TAX DIVISION OF THE

AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

 

PUBLIC HEARING OF

THE NATIONAL COMMISSION ON RESTRUCTURING THE INTERNAL REVENUE SERVICE

 

TESTIMONY OF MICHAEL E. MARES

CHAIR, TAX EXECUTIVE COMMITTEE

 

RECOMMENDATIONS

 

April 17, 1997

I. INTRODUCTION

 

Chairman Kerrey, Chairman Portman, and Commissioners: Thank you for inviting the American Institute of Certified Public Accountants ("AICPA") to testify before you today. The AICPA is the national, professional organization of certified public accountants comprised of 331,000 members. Our members advise clients on Federal, state, and international tax matters and prepare income and other tax returns for millions of Americans. They provide services to individuals, not-for-profit organizations, small and medium-size businesses, as well as America's largest businesses. It is from this base of experience that we offer our comments.

 

The Internal Revenue Service ("IRS"), despite numerous problems, is often regarded as a model to be emulated by the tax administration agencies of other countries. While we acknowledge the many strengths of the IRS, we also are aware of its shortcomings. We hope the work of this Commission will result in assisting the IRS to improve further its operations, which will help improve its image. A more effective IRS would be beneficial for both the American public and the IRS itself.

 

We have already testified before the Commission on complexity of the tax laws and on taxpayer rights issues. In addition, we will soon submit to the Commission specific tax law simplification proposals. The purpose of our testimony today is to look at the IRS restructuring project from a broader perspective and to present you with our thoughts on the major problems confronting the IRS and our recommendations for addressing them. We have intentionally kept this report brief, but would be happy to discuss in detail with you any of the points mentioned.

 

II. MAJOR PROBLEMS AND RECOMMENDED SOLUTIONS

 

In our opinion, four major problems confront the IRS: management structure and culture; quality control; tax system modernization; and tax law complexity.

 

A. MANAGEMENT STRUCTURE AND CULTURE

 

1. Need for Stability in Management Structure

 

The IRS is a highly complex organization with over 100,000 employees, an annual budget of over $7 billion, and responsibility for many diverse programs. Such a large and complex entity requires an established, stable management structure that can provide continuity and have the necessary management expertise.

 

Recommendation:

 

· Establish a Board of Directors.

An outside board of directors should be established to provide the IRS with broad-based management expertise and insight into the practices of the private sector. (Such use of private sector experts to complement agency executives has been used successfully by such agencies as the Federal Reserve Board and the Securities and Exchange Commission.)

The board should have responsibility for making nontechnical policy decisions regarding IRS operations and for providing direction, oversight, and support for the IRS management. The board's responsibilities should include providing input on long range strategic planning, approving the IRS strategic plan, monitoring organizational performance, and evaluating compensation and bonuses for the Commissioner and the top-level IRS managers.

 

The board should consist of eight to twelve members, nominated by the President and confirmed by the Senate. Board members should serve three-year staggered terms, subject to reappointment. A minimum of 25% of the board membership should be reserved for Treasury officials, such as the Secretary, Deputy Secretary, Chief Financial Officer and the Assistant Secretary for Tax Policy. Non-government members of the board should be compensated. The chairperson should be appointed by the President and confirmed by the Senate, for a three-year term.

 

We recognize that there may be constitutional issues that need to be analyzed before implementing our recommendation. If it is ultimately determined that such an arrangement cannot be implemented for constitutional reasons, we recommend that alternatives be considered that meet the constitutional criteria, yet provide some private sector oversight and input into management of the IRS.

 

2. Office of Commissioner

 

The current system, with no fixed term of office for the Commissioner and the possible appointment of a new Commissioner with each new Administration, does not provide the stability required for such a significant leadership position. Further, there are no established qualifications that a candidate must meet to be considered for appointment to the position.

 

Recommendations:

 

· Establish a Fixed Term and Competitive Compensation.

The Commissioner should continue to be a Presidential nominee, confirmed by the Senate, but should be appointed for a set term of five to seven years; thus, a Commissioner may serve under different Administrations. Competitive compensation must be paid, to attract qualified candidates for the appointment period envisioned.

 

· Evaluate Candidates Based on the Necessary Attributes for Commissioner.

Each candidate for Commissioner should be evaluated based on the following attributes, each of which is deemed essential for the Commissioner:

 

· Thorough understanding of the tax system and the impact of technical and administrative decisions of the IRS (a significant attribute);

· Recognized business leadership/management abilities; and

· Superior communication and interpersonal relationship skills.

 

Examples of desirable backgrounds for the Commissioner would be experience as: a CEO/CFO who dealt extensively with the impact of tax laws, rules and regulations; a tax director, tax attorney or CPA; a tax administrator at the Federal, state, or local level; an official in Treasury, or other Federal agency, or a member or staff of a Congressional committee dealing with oversight of the IRS. Also desirable would be business leadership and management experience in a large, complex organization and knowledge of trends and developments in organizational management.

 

3. Executive Leadership

 

The IRS has been a very closed organization, with its executive leadership consisting almost exclusively of IRS career employees. People with varied backgrounds and expertise need to be added to the executive leadership to provide the IRS with different insights and to help generate innovative approaches. Also steps need to be taken to encourage qualified IRS career executives to remain with the IRS so that their knowledge and expertise is not lost to the IRS.

 

Recommendations:

 

· Improve Training of IRS Executives.

IRS executives should be selected and trained so they possess or acquire the same attributes as those listed above for the Commissioner.

 

· Establish a Program for "Professional Appointees".

To facilitate broad approaches and thinking on issues, some positions now reserved for career civil service employees should be open for "professional appointees." Professional appointees would be selected based upon professional and managerial competence rather than political affiliation. They would be appointed by the Commissioner, with the approval of the board of directors.

 

Emphasis should be placed on using professional appointees in positions managing program execution rather than solely in policy-making positions. There should also be a limit on the number of such appointments. To prevent such appointees from dealing directly with specific cases, no such appointments outside the National Office should be for positions below the Regional Commissioner level.

· Restructure the Executive Committee.

The Executive Committee of the IRS, responsible for managing day-to-day operations, should consist of an equal number of IRS career executives and professional appointees.

 

· Provide Flexibility in Compensation.

There should be flexibility in compensation for IRS executive positions, to enable the IRS to attract outside professionals with the required experience and expertise and to retain career IRS employees in critical positions.

 

4. Accounting and Financial Records

 

Recommendation:

 

· Establish an Accounting and Financial Records Advisory Group.

The IRS board of directors should establish an advisory group of CPAs/CFOs (in effect, an audit committee) from the private sector. The group should act as an advisor to the IRS on the financial statement and accounting issues raised by the GAO in its financial statement audits, as well as serve as a resource to the GAO on the issues and corrective actions involved in the annual financial statement preparation and audit processes.

 

B. QUALITY CONTROL

 

The IRS will never be loved. It may be useful in enforcing compliance for the agency to be feared. However, it is detrimental both to the IRS and to the goal of revenue collection for the IRS to have the negative public image it currently has and to receive such poor performance ratings as it has in recent surveys.

 

1. Treatment of Taxpayers as Customers

 

When Lawrence Gibbs became IRS Commissioner, he instituted the policy that taxpayers should be treated as the "customers" of the IRS. This should be the continuing policy of the IRS. Unfortunately, the attitude of the IRS toward its "customers" has deteriorated in recent years.

 

Recommendations:

 

· Revise IRS Notices to Describe Clearly the Controversy and Amounts Owed.

Because years of failure mark the IRS's attempts to improve significantly taxpayer notices, the re-engineering of notices should be outsourced. As a means to clarify

matters, a statement of account, showing the issues in controversy, amounts assessed and payments made, should be routinely provided with each notice.

 

· Enable Taxpayers To Resolve Questions with a Single Telephone Call.

IRS notices frequently demand written correspondence from taxpayers; then IRS takes some sixty days to respond to such correspondence. A telephone call is more efficient and less expensive for both the taxpayer and the IRS in resolving certain disputes. In the private sector, financial institutions, credit card companies, and airlines, have all led taxpayers to expect to be able to resolve many problems over the phone. They expect their calls to be answered with a minimum time on hold. They also expect to speak with someone who has immediate access to their information and the authority to resolve their problems without further delays. Such service will require far greater computer capabilities than the IRS currently has, as well as controls over access to taxpayer information by telephone service representatives. These issues need to be addressed immediately so that such expected service can be provided to taxpayers.

 

· Simplify Taxpayer Representatives' Contacts with the IRS.

To serve taxpayers better, a third party should be allowed to discuss a notice and its related account with the IRS, based on the third party's submission of the Personal Identification Number (PIN) set forth on the notice sent to the taxpayer. The ability of a practitioner, relative, or neighbor quickly and easily to assist a taxpayer who does not understand, see well, hear well, etc. in handling his or her business affairs with the IRS, such as in a telephone reply or discussion, would reduce time, cost, and frustration. A system of interaction via telephone with the IRS is the future of "one-stop" service and efficiency in a modern-day tax system. Holding a two-way conversation with the IRS to discuss payments, penalties, errors, missing information, etc. must be distinguished from representing taxpayers before the IRS and entering into binding agreements on their behalf, for which there is a continuing need for a formal power of attorney.

 

· Seek Alternatives to Standard Techniques.

Develop alternatives that save time and/or expense for the IRS and taxpayers. One example could be allowing many taxpayers to handle their audits by mail, instead of requiring them to visit the IRS office. Another example might be allowing business entities to submit their financial statements, or some variation, for tax reporting purposes instead of requiring them to compress their information into a Form 1120 or 1065.

 

2. Professionalism and Image

 

The Forward to the IRS Rules of Conduct notes that public confidence in the Service "can be instilled and maintained only if every contact with the public reflects high ethical standards and [the] commitment to perform [the] work conscientiously, courteously, and effectively." The professionalism that is present in the executive ranks of the IRS must be passed down to employees at all levels.

 

Recommendations:

 

· Codify Professional Standards.

The IRS should codify and enforce its professional standards. Due to the interdisciplinary nature of professionalism, the IRS and professional tax organizations should form a working group to develop such standards of professionalism.

 

· Measure Job Performance Based on Professionalism.

The 1997 IRS Examination Program Letter rates job performance and productivity of tax auditors and revenue agents (except those in the coordinated examination program) based on only two factors -- cycle time for their audits and the additional tax, penalties and protection dollars they have recommended. Better performance measures must be devised to reward performance that furthers the missions of the IRS and of the Examination Division, rather than encourage overly aggressive and unjustified proposed adjustments.

 

· Engage in a Public Relations Campaign.

As a means of aiding compliance and reducing negative ratings, the IRS should communicate to the public that it works in the public interest carrying out the mandates of Congress.

 

3. Recruitment and Retention of the Best Employees for the IRS

 

Employment at the IRS has always been viewed as a professional career. In the past, the IRS successfully recruited entry level personnel who not only grew with the organization, but who today are leaders in the tax field either inside or outside the IRS. Ensuring the continuity of this succession of leaders will require improvements in recruitment, training, and compensation, as well as clarification of career paths for IRS employees. The IRS's strategic plan needs to focus on accomplishing these objectives.

 

Recommendations:

 

· Pay Competitive Salaries.

In many geographic locations, IRS salary levels are woefully uncompetitive. The IRS must be capable of paying competitive salaries in order to recruit and retain qualified employees.

· Provide Superior Training.

Superior training has been one of the attractions of a career with the IRS. Obviously, better trained IRS employees work more efficiently and taxpayers have a better experience dealing with properly trained IRS employees. Conversely, for taxpayers and tax professionals, dealing with ill-informed auditors often results in wasted time resolving needless issues and promotes negative attitudes toward the IRS.

 

· Set High Educational Standards.

High educational standards must be set for IRS employees. These standards should require both a quality accounting education as a prerequisite to hiring and dismissal of agents who cannot pass training.

 

· Reinstate Hiring CPAs in Office of IRS Chief Counsel

To provide a broader pool of qualified candidates from which to hire employees, the practice of hiring CPAs in the Office of IRS Chief Counsel should be reinstated.

 

4. Allocation of Limited IRS Resources

 

IRS resources, including manpower, training, and computer hardware and software, are limited. Capacity and marginal efficiency issues must be considered in utilizing available resources.

 

Recommendations:

 

· Promote Simplification and Stability in Tax Laws.

Changes in tax laws and the complexity of the tax laws strain IRS resources. The impact of new or complex tax laws must be considered when tax legislation is enacted. For the IRS, new legislation requires the development of training for IRS employees and educational programs for taxpayers, the reprogramming of computer software and the reallocation of audit resources, in addition to the revision or development of tax forms to reflect the new law. Congress, Treasury and the IRS should actively and collectively strive for simplification and stability.

 

· Develop New Approaches to Audit Research.

If the use of TCMP audits is not to be resumed, new approaches to audit research need to be developed.

 

· Be Very Cautious About Outsourcing or Privatizing IRS Functions.

Privatization should be considered, but only where customer service can be improved without impairing professionalism or taxpayer privacy. Examples of functions where outsourcing might be considered are providing general tax advice and training. In contrast, because of potential infringement of taxpayer privacy and taxpayer rights, great caution needs to be exercised in considering outsourcing collection activities.

 

C. TAX SYSTEM MODERNIZATION

 

1. Use of Outside Contractors

 

The IRS, taxpayers and Congress agree the IRS must replace its obsolete computer system with state of the art equipment; however, the IRS has been hesitant to use outside contractors and Congress has not provided necessary budget flexibility to assist with modernization in such a rapidly changing field. Organizations such as banks and other financial service businesses have put state of the art technology to work, utilizing outside consultants to achieve their desired goals, and can now process on a same-day basis large numbers of transactions virtually error-free. The IRS should follow their examples. One instance where the IRS did so, which at this point appears to be successful, is the implementation of the new EFTPS system. Congress and the IRS outlined the goals and private banks effectively implemented the program.

 

Recommendation (for the IRS):

 

· Use Outside Contractors.

Identify the goals to be achieved; then hire contractors to design and implement the system to complete the process.

 

Recommendation (for Congress):

 

· Allow Flexibility in Procurement Rules.

Allow the IRS the flexibility to operate outside the government procurement rules with proper and adequate oversight to the extent necessary to facilitate the modernization program.

 

2. Customer Service as a Goal

 

Individuals are accustomed to receiving answers and information at all hours of the day and night from private sector businesses. Businesses have responded to this expectation by providing services such as fax-on-demand, automated phone systems, and expanded telephone hours.

 

The IRS must concentrate on improving its customer service and its ability to respond immediately to taxpayer inquiries. The key to better service lies with a modern telephone system as well as a modern computer system which processes transactions in a matter of one or two days, not four to six weeks, and which makes that information immediately available to IRS employees responding to taxpayer inquiries.

Recommendations:

 

· Improve the IRS telephone service so that taxpayers' calls are answered in a timely fashion.

 

· Expand the services available to taxpayers during hours beyond the traditional period of 8 a.m. to 5 p.m.

 

· Provide immediate access to integrated account information for IRS employees who respond to taxpayer inquiries.

 

· Continue to develop and expand the IRS website.

 

3. Electronic Filing

 

The use of electronic filing needs to be increased. Since it costs taxpayers more, not less, to file electronically, there currently is no perceived benefit to filing electronically for those taxpayers who have a balance due. Further, CPAs have not embraced electronic filing because: all forms cannot be filed electronically; there is no ability to attach white paper schedules, disclosures or elections; the required Form 8453 (Jurat form) disrupts the normal processing of the returns in a CPA office; the procedures for registration and the annual registration cutoff of December 2 are less desirable than a rolling acceptance date; and the registration is cumbersome for firms with multiple offices.

 

Recommendations:

 

· Increase electronic filing in stages, based on the complexity of returns.

Concentrate systems development and marketing efforts on the largest universe of returns that are easy to file either electronically or by Tele-file; after success has been achieved at that level, redirect efforts to expand electronic filing for the next level of returns. Concentrate processing the remainder of the returns in one or two service centers.

 

· Provide incentives for filing electronically.

 

· Remove the above-mentioned hindrances to CPAs' use of electronic filing.

 

4. Congressional Support for the IRS

 

When Congress cuts off funding for the IRS and when the IRS does not have the ability to foresee its long-term budget due to political manipulation, it is difficult, if not impossible, for the IRS to engage in meaningful long-range planning. Further, tax law complexity translates into more complexity in related computer processing and, therefore, creates the potential for more errors. Thus, tax law complexity is a drain on the IRS computer system and personnel, as well as on taxpayers.

 

Recommendations (for Congress):

 

· Introduce stability into the IRS budget process.

 

· Enact enabling legislation which will allow for the procurement of major capital expenditures for tax system modernization outside the normal budgeting process.

 

· Minimize tax law changes and complexity in the tax law.

 

D. TAX LAW COMPLEXITY

 

The problem of tax law complexity originates with complex statutes, not administration. We have previously testified before the Commission on problems resulting from complexity of the tax law and on our recommendations for achieving simpler rules. The IRS can be restructured over and over again but the basic frustration taxpayers experience with the IRS will remain until the issue of complexity has been addressed.

 

A basic illustration of the complexity that has become a part of the current Internal Revenue Code is set forth in Exhibit 1. This exhibit contains the statutory language for the standard deduction as in effect on December 31, 1958 and for the current standard deduction. What was covered in four lines in 1958 now takes over two pages. Unfortunately, there are many other examples in the Code of such developments over the years.

 

We refer you to our November 8, 1996 testimony for a more detailed discussion of the complexity issue and to the AICPA Tax Complexity Index. (See Exhibit 2.)

 

Recommendations (for Congress, Treasury, and the IRS):

 

· Establish a Complexity Analysis Process for Hearings.

Hearings on all tax proposals before either the House Ways and Means or the Senate Finance Committees should require disclosure of the proposals' effect on complexity. Analysis of such effects by the staffs of both the Joint Committee on Taxation and the Tax Legislative Counsel should be published and discussed. The staff of the Joint Committee on Taxation should be required to adopt a methodology for evaluating the complexity aspects of a proposal and to discuss the results in any hearing pamphlets or other published documents. In addition, simplification options, with respect to the proposals under consideration at the hearing, should be discussed.

 

Testimony by representatives of the Treasury Department should include an independent analysis of the effect of any proposals on complexity, as well as evaluation of the published comments of the staff of the Joint Committee on Taxation.

 

· Establish a Complexity Review Process for Legislative Markup.

All proposals considered during the legislative markup process should also be evaluated to determine their effect on complexity. If the markup begins with the acceptance of a Chairman's Mark or other basic document, a complexity analysis should be required for each item in the mark. Amendments must include analyses of their effect on complexity before being considered. At each step, the staff should be prepared to offer alternatives to the items included in the mark or offered as amendments that could make greater contributions to simplification.

 

· Study Revising the Legislative Drafting Process.

The staffs of the House and Senate Legislative Counsel's Offices should be instructed by the members to undertake a study of drafting procedures and techniques that would contribute to simplification, such as requiring IRS input on complexity (including comments re administrative complexity) during the drafting process and using horizontal drafting. Candidates for horizontal drafting include the constructive ownership rules and the provisions governing pass-through entities and their owners or beneficiaries. The respective Legislative Counsel's Offices should be required to publish the results of their study within a reasonable period of time.

 

· Establish a Complexity Review Process for Regulatory Action.

The Treasury Department and the IRS should be required to include an analysis of the effect of any proposed, temporary, or final regulations on complexity, along with a discussion of alternative approaches.

 

· Mandate Periodic Simplification Initiatives.

Appropriate governmental staff (Treasury, IRS, Ways and Means, Finance, Legislative Counsel, and/or Joint Committee on Taxation) should be required periodically to publish simplification initiatives that could form the basis of future legislation. Such initiatives could include:

 

· A review of the Internal Revenue Code for "deadwood" provisions;

· A review of the Code and regulations for complex rules that should be withdrawn or substantially simplified;

· Analyses of various rules to determine where horizontal consistency is lacking (proposals to enhance horizontal consistency would be expected) and development of a tax term glossary to ensure consistent use of terms across different sections of the Code; and,

· Analyses of specific subjects in the Code to determine the level of complexity present and to make proposals for the reduction of complexity.

 

III. CONCLUSION

 

The AICPA appreciates the opportunity to offer comments at today's hearing and is willing to provide the Commission with additional assistance and comments as requested. Thank you for your attention.

 

 

EXHIBIT 1

 

Comparison of 1958 and 1997

Standard Deduction Provisions

 

I. Standard Deduction, as in effect on December 31, 1958:

 

Section 141:

 

The standard deduction referred to in section 63(b) (defining taxable income in case of individuals electing standard deduction) shall be an amount equal to 10 percent of the adjusted gross income or $1,000, whichever is the lesser, except in the case of a separate return by a married individual the standard deduction shall not exceed $500.

 

II. Standard Deduction, as currently in effect:

 

Section 63:

 

(c) Standard deduction.

For purposes of this subtitle

(1) In general. Except as otherwise provided in this subsection, the term "standard deduction" means the sum of

(A) the basic standard deduction, and

(B) the additional standard deduction.

(2) Basic standard deduction. For purposes of paragraph (1), the basic standard deduction is

(A) $5,000 in the case of

(i) a joint return, or

(ii) a surviving spouse (as defined in section 2(a)),

(B) $4,400 in the case of a head of household (as defined in section 2(b)),

(C) $3,000 in the case of an individual who is not married and who is not a surviving spouse or head of household, or

(D) $2,500 in the case of a married individual filing a separate return.

(3) Additional standard deduction for aged and blind. For purposes of paragraph (1), the additional standard deduction is the sum of each additional amount to which the taxpayer is entitled under subsection (f).

(4) Adjustments for inflation. In the case of any taxable year beginning in a calendar year after 1988, each dollar amount contained in paragraph (2) or (5)(A) or subsection (f) shall be increased by an amount equal to

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting "calendar year 1987" for "calendar year 1992" in subparagraph (B) thereof.

(5) Limitation on basic standard deduction in the case of certain dependents. In the case of an individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins, the basic standard deduction applicable to such individual for such individual's taxable year shall not exceed the greater of

(A) $500, or

(B) such individual's earned income.

(6) Certain individuals, etc., not eligible for standard deduction. In the case of

(A) a married individual filing a separate return where either spouse itemizes deductions,

(B) a nonresident alien individual,

(C) an individual making a return under section 443(a)(1) for a period of less than 12 months on account of a change in his annual accounting period, or

(D) an estate or trust, common trust fund, or partnership, the standard deduction shall be zero.

(d) Itemized deductions.

For purposes of this subtitle, the term "itemized deductions" means the deductions allowable under this chapter other than

(1) the deductions allowable in arriving at adjusted gross income, and

(2) the deduction for personal exemptions provided by section 151.

(e) Election to itemize.

(1) In general. Unless an individual makes an election under this subsection for the taxable year, no itemized deduction shall be allowed for the taxable year. For purposes of this subtitle, the determination of whether a deduction is allowable under this chapter shall be made without regard to the preceding sentence.

(2) Time and manner of election. Any election under this subsection shall be made on the taxpayer's return, and the Secretary shall prescribe the manner of signifying such election on the return.

(3) Change of election. Under regulations prescribed by the Secretary, a change of election with respect to itemized deductions for any taxable year may be made after the filing of the return for such year. If the spouse of the taxpayer filed a separate return for any taxable year corresponding to the taxable year of the taxpayer, the change shall not be allowed unless, in accordance with such regulations

(A) the spouse makes a change of election with respect to itemized deductions, for the taxable year covered in such separate return, consistent with the change of treatment sought by the taxpayer, and

(B) the taxpayer and his spouse consent in writing to the assessment (within such period as may be agreed on with the Secretary) of any deficiency, to the extent attributable to such change of election, even though at the time of the filing of such consent the assessment of such deficiency would otherwise be prevented by the operation of any law or rule of law.

This paragraph shall not apply if the tax liability of the taxpayer's spouse for the taxable year corresponding to the taxable year of the taxpayer has been compromised under section 7122.

 

 

(f) Aged or blind additional amounts.

(1) Additional amounts for the aged. The taxpayer shall be entitled to an additional amount of $600

(A) for himself if he has attained age 65 before the close of his taxable year, and

(B) for the spouse of the taxpayer if the spouse has attained age 65 before the close of the taxable year and an additional exemption is allowable to the taxpayer for such spouse under section 151(b).

(2) Additional amount for blind. The taxpayer shall be entitled to an additional amount of $600

(A) for himself if he is blind at the close of the taxable year, and

(B) for the spouse of the taxpayer if the spouse is blind as of the close of the taxable year and an additional exemption is allowable to the taxpayer for such spouse under section 151(b).

For purposes of subparagraph (B), if the spouse dies during the taxable year the determination of whether such spouse is blind shall be made as of the time of such death.

(3) Higher amount for certain unmarried individuals. In the case of an individual who is not married and is not a surviving spouse, paragraphs (1) and (2) shall be applied by substituting "$750" for "$600".

(4) Blindness defined. For purposes of this subsection, an individual is blind only if his central visual acuity does not exceed 20/200 in the better eye with correcting lenses, or if his visual acuity is greater than 20/200 but is accompanied by a limitation in the fields of vision such that the widest diameter of the visual field subtends an angle no greater than 20 degrees.

(g) Marital status.

For purposes of this section, marital status shall be determined under section 7703.