II. Explanation of the Bill
(Secs. 1201-1205 of the bill and new chapter 95 of Title 5, U.S.C.)
The IRS is subject to the personnel rules and procedures set forth in title
5, United States Code. Under these rules, IRS employees generally are
classified under the General Schedule or the Senior Executive Service.
Reasons for Change
The Committee believes that as part of restructuring the IRS, the
Commissioner should have the ability to bring in experts and the
flexibility to revitalize the current IRS workforce. The current hiring
practices often inhibit the ability of the Commissioner to change the IRS'
institutional culture. Commissioner Rossotti has indicated that in order to
maximize efforts to transform the IRS into an efficient, modern and
responsive agency, the ability to recruit and retain a top-notch leadership
and technical team is critical.
The Committee believes the IRS needs the flexibility to recruit employees
from the private sector, to redesign its salary and incentive structures to
reward employees who meet their objectives, and to hold non-performers
accountable. Personnel and pay flexibilities are necessary prerequisites
for larger fundamental changes in the IRS.
The Committee wants to support the Commissioner's initiatives to
reposition the current IRS workforce as part of implementing a new
organization designed around the needs of taxpayers.
Explanation of Provision
The bill amends title 5 of the United States Code to provide certain
personnel flexibilities to the IRS. In general, the bill provides that the IRS
exercise the personnel flexibilities consistently with existing rules
relating to merit system principles, prohibited personnel practices, and
preference eligibles. In those cases where the exercise of personnel
flexibilities would affect members of the employees' union, such
employees' will not be subject to the exercise of any flexibility unless
there is a written agreement between the IRS and the employees' union.
Negotiation impasses between the IRS and the employees' union may be
appealed to the Federal Services Impasse Panel.
Senior management and technical positions
Streamlined critical pay authority
The bill provides a streamlined process for the Secretary of the Treasury,
or his delegate, to fix the compensation of, and appoint up to 40
individuals to, designated critical technical and professional positions,
provided that: (1) the positions require expertise of an extremely high
level in a technical, administrative or professional field and are critical
to the IRS; (2) exercise of the authority is necessary to recruit or retain
an individual exceptionally well qualified for the position; (3) designation
of such positions is approved by the Secretary; (4) the terms of such
appointments are limited to no more than four years; (5) appointees to
such positions are not IRS employees immediately prior to such
appointment; and (6) the total annual compensation for any position
(including performance bonuses) does not exceed the rate of pay of the
Vice President (currently $175,400).
These appointments are not subject to the otherwise applicable
requirements under title 5. All such appointments will be excluded from
the collective bargaining unit and the appointments will not be subject to
approval of the Office of Management and Budget ("OMB") or the Office of
Personnel Management ("OPM").
The streamlined authority will be limited to a period of 10 years.
Critical pay authority
The bill provides OMB with authority to set the pay for certain critical pay
positions requested by the Secretary under section 5377 of title 5 of the
United States Code at levels higher than authorized under current law.
These critical pay positions would be critical, technical, administrative
and professional positions other than those designated under the
streamlined authority. Under the bill, OMB is authorized to approve
requests for critical position pay up to the rate of pay of the Vice
President (currently $175,400).
Recruitment, retention and relocation incentives
The bill authorizes the Secretary to vary from the existing provisions
governing recruitment, retention and relocation incentives. The authority
will be for a period of 10 years and will be subject to OPM approval.
Career-reserve Senior Executive Service ("SES") positions
The bill broadens the definition of a "career reserved position" in the SES
to include a limited emergency appointee or a limited term appointee who,
immediately upon entering the career-reserved position, was serving
under a career or a career-conditional appointment outside the SES or
whose limited emergency or limited term appointment is approved in
advance by OPM. The number of appointments to these SES positions will
be limited to up to 10 percent of the total number of SES positions
available to the IRS. These positions will be limited to a 3 year term, with
the option of extending the term for 2 more 3-year terms.
The bill provides the Secretary with the authority to provide performance
bonus awards to IRS senior executives of up to one-third of the
individual's annual compensation. The bonus award would be based on
meeting preset performance goals established by the IRS. An individual's
total annual compensation, including the bonus, can not exceed the rate of
pay of the Vice President. The authority will not be subject to OPM
It is anticipated that the bonuses will not be available to more than 25
IRS senior executives annually.
Performance management system
The bill permits the Secretary to establish a new performance
management system which will maintain individual accountability by: (1)
establishing one or more retention standards for each employee related to
the work of the employee and expressed in terms of performance; (2)
providing for periodic performance evaluations to determine whether
employees are meeting the applicable retention standard; and (3) taking
appropriate action, in accordance with applicable laws, with respect to
any employee whose performance does not meet established retention
The bill requires that the performance management system provide for: (1)
establishing goals or objectives for individual, group or organizational
performance and taxpayer service surveys; (2) communicating such goals
or objectives to employees; and (3) using such goals or objectives to make
performance distinctions among employees or groups of employees.
It is intended that in no event will performance measures be used which
rank employees or groups of employees based on enforcement results,
establish dollar goals for assessments or collections, or otherwise
undermine fair treatment of taxpayers.
The bill provides the Secretary the authority to establish an awards
program for IRS employees. The program will be designed to provide
incentives for and recognition of individual, group and organizational
achievements. The Secretary will have the authority to provide awards
between $10,000 and $25,000 without OPM approval.
These awards will be based on performance under the new performance
management system, and in no case will awards be made (or performance
measured) based on tax enforcement results.
Workforce classification and pay banding
The bill provides the Secretary with authority to establish one or more
broad band pay systems covering all or any portion of the IRS workforce,
subject to OPM criteria. At a minimum, the OPM criteria will have to: (1)
ensure that the pay band system maintain the concept of equal pay for
substantially equal work; (2) establish the minimum and maximum number
of grades that may be combined into pay bands; (3) establish requirements
for setting minimum and maximum rates of pay in a pay band; (4) establish
requirements for adjusting the pay of an employee within a pay band; (5)
establish requirements for setting the pay of a supervisory employee in a
pay band; and (6) establish requirements and methodologies for setting the
pay of an employee upon conversion to a broad-banded system, initial
appointment, change of position or type of appointment and movement
between a broad-banded system and another pay system.
The bill provides the IRS with flexibility in filling certain permanent
appointments with qualified temporary employees. A qualified temporary
employee is defined as a temporary employee of the IRS with at least two
years of continuous service, who has met all applicable retention
standards and who meets the minimum qualifications for the vacant
The bill authorizes the IRS to establish category rating systems for
evaluating job applicants, under which qualified candidates are divided
into two or more quality categories on the basis of relative degrees of
merit, rather than assigned individual numerical ratings. Managers will be
authorized to select any candidate from the highest quality category, and
will not be limited to the three highest ranked candidates. In
administering these category rating systems, the IRS generally will be
required to list preference eligibles ahead of other individuals within
each quality category. The appointing authority, however, could select any
candidate from the highest quality category, as long as existing
requirements relating to passing over preference eligibles are satisfied.
The bill authorizes the IRS to establish probation periods for IRS
employees of up to 3 years, when it is determined that a shorter period
will not be sufficient for an employee to demonstrate proficiency in a
Voluntary separation incentives
The bill provides authority to the IRS to use Voluntary Separation
Incentive Pay ("buyouts") through December 31, 2002. The use of voluntary
separation incentive is not intended to necessarily reduce the total
number of Full Time Equivalents ("FTE") positions in the IRS.
The bill provides the IRS with authority to conduct one or more
demonstration projects through a streamlined process. The authority will
enable the IRS to test new approaches to Human Resource Management. The
bill provides authority to the Secretary and OPM to waive the termination
of a demonstration project, thereby making it permanent. At least 90 days
prior to waiving the termination date OPM will be required to publish a
notice of such intent in the Federal Register and inform the appropriate
Committees (including the House Ways and Means Committee, the House
Government Reform and Oversight Committee, the Senate Finance
Committee and the Senate Governmental Affairs Committee) of both
Houses of Congress in writing.
The IRS is directed to develop employee performance measures that favor
taxpayer service and prohibit awarding merit pay or bonuses that are
based on enforcement quotas, goals, or statistics.
Violations for which IRS employees may be terminated
The bill requires the IRS to terminate an employee for certain proven
violations committed by the employee in connection with the performance
of official duties. The violations include: (1) failure to obtain the required
approval signatures on documents authorizing the seizure of a taxpayer's
home, personal belongings, or business assets; (2) providing a false
statement under oath material to a matter involving a taxpayer; (3)
falsifying or destroying documents to avoid uncovering mistakes made by
the employee with respect to a matter involving a taxpayer; (4) assault or
battery on a taxpayer or other IRS employee; (5) violation of the civil
rights of a taxpayer or other IRS employee; (6) violations of the Internal
Revenue Code, Treasury Regulations, or policies of the IRS (including the
Internal Revenue Manual) for the purpose of retaliating or harassing a
taxpayer or other IRS employee; and (7) willful misuse of section 6103 for
the purpose of concealing data from a Congressional inquiry.
The bill provides non-delegable authority to the Commissioner to
determine that mitigating factors exist, that, in the Commissioner's sole
discretion, mitigate against terminating the employee. The bill also
provides that the Commissioner, in his sole discretion, may establish a
procedure which will be used to determine whether an individual should be
referred for such a determination by the Commissioner. The Treasury IG is
required to track employee terminations and terminations that would have
occurred had the Commissioner not determined that there were mitigation
factors and include such information in the IG's annual report.
IRS employee training program
The bill requires the IRS to place a high priority on employee training and
to adequately fund employee training programs. The bill also requires the
IRS to provide to the Congressional tax writing committees a
comprehensive multi-year plan to: (1) ensure adequate customer service
training; (2) review the organizational design of customer service; (3)
implement a performance development system; and (4) provide, in fiscal
year 1999, sixteen to twenty-four hours of conflict management training
for collection employees.
The provision, other than the IRS employee training program provision, is
effective on the date of enactment. The provision relating to the IRS
employee training program is effective 90 days after the date of