Taxpayer Bill of Rights  

II. Explanation of the Bill

Title I. Executive Branch Governance & Management of the IRS
G. IRS Personnel Flexibilities

(Secs. 1201-1205 of the bill and new chapter 95 of Title 5, U.S.C.)

Present Law

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

In General

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.

Variable compensation

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 approval.

It is anticipated that the bonuses will not be available to more than 25 IRS senior executives annually.

General workforce

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 standards.

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.

Workforce staffing

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 position.

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 position.

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.

Demonstration projects

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.

Performance measures

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.

Effective Date

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 enactment.

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