Mr. Chairman, thank you for this opportunity to testify. I am here today to voice my support for S. 2400, a taxpayer's rights bill that you introduced (and I co-sponsored), and to urge the other members of the Subcommittee to support this piece of legislation. The need to safeguard the rights of taxpayers is very important and this legislation meets that need.

On July 13, 1980, I chaired a hearing held by the Governmental Affairs Subcommittee on Oversight of Government Management, of which I am currently the Ranking Minority Member, to investigate the collection practices of the IRS and their impact on small businesses. The investigation was initiated in response to complaints from small business owners and IRS officers regarding the IRS's arbitrary and capricious use of lien, levy and seizure authority to collect delinquent taxes. During the hearing, the Subcommittee found that liens were being issued against taxpayer's bank accounts and receivables, even where the revenue officers had agreed to an installment pay plan which the taxpayer had not violated. These practices are particularly egregious to small business taxpayers who need to have their assets unencumbered, and who rely on the representations of the IRS and then suddenly find themselves faced with a seizure or levy which eliminates their cash reserves and irrevocably damages their credit-worthiness. These individuals are not crooks; they are not out to defraud the government or avoid paying less than their rightful share of taxes. These individuals admit their liability and agree to pay it off. The only question is how and when it will be paid. For the small business man or woman, the installment pay plan often provides the only viable means by which they can pay-off their tax liability and still continue to operate their business, which is not only of mutual benefit to the delinquent taxpayer and the IRS, but to taxpayers in general who must ultimately bare the cost of uncollected taxes.

Evidence of the IRS's abuse of its enforcement authority was clearly demonstrated in cases uncovered by the Subcommittee during its investigations - such as the case of Mr. Maurice Bishop, a Michigan businessman. Mr. Bishop's business suffered an embezzlement and accrued a $40,000 tax indebtedness before the embezzlement was discovered. The IRS placed a lien on virtually everything that Mr. Bishop owned except his personal residence. The total value of the property attached amounted to approximately $400,000 for a $40,000 indebtedness, or ten times the indebtedness. And even when half of the delinquency was paid in cash the IRS refused to discharge any of Mr. Bishop's property from the liens. Another example was that of the case of Mr. Richard Dyke, a Maine businessman and small business consultant. As a result of an embezzlement, Mr. Dyke's company incurred a $20,000 tax arrearage. When the problem was discovered, Mr. Dyke promptly informed the IRS and made arrangements for repaying the delinquency. It was orally agreed to with a IRS revenue officer that the company would pay $2,000 monthly on the delinquency. This arrangement went from November 1979 until June 1980. All payments were made faithfully. But then without warning the IRS went into the company's bank and seized the balance of $9,000 due on the account. The first notice that Mr. Dyke received of this action was when his manager received a slip from the bank indicating that the account had been charged $9,000. This action nearly caused the business to lose many of its business relationships, contracts and confidences it had developed with its vendors.

At the time of the hearing the evidence also indicated that the IRS had a penchant for seizure and enforcement statistics, and sometimes pressured its officers to seize taxpayer property, in contradiction to their training and good sense, with little or no attention to considerations of the amount of money collected, the extenuating circumstances of the taxpayer, or stated IRS policy.

As a result of this hearing, I introduced a bill, S. 1032, in an effort to alleviate some of the problems that we had discovered. S. 1032 was referred to the Finance Committee and parts of the bill were subsequently incorporated in TEFRA, the "Tax Equity Fiscal Responsibility Act of 1982." However, two of the provisions of S. 1032 were not incorporated into TEFRA, namely the "Installment Pay Plan" provision and the "Civil Action by Taxpayers" provision. These two provisions are very important and I believe that they need to be enacted into law. For this reason I was going to introduce these two provisions in the form of my own bill later this year. However, in drafting your legislation Mr. Chairmen, you saw fit to include these provisions, and thus I feel no need to introduce a separate bill, but rather have placed my support behind S. 2400.

The two provisions that I have spoken about, would prohibit the IRS from precipitously reneging on their installment agreements and levying or seizing taxpayer property, as long as, the taxpayer does not violate the terms of the agreement, and provide the taxpayer with an avenue for judicial recourse when the IRS violates its agreements with the taxpayer or violates or abuses its own collection procedures.

The forcible collection authority of lien, levy and seizure conferred on the IRS are extremely powerful. They play an important role in the IRS collection ability and are necessary to ensure that taxpayers will not ignore the Federal tax system. However, these powers must not be abused or applied arbitrarily, the taxpayer should be able to take the IRS and their government at its word.

S. 2400, and in particular the "Installment Pay Plan" and "Civil Action by Taxpayers" provisions, will in no way reduce the IRS's ability to properly pursue their collection procedure program, but protects taxpayers from the arbitrary administration of those programs and procedures and irregular collection methods.