Good morning ladies and gentlemen. I welcome you to our hearing to explore the development of a Taxpayer Bill of Rights II during the 104th Congress.

The Subcommittee's primary focus today will be to examine measures to better protect the rights of taxpayers in their dealings with the Internal Revenue Service. However, before turning to the discussion of improved taxpayer rights, I want to talk for a moment about the enormous responsibilities that are placed upon the IRS under our current tax system.

The primary mission of the IRS is enforcing our nation's tax laws and collecting the taxes that are legally owed. This is a very important responsibility because the functioning of the federal government depends on the American public's willingness to pay the taxes they owe. However, it is also a very difficult responsibility because it necessarily interjects the IRS into our private lives.

In carrying out its mission, the IRS faces three major challenges. First is the massive job of processing the over $1 trillion in taxes paid each year by the taxpayers. Second is collecting the over $150 billion in unpaid taxes which are currently outstanding. Third, is how to accomplish the first two jobs with outmoded and inefficient computer systems which date back to the 1960s.

These challenges are extraordinarily difficult and I certainly don't envy the IRS Commissioner's job. Based on my experience, I firmly believe that most of the IRS's 114,000 employees carry out their responsibilities in a professional and helpful manner. Unfortunately, those of us who serve on the Oversight Subcommittee hear far too often of cases where the IRS has acted in a heavy-handed or unfair manner in its dealings with the taxpayers.

That is why we are here today -- to examine changes to our tax laws which will help ensure that honest, hard-working Americans are treated fairly by the IRS.

The original Taxpayer Bill of Rights was enacted in 1988. It sought to level the playing field between taxpayers and the IRS by creating over a dozen procedural safeguards for taxpayers. For example, it gave those in financial hardship the statutory right to pursue installment payment plans with the IRS. It also gave taxpayers who prevail over the IRS the right to have the IRS reimburse their attorneys' fees in some circumstances.

The 1988 Taxpayer Bill of Rights was a good first step, but it soon became apparent that more needed to be done. In 1991, the Subcommittee on Oversight held two public hearings in order to examine additional taxpayer safeguards. Those hearings led to the development of H.R. 3838. In 1992, a modified version of H.R. 3838 passed Congress as part of H.R. 11, a bill that was vetoed by President Bush for reasons unrelated to the Taxpayer Bill of Rights II provisions.

It is now time for this Subcommittee to return to its investigation of measures that are needed to assist taxpayers in their dealings with the IRS. Naturally, the first place to look for ideas is to the bill developed in the 102nd Congress. There are plenty of good provisions in H.R. 3838 and H.R. 11 for us to review. In addition, several bills have been introduced in the 104th Congress which offer new proposals for helping taxpayers.

While we can build on the work that took place in 1992, our Subcommittee should be open to new ways to help taxpayers. I commend the work that occurred in 1992, but I do not feel limited by it. New problems have been brought to our attention. For example, what rights do taxpayers need to protect themselves from inaccurate information collected by the IRS from third party data in the course of an "economic reality" audit? What rights should taxpayers have if the IRS computers make a mistake and accidentally release confidential tax return data to the public?

The need for new taxpayer protections may be even more acute than is was in 1992. For example, the IRS is increasing its audits of taxpayers and increasing its overall compliance and collection program. This effort may bring in extra revenue to help reduce the deficit, but it is also likely to increase the level of friction between taxpayers and the IRS.

The nation's taxpayers probably won't ever enjoy paying their taxes, but they shouldn't feel powerless and defenseless in dealing with the IRS. The IRS headquarters personnel always seem to be the most reasonable persons on the face of the earth. They always show great common sense. Unfortunately, not all the IRS agents in the field possess these noble qualities.

When the average taxpayer goes up against the IRS, it's often like a contest between David and Goliath. Taxpayers have a duty to pay the taxes they legally owe, but they shouldn't be put at a disadvantage by procedural rules and IRS policies which make the David and Goliath contest any more one-sided than it already is.

I welcome all our witnesses today and thank them for their willingness to testify before our Subcommittee.