INCREASING SEIZURE STATISTICS

The Internal Revenue Code defines "levy" as "the power of distraint and seizure by any means." The IRS's extensive authority to levy is perhaps its most onerous enforcement tool. Use of the levy power has brought the IRS its most adverse publicity and virulent criticism. Neither the audit nor the criminal enforcement powers of the IRS outrage the citizenry as much as the levy power.

Thus far the words "levy" and "seizure" have been used interchangeably. In IRS parlance the words are usually used to differentiate between types of distraint action. The word "levy" is commonly used to refer to the attachment of monetary assets held by third parties, such as bank accounts and paychecks; the word "seizure" refers to the act of the IRS taking possession or appropriating the "right, title, and interest" of tangible personal property such as an automobile, house, furniture, machinery or equipment. For purposes of this discussion, we shall use the words "levy" and "seizure" in the same context as the IRS.

IRS statistics show an alarming increase in tax delinquencies and a corresponding increase in enforcement actions. In 1978 the Service disposed of 2 million delinquent accounts (TDAs) by filing 348,OOO Notices of Federal Tax Liens, serving 444,000 Notices of Levy to attach paychecks and bank accounts; and seizing 5,104 pieces of real and personal property. In 1981 the IRS disposed of 2.18 million delinquent accounts (a 9% increase since 1978) by filing 503,()00 tax liens, serving 740,000 Notices of Levy (a 66% increase), and seizing 8,848 pieces of real and personal property (a 73.3% increase).

The question that arises is-"Why have IRS enforcement statistics increased by over 60% on the average, but the number of disposed accounts not shown a comparable increase'?" Even if we look at the workload statistics, we don't find an answer. In 1978 the Collection Division began with a TDA inventory of 843,154 cases. In 1981 the Collection Division began with a TDA inventory of 1.204 million cases (a 42.7% increase from 1978's beginning inventory). There were 2.4 million TDAs issued during the year (a 17.3% increase over 1978) and an ending inventory of 1.436 million cases (a 19% increase from the beginning inventory, but a 62% increase over 1978's ending inventory).

These statistics reflect a burgeoning workload, without a comparable increase in results.

The next step is to look at personnel figures to see if the increase in enforcement statistics is related to an increase in enforcement officers. Revenue of officers are the only ones who can make seizures, but liens and levies can be made by other collection employees. In 1978 there were 5,924revenueofficersonstaffnationwide. In 1981 that number cropped to 5,312 (10% decrease). In 1981 there were 6,076 other Collection Division employees, a 35% increase from 1978.

This 35% increase would appear to explain the increase in enforcement statistics. However, an examination of IRS's 1981 budges request reveals that 823 of the 1,588 new positions were related to the establishment of a collection branch in the service center. This was a program the IRS initiated to increase more personal contact with delinquent taxpayers and hopefully stem the tide of increasing delinquent accounts, but it had no enforcement authority. The budget for 1981 revealed an actual increase of 465 average positions for collecting unpaid accounts (the remainder of the increase was for other administrative and program purposes). This clearly shows that a larger staff is not responsible for the increase in enforcement statistics.

The only other possibility is a change in attitude among Collection Division management and field personnel. In 1977 when the G.M. Leasing decision was issued by the Supreme Court, the number of seizures dropped precipitously from an average of 18,OOO a year to under 6,000. (Even though the 18,000 seems high in comparison, the figure reported was not really indicative of the true number of seizures. Revenue officers sometimes reported each item seized as a separate count for the sole purpose of enhancing their individual statistical profile). Commissioner Donald C. Alexander told Congress that the drop was due to a new attitude on the part of the IRS to encourage compliance by "education" rather than enforcement. While this was far from the truth, it earned the IRS some brownie points on Capitol Hill.

In early 1979 the Collection Division director became concerned because the number of seizures and levies had dropped after the G.M. Leasing case. He was worried that field personnel had changed their attitudes and were not adapting to the new procedures requiring Writs of Entry in certain cases. Therefore, a memo was issued to the field "reminding" employees of their enforcement authority. As everyone who understands the bureaucracy knows, when the headquarters office says "jump," the subordinates are supposed to say "how high?"

As expected, enforcement statistics started increasing because field managers were feeling the pressure to produce. The national office compiled statistics of closures and enforcement and sent them back to the field showing "ranking order." The hidden message was clear: no one wanted to be ranked last. Some field managers interpreted this as pressure to produce more statistics, and ultimately more seizures.

THE LEVIN HEARINGS

In July 1980 the Senate Subcommittee on Oversight of Government Management of the Committee on Governmental Affairs held hearings on IRS collection policy and its impact on small businesses. Chaired by Senator Carl Levin of Michigan, the hearings have become known as the "Levin hearings." A good deal of information about IRS seizure practices came out of these hearings. Several revenue officers broke ranks and testified that IRS field policies encouraged seizures for the purpose of building statistics. Those revenue officers laid their careers on the line, hoping that the result would be a major reform of the Collection Division. The result was supposedly "in-house IRS changes in policy." The meager legislation that emerged from the Governmental Affairs Committee as a result of the hearings was a slap in the face to the witnesses and revenue officers who came forward to testify.

But the hearings were valuable because they provided a look at the operations of the national office of the Collection Division and several districts. For example, on May I, 1980, the national office chief of the Evaluation and Research Branch issued a memo to the director of the Collection Division titled "Seizures, Levies and other Investigations, First Quarter FY 1980." The memo presented a statistical analysis (developed by computing the ratio of enforcement activity per 100 TDA dispositions) showing that "regional fluctuation in the seizure ratio for first quarter fiscal 1980 is considerable," and "district fluctuation in the seizure ratio for first quarter fiscal 1980 is extreme." The memo then states:

    Seizure activity does not occur at a consistent level in the
    districts as should be the case given a goal of an even handed
    policy toward enforcement. That three large districts, Brooklyn,
    Cleveland, and San Francisco, could have seizures at a rate 50%
    below the national average indicates reasons for concern with
    enforcement policy in actual application. This is especially
    true, as it does not appear that factors such as inventories,
    compliance levels and so forth are responsible for
    inconsistencies.

The memo then constructed a levy ratio (the number of levies per 100 TDA dispositions) and a lien ratio (the number of liens per 100 TDA dispositions.) The memo made a point to list those districts that had enforcement ratios less than 50% of the national average. No mention was made of districts that had more than 50% of the national average, but the memo recommended an "even-handed approach to enforcement activity" with efforts to "try to even out the fluctuation in seizure and levy ratios."

Even though the memo further stated that "seizure and levy activity has not been proven to increase productivity," the director of the Collection Division made a special point of sending the memo to the Assistant Regional Commissioner (Collection) of the North Atlantic region. Why would the North Atlantic region be singled out for a specially directed copy of this memo? It was because the North Atlantic region had the second lowest seizure ratio (.23, with Western having only .21) and contained three of the 11 districts nationwide with the lowest seizure averages. Also, the North Atlantic region had the second lowest levy ratio (26, with Western having only 25) and had two out of six districts with the lowest ratio in the country.

Another memo dated May 28, 1980 from the national office chief discussed "Variations in Levies and Seizures Among District Offices." This memo confirmed that there was indeed a "wide range of variation in the use of enforcement actions by individual districts" and "the variation does not appear to be random." An analysis of seizure statistics over a 4 1/2 year period (FY 1976 through first half of FY 1980) revealed that "patterns of high frequency or low frequency tend to be constant in specific districts over a number of years." Furthermore, the study showed that "there appears to be no correlation with the size of districts, the over age inventory levels (cases over a year old), productivity norms, or any other presently qualified factor regarding TDA activity." The only correlation factor the study came up with was that a district with a high enforcement rate for levies also had a high enforcement rate for seizures.

The 10 districts showing the highest levy and seizure rates are listed here. Column A lists the districts having the highest levy frequency rate; and Column B, the highest seizure frequency rate. The national average of levy frequency is 24 for the period FY 1976 through FY 1979. The national average of seizure frequency is .27 for the period FY 1977 through FY 1979 (pre-1977 data was not compared due to a change in seizure policy following the GM Leasing case).

A (Levy Rate per 100 TDAs)      B (Seizure Rate per 100 TDAs)

    Anchorage -   52                Reno -        .68
    Burlington -  43                Omaha -       .67
    St. Paul -    36                Greensboro -  .64
    Richmond-     35                Richmond -    .49
    Albany -      34                Springfield - .42
    Cleveland-    34                St. Paul -    .41
    Reno -        33                Denver-       .41
    Brooklyn -    32                Phoenix -     .40
    Phoenix -     31                Dallas -      .40
    Springfield - 29                Aberdeen -    .40

The memo of May 28 contained further observations: "We rely heavily upon the independent judgment of the revenue of officer Of course, these judgments are not made in an influence-free environment. Collection management can influence and monitor the revenue officer decisions." However, "objective criteria for evaluating management influence factors do not exist." One of the three recommendations made for minimizing "inconsistent application of IRS enforcement policy" was to require revenue officers "to document reasons for not undertaking enforcement actions in specific cases." Nothing was said about the districts with the highest enforcement ratios. The message is clear: inconsistent enforcement levels are troublesome to the national of office only when there are low rates of enforcement activity; high rates of levy and seizure action are of no concern.

MANAGEMENT PRESSURE TO MAKE SEIZURES

The Levin hearings focused on district management pressure to close cases and produce seizure statistics. Even though the IRS attempted to characterize this pressure as an aberrant problem of a few overzealous managers who were disregarding the IRM, the evidence was overwhelming that the national office had lost control of what was happening in the field. While the Commissioner testifies to Congress about how well IRS policy and procedure protects taxpayers' rights, the managers in the field are quietly subverting national office policy by requiring their revenue of officers to follow their policy, their philosophy of collection and their whims and moods.

As explained earlier, it is the exercise of the seizure authority that usually results in most abuses of taxpayers' rights. The national office staff, responsible for designing programs and developing policy, is far removed from the field where their programs and policies are carried out. In districts where the collection division management has not changed in many years, it is that management's philosophy that tends to supersede national office directives.

The relationship between the national office and the field is "cordial and cool" at best. More often than not, the managers in the field view the staff at the national of office as "ivory tower" pen-pushers with no perception of the real world. The staff in the national office view the field as a place to avoid at the working troop level, but an advantageous place to be at the managerial level. High-ranking executives in the national office often go back to the field as division directors, district directors, or regional officials after a stint in Washington. The perfect scenario is to become a high-ranking field of official in the state where you want to retire.

The staff in the national office Collection Division, who are called "program analysts," are ax-revenue officers. Many are at the GS- 13 level without managerial experience. This lack of managerial experience complicates return to the field as a GS-14 branch chief and few GS-13 group manager slots exist nationwide. The field views program analysts as somewhat "tainted" and hesitates to accept them, thus restricting their upward mobility. However, most program analysts hope to ultimately return to the field. Therefore, they are very reluctant to critically review the field implementation of national office policy for blatant violations. Program analysts use field trips more for studying the mechanics of how things operate, than for determining how well field revenue officers perform their job, whether they are performing according to national office standards, whether the IRM is being followed, and whether taxpayer abuses or harassment occur with any frequency.

Clearly, the national office does not really know what is going on in the field, does not really care, and is too afraid to find out. Their probable answer to this allegation is that they don't have the time and money to investigate field activities and that regional officials are responsible for that function. During four years as a field employee, I had practically no contact with any regional officials. Once a year a regional analyst came to the local office and reviewed cases, but this review was mainly for determining how well regional standards were being followed and mostly involved reading TDA history sheets. Anything not recorded in the TDA history sheet, whether to the revenue officer's credit or his detriment, would be missed. Conversations between a group manager and his employees are not usually recorded in the history sheet, so verbal pressures are not likely to be discovered. And regional analysts never take the time to interview individual revenue officers about problems of the job.

One revenue officer was ordered by his group manager to make a seizure on a case, but resisted. During a visit by the field branch chief, he was ordered again to make a seizure on the case. The revenue officer protested that there was no equity in the property to be seized, but was still instructed to carry out his manager's orders. He then wrote in his history sheet that he was ordered to make a "no-equity" seizure by the branch chief and group manager. Later he was reprimanded by his group manager for making that notation. The management clearly indicated that they refused to accept any blame for violating a national office policy.

It is firm conviction that supervisory pressure is responsible for the vast majority of violations of policy and taxpayers' rights. There are only a few revenue officers who, of their own volition, would wreak havoc on the system. The rest are truly concerned that the laws are administered with full regard for the tax laws and for taxpayers' rights. But revenue officers are like others in our society who need their jobs and "bend the rules" when it is a matter of their own survival. The tax collection job is the most difficult one in the IRS and probably one of the most difficult in the government. Yet there is no sense of camaraderie among revenue officers. Friction always exists between employees and management, the work is increasingly fatiguing and demanding, and very few rewards are offered, either monetary or psychological.

Most revenue officers gradually become cynical, suspicious, and bitter. Because their own managers treat them with disrespect, and make their jobs more difficult than necessary, revenue officers are prone to treat their taxpayers in the same manner. A potentially explosive situation results, not only for the taxpayers who are affected. but also for the "voluntary compliance" system.