agreement, a debt for which a hearing or 
appeal is pending or ongoing, a debt for which the IRS has 
already issued a levy for repayment, or a debt for which relief 
has been otherwise granted.
    Section 1(b)(1) prohibits any applicant for federal 
employment with seriously delinquent tax debt from working for 
the federal government or being appointed to federal 
employment.
    Section 1(b)(2)(A) requires an agency to provide written 
notice to a current federal employee if the employee has 
seriously delinquent tax debt. The employee has 150 days from 
the date of the notice to begin repaying the debt.
    Section 1(b)(2)(B) requires the agency to notify an 
employee who has seriously delinquent tax debt and has not 
begun repaying the debt within the 150-day deadline that they 
must repay the total amount or enter a repayment program within 
60 days from when the notice is received, or be terminated from 
employment.
    Section 1(b)(2)(C) allows an exemption for federal 
employees who do not comply if the head of the employing agency 
determines that the employee's continued service is in the best 
interests of the United States.
    Section 1(b)(2)(D) provides terminated employees with 
applicable appeal, review, and grievance procedures provided by 
current law, if they are terminated for failing to repay their 
seriously delinquent tax debt in full or for failing to enter a 
repayment program to begin paying back the seriously delinquent 
tax debt.
    Section 1(c) requires the head of an employing agency to 
require applicants to certify, under penalty of perjury, that 
they do not possess a seriously delinquent tax debt. It 
prohibits the employing agency from hiring someone who does not 
make such a certification. It further requires the head of an 
employing agency to establish a fair and efficient appeals 
process for employees who are denied employment for not making 
the certification.

                   V. Evaluation of Regulatory Impact

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact that would be incurred in 
carrying out this legislation and determined that there is no 
regulatory impact within the meaning of the rule. The Committee 
further agrees with the Congressional Budget Office there are 
no intergovernmental or private-sector mandates as defined in 
the Unfunded Mandates Reform Act and no costs on State, local, 
or tribal governments.

                VI. Congressional Budget Office Estimate

                                                      June 5, 2014.
Hon. Tom Carper,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1045, a bill to 
amend title 5, United States Code, to provide that persons 
having seriously delinquent tax debts shall be ineligible for 
federal employment.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

S. 1045--A bill to amend title 5, United States Code, to provide that 
        persons having seriously delinquent tax debts shall be 
        ineligible for federal employment

    Under S. 1045, individuals with federal tax debt that is 
seriously delinquent would be ineligible to be appointed or to 
continue serving as an employee of the federal government. The 
legislation defines tax debt to be seriously delinquent if a 
public lien has been filed. Tax debt that is being repaid in a 
timely manner, is part of a requested or pending collection-
due-process hearing, or whose repayment the Department of 
Treasury determines would cause financial hardship, would not 
be considered seriously delinquent. Federal agencies would be 
required to have job applicants certify that they do not have 
such debt. Current federal employees would have 150 days after 
receiving their outstanding debt notice to enter into 
agreements to resolve their debt in order to remain eligible 
for continued employment.
    Based on information from the Office of Management and 
Budget, the Internal Revenue Service, and staff of the Joint 
Committee on Taxation (JCT), CBO estimates that implementing S. 
1045 would cost less than $500,000 annually, subject to the 
availability of appropriated funds, mostly to create and 
administer certification forms.
    Pay-as-you-go procedures apply to the bill because it would 
affect direct spending and revenues. Agencies not funded 
through annual appropriations, such as the Tennessee Valley 
Authority and Bonneville Power Administration, would face some 
additional costs (as described above), but CBO estimates that 
any net increase in direct spending by such agencies would not 
be significant. JCT estimates that enacting the bill would have 
a negligible effect on revenues.
    S. 1045 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on budgets of state, local, or tribal 
governments.
    On April 11, 2013, CBO transmitted a cost estimate for H.R. 
249, the Federal Employee Tax Accountability Act of 2013, as 
ordered reported by the House Committee on Oversight and 
Government Reform. Both bills address delinquent taxes of 
federal employees, however, the House bill would authorize 
agencies to review tax records. The estimated costs reflect the 
differences between the bills.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

                      VII. Changes in Existing Law

    In compliance with section 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill 
as reported are shown as follows: Existing law proposed to be 
omitted is enclosed in [black brackets], new matter is printed 
in italic, existing law in which no change is proposed is shown 
in roman:

                           UNITED STATES CODE

TITLE 5--GOVERNMENT ORGANIZATION AND EMPLOYEES

           *       *       *       *       *       *       *

PART III--EMPLOYEES

           *       *       *       *       *       *       *

Subpart F--Labor-Management and Employee Relations

           *       *       *       *       *       *       *

             CHAPTER 73--SUITABILITY, SECURITY, AND CONDUCT

                  SUBCHAPTER I--REGULATION OF CONDUCT

SEC.

7301. PRESIDENTIAL REGULATIONS.

           *       *       *       *       *       *       *

 SUBCHAPTER VIII--INELIGIBILITY OF PERSONS HAVING SERIOUSLY DELINQUENT 
                    TAX DEBTS FOR FEDERAL EMPLOYMENT

7381. INELIGIBILITY OF PERSONS HAVING SERIOUSLY DELINQUENT TAX DEBTS 
                    FOR FEDERAL EMPLOYMENT.

           *       *       *       *       *       *       *

 Subchapter VIII--Ineligibility of Persons Having Seriously Delinquent 
                    Tax Debts for Federal Employment

Sec. 7381. Ineligibility of persons having seriously delinquent tax 
                    debts for Federal employment.

    (a) Definitions.--In this section--
          (1) the term ``agency'' means--
                  (A) an Executive agency;
                  (B) the United States Postal Service;
                  (C) the Postal Regulatory Commission; and
                  (D) an employing authority in the legislative 
                branch;
          (2) the term ``Code'' means the Internal Revenue Code 
        of 1986;
          (3) the term ``Federal employee'' means an employee 
        in or under an agency, including an individual 
        described in section 2104(b) or 2105(e);
          (4) the term ``seriously delinquent tax debt'' means 
        an outstanding debt under the Code for which a notice 
        of Federal tax lien has been filed in public records 
        pursuant to section 6323 of the Code, except that such 
        term does not include--
                  (A) a debt that is being paid in a timely 
                manner pursuant to an agreement under section 
                6159 or section 7122 of the Code;
                  (B) a debt with respect to which a collection 
                due process hearing under section 6330 of the 
                Code, or relief under subsection (a), (b), or 
                (f) of section 6015 of the Code, is requested 
                or pending;
                  (C) a debt with respect to which a levy has 
                been issued under section 6331 of the Code (or, 
                in the case of an applicant for employment, a 
                debt with respect to which the applicant agrees 
                to be subject to a levy issued under that 
                section if employed by an agency); and
                  (D) a debt with respect to which relief under 
                section 6343(a)(1)(D) of the Code is granted.
    (b) Ineligibility for Federal Employment.--
          (1) In general.--Except as provided in paragraph 
        (2)(C), an individual who has a seriously delinquent 
        tax debt shall be ineligible to continue serving as a 
        Federal employee or, subject to subsection (c), to be 
        appointed as a Federal employee.
          (2) Federal employees.--
                  (A) In general.--A Federal employee who has a 
                seriously delinquent tax debt shall have 150 
                days after the date of written notice by the 
                agency employing the Federal employee to begin 
                repaying the debt in a timely manner pursuant 
                to an agreement under section 6159 or 7122 of 
                the Code.
                  (B) Failure to begin repaying seriously 
                delinquent tax debt in a timely manner.--If a 
                Federal employee who has a seriously delinquent 
                tax debt does not begin repaying the debt in a 
                timely manner pursuant to an agreement under 
                section 6159 or 7122 of the Code during the 
                period specified in subparagraph (A), the head 
                of the employing agency of the Federal employee 
                shall--
                          (i) notify in writing the Federal 
                        employee that, not later than 60 days 
                        after the date on which the Federal 
                        employee receives the notification, the 
                        Federal employee shall--
                                  (I) repay the total amount of 
                                the seriously delinquent tax 
                                debt of the Federal employee; 
                                or
                                  (II) begin repaying the debt 
                                in a timely manner pursuant to 
                                an agreement under section 6159 
                                or 7122 of the Code; and
                          (ii) except as provided in 
                        subparagraphs (C) and (D), terminate 
                        the Federal employee if the Federal 
                        employee does not comply with the 
                        requirements of a notice issued under 
                        clause (i).
                  (C) Exemption.--A Federal employee who does 
                not comply with the requirements of a notice 
                issued under subparagraph (B)(i) may continue 
                serving as a Federal employee if the head of 
                the employing agency of the Federal employee 
                determines that the continued service of the 
                Federal employee is in the best interests of 
                the United States.
                  (D) Procedure.--Chapter 75, any other 
                applicable provision of law, and appeal, review 
                or grievance procedures to which the employee 
                is entitled shall apply to a termination under 
                subparagraph (B)(ii).
    (c) Applicants.--The head of an agency--
          (1) shall take appropriate measures to ensure that 
        each individual that submits an application for 
        employment with the agency certify (as part of the 
        application) under penalty of perjury as provided in 
        section 1746 of title 28 that the individual does not 
        have a seriously delinquent tax debt (as of the date on 
        which the certification is made);
          (2) may not employ any individual who does not make 
        the certification described in paragraph (1)(C); and
          (3) shall establish an appeal process for individuals 
        denied employment under paragraph (2).

                                  [all]
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