I am John C. Lynch, Legislative Counsel of Citizen's Choice, a national grassroots taxpayers' organization founded in 1976.

I am pleased to have this opportunity to testify before the Committee on S. 2400. Citizen's Choice is well qualified to present testimony on this subject having made a year and half long investigation into the taxpayers/IRS relationship through the National Commission on Taxes and the IRS. The Commission determined that if the relationship between the Internal Revenue Service and the taxpayer were improved, a higher rate of tax compliance would be achieved. The Commission's recommendations to Congress and the IRS were premised on reducing the adversarial relationship and returning volunteerism to our tax system; while recognizing the extremely difficult job the IRS has in administering our complicated tax code and calling on Congress to be sympathetic to IRS budget requests.

These are worthy goals, though difficult to achieve. Paying taxes has never been a favorite pastime and accordingly, the individuals or organization responsible for collecting taxes will never win a popularity contest. On the other less publicized side is the individual who fails to pay his taxes. If his failure is a knowing violation of the tax laws, then he is perhaps even more responsible for the adversarial relationship than the over-zealous IRS official.

Tax protestors are not to be tolerated. Each of us is fortunate to be a citizen of the United States. With that citizenship we assume certain responsibilities, one of which is paying taxes. Though we may not like to, we have no right whatsoever to refuse to fulfill this obligation. As a matter of fact, refusing to pay taxes is one of the most unpatriotic acts a citizen can perform. The detrimental effects are many.

First, the individuals who fail to pay their taxes keep the rates higher for those of us that do. Second, their refusal to pay aggravates the taxpayers/IRS relationship which results in a more strident collection attitude on the part of the Internal Revenue Service and ultimately a higher incidence of taxpayer abuse. Third, and most important, tax protestors make our job of protecting those people that do pay taxes more difficult by fostering the "us-against-them" attitude that currently prevails.

Citizen's Choice members pay their taxes. Citizen's Choice members also recognize that there are legislative improvements to be made in the taxpayer/IRS relationship. Our goal in this area is to make sure that the rights of the taxpayer are protected and that the treatment given the taxpayer is uniformly consistent.

It is this desire for uniformity that forms the backbone of the subject legislation. We have found that most of the problems between the taxpayer and the IRS do not stem from official IRS policy as contained in the Internal Revenue Manual. The manual establishes the guidelines to be followed in the audit and collection processes. Rather, most taxpayer/IRS problems develop from the discretionary application of this policy.

For example, it is an established IRS policy to allow first time tax delinquents to enter into an installment agreement. This gives the taxpayer up to a year to pay his back taxes. Unfortunately, there are circumstances where a first time delinquent is not permitted this opportunity. This happens for a variety of reasons not the least of which is the "seizure mentality" of some revenue officers in the field. A seizure mentality develops when a revenue officer's advancement is contingent on the number of seizures he makes or the amount of back taxes that he collects. Therefore, entering into an installment agreement can work at cross purposes to an individual's advancement within the IRS.

The subject legislation would codify some of what is already official IRS policy. By doing so, the legislation would help ensure that the treatment of the taxpayer by IRS agents in the field is uniformly consistent. Citizen's Choice, however, is not in a position where it can give a blanket endorsement to this legislation. In particular, Citizen's Choice makes the following suggestions:

1. Property and Wages Exempt from Levy - The dollar amounts suggested in the legislation have been chosen arbitrarily. Citizen's Choice would prefer if the specific amounts reflect a 1984 valuation of the amounts originally set forth in the Internal Revenue Code of 1954.

2. Awarding of Court Cost and Certain Fees - Citizen's Choice believes that the legislation as it presently reads is unclear because it would require the IRS to substantially justify its position in each lawsuit it loses. This would be unnecessarily burdensome and may protract the litigation resulting in even higher attorney fees for the taxpayer. We suggest that the question of court costs and certain fees only be addressed if requested by the taxpayer.

3. Payment of Tax Liability in Installments - Citizen's Choice believes that installment contracts should be binding regardless of any change in the taxpayer's financial condition. The purpose of installment agreements is to ensure that the government receives the money it is due while the taxpayer remains solvent. Because the term of an installment agreement does not usually exceed one year, it is unlikely that many of the administrative hearings called for by the legislation would be completed within the term of the agreement itself. Therefore, the hearing procedure would be unnecessarily burdensome to the IRS and may result in added expenses for the taxpayer who chooses to contest the government's assertion that his financial condition has changed.

4. The Establishment of an Office of Ombudsman - Citizen's Choice recommends that the authority given the Taxpayer Ombudsman as set forth in the legislation remain as it is; but that the office be established outside the IRS to ensure maximum objectivity.

While Citizen's Choice seeks protection for the honest taxpayer, we are, as stated, sympathetic to the needs of the IRS. The National Commission on Taxes and the IRS recommended that Congress be responsive to IRS budget requests. Statistics indicate that for every dollar spent on the IRS there is a return of up to $5.00 in increased revenues. In an era where there is an annual revenue short-fall of nearly $100 billion, it makes perfect sense to provide the IRS as much help as possible in performing its very difficult job.

But while we recommend additional assistance to the IRS, Citizen's Choice will remain dedicated to protecting the honest taxpayer. The vast majority of Americans meet their tax obligations. They should not suffer at the hands of the IRS because of the actions of a radical and dishonest few.

On behalf of the members and staff of Citizen's Choice, I offer to this Committee and to any of its members in particular, our assistance in any way you might find helpful towards reaching our common goal of a more effective tax administration system. We look forward to working with you to this end.