THE BLOG
05/17/2013 09:48 pm ET Updated Jul 17, 2013

An IRS With Integrity: Will This Be the Dawn of Another New Era?

Thursday President Obama stood before the nation declaring that "the IRS has to operate with absolute integrity." Will the words Internal Revenue Service and integrity ever be synonymous? Integrity means consistency in actions and values. It means an agency that acts in accordance with the principles it is meant to embody. Integrity means honesty. As with the integrity of a person, the integrity of the IRS is measured by human accounts -- the experiences people have when interacting with the agency. On a more scientific scale, it means the agency's results need to meet the nation's expectations.

There is far more that needs to be fixed for the IRS to bask in an aura of integrity. This latest scandal examining whether IRS employees had a political bias when scrutinizing applications for tax-exempt status is merely the tipping point. The scandal draws attention to a larger problem -- death and taxes should not be the only certainties in life. In the same vein, dealing with the IRS should not instill the fear and frustration in taxpayers that it often does.

The agency's powers must be checked. Neither the IRS, nor credit card companies, nor student loan lenders, nor any other collector should have the ability to make an American citizen feel like his or her life will fall to ruins. According to former IRS employees, the harassment that those groups applying for tax-exempt status say they experienced, is not unlike the harassment that everyday taxpayers experience on a regular basis when dealing with the IRS in a variety of circumstances. In a 2002 speech at a Washington, D.C. 'Truth in Taxation' hearing, one former IRS agent, who was imprisoned for refusing to file tax returns said, "In my tenure as an IRS agent, I personally saw marriages broken, families torn apart, homes confiscated and businesses destroyed...without the proper authority." Prior to 1998, the IRS used to be allowed to seize homes for outstanding tax bills that amounted to less than $5,000.

A new law in 1998 changed that. The law blossomed out of Congressional hearings in 1996 and 1997. The entire nation watched as the testimony of former IRS employees exposed the widespread abuse practiced by IRS agents against taxpayers. Taxpayers who challenged the IRS and the tax system back then were labeled "illegal tax protesters." One former IRS employee testified that in addition to its unscrupulous practices, the agency destroyed its paper trails. Following the explosive hearings, President Clinton joined Republicans and enacted "The Internal Revenue Service Restructuring and Reform Act of 1998." The law banned the term "illegal tax protester," it created a taxpayer advocate and an oversight board to monitor taxpayer interaction with IRS employees. It also broadened the protections for innocent spouses, meaning spouses shocked to learn of enormous tax liability as a result of filing a joint return. In short, the law contained more than 70 provisions intended to protect taxpayers and revamp, even moralize the Agency's operations.

Today, 15 years later, the IRS and its operations are before Congress once again. It is surprising that it took 15 years for the IRS to come back under the microscope. Congress is charged with overseeing the IRS. Under the Sixteenth Amendment, Congress is responsible for levying taxes. Congress must write and reform the tax code. The IRS interprets and enforces the Code. But, the Constitution did not give those powers to the IRS, Congress did. Allocated power must be regulated. It is Congress's job to ensure that IRS enforcement complies with the purpose and meaning of the tax laws. Congress, increasing its regulation of the IRS, would be one step toward integrity.

The Congressional hearings of 1996 and 1997 bear great significance as we look ahead toward an IRS with integrity. There is much to be learned from them. The most glaring point being that one new law, one new reform, one new Commissioner will not fix the problems inherent within. The IRS when left to its devices will find ways around the ethical enforcement of the Code, because ultimately its goal is to collect. We have seen this happen before, for example, with the evolution of the statute of limitations law. A statute of limitations governs how long the IRS can hunt down a taxpayer. It is a vital part of tax law, because it sets a limit on collection efforts. It creates a light at the end of the tunnel. If a taxpayer truly does not have the income or assets to pay his or her entire tax liability, often times compounded by interest and penalties, the statute of limitations allows that taxpayer to one day move on with life.

The present statute of limitations only allows tax collection for ten years from the date of tax assessment. Before 1998, the IRS used to "coerce" taxpayers to waive the statute of limitations. Some taxpayers signed waivers agreeing to let the IRS pursue them for an additional 20 even 30 years in exchange for leniency in immediate tax collection. One man agreed to waive the statute of limitations beyond his life expectancy so that the IRS would not levy his military retirement benefits. The 1998 law banned such waivers. It recognized the injustice. The parties were not operating on a level playing field given the sweeping powers of the IRS. It wasn't a fair quid pro quo under the law.

Today the IRS is STILL getting taxpayers to agree to extend the statute in exchange for workout plans. If a taxpayer agrees to a monthly payment plan called an "installment plan," he or she must also agree to toll the statute. If a taxpayer makes an "offer in compromise" to settle a debt for less than what is owed, the IRS can wait two years before deciding whether to accept or reject the offer. During those two years, the statute is tolled. Workout plans are designed to extend a helping hand. Participation often evidences a willing and cooperative taxpayer who sometimes just can't keep up with mounting interest and penalties. Yet, a good faith effort to resolve the debt results in a longer collection period. The statute is also tolled in other instances like during bankruptcy proceedings. At one point in 2000, one law repealed the IRS's ability to suspend the statute of limitations but less than two years later, the power was re-established by another law. Exceptions like this, that still exist today, and contradict the purpose of the 1998 revisions, show that one new law, one new reform, one new Commissioner will not fix the problems inherent within.

In 1998, when the sweeping IRS reform law passed, then Senate Finance Committee Chairman William Roth, Jr. said, "Today marks the dawning of a new era for the IRS, the way it does business, its service orientation, its efficiency and mission." The question is, will today mark the dawning of another new era? Or will Congress miss the opportunity to examine the problems within the agency that extend beyond this one scandal?

Subscribe to the Politics email.
How will Trump’s administration impact you?