Introduction

 

It has been over forty years since Congress and the President have considered significant reforms to the Internal Revenue Service (IRS). With this report, once again there is an historic opportunity to overhaul the IRS and transform it into an efficient, modern, and responsive agency. Because of the vital nature of the institution—the IRS interacts with more citizens than any other government agency or private sector business in America and collects ninety-five percent of the revenue needed to fund the federal government—Congress and the President owe it to the American public to seize this opportunity. 

The goal of this Report is to recommend changes to the IRS that will help restore the public’s faith in the American tax system. Most American citizens are willing to pay their fair share of taxes; the Commission’s recommendations will make it easier for them to do so. No single recommendation will fix the IRS, but taken as a whole, this package sets the stage for an IRS that is fair, efficient, and friendly.

This report is based upon a year of intensive work by the Commission members and the professional staff. The Commission received extensive input from American taxpayers and experts on the IRS and tax system, holding 12 days of public hearings and spending hundreds of hours in private sessions with public and private sector experts, academics, and citizen’s groups to review IRS operations and services. In addition to holding three field hearings in Cincinnati, Omaha, and Des Moines, the Commission met privately with over 500 individuals, including senior level and front-line IRS employees across the country.

The Commission also received continuous input from stakeholder groups and congressional representatives, and conducted research and surveys to better understand IRS operations and gauge the American public’s view of the IRS. Finally, the Commission reviewed thousands of reports and documents on IRS operations, management, governance, and oversight. The report that follows is the result of this year long effort, and it represents the collective judgment of a strong majority of the Commissioners.

As a guiding principle, the Commission believes that taxpayer satisfaction must become paramount at the new IRS and that the IRS should only initiate contact with a taxpayer if the agency is prepared to devote the resources necessary for a proper and timely resolution of the matter.

 

Our key recommendations are that:

· Congressional oversight of the IRS should be restructured and coordinated through a new entity which ensures that Members and staff have sufficient information to make informed decisions regarding tax administration and policy.

· Overall responsibility for executive branch governance of the IRS should be placed with a new Board of Directors, accountable to the President and the American people, to provide the expertise and continuity to ensure that the IRS achieves its mission. Board members, including those who have experience running large service organizations, will be appointed by the President and confirmed by the Senate for five year staggered terms. The Department of the Treasury would continue to be responsible for tax policy, and the Board will have no involvement in specific matters in the areas of interpretation or enforcement of the tax laws, procurement, or tax legislation.

· The Commissioner of Internal Revenue should be appointed for a five year term and should be given greater flexibility in hiring, firing, and salary decisions.

· The IRS should receive stable funding for the next three years so that its leaders can undertake the proper planning to rebuild its foundation.

· The IRS must address training, operations, technology, culture, and taxpayer education if the IRS is to operate efficiently and with customer focus.

· The IRS must update its technology and treat taxpayer information as a strategic asset to improve its customer service and compliance functions.

· The IRS must develop a strategic marketing plan to make paperless filing the preferred and most convenient means of filing for the vast majority of filers within the next ten years.

· Additional steps should be taken to improve taxpayers ability to recover damages for wrongful actions by the agency, and significant efforts should be made to protect taxpayers from unnecessary disputes with the IRS before they occur.

· Simplification of the tax law is necessary to reduce taxpayer burden and facilitate improved tax administration.

 

These key recommendations are all geared toward making the IRS more user friendly. Consolidated congressional oversight, an accountable Board of Directors, and a strengthened IRS Commissioner are necessary structural changes to ensure that good decisions are made, that there are clear lines of accountability, and that the IRS leadership has the continuity and expertise to guide the agency. Without all three of these elements—accountability, continuity, and expertise—along with focus of purpose in one governing entity, a turn around of the agency will be difficult.

Furthermore, a stable budget will allow the IRS leadership to plan and implement operations which will improve taxpayer service and compliance. Advancements in technology will make it easier for the IRS to resolve taxpayer problems quickly, thereby reducing the intrusiveness of the government. The Commission’s taxpayer rights provisions will give Americans the ability to fight back if they feel the IRS is not treating them fairly. Finally, tax simplification will make it easier for citizens to comply with their tax obligations with less intrusion from the IRS.

The sum of these recommendations is to make it easier for citizens to interact with the IRS. The Commission found that there are no isolated solutions and believes an integrated approach will set the stage for a more taxpayer friendly IRS and a tax system which Americans can believe in and trust.

Bob Kerrey

Rob Portman

Ernest J. Dronenburg, Jr.

J. Fred Kubik

Fred T. Goldberg, Jr.

Mark McConaghy

Chuck Grassley

Grover Norquist

Gerry Harkins

Robert Tobias

David Keating

Josh S. Weston