President Clinton today is announcing a comprehensive plan to help American taxpayers by reforming the Internal Revenue Service, improving its customer service, giving taxpayers new rights, creating new avenues of recourse, and establishing a new public-private board to strengthen oversight. The President's plan will be implemented immediately and is based on the recommendations of a comprehensive report by Vice President Al Gore and Treasury Secretary Robert E. Rubin to improve service for taxpayers.

The report's recommendations fall into four main categories:

I. Reinvention: Improve customer service

• Ban measures that undermine fair treatment of taxpayers -- such as using enforcement activities to rank districts.
  
• Ban using dollar goals to evaluate IRS employee performance.
  
• Create an IRS that answers the phones 16 hours a day in 1998 and 24 hours a day, 7 days a week in 1999.
  
• Keep IRS offices open on Saturdays during the filing season.
  
• Rewrite existing forms in language people can understand.
  
• Eliminate unnecessary forms and 30% of all notices.
  
• Customize support for small businesses.
  
• Expand electronic filing and introduce new payment options.

II. Recourse: Give taxpayers new ways to solve problems

• President Clinton proposes to expand the power of the Taxpayer Advocate to issue immediate relief to taxpayers through taxpayer assistance orders. Last year, the Taxpayer Advocate helped more than 300,000 Americans solve their tax complaints.
  
• The President's proposal requires the IRS to alert taxpayers to the availability of Taxpayer Advocates, and to catalog and review all taxpayer complaints to hold employees accountable for improper conduct.
  
• Create new, independent, local Citizen Advocacy Panels to help taxpayers ensure that their problems and complaints are addressed.
  
• The citizen panels will:
  
  • Work with Taxpayer Advocates to help resolve taxpayer problems.
    
  • Independently audit the performance of the local IRS office.
    
  • Refer complaints to the national Taxpayer Advocate when they can't be resolved at the local level.

III. Rights: Expand taxpayer rights and remedies

President Clinton will propose a Taxpayer Bill of Rights 3 that will:

• Extend the refund period for taxpayers with health problems that kept them from seeking refunds.
  
• Make it easier for "innocent spouses" to get relief
  
• Make installment agreements available to more taxpayers.
  
• Help innocent, third party victim of collection actions.
  
• Let more taxpayers use the Tax Court's streamlined small case procedures.
  
• Expand assistance for low-income taxpayers.

IV. Reform: Create a new IRS Board of Trustees

• This public-private Board will provide strategic advice to the Secretary of the Treasury on issues including long-term planning; performance measures; customer service issues; and Citizens Advocacy Panel recommendations.
  
• The Board's members will include five private sector members appointed by the President and confirmed by the Senate, including a representative of an IRS employee organization, the Deputy Secretary of the Treasury and the IRS Commissioner. Private sector members will serve staggered six-year terms.
  
• The Board will be required to report independently and at least annually to Secretary of the Treasury, the President and the Congress.

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Report of the IRS Customer Service Task Force

I. REINVENTION: IMPROVE CUSTOMER SERVICE

"For the vast majority of Americans who want to do the right thing, the IRS should do right by them, and that means treating them with respect and trust. And, it means recognizing that taxpayers are its customers."

-- Vice President Al Gore
May 20, 1997

Far too many Americans feel the Internal Revenue Service is not doing right by them, or that it doesn't treat them with the respect and trust they deserve. Taxpayers can't understand complex IRS forms, notices and procedures. IRS phones and toll-free numbers are often busy. Taxpayers who get through frequently get put on hold or transferred to a person who cannot answer specific questions. Taxpayers who do not speak English are unlikely to reach an employee who speaks their language. And even the simplest problems take far too long to resolve.

On May 20, 1997, Vice President Al Gore and Treasury Secretary Robert Rubin launched a National Performance Review study to find ways to improve customer service at the IRS. The IRS Customer Service Task Force consisted of over 60 frontline IRS employees, Department of Treasury officials, and members of the National Performance Review. The Task Force interviewed many hundreds of people: it listened to complaints, read thousands of letters from taxpayers and met with tax preparers. The Task Force gathered ideas from others in government and the private sector, including businesses that excel in customer service and consultants who help those companies improve customer service.

The Task Force also studied other government reinvention efforts and found ample evidence that enforcement is not the only good method of ensuring compliance with the law. It examined programs that prove that agencies that treat people like customers and partners are more successful in encouraging people to obey the law and can then focus enforcement efforts on those who deliberately violate it. For example, until the U.S. Customs Service began working with airlines, importers and the rest of the trade community, the Customs at the Miami Airport had a record of long lines for passengers and endless waits for cargo. Customs designed and implemented a plan that enabled them to identify high risk passengers or freight before a plane landed. This resulted in an increase in drug seizures, faster passage through customs for law abiding passengers and less waiting time for importers. Similar results were found at the Environmental Protection Agency and the Occupational Safety and Health Administration when these agencies joined with the people and companies they regulate to solve problems. This resulted in reducing both the number of fines and injuries on the job.

The Task Force also looked at IRS pilot programs that have improved customer service and compliance and collected new ideas from frontline employees. For example, the IRS has run pilot programs with small businesses who risked bankruptcy because of tax troubles. Special IRS teams moved in to work with these businesses and designed a program that allowed them to pay off tax debts and keep afloat saving jobs and contributing to the local economy. In the process the IRS doubled the tax revenues collected in their area. As a preventive measure, the teams also set up an intensive taxpayer education program to teach businesses what the IRS expects them to do and how to do it.

The report of the Task Force contains more than 200 actions which share a clear goal: to ensure that every taxpayer is treated with fairness and respect and that IRS customer service begins to meet the same standards that characterize private sector firms. Together these actions will make the IRS easier to deal with in everything from finding forms to filing taxes, from getting information to resolving a problem.

HIGHLIGHTS OF THE ACTIONS:

1. Ban Measures That Undermine Fair Treatment of Taxpayers

• In 1998, the IRS will ban measures such as enforcement activities to rank districts and assigning dollar goals for employees.
  
• The IRS is working with the National Treasury Employees Union (NTEU) to design and test a balanced scorecard to evaluate the IRS and its employees in 1998. The scorecard will rate performance on

1. customer service, based on customer satisfaction surveys;
2. employee satisfaction; and
3. business results.

• Over the longer term, the IRS will change how it selects, trains, evaluates, rewards and supports its employees to they can better serve customers.

2. Provide Better Telephone Service

• Increase Hours
  To make service more convenient, the IRS will, by January 1, 1998, expand telephone service to 6 days a week, 16 hours a day. By January 1, 1999, the IRS will expand telephone service to 7 days a week 24-hours a day. Currently, a caller can get their questions answered by an IRS telephone representative only 5 days a week, 12 hours a day. Expanding phone service will be achieved by putting more of the current work force on the phones during peak calling periods, using a new national call-routing system to route calls to the next available customer service representative, and forwarding calls to employees in other time zones during late night hours.

• Expand Customized Services
  In 1999, the IRS will begin using new call-routing technology to provide service that is geared to specific customer needs - such as the sale of a house, retirement or job change - and multi-lingual service. The IRS will also provide a nationwide hotline for tax preparers.

3. Make It Easier To Get Answers

• Institute New "Problem Solving Days"
  Beginning on November 15, 1997, the IRS will institute monthly "IRS Problem Solving Days" in every district, where employees will meet with taxpayers to hear and resolve problems.

• Expand Office Hours
  Beginning in 1998, the IRS will open district offices on Saturdays during the busiest weekends of the filing season.

• Open More Convenient Locations
  Beginning in 1999, the IRS will open additional temporary community-based locations during peak season for publications and forms, such as banks, libraries or shopping malls. Expand the telephone information system so that people can find out when and where they can get help.

• Complaint Tracking System
  Using the Taxpayer Advocate's Problem Resolution Information System (PROMIS), the IRS will track every complaint and, if unresolved in a reasonable period of time, reassign the case to the next level.

• Review Unnecessary Penalties
  The Administration will undertake a comprehensive review of all penalties and report to Congress by July 30, 1998 on their fairness and effectiveness and make recommendations for legislative changes.

4. Reduce and Simplify Forms and Notices

• Rewrite Notices
  By 1999, the IRS will rewrite in plain language its most frequently used notices, like those for late payment or mathematical errors. These notices will not be released without testing them for clarity and acceptance on ordinary people who do not have accounting or tax law backgrounds.

• Eliminate 30% of All Notices
  By the end of next year, the IRS will eliminate unnecessary notices. This will eliminate more than 45 million pieces of mail, almost one-third of the total number of notices the IRS has been sending to taxpayers.

• Simplify Forms and Brochures
  By 2000, the IRS will rewrite the basic 1040 instruction package and test it for clarity on ordinary citizens. During 1999, the IRS will create easy-to-read brochures to provide important information on tax benefits and obligations when and where taxpayers need it, such as at hospitals and adoption agencies after the birth or adoption of a child.

5. Strengthen Customized Support For Small Businesses

• Help Start-Up Businesses
  Beginning in 1998, the IRS will team up with other Federal agencies, financial institutions, tax preparers, state and local authorities and others to provide tax information, training and consultative services to small start-up businesses. These services are designed to make record keeping, filing and payment requirements as simple and easy as possible.

• Provide Specialized Phone Services
  The IRS will provide small businesses with 24-hour-a-day phone assistance geared to their needs by the 1999 tax season. In 1998, the IRS will offer businesses the opportunity to file 941s by phone, expanding a successful pilot program nationwide.

• Work With Troubled Small Businesses
  The IRS will work proactively with troubled small businesses to help them comply and avoid future tax problems, expanding on the successful pilot program of San Joaquin Valley.

6. Expand Electronic Filing

• Telefile
  By 1998, the IRS will increase by 3 million, or about 10%, the number of taxpayers who are eligible to use Telefile - the telephone filing system. Introduce the use of Telefile for business.  Increase the number of forms that can be filed electronically and educate customers about the benefits of electronic filing -- fewer hassles, fewer contacts with the IRS and faster refunds.

• Paper-less Taxes
  In 1999, the IRS will work to enable taxpayers to file "paper-less taxes" by eliminating the need for mailing in W-2s and other forms and for paper signatures.

7. Introduce New Payment Options

For the first time, beginning in 1999, taxpayers who file electronically will be able to pay their taxes with a direct withdrawal from their bank account. The IRS is seeking credit industry partners to pilot-test credit cards for taxpayers who file electronically in 1999.

8 . Eliminate Unnecessary Filing

In 1998, the IRS will step-up its efforts to make the nearly 1.8 million older and lower income taxpayers who are currently filing forms aware that they don't need to file forms, saving them and the IRS time and money.

9. Upgrade Technology to Improve Customer Service

In the long term, the IRS Modernization Plan will improve assistance to customers -by making accurate, electronically accessible and up-to-the-minute information available on taxpayer returns and accounts. In 1999, for example, the IRS will pilot a national call routing system and provide simpler menus to let taxpayers get to information more easily and to check on the status of their refunds using a much more reliable Teletax system.

10. Improve Customer Service Training

Before the 1998 filing season, the IRS will have an intensive IRS-wide special training program. This program will initiate the new approach to customer service and make specific plans for 1998. In addition, IRS managers from the Commissioner on down will commit to spending time each year serving customers.

Taken together, these recommendations promise to introduce a new culture of customer service at the IRS. Accountability at all levels for customer satisfaction, greater access to telephone and walk-in service, easy-to-understand forms and notices, expanded electronic filing, improved technology, an effective complaint system -- all this will make it simpler to get questions answered, fill out forms and pay taxes. This program will provide new support for small business, the lifeblood of the American economy and the taxpayers who face the greatest hurdles in achieving compliance.

The 102,000 employees of the IRS were represented on the Task Force by people like Nancy Eik, a customer service representative in a walk-in center in Missoula, Montana. Ms. Eik spends every Saturday during the tax season at the public library helping people fill out their tax forms. This is the type of IRS employee service that is outlined in this report that will help rebuild the pride, energy and professionalism of the IRS. They believe that by taking steps in this report, IRS employees will be able to provide better customer service and work to restore the morale of the workforce.

These actions will help ensure that the IRS meets Vice President's Gore's statement of taxpayer rights - the right to fair treatment. "...regardless of how taxpayers interact with the IRS, the goal is this: to treat them with trust, with respect, with accuracy and with fairness. It's that simple."

Top management's recent apology for past IRS abuses was both courageous and necessary. This action, taken with this report, signals the change in the relationship within the IRS and the relationship between the IRS and the American taxpayer. These changes signal a new era in which the tax collectors earn public trust and are proud of the changes they're making on behalf of their neighbors.

For government reinvention to be successful - legitimate and lasting - it must come from both the frontline workers and the customers. With fair treatment, courtesy and respect, the IRS will regain the trust and better serve the American taxpayer.

II. RECOURSE: GIVE TAXPAYERS NEW WAYS TO SOLVE PROBLEMS

The Administration proposes to improve the IRS system for resolving taxpayer complaints with two fundamental steps:

(1) strengthening the office of the Taxpayer Advocate; and

(2) creating new Citizens Advocacy Panels.

STRENGTHEN TAXPAYER ADVOCATE

The Taxpayer Advocate assists taxpayers with unresolved problems relating to IRS administration of the tax laws. Last year, nearly 300,000 cases were brought to the attention of Taxpayer Advocate offices around the country, and cases were resolved in an average of 38 days. The Administration proposal will enable the Taxpayer Advocate to provide greater assistance to taxpayers by:

• Expanding Powers
  The Taxpayer Advocate will consider new, specific factors in issuing "Taxpayer Assistance Orders" - actions, which can be initiated by taxpayers or by IRS employees, that stop IRS collection orders. This proposal will increase the types of situations in which taxpayers can be provided relief The Taxpayer Advocate will be specifically authorized to consider the following factors: unreasonable delays in resolving taxpayer account problems; immediate threats of substantial adverse action (such as the seizure of a residence); the likelihood of irreparable harm, including the need to pay significant professional fees, if relief is not granted; and the possibility of long-term adverse impact on the taxpayer.

• Drawing the Taxpayer Advocate from the Outside
  In the future, the Taxpayer Advocate will be selected from outside the IRS to ensure greater independence and to better represent taxpayers' interests. Emphasis in selection will be placed on people from the private sector who have a background in customer service, as well as requisite tax knowledge.

• Increasing Access
  The IRS will initiate a public information campaign to inform taxpayers about the Taxpayer Advocate program and the remedies it offers. Increased staffing will be provided to respond to increased requests for assistance in both the 43 local Taxpayer Advocate offices and the national Taxpayer Advocate office. The IRS will publicize its toll-free number for taxpayer complaints in IRS publications that describe taxpayer rights and protections.

• Increasing Resources to Meet Demand
  To ensure that customer demand is fully met, the IRS will substantially expand the national and local Taxpayer Advocates' staffs. This will make it possible to serve more taxpayers and resolve complaints faster.

• Improving Response to Taxpayer Complaints
  The IRS will be required to track and review all taxpayer complaints, including those referred by the Citizen Advocacy Panels (see below). This proposal would provide better information about taxpayer problems and help hold IRS employees accountable for their actions.

• Expanding Reporting to Congress
  Under this new proposal, the Taxpayer Advocate's reporting obligations will expand to include informal interventions on behalf of taxpayers as well as Taxpayer Assistance Orders. Under the Taxpayer Bill Of Rights 2, the Taxpayer Advocate is required to compile reports of problems confronting taxpayers, which are forwarded to Congress annually along with reports on IRS employee misconduct. The Administration's new proposal would allow the public to better evaluate the extent of assistance provided to taxpayers and to evaluate the work of the Taxpayer Advocate.

CREATE NEW, INDEPENDENT CITIZEN ADVOCACY PANELS

The President proposes to create 33 new local Citizen Advocacy Panels to ensure that the IRS is responsive to taxpayers' needs and to monitor the quality of taxpayer service. The panels will be established through a carefully phased-in process, with the first four expected to begin operations in selected IRS Districts within six months after they are authorized; thereafter the program will expand nationwide as quickly as possible.

The citizen panels will be independently staffed and be empowered to work with the Taxpayer Advocate to improve resolution of taxpayer cases by the Advocate. Among their functions, they will:

• Refer members of the Public to the Taxpayer Advocate
  Taxpayer complaints about the handling of their case (e.g., denial of a request for relief based on hardship or unsatisfactory resolution of account problems) will be referred to the local Taxpayer Advocate.

• Monitor Performance
  The citizen panels will independently audit the performance of the local IRS office and its Taxpayer Advocate in serving customers and handling complaints. Panels will track complaints on a local level and have access to IRS management data (but not to information about individual cases). They will also provide public reports and submit recommendations for improvements to the national Taxpayer Advocate, the Commissioner, and the IRS Board of Trustees.

• Refer Problematic Cases to National Level
  If a taxpayer returns to the panel with a complaint about the resolution of a case by the local Taxpayer Advocate, it will refer the case to the national Taxpayer Advocate to facilitate the successful resolution of taxpayer cases. The taxpayer can also take such a complaint directly to the National Advocate. These changes give the taxpayer an avenue for resolving cases that is independent of the local Taxpayer Advocate office. The national Taxpayer Advocate will also be given additional staffing to handle this increased workload.
  

III. RIGHTS: EXPAND TAXPAYER RIGHTS AND REMEDIES TAXPAYER BILL OF RIGHTS 3

BACKGROUND

New taxpayer rights - in conjunction with improved customer service, expanded authority of taxpayer advocates and newly-announced Citizen Advocacy Panels to resolve taxpayer complaints, and increased accountability of IRS management - will make interactions with the IRS easier and strengthen remedies for wronged taxpayers.

From its first day in office, the Clinton Administration has expanded and protected taxpayer rights. President Clinton signed the Taxpayer Bill of Rights 2 into law on July 30, 1996. This summer, many additional taxpayer rights provisions that the Administration announced in April 1997 were enacted as part of the Taxpayer Relief Act of 1997. Today, President Clinton has proposed a third step to help taxpayers, the Taxpayer Bill of Rights 3 (TBOR 3).

HIGHLIGHTS

• Extend Refund Period for Equitable Reasons
  Extend the statute of limitations for seeking refunds of overpayments for taxpayers who were disabled to the extent of not being able to manage their financial affairs. This policy change, which has been previously recommended by Treasury, is also known as "equitable tolling."

For example, John Smith overpaid his 1992 taxes by $5,000. In 1995, Mr. Smith fell seriously ill and was unable to manage his financial affairs, a condition which lasted for more than a year. When Mr. Smith recovered in late 1996, he realized that he had overpaid his 1992 taxes. Under current law, because the three year statute of limitations for seeking a refund of his $5,000 had expired, he could not recover the money. Under this proposal, he would still be able to recover the $5,000.

• Make it Easier for Innocent Spouses to Get Relief
  An "innocent spouse" is a taxpayer who filed a joint return without knowledge or reason to know of inaccurate information supplied by their spouse. This proposal would expand their rights in three ways.

1. Taxpayers would be granted an additional opportunity to assert innocent spouse relief in Tax Court.

2. Standards for relief for innocent spouses would be changed to help additional taxpayers, including those with smaller tax bills who were previously ineligible.

3. The IRS would be required to clearly alert taxpayers of their joint and several liabilities on all appropriate publications.

For example, John & Mary Smith filed a joint return in 1994, on which Mr. Smith understated his personal income. In 1995, the Smiths were divorced. In 1996, an audit revealed that the Smiths owed $2,000 in back taxes: Mr. Smith's whereabouts were unknown, so the IRS sought the $2,000 from Mrs. Smith. Later, Mrs. Smith discovered that because her husband had cheated on his taxes, she might be entitled to relief as an "innocent spouse." Under current law, Mrs. Smith would have to pay the $2,000 before she could seek a refund. This proposal would allow Mrs. Smith to claim relief in Tax Court - while her case was in court, she would not have to pay the $2,000.

• Ensure Availability of Installment Agreements
  Require the IRS to enter an installment payment agreement with individual taxpayers who cannot pay their entire tax bill if the taxpayer meets certain eligibility requirements. Currently, this is only an option that the IRS can exercise at its discretion.

For example, Mary Smith, who has paid her taxes for the past five years, owes $5,000 in taxes on her 1996 return, but does not have the money to pay that sum in full. Under TBOR 3, Mrs. Smith can arrange to pay her taxes in equal monthly payments over a period of up to 36 months.

• Provide Remedies for Innocent Victims Unauthorized Collection Actions
  Clarify the procedures through which a third party may challenge whether a federal tax lien attaches to their property. This proposal also allows persons other than the taxpayer to collect damages in the event of a wrongful collection action.

For example, John and Mary Smith have paid their taxes in full in all recent years. In refinancing their house, the Smiths learn that a lien has been placed on their property for taxes due. After contacting the IRS, they find the taxes due are those of John Smith. This proposal would make it easier to have the lien removed.

• Expand Small Case Jurisdiction of the Tax Court
  Increase the definition of "small case" from disputes involving sums of under $10,000 to cases involving up to $25,000, making simplified, less expensive procedures accessible to even more taxpayers.

• Expand Low Income Taxpayer Clinics
  Require the Legal Services Corporation to make grants for the development, expansion, or continuation of clinics for low-income taxpayers. This new proposal builds on the current IRS program of partnering with community-based organizations to provide assistance to low-income taxpayers.

• Apply Interest Rates Fairly
  When a taxpayer has both an outstanding balance due to the IRS and a refund due from the IRS, interest would not be calculated in a way which would unfairly penalize the taxpayer. This proposal has been previously recommended by Treasury.

For example, in 1996 John Smith's 1994 return was audited by the IRS. Mr. Smith was found to owe additional tax of $1,000, plus interest, which he paid at the end of the audit in 1996. In 1997, Mr. Smith filed a claim for refund of his 1995 taxes, and the IRS agreed that he was entitled to a refund of $1,000, plus interest. Under current law, different interest rates on these two sums would result in Mr. Smith having paid additional interest on the 1994 tax deficiency for the period in 1996 when the two offsetting sums overlapped.

Under the new provision, Mr. Smith would be entitled to a refund of the additional interest.

• Reduce Filing Requirements
  Allow taxpayers to file a single return to cover state and federal taxes in states that have entered agreements for joint filing and processing of returns. This would simplify the filing process for many taxpayers.

• Refund Overpayments Pending Appeals
  Allow taxpayers to receive a partial or complete refund while awaiting the final decision of the appellate court, if the Tax Court has determined that there was an overpayment but the taxpayer or the IRS has appealed the decision. Current law prohibits making a refund during the time of appeal. (A similar provision would allow estates to seek refunds of overpayments in ordinary refund courts before they pay their final installment. Currently, estates must pay all installments before seeking a refund.)

For example, Mary Smith has paid $10,000 for her 1995 taxes. The IRS proposes additional taxes, and she goes to Tax Court. The Tax Court rules that she is actually due a refund of $1,500. Mrs. Smith appeals, believing she is actually due a refund of $2,500, or an additional $1,000. Current law would prevent Mrs. Smith from receiving her refund of $1,500 while she awaits the ruling on the remaining $1,000. This proposal would allow the IRS to repay the $1,500 while the appeal is pending.

• Refund Amounts Prematurely Collected
  Require the IRS to refund amounts prematurely collected where a timely petition has been filed in the Tax Court, and authorize the Tax Court to order such a refund.

For example, John Smith has been sent a deficiency notice for $1,000 for 1997, which he intends to contest in Tax Court. Smith is owed a refund of $1,000 from his 1996 return. Before Mr. Smith can rile in Tax Court for 1997, the IRS erroneously applies the $1,000 refund for 1996 as payment for the 1997 tax bill. This proposal would require the IRS to refund the $1,000 that it prematurely collected for 1997.

• Ensure That Taxpayers Understand Their Rights
  Require that IRS officials present a summary of taxpayer's rights in their initial interview process and offer to answer any reasonable questions about that process before proceeding with the interview.

• Help Taxpayers Get Good Legal Representation
  Authorize fees in pro bono cases, payable to the taxpayer's representative. This proposal would encourage specialists to take pro bono cases and thereby ensure that low-income taxpayers are able to obtain necessary assistance. In addition, the IRS would be forced to pay attorneys' fees for taxpayers who prevail on an issue that the IRS has already lost in three circuit courts of appeal.

IV. REFORM: CREATE A NEW "IRS BOARD OF TRUSTEES"

BACKGROUND

The Administration, Members of Congress, the National Commission on Restructuring the Internal Revenue Service (the Commission) and IRS experts have discussed ways to improve IRS oversight. Their shared goals are to make the agency more responsive to the public and better able to provide the American people the level of customer service and fairness that we all want from the IRS. In the course of this debate, there has been near universal agreement on the need for two important features to improve IRS performance:

• The need to provide private sector expertise and input to the Treasury Department in a manner tailored to the mission of the IRS.

• The need for enhanced Executive Branch oversight consistent with Constitutional principles.

While the Administration has been and remains strongly committed to strengthening Treasury's governmental oversight of the IRS, this proposal focuses on establishing a robust new mechanism for private sector input while preserving accountability to the American people and preventing conflicts of interest.

MEANINGFUL PRIVATE SECTOR INPUT

Building on its original proposal, the Administration intends to replace the proposed IRS Advisory Board with an IRS Board of Trustees. Like the proposed Advisory Board, the Trustees would provide private sector expertise to the Secretary of the Treasury in the areas identified by the Administration, the Commission, and the Kerrey-Portman legislation, including customer service, taxpayer rights, technology, business organization, performance measures, and tax administration.

To ensure that the Board of Trustees has a powerful voice, the Administration proposes that the Board of Trustees:

• Combine Private Sector Expertise With Public Sector Experience
  The Board of Trustees would be composed of five private sector members appointed by the President and confirmed by the Senate, including one representative of an organization that represents a substantial number of IRS employees, the Deputy Secretary of the Treasury, and the IRS Commissioner. Having these public officials on the Board of Trustees would provide in-depth knowledge of the agency.

• Have Enhanced, Statutorily Defined Responsibilities
  Defining the Trustees' authority by statute gives the Board clear responsibilities. The Trustees would have the responsibility to review and advise the Secretary of the Treasury on:

  • IRS long-term strategic plans;

  • IRS performance measures;

  • IRS customer service issues; and

  • IRS Citizen Advocacy Panel recommendations.

• Report independently and at least annually to the Secretary of the Treasury, the President, and the Congress.

• Receive Reports and Recommendations Directly From the Citizen Advocacy Panels
  In this manner, the new Citizen Advocacy Panels will be empowered to bring their concerns directly to the national level of IRS oversight, and the Trustees will have the benefit of receiving up-to-date information from outside the IRS on taxpayer issues around the country.

• Serve Staggered Five-Year Terms (rather than the proposed two-year terms of the Advisory Board)
  Longer terms will enable the Trustees to develop relationships with Administration and Congressional officials, and to become more knowledgeable about the IRS, the tax code, and tax administration, so that they can make stronger recommendations. The longer and staggered terms of the Trustees provide greater continuity in oversight that will span different Administrations.

The Trustees would have a small staff supplied by the Treasury Department, and would meet four to six times per year. The IRS and Treasury would provide the Trustees with information the Board needs to fulfill its responsibilities. Trustees could receive nominal compensation, and would be reimbursed for their expenses. The Trustees would be subject to all existing ethics laws, including laws on conflicts of interest.

PRESERVING ACCOUNTABILITY

To preserve accountability to the American people, the Secretary would retain current authority to administer and enforce the Internal Revenue Code, and the IRS Commissioner would continue to be appointed by the President, confirmed by the Senate, and report to the Secretary. To institutionalize and demonstrate the seriousness of the commitment to enhanced oversight, the Administration proposes legislation that requires the Secretary and the Deputy Secretary to testify on their stewardship of the IRS twice per year before an appropriate committee (or joint committee) of the House and the Senate.

In March 1996 the Administration created the Modernization Management Board composed of senior IRS and Treasury officials with responsibility for managing the IRS. The Commission report called the MMB a "commendable" management innovation. To institutionalize this heightened level of oversight, on June 24, 1997 the President signed an Executive order expanding the responsibilities of the MMB and renaming it the IRS Management Board. The President intends to streamline the IRS Management Board.