January 03,2000

Roth Statement on GAO Report: IRS Seizures

WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) today released the following statement on the General Accounting Office's report on IRS seizures. The report was requested by the Finance Committee as part of the Committee's oversight of the implementation of the Internal Revenue Reform and Restructuring Act of 1998.

"It has been over a year since Congress, with near unanimous support, passed the Internal Revenue Reform and Restructuring Act of 1998. Oversight hearings conducted by the Senate Finance Committee, which included testimony from taxpayers, agency employees, and practitioners, as well as reports from the General Accounting Office and the IRS itself, demonstrated that change was needed within the powerful agency that for too many years had largely gone unmonitored by Capitol Hill.

"Witnesses and documentary evidence showed how agency employees were pushed through the use of goals, quotas, and statistics to conduct and even inflate audits and to execute liens, levies, and seizures against taxpayers in collection processes that many times were carried out incorrectly and without adequate oversight.

"The hearings made it clear that a reform effort was needed -- one that balanced the responsibility of the IRS to collect and protect the federal revenue with the rights of taxpayers and agency employees to be free from heavy-handed and abusive practices that had become all too familiar.

"The IRS Reform and Restructuring Act opened a new era. Important changes would be made within the agency. A new Commissioner, Charles O. Rossotti, was appointed, promising that the law would be implemented as Congress intended. The IRS would still have the authority and tools necessary to perform its duties, but taxpayers would have common-sense protections like due process in the collections process, and be free from being targets of an agency driven by goals, quotas, and statistics.

"Commissioner Rossotti and I both warned that real change within the agency would not be immediate. Almost half a century of institutionalized behavior was being modified, and Congressional efforts -- as well as Commissioner Rossotti's best managerial directives -- would be met by resistance in certain quarters. But as Chairman of the Senate Finance Committee, I promised to continue Congressional oversight to assure that the new law was carried out as Congress intended.

"The GAO report being released today is an important step in that oversight effort. It shows where we are in the reform effort, demonstrating that while important changes seem to be taking effect, much remains to be done. For example, the GAO concludes that the IRS's use of seizure authority continues to produce mixed results in terms of targeting the most noncompliant taxpayers, is questionable in some cases, and is difficult to appropriately monitor because of woefully inadequate documentation.

"Among other things, the GAO concludes that while seizures are generally targeted to more noncompliant taxpayers, they are not conducted on a uniform basis. For example, taxpayers in Boston are 17 times more likely to have their property seized by the IRS than taxpayers in San Jose. For business taxpayers, the GAO found that the likelihood of seizure may be 14 times greater in one district than in another.

"The report also confirms pre-Restructuring Act examples of disproportionate seizures, the IRS's unwillingness to work with taxpayers, superficial investigation work, little advance warning provided to taxpayers, seizure of everything owned by the taxpayer, IRS sale of assets with uncertain value, and assets that are questionably sold by the officers who seize them.

"The taxpayer protections established by the Restructuring Act and the GAO's recommendations should help remedy these concerns, just as they should also help remedy weaknesses that the GAO found in a number of instances where the IRS did not follow basic notification requirements or the revenue officer's files did not document adherence to basic taxpayer protection requirements.

"Once assets were seized, the GAO found many weaknesses in how the IRS controlled the assets. The process did not provide IRS management with adequate information to oversee the process. In addition, there was little assurance that seized assets were marketed and sold for the maximum price possible. GAO found that a little more than half (51%) of the sales of seized assets were not competitive because there was only one bidder, and only 42% of sales were for more than the minimum bid price. The report includes egregious examples of seized property being sold for ridiculous prices with little benefit to the IRS or to the taxpayer.

"While the GAO report confirms many of the weaknesses documented during Congressional hearings and demonstrates how some persist despite the new law, I remain optimistic that positive change is taking hold within the agency. Commissioner Rossotti suggested that reform would take the better part of ten years.

"The report notes that the IRS seizure program is 'in a period of transition while it adapts to Restructuring Act requirements for providing greater taxpayer protections.' I anticipate, as the GAO suggests, that a rebound seems consistent with its analysis. Our reform efforts will continue to take root."