Taxpayer Bill of Rights  

News Release:
Roth Opens IRS Investigative Hearings

WASHINGTON -- The Senate Finance Committee today opened the first of three days of hearings into the practices and procedures of the internal Revenue Service. Chairman Roth's Opening statement follows:

"This morning we begin the first of three days of oversight hearings into the tactics, management, and inner workings of the Internal Revenue Service. There is no other agency in this country that directly touches the lives of more Americans. Nor is there any agency which strikes more fear into their hearts. The threat of an audit -- the awesome power of the IRS -- looms like the sword of Damocles over the heads of taxpayers.

"As Chairman of the Senate Finance Committee, I wanted to know why. I wanted to understand where this fear came from. I wanted to know if it was justified. Our Committee's responsibility is to provide the oversight of this agency. This is a responsibility I take seriously. So, in January of this year -- with the support of my friend and colleague, Senator Moynihan, I began an investigation into how this agency conducts business with the American people.

"There is no political bias -- no partisan motive -- behind our investigation and these hearings. As I said, they were initiated some eight months ago, and what we have discovered indicates that problems within the IRS are not recent. They cover several Administrations.

"Let me also say that the IRS is made up of many fine men and women -- men and women of great character and integrity, who perform a vital and very difficult job for this country. In reflecting upon our investigation, I found this to be especially true, and I note that without the help of many such IRS employees, our investigation would have been incomplete.

"There is no doubt that the powers of the Internal Revenue Service are extraordinary. The IRS can seize property, paychecks, and even the residences of the people it serves. Businesses can be padlocked, sometimes causing hundreds of employees, who are also taxpayers, to be put out of work. In some instances, the first time a taxpayer is aware of any enforcement action by the IRS is when his or her bank calls to notify that funds have been frozen. The IRS can take these actions. In many cases, without giving the taxpayer notice, or opportunity to be heard.

"This is an awesome amount of power to place in the hands of any governmental agency. Is it appropriate? Perhaps. But with such power there must be an effective counterbalance of responsibility. Why? Because the greater the power, the more extensive the damage that can be done if that power is abused. Any agency with such power must be above reproach -- especially as that awesome power allows it to pervade the most sensitive aspects of our citizens' private lives.

"Congress has granted such power to the IRS. As a consequence, Congress has a fundamental responsibility to see that the IRS operates with the highest degree of integrity, honor and ethics. As the Good Book says, "Where much is given... much is required."

"Unfortunately, our investigation to date has found that in many cases such high standards are not being upheld. Over the course of the next three days we are going to see a picture of a troubled agency, one that is losing the confidence of the American people, and one that all too frequently acts as if it were above the law.

"This is unacceptable.

"Even high-ranking employees of the agency have come forward at some risk to themselves and their careers to speak with us. In consequence of such risks, employees who will testify have requested confidentiality, and we have honored that request. We have also talked with many private citizens whose lives have been altered by IRS actions. These men and women have related their sometimes tragic experiences, not out of vindictiveness, or mean-spiritedness, but out of deep concern and the fundamental belief that such a violation of their civil rights should not have taken place -- not in America.

"We have listened to these men and women, and we are holding these hearings because one thing is certain: we can't fix the IRS without knowing what ails the IRS. What we seek is constructive criticism -- criticism with the intent to improve, not destroy -- to protect, not denigrate. This is not IRS bashing; it is oversight. There will be no condoning of tax protestors, or any others who would misinterpret our objectives to legitimize anti-government attitudes or behavior. These hearings are about good government, about correcting problems within government - problems that are acknowledged by those whose lives are dedicated to public service.

"Responsible oversight is the best way to ensure that not only is the government meeting the needs of the people, but it's the surest way of letting the people know that they have influence over, and a strong voice in, their government. That's what these hearings are all about. Just as the IRS is quick to say that no honest taxpayer should fear an audit, no government agency should ever fear a Congressional investigation into its activities.

"While it is imperative that Americans pay their fair share of taxes in an effort to establish and maintain necessary government functions, it is equally imperative that the agency charged with the responsibility for this activity be fair, honest, open and accountable.

"With this introduction, I believe it's important to outline how we went about conducting our investigation. Our objective from the beginning was to keep our methodology fair, and yet still be able to get inside the agency to uncover the facts. In reviewing the treatment of taxpayers, we took various cases to the IRS and reviewed every document that we could obtain. We interviewed the IRS employees involved in the particular cases.

"Over the next three days, we'll hear about a number of these cases. We will hear from taxpayers and IRS employees. It is important to understand that these witnesses are typical of far greater numbers who have been moved to contact the committee. These individuals serve as a sampling which demonstrates the significance of problems and concerns within the agency.

"The facts will be startling.

"For instance, while the use of pseudonyms is forbidden by the Internal Revenue Manual - except for those in the law enforcement areas of Criminal Investigations and Inspections Divisions -- many Revenue Officers have been issued false identification credentials. While the IRS suggests that this is to protect agents from assault, I'm concerned that it makes them unaccountable. Even members of the Metropolitan Police Force here in the District of Columbia, despite substantial danger, wear their true names on their uniforms.

"In the next three days, you will hear about an audit term called 'Blue Sky Assessments.' These are tax assessments made against Americans that have no basis in fact or tax law. They can either be designed to hurt the taxpayer, or simply raise the individual statistics of an IRS employee.

"You will hear a lot about statistics and quotas. We have reamed that even at managerial levels, the drive to achieve the appropriate statistic has caused problems in many areas of the country. While the use of quotas is specifically prohibited in rating the success of agents or officers in their jobs, it appears to be commonplace. And this, I believe, is outrageous -- a major problem that has become part of the agency's culture.

"Levies and seizures are also measurements of employee performance. In one case we reamed a revenue officer was counseled for "not keeping his statistics up" so he seized several properties the next day. Some officers who are able to collect the full amount of taxes due are often rated lower than those who have seized property. Seizures may be done for status and promotion as much as for enforcement.

"Not only are levies and seizures measurements of an employee's performance, but so is the number of referrals of cases to the Criminal Division. In other words, while there may be no basis in fact for a criminal referral, a taxpayer's life may well be turned upside down simply to keep an employee's, or district's, performance statistics up.

"Liens and levies may be filed against those whom the IRS knows has no liability for a particular tax. Parents, relatives or a company employee may have liens filed against their property, or have a paycheck levied, in order to get the real taxpayer to comply. This is called the 'whipsaw technique.' This practice was explained to us as, 'When we go after everybody, we know someone will pay.' We will present an example of that method during the course of this hearing.

"One of the most distressing things you will learn from this hearing is the preference to audit middle- and lower-income taxpayers, as well as mom and pop small businesses. This is almost incredible to understand. Certainly it's not for the high revenues that these kinds of audits bring to the Treasury. So why are these Americans audited? Because it's easy. Most often, these are the taxpayers who can't afford to fight back.

"Beyond learning about the fear taxpayers have concerning the IRS, I was very much concerned about how agency employees, themselves, feel. Many expressed fear of being retaliated against for speaking out against the kind of abuses I have mentioned here. We have heard in our investigation that the use of false allegations of wrongdoing against targeted employees takes place. In fact, just the number of times we heard the term "targeting" in relation to harassment of employees was stunning. Certainly if this treatment bothers the front-line employees of the IRS, it's devastating to the American taxpayer.

"Over the next three days we will hear more about these concerns. As Congress has given the IRS awesome power in an effort to help the agency carry out its tremendous responsibility, it is also Congress' responsibility to ensure that such power is being used prudently, constructively, and with regard for the taxpayer and employees of the agency. What we are learning suggests that there are problems and begs that Congress address three fundamental questions: First, does the IRS have too much power? Second, if Congress were to limit that power, what expectations do we have that the new limits will be more effective than the old limits? Third, how do we go about changing the culture of the IRS?

"What we seek to do is help the IRS get back to its mission statement. That statement reads: "The purpose of the Internal Revenue Service is to collect the proper amount of tax revenue at the least cost; serve the public by continually improving the quality of our products and services; and perform in a manner warranting the highest degree of public confidence in our integrity, efficiency and fairness."

"This is our desire. Improving the IRS is not only good for taxpayers; it's good for government."

Press Release #105-176
Contact: Ginny Flynn
Christina Pearson

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