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) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

43–913 CC 1997

INTERNAL REVENUE SERVICE MISMANAGEMENT

AND IDEAS FOR IMPROVEMENT

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, 

INFORMATION, AND TECHNOLOGY

OF THE

COMMITTEE ON 

GOVERNMENT REFORM 

AND OVERSIGHT 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

FIRST SESSION

APRIL 14, 1997

Serial No. 105–43

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

(

(II)

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT 

DAN BURTON, Indiana, Chairman 

BENJAMIN A. GILMAN, New York 

J. DENNIS HASTERT, Illinois 

CONSTANCE A. MORELLA, Maryland 

CHRISTOPHER SHAYS, Connecticut 

STEVEN SCHIFF, New Mexico 

CHRISTOPHER COX, California 

ILEANA ROS-LEHTINEN, Florida 

JOHN M. MCHUGH, New York 

STEPHEN HORN, California 

JOHN L. MICA, Florida 

THOMAS M. DAVIS, Virginia 

DAVID M. MCINTOSH, Indiana 

MARK E. SOUDER, Indiana 

JOE SCARBOROUGH, Florida 

JOHN B. SHADEGG, Arizona 

STEVEN C. LATOURETTE, Ohio 

MARSHALL ‘‘MARK’’ SANFORD, South 

Carolina 

JOHN E. SUNUNU, New Hampshire 

PETE SESSIONS, Texas 

MICHAEL PAPPAS, New Jersey 

VINCE SNOWBARGER, Kansas 

BOB BARR, Georgia 

ROB PORTMAN, Ohio 

HENRY A. WAXMAN, California 

TOM LANTOS, California 

ROBERT E. WISE, JR., West Virginia 

MAJOR R. OWENS, New York 

EDOLPHUS TOWNS, New York 

PAUL E. KANJORSKI, Pennsylvania 

GARY A. CONDIT, California 

CAROLYN B. MALONEY, New York 

THOMAS M. BARRETT, Wisconsin 

ELEANOR HOLMES NORTON, Washington, 

DC 

CHAKA FATTAH, Pennsylvania 

TIM HOLDEN, Pennsylvania 

ELIJAH E. CUMMINGS, Maryland 

DENNIS J. KUCINICH, Ohio 

ROD R. BLAGOJEVICH, Illinois 

DANNY K. DAVIS, Illinois 

JOHN F. TIERNEY, Massachusetts 

JIM TURNER, Texas 

THOMAS H. ALLEN, Maine 

———

BERNARD SANDERS, Vermont 

(Independent) 

KEVIN BINGER, Staff Director 

DANIEL R. MOLL, Deputy Staff Director 

JUDITH MCCOY, Chief Clerk 

PHIL SCHILIRO, Minority Staff Director 

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY

STEPHEN HORN, California, Chairman 

PETE SESSIONS, Texas 

THOMAS M. DAVIS, Virginia 

JOE SCARBOROUGH, Florida 

MARSHALL ‘‘MARK’’ SANFORD, South 

Carolina 

JOHN E. SUNUNU, New Hampshire 

ROB PORTMAN, Ohio 

CAROLYN B. MALONEY, New York 

PAUL E. KANJORSKI, Pennsylvania 

MAJOR R. OWENS, New York 

ROD R. BLAGOJEVICH, Illinois 

DANNY K. DAVIS, Illinois 

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California 

J. RUSSELL GEORGE, Staff Director and Chief Counsel 

ANNA MILLER, Professional Staff Member 

JOHN HYNES, Professional Staff Member 

ANDREA MILLER, Clerk 

DAVID MCMILLEN, Minority Professional Staff Member 

MARK STEPHENSON, Minority Professional Staff Member 

(III)

C O N T E N T S 

Page 

Hearing held on April 14, 1997 .............................................................................. 1

Statement of: 

Davis, Shelley, former IRS Historian; Sheldon Cohen, IRS Commissioner 

during the Johnson administration, fellow, National Academy of Public 

Administration; and Robert Tobias, president, National Treasury Employees Union ................................................................................................ 70

Dolan, Michael, Deputy Commissioner, Internal Revenue Service, accompanied by Jim Donelson, Chief Compliance Officer; Tony Musick, Chief 

Financial Officer; Arthur A. Gross, Chief Information Officer; and 

David Mader, Chief, Management and Administration ............................ 137

Trinca, Jeffery S., chief of staff, National Commission on Restructuring 

the Internal Revenue Service ....................................................................... 230

Willis, Lynda D., Director, Tax Policy and Administration, General Government Division, U.S. General Accounting Office, accompanied by 

Rona B. Stillman, Chief Scientist for Computers and Telecommunications, U.S. General Accounting Office ..................................................... 28

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

Cohen, Sheldon, IRS Commissioner during the Johnson administration, 

fellow, National Academy of Public Administration: 

Followup questions and responses ........................................................... 134

Prepared statement of ............................................................................... 90

Davis, Shelley, former IRS Historian, prepared statement of ...................... 74

Dolan, Michael, Deputy Commissioner, Internal Revenue Service: 

Followup questions and responses ........................................................... 228

Information concerning outcome oriented measures .............................. 218

Information concerning the number of cases of unauthorized access, 

or browsing, that were appealed by employees ................................... 204

Prepared statement of ............................................................................... 143

Horn, Hon. Stephen, a Representative in Congress from the State of 

California: 

Article from Time Magazine ..................................................................... 220

Excerpts from the IRS Management Report, High Risk Series ............ 210

Information concerning fiscal year 1998 performance measures and 

targets ..................................................................................................... 207

Information concerning section 6103 of the IRS Code ........................... 219

Prepared statement of ............................................................................... 5

Mader, David, Chief, Management and Administration, information concerning browsing cases statistics ................................................................. 202

Maloney, Hon. Carolyn B., a Representative in Congress from the State 

of New York, prepared statement of ........................................................... 9

Sanders, Hon. Bernard, a Representative in Congress from the State 

of Vermont, prepared statement of .............................................................. 13

Tobias, Robert, president, National Treasury Employees Union, prepared 

statement of ................................................................................................... 110

Traficant, Hon. James A., Jr., a Representative in Congress from the 

State of Ohio, prepared statement of .......................................................... 19

Trinca, Jeffery S., chief of staff, National Commission on Restructuring 

the Internal Revenue Service, prepared statement of ............................... 234

Willis, Lynda D., Director, Tax Policy and Administration, General Government Division, U.S. General Accounting Office: 

Followup questions and responses ........................................................... 66

Prepared statement of ............................................................................... 33

(1)

INTERNAL REVENUE SERVICE MISMANAGEMENT AND IDEAS FOR IMPROVEMENT 

MONDAY, APRIL 14, 1997

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY, COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT, Washington, DC. 

The subcommittee met, pursuant to notice, at 10 a.m., in room 

2154, Rayburn House Office Building, Hon. Stephen Horn (chairman of the subcommittee) presiding. 

Present: Representatives Davis of Virginia, Sununu, and 

Maloney. 

Also present: Representative Sanders. 

Staff present: J. Russell George, staff director and counsel; Anna 

Miller and John Hynes, professional staff members; Andrea Miller, 

clerk; and David McMillian and Mark Stephenson, minority professional staff members. 

Mr. HORN. The Subcommittee on Government Management, Information, and Technology will come to order. 

Today, the subcommittee revisits the issue of management at the 

Internal Revenue Service, IRS. The problem before us is the apparent inability of the IRS to adapt to the information and accountability demands of the late 20th century. 

One year ago, this subcommittee held a hearing on financial 

management at the IRS. At that hearing, we discussed the IRS’ revenue accounting system, which is in such disarray it cannot 

even be audited. We also reviewed the IRS’ problems with collections, management of accounts receivable, filing fraud and fraudulent refunds, records retention, tax lien recovery, and personnel 

browsing of taxpayer records. It was not a short hearing. 

Last September, we held another hearing on IRS financial management. At that session, we received more reassurances that improvements were under way. Yet, here we are today, reading a 

steady stream of press reports on feeble management, failed automation, and poor customer service at the IRS. 

The list of failed projects only grows longer: The tax system’s 

Modernization Project, a $4 billion attempt to modernize the IRS’ decades-old computer systems; Cyberfile, a project that would have 

allowed taxpayers to prepare and electronically submit their tax returns from their personal computers; Integrated Case Processing, 

a program that would have allowed IRS representatives to access 

all data needed in order to answer all taxpayer questions over the 

telephone; the Document Processing System, a system that would 

2

have scanned paper documents and electronically captured data for 

subsequent processing and retrieval; and even the Service Center 

recognition/image processing system, the failed document-scanning 

program that the Document Processing System was designed to replace. 

I hope we will not have to add to this list the year 2000 computer 

software conversion problem. It would be a catastrophe not only for 

the IRS, but for all other agencies and organizations that depend 

on IRS information. 

A Senate hearing last week focused on the problem of certain 

IRS employees snooping in the agency’s taxpayer computer files. 

The IRS had previously announced a policy of zero tolerance for 

this inappropriate browsing and assured Congress that the problem 

had been solved. Yet the General Accounting Office has just released evidence that personnel snooping continues. 

It is attempting to solve many of the problems at the IRS by contracting out various functions, especially those in information technology development. But this will only work if the IRS can specify 

its objectives and assess the costs and the time it will take. The 

IRS must also be able to determine whether delays in delivery of 

components of the system are going to cause delays in the whole 

implementation process and what the implications of such delays 

will be. It is not clear that the leadership of the IRS at this point 

is up to the challenge. 

Contracting out is clearly not a panacea. One can hope that the 

Government Performance and Results Act is forcing top management at the IRS to re-evaluate what they are doing and how they 

are doing it. Federal agencies right now are supposed to be consulting with congressional committees of jurisdiction to refine their 

strategic and performance plans and proposals for how they are 

going to measure results. This is an excellent opportunity to put 

into place a new approach to doing business. But from what we 

have seen so far of the plans and performance measures that the 

IRS is developing, it is still business as usual. 

At this point, the subcommittee hopes that improvement will 

occur. There are several important questions that must be answered: What does the IRS need to do to get its Modernization 

Project back on track? How is the Treasury going to ensure that 

IRS embarks on a modernization plan that will work? What sort 

of milestones or benchmarks should a modernization plan have so 

that its progress can be monitored? How long do we have to wait 

to see results? Will the right people be held accountable? How can 

we overcome obstacles to change, such as the organizational culture of the IRS? How do we modify it? How do we make sure the 

IRS can manage multimillion-dollar information technology development projects that often amount to several billion before we 

know they failed, even if such projects are going to be given to outside contractors? 

The IRS needs to be accountable. Americans have a right to 

know whether the agency that collects taxes from their hardearned money is capable of managing internal operations in an efficient, fair, and accountable way. 

The IRS emphasizes the need to maintain taxpayers’ faith in the 

voluntary compliance system. That faith is undermined by stories 

3

of refund fraud and of translators helping illegal aliens to get refunds. We need to know that the IRS has adequate control over refund fraud. We need to know that the information provided in their 

financial statements is reliable. We need to know that the IRS 

gives good information to taxpayers in response to their telephone 

queries. We need to know that the IRS treats all taxpayers fairly 

and appropriately, and we need to know that the IRS is collecting 

the proper amount of taxes at the lowest possible cost to the public. 

These are the measures of success. 

We welcome our guests today who will be testifying on a number 

of these questions. We will be hearing first from Lynda Willis of 

the General Accounting Office. She is Director for Tax Policy and 

Administration, and will discuss the progress the IRS has made in 

acting on recommendations submitted by GAO to improve IRS operations. 

Robert Tobias, of the National Treasury Employees Union, will 

represent the IRS employees’ views on how to restore public and 

congressional confidence in the IRS. 

Sheldon Cohen, former IRS Commissioner during the Johnson 

administration and now a fellow of the National Academy of Public 

Administration, will tell the subcommittee how the situation looks 

from his vantage point. He was Commissioner when IRS first started to computerize its operation. 

Also testifying will be Shelley Davis, the former IRS Historian, 

the only one it has ever had. She will present her views on why 

the IRS is in trouble and what they can do to get back on the track. 

The IRS will have an opportunity to tell us about its own plan. 

Deputy Commissioner Michael Dolan will provide us with testimony on the IRS approach to modernization. Originally Rob 

Portman, Representative from Ohio, co-chairman of the congressionally appointed National Commission on Restructuring IRS, and 

a member of this subcommittee, had planned to give his perspective on some of the ideas for how we can make sure the IRS becomes a well-managed agency. Unfortunately, he is detained back 

in Ohio. The views of the National Commission will be given by 

Jeffrey S. Trinca, the chief of staff of the commission. 

We welcome all of you. 

We had also invited Jim Traficant, another Representative from 

Ohio, to present his views on changing the burden of proof in tax 

disputes from the taxpayer to the IRS, the proposal that would 

level the playing field. Unfortunately, Mr. Traficant cannot be with 

us today, but he has provided us with a written statement that will 

be included in the hearing record at the end of the opening statements, without objection. 

This subcommittee does not like to be unduly pessimistic. For 

every problem, there are opportunities, not only to solve the problem, but to make things better than they were before. 

I have gone on record as advising the President that he should 

be judicious in his choice of the new IRS Commissioner. It should 

not be someone who is simply a very bright and outstanding CPA 

tax accountant. It should not be someone who is simply a very 

bright and outstanding tax lawyer. It should be someone who has 

demonstrable management expertise in providing leadership to 

large, complex organizations. 

4

As we know, the IRS has 106,000 or so employees. Next to the 

Pentagon, it is really the second largest Federal service, excluding 

the Postal Service, that is now largely independent. 

At this point I would like to yield to Mr. Sununu, the gentleman 

from New Hampshire, for any opening statement that he has to 

make. 

[The prepared statement of Hon. Stephen Horn follows:]

5


g:\graphics\43913.001
6


g:\graphics\43913.002
7


g:\graphics\43913.003
8

Mr. SUNUNU. Mr. Chairman, I don’t have a full opening statement this morning, but I certainly want to thank the witnesses 

that are going to be providing testimony today. Certainly your appearance here before the committee is extremely timely. As we 

move forward toward the 21st century, toward the century change, 

and look at the technological issues that are facing all of Government’s areas of administration, but in particular the Internal Revenue Service and their attempts to improve their operations in 

such a way as to not just promote efficiency and capability within 

the organization, but hopefully to restore some public confidence in 

the integrity of the operations of Government’s financial systems. 

I think there is a tremendous amount of opportunity to bring modern management techniques, information systems, and the kind of 

changes that will make a difference, as I say, in both, in terms of 

how we operate Government and also in restoring public confidence 

to the operations of one of the most important agencies in Government. 

I look forward to the testimony today and hope we will have the 

opportunity to ask some questions that might shed additional light 

on to where the opportunities for improvement might exist. Thank 

you. 

Mr. HORN. I thank the gentleman. 

[The prepared statements of Hon. Carolyn B. Maloney, Hon. Bernard Sanders, and Hon. James A. Traficant, Jr., follow:]

9


g:\graphics\43913.004
10


g:\graphics\43913.005
11


g:\graphics\43913.006
12


g:\graphics\43913.007
13


g:\graphics\43913.008
14


g:\graphics\43913.009
15


g:\graphics\43913.010
16


g:\graphics\43913.011
17


g:\graphics\43913.012
18


g:\graphics\43913.013
19


g:\graphics\43913.014
20


g:\graphics\43913.015
21


g:\graphics\43913.016
22


g:\graphics\43913.017
23


g:\graphics\43913.018
24


g:\graphics\43913.019
25


g:\graphics\43913.020
26


g:\graphics\43913.021
27


g:\graphics\43913.022
28

Mr. HORN. Now we will swear in the panel witnesses, Lynda D. 

Willis, Director of Tax Policy and Administration, General Government Division, U.S. General Accounting Office. She is accompanied 

by Rona B. Stillman, the Chief Scientist for Computers and Telecommunications, U.S. General Accounting Office. 

[Witnesses sworn.] 

Mr. HORN. Both witnesses have affirmed, the clerk will note. 

Please proceed, Ms. Willis. As you know, the routine is we would 

like you to summarize your statement. We all have the statement, 

and had it in advance, but this is an important subject. If you go 

over 10 minutes in summary, I am not going to be offended, because I would like you to get out your key points on the record. 

STATEMENT OF LYNDA D. WILLIS, DIRECTOR, TAX POLICY 

AND ADMINISTRATION, GENERAL GOVERNMENT DIVISION, 

U.S. GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY 

RONA B. STILLMAN, CHIEF SCIENTIST FOR COMPUTERS AND 

TELECOMMUNICATIONS, U.S. GENERAL ACCOUNTING OFFICE 

Ms. WILLIS. Thank you, Mr. Chairman. We will submit our written statement for the record. 

We are very pleased to be here today to testify before this subcommittee on GAO’s high-risk work. A key factor in understanding 

IRS’ ongoing difficulties in the high-risk areas is the realization 

that its major processes and systems were developed and implemented decades ago and were not designed to address the critical 

needs and vulnerabilities that confront IRS in the 1990’s. 

In addition, the problems IRS faces in eliminating its high-risk 

vulnerabilities are compounded by their interdependencies. IRS’

success in addressing the weaknesses in its program areas is clearly linked to the successful modernization of its systems. However, 

this understanding does not mitigate our concern over IRS’

progress in developing a comprehensive strategy or detailed business plan for modernizing its outdated processes and systems. 

For years, we have chronicled IRS’ struggle to manage its operations and have made scores of recommendations to improve IRS 

systems, processes, and procedures. In order to achieve its stated 

goals of reducing the volume of paper tax returns, providing better 

customer service, and improving compliance with the Nation’s tax 

laws, IRS needs to develop a comprehensive business strategy to 

ensure that new and revised business processes drives systems development and acquisition. 

Solving the problems in the high-risk areas is not an insurmountable task, but it requires sustained management commitment, accurate information systems, and reliable performance 

measures to track IRS’ progress and provide the data necessary to 

make informed management and oversight decisions. There are 

four long-standing high-risk areas at IRS: tax systems modernization, financial management, accounts receivable, and filing fraud. 

In addition, two of the new governmentwide high-risk areas also directly affect IRS’ operations: information security and the year 

2000 problem or century date change. 

29

Turning to each of these, I would like to briefly discuss the 

progress IRS has made and the measures IRS must take to resolve 

the issues. 

In July 1995, we reported that IRS, one, did not have a comprehensive business strategy to cost effectively reduce paper tax return filings; two, had not yet fully developed and put in place the 

requisite management, software development, and technical infrastructure necessary to successfully implement its ambitious worldclass modernization; and, three, lacked an overall systems architecture, or blueprint, to guide the modernization development and 

evolution. At that time, we made over a dozen recommendations to 

the IRS Commissioner to address these weaknesses. 

In 1996, we reported that IRS had initiated many activities to 

improve its modernization efforts, but had not yet fully implemented any of our recommendations. 

Since then, IRS has taken additional steps. For example, a new 

Chief Information Officer has been hired, as well as additional 

technical expertise. IRS also created an investment review board 

that has re-evaluated and terminated several modernization development projects that were found to be not cost effective. IRS has 

also updated its systems development life-cycle methodology, and is 

developing a systems architecture and project sequencing plan for 

the modernization. 

While we recognize IRS’ actions, we remain concerned because 

much remains to be done to fully implement essential improvements. It will take both management commitment and technical 

discipline for IRS to accomplish these tasks. 

Furthermore, despite persisting weaknesses in both software development and acquisition capabilities, IRS continues to request 

hundreds of millions of dollars for systems modernization efforts. 

In its fiscal year 1998 budget request, IRS and the administration 

are seeking $131 million for systems development initiatives, and 

$500 million in each of the next two fiscal years for yet to be specified modernization efforts. However, the requests do not include 

credible justifications for the spending and are not based on analytical data or derived using formal cost estimating techniques. Accordingly, we believe that Congress should consider not funding either request. 

Turning to financial management, our audits of IRS’ financial 

statements have outlined the substantial improvements needed in 

IRS’ accounting and reporting in order to fully comply with the requirements of the CFO Act. The audits for fiscal years 1992 to 1995 

have described IRS’ difficulties in, one, properly accounting for its 

tax revenues, in total and by reported type of tax; two, reliably determining the amount of accounts receivable owed for unpaid taxes; 

three, regularly reconciling its fund balance with Treasury accounts; and, four, either routinely providing support for the receipt 

of goods and services it purchases, or, where supported, accurately 

recording the purchased item in the proper period. 

IRS has made progress in addressing problems in these areas 

and has developed an action plan, with specific timetables and 

deliverables, to address the issues our financial statement audits 

have identified. 

30

IRS has been working to position itself to have more reliable financial statements for fiscal year 1997 and thereafter. To accomplish this, especially in accounting for revenue and related accounts 

receivable, IRS will need to institute long-term solutions involving 

reprogramming software for its antiquated systems and developing 

new systems as required. 

Follow-through is essential to complete corrective measures if 

IRS is to solve its financial management problems. IRS’ ability to 

effectively address its accounts receivable problems is seriously 

hampered by its outdated equipment and processes, incomplete information needed to better target collection efforts, and the absence 

of a comprehensive strategy and detailed plan to address the systemic nature of the underlying problems. 

IRS’ collection efforts have also been hampered by the age of the 

delinquent tax accounts. In the past 2 years, IRS has undertaken 

several initiatives to overcome its deficiencies. Specifically, it has 

efforts under way to correct errors in its master file records of tax 

receivables, develop profiles of delinquent taxpayers, and study the 

effectiveness of various collection techniques. It has also streamlined its collection process, placed additional emphasis on contacting repeat delinquents, made its collection notices more readable, and targeted compliance-generated delinquencies for earlier 

intervention. 

In part due to these efforts, IRS reported collecting more in de- linquent taxes in fiscal year 1996 than it ever has, almost $30 billion. Despite these positive results, IRS needs to continue the development of information data bases and performance measures to 

afford its managers the data needed to determine which action or 

improvements generate the desired changes in IRS’ programs and 

operations. 

Mr. Chairman, this is not a short-term commitment. It will take 

some time before the full results of the new initiatives are realized. 

IRS must take deliberate action to ensure that its problem-solving 

efforts are on the right track. It needs to implement a comprehensive strategy that involves all aspects of IRS’ operations and that 

sets priorities, accelerates the modernization of outdated equipment and processes, and establishes realistic goals, specific timetables, and a system to measure progress. 

Turning to filing fraud, when we first identified filing fraud as 

a high-risk area in 1995, the amount of filing fraud being detected 

by IRS was on an upward spiral. Since then, IRS has introduced 

new controls and expanded existing controls in an attempt to reduce its exposure. These controls are directed toward either preventing the filing of fraudulent returns or identifying questionable 

returns after they have been filed. 

IRS’ efforts have produced some positive results. For example, 

IRS’ efforts to validate Social Security numbers on paper returns 

produced over $800 million in reduced refunds or additional taxes. 

IRS was less successful in identifying fraudulent returns, identifying over 65 percent fewer fraudulent returns in 1996 than during 

a comparable period in 1995. IRS believes this decrease is attributable to a 31 percent reduction in its fraud detection staff and the 

resulting underutilization of its electronic fraud detection system, 

which enhances the identification of fraudulent returns. However, 

31

IRS does not have the information it needs to verify that the decline was the result of staff reductions or by a general decline in 

the incidence of fraud. Given the decrease in the fraud detection 

staff, it is critically important for the IRS to optimize the electronic 

controls that are intended to prevent the filing of fraudulent returns and maximize the effectiveness of available staff. Modernization is key to achieving both of these objectives. 

Turning now to the two new governmentwide, high-risk areas, 

IRS is vulnerable to problems in both. Related to information security, as the result of our work at IRS, we believe that the 

vulnerabilities of IRS’ computer systems may affect the confidentiality and accuracy of taxpayer data and may allow unauthorized 

access, modification, or destruction of taxpayer information. 

IRS does not have a pro-active, independent information security 

group, that systematically reviews the adequacy and consistency of 

security over IRS’ computer operations. In addition, computer security management has not completed a formal risk assessment of its 

systems to determine system sensitivity and vulnerability. As a result, IRS cannot effectively prevent or detect unauthorized browsing of taxpayer information by its employees and cannot ensure 

that taxpayer data is not being improperly manipulated for personal gain. IRS needs to address its information security weaknesses on a continuing basis, impressing upon its senior managers 

the need to conduct regular, systematic security reviews. 

The year 2000 problem at IRS is such that it could create a disruption of functions and services that could jeopardize all of IRS’ tax processing systems. It could effectively halt the processing of 

tax returns and return-related information, the maintenance of 

taxpayer accounts, the assessment and collection of taxes, the recording of obligations and expenditures, and the disbursement of 

funds. 

To avoid the crippling effects of a multitude of computer systems 

simultaneously producing inaccurate and unreliable information, 

IRS must assign management and oversight responsibility within 

its senior executive corps to define the potential impact of such systems failure and develop appropriate renovation strategies and contingency plans for its critical systems. 

Mr. Chairman, IRS and Congress face many challenges in moving the Nation’s tax system into the next millennium. The funding 

limits and program tradeoffs faced by IRS in fiscal year 1997, and 

anticipated for fiscal year 1998, are likely to continue for the foreseeable future. The administration’s out year projections actually 

reflect a decline in IRS funding when inflation is considered. At the 

same time, IRS is faced with competing demands and pressures 

from external stakeholders, including Congress, to improve its operations and resolve long-standing concerns. 

In recent years, Congress, including a big role played by this 

committee, has put in place a statutory framework for helping Congress and the executive branch make the difficult tradeoffs that the 

current budget environment demands. This framework includes the 

Chief Financial Officers Act, the Clinger-Cohen Act, and GPRA. 

GPRA requires each agency to develop a strategic plan that lays 

out its mission, long-term goals and strategies for achieving those 

goals. GPRA requires agencies to consult with Congress, as you 

32

noted, as they develop their strategic plans. For IRS, these consultations provide an important opportunity for Congress, IRS and 

the Treasury to work together to ensure that IRS’ mission is focused, goals are specific and results oriented, and its strategies and 

funding expectations are appropriate and reasonable. 

The consultations may prove difficult as they are likely to underscore the competing and conflicting goals of IRS programs, as well 

as the sometimes different expectations of the numerous parties involved. 

In summary, Mr. Chairman, for years IRS has struggled to collect the Nation’s tax revenues, using outdated processes and technology. To address these high-risk problem areas, IRS needs an implementation strategy for modernizing its systems that includes developing cost-benefit analyses and reasonable estimates of the 

timeframes and resources required. Above all, IRS management 

needs to sustain an agency-wide commitment to solving the agency’s high-risk problems. 

That concludes my statement. We would be happy to answer any 

questions you may have. 

Mr. HORN. Well, I thank you for that excellent statement and the 

really fine work that your staff has done over the years. It certainly 

is reflected in your statement, which is put in the record the 

minute we introduce you. 

[The prepared statement of Ms. Willis follows:]

33


g:\graphics\43913.023
34


g:\graphics\43913.024
35


g:\graphics\43913.025
36


g:\graphics\43913.026
37


g:\graphics\43913.027
38


g:\graphics\43913.028
39


g:\graphics\43913.029
40


g:\graphics\43913.030
41


g:\graphics\43913.031
42


g:\graphics\43913.032
43


g:\graphics\43913.033
44


g:\graphics\43913.034
45


g:\graphics\43913.035
46


g:\graphics\43913.036
47


g:\graphics\43913.037
48


g:\graphics\43913.038
49


g:\graphics\43913.039
50


g:\graphics\43913.040
51


g:\graphics\43913.041
52


g:\graphics\43913.042
53

Mr. HORN. Dr. Stillman, any comment you want to make? 

Ms. STILLMAN. No separate comments, sir. 

Mr. HORN. We thank you. 

I am now going to yield 10 minutes to the gentleman from New 

Hampshire, Mr. Sununu, to question the witnesses. 

Mr. SUNUNU. Thank you, Mr. Chairman. 

I thank you very much for your testimony. I don’t know quite 

where to begin, given the litany or the length of the issues that you 

have raised and that were originally raised with the high-risk series in which you have done such a fine job of following the implementation of some of the original recommendations and some of the 

newer recommendations as well. 

It is a source of frustration to me that a number of the problems 

that you cite, particularly those in important areas of fraud detection and recovering collectibles, are areas where given the reputation and, in fact, the implementation of what many feel are intrusive and aggressive attitudes on the part of people at the IRS. Despite that intrusiveness, it seems that the area of collections and 

of fraud detection and of ensuring high rates of compliance have 

not been very successful. 

You raised a number of obviously very important and critical 

areas. What I would like to do is try and focus on just a couple of 

those areas, specifically the collections and the fraud detection. I 

apologize for any repetition that might occur here, but I think 

there are certain areas that are worth emphasizing and that I 

would like you to go into a little bit more detail, if at all possible. 

Speaking about the receivables backlog and the collection of overdue receivables, could you talk a little bit more about the scope of 

the backlog and what its age characteristics are? Specifically, 

would you speak about the collections of delinquent receivables? 

Your report shows that delinquent collections have increased 

somewhat from 1995 to 1996 by 15 or 20 percent. I would like to 

know why, if there is any reason for optimism for the increase in 

collection of overdue receivables, and how the collection rate compares to what historic success rates have been? 

Ms. WILLIS. Congressman Sununu, the accounts receivable problem at IRS is one we have been concerned about since we initially 

issued the high-risk series early in the 1990’s. There are a multitude of things that contribute to the problem. Right now IRS is 

sitting with just over $200 billion in gross accounts receivable. But 

that number reflects not only the amount that are what we call financial receivables or receivables that we acknowledge are due the 

Government, but also compliance receivables which are in our nomenclature, placemakers for actions IRS has taken regarding moneys that may or may not be owed the Government. When you get 

down to the amount of money that IRS believes or estimates is actually collectible out of that, we are talking under $50 billion. It 

is still a substantial amount of funds. 

Problems that IRS has faced in addressing the receivables problems run across the full gambit of its operations, from inaccurate 

data that is entered when a return is processed, which then turns 

into a receivable that is inaccurate on the record, to having problems with the age of the receivables, which is a big issue in terms 

of their collectibility. 

54

Right now it can take IRS 2 to 5 years after the filing date of 

a return before an additional assessment because of its enforcement programs is actually posted to its books. In our society, as 

mobile as it is today, 2 to 5 years is a very long time in terms of 

finding the taxpayer, having a corporation that may now be 

defunct, and being able to actually collect that money. That is one 

of the reasons why we believe very firmly that IRS needs to modernize the systems that support the collection of its receivables, 

one, so that we know more about how effective specific programs 

are. 

We don’t collect very good data right now on what works in particular cases, and we also need to understand more about how we 

can get these receivables on the books earlier when the accounts 

are newer, when the private debt collectors tell us the success rate 

for actually getting the money in the bank is much higher. 

But all of that takes a comprehensive look at the causes and the 

underlying problems behind the receivables and the development of 

a strategy to both modernize the systems and the processes that 

support receivables, and bring in new ways of doing business to collect the money that is truly due the Government. 

Mr. SUNUNU. Do you mean to suggest that the IRS doesn’t actually know why the collection of delinquent receivables increased 

from 1995 to 1996? 

Ms. WILLIS. We have some general ideas, the IRS has some general ideas in terms of specific programs that took place. But they 

are more estimates than numbers that can be readily validated. So 

while we have a sense of what is bringing money in, for example, 

sending notices out earlier and being able to contact the taxpayer 

more quickly, it is hard to be precise about how effective that particular effort is and how that effort would compare to other alternatives in terms of picking the most efficient way to increase collections.

Mr. SUNUNU. Explain for me what the difference is between the 

$50 billion that you earmarked as collectible receivables and the 

$200 billion figure that the IRS currently has logged in as accounts 

receivable? 

Ms. WILLIS. The number is actually under $50 billion. I can’t recall right off the top of my head what this year’s number is, but 

the difference between the two numbers is—the $200 billion is the 

gross receivables, and that includes everything that is in there that 

may be a compliance assessment, like I said, as well as a financial 

assessment. 

Mr. SUNUNU. Is that a euphemism for a fine? 

Ms. WILLIS. No. Compliance assessment, for example, is if you 

did not file a tax return and I did a substitute for a return and I 

determined based on information that was available that you owed 

a certain amount of money and I could not contact you or you did 

not respond, IRS has the ability to go ahead and seize that money 

while pursuing the taxpayer to determine how much is actually 

due. 

When the return is actually filed, that number may be reduced 

to zero or the taxpayer may even need a refund. But based on the 

information IRS has available to it at the time, it appears to be a 

receivable. Once you take the compliance receivables out of there, 

then you get down to the financial receivables, only a portion of 

55

which are actually perceived to be collectible, and noncollectible receivables could be from defunct corporations, deceased taxpayers, 

hardship cases, but money that right now we don’t believe is within 

the purview of the collection efforts to actually go after. 

Mr. SUNUNU. On the issue of older receivables, to what extent is 

it realistic to keep the older receivables on the books, and in answering the same question, could you talk a little bit about the success or lack of success that the agency, the IRS, has received or 

seen in the use of subcontractors to handle some of the debt collection? 

Ms. WILLIS. The question of how long we keep the receivables on 

the books is one that has been discussed extensively. Right now, 

IRS keeps the receivables on the books until the expiration of the 

10-year statute of limitations. 

I think it is less important whether they keep the number on the 

book. It is more important that we understand how much of the 

money is affected by the 10-year statute of limitations, how much 

of the money is actually collectible. That is why the financial accounting systems become so important, because those systems, 

properly done, would allow us to know how much of this money 

ages into different categories, so we would be able to determine in 

terms of reporting those numbers out to the Congress and the public, what boxes they fall into and which ones are reasonable to collect. 

Mr. SUNUNU. And how about the effectiveness of some of the trial 

programs, using subcontractors? What are the privacy issues there? 

How can we be sure to the extent the IRS relies on private debt 

collection organizations that the privacy of taxpayers is respected? 

Ms. WILLIS. IRS is moving now into the second phase of the private debt collection initiative, the first years. Basically, what we 

have discovered so far is not surprising, that private debt collectors 

are running into the same problems collecting IRS accounts, they 

are old, the people are difficult to find, that IRS employees are having. 

Improving the quality of the information in the accounts would 

not only enhance the ability of private collectors or subcontractors 

to collect the money, but would also help IRS employees be more 

productive. 

In terms of privacy, the same taxpayer privacy requirements are 

imposed upon private debt collectors as are imposed upon IRS employees. The taxpayer data is treated with the same level of confidentiality. 

One of the things that IRS is tracking and is very interested in, 

as is the Congress, is whether there are any problems that evolve 

because of the use of subcontractors or private debt collectors in 

this experiment. I think that is a very critical policy issue that is 

before the Congress, is how far do we want to go in making taxpayer data available to individual contractors doing a variety of different tasks. 

Mr. SUNUNU. Thank you very much. Thank you, Mr. Chairman. 

Mr. HORN. You are quite welcome. 

I now recognize the ranking Democrat on the committee, Mrs. 

Maloney of New York. I might add, the quorum was established beVerDate 0ct 02 2002 05:02 Oct 06, 2002 Jkt 010199 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 W:\DISC\43913 43913
56

fore Mr. Sununu spoke. We are delighted to have the gentlewoman 

from New York. 

Mrs. MALONEY. On my flight here from New York this morning, 

several constituents mentioned a program that was on television 

last night, I didn’t see it, that talked about United States taxpayers 

using tax havens as a means of hiding their income, Grand Cayman accounts. It also noted that the IRS was cutting back its overseas unit that tracks moneys that may be moving overseas that 

should be taxed in the United States. 

I would like your comments on that. The Grand Cayman accounts, what are you doing to track these accounts? Could you talk 

briefly about your overseas unit and operation in tracking moneys 

that should be coming to the U.S. Treasury? 

Ms. WILLIS. Congresswoman Maloney, Deputy Commissioner 

Dolan, who is going to be testifying shortly, would be in a better 

position to talk about any shifts that IRS is making in terms of the 

resources addressing issues associated with taxpayers moving 

money overseas. 

What I can say is that the movement of money out of this country into tax havens in other parts of the world is not a new phenomenon, but it is one that we have increasing concern about because of the use of the Internet and the difficulties that cyberspace 

present us in terms of audit trails and being able to track where 

the money was actually generated or the revenue was generated 

and where it should properly be taxed. 

I know IRS is aware of these issues, but I am not familiar right 

now with either the program that you spoke of or specifically what 

is happening with them in terms of the staffing of those operations. 

Mrs. MALONEY. In terms of staffing, you have been cut, you testified, 10,000 employees; is that correct? 

Ms. WILLIS. IRS has been cut about 10,000 employees over the 

past 2 years. 

Mrs. MALONEY. What is that impact on your ability to collect delinquent taxes and collect taxes owed the public, the Treasury of 

the United States? 

Ms. WILLIS. When we, GAO, have looked at the IRS budget cuts, 

one of the things that we have been very concerned about, as I alluded to in my formal statement, is the cut in the resources that 

have gone to things such as the questionable refund program, the 

program that is designed to identify filing fraud. We believe, or IRS 

reports, that part of the reason that the number of fraudulent returns that have been identified is down is because of staffing cuts 

in that program. 

I think both of these areas, both the international issues, as well 

as the filing fraud issues and the staffing cuts that have taken 

place, identify some of the very marked challenges that IRS is 

going to be facing over the next years as we move beyond the year 

2000 in providing not only the compliance resources that are needed to effectively implement the programs but also to increase the 

quality of customer service that is provided to the taxpayer. 

Mrs. MALONEY. There has been a considerable discussion about 

the appropriateness of the IRS using random audits to update its 

audit programs. What is GAO’s position on these audits? Will or 

have you looked at it? 

57

Ms. WILLIS. We have looked at IRS random audits in terms of 

the research audits to identify taxpayer noncompliance, and we believe that IRS needs a tool to identify noncompliance that may be 

occurring in places that we are not expecting it. We have not found 

a comprehensive replacement for the taxpayer compliance measurement program, which was supposed to take place in 1994, but 

which has been indefinitely delayed. 

One of the concerns that we have is, unless we come up with a 

new way of measuring compliance and measuring compliance in 

such a fashion that we can identify it in places where we are not 

expecting it, that we will undermine the total compliance of the tax 

system. I know that IRS is working on this and recently has accepted a report from Price Waterhouse on the measuring of taxpayer compliance, and where random audits will fit into that entire 

program in the future, I am not sure. 

Mrs. MALONEY. There have been a number of proposals on restructuring the rules and the GAO in a series of your own audits 

have pointed out failures in management. Some people have argued moving the IRS out of the Treasury, and some have argued 

that Treasury should have more of an oversight of the IRS. The 

IRS has always been sort of a completely independent unit, and 

when you talk to Treasury, they say they are totally separate. 

What is your feeling on the structure of the IRS? Should there 

be more of an oversight by Treasury? Should it be moved to someplace else? What are your feelings about correcting some of the 

faults actually that your agency, GAO, has pointed out in the failure to meet management goals? 

Ms. WILLIS. Congresswoman Maloney, there are a variety of public policy issues that have to be addressed when we look at the 

structure of the IRS, and there is attention between the independence that we want in this country for the Nation’s tax collector to 

have, to be free from political intrusion or political persuasion, and 

the need for proper agency management and oversight. 

We believe that Treasury’s new role or more enhanced role in 

terms of providing oversight of IRS is necessary right now in light 

of the management difficulties and the long-standing problems and 

their magnitude. However, providing proper management oversight 

while remaining outside and keeping the independence of the IRS 

is a critical dilemma that the Congress faces and would need to be 

considered regardless of what the structure is. But, regardless of 

what the structure is, key to making improvements at the IRS is 

using the tools that we have to hold IRS accountable for the moneys that it spends and the effectiveness of its programs. And we 

think that the three acts that Congress has passed over the past 

few years, Clinger-Cohen, GPRA, and the CFO Act——

Mr. HORN. I want to interrupt, some people don’t know what 

GPRA is. 

Ms. WILLIS. Government Performance and Results Act. 

Mr. HORN. Probably one of the most significant acts passed by 

Congress. 

Ms. WILLIS. Absolutely. Absolutely. An act which if properly implemented will give us the ability to track the effectiveness of various programs within the IRS and in achieving efficient mission 

goals and determine which ones work the best. So I think all of 

58

those things need to remain in place and be applicable to whatever 

structure is used to collect the Nation’s taxes. 

Mrs. MALONEY. In your testimony you recommended that Congress should consider not funding either the $131 million for system development or the $1 billion capital account. At the same 

time, Mr. Tobias testified about an experiment in compliance funding that returned considerably more than projected. 

Would you recommend that the system development and capital 

fund money be invested in compliance efforts? 

Ms. WILLIS. I think those are basically two different decisions. 

Our concerns with the system development request is that the 

money has not been properly justified, that the methodology used 

to develop the numbers is not adequate, and we have no guarantee 

that this money will be spent any better than the money that has 

been spent in the past in terms of systems development. That is 

basically why we recommended that Congress consider not funding 

that money. 

In terms of the compliance initiative money that was funded in 

1995, there are a couple of concerns that we would have about future appropriations. One is that the money be fenced. By that I 

mean that IRS be required to spend the money for the specific compliance initiative programs that the Congress charters. In the past, 

before 1995, when it was not fenced, we found that the money generally was not spent on improving compliance. 

In 1995, that was not the case. We are currently looking at the 

numbers and the methodology used to derive those numbers in 

terms of the return on that investment. And it appears that IRS 

did bring in more money than they expected to in the first year of 

that compliance, or first and only year of that compliance program. 

We need assurances that the money, if properly spent, we will also 

be able to account, however, for the additional revenues that come 

in. That has been a problem from a data perspective historically. 

Mrs. MALONEY. One of your earlier audits criticized the $3 billion 

spent by the IRS supposedly on modernizing its computers. Your 

report showed that they had virtually nothing to show for it. 

Do you have any other comments on their efforts to modernize 

and update their computer technology and the specific audit that 

I mentioned that came out, I believe, last year from GAO? 

Ms. WILLIS. Let me turn that question to Dr. Stillman, our Chief 

Scientist for Computers at GAO. 

Ms. STILLMAN. The basic problem with the $3 or $31⁄2 billion expended on TSM is that IRS cannot demonstrate benefits or return 

on investment exceeding the $3.5 billion. We have reported that 

they cannot do that, and that in investments in the future, they 

should be much more careful to analyze their investments consistent with GPRA and Clinger-Cohen to avoid repetition of that 

kind of thing. 

Mrs. MALONEY. In other words, you are saying they wasted the 

$3.5 billion? 

Ms. STILLMAN. Wasted in general is a poorly defined term. IRS 

has testified it feels what it would call waste is somewhere in the 

area of $400 to $500 million. The key question, I think, is can it 

demonstrate benefit in excess of the $3.5 billion expended, and in 

59

fact it cannot come close to demonstrating benefit anywhere near 

$3.5 billion expended. 

Mrs. MALONEY. So they cannot run their own computer system? 

Ms. STILLMAN. They have done a poor job developing new computer systems. 

Mrs. MALONEY. What would you suggest we do? Do we have another agency come in and develop their computer system? What are 

your suggestions? 

Ms. STILLMAN. Actually, we have made well over a dozen specific 

recommendations detailing what IRS can do better in the future. 

Among the things they can do better in the future, first, they can 

formulate a comprehensive business strategy so that they know 

how they want to do business better in the future, relying more on 

electronic submissions of returns and less on paper. First, they 

have to know what they are doing. 

Second, they have to correct the underlying infrastructure weaknesses. They do not now have disciplined processes in place for developing software and systems or for acquiring software and systems. Until they do, they should not be in the business of doing either to any major degree. 

They should also be careful to measure progress on an incremental basis so that we don’t have the big bang theory that Mike 

Dolan has testified in the past has not worked for him, and in all 

fairness has not worked for any agency and not worked in private 

industry. 

Mrs. MALONEY. Well, that is a very heavy criticism of the IRS. 

One area where they appear to have made some progress is an 

area where the chairman and I have worked very hard in the last 

year, and that is in collecting delinquent taxes, that which is owed 

the American people, and apparently their collection is up 17 percent from last year. They had $30 billion delinquent; now they are 

$25 billion delinquent.

Why do you think they have improved that collection? 

Ms. WILLIS. It is hard to say specifically what actions led to what 

level of improvement, but there are a number of things that IRS 

has done over the past year, including earlier intervention in the 

collection of accounts that appears to have enhanced the collections, changes, making notices more readily so when people get 

them they understand better what the Government needs from 

them and expects from them, moving different people and people 

into different, more productive types of positions within IRS, so 

that the taxpayers can be contacted in the most efficient fashion. 

All of those things have provided incremental levels of improvement to the collection of tax debts. But they have not solved the 

underlying problems. 

Mrs. MALONEY. Thank you. 

Mr. HORN. I thank the gentlewoman from New York. 

Let me just pursue a few closing questions here. 

One, I am curious, in the degree to which GAO is the Congress’

program and financial auditor, you have looked at the pilot programs that were issued by IRS in terms of the collection of debt. 

The Debt Collection Act that I and Mrs. Maloney authored last session applies to everybody but IRS. We are awaiting the Ways and 

Means Committee action in this area. But it was IRS that got me 

into this when I saw they had written off, in quotes, over $100 bilVerDate 0ct 02 2002 05:02 Oct 06, 2002 Jkt 010199 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 W:\DISC\43913 43913
60

lion beginning first under the Bush administration, accelerating 

greatly under the Clinton administration. Then they said, well, we 

have another $64 billion that we think we can collect. 

What I am curious about is, what is your assessment of the pilot 

projects, some of which I hear offered, 5-year-old debt to collect? 

Now, what that meant to me as I heard about that, if that is correct, and I wonder if you could verify it, is that IRS doesn’t want 

the private debt collectors to succeed, because 5-year-old debt is almost impossible for everybody in the world to collect. People are 

dead, they have forgotten there is a debt and so forth. So what is 

the reading of GAO in looking at those pilot programs? 

Ms. WILLIS. We are kind of in the middle of looking at the pilot 

programs. IRS did face some difficulty initially in getting the cases 

out to the debt collectors that were selected as the subcontractors 

for that program. When the cases were sent out, they were old. 

Some of them were 5 years old, there is no question about that. 

I would hesitate to say that was because IRS didn’t want the 

pilot to succeed, in part because those are the same cases being 

sent out to IRS collectors. The other thing with the pilot program 

is that it is limited to the private collectors contacting or attempting to locate the taxpayer, attempting to explain their obligations 

to them, and asking them to contact IRS. So there are a variety 

of ongoing things. We expect to be finished early in the summer, 

in terms of what we are doing for Ways and Means, and to have 

a better sense of where we need to go on the second phase, the second $13 million part of the private debt collection program. 

Again, my understanding is that IRS is beginning to look at what 

sort of mid-course corrections need to be made to get a better sense 

from the program on whether private debt collectors can be effectively used and what we can learn from them. 

Mr. HORN. I gather from your testimony that they seem to have 

solved the problem of confidentiality when they put these pilots together. Is that correct? 

Ms. WILLIS. I think that is an open issue. The same requirements that face IRS employees are imposed upon the private collectors. There have been fire walls built around the information, et 

cetera. But one of the things that is being tracked is whether there 

are difficulties with maintaining the privacy. 

Mr. HORN. I would think—and I told this to the Commissioner 

when I listened to all the confidentiality nonsense, which I thought 

was just a red herring to avoid collecting debt—what seems to me 

is you give them the amount owed and the address and say, go to 

it. That is what I had not seen in the IRS’ own collection efforts. 

It seems to me if they want to collect in the IRS, they ought to be 

moving on these debts within 30 days of the delinquency, when it 

is discovered, because pretty soon people forget it is a debt. Students certainly do. They think the loan has become a grant, and 

it seems to me the sensitivity of this is simply to let them have the 

address, let them have the amount. If they have to quibble, let 

them quibble with IRS, not the debt collector. 

But the debt collector ought to work out a deal to get something 

they are not getting. When they let it run up to $100 billion, that 

is a national scandal, as far as I am concerned, and they are not 

organized. Do you detect any way now that these pilots will make 

61

some sense in terms of getting them to organize, to collect debt, 

and work cooperatively with private debt collectors as the indication may be? 

Ms. WILLIS. I think we, IRS, will learn a variety of things from 

the pilot in terms of how to use more modern processes and operations in order to track down and find taxpayers who owe the Government money. The pilot will not, however, address the underlying problems that lead to it being 3 to 5 years after the date of 

the tax return being filed before the additional assessment is imposed. So even if IRS were to move out within 30 days of the delinquency being assessed, even at that point we are 3 to 5 years beyond the time when the taxpayer incurred the liability. 

Mr. HORN. So it is 5 years at the start of all this. 

Ms. WILLIS. In some cases, yes. At that point we have also had 

interest building up on the amount owed, but the private debt collection pilot will not address those issues beyond, I suspect, confirming our sense already that the older the debt, the more difficult 

it is to collect. 

Mr. HORN. Has the IRS got any way of tracking people that declare bankruptcy to avoid payment of taxes? Has GAO ever looked 

at that? 

Ms. WILLIS. It has been a number of years since we have looked 

at IRS’ efforts to track people that are in bankruptcy, and that 

would have been long before the surge that we have seen in bankruptcies through the 1980’s and into the early 1990’s. It is an area 

of concern for any debt collector, for any person who is owed 

money, the number of bankruptcies that are out there, but I can’t 

testify at this point on the current effectiveness of IRS programs 

in that area. 

Mr. HORN. Let me move to the year 2000 issue which you 

brought up. As you know, this committee started the interest in it. 

Has GAO looked at the degree to which IRS is trying to solve this, 

and in looking at IRS, are they behind most other agencies in this 

regard? We know that Social Security started in 1989, on its own 

initiative without congressional prodding, and we know that a lot 

of agencies, such as Energy and Transportation, in the case of 

Transportation, everyone but the Federal Highway Administration 

didn’t really know it was a problem. They had started also in 1987, 

but their management system didn’t get that information to the 

top, so the Secretary knew it and knew it was a department-wide 

problem. 

So do you have any reading as to the degree which IRS stands 

in marching toward the solution before there is a lot of chaos on 

midnight of the year 2000? 

Ms. WILLIS. Mr. Chairman, I am not in a position to tell you 

where IRS stands as it compares to other Federal agencies in dealing with the year 2000 problem. 

We are looking at IRS’ efforts, and I am in a position to tell you 

that the problem is serious. IRS is in the assessment phase of looking at its systems. It has divided its various systems into the tiers, 

with the tier one being the largest, biggest systems, and I think 

they are well aware of the magnitude, the challenge that they face 

in bringing very large, very fragile, very old systems into compliance by the year 2000. 

62

They have laid out an aggressive schedule for bringing the tier 

one or the major tax processing systems into compliance, and we 

would expect that they would begin testing that sometime in the 

year 1999, in order to determine whether we are going to be successful. But I don’t think it is an issue that anybody can relax their 

vigilance on until we know the systems have been made compliant. 

IRS also faces a problem in having systems that cannot be made 

compliant, that are so old they are going to have to be replaced. 

In dealing with some of the issues that Dr. Stillman discussed with 

systems acquisition-systems development, they are going to have to 

be addressed in the year 2000 process as well as any modernization 

effort. 

Mr. HORN. As you look across the Federal Government in terms 

of how automation is effectively implemented, to what extent have 

you found the tradeoff of personnel positions to incremental moves 

toward automation, and is IRS ahead or behind in that issue? Do 

they simply come up and want more money, isolated solely for automation, or do they do what the rest of us have done when we 

head large organizations, and that was simply try to work an incremental tradeoff and make some progress in that area? What is 

your sense of that? 

Ms. WILLIS. Successful modernization of the IRS systems will 

allow it to do more with fewer people. The tradeoffs that have been 

made so far have been limited in part because we have not successfully modernized the systems, in terms of being able to deliver the 

additional capability that will make IRS employees more productive, have better access to information, and do things more electronically as opposed to by paper. 

This year’s IRS budget request included both additional money 

for systems modernization as well as additional funds for new positions and terms processing. While there have been tradeoffs made, 

obviously there have been requests for additional funds in both 

areas. 

Mr. HORN. One last question. I will pursue the rest with IRS, 

and we will also send you some questions. 

But in testimony before this committee in its March 1996 hearing, a witness reported that the Internal Revenue Service is not 

logging, tracking or able to report the number, location or dollar 

value of the liens they have placed; and they are not redeeming 

those properties with IRS liens against them when they are foreclosed on by a bank, a savings and loan or an investor. It has been 

estimated that over $100 billion in these liens has been written off, 

and another $60 billion is ready to be abandoned. 

The witness said that in her experience, the IRS has failed to redeem approximately 99 percent of these properties and, therefore, 

to recover billions of dollars in Treasury tax dollars. Instead, the 

IRS property tax liens are simply allowed to expire and disappear. 

What do you suggest should be done to restore confidence in the 

IRS’ ability to effectively manage the program and has that come 

within GAO’s review? 

Ms. WILLIS. Mr. Chairman, we are currently in the process of 

looking at the issue of liens for the Senate Finance Committee. We 

have just begun this work, and I can tell you there are problems 

63

in identifying all of the liens that IRS has either imposed or has 

standing in the courts against taxpayers. 

Some of the questions that were raised by the statement by the 

witness have been raised by others, especially as it relates to 

downsizing restructuring of IRS activities and whether this will impact on their ability to release liens, et cetera. These are issues 

that we will be looking at over the next few months for Senate Finance. Right now, I am not prepared to comment on that particular 

statement. 

Mr. HORN. I understand the IRS has no nationwide data base of 

liens, is that correct? 

Ms. WILLIS. That is my understanding as well. 

Mr. HORN. Well, I thank you. We will have a number of questions, if you don’t mind answering, that we will put in. 

Ms. WILLIS. I will be happy to. 

Mr. HORN. We welcome to the committee a member of the full 

committee, Mr. Sanders of Vermont, who has asked to sit with us 

and without objection we will permit Mr. Sanders to ask questions. 

Mr. SANDERS. Thank you, Mr. Chairman. 

The major concern I have is to try to understand the impact of 

the new organization under New England and specifically under 

Vermont, because we are hearing a whole lot of concerns about 

that. 

Before we get to that, I would like to ask Ms. Willis and Dr. 

Stillman a question and see if they can give us a response from 

GAO’s perspective. 

Yesterday, there was an article in the Boston Globe, and let me 

just quote from it, and I would appreciate it if you might comment. 

This is what the globe writes: ‘‘Because of the shift in IRS priorities, audit rates for high-income taxpayers have plummeted in recent years while the rate for people earning less than $25,000 has 

more than doubled.’’ Later on they say, ‘‘Only a few years ago, wealthy taxpayers in 

any part of the country were far more likely to be audited than 

they are today. In 1988, the IRS audited better than 11 percent of 

returns filed by people with $100,000 or more in income. By 1995, 

the audit rate had fallen sharply to less than 3 percent. Meanwhile, the audit rate doubled for people with income under $25,000, 

going from about 1 percent of returns in 1988 to 2 percent in 1995.’’

My understanding is that, in terms of higher income people and 

corporate America, there are tens and tens of billions of dollars of 

unpaid taxes out there. So my question from the GAO perspective—and I wonder if you have done any research on this—why is 

it there seems to be a tremendous interest in going after and auditing people making less than $25,000 but not quite that interest in 

going after billionaires and large corporations? 

Ms. WILLIS. Congressman Sanders, we issued a report last year 

that looked at IRS audit rates and coverage; and it is true that IRS 

audit rates have fallen; and we did find some of the same trend 

lines that you mentioned. But I’d like to explain a couple of things 

we found that affect those lines. Because the reduced resources, the 

audit rate overall declined and continues to decline. 

But IRS has also been doing a variety of audits as relates to the earned income credit which are typically people under the $25,000 

64

threshold that you’re talking about. And those audits have been 

put in place because of concerns of the Congress, GAO and others 

regarding the high level of reported noncompliance within that 

credit. And so, as those programs have taken off, as IRS has attempted to identify where the noncompliance and the level of noncompliance within the earned income credit is, that has put additional resources and additional emphasis on taxpayers in the under 

$25,000 income range. 

So I think when you combine the cut in resource that reduces the 

overall audit rate and add to that the increases in the earned income credit, you see that trend lines where higher income are audited less often, lower income are audited more often. 

Mr. SANDERS. So, basically, you are confirming what the article 

indicated, that there is more of an emphasis on going after lower 

income people who might take advantage of the EITC and less interest in going after upper income people. 

If the argument is there are simply not resources available? One 

might ask if, as I have heard—you might want to correct me if I 

am wrong—I’ve heard there is an estimate of over $100 billion a 

year in unpaid taxes from corporate America and wealthy individuals. Some may want to know why there is not an emphasis in 

going after those folks but we are going after folks making less 

than $25,000. 

Ms. WILLIS. Well, there is an emphasis in terms of the corporate 

side. The numbers that you typically see cited address corporate 

rates as opposed to individual audit rates, and IRS has an ongoing 

corporate audit program for the largest corporations in this country, the 1,700 largest. So the numbers that I’m talking about are 

for individual taxpayers. And I would suggest that our work shows 

that IRS has an interest in going after low income more than high 

income, but rather because of different drivers behind the compliance programs as well as the resources that are available, that 

when you look at the numbers, the trends on one are down and the 

trends on the other are up. 

Mr. SANDERS. Thank you for your response. 

But, Mr. Chairman, I would suggest that at a time when over 

the last 15 or 20 years this country has given huge tax breaks, 

lower taxes for upper income people and large corporations, there 

is something wrong in the priorities of the IRS that they seem to 

be focusing on low-income people and ignoring tens of billions of 

dollars of potential tax revenue we could bring in from upper income people and large corporations. 

Thank you very much, Mr. Chairman. 

Mr. HORN. Thank you. You have raised an interesting question 

and I think we will pursue it with the IRS management. 

But as I read your full testimony and GAO’s work in this area, 

does it mean essentially there is a greater percentage of fraud in 

the earned income tax credit program based on what we know? Or 

is that level of fraud—as I saw it, it seemed to be just dependents 

added to the form to get more money under the income tax credit. 

Is that about the same level of fraud as you find in the upper income? 

And I say that for this reason. It seems to me the people that 

pay the taxes in this country are the middle class in the aggregate, 

65

because there’s more of the middle class than there is of the socalled corporate barons. And when you get an earned income tax 

credit which has millions of people eligible, that aggregate is going 

to add up to quite a bit of money if there’s substantial fraud. Has 

GAO looked at the relative fraud potential of these various programs? 

Ms. WILLIS. Yes, we have; and we reported in 1994 and 1995 to 

the Senate Finance Committee, I think, a couple of interesting statistics. When you look at the amount of noncompliance—and I say 

noncompliance because we don’t always know when there’s a problem with a return, especially an earned income credit return, 

whether it’s intentional fraud or unintentional noncompliance. The 

earned income credit can be an extremely complicated credit, especially for the group of taxpayers that it’s targeted toward. 

But when you look at the noncompliance rate for the earned income credit, it is not higher than the reported noncompliance rate, 

for example, for sole proprietors; and it is much lower than if you 

look at the noncompliance rate for people that we call informal suppliers or the people who sell wood in your neighborhood who essentially work the cash economy. So, from a tax program perspective, 

there are other programs that have equally concerning areas of 

noncompliance. 

Part of the problem with the earned income credit in terms of 

compliance is that it is a refundable credit, and so it is not covered 

by money that is withheld or is simply not paid to the Government. 

It is money that actually flows out of the Government Treasury as 

a supplement to the income of these families. And so we are concerned about the noncompliance and also concerned about how we 

can efficiently reduce that noncompliance; and IRS has done a 

number things that have been effective, especially as it relates to 

the electronically filed returns and moving more into the paper returns and identifying people with dependents or who don’t have the 

proper filing status. 

I think it’s important that we focus across the board in all the 

areas of noncompliance and ways that either IRS administratively 

or Congress statutorily can improve compliance. 

Mr. HORN. Well, I thank you very much for that statement; and 

we’ll followup with some more specific questions. You’ve done a fine 

job, and we thank you very much for appearing. 

Ms. WILLIS. Thank you very much. 

[Followup questions and responses follow:]

66


g:\graphics\43913.043
67


g:\graphics\43913.044
68


g:\graphics\43913.045
69


g:\graphics\43913.046
70

Mr. HORN. Next panel, panel two will please come forward. We 

have Shelley Davis, former IRS Historian; Sheldon Cohen, IRS 

Commissioner during the Johnson administration, fellow of the National Academy of Public Administration; and Robert Tobias, the 

president of the National Treasury Employees Union. 

[Witnesses sworn.] 

Mr. HORN. All right. All three have affirmed. 

We welcome you, and we will start just the way it is on the roster. 

Shelley Davis, Ms. Davis, the former IRS Historian, if you would 

summarize your statement in about 10 minutes. We won’t hold you 

completely to it, but as you know your full text goes in at this point 

in the record. We’d like to hear the basic thrust of it for about 10 

minutes. 

STATEMENTS OF SHELLEY DAVIS, FORMER IRS HISTORIAN; 

SHELDON COHEN, IRS COMMISSIONER DURING THE JOHNSON ADMINISTRATION, FELLOW, NATIONAL ACADEMY OF 

PUBLIC ADMINISTRATION; AND ROBERT TOBIAS, PRESIDENT, NATIONAL TREASURY EMPLOYEES UNION 

Ms. DAVIS. Sure, thank you Mr. Chairman, members of the committee. I’m pleased to be here before you today as you attempt to 

understand and ultimately improve the IRS. 

As the only person to ever serve as the Historian for the IRS, I 

would like to focus my testimony on the subject with which I am 

most familiar, the evolution and history of the IRS. As a Historian, 

I have to admit to a professional bias to the need to understand 

the past in order to move intelligently into the future. 

My testimony before you will consist primarily of two parts, and 

I will give you your history lesson as quickly as possible. The first 

part, I will discuss what I call flash points of IRS history, those 

events which had a defining influence on the tax collector, and I 

will briefly outline the congressional response to some of these 

flash points. 

The first flash point in IRS recent history is 1952. Thirty-five 

years ago, on March 15, 1952, the IRS was officially reorganized 

into the structure with which we are familiar today. This was not 

a reorganization dreamed up by the IRS. Rather, the 1952 reorganization was forced upon a reluctant IRS by President Truman and 

a Congress fed up after years of reports of problems with the tax 

collector, pledges from the IRS to clean up its act, and a glaring 

failure of the agency to be able to implement change by itself. 

Recent cries from current Commissioner Margaret Milner Richardson that the IRS is undergoing some of the greatest attacks in 

its history today, in my opinion, demonstrate the lack of awareness 

of its own history that the IRS reflects, because compared to the 

outcry that faced the IRS in 1952, the IRS today is really having 

a picnic in the park, at least so far. 

Moving to the second flash point requires a jump of 20 years, to 

1973. That was the year, in June 1973, when White House Counsel 

John Dean revealed that the White House had developed what he 

called an ‘‘enemies list’’. He also revealed that the IRS had set up 

a small secret staff to collect information on dissidents and malcontents in American society. In the media frenzy that followed 

71

these revelations, these two references became forever jumbled in 

the American psyche; and the enemies list became forever linked 

with the IRS, with the general assumption being that the IRS was 

guilty of auditing and chasing after President Nixon’s enemies. 

The problem was that the IRS wasn’t guilty. At least they 

weren’t guilty of auditing Nixon’s enemies. The bigger problem 

though, for the IRS at least, was that the IRS was guilty of assembling its own enemies list, far more substantial and far more dangerous than anything President Nixon ever dreamed of. 

So in mid-1973, the IRS knew that it had a big problem. It knew 

it hadn’t audited President Nixon’s enemies, but it couldn’t very 

well go out waving a flag with this pronouncement because it knew 

its own internal actions were far more dangerous and its own list 

was far more extensive than Nixon’s. Just as a matter of perspective, the IRS list had over 11,000 taxpayer names on it. All the various compilations of Nixon’s enemies list had around maybe 600, at 

the most, names. So what did the IRS do in 1973? It remained 

mute. The IRS learned that by simply keeping its mouth shut, by 

biding its time, that events would eventually calm down and normalcy would resume. 

The third flash point of recent IRS history jumps forward a decade to 1985, the year of the great IRS meltdown of which we have 

all heard so much recently. This was the year the IRS installed 

new computer hardware and software in its 10 processing centers 

around the country. When the new systems had trouble keeping up 

with the sheer workload of tax processing, the IRS workload became quickly overwhelmed and the service flooded with stories of 

IRS employees stuffing tax returns down toilets and into ceiling 

tiles and into wastebaskets just to get them off their desks in front 

of them. 

The final flash point I want to address is actually more of a fizzle 

than a flash, but it’s important nonetheless. The final example 

demonstrates how the lessons the IRS took from these earlier flash 

points have succeeded, that its best defense is often silence, that 

the waiting game is usually the winning strategy for the IRS. 

The flash point fizzle that I refer to happened between 1989 and 

1992, and involves the investigations launched by former Congressman Doug Barnard into allegations of misconduct by senior IRS executives. In all, during those 3 years of hearings, Barnard revealed 

some serious abuses on the part of at least 25 top-level IRS executives. But of these 25 cases, only one individual received even a 

modicum of punishment, that being a 10-day suspension. The pain 

of that suspension, though, lessened when this man’s fellow executives took up a collection to reimburse him for his lost pay for that 

period of suspension. 

The value of the lessons learned from the previous flash points 

became immutable truths for the IRS after the Barnard hearings. 

By verbally pledging to clean up its act, by shifting the players to 

avoid accountability, by remaining mute, the IRS emerged from the 

most painful public hearings into its integrity since the 1952 hearings with nary a scratch. 

And now, just for a moment, about the congressional response to 

these various flash points. As I already pointed out, in 1952 Congress acted by reforming and restructuring the IRS. This is the 

72

only time in the recent history of the IRS that Congress has taken 

decisive action which resulted in significant change inside the tax 

collector. 

And what of the Watergate years? Well, because the IRS was 

successful in hiding the real story of what was going on, Congress 

fixed the wrong problem. In 1976, asserting that the IRS had become what was called a ‘‘lending library’’ of tax returns to the 

White House, Congress moved to tighten the privacy restrictions on 

tax return information, enacting the most restrictive provisions in 

the history of the Tax Code to access to tax information. 

The result of this was that Congress actually handed the IRS the 

best defensive weapon it has ever had. By continually citing restrictions on access to taxpayer information, the IRS has perfected the 

art of blunting criticism and deflecting blame. Rather than putting 

real restraints on the IRS, Congress inadvertently gave the IRS 

even more power to operate without accountability. 

And what of 1985, the great tax meltdown? Well, there’s nothing 

like cries from constituents to bring about change. After the dust 

settled, Congress essentially gave the IRS a blank checkbook in 

1985 and told the agency to fix its computers forthwith. We have 

all heard the results of that. 

What about the flash point fizzle of Congressman Barnard’s 

hearings, which finally concluded in 1992? Nothing. Congress did 

not enact a single reform or take any action at all at the end of 

3 years of very painful investigations by Congressman Barnard. 

Fizzle. 

So the circle begun in 1952 was now complete 40 years later. 

From an era when Congress was appalled with ethical problems inside the IRS and took decisive action to an era when Congress was 

deaf and dumb to revelations of unethical behavior and mismanagement inside the tax collector, the IRS completed its learning curve that the best defense is to promise that studies will be 

made, pledge to fix existing problems and convince Congress to 

leave it untouched. 

The IRS executive cadre of today is filled with employees who are 

steeped in the culture of secrecy, who believe that running the tax 

system is too important a job to be left in the hands of anyone but 

a member of their private club, who have learned to wait out every 

storm, rearranging the deck chairs after every public revelation of 

mismanagement or financial bungling. 

I will digress for a minute and talk about the IRS news story of 

the week, which is browsing by IRS employees, which shows that, 

once again, I believe Congress is attacking the wrong problem. 

Rather than focusing on low-level, poorly trained, in many cases 

not very highly educated IRS employees, the more important question is what is being done about the IRS executives who promised, 

who pledged to Congress 4 years ago that they would implement 

a no-tolerance policy for browsing when this issue was raised. 

Accountability on the part of IRS executives is where Congress 

needs to be looking. The browsing story ultimately plays directly 

into the hands of the IRS, which wants to be able to proudly stand 

tall and claim they are protecting taxpayers, all the while skirting 

the more important issue of accountability. 

73

The IRS simply doesn’t hold the members of its own executive 

club accountable for their actions. By drumming out an occasional 

low-level employee, by protecting its top-level bureaucrats, the IRS 

has once again succeeded in duping Congress and the American 

taxpaying public. 

So what can be done? Well, I believe that we and you, Members 

of Congress, can no longer wait for the IRS to fix its own problems. 

With historical parallels to 1952, IRS’ plans and reorganizations of 

recent years have not corrected the problems that we all know are 

there. 

I believe that Congress should look to 1952 for suggestions on 

where to go from here. The problem today, like that of 1952, is one 

of leadership; and not just leadership at the very top of the IRS in 

the position of the Commissioner, but leadership throughout the 

entrenched secret society of IRS executives. 

Congress excised the problem 45 years ago by replacing both the 

Commissioner and the entire top tier of IRS executives. Today, I 

believe that same type of action is necessary to recreate the IRS 

into the premier organization that it has been and that it can be 

again in the future. 

Thank you. 

Mr. HORN. We thank you for that marvelous statement, and in 

the question period we will get into it more and your own experiences with IRS as Historian. 

Is your book out yet? 

Ms. DAVIS. Yes. Sure. It should be in any bookstore. 

Mr. HORN. OK. What’s the title of it? 

Ms. DAVIS. ‘‘Unbridled Power: Inside the Secret Culture of the 

IRS.’’ Mr. HORN. You and I have a similar title. I had a book called ‘‘Unused Power: The Work of the Senate Committee on Appropriations.’’ Unused and unbridled. 

OK, Bernie, what is yours? Is yours out? 

Mr. SANDERS. Oh, it is coming up. 

Mr. HORN. OK. That’s very fine. 

[The prepared statement of Ms. Davis follows:]

74


g:\graphics\43913.047
75


g:\graphics\43913.048
76


g:\graphics\43913.049
77


g:\graphics\43913.050
78


g:\graphics\43913.051
79


g:\graphics\43913.052
80


g:\graphics\43913.053
81


g:\graphics\43913.054
82


g:\graphics\43913.055
83


g:\graphics\43913.056
84


g:\graphics\43913.057
85


g:\graphics\43913.058
86

Mr. HORN. Let me go to former Commissioner Sheldon Cohen, 

who was Commissioner of the IRS during the Johnson administration, now a fellow of that distinguished body known as the National 

Academy of Public Administration. Thank you for coming. 

Mr. COHEN. Thank you, sir. 

I should start by saying the views I express today are my own. 

They are not attributable to my law firm nor the National Academy, which did send me here but did not review what I was going 

to say. I will try to summarize. 

I am somewhat familiar with the King and Kean hearings because I was there. I was recruited to the IRS in the fall of 1952, 

just as the reorganization was in full swing. So I do subscribe to 

some of what Ms. Davis has said but not all. 

I would admonish the committee that a page of history is worth 

a volume of logic, so you need to look to where you have been to 

see where you are going. There are some suggestions I have heard 

recently that we should repoliticalize the IRS. That is, we need 

more political responsiveness. That’s the lesson we learned in 1952, 

that we don’t want. 

So I would go through this by saying that when I came to the 

tax law, the Internal Revenue Code was as thick as my thumb; and 

the regulations were somewhat smaller than that. I measured 

them on my desk the other day when I prepared my statement, 

and the Internal Revenue Code is now about 41⁄2 inches thick, and 

the regulations are now in six volumes rather than one, and they 

measure something over 91⁄2 inches wide. 

That’s not the choosing of the Internal Revenue Service. That’s 

the choosing of the complexity of the society and the feeling of the 

Congress, that it has to respond to that complexity in some way or 

another. And so the complexity of the rules does create many of the 

problems, not all, but many of the problems that we’re dealing 

with. 

You have alluded to the fact that earlier in its history, back in 

the late 1950’s, early 1960’s, through the 1970’s, the Internal Revenue Service was thought of as one of the best administrative agencies in the Government, and that is so. I should say that, as a preface or a footnote to that, that the cost of collection in the United 

States is still the lowest cost in the developed world. 

So we are doing some things right. There are many things we’re 

doing wrong, but we’re doing some things right. 

One of the problems that we find, and I think the restructuring 

commission has alluded to this publicly a number of times, is that 

the Congress never saw a problem which it couldn’t address with 

a tax solution. 

My first job was as a legislative draftsman. I can draft any appropriations bill as a tax law, and you have done it in spades over 

the years. Not just this group, of course, but the Congress, over the 

last 35 or 40 years that I have been watching it, has put in the 

earned income tax credit that we were talking about 10 minutes 

ago. That credit is a welfare provision that happens to be in the 

Internal Revenue Code. It doesn’t belong there, and so the Internal 

Revenue Service catches the heat for administering a provision 

that should be in the welfare system. 

87

And we could go on. I could spend the rest of the day discussing 

chapter and verse of other illustrations of that. 

Change itself is complex. One of the simplest things I can advise 

you—and I’ve seen other tax experts up here try to say the same 

thing—is leave the tax law alone for 3 to 5 years and we would all 

get used to it. At least we will learn the rules. We wouldn’t be dealing with a constant change of rules which makes it very difficult. 

Last year, as I say in the statement, I was delivered 700 pages 

of explanation and law, and it was a quiet year. I am presumed—

I did read it all, but I don’t think you want to impose on the Revenue Service the jobs of collecting school loans, of finding wayward 

parents or fathers or mothers or going out and dealing with organized crime. Each one of these issues is probably meritorious, but 

each one adds to the complexity of the management of the job. 

And I don’t think anybody up here, including the oversight committees, has taken the time to say what is the overall effect of each 

of these piling on of layers of work. And of course we see now that 

result. We’re looking at that result right now. We are looking at 

the result of a deteriorating system come about by the layering on 

of additional responsibilities. 

Stability of work force. You can’t give them 5,000 or 10,000 people today so you can score it for budgetary purposes, take it away 

next year and not have a deleterious effect. That is a negative, not 

a positive effect on the organization. You have geared up to hiring 

them, you’ve trained them, and then they are gone, and that’s just 

demoralizing. 

The cuts that come, when you say cut the Internal Revenue Service, well, you can’t cut producing returns, you can’t cut processing 

returns, you can’t cut depositing checks. Well, where does a cut 

come from? It comes from training. Well, that makes the work force 

less responsive. It comes from auditing, comes from collection, 

comes from answering telephones. I mean, somebody—the Commissioner and the staff have to decide what are we going to cut, and 

what you cut really is the most productive work you do. And so it 

is that you will see the deleterious effects when you have these 

kinds of cuts. 

I was lucky. We were living in different times, and I didn’t have 

to face many of those problems, although I did face some of them. 

There were some freezes and those kinds of things when I was 

there. 

One of the things just alluded to was the audit rate. The audit 

rate was something on the order of between 4 and 5 percent when 

I was Commissioner. The audit rate is presently they say between 

1.5 percent and 1.6 percent but really it’s less than 1 percent because they have redefined what an audit is in order to get the 

numbers up. 

Well, you all drive as I drive out on the suburban highways. If 

we see a policeman once in a while, we tend to stay close to the 

speed limit. If we don’t ever see a traffic policeman, we all bear a 

little heavily on the accelerator. And so it is with taxpayers. I think 

everyone who has ever worked in this business knows that, and so 

the deteriorating audit rate is just not acceptable, I don’t think, in 

this kind of a system. 

88

Now, I talked about the fact that we put in the computer system. 

We were lucky. The Congress didn’t know what we were doing; and 

by the time anybody looked at it, it worked. It took a long time. 

The system that I put in in the middle 1960’s was designed in 

1959, 1960 and 1961 by my predecessor. What happens is the Commissioner puts in the program that’s designed by his or her predecessor and is responsible for planning for the programs that are 

going to be put in by the next one. 

One of the things that has attrited in the last 10 or 15 years and 

attrited seriously is the IRS planning staff. The IRS had a premier 

research and planning staff. And of course when you start cutting 

back on their resources, they start cutting back; and somebody 

says, that’s fat, well, it goes. And then goes your capability of producing the good plan, as Ms. Willis said, for your computer system—that computer system that was put in in the mid-1960’s was 

designed mostly in-house, although some out-house work, but mostly in-house by a small group of 8 or 10 people. 

One of the problems we have, of course, is I lived in a period of 

can-do Government. Today, we have Government being dumped on. 

And one of the problems I see is you would never see a commercial 

company—General Motors’ chairman would never say, ‘‘we make 

lousy cars,’’ although a few years ago they did. He would say, ‘‘we 

make great cars. We’re going to make better ones if we all work 

together.’’ Unfortunately, we have had dumping on Government. Government is the source of every problem in the world. The Government 

has a lot of problems, but it also has a lot of solutions. And the 

revenue system, as I said in my paper, does produce more revenue 

at a lower cost than any system in the world and is a model for 

most of the rest of the world. It can be improved dramatically, but 

we have got to recognize that. 

Ms. Davis is right, the revenue service was not responsive to the 

enemies list. I represented a taxpayer who was audited under 

TCMP during Watergate. He was one of the top 10 persons on the 

enemies list. And there were no problems. He never had a serious 

problem. 

TCMP is an essential ingredient. Ms. Willis avoided answering 

your question, but there is no substitute at the moment. If there 

is no substitute, then we need a sample program. If nobody has got 

a better one, it would be a shame to let this one die; and as the 

data that is used to develop that program withers because of age, 

it becomes useless. 

The program actually is designed to help taxpayers, not to harm 

them. Because when we started TCMP, about 50 percent of individual audits resulted in no change. By the time we finished, I 

think last year I saw the data for it, it was about 15 or 16 percent 

no change. That is, the computer selected a return, it looked like 

it had an error, it didn’t. That’s a big change from 50 percent down 

to 15 percent. Without that kind of data, you are just by guess and 

by God; and when you go into individual selection techniques, it 

uses up the most important resource you’ve got, people. 

I am going to skip a lot of this, because you will I am sure read 

it, if you like. I will talk about a couple of the ideas that have been 

suggested. They are not new. 

89

The idea of separating the IRS from Treasury has been suggested as long ago as 30, 35 years. I think it’s a bad idea. If I were 

Secretary of Treasury, I would find it abhorrent that the most important revenue function of the Government does not report to me. 

That’s not to say that the Secretary of the Treasury ought to have 

much in terms of management control. The Commissioner is the 

equivalent of an Under Secretary and ought to be left alone and 

ought to be responsible for doing the job. But there are tax policy 

issues and there are monetary and fiscal issues involved in the creation and the operation of a tax system, and the Secretary should 

have a voice in those, if need be. 

The idea of a board of directors doesn’t sit well with me; and, Mr. 

Chairman, you indicated that you want a manager for the Commissioner of IRS. Yes, you do. You want a good manager. But whether 

that manager is a CPA or a lawyer or a businessman is a hard 

question to answer. 

Because, as I say in the statement, I wrote speeches when I was 

a kid for the last Commissioner of Internal Revenue, who was a 

nontechnician. He happened to be a CPA, but he happened to be 

a manager. He knew nothing about the tax system. He was a nontechnician. And he would come out congressional committees or he 

would go out and make a speech, and he would answer a question, 

and he would answer it logically. Well, the tax system isn’t necessarily logic. The tax system is what the Congress says it is. 

Then we would have to explain why he was wrong. Well, we 

would never admit he was wrong—why he was misquoted or similar problems. If you have a nontechnician sitting here today and 

you ask him a technical question, he or she has got to have enough 

nerve to say, ‘‘I don’t know the answer to that question. Ms. Jones 

or Mr. Brown will answer it.’’ It is a little hard in this context. So 

you may get what you wish for in this world, and that’s kind of 

tough. 

I think that’s a pretty good summary. I’d say that, as I indicated 

to you, if you had a perfect tax plan right now, if you had a system 

that you thought was perfect in the Internal Revenue Service and 

you began to put it in today, it would take you 6 or 7 years to get 

it in. 

So don’t have an illusion that somebody is going to come up in 

the next 6 months with a magic bullet to make this thing work and 

work beautifully. It’s going to take a lot of people and a lot of 

money and a lot of planning. 

And one of the notes I handed Ms. Willis is she ducked your 

question. You asked her what kind of a system she would put in, 

and she doesn’t know. Well, they don’t know either. They ought to 

know, but they need enough money to think about it. And you want 

to hold them closely and make them produce the thing, but you 

have got to give them enough money to plan it. Because it isn’t 

going to produce itself; and nobody outside the Revenue Service, 

without the cooperation of the Revenue Service, can produce that 

plan, because nobody knows what they need to do except themselves. 

Mr. HORN. We thank you very much for that statement. I am 

sure we’re going to be pursuing a number of questions with you. 

[The prepared statement of Mr. Cohen follows:]

90


g:\graphics\43913.059
91


g:\graphics\43913.060
92


g:\graphics\43913.061
93


g:\graphics\43913.062
94


g:\graphics\43913.063
95


g:\graphics\43913.064
96


g:\graphics\43913.065
97


g:\graphics\43913.066
98


g:\graphics\43913.067
99


g:\graphics\43913.068
100


g:\graphics\43913.069
101


g:\graphics\43913.070
102


g:\graphics\43913.071
103


g:\graphics\43913.072
104


g:\graphics\43913.073
105


g:\graphics\43913.074
106

Mr. HORN. The last witness on this particular panel is Robert 

Tobias, president of the National Treasury Employees Union. Mr. 

Tobias. 

Mr. TOBIAS. Good morning, Mr. Chairman. Thank you very much 

for allowing me to testify. 

As all of us in this room know, the IRS has been bashed and battered by some Members of Congress, by the press and the public. 

Now, some of that criticism is justified. But much of the criticism 

ignores the IRS successes, and there are many. IRS collected $1.36 trillion in revenues in fiscal year 1996. It is projected to collect $1.47 trillion in fiscal 1997 and projects it will 

collect $1.57 trillion in fiscal year 1998. In addition, in fiscal year 

1996 IRS collected $38 billion through its enforcement efforts, revenue voluntarily paid and revenue from enforcement actions headed up through fiscal year 1996. 

And in response to some of the questions Congressman Sununu 

raised, the IRS knows why those enforcement dollars are up. They 

are up because of the compliance initiative that was initiated by 

Congress in 1995, which allowed for more people to be involved in 

collecting taxes and in auditing taxes. The audit rate went up from 

1.02 percent to 1.6 percent. And the number of people actively engaged in reducing the accounts receivable led to collecting in the 

first year of the compliance effort $800 million, notwithstanding 

the fact that the IRS promised $300 million in the first. Now, Congress killed that initiative in 1996, and I believe you are going to 

see a reduction in the enforcement revenue as a result. 

Now, in contrast, the cost of collecting revenue is headed down. In fiscal year 1997, the cost to collect $100 of revenue—excuse me, 

in 1992, was 60 cents, 50 cents in 1997 and it’s projected to be 47 

cents in 1998, or an 18 percent drop in 4 years. Most democracies 

spend $1.25 to $1.70 per $100 of revenue collected. No tax collection agency anywhere comes close, much less matches the IRS cost 

per dollar of revenue raised. 

While costs are declining, work is increasing. More returns are 

processed, more refunds distributed and more telephone calls answered. In the 1996 filing season, the IRS answered only 9 million 

calls of the 42.3 million made. Using roughly the same period, January 1 through February 24, 1997, the IRS answered 11.3 million 

calls or 2.3 million more of the 21.6 million calls attempted. 

It’s also important to note that fewer calls are being made this 

year, primarily because of IRS attempts to reduce unnecessary notices which, in turn, stimulate telephone calls. More revenue, more 

work performed and decreased costs should be the basis for at least 

mild applause from those who would evaluate the Internal Revenue 

Service based on a comparison to the private sector. 

Despite these successes, the conflicting pressures imposed by 

Congress, the administration and the Federal deficit threaten to 

exert too costly a burden to the IRS and, in turn, the compliant 

taxpayer. Left unresolved, these pressures will result in lower levels of compliance, greater costs per unit of revenues collected and 

an erosion of the public confidence in the fairness of our tax administration system. As such, the Congress and the administration 

must immediately forge a new consensus on the mission of the Internal Revenue Service. 

107

I believe that the IRS must make it a priority to provide the taxpayers who already comply or those who are seeking to comply 

with the services they need. At the same time, the IRS must increase enforcement activity upon the noncompliant to restore the 

confidence of the already compliant taxpayers in the system. The 

noncompliant have the right to be treated with respect, but the 

compliant taxpayers have a right to expect the IRS to enforce the 

law against the noncompliant. The compliant have a right not to 

expect to subsidize the noncompliant taxpayers in this country. 

Now, the IRS management’s proposed field reduction in force is 

a prime example of its moving away from its obligation to provide 

customer services to compliant taxpayers. The RIF plan will reduce 

customer service to those trying to comply, reduce net revenues 

and cause several hundred low-paid, mostly female employees to 

lose their jobs. 

As the subcommittee is aware, the IRS scrapped the plans jointly 

developed to implement the field reorganization. The regional and 

IRS field offices had approved these carefully drafted plans but 

unilaterally rejected them and directed that a RIF of 2,371 employees would occur and 1,312 employees would be hired doing the 

same work in new locations. 

The IRS continues to assert that the proposed RIF ‘‘has not and 

will not adversely impact service to taxpayers.’’ I emphatically disagree with that. From May 1996, to April 14, 1997, the IRS failed 

to complete a plan to perform work with 1,059 fewer employees; 

and no new working processes has been created; and no new technology has been introduced. There is no question that taxpayers 

will have less service under the plan the IRS is proposing to implement. 

The IRS has no data and no plan to refute the logical inference 

that 1,012 new inexperienced employees cannot provide the same 

level of customer service as 2,371 experienced employees. There 

can be no question that taxpayers, compliant taxpayers and those 

seeking to be compliant, will not receive the service they need and 

deserve; and the IRS cannot absorb the downsizing by detailing experienced employees or creating dual-position descriptions to solve 

the problem. 

As was pointed out, the Internal Revenue Service has lost some 

10,000 employees over the last 2 years. I identify in my testimony 

the specific kinds of actions that taxpayers will suffer as a result 

of this: delays in the release of tax liens; increased interest costs 

to taxpayers from delays in processing liens; late case closure, resulting in an increased notice of unwarranted notices of deficiencies; increased errors by inexperienced replacements; reduced 

problem resolution service; reduced taxpayer education programs to 

help targeted groups; reduced information systems personnel to 

maintain computer and telephone systems; and fewer individuals 

to help taxpayers interested in electronic filing. 

And to bring this home, Mr. Chairman, consider what would happen to those who cannot get timely assistance from the IRS. Your 

constituent may be an elderly and infirmed widow who has just 

discovered she has a tax lien to her house. She needs to sell her 

home to move into a nursing home. Her health is failing rapidly. 

108

She promptly satisfies the lien, but she cannot complete the sale 

until the IRS clears the lien. 

Instead of clearing the lien in 3 days, as is the current practice, 

there are IRS locations today where 30 days will pass before her 

lien is released. Her buyer will lose patience. The sale will fall 

through. She will, without doubt, be damaged. 

While this story is fictional, it illustrates what will happen to 

countless real people, real taxpayers. Each person affected could 

needlessly suffer personal hardship and monetary damages resulting directly from the failure of the IRS to provide prompt and accurate customer service. 

Mr. Chairman, NTEU fully supported the IRS announcement 

that it would reduce the number of districts from 63 to 33 and the 

number of regions from 7 to 4. However, we cannot support the 

proposed RIF of these employees. NTEU urges Congress to prevent 

the IRS current proposed method of implementing its reorganization plan. 

If the ultimate goal of the field reorganization, as stated in the 

IRS congressional testimony presented on March 18, 1997, is to ensure, ‘‘that salary dollars can be spent instead on front-line operations,’’ NTEU asserts that Congress should transfer the $97 million in fiscal year fiscal 1997 appropriations, which will not be 

spent as planned on information services’ downsizing and several 

tax systems modernization programs that have been canceled, and 

use that money to provide more front-line compliance and customer 

service positions. 

In addition, Congress could get the IRS back on the right track 

and enhance confidence in the tax system by restoring funding for 

more rigorous compliance activity. While wage earners are 95 percent compliant and 75 percent of taxpayers take a standard deduction, the latest calculation in 1992 of the compliance gap showed 

$129 billion in taxes went unpaid, $22 billion more than the Federal deficit of $107 billion last year. 

Congress conducted an experiment in 1995 which proved the IRS 

could reduce the noncompliant population and increase revenue for 

deficit reduction. The IRS geared up, hired and trained people. The 

IRS promised, as I mentioned, $300 million in marginal revenues 

and produced $833 million in marginal revenue. Congress withdrew its support for the initiative to save money for other purposes, 

and the administration has since not renewed its funding request. 

NTEU believes it is penny wise and pound foolish to forgo the 

added revenues which can be collected through investment in compliance activity. Congress could use the added revenue to further 

realize customers’ objectives and reduce the Federal deficit. 

Last, NTEU believes that Congress must consider alternative 

funding mechanisms to provide the IRS with adequate and stable 

funding resources. Current budget rules do not provide sufficient 

reliability to allow the IRS to function at its most efficient state. 

For example, when Congress decided to end the 1995 compliance 

initiative, the budget rules scored the $400 million cut in salaries 

and expenses as a savings and ignored the $9 billion in revenue 

that the initiative would have brought in over the next 5 years. 

These rules presumably are intended to conserve our resources, yet 

109

our common sense tells us they do just the opposite. NTEU urges 

Congress to rethink these rules as they apply to the IRS. 

Thank you again, Chairman Horn, for the opportunity to express 

NTEU’s views on the management issues confronting the IRS 

today. I will be very happy to answer any questions you might 

have. 

Mr. COHEN. Mr. Horn, if I may—— Mr. HORN. I thank you very much for your testimony. 

[The prepared statement of Mr. Tobias follows:]

110


g:\graphics\43913.075
111


g:\graphics\43913.076
112


g:\graphics\43913.077
113


g:\graphics\43913.078
114


g:\graphics\43913.079
115


g:\graphics\43913.080
116


g:\graphics\43913.081
117


g:\graphics\43913.082
118


g:\graphics\43913.083
119

Mr. COHEN. I left one thing out. Ms. Davis mentioned 6103; and 

I need to tell the committee, 6103 was amended in 1976 at the request of the Senate Government Operations Committee. 

Mr. HORN. Do you want to translate 6103? 

Mr. COHEN. 6103 is the privacy section of the Code. It requires 

confidentiality. And the Administrative Conference of the United 

States was requested to make a study. The chairman of the Administrative Conference at that time was Nino Scalia—excuse me, 

Antonin Scalia, the Supreme Court Justice; and I was the co-chair. 

So it was done for a valid purpose. It may not have been done 

right, since one can argue about public policy, but it was done carefully by a careful committee. 

Mr. HORN. Let me make another translation for those who read 

this transcript. We heard a lot about the TCMP. What it translates 

to in day-to-day English is the Taxpayer Compliant Measurement 

Program, in case anyone is wondering about that. 

I now yield 5 minutes to Mr. Davis, the gentleman from Virginia. 

Mr. DAVIS OF VIRGINIA. Thank you very much. 

Mr. Tobias, what is the morale like among the rank and file? 

There has been a lot of bashing against the IRS. Has it filtered 

down to the employee level and—with the planned RIFs? Could you 

give us a reading on that? 

Mr. TOBIAS. The morale of the Internal Revenue Service employee is very low, certainly in connection with the planned RIF 

and certainly in connection the bashing they have taken over the 

last 2 years primarily; and that translates not only into problems 

in the workplace, but also I think a lack of respect by taxpayers 

toward the IRS and the legitimate actions that IRS takes. I mean, 

all too often, the Internal Revenue Service employees are blamed 

for the laws that you all create. 

Mr. DAVIS OF VIRGINIA. That’s so often the case. 

I was interested in your comments on the RIF. The IRS thinks 

that it won’t adversely impact services, taxpayers. You obviously 

take a different view on this. Do any of you have any evidence that 

women and minorities aren’t going to be disproportionately treated? 

Mr. TOBIAS. We have been trying to get that information from 

the IRS since May of last year, and we still haven’t been able to 

get the information. The anecdotal evidence is, yes, they will be adversely impacted and perhaps illegally so. But the kinds of jobs 

that are adversely impacted are, primarily, based on the anecdotal 

evidence and my travels around the country, are women and minorities. 

Mr. DAVIS OF VIRGINIA. Anybody else on the panel have anything 

about that? 

Let me ask, why do you think that walking into a local office and 

making a local telephone call is preferable to calling a 1–800 number? Is it more productive, do you think, in terms of customer satisfaction or comfort in terms of the calling up? Any studies on this? 

Mr. TOBIAS. Certainly, the Internal Revenue Service can’t supply 

enough people in every office to satisfy walk-ins, and a 1–800 number is critically important. But it’s also critically important to have 

someone in a location to release a lien, or to answer a question, or 

120

take a check when someone does walk in an office. So both are necessary. One can’t be advanced to the exclusion of the other. 

The Internal Revenue Service has attempted to characterize this 

dispute in terms of taxpayer service, traditional 1–800 taxpayer 

service. I believe the issue is whether or not customer service, service to taxpayers in general, will decline with this proposed RIF. 

And I don’t think there’s any question, there can be no doubt that 

this will occur. 

Senator Kerrey did some hearings out in Nebraska just last week 

where practitioners, IRS employees and the public all came and 

testified that they were not receiving the service that they had received 3 months, 6 months, 9 months ago. And I think you will find 

that to be true across the country. 

Mr. DAVIS OF VIRGINIA. You talked at length about the release 

of liens and the widow who may need to release a lien and how difficult that may become. We heard from a witness in a prior hearing 

that the IRS didn’t do a very good job of working on taxpayer liens 

anyway. Do you have a different impression or are you saying if 

it didn’t before it’s going to be worse under this? 

Mr. TOBIAS. It’s going to be worse. It’s going to be worse in those 

districts, in those noncontinuing districts, the districts who have 

been identified as noncontinuing districts. There used to be 63, now 

there are 33. There are 30 noncontinuing districts, and in those 

districts, there will be problems. 

Mr. DAVIS OF VIRGINIA. OK. Thank you very much. 

Ms. Davis, let me ask you. In your opinion, if the IRS contracted 

out for a new state-of-the-art computerized information system 

with bells and whistles such as access and other security controls, 

had it installed and saw it was working perfectly, would that mean 

that Congress, GAO, the Treasury, the IG and all the other IRS 

stakeholders could rely on the IRS information from then on? 

Would the current staff be capable of taking it from there and running with it? 

Ms. DAVIS. I’m not sure I understand the question. 

Mr. DAVIS OF VIRGINIA. If you had a system that was up and 

working perfectly, could we then rely on the IRS information from 

then on or are there other inherent problems? 

Ms. DAVIS. Well, it’s a hard theoretical question to answer. I 

guess one thing, as far as contracting out a computer system—I 

know this isn’t really what your question is getting at—I don’t 

think the confidentiality flags that get waved in the air every time 

something is talked about getting contracted out are really a severe 

problem to be concerned about. So you could potentially even contract out the entire computer system as well as the operation of the 

computer system, and that may be where the best answer lies. 

I think that if the IRS had a completely wonderful new computer 

system placed in its hands—I think the vast majority of IRS employees who are out there across the country in the field offices 

running the computer systems, processing the tax returns are 

doing the best job they possibly can. I think that would be fine. 

As I said in my statement, I really believe that already every 

problem that the IRS is saddled with today emanates from the 

headquarters of the IRS, from the executives. So I think if you put 

a new computer system in the hands of the IRS employee around 

121

the country, I think you might very well have a much smoother 

running system. 

Mr. DAVIS OF VIRGINIA. That’s a very good endorsement. I am 

sure Mr. Tobias would agree the problems here aren’t generated 

from the rank and file employee. 

Mr. TOBIAS. They are not. 

Mr. DAVIS OF VIRGINIA. Mr. Cohen, any observations on that? 

Mr. COHEN. That’s a little too simplistic. If you had a perfect 

computer system—and you wouldn’t ever have it, because the moment it’s perfect, it’s out of date as soon as you put it in. So you 

can’t stop. You can’t stop planning for tomorrow because you have 

got—things are going right today, because that’s a recipe for disaster. 

We’re entitled to a fair trial in the United States. We’re not entitled to a perfect trial. We are entitled to a fair tax system, not a 

perfect tax system. And so we have got a very good one. 

We have got a lot of defects. There has been some managerial 

fall-down, not to the extent Ms. Davis says, and so you can’t design 

this system with the thought that this is the last time you are 

going to design a system. That’s the problem. We designed the system 30 years ago, which was a fine system. It is not a fine system 

today. 

Mr. DAVIS OF VIRGINIA. Thank you, my time is up. I appreciate 

that. 

Mr. HORN. Thank you. Five minutes to the ranking Democrat, 

Mrs. Maloney of New York. 

Mrs. MALONEY. Thank you. Mr. Cohen, you indicated in your testimony, the changing laws, Tax Code laws, are a problem. What do 

you suggest we do about it? 

Do you suggest we have a 2-year moratorium on changes in the 

Tax Code? 

Mr. COHEN. I do that, really, as a joke. I think the Congress is 

like every other body in the United States. It needs an internal discipline also. You need an internal discipline here, and you need 

someone who is going to say—well, I will give you an illustration. 

I used to say for the Assistant Secretary for Tax Policy—he was 

a close friend, a premiere tax attorney in the United States, a professor—I said, Stanley, you understand it; I almost understand it. 

How in the world do I explain it to the rest of the people? Someone 

here has to say the same thing; that this is a good rule. It may be 

better than the existing rule, but it is—for example, the alternative 

minimum tax is a rule that was enacted up here. Now, it seems 

to be the current kicking boy. Everybody is kicking the alternative 

minimum taxes being the most complex rule in the Internal Revenue Code. 

What was it designed to do? It was designed to help a Congress 

avoid facing limitations on individual deductions, which, when put 

together, gave some taxpayers unusually large deductions, and, 

therefore, they paid no tax. So, instead of addressing the problem 

directly, as it should have, Congress said let’s take this pill. This 

pill is called the alternative minimum tax, and that tax has been 

in here since 1968 or 1969, and you diddled with it, but after you 

diddled with it, you made it worse, not better. 

122

Mrs. MALONEY. What do you suggest we do about it? Do you suggest that possibly we informally have a collaboration with IRS professionals on what the consequences of certain tax changes have in 

the implementation? 

Mr. COHEN. It is a nice idea, I kind of like that. 

Mrs. MALONEY. It is a serious suggestion that you have on the 

constantly shifting tax policy, which is problematic not only for the 

IRS, but certainly for the American businesses, and certainly the 

trade of the world that we are involved in, and the constant—you 

know, we now have a certain budget cycle. Maybe we should have 

a tax cycle of 2 years so that people have a chance to sort of understand the ramifications, and that you are not constantly going into 

situations, which you pointed out, the IRS goes into. 

One day they have a certain set of employees, the next day they 

have a certain set of employees. It is hard to plan and implement. 

With all the cutbacks, maybe we should have the same type of 

planning restrictions not only on personnel in the job, but also on 

changes of policy, so that the business community, the trade community and the IRS professionals themselves could catch up with 

it. 

And, also, I want to very quickly throw in another question with 

response to your testimony. You mentioned, we train them, we 

spend time with them and then they leave. Why are they leaving? 

You were talking about the personnel. 

Mr. COHEN. Let me answer in the order that you asked them. 

The chairman of the Ways and Means Committee many years ago 

was a fellow by the name of Wilbur Mills, who was a Harvard Law 

School graduate and a first grade technician. And he had an interest in the technical aspects of the tax law. 

Most Congress people don’t have that. They, you know, they are 

interested in the policy, but they are not interested in technical aspects. Somebody here has to ask the question once in a while, what 

does this do to the tax law? 

Wilbur had a plan at one time. It was never implemented because he couldn’t get anybody to go along with it. He would divide 

the Code into sections and he would study over a period of 4 to 5 

to 6 years. Each year he would study different elements and try to 

improve them. 

Now, that would take up the full power of the Ways and Means 

Committee and it wouldn’t be able to do all the other things it 

does, but at the end of a 4 or 5-year period, you would have a much 

better law. That is why it never got done, because it would have 

diverted them from doing the little diddles that help each one of 

the Members of Congress do what they would like to do. 

One of the things I have suggested, and I have heard other people suggest on occasion, is each time somebody suggests an improvement or change in the Internal Revenue Code, they be required to submit to you how that be reflected on a tax return because that would be very telling. Where is the space on the return? 

What would the instructions look like? 

Mrs. MALONEY. Also, Mr. Cohen, you could add to that thought 

having the IRS comment on how they would implement it. 

Mr. COHEN. You don’t ever ask them. Again, I used to be a staff 

person, so I drafted legislation, and it was rare to come up here. 

123

Now, Mr. Mills would invite me in private. I would come in and 

tell him what I thought, but it would be rare that I testified in public hearings because I wasn’t invited. Policy wasn’t my bag, so I 

mean, it can be done because Mr. Mills used to do it, but both of 

those ideas withheld. 

Now, why do people leave? Government is unattractive now. 

When I was Commissioner, and it didn’t have anything to do with 

me being Commissioner, President Johnson passed a Comparability 

Act and Government salaries were within about 85 percent of going 

rate in the area. The work was good, so good people came and they 

enjoyed it. 

As I indicated to you, I had the 15 top people on my staff and 

only 2 of those people changed in a 5-year period of time. You got 

a 50 percent turnover in less than that right now. That is because 

the pay isn’t up to snuff and because they get beat around the head 

fairly often. 

Mrs. MALONEY. Well, as you know, our Nation was founded on 

a tax revolt, and certainly no one wants a meddlesome ‘‘Big Brother’’ approach in our taxes, but we should at least demand, from an 

important Government agency, that they be competent and efficient. They should certainly be as competent and efficient as American Express, or Citicorp. Yet, by all accounts, they are not. 

Mr. COHEN. Citicorp picks its clients. The IRS doesn’t pick its clients. 

Mrs. MALONEY. Well, that is true. But, certainly, the management, not just the clients, the management—— Mr. COHEN. See, the client is involuntarily dealing. If I go to the 

bank to borrow money or to have a credit card arrangement, it is 

benefiting me. If I go to the IRS to pay them taxes, it is hurting 

me. The definition of a tax is that it’s an enforced exaction of a 

State. That is the definition of a tax. 

Mrs. MALONEY. Yet by all accounts, the GAO reports, repeatedly, 

your testimony and others, there has been, shall we say, not especially efficient or consistent management, or effective management 

at the IRS, and I would like to come back to your testimony. I am 

out of time, he is telling me. 

Mr. HORN. I thank the gentlelady from New York. The gentleman from New Hampshire, Mr. Sununu. 

Mr. SUNUNU. Thank you. 

Mr. Tobias, we have all read by now a number of accounts about 

information systems, numbers in the computers, what has been 

spent and how effective it has been. But my perspective is that 

while a computer is a good information system and is important, 

technology is a poor substitute for good people and good training. 

But having said that, I would like to hear your perspective on 

what opportunity there is to improve the tools and equipment that 

is in the hands of the people on the front lines? What kind of 

changes or modifications and opportunity for improvement is there, 

that certainly the members of your employment group would like 

to see, as we go about trying to repair and amend some of the technology implementation plans that we have. 

Mr. TOBIAS. I would start at the most basic tool and that is the 

human resource tool. The amount of dollars spent on basic training 

and advanced training of the IRS, I believe, was cut $21 million 

124

from—in 1996. So continuing education was not part of the 1996 

IRS effort because Congress cut funds and training was cut. So I 

think basic training is critically important. 

For the customer service representative Congresswoman Maloney 

was speaking of just a moment ago, they need the tool to be able 

to have the return come up on their screen so that they can provide 

an instantaneous response to the question that the taxpayer asks, 

and the tax system’s modernization effort was to provide that kind 

of information, to integrate the data bases so that questions could 

be answered and adjustments made at the time the first telephone 

call was made. 

Those kinds of tools, to customer service representatives, would, 

in my view, significantly enhance the credibility of the IRS and 

provide the information compliant taxpayers need to remain compliant. 

Mr. SUNUNU. Where, in your mind, have the shortcomings been, 

though, in trying to implement the modernization programs? I 

mean, there have been clearly shortcomings, clearly failures, and 

I don’t know if it is a question of setting expectations that are too 

high with regard to what technology can do, or failure at the management level or failure in not being inclusive enough in taking 

into consideration people at the customer service level and design 

of the systems. Where, in your mind, has the failure been? 

Mr. TOBIAS. I think the IRS bit off more than it could chew. I 

think that the IRS recognized that the technologies of the sixties 

and seventies wasn’t going to be good enough for the technology of 

the nineties. It had tried, like private sector corporations, on several occasions, to introduce new technology. 

It would get up to the brink of implementation, Congress pulled 

the plug on the funding, and so there came to be a consensus that 

the IRS had to have new technology and the IRS’, I believe, mentality was we have to go for broke because we don’t know how long 

this funding will last. 

There was no idea of stable funding, so I believe the IRS tried 

to do too much. It did not integrate the 23 separate programs. And 

the several millions of dollars, hundreds of millions of dollars it 

was projected to spend, it didn’t have infrastructure. It didn’t have 

architecture, and as a result, it was not managed properly. 

Mr. SUNUNU. Mr. Cohen, maintaining the line of inquiry on technology, you talked about the system designed in 1960, 1961, and 

then put into place when you were Commissioner. To what extent 

is that venerable computer system still utilized in the activity 

today? 

Mr. COHEN. Unfortunately, much of it is still utilized. Some of 

the hardware has changed, but, basically, the basic thrust of the 

program is the same in technology, of course. We had no random 

access. If we wanted to find Sheldon Cohen’s tax return, we had 

to go through a roll of tape and run it until it got to my Social Security number and it would stop and produce my information. But 

no random access. 

I mean, my little personal computer has more random access 

than their big computer down at Marksberg. We put in three IBM 

360’s and 370’s, which were state-of-the-art in the mid 1960’s, absolutely top line. I doubt if Congress would have let us do it if they 

125

had known what we were doing. We were going for broke because 

we knew we had one shot to put it in there. 

And Mr. Tobias is absolutely right. You have this instant gratification mentality. This is a long program, as I say, if you knew 

what you wanted. I talked to Mr. Gross. We had lunch a few weeks 

ago, and if you had a program today that was as good as you could 

get, close to perfect, you were talking about 6 or 7 years to put it 

in, and you are talking about 2 or 3 years at least to design it, so 

you are talking about a 7 or 8-year program. Life was simpler then. 

It was designed in 1959. We began installation in 1964 or 1965, so, 

you know, the machines were simpler, the context was simpler. 

And, by the way, the first thing we had to learn, then, was that 

we had to have our paper system working as good as it could possibly work before we went into computers. You can’t leapfrog. So 

you need to take the present system and make it work as perfectly 

as you can make it and move into the new system. You can’t leapfrog, and they are trying to leapfrog two or three generations. That 

is awfully hard. 

Mr. SUNUNU. Thank you. Thank you, Mr. Chairman. 

Mr. HORN. Thank you very much, Mr. Sununu. Let me pursue 

a few questions with each of you. 

Mr. Cohen, I noticed in your remarks that citizens are entitled 

to a fair trial. You are a lawyer by background. A lot of citizens 

and a lot of Members of Congress say if that is true, why don’t we 

switch the burden of proof to the client, the taxpayer, and away 

from the IRS, right? Right now the IRS does not have to prove its 

case. The taxpayer has to prove the case. Why hasn’t that changed? 

Mr. COHEN. Because you would make the IRS more intrusive if 

you did. If you think about the system as it exists, we are dealing 

in the civil system, not a criminal system. In a criminal system, the 

IRS has the burden of proof. The plaintiff in a civil trial, he is proposing the idea, he has the burden of proof. Why, because he has 

all the information. If I have to prove my medical deductions, I 

have them. I have all the doctor bills. I have all my checks, I can 

do it. The IRS doesn’t have it. 

All they can say is we don’t see from your return that your medical deductions look right, please show them to us. That is why I 

have the burden of proof, so it is with business records or anything 

else. If we want to make audits more intrusive, then the IRS will 

have to demand all the records. They will become much more intrusive. They will be less productive, but everybody forgets that I have 

the tax records, they are in my possession. I ought to produce them 

if I am making an assertion. There are problems that come up 

around the edges. 

I am not saying there aren’t taxpayers who don’t feel abused, and 

a few of them are right, but the question is, which of those techniques will burden more of the taxpayers, and clearly the burden 

of proof on the Government will burden more taxpayers because 

the Government is then in a position of saying produce all your 

records. You will have to subpoena them or summon them or use 

some technique to make you bring them in, in order to see if they 

have a case or not. 

Mr. HORN. Mr. Tobias, do you have any comment on that question? 

126

Mr. TOBIAS. Only that we have a voluntary tax system. People 

say what it is they owe and what deductions they are going to 

claim, and I would just mirror what Mr. Cohen said. If I am a taxpayer, I have the information, and, therefore, I should have the 

burden, in a voluntary tax system, of showing why I owe $10 instead of $20. 

Mr. HORN. Ms. Davis, do you have any comment on this part, 

based on your review of IRS? 

Ms. DAVIS. Just very quickly, I wasn’t involved in personal audits, but I had conversations with IRS employees. Believe it or not, 

many of them talk to me openly. One of the things a recently retired IRS executive pointed out to me was that he believed that the 

IRS approaches virtually every taxpayer as though they are cheating on their taxes, you know, if they can cheat, they will, or if they 

can scam, they will. They are going to go into an audit situation 

with that kind of negative attitude, rather than approaching taxpayers as though they are doing everything they can to comply 

with this outrageously complex system we have all been saddled 

with. 

So I think it is probably more of an attitude question than anything, and if you change, even that cultural perspective on the part 

of the IRS, I suppose you could even accomplish what you want to 

accomplish by changing the burden of proof, by changing the way 

in which taxpayers are approached on the initial instance by the 

IRS, that we are trying to comply. I filed my tax return as a selfemployed person for the first time this year, and I have never seen 

such a mind-boggling mess of paperwork in contrast to the simple 

returns I used to have. 

Mr. HORN. I did suggest about 3 or 4 years ago when I first came 

here that we ought to pass a resolution in the Congress. We all as 

Members have to sit on the floor of the House on April 15, no tax 

attorneys, no tax accountants with us and we have to fill out our 

own form. I suspect there would be great reform that followed that 

immediately, but we have now turned it over for $750 or $1,000 to 

an accountant and we don’t worry. We just sign and then you 

worry and hope it’s right. But let me ask you, Mr. Tobias. You are 

familiar with the Debt Collection Act we authored last year? 

Mr. TOBIAS. Yes, I am. 

Mr. HORN. Elements of that are now before the special subcommittee of Ways and Means. As to apply in that act, to IRS, it 

is the only part of the Federal Government that it’s not been applied to, because we have the interest of Ways and Means, which 

I certainly can thoroughly understand, who have jurisdiction over 

that. 

On the other hand, we have lost a year. Now, does the union that 

you were president of have any feelings on that legislation one way 

or the other? 

Mr. TOBIAS. I believe, Mr. Chairman, that contracting out the 

collection of taxes to the private sector is unwise for a number of 

reasons. First and foremost, I believe the IRS employees can and 

do and will be proven that they collect dollars owed, faster, better, 

and cheaper than the private sector, and that the answer to reducing the accounts receivable inventory is to provide the IRS the reVerDate 0ct 02 2002 01:17 Oct 06, 2002 Jkt 010199 PO 00000 Frm 00130 Fmt 6633 Sfmt 6633 W:\DISC\43913 43913
127

sources they need to collect more taxes, not contract it out to the 

private sector. 

I believe collecting taxes is an inherent governmental function, 

not to be contracted out. Second, I think there are issues of privacy 

about providing information to the private sector. As you were 

speaking this morning, those who are involved in this experiment 

receive only a name and the amount owed, but what the IRS is 

finding is that these people can’t find taxpayers any easier than 

the IRS can, and that in some substantial number of cases, the 

amount owed is disputed, which means they have to hand it back 

to the IRS to close the case, or to do a part pay agreement. So I 

think there is inherent inefficiency, and I believe, based on that 

1995 tax compliance initiative, the IRS proved it could collect 

money if it were given resources. I don’t think the private sector 

is the answer in this case. 

Mr. HORN. When you have 100,000 plus employees and you let the debts run up to $100 billion plus, why can’t 100,000 employees 

be so organized that they reduce that debt? That is a scandal of 

the IRS, to let $100 billion accumulate in lost revenue. 

Mr. TOBIAS. I think perhaps it is a scandal for the IRS, but I 

think Congress shares some of that responsibility. When the IRS 

proves that with more resources, it can decrease those accounts receivable and then Congress says, sorry, I am not going to fund it 

in 1996. Even though you are successful in 1995, I think Congress 

bears some of that responsibility. And it is easy to say, well, there 

are 100,000 people and why can’t they collect the money, but those 

100,000 people are also processing 200 million returns, issuing, I 

don’t know, I think it is $190 billion in tax refunds. So they are 

not all in fault in accounts receivable. If the IRS had 5,000 more 

people focused on that issue, it could maybe produce more. 

Mr. HORN. Well, I am willing to give the first 30 days, but if they 

can’t produce, I think it ought to be turned over to somebody who 

can produce. 

Mr. TOBIAS. I will take that 30 days with the resources and 

whatever test you want to create. I think we will beat whoever is 

at the starting line. 

Mr. HORN. I think the fact is, with 100,000 people, and I don’t 

blame you, I blame management for not organizing themselves so 

they can make that 30-day call. They haven’t been making the 30-

day calls and pretty soon, people forget, as I said earlier, that it’s 

a debt. They think, gee, it is a grant, it is my money, they have 

forgotten me. 

Mr. TOBIAS. One of the problems the IRS had to decide just this 

year was, well, we don’t have enough money to do audits of small 

businesses, and so—and at the same time, increase the level of access for compliant taxpayers, so we are going to move people who 

otherwise do audits to answering telephones. 

Well, as a result, my prediction is, there is going to be less revenue in fiscal year 1997 than projected. There will be more happy 

compliant taxpayers, who everyone speculates, but no one can 

prove will pay more taxes because they know what it is they owe 

and will pay that money. But in the meantime, I project that there 

will be a hearing next year about why the IRS has less enforcement revenue in 1997 than they did in 1996 and when the answer 

128

is, well, we answered more phones, Congress won’t be satisfied 

with that. 

Mr. HORN. Well, no one is talking about moving trained auditors. 

What we are talking about is training people who are not auditors 

to followup on the results of the audit. 

Mrs. Maloney, 5 minutes. 

Mrs. MALONEY. Thank you very much. Following up on your 

questions, Mr. Chairman, I would like Mr. Tobias to get back to the 

committee and write a projected pilot project that we could put 

forth with IRS employees, where they are given the resources to 

get off the phones, to do the collections, what resources would you 

need, and I would like it to be a pilot project that we could possibly 

compare to the pilot project we are having now with contracting 

out to private sources. I don’t want to use my time with your explanation. I would like to get it back in writing and we will look at 

it. We have a strong working relationship together productively. 

I would like to ask a question of Mr. Cohen that follows up on 

the exchange of what we just heard about confidentiality. Mr. 

Tobias raised a concern, and one that I share, on confidentiality. 

I truly believe that tax collection is one of the most sensitive and 

important jobs of Government, and it has to be done fairly and 

well, or the trust between people and their Government will not be 

there, and I am very concerned about confidentiality, not only within the IRS on individual tax returns, but I am very troubled about 

the idea of contracting out to private firms and on the confidentiality situation. 

Also what troubles me, what if a private firm acts in a way that 

is irresponsible? Then that reflects back on Government and may 

undermine the confidence that people have in their Government. 

And as a followup on it, you talked about section 6103, which you 

helped write, and, again, I would like to request that possibly you 

may get your comments back to me in writing of any changes that 

you think should take place in section 6103 to protect confidentiality of American citizens, while helping Government be more efficient and effective in doing their job. 

Mr. COHEN. One of the problems that was discussed earlier in 

the hearing was the browsing. Now, in the early sixties before we 

had the computer system, because everything was on paper, so if 

you locked the cage, only people who had authorization to go look 

for returns could look for returns. Now, that is not to say there 

wasn’t browsing. 

If Sheldon Cohen’s return was next to President Clinton’s return—it doesn’t happen to be—it happens to be filed in the Commissioners office, but they could look at the returns, but it was 

much more difficult. However, with a computer, it is easier, and 

that is a problem that is going to exist every day of every year, no 

matter what your rules are. 

You have to impose strong management controls and you do have 

to enforce them. You do have to make people suffer when they 

break those rules because they shouldn’t be rummaging through returns. They will, and then you will have to discipline them again. 

The more people that have access, the more difficult it will be, so 

if you introduce private contractors to this, it will be, and it will 

be more difficult. 

129

You will also find the private contractor does work that is at conflict with the Government work, so they will have to build fire 

walls, but they won’t build fire walls. Someone, somewhere on a 

private contract will use the information he got from the IRS information to help his boss do something else and then there will be 

a scandal, and then the IRS will be blamed for leakage of the information from one side of the collection system to the other side, it 

will happen. I mean, that is why erasers are on the end of pencils, 

because errors do occur. So you do need to know, no matter how 

careful you are, errors will occur. You have to build a system that 

corrects as many of them as possible. 

Mrs. MALONEY. I would like all the panelists to either comment 

or get back to me in writing. I am particularly interested in your 

comments, Mr. Cohen, with your experience as a tax lawyer and 

your former experience in Government, on Friday, 20/20 ran a special on United States citizens evading their taxes, and 20/20 infiltrated a tax seminar in Cancun, Mexico, that taught 300 individuals, American citizens, on how to set up, ‘‘personal sham banks’’ offshore. The banks only need to have a mailing address, since 

international banks do not have to pay taxes in the United States. 

These citizens could possibly evade billions in taxes. 

What could we do to the IRS code or to Government laws to 

make sure that this does not take place? It obviously is taking 

place, and they ran an entire special of it, I have a film on it. I 

would be glad to get it to any of you, and then I have one other 

brief question and my time is almost up. 

Mr. COHEN. My comments on the banks, I get this literature all 

the time in my office, do this, do that, your clients will avoid this 

or that, and what I do is I send them to Mr. Dolan. I take them 

and stick them in another envelope and write Mr. Dolan on a 

memo and say turn this over to the appropriate people. 

There are lots of silly, illegal ideas out there. It is a free country. 

You can say any screwy thing you want to say. Unfortunately, 

some people fall into these patterns and I am sure the IRS can tell 

you what techniques they design and they do design, they clip the 

newspapers, they watch the television, they pick up the stories and 

set up programs to try to pick them up. Now, most of the time it 

works, but not always. 

Mrs. MALONEY. Any other comment? Over the weekend, Speaker 

Gingrich stated that he felt that Americans that have overdue 

taxes, that they should be given a 1-year amnesty to pay up without penalties, and he says it’s an idea that would bring in billions 

of dollars in extra revenue, and I would like to ask the panelists 

if they would like to comment on the idea. Do you believe it would 

bring in extra revenue, and do you think it would work? 

Mr. TOBIAS. I am not so sure that it would work. I think there 

has been some success with tax amnesty efforts in State governments, but it was primarily related to States where there wasn’t 

real active tax enforcement. 

At the Federal level, there is no question that there has been 

knowledge and enforcement, so the idea that somebody could go 

years without paying and then suddenly be relieved of all of that 

liability, and be relieved of all of that liability through a tax amnesty period, I think would punish those who have tried to be comVerDate 0ct 02 2002 01:17 Oct 06, 2002 Jkt 010199 PO 00000 Frm 00133 Fmt 6633 Sfmt 6633 W:\DISC\43913 43913
130

pliant over the years, and force them, once again, to subsidize the 

noncompliant. I don’t think it is a good idea. 

Mr. COHEN. The worst thing that could happen to you is you 

would be successful, and the reason I say that is you would then 

be tempted to do it a second time and then you would ruin the 

whole tax system. It would absolutely ruin your discipline, so I go 

along with Mr. Tobias’ comments. That is, in any State where it 

has had any degree of success, it has been associated with a markedly increased enforcement effort. They announced we are going to 

do it today, and as of tomorrow, we are going to have this new and 

impressive enforcement effort. You have a reasonably good enforcement effort in the United States right now. 

Also, Congress is cutting the IRS’ budget. Is the IRS going to get 

a 10 percent increase next year because they are going to have an 

increased effort? No. So you don’t have any credibility on that side. 

And you have more downside than upside. You stay home—as my 

grandmother used to say, ‘‘when in doubt, stay home.’’ Mr. HORN. Thank you very much. I just have two questions to 

round out the panel. I might ask on the last question, that it seems 

to work with overdue books at libraries, and it sounds a little— your remarks, Mr. Cohen, and I think you might be right about 

that, much like the amnesty for illegal immigrants, and it doesn’t 

solve the problem. 

I have one question for Ms. Davis, which is, you have heard a 

lot this morning. The GAO, your colleagues on this panel, is there 

anything you would like to say based on your experience, being 

from on the inside of the IRS? 

Ms. DAVIS. I think it is a reiteration of what I said in my testimony. I think if we are going to bring any significant change, we 

have to forget this broken record of GAO reports, congressional 

hearings, the litany, on and on and on of bringing out this broad 

array of significant problems with the IRS, and actually begin to 

take significant action. 

One of the things that I did, as the historian for the IRS, was 

I looked at a long view of GAO reports. I didn’t just look at last 

year’s GAO reports, the most recent, even the last 5 years, but I 

looked at a 20-year span. 

One of the first projects I took on that was squelched by IRS 

management very quickly when they learned what I was planning 

to do was to do an overview of the history of how the IRS implemented its initial computer system Mr. Cohen had spoken of back 

in the early 1960’s, and its plans to modernize that system over the 

history of the years. 

One of the things I also did, in addition to pulling every GAO report that had been written over this 20 to 25-year span, was I tried 

to collect all IRS internal audit reports because that function of the 

IRS, which is supposed to evaluate internal progress for their own 

programs, has done report after report about the modernization 

program also. 

The first problem I encountered was when I asked for this broad 

range of internal audit reports of a 20-year span, they looked at me 

like I was crazy. This was early in my tenure of the IRS when I 

realized they had no systematic way to keep the reports. We went 

all around the country with a request, and we managed to come 

131

up with 60 percent of the audit reports. But the point being, when 

I reviewed those 20 years of internal audit reports by the IRS; and 

20 years of GAO audit reports, the same problems were repeated 

over and over and over again, so we are facing another 20 years 

of more GAO reports, more hearings, more internal audit reports 

without any significant change, unless someone in Congress gets 

serious about really getting to the heart of this issue. 

Mr. HORN. Well, we thank you. 

That leads to my next question. Besides getting serious by some 

in Congress, I think we have enough that want to be serious this 

time. A Dear Colleague letter from our colleague from northern 

Virginia, Frank Wolf, talks about his legislation, H.R. 1224. And 

this is a question I want to direct to Mr. Cohen and Mr. Tobias, 

it will just summarize what it’s about. 

H.R. 1224 does two important things. First, it establishes a set 

6-year term for the Commissioner, thereby providing an important 

degree of independence from the President. Second, it establishes 

a new objective selection process for the Commissioner. Prior to the 

expiration of the Commissioner’s term or when a vacancy occurs, 

a special election is considered to elect potential candidates. The 

commission then submits to the President a slate of qualified candidates, and the President selects the nominee from that slate. 

H.R. 1224 insures that strong, qualified candidates are selected 

for IRS Commissioner, further insures the Commissioner is afforded necessary insulation and distance from an attempt to make 

the IRS a tool for the party in power at the White House. 

I believe that legislation is greatly needed to ensure integrity and 

objectivity of the IRS. How do you feel about that, Mr. Cohen? 

Mr. COHEN. I do spell out a little bit of my views for the Commissioners in my written statement, but I haven’t addressed all of 

these issues. 

There is no involuntary servitude in the United States. That was 

abolished in the 13th and 14th amendments. I see all the commissions around town with 4-year terms, 5-year terms, 15-year terms, 

whatever they happen to be. I rarely see anybody serve that period 

of time. 

I mean, I served over 4 years as Commissioner of the IRS, a few 

years as chief counsel, 5 years in the one agency. That is a long 

time. The reports, as I have seen them, say about 2, 21⁄2 years is 

probably more normal. I think that more years is important. It was 

important for me, because I could get something done. It was important for the agency, because it had some continuity. 

Mr. HORN. Mr. Cohen, I might remind you, we have a 10-year 

tenure for the Director of the Federal Bureau of Investigations. 

Mr. COHEN. And no one has ever served it. 

Mr. HORN. There is hope they will. 

Mr. COHEN. I will bet you $5 that will not happen. 

Mr. HORN. We also have the Comptroller General of the United 

States, and I think you will agree most Comptroller Generals, unless they have died in office, have served out that term. 

Mr. COHEN. You have only had two serve under that term, and 

I have served on the advisory committee for both of them. And the 

Comptroller General is in a completely different spot because the 

132

Comptroller General is a quasi-legislative employee. He really is a 

legislative employee. He is not an executive branch employee. 

I am not a constitutional scholar, so I won’t regale you now with 

the constitutional problem of having the chief revenue official of 

the United States, who is part of the executive branch of the 

United States, chosen without regard to the President of the 

United States. I don’t want to get into that right now because that 

is a long discussion. 

Mr. HORN. Mr. Wolf provides that that nominee would come from 

the President of the United States, but there would be a list of very 

qualified people, and for those of us—— Mr. COHEN. Can he send the list back and say I want more? 

Mr. HORN. Well, he perhaps can. But if you are saying let us get 

some people in there that know something about management and 

are not simply tax technicians, with all due respect to all the fine 

people that have been Commissioners, the fact is, that agency of 

over 100,000 people needs somebody like a Jim Webb. 

Mr. COHEN. I knew him very well. 

Mr. HORN. Administrator of NASA. 

Mr. COHEN. And he was chosen by the President of the United 

States. 

Mr. HORN. Fine. But we have had numerous Presidents not 

choose somebody that could run an agency. We have a long list of 

them. And the failures of the agency I would blame partly on the 

fact we don’t have a management structure and somebody that 

knows how to run a large organization. 

Mr. COHEN. I am not going to differ with that assessment. As I 

have said in my testimony, the IRS is like running a large spaghetti factory. It is more important that the person run the spaghetti factory have management know-how than it is that he or she 

know how to make spaghetti. On the other hand, they better know 

how to taste spaghetti. Otherwise, they are going to produce something like a Soviet factory that will put out a blah product that nobody will ever eat. 

So you can’t make this a little narrow point, because there is a 

whole variety of talent that is needed. And I am not sure, it may 

be your selection technique will produce the only two people that 

are introduced—that have those kinds of terms. 

The FBI Director has those terms, although he is chosen by the 

President. He is not chosen by slate. The GAO has it where the 

Congress sends a panel of names, but that is because it is an officer of the Congress that is being chosen, not an officer of the executive department. 

Mr. HORN. And we are not talking about officers of Congress in 

this. 

Mr. COHEN. This is an officer of the executive department that 

is nominated by people who are not of the executive department. 

I should say, I am a lawyer, but I am not a constitutional lawyer. 

I will leave that to your friends on the Judiciary to argue out. I 

wouldn’t want to be selected under such a technique. 

If a Commissioner of the IRS doesn’t have sufficient internal— intestinal fortitude—my statement used to be, people would ask 

me, and I said, if you don’t threaten to resign at least twice a year 

over an important issue, you oughtn’t be in the job. 

133

There are times you say, no, I will not do that. I did that to the 

Secretary. I did that to the President. I didn’t do it very often. If 

you do it too often, you wouldn’t be there either. But if you are 

going to have independence, you are going to have independence. 

If you are not, this technique is not going to help. 

Because if you are there when there is a Secretary of Treasury 

of a different persuasion and a President of a different persuasion, 

your life is going to be impossible. You are never going to get a 

budget through. You will never get your personnel through the Office of Personnel Management. There are a million other problems 

that will come up every day to make your life miserable. 

Mr. HORN. Mr. Tobias. 

Mr. TOBIAS. Mr. Chairman, I think one of the key problems with 

the IRS is the fact Commissioners turn over too frequently. I like 

the idea of a 5-year or a 6-year term, but I do not believe hiring 

a Commissioner with a 5-year term, however that person is nominated or selected, is the silver bullet. 

I think that no matter how well a person with a 6-year term 

planned, if there isn’t a steady stream of funds from the Congress 

in order to allow a plan to be created, implemented and evaluated 

along the way without the circumstances changing, it won’t matter, 

really, who is in charge of the IRS. It will be great public relations, 

but if we don’t have appropriate funding, you know—second, I 

think the Internal Revenue Service, both in terms of its ability to 

obtain more credibility and its ability to plan long-term, needs 

some help. The Commission To Restructure the IRS is considering 

several different options. One is strengthening the role of getting 

information, and the other is to create a more independent IRS. 

The board of directors and those members would be from—the people from outside with managerial expertise. 

That report would be due on July 1st. But, clearly, the IRS has 

to be thinking more long-term than just 1 year to the next. 

Mr. HORN. We thank you all, Ms. Davis, gentlemen. We appreciate the time you have taken here and having the perspective you 

provide, based on your experience. Thank you for coming. 

[Followup questions and responses follow:]

134


g:\graphics\43913.084
135


g:\graphics\43913.085
136


g:\graphics\43913.086
137

Mr. HORN. The next panel is panel three: Michael Dolan, the 

Deputy Commissioner, primarily for management of the Internal 

Revenue Service; accompanied by Jim Donelson, the Chief Compliance Officer; Tony Musick, Chief Financial Officer; Arthur Gross, 

Chief Information Officer; and David Mader, Chief, Management 

and Administration. 

[Witnesses sworn.] 

Mr. HORN. All five witnesses affirmed the oath; and we will start 

with Michael Dolan, Deputy Commissioner of the IRS. 

STATEMENTS OF MICHAEL DOLAN, DEPUTY COMMISSIONER, 

INTERNAL REVENUE SERVICE, ACCOMPANIED BY JIM 

DONELSON, CHIEF COMPLIANCE OFFICER; TONY MUSICK, 

CHIEF FINANCIAL OFFICER; ARTHUR A. GROSS, CHIEF INFORMATION OFFICER; AND DAVID MADER, CHIEF, MANAGEMENT AND ADMINISTRATION 

Mr. DOLAN. Good morning. 

Mr. HORN. Thank you very much for coming, Mr. Dolan. 

Mr. DOLAN. Thank you very much for having us. 

I was sitting out here thinking about batting cleanup on April 

14th with the people who preceded us was kind of a tough spot to 

be in, until I heard you talk about what might have been a tougher 

spot on April 15th in the well of the Congress doing tax returns. 

So, I will assume we got the better of the deal. 

And what I would do, with your permission, Mr. Chairman, I 

prepared a longer statement that I know you will accept into the 

record. What I would like to do in the interest of time and getting 

to your questions is to briefly make some of the points. 

Mr. HORN. Feel free for a 10-minute summary. In your case, if 

you would like 15 minutes, please feel free. Because you have 

heard a lot here, and you obviously have the experience to know 

a tremendous number of the basic questions that have been asked. 

Mr. DOLAN. Thank you. 

I would say, for starters, that one of the things I think we all 

feel is important is the opportunity to talk about and respond to 

some of your questions in several of the areas raised this morning. 

Because, to say the least, some of the observations were interesting. To say it a little more aggressively, there are some places 

where that we would like very much to be able to correct some 

misperceptions. And I start with conceding your basic point. We 

are here talking at your invitation about high-risk areas. 

Mr. HORN. Right. 

Mr. DOLAN. Risk by definition means that there are opportunities and requirements to improve. And so I stipulate to that. Not 

for a minute do we shrink or shirk from that. 

But the second thing I wish my colleagues at the GAO might 

have made a little stronger point in their testimony that would accompany the point they made in the documents is, in each of the 

four areas we identified as high-risk, there has been considerable 

progress. So I would like to believe we are sitting before you today 

not with some set of promises about what we are going to do in 

the future, but with some established track record in each of the 

four areas where we have tried very hard and with some success 

to make progress against each of the four areas. 

138

Third, and you made the point, Mr. Chairman, several times, in 

the context of looking at the IRS and looking at its management 

challenge, clearly, it strikes me that any enterprise our size or the 

size of any large corporation is, by definition, going to have some 

risk. And so I assume what you want from us is not a guarantee 

that we will never run a risk, but I assume what you want from 

us is what you would want from any major enterprise—some conviction that we are capable of mitigating risk and capable of creating systems, that in the first instance, identify the risk and then 

that we do our level best to manage that risk. Not in some theoretical context, but in the context of our business. 

And one thing I was particularly appreciative of in Mr. Tobias’

testimony, is that we found ourselves in pretty much of a chorus 

of commentary here in the last 2 years. Some of that commentary 

is very well informed, very much on the mark and very much with 

an aspiration, I think, of improving tax administration. 

There is another part of that chorus that you no doubt have 

heard some of yourself, where you are less sure the chorus is wellinformed and you are less sure that the outcome of the rhetoric is 

designed to improve the system, as opposed to making some rhetorical points or trying to play with a different kind of agenda. 

So, one of the things I think Mr. Tobias did, that my longer 

statement does at some length, is make the point that, notwithstanding being here to talk about four risk areas, if you look at the 

four risk areas in the context of the operation of the organization, 

there are a tremendous number of things that are going well, not 

only at the level that Mr. Tobias talked about, in terms of some 

macro measure of how much it costs to collect $100, but today is 

April 14th, most people relate that to April 15th, which most people relate to a filing season. 

This is a filing season, and I think by any measures people impose on us today is a filing season of good news for the taxpayer 

and good news for the system; and most people’s encounter with us 

is during this 4-month period. Most people think a filing season is 

January to April. As you well know, Mr. Chairman, it started last 

fall. 

As Mr. Cohen said, there was no tax legislation at the end of the 

last session of Congress. However, we got 700 pages of tax instructions about those three bills that passed at the end of the year. 

Hundreds of changes at the end of August and September went on 

line. About the time we reach August 15th’s peak of this year’s extension, we will be back through the cycle again. So, in practical 

terms, a filing season is a year-long business. 

And, this year, I think there are things, if you look at from a 

standpoint of the taxpayer, and you yourself gave a litany and others gave litanies about programs, that aren’t what we would like 

them to be and some programs that were underleveraged. But, as 

Mr. Tobias said, we are going to process 211 million individual and 

business returns this year. From the period of 1993 to 1996, we did 

that and we were almost 11 percent more effective and more efficient with fewer staff years than we did in the 1993 timeframe. 

TeleFile which, for my money, is one of the most significant retail 

technological options offered to assist in this country. It’s the opVerDate 0ct 02 2002 01:17 Oct 06, 2002 Jkt 010199 PO 00000 Frm 00142 Fmt 6633 Sfmt 6633 W:\DISC\43913 43913
139

portunity for a taxpayer, in an 8- to 10-minute telephone call, to 

completely satisfy a tax obligation. 

I have heard a lot of ballyhoo about people who can apply for this 

or apply for that or get a piece of information downloaded, but in 

terms of accomplishing your entire transaction with your Government on something as sensitive as meeting your tax obligation, 25 

million Americans this year are capable of doing that in an 8- to 

10-minute telephone call. 

At this point in the year, over 4 million have done it. Over 17 

million at this point of the year have filed in a variety of electronic 

forms. Those, I think, are evidences of things that are working 

well. 

Last month, we made available to some small businesses in 14 

States the opportunity to file their 941, a quarterly tax return, by 

TeleFile. That historically was a very convoluted process for big or 

small businesses because it represented sending us a coupon and 

hoping that the coupon and the dollars got posted correctly to their 

account. 

Now again, in those 14 States, a million employers are capable—

whether I’m a pizza shop with 7 people and I don’t want to go to 

the bank or I am a bigger enterprise, I can pick up and use the 

touchtone phone, and in the course of a few minutes, make my 

quarterly tax obligation. 

Assisting taxpayers better—several people talked about this conflict in our mission or balance in our mission. Clearly, Mr. Chairman, you have made it real clear from the outset, accounts receivable is a passion with you. It is with us as well, but it’s just one 

of the pieces of our mosaic that we try to balance each year. 

This year, we came into the year fully aware that for the last 2 

years, one of the metaphors of our performance has been can we 

answer our phones? Because it didn’t make any difference if when 

we were answering our phone, we were answering at 94 to 95 percent quality. The fact that half our customers couldn’t get to us 

was too easy a metaphor for the entire organization. So we went 

to huge efforts this year to try to beg, borrow and steal and try to 

tip that balance, if you will, to the service side, with the outcome 

that, this year, rather than half the people being served, nearly 

three quarters of the people are being served. 

If I am running a business, I am not bragging about only three 

quarters of my customers being served; so we know we have a long 

way to go. But I think, as measured in the context of actual operations, it is a fairly significant commentary on the organization’s 

ability to respond to its customers in a way that is important. 

People talk about the GAO, sort of rolls off their tongue, that we 

are using old systems, and the implication left is that we are nonmodernized and still in the knuckle-dragging ways of the past. I 

dare say that anybody who has decided to take its information from 

us on the Web site in the last couple of years find that to be a remarkable way to do something that you only used to be able to do 

at the IRS office, the bank, or the post office, and that would have 

people consistently scrambling this week. Instead, 100 million 

times this year, multimillion forms and publication have been 

drawn down. 

140

I don’t know about you. I can’t go to a soccer field or church over 

the weekend without somebody saying, I was looking for my extension form or this arcane past form and I pulled it down on your 

Web site. Is that the whole ball game? Not by any means. It is that 

plus the CD-ROM that we now put in the hands of practitioners, 

and for anybody that wants it, the fax capability to come to us any 

hour of the day and get a form back by fax. Those, to me, are not 

commentaries of an organization, it is trying to do its business like 

it did in the 1960’s and insulate from its customers’ expectations. 

You heard a little bit this morning about some of the rest of our 

business. I would like for there not to be 200 plus billion dollars 

in accounts receivable. I think, upon questioning, we will probably 

realize it is a number that is clearly able to create a couple different impressions—several of them not exactly on the money. 

But I will tell you, one of our key compliance requirements is to 

collect the amount of money, not only because it is there to collect 

but because, as several of the witnesses said, that is a common element of fairness of the entire system—that you pay yours and I 

pay mine. If the people to the left and right of us see that, they 

are confident in the system. If they see the people to the left and 

right of them not paying, then there is an unfairness, and that’s 

in addition to the obvious financial interest the Government has in 

collecting its receivables. 

Last year was the single most successful year we’ve had in our 

history of collecting the dollars in accounts receivable. One part of 

it was a function of still being able to capitalize on the revenue initiative that came in 1995, but another part of it again was a function of looking at many, many aspects of our processes, not being 

content to use 1960’s, 1970’s, 1980’s processes but looking at the 

whole notice stream and eliminating notices that: were confusing 

the taxpayers, were in of producing the outcome; changing our bills 

to look like a bill that comes from a credit card; accentuating our 

telephone operations; accentuating business taxpayers who we can 

get; not always in the 30-day timeframe you mentioned, but while 

they are in business and while they are still capable of resolving 

their issues instead of downstream. 

We have done things that, by traditional standards, would have 

been viewed as lax on enforcement. We have substantially utilized 

both the installment agreement process and the offer and compromise process as a way to take taxpayers, who might not be able 

to pay fully, but are trying to get in or stay in the system. And I 

think you could go up and down a variety of other initiatives that 

would reflect on the way we have attempted to improve our collection processes. 

The four risk areas GAO talked about this morning, they clearly 

are not all equal. I think you point out, Mr. Chairman, quite aptly, 

really, that technology, the ability of us to modernize our technology infrastructure is—I think it was Senator Thompson said the 

other day, over on the other side, it’s the long pole and tent—clearly the most significant of the risks. If we are capable of mitigating 

that in a way I think we are well-positioned to do, then the concerns we have with respect to the accounts receivable, the concerns 

we have with respect to data security, the concerns we have with 

141

respect to getting a clean audit opinion, will indeed be buttressed 

by our ability to modernize our infrastructure. 

My statement goes to some length and I guess at this hour of the 

day you probably would prefer that I not go into much length on 

the modernization punch list, but there really are a tremendous 

number of things that have happened since the last time the IRS 

was before you. 

At my left is Art Gross. You will get an opportunity in questioning to speak a little more directly to some of those that you are 

interested in. Suffice it to say, we have tried to include in our long 

statement the road map, as we see it, for addressing not only the 

latest round of General Accounting Office issues, but as we can 

best determine, the set of outside feedback and commentary from 

the National Research Council, from within Treasury, and from the 

various bodies of Congress that have looked at modernization over 

the 20-plus years that you detailed in your statement. 

We do believe that we have positioned ourselves at a point in 

time now to do what is the long pull, to do what won’t happen overnight and be a silver bullet, but to do the kind of improvement in 

the technology infrastructure that not only the system, but our customers require. 

I also included in my longer statement a fair amount of information about the so-called browsing. I think none of us sits at this 

table at all happy that the condition prevails. It is a circumstance 

that is unacceptable to us, as it should be to the American taxpayer. People who have access to tax information and work for the 

IRS have access for one purpose and one purpose alone, and that 

is to pursue their job responsibilities. Any use beyond that is unacceptable. 

The difficulty we have is in the computer infrastructure we have 

today, it is much more difficult on the front end of those systems, 

identifying exactly who has a work unit that involves access to a 

particular piece of taxpayer information. As a consequence, we find 

ourselves doing after-the-fact running of audit trails and developing scenarios that will detect abuse and then dealing with that 

abuse as it is detected. 

Our modernized infrastructure will deal with that fundamentally. It is not only possible, but a goal of us on the front end of 

the modernized systems, to be able to move and work precisely and 

specifically with a particular employee, based on a particular assignment, and not, as is done today, based on a range of assignments and based on a range of authorities. 

In the interim, we know it is our responsibility to step up the 

even more redoubled effort to train, educate, communicate, and to 

discipline, and to make the discipline be severe and make the discipline be consequential when abuses continue. 

What I would offer for your observation is, there is a whole lot 

more I could talk about here, and probably I would serve your 

needs and mine both better by letting you go in the areas that you 

would like to question us. I got off the track here in a kind of rude 

way and didn’t introduce my colleagues. 

So if you wouldn’t mind, if I could spend a minute recognizing 

on my far left Tony Musick, who I know has been before you before. He is our CFO. To my immediate left is Art Gross, our AssoVerDate 0ct 02 2002 01:17 Oct 06, 2002 Jkt 010199 PO 00000 Frm 00145 Fmt 6633 Sfmt 6633 W:\DISC\43913 43913
142

ciate Commissioner and CIO. Dave Mader is our Chief, Management and Administration. On Dave’s right is John Dalrymple, who 

is our deputy in our essential operations function. 

With that, I will close and instead invite your questions, and 

hopefully we can be responsive to those. 

[The prepared statement of Mr. Dolan follows:]

143


g:\graphics\43913.087
144


g:\graphics\43913.088
145


g:\graphics\43913.089
146


g:\graphics\43913.090
147


g:\graphics\43913.091
148


g:\graphics\43913.092
149


g:\graphics\43913.093
150


g:\graphics\43913.094
151


g:\graphics\43913.095
152


g:\graphics\43913.096
153


g:\graphics\43913.097
154


g:\graphics\43913.098
155


g:\graphics\43913.099
156


g:\graphics\43913.100
157


g:\graphics\43913.101
158


g:\graphics\43913.102
159


g:\graphics\43913.103
160


g:\graphics\43913.104
161


g:\graphics\43913.105
162


g:\graphics\43913.106
163


g:\graphics\43913.107
164


g:\graphics\43913.108
165


g:\graphics\43913.109
166


g:\graphics\43913.110
167


g:\graphics\43913.111
168


g:\graphics\43913.112
169


g:\graphics\43913.113
170


g:\graphics\43913.114
171


g:\graphics\43913.115
172


g:\graphics\43913.116
173


g:\graphics\43913.117
174


g:\graphics\43913.118
175


g:\graphics\43913.119
176


g:\graphics\43913.120
177


g:\graphics\43913.121
178


g:\graphics\43913.122
179


g:\graphics\43913.123
180


g:\graphics\43913.124
181


g:\graphics\43913.125
182


g:\graphics\43913.126
183


g:\graphics\43913.127
184


g:\graphics\43913.128
185


g:\graphics\43913.129
186


g:\graphics\43913.130
187


g:\graphics\43913.131
188


g:\graphics\43913.132
189


g:\graphics\43913.133
190


g:\graphics\43913.134
191


g:\graphics\43913.135
192


g:\graphics\43913.136
193


g:\graphics\43913.137
194


g:\graphics\43913.138
195


g:\graphics\43913.139
196


g:\graphics\43913.140
197


g:\graphics\43913.141
198

Mr. HORN. Well, since I am half Irish, I can sympathize with 

you. I enjoyed what you had to say. 

Let me pursue a few of the points you made, and then we will 

go down the line on another area. 

One of the things that really concerns people is the browsing, 

snooping issue, if you will. I was assured by the Commissioner a 

year or so ago that IRS had taken action to reduce browsing, and 

there were several people under indictment for violating the statute. I am just curious, what happened to them? Were any people 

ever indicted? Were they fired? What? 

Mr. DOLAN. The answer is yes to all of the above. If you permit 

me to roll it back maybe just a frame or two before that, when the 

Commissioner was before you, as she has before others, she said 

unequivocally that browsing was not acceptable and not to be condoned. And what she and the rest of the senior management team 

have tried to do is drive that down in the organization in all of the 

ways you would expect in a large organization. 

We have taken and adjusted the tables of penalties that apply 

to disciplinary action. We have instructed those who are responsible for taking discipline that abuses or unauthorized accesses 

were to be treated very seriously in the discipline process. We have 

created basically a system we call the electronic access research 

log, which gives us an opportunity to take, in a much more creative 

way, these audit trails and determine where there are potential 

abuses. 

We have developed case processing procedures and the personnel 

and inspection and line management process to ensure that not 

only detection of abuses takes place, but that discipline be appropriate and be consistent. 

We have taken a variety of steps. We have actually prosecuted 

a number of cases, some of which we have found bouncing back on 

us, because while we had a standard that we thought was clear, 

the courts have in some instances distinguished between those instances where somebody uses information for some purpose and in 

other instances where they do what they have dubbed ‘‘self-disclosure,’’ so if that person has accessed information and made no further use of it, some of our prosecution and disciplines have failed 

because people have looked at that and said the standard of conduct is not explicit enough to have put the employee on notice—

that is unacceptable. 

A couple of things have happened in the meantime. We have 

made it administratively explicit that it doesn’t make any difference whether you use the information or not. If it is an unauthorized access, it is offensive and actionable with respect to a disciplinary action. 

On the automated access side, as I think you know, the changes 

last year in title 18 have now substantially improved the ability to 

take the criminal prosecution where the access is one that occurs 

through automation. Both Chairman Archer and Senator Glenn 

have bills working in the House and Senate that take that same 

provision and overlay it on paper accesses. 

So we are hopeful that those additional attributes will help us 

continue to try to make this less and less the type of risk that an 

individual employee takes and more and more the kind of protecVerDate 0ct 02 2002 01:17 Oct 06, 2002 Jkt 010199 PO 00000 Frm 00202 Fmt 6633 Sfmt 6633 W:\DISC\43913 43913
199

tion we can sit here in front of you and say we have greater confidence that it is not going to go on. 

Mr. HORN. Well, I don’t want to create 106,000 pieces of paper 

in the agency, but it seems to me you could get employees to sign 

a statement that I am aware of this policy, and I will not violate 

it. Do we have something like that? 

Mr. MADER. Mr. Chairman, we do have a policy when employees 

first come into the Internal Revenue Service. As part of our orientation program we talk about the rules of conduct. As Mr. Dolan 

mentioned, safeguarding taxpayer information is in those rules of 

conduct. When employees are trained and profiled to access our 

computer systems, they sign the very kind of form that you mentioned, advising that they have been told what the rules and regulations are and what the ramifications are for violating them. 

Every time an IRS employee accesses one of our main systems, 

a warning screen comes on and reminds them another time about 

unauthorized access. 

Mr. HORN. Approximately how many thousand employees have 

access to this information? 

Mr. DOLAN. I think Bill told me the exact number, but somewhere in the neighborhood of 55,000 people would have responsibilities that would take them into what is our principal, one of our 

principal on-line systems, our integrated on-line retrieval system. 

Mr. HORN. So over half the agency personnel have access? 

Mr. DOLAN. In having the access, they all have different kinds 

of access, depending upon the nature of the job. I may have access 

that allows me research, or I may have access that allows me to 

adjust. I may have some combination. Specific authorities comes 

with the passwords and the specific accreditations that are akin to 

my job. 

About 1.5 billion transactions take place in that one integrated 

data retrieval system in the course of a year by these 55,000-some 

people. We are talking about an incredibly fractional number of instances in which there is any unauthorized access. One is too 

many, but in the context of the 50,000-some people being asked to 

do the key responsibilities across the data point, it is only a fractional number. 

Mr. HORN. At what point have we found a weakness in the system in the sense that they could make the claim that, gee, this employee didn’t really know it was a problem? Has that come at the 

internal IRS, or Treasury level, where discipline was administered, 

that claim was made and they haven’t been able to make it stick? 

Where has it happened? Or is it happening in court? 

Mr. DOLAN. We talked a little bit about the court, and the administrative action, it goes something like this: the EARL system 

will produce a lead. The lead will go to some combination, typically 

of a line person, personnel person, maybe an inspection person. 

They will develop the lead, go back into the person’s assignments. 

They will make some judgment as to whether it appears that this 

is a good lead, a good lead meaning a lead that looks like it—— Mr. HORN. Is this lead a tip? 

Mr. DOLAN. It is a tip, but it comes as a result of massaging 

these thousands of audit trails. Without getting into a lot of explicit 

detail here, it takes characteristics. There have been a series of sceVerDate 0ct 02 2002 01:17 Oct 06, 2002 Jkt 010199 PO 00000 Frm 00203 Fmt 6633 Sfmt 6633 W:\DISC\43913 43913
200

narios developed that are high likelihoods of abuse scenarios. Not 

every one of them reflects abuse, but they will narrow a set of 

leads. Those leads will then subsequently have to go back to the 

individual employee’s precise work assignments, precise fact patterns, and determine, yes, this lead turns out to be an instance of 

abuse. 

When it is, that instance of abuse, that allegation of abuse, will 

go to the head of an office. The head of that office will end up having their personnel people develop an adverse action or disciplinary 

action. It will be taken. It may or may not be appealed. 

One of the things we found upon appeal is, again, we are operating within a system that the Federal disciplinary system assumes a couple of things. It assumes for the most part discipline 

is progressive. What that means in a code word is, typically a person is disciplined for a first offense and given some opportunity to 

remediate their performance or to improve on the job. 

Mr. HORN. In other words, nothing happens if they don’t do it 

again? 

Mr. DOLAN. No. 

Mr. HORN. You could get one crack at a rock star, celebrity, or 

politician? 

Mr. DOLAN. I knew I was going down the wrong road giving you 

that explanation. That is not the rule. 

Mr. HORN. I am trying to get the process. 

Mr. DOLAN. There are no one cracks. You do it once, it is wrong. 

I was trying to explain in the context of the precedents built up in 

the Merit Systems Protection Board, the courts and everywhere 

else. There are some rules about how you do discipline in the Government. I can sit here and say it is wrong one time, it ought to 

be a firing and nobody ought to have any recompense on that. That 

is not the real world. 

The real world we have taken the disciplines into, is a world surrounded by the practice of precedents of the general disciplinary 

system. What we tried to do, as I mentioned at the outset, is tried 

to make our penalty provisions be explicit about ranges. We tried 

to say to our directors—propose on the high end and make it very 

difficult to mitigate from the high end, meaning removal. So principally our reaction is going to be removal when it is a willful access. 

When it is some trainee in the first week who bounces up there 

and comes back and says, wait a minute, I did it and didn’t mean 

to, that person is not going to be removed probably. But the willful 

access is something we would be pursuing removal as a first resort. 

Mr. HORN. Willful is very hard to prove; is it not? 

Mr. DOLAN. It is. Our systems today, Mr. Chairman, lock you out 

of your own account. Everybody knows they lock you out of your 

own account. Notwithstanding that, we will have on the audit trail 

evidence that somebody tried to go to their own account. When you 

go to that person, you get one of two answers. You can find somebody who was brand new, didn’t understand or whatever, went up 

and bounced, and that will come up as a transgression. Or you can 

find some of your best employees who will tell you—when they 

have been on the system all day long, bringing up Social Security 

numbers to resolve them, they will on occasion bring up their own 

201

Social Security number. You will have that pop. They will not get 

into their own account because they are frozen, but it will show up. 

When you go back to that person, if indeed there is no history of 

anything else, you can say, OK, I take that explanation of what it 

was for and it is not some attempt to gain the system. 

Mr. HORN. Well, how many people have you had any effective 

discipline with, and what penalties have you given and how many 

are involved? How many were brought up to the disciplinary system and what happened as a result of that disciplinary system? 

Mr. MADER. I would like to submit for the record, Mr. Chairman, 

a summary of those actions from fiscal year 1994 through the yearto-date. But let me, if I could, just talk about 1996. 

There were a total of, and this goes back to what Mr. Dolan said, 

of 1,374 instances where the computer system kicked out there 

may be something here, you need to investigate it further. Of that 

1,374, 797 of them were confirmed as an unauthorized access. Of 

those cases, 93 employees were separated, either involuntarily or 

they resigned before we could separate them. There were 476 cases 

where upon further investigation there was no unauthorized access. 

What I would like to do is submit this for the record. I know 

there have been a lot of numbers in the press in the last week and 

I think it is important. 

Mr. HORN. It will be in the record, without objection. 

[The information referred to follows:]

202


g:\graphics\43913.142
203

Mr. HORN. Could you just give me the summary again of how 

many cases, how many didn’t result in cases once it was explored, 

how many went into the disciplinary system beyond the first or 

second stages, and what happened and what were the penalties? 

Mr. MADER. Of the total 1,374 cases, 411 of them were not cases 

in which there was abuse. 

Mr. HORN. What were they? What is the typical one, the 411 

were? 

Mr. MADER. As Mr. Dolan mentioned, when we actually pulled 

the work of the employee, we determined that the kind of access 

they had to a particular account was justified. As Mr. Dolan said, 

we have several scenarios built on the front end of this system that 

pull together certain transactions. 

Mr. DOLAN. The system looks for multiple accesses to the same 

account. On the face of it that might look like somebody has got 

either an interest in browsing or it might, in fact, be someone who 

has had repeated conversations or repeated telephone calls from 

the same taxpayer, and gone into the account several times to either look at a refund or look at some other transaction. 

Mr. HORN. Of the 963 left, what happened? 

Mr. MADER. Of the remaining cases, there were 797 cases in 

which we confirmed there was an unauthorized access. Twenty of 

those resulted in a caution letter to the employee. 

Mr. HORN. I am sorry, 20 what? 

Mr. MADER. Twenty resulted in a caution letter to the employee. 

Mr. HORN. Don’t do it again? 

Mr. MADER. Don’t do it again; 326 resulted in oral or written 

counseling, which is more severe in our disciplinary system than 

just a caution letter. 

Again, Mr. Dolan had mentioned—— Mr. HORN. Excuse me, the caution order doesn’t go into their personnel file? 

Mr. MADER. No, it does not, sir. 

Mr. HORN. How do you have any trail that this person keeps 

doing these things if you don’t put something in the personnel file? 

Mr. MADER. They are given a letter. The next instance would result in more severe discipline, and that would go in their personnel 

file. 

Mr. HORN. You have 326 you tell me you did put in out of the 

963 that was made after you got rid of 411 by not really being abusive? 

Mr. MADER. Right. 

Mr. HORN. But was justified. So I am just trying to find out how 

the system works. So we get down to 326 where you have got oral 

and written. Now, is it both? 

Mr. MADER. It is either/or. 

Mr. HORN. So how many actually had something put in their personnel files? 

Mr. MADER. Counseling is a step above the caution. The counseling is formal discipline, and a notation would be made in their 

personnel file. Sixty-two employees received an admonishment. 

Mr. HORN. What does that do? Does that get into the personnel 

file? 

Mr. MADER. Yes, it does, sir. 

204

Mr. HORN. Is that the first level that goes into the personnel file? 

Mr. MADER. Yes, sir. 

Mr. HORN. And 62 admonishments. 

Mr. MADER. Eighty-seven reprimands, which are more severe 

than admonishments. 

Mr. HORN. Eighty-seven reprimands. 

Mr. MADER. One hundred forty-seven suspensions of 14 days or 

less. 

Mr. HORN. And that is without pay? 

Mr. MADER. That is without pay, sir. Thirty-eight suspensions 

greater than 14 days without pay, one reduction in pay, and 93 

separations from the service. 

Mr. HORN. Ninety-three separations as a result of this incident 

or did they have other reasons? 

Mr. MADER. As a result of this incident. 

Mr. HORN. OK. So 93 were asked to leave and did. 

Now, did you lose any of those on appeal? 

Mr. MADER. I don’t know, sir. I would have to check the record. 

Mr. HORN. Would you mind? Check it, because where did the 

union stand in all this? Did they back you on a no browsing, no 

tolerance, as the Commissioner told me, policy? 

Mr. DOLAN. I think for the most part, yes. Bob Tobias is a cosignatory on a series of memorandums that have been put out on 

this. I think they would clearly have an interest in making sure 

that whatever disciplinary process works, gives people an opportunity to explain themselves and defend themselves, but they have 

not condoned it, either. 

Mr. HORN. Any other data relevant to this? 

Mr. DOLAN. Dave has all 4 years there, actually 4 years, and we 

will provide all 4 to you, Mr. Chairman. 

[The information referred to follows:]

We are providing a status report on the number of cases of unauthorized access, 

or browsing, that were appealed by employees either to arbitration or to the Merit 

Systems Protection Board (MSPB). These figures are from October 1993 to the 

present. There were six cases appealed to arbitration: five were sustained and one 

was mitigated to a suspension in excess of one year. There were seven cases referred 

to the MSPB: six were sustained and the seventh is the Czubinski case, which was 

recently overturned by the courts.

Mr. HORN. Does it show a trend line in any way? Is there more 

browsing now than there was 4 years ago? 

Mr. MADER. No, it shows, Mr. Chairman, as Mr. Dolan testified, 

that 1995 and 1996 are about the same. So far, the trend in 1997 

is upwards a little bit. 

Mr. DOLAN. That is a classic dilemma. Is the trend a function of 

better detection or a function of more instances? As I sit here, I 

can’t tell you, but I can tell you we improved our detection, but I 

can’t tell you in absolute terms what it reflects. 

Mr. HORN. What we are talking about here is in 1/13th of the 

cases that start there is an actual separation and a notice put in 

their personnel file, a note on a separation? Is it simply a separation or does it state why the separation occurred? 

Mr. DOLAN. Within the personnel parlance, it would be a permanent record that would be reflected upon anybody, any other Federal employer pulling their Federal jacket. It would be reflected in 

there. 

205

Mr. HORN. In other words, when they go to another agency the 

next day and they phone back, presumably they are told this person was separated for cause. 

Mr. DOLAN. Don’t let me mislead you. There will be some instances in that 93, whereupon realizing that we were going to fire 

them, the person might have left. When you leave before the actual 

discipline is accomplished, then your record would not reflect that. 

Mr. HORN. In other words, you can’t fire me, I quit? 

Mr. DOLAN. Correct. 

Mr. HORN. OK. Do you think that is sufficient action or should 

there have been any criminal action? 

Mr. DOLAN. I don’t think any action—— Mr. HORN. What was the biggest number of voyeur cases you had 

in terms of one person accessing 200 files, 500 files? 

Mr. DOLAN. I don’t have those specifics in front of me. I would 

tell you that if you ask is it sufficient—to the extent it exists at 

all, it has not been sufficient. So I think we have still got a task 

ahead of us to eradicate it. 

Mr. HORN. Now, did any of these cases, were they ever taken to 

the U.S. attorney, asked for an indictment? 

Mr. DOLAN. Some have. We could get you more detail. 

Mr. HORN. What did the U.S. attorney say? Didn’t want to deal 

with it? 

Mr. DOLAN. On several occasions, U.S. attorneys have taken the 

cases. We talk in our testimony about a couple that have not been 

successful, but there are others that have been successful. The U.S. 

attorneys are not reluctant to help us pursue the prosecution, and 

particularly in the grievance cases. 

Mr. HORN. Are they primarily here in Washington or out in the 

field? 

Mr. DOLAN. Principally in the field. 

Mr. HORN. Principally in the field. In terms of the U.S. attorney’s 

actions, could you give us a statement for the record of how many 

times you went to a U.S. attorney, wherever, separate field and 

Washington, and the times they took it and times they rejected it, 

and, if so, what was the reason for rejection. Just they are overworked and have more serious things like murders or whatever, 

and I understand that, but I am not happy about it. And what 

went on to a court and what did those courts rule on this. Did they 

give you any further instructions from the court as to clarity of policy or what? 

Mr. DOLAN. In response to your invitation, why don’t you let us 

give you the whole spectrum. 

Mr. HORN. The whole works. I want to know why this policy isn’t 

working and it keeps occurring. 

[The information referred to follows:]

We are providing a chart which provides a breakdown on the U.S. Attorney’s actions concerning unauthorized access (browsing) cases from October 1, 1994, 

through March 31, 1997.

[Note.—The chart can be found on p. 202.] 

Mr. DOLAN. The other thing, that I think will be implicit in anything we give you about this part of it, is one place that I suspect 

you would be at anyway. This is something today you are not going 

to prosecute out of existence. Because with the most cooperative 

206

U.S. attorneys in the world, what you want to do is you want to 

eradicate this on the front end. You don’t want to depend on prosecution. You want the deterrence of people knowing that not only 

will you prosecute but upon prosecution, it will be a successful 

prosecution. But at the end of the day our objective has been to 

eradicate this sort of prosecution by the training, by the systems, 

by the front end proactive stuff to the maximum extent possible. 

Mr. HORN. In the early 1970’s, the Nixon White House, one Presidential assistant went to Federal prison for looking at one FBI file. 

We now have cases in the White House, we still don’t know their 

reason for looking at 600 to 1,100 FBI filings, and nothing has happened. 

Is this just we change our sense of morality in three or four decades or are we just incompetent in terms of our processes for dealing with discipline or what? 

Mr. DOLAN. Well, I don’t believe—— Mr. HORN. What would you do to change this process and make 

it very clear that this is serious business? 

Mr. DOLAN. A couple of things. One is at the front end, I would 

like to be able to prevent more of it so I don’t have to explain it 

in any context of it being unacceptable. But it is plain flat out impossible to occur. 

Mr. Chairman, you have been involved in big organizations, and 

I believe you know it is repetition, repetition, repetition. It is finding every possible way, every medium available to you, training, information, communication, to continue to reinforce up and down 

the line with everybody to the point of people being tired of hearing 

you reinforce it. 

Mr. HORN. That is why I want them to sign a piece of paper and 

get it in the file. 

Mr. DOLAN. They need to sign it and need to sign it and sign it. 

Because, again, the repetition, one time doesn’t do it on that score, 

either. 

Mr. HORN. Maybe they shouldn’t be working for your agency if 

they are that dumb. 

Mr. DOLAN. I don’t think people who are making unauthorized 

access should be working for the agency. 

Mr. HORN. Let me move to the results bit. We talked earlier in 

some of the testimony about the Government Performance and Results Act. In testimony to the appropriations subcommittee on the 

IRS fiscal year 1988 budget, the Commissioner stated that the IRS 

has outcome-oriented performance indicators. I assume that is in 

the 1998 budget, right? Yes, 1998 budget. Here it says 1988. Thank 

you. It is 1998, as I thought. 

The appendix to the fiscal year 1998 included several measures. 

Now, I found them rather interesting, and I would like to put it 

in the record, without objection. 

[The information referred to follows:]

207


g:\graphics\43913.143
208

Mr. HORN. This is the chart where it says fiscal year 1998 Performance Measures and Targets. It starts in with the mission effectiveness indicator, total net revenue of budget minus burden, divided by total true tax liability, is roughly 80 percent, 79.9, and 

goes down with a series of indicators on collection, where we are 

on compliance, improved customer service. You mentioned some of 

that, increase in productivity, and then various budget activity code 

measures such as processing accuracy, processing accuracy rate, 

and so forth. 

I guess I would ask why is refund timeliness used? Does it serve 

the American people well if you send out refunds in a timely manner, but they are for the wrong amount to the wrong people, and 

how do we get at that problem? 

Mr. DOLAN. Well, in the first instance, in the very largest percentage, in almost every instance, the right refund is going out to 

the right person in what we have identified within our customer 

service standard, which is 40 days. 

In point of fact, if you are using both electronic input and taking 

your refund to the bank, you are going to get it out considerably 

quicker than that. We do believe, Mr. Chairman, if I am following 

your question correctly, that this is a measure our customers have 

told us is important to them. It doesn’t have to be overnight, but 

it has to be predictable, and it has to be consistent. 

Mr. HORN. Are we looking at the wrong refunds and working 

that in? 

Mr. DOLAN. Maybe your point is to refund fraud. Is that your 

point? 

Mr. HORN. Let me just read you a little bit, a paragraph from 

the IRS Management Report, High Risk Series, U.S. General Accounting Office, February 1997. ‘‘When we first identified filing fraud as a high-risk area in February 1995, the amount of filing fraud being detected by IRS was 

on an upward spiral. From 1991 to 1994, the number of fraudulent 

returns that IRS detected rose from 11,168 to 77,781, and the total 

amount of fraudulent refunds detected rose from $42.9 million to 

$160.5 million. In 1995, after being urged to take immediate action 

by us, Congress and the Treasury task force, IRS introduced new 

controls and expanded existing controls in an attempt to reduce its 

exposure to filing fraud. Those controls were directed toward either, one, deterring the filing of fraudulent returns; or, two, identifying questionable returns after they had been filed.’’

Then it notes that ‘‘To deter the filing of fraudulent returns, IRS 

took several steps that were focused on electronic filers. As a result 

of these steps, IRS, one, expanded the number of upfront filters in 

the electronic filing system designed to screen electronic submissions for problems, such as the missing, or incorrect Social Security 

numbers, to prevent returns with these problems being filed electronically, and strengthened the process for checking the suitability 

of persons applying to participate in the electronic filing program 

as return preparers or transmitters by requiring fingerprint and 

credit checks,’’ all of which are good moves. 

‘‘To better identify fraudulent returns once they have been filed, 

IRS placed an increased emphasis in 1995 on validating the Social 

Security numbers on filed paper returns and delayed any related 

209

refunds to allow time to do these validations and to check for possible fraud. IRS also improved its Questionable Refund Program 

by, one, revising the computerized formulas used to score all tax 

returns as to their fraud potential, and, two, upgrading the electronic Fraud Detection System to give staff better research capabilities.’’ I will put the rest in the record. I will not bore you with reading 

it. You are probably well familiar with it. 

[The information referred to follows:]

210


g:\graphics\43913.144
211


g:\graphics\43913.145
212


g:\graphics\43913.146
213


g:\graphics\43913.147
214


g:\graphics\43913.148
215


g:\graphics\43913.149
216

Mr. HORN. But, again, are we treating the electronic forms on refunds differently and permitting more errors to get through simply 

because they haven’t filed in paper? Filing in paper, programs you 

have more time to deal with that. So where are we between those 

two filings? 

Mr. DOLAN. It is a great question because it is actually just the 

reverse. Part of what gets lost in the GAO narrative is, there is a 

little bit of apples and oranges between the kinds of returns that 

are being detected because not when the GAO first discovered this, 

but when we discovered it and the GAO then began writing reports 

on it, part of what we understood about both the paper and the 

electronic side were there were insufficient filters. 

What was happening on the electronic side was you had, my 

term, some ‘‘bozo criminals’’ out there putting together various 

scheme and trying to game the electronic system. What we have 

done over the past several years, particularly with the filters, is 

make it far less possible—it is impossible, I never want to say impossible—highly unlikely today that a bogus Social Security number is going to get through the electronic processes because of the 

way the electronic screens are able to look at all that data and basically pull any of the mismatches out. So what happens today, 

what used to show up as a casework further downstream, is those 

cases which are rejected up front. 

Now, in the instance where it is not anybody with fraudulent intent, but somebody who transposed their daughter’s Social Security 

number or forgot their spouse’s or didn’t make an adjustment of 

maiden to married name, those things reject, but don’t ever get in 

the system. They reject, but are able to be corrected and, when corrected, they process through. In the early years we were relying almost exclusively on catching those on the back end, particularly on 

the electronic side. We are able to detect much, if not all, of that 

on the front end. 

Mr. HORN. Let me move to another indicator here and that is the 

number of calls that are taken. I think, wouldn’t you agree, that 

it isn’t the fact that you talk to the people over the telephone, but 

isn’t the real measure a measure of the outcome—such as the call 

is correctly answered. I know from time to time we have all seen 

stories where they have checked the same question at different regional offices and gotten different answers. I have forgotten if you 

have an internal review like that. So could you tell me a little 

about it? Why don’t we have as one of the results indicators the 

accuracy of the response rather than simply the fact that, yes, I 

talked to a taxpayer. 

Mr. DOLAN. We do, Mr. Chairman. We actually have two other 

metrics that I think make your point. One is the actual accuracy 

rate. You are quite correct that in years past it was quite a celebrated cause, what the quality rate of the IRS was, and a lot of 

pundits had a lot of fun with that. For the last several years, the 

GAO and IRS have actually had their acts pretty well together. We 

have had a protocol for doing test calls and evaluating quality. It 

is posted weekly. It is tracked very carefully. At least on the appendix I have, which if it is the same one you are looking at, toward 

the bottom, maybe a third of the way to the bottom of that, it is 

217

something called ‘‘Taxpayer Service Tax Law Accuracy Rate,’’ 92 

percent, that would be one of the metrics we would use. 

The other one, up toward the top of that page, under something 

called ‘‘Objective—Improve Customer Service,’’ you see something 

called ‘‘Initial Contact Resolution Rate.’’ That is another metric 

that we think is very important, because we want the person to 

call, ask their question, and we want a person capable of resolving 

that issue then, not having to write us, or call us back. 

So those three things would work in concert as a function of how 

well we are doing our customer service. 

Mr. HORN. How is that 92 percent arrived at? Is that simply a 

random sample check of your people or do you know what they 

have said on each call? How can you, unless you tune in and tap 

them, how do you know? 

Mr. DOLAN. It is actually a very precise formula, agreed upon by 

the GAO before the start of the filing season, where you take a specific category of calls, numbers, and you place a specific set of test 

calls that will give you statistical reliability of the result. You take 

that at the front of the season, you agree with GAO, and you have 

test calls made throughout the season. We report site-by-site so 

that every site is able to track week-to-week not only their gross 

quality rate, but know where they are falling below on a particular 

set of answers. So it is a fairly elaborate process designed to give 

us that kind of feedback. 

Mr. HORN. What else do you think needs to be done in that area 

to improve accuracy? 

Mr. DOLAN. Well, we have got a significant number of automated 

systems that I think at the end of the day will take what I would 

call some of the more easy traffic off of the system, so that somebody who really has a relatively routine question, and is comfortable with the automated systems, that you can move that traffic off into those systems, thereby giving not only greater access, 

but knowing that the human beings that you have working on the 

phones are ones that you could continue to specialize. So at least 

arguably you wouldn’t have to spend as much time answering, 

where is my refund or can I claim this dependent, and maybe 

somebody becomes more skilled in some of the more technical 

areas. So being able to provide depth of training to a greater range 

of our employees, I think that is the next best thing we can do. 

Mr. HORN. What do you think of the rest of the appendix, what 

do you think the best outcome measure is? If you as a manager had 

to look at one thing, what would be the one that meant the most 

to you as to how the agency is doing? 

Mr. DOLAN. As a manager, the first thing I would want to do is 

make sure that I knew where my board of directors was going to 

come with that answer; because I would probably tell you at any 

given time, I am trying to balance a success in both access and accuracy of my customer service; as well as my ability to collect my 

accounts receivable; and as well as my ability to place the rest of 

my compliance resource across those parts of the tax gap that are 

most significant. 

So I think we are always in a balancing exercise. And then overlaid on that, I would say I would hope I am seeing productivity out 

218

of all corners. That is kind of the horse race we find ourselves in, 

not always with a board of directors that sees it the same way. 

Mr. HORN. You might want to file this for the record, if you are 

not prepared to deal with it now, but the last point I have on that 

appendix is which of those indicators do you regard as outcome oriented? Do they meet the definition of an outcome indicator envisaged in the Government Performance and Results Act? I don’t 

know if you had a chance to review all these. 

Mr. DOLAN. I will be happy to take your invitation of giving you 

something for the record. 

Mr. HORN. Just file it in the record then and we will take a look 

at it. 

[The information referred to follows:]

The IRS considers the following measures to be outcome oriented: • Mission Effectiveness; 

• Total Collection Percentage; 

• Total Net Revenue Collected; 

• Servicewide Enforcement Revenue Collected; 

• Servicewide Enforcement Revenue Protected; 

• Taxpayer Burden Cost for IRS to Collect $100; 

• Initial Contact Resolution Rate; 

• Budget Cost to Collect $100; 

• Percent of Returns Filed Electronically; 

• Field Examination Dollars Recommended; and 

• Field Collection Dollars Collected.

The General Accounting Office recently completed a review of the results orientation of selected federal regulatory agencies and generally agreed that the IRS Objective Level Measures were outcome oriented. In addition, most of the measures in 

the President’s Budget Submission for IRS were intended to fulfill the GPRA Annual Performance Plan requirements.

Mr. HORN. Let me ask you now on the lien problem, that has 

come up before, and we have some horror stories of course that 

often occur. 

All of us have district offices, as you know, where we have a staff 

that operates, as the Swedes would call it, in an ombudsman role, 

where if they have problems with any Federal agency, we try to be 

helpful with them. 

I must say your congressional relations people at Laguna Niguel 

have been outstanding. When we needed help, they have done a 

very fine job and have been very receptive. 

I noticed this article in the Washington Post, Albert B. Crenshaw 

wrote called ‘‘A Struggling IRS Collects Its Fair Share of Problems.’’ They have this one case, and I am sure you are knowledgeable of it: Betty and Gerald Wesley of Annapolis. The difficulties 

for the Wesley’s began after they missed a payment in November, 

when Gerald Wesley became sick. The Internal Revenue Service 

sent a notice that unless the couple caught up in 30 days, the installment agreement would be canceled and the full amount would 

be due. So the Wesleys quickly arranged a personal loan and paid 

up 4 days later. They made their next payment as scheduled and 

were confident the issue was behind them. 

On February 7th, however, the IRS seized the checking account, 

leaving them with 23 cents in cash. The matter was straightened 

out. The lien on their account was lifted the following Tuesday. The 

Wesleys, meanwhile, were left shocked and mystified at their experience. ‘‘Nobody at the IRS can explain why this happened. They 

honestly do not know,’’ Betty Wesley said. 

219

The reason that case interests me, I had a case exactly like that 

about a year ago where one part of the IRS was moving with a lien, 

the other part of the IRS was settling with the individual. When 

the individual got back, he found all his accounts tied up, and the 

fact was that he couldn’t pay his workers and he couldn’t pay his 

tax bill. 

So how many of these do we have floating around where the 

right and left hand don’t know what each other is doing? 

Mr. DOLAN. If you will permit me, what I would like to do is ask 

John Dalrymple to talk a little bit about the core issue you identified in the lien issue. That will shed some general light. John? 

Mr. DALRYMPLE. The issue around filing Federal tax liens that 

you mentioned earlier—those are generally filed by our field personnel. And once that lien would have been filed on the taxpayer, 

when we went to execute on it, the taxpayer sent a payment in, 

in a particular case the Wesleys, it is possible that the payment 

showed up after the lien or levy had been effectuated at the bank. 

The process is that the bank is to generally hold the funds, notify 

the taxpayer they are going to be held for a period of time, and 

then the taxpayer has an opportunity to deal with the service before those funds are actually taken and given back to the taxpayer. 

I can’t really talk about this case specifically, but that is what 

generally is supposed to happen. 

Mr. HORN. Well, if you could, since it has appeared in the papers, 

let’s get a little analysis of the case, put it at this point in the 

record as to what happened and what went wrong. Is it communication and have we got some management process by which that 

can be checked? Because, let’s face it, that is a real shock when you 

go home and you can’t get anything because the lien is placed on 

your property, on your bank account, and all the rest. 

How are you going to even make the payment if you haven’t got 

the money? 

[The information referred to follows:]

Section 6103 of the Internal Revenue Code prohibits the disclosure of any taxpayer’s tax return or return information. This prohibition includes providing an 

analysis of the Wesley’s case.

Mr. DALRYMPLE. I should make an explanation between lien and 

levy, because they are two different things. I think what is described in the newspaper article is a levy, which generally arises 

out of a lien. A lien, of course, attaches to property. But until you 

actually effectuate some action, such as a levy, then it just has the 

effect of notifying other creditors that the IRS, in fact, is a creditor 

itself, protecting the Government’s interest. 

Mr. HORN. Let me pursue the year 2000 problem for a little 

while. This subcommittee started that discussion back in April 

1996 with the executive branch, and just perhaps, Mr. Gross, I 

read a lot about you in Time Magazine here. I want to put the 

Time’s story in the record. It says Arthur Gross, the Assistant IRS 

Commissioner who is ‘‘the agency’s first world-class information 

systems officer,’’ so I am looking for a lot out of you with the endorsement of Time. 

[The information referred to follows:]

220


g:\graphics\43913.150
221


g:\graphics\43913.151
222


g:\graphics\43913.152
223


g:\graphics\43913.153
224


g:\graphics\43913.154
225

Mr. HORN. I remember the words of the late George Murphy 

who, when he was in the Senate, when one day I questioned some 

article he was going to read as a Senate staff person, he put his 

arm around me and said, Steve, it is in print, it has got to be true. 

I assume, Mr. Gross, it is all true and you are going to solve the 

problem. So how are you solving it? 

Mr. GROSS. The century date problem for the IRS is a world-class 

problem. We have more than, potentially more than 100 million 

lines of computer code that are embedded in our core business systems and a variety of our field systems. Since April, we have made 

a very aggressive, as GAO reported, a very aggressive effort to gain 

command and control of the core business systems, the systems 

that process the 200 million tax returns, and the hundreds of millions of payment records that account for $1.4 trillion in tax payments each year. 

I would say at this point we have reasonable command and control of the century date conversion for those core business systems, 

and it is far more complex than simply the application systems. 

There are major infrastructure problems. What I mean by that is 

that we have more than 50 mainframe computers that have to 

interact with each other that support these core business systems 

across our 10 service centers and 2 computing centers. The century 

date conversion plan that we have developed and are in the midst 

of executing provides, therefore, not just for the application code 

analysis and conversion, but also the upgrade, where applicable, of 

the infrastructure, the mainframe platforms, the telecommunications, that support those systems. 

The second part of the century date challenge for the IRS are our 

field systems. While those systems do not provide for the core business support processing tax returns, issuing refunds, processing tax 

payments, they are, nevertheless, important to the business of the 

Internal Revenue Service. And for those systems we are in the 

midst of an inventory of both the application code and the infrastructure upon which that application code functions. 

We do not know what we do not know. What I mean by that is 

until we complete that inventory of those field systems, we are not 

going to be in a position to assess the extent of the problem or to 

execute a plan. Our projection is we should have most of that inventory completed by June 1997, this June, and once that inventory is completed we will be able to provide a much more detailed 

decomposition of both the problem, the resources to correct it, and 

the plan for executing. 

Mr. HORN. I should say for the record that what we are talking 

about here is back in the 1960’s, when you got your present computer system, we didn’t have very much capacity in computers in 

those days, and somebody had the bright idea, why use a 4-digit 

year, let’s just put in ‘‘66’’ instead of ‘‘1966.’’ They knew it would 

be a problem, but they figured technology would take care of it 

somehow. 

I take it, then, your computers from the 1960’s have essentially 

used the 2-digit year; is that correct? Or was there a point where 

you have changed to the 4-digit year? 

Mr. GROSS. Your first statement is correct. Not only our computer systems of the 1960’s, but like many corporations and other 

226

Government agencies, even computer systems developed in the 

1970’s, 1980’s, and even early 1990’s, typically have the 2-digit date 

field. That means that the application code analysis and conversion 

covers more than simply the legacy systems built in the 1960’s. It 

also covers a variety of applications built in the 1980’s and 1990’s, 

and, interestingly enough, the commercial products that are purchased even as late as the mid 1990’s are not necessarily century 

date compliant. What that means is that we need to also evaluate 

each and every one of our commercial off-the-shelf products to assess compliance. 

We have initiated procurement and acquisition guidance to our 

procurement office so that since December 1996, we are not acquiring any commercial products until and unless they are validated 

and certified as century date compliant. 

Mr. HORN. In brief, what happens when you get to the year 2000 

with a ‘‘66’’ in there and it becomes suddenly ‘‘00’’ for the year 

2000, the computer doesn’t know what to do, and you get some misinformation. Someone mentioned the other day, I don’t know if it 

is true, that various delinquencies were issued, it was primarily in 

the Pentagon, I didn’t know if that had happened at IRS, but I 

think they got a 1997 year delinquency, because something flipped 

over into the year 2000 and just sent the notice out. So that it had 

to be corrected. 

Have you had any problems at this point? 

Mr. GROSS. Mr. Chairman, we have identified those application 

systems that do project out in the current year, and we have already converted more than 200 systems that have future year 2000 

or beyond implications. So, to date, we have been able to avoid that 

kind of a problem in the IRS. 

Mr. HORN. Now, presumably the figure that the Gartner Group gave us way back in April was that it would be a $30 billion Federal problem, a $600 billion worldwide problem on private and public computers, and the U.S. share would be half that, because we 

have half the computers in the world. 

The administration when it sent up its budget for fiscal year 

1998 said it is a $2.3 billion problem. When we listened to Assistant Secretary Paige in the Pentagon, who is in charge of that area, 

said we have just started trying to figure out what we are facing 

in the year 2000. And we had submitted $1 billion of that $2.2 or 

$2.3 billion, I guess I would ask, how are you analyzing the code? 

Can you put a price on it in terms of the human resource help or 

technical help that you have to get to solve the problem? What are 

some of the problems that you are dealing with? 

Mr. GROSS. Of the 100 million lines of codes that we are estimating, 62 million lines of code are in our core business systems 

for which we have identified a plan of conversion. Our projections 

are that we will be spending approximately $2.50 per line of code 

for that conversion. That is based on an estimated 1,780 work 

years of effort from the date that conversion began to the date it 

is projected to be completed. We have not yet identified the total 

all in costs for the infrastructure upgrades necessary to support the 

core business systems, nor have we estimated the cost of the conversation for the field applications, and we will not be able to do 

so until we complete that inventory. 

227

Mr. HORN. That is very helpful. 

Well, gentlemen, I know we have kept you a long time. We have 

some other questions. If you don’t mind following our usual procedure, we will submit them to IRS. If you would give us a reply, we 

will put it in at this point in the record. 

[Folowup questions and responses follow:]

228


g:\graphics\43913.155
229


g:\graphics\43913.156
230

Mr. HORN. I thank you all for coming, and I wish you well, because you have a tough job. But the key part I think, before you 

get computer systems or anything else, is to think through what 

you are doing from a management standpoint and try to get some 

integration of those numerous computer systems you have got right 

now, which I guess you are trying to figure out, Mr. Gross, how to 

get them to talk to each other effectively. And hopefully you field 

the equipment off the shelf without sitting around doing what FAA 

and your predecessors did, getting the last ultimate system. You 

are never going to get it. You just need to take it off the shelf, I 

would think. Is there anything on the shelf that makes sense for 

use with IRS? Or does everything have to be redesigned from 

ground zero? 

Mr. GROSS. There are systems in the commercial market, for example, financial reporting systems that have applicability to our 

environment. Part of our modernization plan for the future is to 

identify the application of commercial products in lieu of custom 

development, to the extent possible. 

Mr. HORN. Good. I think that is a sensible way to go. Thank you 

all for coming. 

We have one more panel, one witness, Mr. Trinca, the Chief of 

Staff of the National Commission on Restructuring the Internal 

Revenue Service. Please come up. If you would stand and raise 

your right hand. 

[Witness sworn.] 

Mr. HORN. Let the clerk note Mr. Trinca has affirmed that oath. 

Jeffery S. Trinca has been Chief of Staff of the National Commission on Restructuring the Internal Revenue Service for how many 

months now? 

Mr. TRINCA. Ten months, sir. 

Mr. HORN. About a year. And the Commission reports when? 

Mr. TRINCA. The end of June. 

Mr. HORN. The end of June. Could you tell us a little bit about 

the interim thinking of the Commission in terms of the IRS? 

Mr. TRINCA. Yes, sir. 

STATEMENT OF JEFFERY S. TRINCA, CHIEF OF STAFF, NATIONAL COMMISSION ON RESTRUCTURING THE INTERNAL 

REVENUE SERVICE 

Mr. TRINCA. Thank you, Mr. Chairman. Thank you for allowing 

me on behalf of Congressman Portman to provide an update on the 

work of the National Commission on Restructuring the IRS. 

Mr. Portman, who I believe is the newest member of this subcommittee——

Mr. HORN. That is correct. 

Mr. TRINCA [continuing]. Sends his regrets and apologizes that 

he could not make it here this morning. 

Let me begin by telling you a bit about the Commission’s work 

to date. The Commission has 17 members; 4 from Congress, 2 from 

the administration, and 11 from the private sector or State government. 

Our congressional members are Senators Bob Kerrey and 

Charles Grassley, Congressmen Rob Portman and Bill Coyne. So 

this Commission is both bipartisan and bicameral. 

231

The staff is made up of professionals with backgrounds in law, 

accounting, business management, and computer systems development. 

The Commission has a 1-year life, and the final report will be 

completed in June, as I said. Over the last 10 months, our members and the staff have been digging through a mountain of reports, studies, and data from the IRS. We are also conducting a 

number of our own studies, including interviews of over 275 front 

line IRS employees, most of the top IRS executives here in Washington, discussions with business groups, tax preparers, and many 

other stakeholders. 

Additionally, we have been very active in soliciting input from 

the most important experts on the IRS, ordinary American taxpayers. We have communicated with many folks on our home page 

and through town meetings. We also intend to conduct a survey of 

taxpayers later this month. 

We have learned a great deal about the IRS and the challenges 

it faces. Let me briefly describe what we have found to date. Many 

of the problems of the IRS can be traced to three main areas: management and governance at the top of the tax administration system; inability to deliver quality customer service to taxpayers; and 

the complexity of the tax code. 

First, in the area of management and governance, the Commission has found an agency that is unable to set long-term strategies 

and priorities and stick with them. I would like to stress that this 

phenomenon is historical in nature and not a product of a particular administration. 

The current IRS management and governance structure, which 

includes Congress, the Department of Treasury, and senior IRS 

management, does not ensure, one, that a shared vision for the 

agency can be developed and maintained over time; two, that priorities and strategic direction can be set and maintained; three, that 

accountability is imposed on senior management and a knowledgeable governing body; four, that appropriate measures of success can 

be developed and used; five, that budget and technology can be 

aligned with these priorities and strategic direction; and, finally, 

that continuity and coordination of oversight is achieved so problems can be caught at an early stage. 

Of these, the most crucial elements necessary for a turn around 

at the agency are continuity, knowledge and expertise at the top, 

and accountability. In the Commission’s view, the major technology 

and cultural changes that the IRS needs will require a governing 

structure that is capable of setting, implementing, and achieving 

long-term goals. Many of our Commissioners have discussed publicly the possibility of creating a private sector style board of directors of the agency, with outside expertise that is accountable to the 

President and Congress and has the authority to hold top level 

managers at the IRS equally accountable. A majority of our Commissioners strongly believe that any structure put in place at the 

IRS must fulfill the six criteria cited above if it is to have any likelihood of success. 

Let me briefly address another area on which the Commission’s 

findings have focused to date, customer service. The Commission 

has found an IRS that has not successfully made high-quality cusVerDate 0ct 02 2002 01:17 Oct 06, 2002 Jkt 010199 PO 00000 Frm 00235 Fmt 6633 Sfmt 6602 W:\DISC\43913 43913
232

tomer service a top organizational priority. While the private sector 

has rewritten customer service standards over the last 25 years, 

IRS taxpayer service has remained essentially static or actually declined. Billing notices are confusing. Taxpayers have a hard time 

getting through on the phone. Taxpayers must contact the agency 

too many times to resolve even the simplest problems. IRS computer systems are not readily accessible for personnel to solve these 

problems once they do get through. Indeed, an IRS employee may 

have to access as many as nine different computer systems to resolve a taxpayer’s problem. 

Taxpayers have become accustomed to increasingly high performance standards from their banks, credit card companies, airlines, 

and other service organizations. They have come to expect timely, 

accurate, and respectful service from both private companies and 

public agencies. The IRS must move aggressively to close this customer service gap. Among other things, this involves improved 

technology, better training, and enhanced coordination between all 

elements of IRS customer service. 

Finally, the Commission has increasingly focused between the 

length of and the complexity of the tax code and the shortcomings 

of the IRS. Mr. Chairman, I realize that the tax code is a matter 

for another committee, but I would like to point out that the complexity of the code has a direct impact on the problems for tax administration. Even the best run IRS would have a great difficulty 

administrating the complex and ever-changing tax laws presently 

forced upon it. 

Congress and the administration often act well-intentioned but 

impose overly complex tax laws without understanding the downstream problems they impose on the IRS and the average taxpayer. 

One reason is that the IRS does not have an independent voice in 

the tax writing process to make Congress and the administration 

aware of the necessary administrative changes and tax form revisions required to implement new tax laws. 

Another reason is there is no incentive in place to encourage simplicity in the legislative process, and, of course, there are some tax 

provisions that create such tax administration and compliance 

nightmares they need to be repealed. The Commission will address 

each of these issues. 

Mr. Chairman, let me conclude by saying that the Commission 

study to date has given us a good sense of where the IRS stands 

today. More importantly, though, it has helped the Commission 

create a vision of where the agency needs to be 5, 10, and 15 years 

from now. 

The Commission’s vision of the IRS for the next century is a 

service-oriented organization that will collect the proper amount of 

revenue by relying more on modern customer service practices and 

less on enforcement mechanisms. Its highly trained customer service representatives will be able to resolve taxpayer problems on the 

first phone call. It is an IRS that operates under a simplified tax 

code, and not on reducing inadvertent noncompliance. This summer 

the Commission will challenge the President and Congress to create an agency that responds to the needs of taxpayers by fulfilling 

this vision. 

233

The Commission report will be comprehensive, outlining changes 

needed in Congressional oversight, Treasury governance, IRS management, IRS operations and culture, computer systems, taxpayer 

rights and measures to simplify the tax code. This will be the first 

opportunity since 1952 for Congress to create such sweeping 

changes at the IRS. We look forward to working with the subcommittee. 

[The prepared statement of Mr. Trinca follows:]

234


g:\graphics\43913.157
235


g:\graphics\43913.158
236


g:\graphics\43913.159
237

Mr. HORN. We thank you for testifying, Mr. Trinca. In your review of IRS operations and activities and their goals and their role 

within our Government, has the Commission come to any conclusion as to the attributes a new Commissioner ought to have to be 

an effective executive in charge of that organization? 

Mr. TRINCA. Well, we are just now reaching our recommendation 

stage of process, so it is difficult to predict totally. But I think 

going back to the points about continuity, knowledge and expertise, 

and accountability, those can be directed at the Commissioner as 

well as the—— Mr. HORN. Well, to what does knowledge apply? Is it simply 

knowledge of the tax laws and the code, or is it knowledge of how 

to run an organization? 

Mr. TRINCA. It’s knowledge of how to run an organization, how 

to reengineer processes, how to bring very large, very complex computer systems and integrate them into those new processes and the 

tax laws. 

Mr. HORN. I’d like to ask the gentleman from Vermont, Mr. 

Sanders, who has rejoined us, if he has some questions. 

Mr. SANDERS. Thank you, Mr. Chairman. I really want to congratulate you on conducting a very important hearing. 

Mr. Trinca, you are familiar, perhaps, with the recent reorganization plans of the IRS? 

Mr. TRINCA. Yes, sir. 

Mr. SANDERS. I can’t tell you what impact they are having 

around the country, but I know that there are a lot of concerns 

about them in New England and the State of Vermont. In Burlington, VT, which is our largest city, we were one of the district 

offices that was centralized. As you know, Vermont, Maine, New 

Hampshire, and Massachusetts now form one district. 

Mr. TRINCA. Yes, sir. 

Mr. SANDERS. And my impression is that is not working in terms 

of improving the IRS’s relationship to consumers. We have seen a 

layoff of workers in Burlington, many of whom have been frontline 

people, people able to respond to the day-to-day needs of Vermont 

taxpayers. Third, we have seen the very successful volunteer income tax assistance and tax counseling of the elderly programs 

now being coordinated out of the Boston office rather than out of 

Vermont, which has not been a good thing. And fourth, we are seeing that IRS has instructed its taxpayer services personnel to route 

most telephonic inquiries by Vermont taxpayers to toll-free numbers in Boston, and from what we are hearing, people are not making the connection, not all of those people are getting in, they are 

getting kept on hold for a long point, being shifted around and so 

on and so forth. It seems to me from what I have been hearing, 

we have talked to many tax preparation people who are also concerned about the lower quality of service. What’s your judgment on 

the recent reorganization? 

Mr. TRINCA. Recently, we held two town meetings; we’re going to 

hold two more, one in Ohio, one in Nebraska. And I have to say, 

the disturbing information received in those town meetings was not 

necessarily from the unions or from the IRS employees on the reorganization, but from practitioners, enrolled agents, very much concerned that there seems to be a sense of rolling back customer 

238

service in rural areas into more urban areas. One practitioner 

pointed out that this potentially could be analogous to the State, 

the Federal parks closing the Washington Monument to point out 

what happens when you cut their budgets. 

The Commission is still chewing on this issue right now, but 

there were a lot of concerns raised, and it seemed to be pretty uniform across; lawyers, accountants, enrolled agents, everyone. 

Mr. SANDERS. So this is not just a New England or Vermont concern? 

Mr. TRINCA. No, that’s right. 

Mr. SANDERS. It seems to me that if you cut back on employees 

who service people in a given region in a rural area, if you have 

a 1–800 number that is not particularly effective, in is enormously 

frustrating. Here are taxpayers up against a wall. They have an 

April 15th deadline. They are put on hold, shifted all over the 

place. That does not do anybody any good, and I think it just engenders more antagonism toward the IRS. 

So what you are saying is even in the Midwest this reorganization is not working particularly well? 

Mr. TRINCA. Yes, sir. 

Mr. SANDERS. Do you have any thoughts on how those of us in 

Congress might want to respond to that? 

Mr. TRINCA. I think it’s best to wait for our report from our perspective than me to get out in front of our Commissioners. 

Mr. SANDERS. Thank you very much. 

Mr. HORN. I thank the gentleman. Let me just ask one concluding question. Has the Commission and the Commission staff 

had an opportunity to review the Treasury plan with regard to any 

reorganization of the Internal Revenue Service? 

Mr. TRINCA. Yes, sir, we have. 

Mr. HORN. Is there a reaction the Commission has at this point? 

Mr. TRINCA. I think there’s some concern among some of the 

Commissioners that it deals with just pieces of the big picture. We 

hope to deal with the big picture. I think we go back to those three 

tests again on accountability, expertise and continuity. 

Mr. HORN. I take it your report then will have a critique of the 

Treasury’s proposal? 

Mr. TRINCA. Not specifically. I think it will—I think that basically the critique that’s done overall will probably stand, even with 

the Treasury. 

Mr. HORN. Well, in other words, you are going to make your own 

report, but there won’t be a closure as to detail of where the Commission feels the Treasury ought to either expand its proposals or 

think again about integration of the various functions? I mean, how 

are you going to approach that? 

Mr. TRINCA. Well, I think our report in a sense will stand on its 

own. The Treasury report in some sense will take steps toward 

some of those directions they might head in, but I believe that the 

Commissioners are interested in making much more comprehensive 

and dramatic steps than were taken by the Treasury Department. 

Mr. HORN. As you know, in the legislative body the clash of ideas 

is what counts, and if the clash isn’t clear, a lot of people are going 

to go hunting, fishing, misinterpreting, so forth, and I would think 

when we have a group of experts such as you have on the staff in 

239

the Commission on both parties, it would be helpful to us in Congress if the Treasury’s plan was reviewed and very pertinent points 

were made. You could reference other sections of your Commission 

report. But there’s got to be closure here for what did you think, 

what did they think, ultimately that we will use to make some decisions. 

Mr. TRINCA. We have experienced quite a bit of clash on this, and 

I believe there will be a sharp contrast, sir. 

Mr. HORN. That’s the problem with too much business around 

here. We compromise it down, and then we gripe when the executive branch issues regulations under it, when, frankly, we haven’t 

given them specific direction so they know what they are doing. 

And they say, what are those people saying; what do they mean? 

So I’d like to see something that has a real sharpness to it, and 

I think it would be helpful in the Ways and Means Committee, the 

Appropriations Subcommittee, and to the Committee on Government Reform and Oversight, and this subcommittee in particular. 

Mr. TRINCA. Yes, sir. Thank you. 

Mr. HORN. We thank you for coming. I want to thank the staff 

that developed this hearing, J. Russell George, the staff director of 

the Government Management, Information, and Technology Subcommittee; and Anna Miller, who is on my immediate left, professional staff member that prepared the hearing; John Hynes, professional staff member who has been a lot of help in letting the world 

know this hearing has existed; Andrea Miller, our clerk, faithful, 

helpful; and David McMillian, professional staff member for the minority; Mark Stephenson, professional staff member for the minority; Jean Gosa, the clerk for the minority. And we thank our court 

reporters for whom we have put a little test this morning, Bob 

Cochran and Tracy Petty and Katrina Wright. Thank you all. 

With that, this hearing is adjourned—— Mr. SANDERS. Could I introduce this into the record, please? 

Mr. HORN. Yes. This is the statement of Mr. Sanders. We will 

also introduce the statement of Mrs. Maloney, and they will be put 

after the opening statements made by myself and others. 

Mr. SANDERS. Thank you very much. 

Mr. HORN. Thank you very much. Without objection, we’re adjourned. 

[Whereupon, at 2:07 p.m., the subcommittee was adjourned.]

Æ