Let me explain why we did this. Let me give an example to explain why we found it necessary to pass a bill that comprehensively restructures and reforms the Internal Revenue Service. One Christmas day, five or so years ago, as I sat around the Christmas tree opening presents with my family, the telephone rang. On such a glorious day of good cheer and hope I answered my telephone in high spirits. The woman on the other end of the line, a constituent, was in tears. Her husband was critically ill, the IRS was coming after them for everything they owned, and they owned very little, and she had no idea what to do. She had nowhere to turn. So on Christmas Day, that day of hope to us, she picked up the phone and called me. She called someone she had never met. Someone she didn't know. And she cried. This woman was at the end of her rope and she had nowhere else to turn. She didn't understand what was happening to her. She only knew that the IRS was harassing her to pay a debt that she didn't know they had, and was not willing to work with her on it.
Let's think back to the hearings that the Senate Finance Committee has held in the last year. We heard from victims of IRS harassment and abuse. We heard from IRS employees about the culture of intimidation at the IRS that results in taxpayer abuse and keeps good employees from climbing the career ladder. These hearings touched a nerve with the American public. And they did so for good reason. We all saw ourselves in the stories. Either we saw ourselves in the victims, or we knew that it could have been us.
There are critics of this legislation. To the critics I say this: we have different friends; we talk to different people. I am convinced that the critics have never spoken to a taxpayer facing the loss of his home, wondering where his family will sleep that night. They have never spoken with the woman who had IRS agents screaming and threatening her in front of her children. They have never spoken with the average taxpayer who works hard to make ends meet, pays his taxes on time and doesn't want to spend his Kids' college fund on attorneys to fight the IRS. These are the people I talk to. These are my constituents. These are the people who send me to Washington.
This bill is for them. It is for the average American taxpayer, who is neither an accountant nor a lawyer. It is for the average American taxpayer who is not sure how to navigate the system, but who wants to stand up for himself in true American fashion. It is for the IRS employee who wants integrity in his workplace and reward for a job well done.
This legislation is not a rash effort. It was not hatched overnight. Rather, it is the product of years of study and work. Senator Kerrey and I were honored to serve on the National Commission on Restructuring the Internal Revenue Service. In June, 1997 this commission released an 80-page report of recommendations to radically restructure the IRS. These recommendations were turned into legislation, which Senator Kerrey and I introduced in the Senate, and Congressman Portman introduced in the House.
There are many people who worked on the effort you see before you today. Senator Roth, the Chairman of the Finance Committee, held two series of important oversight hearings. These gave us further insight into the IRS and gave this legislation the momentum it needed. He also has shown great leadership in strengthening the House-passed bill, and navigating it through conference.
Senator D'Amato and Senator Graham should be thanked for their leadership to provide relief for innocent spouses. Senator Mack should be thanked for his leadership in creating confidentiality between an accountant and his client. And, of course, my friends Senator Kerrey and Congressman Portman must be recognized for their untiring work, for endless hours on endless days, on the Restructuring Commission and this legislation.
Let's talk about what this bill does. First, it provides oversight and it mandates accountability. It was Justice Louis Brandeis who said, "sunlight is said to be the best of disinfectants; electric light the most efficient policeman." This legislation provides sunlight and electric light throughout the IRS.
First, this bill creates a new Inspector General for Tax Administration within the Treasury Department. This new IG will be dedicated solely to oversight of the IRS. He or she will have all of the powers and responsibilities given by the Inspector General statute. This office will also assume most of the responsibilities now performed by the IRS' Inspection Service. This change moves the oversight function out of the IRS and into the Treasury Department where it can be more impartial and effective.
This bill also requires that this Inspector General for Tax Administration randomly audit IRS denials of public information requests. I have found, and have heard from others, that the IRS sometimes hides improprieties by claiming the information is protected for taxpayer confidentiality or law enforcement reasons. Upon further investigation, it has been discovered that the redacted information has nothing to do with either taxpayer confidentiality or law enforcement. It simply admits IRS error, which the IRS would like to hide from public scrutiny. Claiming taxpayer confidentiality or law enforcement as a reason to redact or fail to release information lets the IRS avoid oversight by Congress, the press and the public.
To help guide this agency and keep it on track, this legislation also creates an Oversight Board. This Board should be comprised mainly of management experts, who will guide the IRS and keep it honest.
In addition, this bill makes it easier to hold IRS agents accountable for their actions, both good and bad. The bill makes it easier to fire bad IRS employees, and easier to reward outstanding IRS employees. It also makes it easier to sue the IRS for the actions of its agents. It expands the cause of action in civil court to permit up to $100,000 in civil damages or harm caused by an officer or employee of the IRS who negligently disregards the rules.
Another major achievement of this bill is that it increases taxpayer rights. As an author of the first two Taxpayer Bills of Rights, I am particularly qualified to testify to the importance of this section of the bill: the Taxpayer Bill of Rights 3. This bill will help even the playing field between the average taxpayer and the IRS. It will help taxpayers to understand the process. It will help put customer service back into the Internal Revenue Service.
Specifically, this legislation shifts the burden of proof from the taxpayer to the IRS is many tax disputes. This bill also gives relief to innocent spouses. Innocent spouses are people who didn't take part in the tax shelter or tax planning that results in a tax assessment. Their marriage has broken down and they are left with little except the IRS pounding on their door. It is important that we collect tax when it is due, but also that we don't collect money from people who don't owe it.
Another important step: this bill increases the independence of the Taxpayer Advocate. The taxpayer advocate is renamed the National Taxpayer Advocate and the local problem resolution officers will become local taxpayer advocates. These local taxpayer advocates will report only to the National Taxpayer Advocate, rather than to the district directors.
This bill also gives the taxpayer relief from interest and penalties in some situations. For example, this bill suspends penalties while an installment agreement is in effect. It suspends the statute of limitations to file for a refund during times of disability. It gives taxpayers more due process rights before the IRS can levy or seize property, and makes it easier to contest the placement of a lien. And the IRS can't seize a principle place of residence or a small business until it has exhausted all other payment options.
In addition, this legislation makes important strides towards empowering taxpayers. I sincerely believe that educating the taxpayer is half of the battle. Americans are generally strong, self-reliant people. Letting them know their rights and responsibilities gives them the ammunition to stand up for themselves. For example, this bill requires the IRS to make extra effort to alert taxpayers to the joint and several liability incurred just by signing an income tax form. It requires the IRS to rewrite Publication 1, which is called "Your Rights as a Taxpayer" to more clearly inform taxpayers of their rights to be represented at interviews with the IRS, and if the taxpayer is represented, that the interview cannot proceed without the presence of the taxpayer's representative unless the taxpayer consents. The IRS also must include with the first letter of deficiency a description of the entire process from examination through collection, including the assistance available to taxpayers from the taxpayer advocate at various points in the process. And now any taxpayer in an installment agreement will receive an annual statement of the initial balance owed, the payments made during the year, and the remaining balance.
This bill also provides greater taxpayer protection during the audit process. It extends the attorney-client confidentiality privilege to some communications between an accountant and a client. This bill makes it impossible for the IRS and the taxpayer to agree to extend the statute of limitations on collection actions beyond 10 years unless there is an installment agreement in place. Then the statute of limitations can only be extended until the end of the installment agreement, plus 90 days. Further, the IRS must always inform the taxpayer of his or her right to refuse to extend the statute of limitations and to limit the extension to specific issues.
These are just some important aspects of this legislation. It is landmark legislation. I am proud to be part of this effort. This legislation reflects hard work by all of us. This effort will be rewarded by the sunshine that will shine into the IRS, giving it the oversight it needs and the accountability that taxpayers deserve. This is a great day.