|
http://www.treas.gov/tigta/
You can submit your complaint by these
methods:
Micsonduct Complaint by Email:
Complaints@tigta.treas.gov
Misconduct Complaint By Phone:
Call toll free: 1-800-366-4484
Misconduct Comprlaint By Fax:
(202) 927-7018
Misconduct Complaint By Mail:
Treasury Inspector General for Tax Administration
Hotline
P.O. Box 589
Ben Frank
lin
Station
Washington, DC 20044-0589
To obtain copies of audit reports, semiannual reports and other TIG Liaisons at
(202) 622-6500
or visit our web site at: http://www.treas.gov/tigta/
What kinds of things should you report?
-
Mismanagement or violations of law, rules, or regulations by the
IRS
employees
-
Mismanagement or violations of law, rules, or regulations by the TIGTA
employees or contractors.
Your complaint will be kept confidential if it is received on the phone, through
the mail, or in person. We cannot guarantee confidentiality if you send your
complaint via the online form or e-mail.
Laws protect you from reprisals (any action taken against you because
you filed this complaint).
Sec. 7214. Offenses by officers and
employees of the United States
(a) Unlawful acts of revenue
officers or agents
Any officer or
employee of the United States
acting in connection
with any revenue law of the United States
-
(1)
who is guilty of any extortion or willful oppression under color of law; or
(2)
who knowingly demands other or greater sums than are authorized by law, or
receives any fee, compensation, or reward, except as by law prescribed, for the
performance of any duty; or
(3)
who with intent to defeat the application of any provision of this title fails
to perform any of the duties of his office or employment; or
(4)
who conspires or colludes with any other person to defraud the United States
; or
(5)
who knowingly makes opportunity for any person to defraud the United States
; or
(6)
who does or omits to do any act with intent to enable any other person to
defraud the United States
; or
(7)
who makes or signs any fraudulent entry in any book, or makes or signs any
fraudulent certificate, return, or statement; or
(8)
who, having knowledge or information of the violation of any revenue law by any
person, or of fraud committed by any person against the United States under any
revenue law, fails to report, in writing, such knowledge or information to the
Secretary; or
(9)
who demands, or accepts, or attempts to collect, directly or indirectly as
payment or gift, or otherwise, any sum of money or other thing of value for the
compromise, adjustment, or settlement of any charge or complaint for any
violation or alleged violation of law, except as expressly authorized by law so
to do; shall be dismissed from office or discharged from employment and,
upon conviction thereof, shall be fined not more than $10,000, or imprisoned
not more than 5 years, or both. The court may in its discretion award out of
the fine so imposed an amount, not in excess of one-half thereof, for the use
of the informer, if any,who shall be ascertained by the judgment of the court.
The court also shall render judgment against the said officer or employee for
the amount of damages sustained in favor of the party injured, to be collected
by execution.
(b) Interest of internal
revenue officer or employee in tobacco or liquor production Any internal
revenue officer or employee interested, directly or indirectly, in the
manufacture of tobacco, snuff, or cigarettes, or in the production,
rectification, or redistillation of distilled spirits, shall be dismissed from
office; and each such officer or employee so interested in any such manufacture
or production, rectification, or redistillation or production of fermented
liquors shall be fined not more than $5,000.
(c) Cross reference
For penalty on collecting or disbursing officers trading in public funds or
debts of property, see 18 U.S.C. 1901.
-SOURCE- Aug. 16, 19
54, ch. 736, 68A Stat. 856; Pub. L. 85-859,
title II,Sec. 204(5), Sept. 2, 19
58, 72 Stat. 1429; Pub.
L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976
, 90 Stat. 1834.)
------------------------------------------------------------------------------------
ACT SEC . 1203 of the Internal Revenue Service
Restructuring and Reform Act of 1998 - TERMINATION OF EMPLOYMENT FOR
MISCONDUCT.
(a) IN GENERAL.--Subject
to subsection (c), the Commissioner of Internal Revenue shall terminate the employment of any employee of the Internal
Revenue Service if there is a final administrative or judicial determination
that such employee committed any act or omission described under subsection (b)
in the performance of the employee's official duties. Such termination shall be
a removal for cause on charges of misconduct.
(b) ACTS OR
OMISSIONS.--The acts or omissions referred to under subsection (a) are--
(1) willful failure to obtain the required
approval signatures on documents authorizing the seizure of a taxpayer's home,
personal belongings, or business assets;
(2) providing a false statement under oath with
respect to a material matter involving a taxpayer or taxpayer representative;
(3) with respect to a taxpayer, taxpayer
representative, or other employee of the Internal Revenue Service, the violation
of--
(A) any right under the Constitution of the United States
; or
(B) any civil right established under--
(i) title VI or VII
of the Civil Rights Act
of 1964;
(ii) title IX of the Education Amendments of
1972;
(iii) the Age Discrimination in Employment Act
of 1967;
(iv) the Age Discrimination Act of 1975;
(v) section 501 or 504 of the Rehabilitation Act
of 1973; or
(vi) title I of the Americans with Disabilities
Act of 1990;
(4) falsifying or destroying documents to
conceal mistakes made by any employee with respect to a matter involving a
taxpayer or taxpayer representative;
(5) assault or battery on a taxpayer, taxpayer
representative, or other employee of the Internal Revenue Service, but only if
there is a criminal conviction, or a final judgment by a court in a civil case,
with respect to the assault or battery;
(6) violations of the Internal Revenue Code of 1986, Department
of Treasury regulations, or policies of the Internal Revenue Service (including
the Internal Revenue Manual) for the purpose of retaliating against, or
harassing, a taxpayer, taxpayer representative, or other employee of the
Internal Revenue Service;
(7) willful misuse of the provisions of section
6103 of the Internal Revenue Code of 1986 for the purpose of concealing
information from a congressional inquiry;
(8) willful failure to file any return of tax
required under the Internal Revenue Code of 1986 on or before the date
prescribed therefor (including any extensions), unless such failure is due to
reasonable cause and not to willful neglect;
(9) willful understatement of Federal tax
liability, unless such understatement is due to reasonable cause and not to
willful neglect; and
(10) threatening to audit a taxpayer for the
purpose of extracting personal gain or benefit.
(c) DETERMINATION OF
COMMISSIONER.--
(1) IN GENERAL.--The Commissioner of Internal
Revenue may take a personnel action other than termination for an act or
omission under subsection (a).
(2) DISCRETION.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the Commissioner of Internal
Revenue and may not be delegated to any other officer. The Commissioner of
Internal Revenue, in his sole discretion, may establish a procedure which will
be used to determine whether an individual should be referred to the
Commissioner of Internal Revenue for a determination by the Commissioner under
paragraph (1).
(3) NO APPEAL.--Any determination of the
Commissioner of Internal Revenue under this subsection may not be appealed in
any administrative or judicial proceeding.
(d) DEFINITION.--For
purposes of the provisions described in clauses (i), (ii), and (iv) of
subsection (b)(3)(B), references to a program or activity receiving Federal
financial assistance or an education program or activity receiving Federal
financial assistance shall include any program or activity conducted by the
Internal Revenue Service for a taxpayer.
Section 4303 of Title 5,
United States Code, authorizes an agency to remove an employee for
"unacceptable performance," as defined in Section 4301 of Title 5. In
addition, Section 7513 of Title 5 authorizes an agency to discipline an
employee (by applying specified sanctions ranging from furlough to removal, as
set forth in Section 7512) only for such cause as will promote the efficiency
of the IRS
. In general, the courts have interpreted this
provision to require a showing that (1) the employee is engaged in misconduct
and (2) there is a connection between such misconduct and the efficiency of the
service. See, King v. Frazier
,
CA
-DC, 77 F.3d 1361.
However, the decision regarding whether to take, and the form of, any
disciplinary action is largely left up to the particular agency.
Under
both of these provisions, employees subject to removal are generally entitled
to certain procedural safeguards including advance written notice, a hearing
and a right of appeal.
IRS
Restructuring and Reform Impact
Acts requiring
termination.--The IRS
must terminate an
employee (absent direct intervention by the IRS
Commissioner as
explained below) if there is a final administrative or judicial determination
that, in the course of his or her official duties, the employee:
(1) willfully failed to obtain the required
approval signatures on documents authorizing the seizure of a taxpayer's home,
personal belongings, or business assets;
(2) provided a false statement under oath with
respect to a material matter involving a taxpayer or a taxpayer representative;
(3) violated the rights of a taxpayer, taxpayer
representative or other employee of the IRS
under the U.S.
Constitution or under specified civil rights acts (see below);
(4) falsified or destroyed documents to conceal
mistakes made by any employee with regard to a matter involving a taxpayer or
taxpayer representative;
(5) assaulted or battered a taxpayer, taxpayer
representative or other employee of the IRS
, but only if there is
a criminal conviction or a final civil judgment to that effect;
(6) violated the 1986 Code, Treasury
regulations, or IRS
policies (including the
IRS
Manual) for the purpose of retaliating against
or harassing a taxpayer or other employee of the IRS
;
(7) willfully misused the provisions of
Code Sec. 6103 (regarding confidentiality of returns and return
information) for the purpose of concealing information from congressional
inquiry;
(8) willfully failed to file any tax return
required under the Code on or before the required date, unless the failure is
due to reasonable cause and not willful neglect;
(9) willfully understated federal tax liability,
unless such understatement is due to reasonable cause and not willful neglect;
or
(10) threatened to audit a taxpayer for the
purpose of extracting personal gain or benefit (Act Sec. 1203(a) and (b) of the
IRS
Restructuring and Reform Act of 1998).
An employee who is
terminated for any of the foregoing reasons will be considered removed for
cause on charges of misconduct (Act Sec. 1203(a) of the 1998 Act).
The Conference Committee
expanded paragraph (3) above to include constitutional violations in addition
to violations of civil rights. Moreover, the prohibition against civil rights
violations was clarified by reference to the following laws:
(i) Title VI or VII
of the Civil Rights Act
of 1964;
(ii) Title IX of the Education Amendments of
1972;
(iii) the Age Discrimination in Employment Act
of 1967;
(iv) the Age Discrimination Act of 1975;
(v) Section 501 or 504 of the Rehabilitation Act
of 1973; or
(vi) Title I of the Americans with Disabilities
Act of 1990.
The Act also makes it
clear that, for purposes of the provisions described in (i), (ii) and (iv)
above, references to a program or activity receiving federal financial
assistance or an education program or activity receiving federal financial
assistance includes any IRS
program or activity
conducted for a taxpayer (Act Sec. 1203(d) of the 1998 Act).
Discretion of the Commissioner.--As an additional
safeguard, the Commissioner may decide to take a personnel action other than
mandatory termination (Act Sec. 1203(c) of the 1998 Act). According to the
Senate Finance Committee report, the purpose of this exception is to allow the
Commissioner to take into account any mitigating factors. However, such a
decision is at the sole discretion of the Commissioner and may not be delegated
to any other officer. Moreover, the Commissioner's decision on this matter is
final and may not be appealed in any administrative or judicial proceeding
(Sec. 1203(c)(3) of the 1998 Act).
Act Sec. 1203. IRS personnel flexibilities
(termination of employment for misconduct)
Senate Committee Report (S. REP . NO. 105-174)
Present Law
The IRS
is subject to the
personnel rules and procedures set forth in title 5, United States Code. Under
these rules, IRS
employees generally are classified under the
General Schedule or the Senior Executive Service.
Reasons for Change
The Committee believes
that as part of restructuring the IRS
, the Commissioner
should have the ability to bring in experts and the flexibility to revitalize
the current IRS
workforce. The current hiring practices often
inhibit the ability of the Commissioner to change the IRS
' institutional
culture. Commissioner Rossotti has indicated that in order to maximize efforts
to transform the IRS
into an efficient,
modern and responsive agency, the ability to recruit and retain a top-notch
leadership and technical team is critical.
The Committee believes
the IRS
needs the flexibility to recruit employees from
the private sector, to redesign its salary and incentive structures to reward
employees who meet their objectives, and to hold non-performers accountable.
Personnel and pay flexibilities are necessary prerequisites for larger
fundamental changes in the IRS
.
The Committee wants to
support the Commissioner's initiatives to reposition the current IRS
workforce as part of
implementing a new organization designed around the needs of taxpayers.
Explanation of Provision
*
* *
Violations for which IRS employees may be
terminated
The bill requires the IRS
to terminate an
employee for certain proven violations committed by the employee in connection
with the performance of official duties. The violations include: (1) failure to
obtain the required approval signatures on documents authorizing the seizure of
a taxpayer's home, personal belongings, or business assets; (2) providing a
false statement under oath material to a matter involving a taxpayer; (3)
falsifying or destroying documents to avoid uncovering mistakes made by the
employee with respect to a matter involving a taxpayer; (4) assault or battery
on a taxpayer or other IRS
employee; (5) violation
of the civil rights of a taxpayer or other IRS
employee; (6) violations
of the Internal Revenue Code, Treasury Regulations, or policies of the IRS (including the Internal
Revenue Manual) for the purpose of retaliating or harassing a taxpayer or other
IRS employee; and (7) wilful misuse of section 6103 for
the purpose of concealing data from a Congressional inquiry.
The bill provides
non-delegable authority to the Commissioner to determine that mitigating
factors exist, that, in the Commissioner's sole discretion, mitigate against
terminating the employee. The bill also provides that the Commissioner, in his
sole discretion, may establish a procedure which will be used to determine
whether an individual should be referred for such a determination by the
Commissioner. The Treasury IG is required to track employee terminations and
terminations that would have occurred had the Commissioner not determined that
there were mitigation factors and include such information in the IG's annual
report.
*
* *
Effective Date
The provision, other
than the IRS
employee training program provision, is
effective on the date of enactment. * * *
Senate Floor Debate for Amendment No. 2376 (144 CONG. REC. 56,
S4486)
* * * Mr. GRAMM.--* * *
Basically, we have in the bill a list of offenses for which an employee of the
Internal Revenue Service may be terminated. In light of concerns that have
arisen since we had the bill before the committee. I want to add two offenses
to the list.
One has to do with
testimony we heard where members of the Internal Revenue Service were said to
be threatening to audit people for personal gain. We heard an assertion that a
police officer had stopped an IRS
agent and was going to
write him a ticket, and the IRS
agent allegedly had
told the officer that if he wrote the ticket, he was going to get audited.
The second provision has
to do with a knowing and willful failure of an IRS
agent to file a tax
return or pay taxes or declare income. Both of these fit, I think, perfectly
into the list of very strong offenses that we have in the bill. * * *
Mr. KERRY.--Mr.
President, the National Restructuring Commission included this provision in our
bill. It is in the House bill, or at least provisions in it that dictate that
an employee who does a number of things would be automatically terminated.
What the Senator from Texas
has done is identified
some additional things that ought to be on the list and once again has
carefully drawn it--I believe the language is "willful" and--what was
the other word, I ask the Senator? "Willful" and
"intentionally."
This would not be a
situation where an individual accidentally underpays taxes or misses a deadline
or something like that. This is a much higher standard, a much more difficult
standard. And I think it is a quite reasonable provision to add to the list of
things that would force and require automatic termination.
In general, this
legislation is attempting to change the culture by saying here are some things
that, if you do it, there are going to be severe penalties. This is obviously a
severe penalty. Punitive damages for damages, we have an expanded right for
legal fees.
What we are trying to do
is change the culture so that there is a new seriousness given to actions taken
by the IRS
. And all of us understand the penalty needs to
be sufficient to meet the offense. I think the amendment of the distinguished
Senator from Texas
is a reasonable one and
I urge its adoption.
*
* *
Conference Committee Report (H.R. CONF. REP . NO. 105-599)
Senate Amendment
*
* *
Mandatory employee
terminations
The Senate amendment
requires the IRS
to terminate an employee for certain proven
violations committed by the employee in connection with the performance of
official duties. The violations include: (1) failure to obtain the required
approval signatures on documents authorizing the seizure of a taxpayer's home,
personal belongings, or business assets; (2) providing a false statement under
oath material to a matter involving a taxpayer; (3) falsifying or destroying
documents to avoid uncovering mistakes made by the employee with respect to a
matter involving a taxpayer; (4) assault or battery on a taxpayer or other IRS
employee; (5) violation
of the civil rights of a taxpayer or other IRS
employee; (6)
violations of the Internal Revenue Code, Treasury Regulations, or policies of
the IRS (including the Internal Revenue Manual)
for the purpose of retaliating or harassing a taxpayer or other IRS employee; (7) willful misuse of
section 6103 for the purpose of concealing data from a Congressional inquiry;
(8) willful failure to file any tax return required under the Code on or before
the due date (including extensions) unless failure is due to reasonable cause;
(9) willful understatement of Federal tax liability, unless such understatement
is due to reasonable cause; and (10) threatening to audit a taxpayer for the
purpose of extracting personal gain or benefit.
The Senate amendment
provides non-delegable authority to the Commissioner to determine that
mitigating factors exist, that, in the Commissioner's sole discretion, mitigate
against terminating the employee. The Senate amendment also provides that the
Commissioner, in his sole discretion, may establish a procedure which will be
used to determine whether an individual should be referred for such a
determination by the Commissioner. The Treasury IG is required to track
employee terminations and terminations that would have occurred had the
Commissioner not determined that there were mitigation factors and include such
information in the IG's annual report.
*
* *
Conference Agreement
The conference agreement
follows the Senate amendment, with modifications. * * *
With respect to
mandatory terminations of employees for certain proven violations committed by
the employee in connection with the performance of official duties, the
conference agreement modifies the definitions of some of the violations. The
definitions of the other violations are the same as the Senate amendment. The
modified definitions are: (1) willful failure to obtain the required approval
signatures on documents authorizing the seizure of a taxpayer's home, personal
belongings, or business assets; (2) assault or battery on a taxpayer or other IRS
employee, but only if
there is a criminal conviction or a final judgment by a court in a civil case,
with respect to the assault or battery; (3) falsifying or destroying documents
to conceal mistakes made by any employee with respect to a matter involving a
taxpayer or taxpayer representative; and (4) with respect to a taxpayer, taxpayer
representative, or other IRS employee, the violation
of any right under the U.S. Constitution, or any civil right established under
titles VI or VII of the Civil Rights Act
of 1964, title IX of the Educational Amendments of 1972, the Age Discrimination
in Employment Act of 1967, the Age Discrimination Act of 1975, sections 501 or
504 of the Rehabilitation Act of 1973 and title I of the Americans with
Disabilities Act of 1990.
*
* *
Act Sec. 3701. Cataloging complaints
House Committee Report (H.R. REP . NO. 105-364, pt. 1)
[Act Sec. 3701]
Present Law
The IRS
is required to make an
annual report to the Congress, beginning in 1997, on all categories of instances
involving allegations Of misconduct by IRS
employees, arising
either from internally identified cases or from taxpayer or third-party
initiated complaints. 44 The report must identify the nature of
the misconduct or complaint, the number of instances received by category, and
the disposition of the complaints.
Reasons for Change
The Committee believes
that all allegations of misconduct by IRS
employees must be
carefully investigated. The Committee also believes that the annual report to
Congress will help develop a public perception that the IRS
takes such allegations
of misconduct seriously. The Committee is concerned that, in the absence of
records detailing taxpayer complaints of misconduct on an individual employee
basis, the IRS
will not be able to adequately investigate such
allegations or properly prepare the required report.
Explanation of Provision
The bill requires that,
in collecting data for this report, records of taxpayer complaints of  misconduct by IRS
employees shall be
maintained on an individual employee basis. These individual records are not to
be listed in the report, but they will be useful in preparing the report. The
Committee intends that these records be used in evaluating individual
employees.
Effective Date
The requirement is
effective on the date of enactment.
Conference Committee Report (H.R. CONF. REP . NO. 105-599)
Senate Amendment
Same as the House bill.
Conference Agreement
The conference agreement
follows the House bill and the Senate amendment.
Effective Date
January 1, 2000
.
Records
of Taxpayer Complaints
Background
The IRS
is required to make an
annual report to the House Ways
and Means Committee and
the Senate Finance Committee on all instances involving allegations of
misconduct by IRS
employees. This requirement was instituted in
1996 by the Taxpayer Bill of Rights 2 (P.L. 104-168, Act Sec. 1211). The report
must identify categories of any misconduct allegations during the past year,
the number of instances in each category, and the disposition during the year
of any complaints, regardless of when the misconduct occurred. The report
covers misconduct identified internally by the IRS
as well as cases
arising from taxpayer or third-party complaints.
The IRS
has not been required
to record allegations of misconduct against particular employees. In order to
increase the public perception that the IRS
is taking allegations
of misconduct seriously, the House Committee Report for the IRS
Restructuring and
Reform Bill suggested requiring personnel details to be recorded. In the
absence of records containing details about taxpayer complaints of misconduct
against individual employees, the IRS
would not be able to
adequately investigate the allegations or properly prepare its report to
Congress.
IRS
Restructuring and Reform Impact
Records of complaints
against individual IRS employees.--In collecting data for the
IRS
's annual report to Congress on allegations of IRS
employee misconduct,
the IRS
is required to maintain records of taxpayer
complaints on an individual-employee basis (Act Sec. 3701 of the IRS
Restructuring and
Reform Act of 1998). According to the House Committee Report, individual
records are not to be listed in the IRS's annual report to Congress on
instances of employee misconduct (this report is required by Act Sec. 1211 of
the Taxpayer Bill of Rights 2, P.L. 104-168). However, according to the House
Committee Report, records of misconduct relating to individual IRS
employees are to be
used in evaluating individual employee performance.
* Effective
date.
No specific effective date is provided by the Act. The provision is, therefore,
considered effective on July
22, 1998
, the date of enactment. Individual records must be maintained
beginning not later than January
1, 2000
.
ACT SEC . 3701. CATALOGING
COMPLAINTS.
In collecting data for
the report required under section 1211 of Taxpayer Bill of Rights 2 (Public Law
104-168), the Secretary of the Treasury or the Secretary's delegate shall, not
later than January 1, 2000
, maintain records of
taxpayer complaints of misconduct by Internal Revenue Service employees on an
individual employee basis.
*
* *
Disclosure of Return Information by Whistle-Blowers
Background
The IRS
is required to disclose
taxpayer return information to the Chair of the Senate Finance Committee, House
Ways and Means Committee, or Joint Committee on Taxation upon written request
from the Chair (Code Sec. 6103(f)(1) ). Information that
directly or indirectly identifies a particular taxpayer may only be furnished
to a committee sitting in closed session, unless the taxpayer consents in
writing to making the information available in open committee meetings.
There was no avenue for
average IRS
employees to reveal return information in the
course of reporting misconduct or taxpayer abuse to a congressional committee.
One consequence of this rule was that employees were prevented by the taxpayer
confidentiality provisions from reporting suspected politically motivated
audits to the tax-writing committees, or from responding to congressional
allegations that particular audits were politically motivated.
Testimony in IRS
oversight hearings on
abusive IRS
management practices revealed several instances
in which whistle-blowers faced retaliation for reporting managerial misconduct
( CCH
Tax Day Reports, May 1, 1998
). In light of these allegations, increased
protection for whistle-blowers was deemed desirable.
IRS
Restructuring and Reform
Impact
Disclosures in the
course of alleging IRS employee misconduct or
taxpayer abuse.--Any person with current or prior authorized access to taxpayer
return information is permitted to disclose the information in the course of
reporting IRS
employee misconduct or taxpayer abuse to the
House Ways and Means Committee, the Senate Finance Committee, or the Joint
Committee on Taxation (Code Sec. 6103(f)(5) , as added by the IRS
Restructuring and
Reform Act of 1998). Whistle-blower information may also be disclosed to any
agents of these congressional committees or agents of the Chief of Staff of the
Joint Committee on Taxation who are authorized to inspect return information
under Code Sec. 6103(f)(4)(A) . Disclosure is
permissible if the person believes that the return information being disclosed
may be related to possible misconduct, maladministration, or taxpayer abuse.
Written approval from the committee chair is not needed prior to the
disclosure.
* Effective
date.
The provision is effective on July
22, 1998
(Act Sec. 3708(b) of the IRS
Restructuring and
Reform Act of 1998).
Records of Taxpayer Complaints
Background
The IRS
is required to make an
annual report to the House Ways
and Means Committee and
the Senate Finance Committee on all instances involving allegations of
misconduct by IRS
employees. This requirement was instituted in
1996 by the Taxpayer Bill of Rights 2 (P.L. 104-168, Act Sec. 1211). The report
must identify categories of any misconduct allegations during the past year, the
number of instances in each category, and the disposition during the year of
any complaints, regardless of when the misconduct occurred. The report covers
misconduct identified internally by the IRS
as well as cases
arising from taxpayer or third-party complaints.
The IRS
has not been required
to record allegations of misconduct against particular employees. In order to
increase the public perception that the IRS
is taking allegations
of misconduct seriously, the House Committee Report for the IRS
Restructuring and
Reform Bill suggested requiring personnel details to be recorded. In the
absence of records containing details about taxpayer complaints of misconduct
against individual employees, the IRS
would not be able to
adequately investigate the allegations or properly prepare its report to
Congress.
IRS
Restructuring and Reform Impact
Records of complaints
against individual IRS employees.--In collecting data for
the IRS
's annual report to Congress on allegations of IRS
employee misconduct,
the IRS
is required to maintain records of taxpayer
complaints on an individual-employee basis (Act Sec. 3701 of the IRS
Restructuring and
Reform Act of 1998). According to the House Committee Report, individual
records are not to be listed in the IRS
's annual report to
Congress on instances of employee misconduct (this report is required by Act
Sec. 1211 of the Taxpayer Bill of Rights 2, P.L. 104-168). However, according
to the House Committee Report, records of misconduct relating to individual IRS
employees are to be
used in evaluating individual employee performance.
·
Effective date. No specific effective date is provided by the
Act. The provision is, therefore, considered effective on July 22, 1998
, the date of
enactment. Individual records must be maintained beginning not later than January 1, 2000
.
ACT SEC . 1211. REPORTS ON
MISCONDUCT OF IRS EMPLOYEES.
On or before June 1 of
each calendar year after 1996, the Secretary of the Treasury shall submit to
the Committee on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate a report on--
(1) all categories of instances involving the
misconduct of employees of the Internal Revenue Service during the preceding
calendar year, and
(2) the disposition during the preceding calendar
year of any such instances (without regard to the year of the misconduct).
*
* *
JCT
General Explanation of 1998 Tax Legislation (Blue Book), JCS-6-98
November 24, 1998
105th Congress
[JOINT COMMITTEE PRINT]
GENERAL EXPLANATION OF TAX LEGISLATION ENACTED IN 1998
PREPARED BY THE STAFF OF THE JOINT COMMITTEE ON TAXATION NOVEMBER 24, 1998
U.S.
GOVERNMENT PRINTING
OFFICE
SUMMARY CONTENTS
PART TWO: INTERNAL REVENUE SERVICE - RESTRUCTURING AND REFORM ACT OF 1998
(H.R. 2676) 14
E. Treasury Office of Inspector General; IRS Office of the Chief
Inspector (secs. 1102 and 1103 of the Act, sec. 7803(d) of the Code, and secs.
2, 8D, and 9 of the Inspector General Act of 1978)
Present and Prior Law
Treasury Inspector General
In general
The Treasury Office of Inspector General ("Treasury IG") was
established in 1988 and charged with conducting independent audits,
investigations and review to help the Department of Treasury accomplish its
mission, improve its programs and operations, promote economy, efficiency and
effectiveness, and prevent and detect fraud and abuse. The Treasury IG derives
its statutory authority under the Inspector General Act of 1978, as amended
("IG Act of 1978").
Appointment and qualifications
The IG Act of 1978 provides that the Treasury IG is selected by the President,
with the advice and consent of the Senate, without regard to political
affiliation and solely on the basis of integrity and demonstrated ability in
accounting, auditing, financial analysis, law, management analysis, public administration,
or investigations. The Treasury IG can be removed from office by the President.
The President must communicate the reasons for such removal to both Houses of
Congress.
Duties and responsibilities
The Treasury IG generally is authorized to conduct, supervise and coordinate
internal audits and investigations relating to the programs and operations of
the Treasury, including all of its bureaus and offices.
29 Special rules apply, however, with
respect to the Treasury IG's jurisdiction over ATF, Customs, the Secret Service
and the IRS
--the four so-called "law enforcement
bureaus." Upon its establishment, the Treasury IG assumed the internal
audit functions previously performed by the offices of internal affairs of ATF,
Customs and the Secret Service. Although the Treasury IG was granted oversight
responsibility for the internal investigations performed by the Office of
Internal Affairs of ATF, the Office of Internal Affairs of Customs, and the
Office of Inspections of the Secret Service, the internal investigation or inspection
functions of these offices remained with the respective bureaus. The Treasury
IG did not assume responsibility for either the internal audit or inspection
functions of the IRS
Office of the Chief
Inspector. However, it was directed to oversee the internal audits and internal
investigations performed by the IRS
Office of the Chief
Inspector.
The Commissioner and the Treasury IG have entered into two Memorandums of
Understanding ("MOUs")
30 to clarify the respective roles of
the IRS
Office of the Chief Inspector and the Treasury
IG in two primary areas: (1) the investigation of allegations of wrongdoing by IRS executives and employees in situations
where the independence of the Office of the Chief Inspector could be
questioned, and (2) oversight by the Treasury IG of the IRS
Office of the Chief
Inspector.31 Pursuant to the 1990 MOU, the
Commissioner agreed to transfer 21 FTEs and $1.9 million from the IRS
appropriation to the
Treasury IG appropriation to be used for the following purposes: (1) oversight
of the operations of the Office of the Chief Inspector; (2) conduct of special
reviews of IRS
operations; (3) investigation of allegations of
misconduct concerning the Commissioner, the Senior Deputy Commissioner, and
employees of the IRS
Office of the Chief
Inspector; and (4) investigation of allegations of misconduct where the
independence of the IRS
Office of the Chief
Inspector might be questioned. With respect to item (4), the Commissioner and
Treasury IG agreed that all allegations of misconduct involving IRS
executives and managers
(Grade 15 and above), as well as any other allegation involving
"significant or notorious" matters were to be referred to the
Treasury IG, and that investigations arising out of such referrals generally
would be conducted by the Treasury IG.
In general, under the IG Act of 1978, Inspectors General are instructed to
report expeditiously to the Attorney General whenever the Inspector General has
reasonable grounds to believe there has been a violation of Federal criminal
law. However, in matters involving criminal violations of the Internal Revenue
Code, the Treasury IG may report to the Attorney General only those offenses
under section
7214
of the Code (unlawful acts of revenue officers or
agents, including extortion, bribery and fraud) without the consent of the
Commissioner.
Authority
The Treasury IG reports to and is under the general supervision of the
Secretary of Treasury, acting through the Deputy Secretary. In general, the
Secretary cannot prevent or prohibit the Treasury IG from initiating, carrying
out, or completing any audit or investigation or from issuing any subpoena
during the course of any audit or investigation.
However, section 8D of the IG Act of 1978 grants the Secretary authority to prohibit
audits or investigations by the Treasury IG under certain circumstances. In
particular, the Treasury IG is under the authority, direction, and control of
the Secretary with respect to audits or investigations, or the issuance of
subpoenas, which require access to sensitive information concerning: (1)
ongoing criminal investigations or proceedings; (2) undercover operations; (3)
the identity of confidential sources, including protected witnesses; (4)
deliberations and decisions on policy matters, including documented information
used as a basis for making policy decisions, the disclosure of which could
reasonably be expected to have a significant influence on the economy or market
behavior; (5) intelligence or counterintelligence matters; (6) other matters
the disclosure of which would constitute a serious threat to national security
or to the protection of certain persons. With respect to audits, investigations
or subpoenas that require access to the above-listed information, the Secretary
may prohibit the Treasury IG from carrying out such audit, investigation or
subpoena if the Secretary determines that such prohibition is necessary to
prevent the disclosure of such information or to prevent significant impairment
to the national interests of the United States
. The Secretary must
provide written notice of such a prohibition to the Treasury IG, who must, in
turn, transmit a copy of such notice to the Committees on Government Reform and
Oversight and Ways and Means of the House and the Committees on Governmental
Affairs and Finance of the Senate.
Access to taxpayer returns and return information
The Treasury IG has access to taxpayer returns and return information under
section 6103(h)(1) of the Code. However, such access is subject to certain
special requirements, including the requirement that the Treasury IG notify the
IRS
Office of the Chief Inspector (or the Deputy
Commissioner in certain circumstances) of its intent to access returns and
return information.
Reporting requirements
Under the IG Act of 1978, the Treasury IG reports to the Congress semiannually
on its activities. Reports from the Treasury IG are transmitted to the
Committees on Government Reform and Oversight and Ways and Means of the House
and the Committees on Governmental Affairs and Finance of the Senate.
Resources
For fiscal year 1997, the Treasury IG had 296 FTEs and total funding of $29.7
million. 174 FTEs were assigned to the Treasury IG's audit function and 61 were
assigned to the investigative function. The remaining FTEs were divided among
the following functions: evaluations, legal, program, technology and
administrative support. Of the total Treasury IG FTEs, approximately 23 were
used for IRS
oversight activities in fiscal year 1997.
IRS
Office of Chief Inspector
The IRS
Office of the Chief Inspector (also known as
the "Inspection Service") was established on October 1, 19
51, in response to
publicity revealing widespread corruption in the IRS
. At the time of its
creation, President Harry S. Truman stated, "A strong, vigorous inspection
service will be established and will be made completely independent of the rest
of the Internal Revenue Service."
In general
The Act establishes a new independent, Treasury Inspector General for Tax
Administration ("Treasury IG for Tax Administration") within the
Department of Treasury. The IRS
Office of the Chief
Inspector is eliminated, and all of its powers and responsibilities are
transferred to the Treasury IG for Tax Administration. The Treasury IG for Tax
Administration has the powers and responsibilities generally granted to
Inspectors General under the IG Act of 1978, without the limitations that
currently apply to the Treasury IG under section D of the Act. The role of the
existing Treasury IG is redefined to exclude responsibility for the IRS
. The Treasury IG for
Tax Administration is under the supervision of the Secretary of Treasury, with
certain additional reporting to the Oversight Board and the Congress.
Duties and responsibilities of Treasury IG for Tax Administration
The Treasury IG for Tax Administration has the present-law duties and
responsibilities currently delegated to the Treasury IG with respect to the IRS
. In addition, the
Treasury IG for Tax Administration assumes all of the duties and
responsibilities currently delegated to the IRS
Office of the Chief
Inspector. The Treasury IG for Tax Administration has jurisdiction over IRS
matters, as well as
matters involving the Board.
Accordingly, the Treasury IG for Tax Administration is charged with conducting
audits, investigations, and evaluations of IRS
programs and operations
(including the Board) to promote the economic, efficient and effective
administration of the nation's tax laws and to detect and deter fraud and abuse
in IRS programs and operations. In this regard, the
Treasury IG for Tax Administration specifically is directed to evaluate the
adequacy and security of IRS
technology on an
ongoing basis. The Treasury IG for Tax Administration is charged with
investigating allegations of criminal misconduct (e.g., Code sections 7212, 7213,
7214, 7216 and new section 7217), as
well as administrative misconduct (e.g., violations of the Taxpayer Bill of
Rights and the Taxpayer Bill of Rights 2, the Office of Government Ethics
Standards of Ethical Conduct and the IRS Supplemental Standards
of Ethical Conduct).
Effective Date
The provision is effective 180 days after the date of enactment (January 18,
1999).
32
Revenue Effect
The provision is estimated to have no effect on Federal fiscal year budget
receipts.
F. Prohibition on Executive Branch Influence Over Taxpayer Audits (sec. 1105 of the
Act and new sec. 7217 of the Code)
Present and Prior Law
There was no prior-law explicit prohibition in the Code against high-level
Executive Branch influence over taxpayer audits and collection activity.
The Internal Revenue Code prohibits disclosure of tax returns and return
information, except to the extent specifically authorized by the Internal
Revenue Code (sec. 6103). Unauthorized disclosure is a felony punishable by a
fine not exceeding $5,000 or imprisonment of not more than five years, or both
(sec. 7213). An action for civil damages also may be brought for unauthorized
disclosure (sec. 7431).
Reasons for Change
The Congress believed that the perception that it is possible that high-level
Executive Branch influence over taxpayer audits and collection activity could
occur has a negative influence on taxpayers' views of the tax system.
Accordingly, the Congress believed that it is appropriate to prohibit such influence.
Explanation of Provision
The provision makes it unlawful for a specified person to request that any
officer or employee of the IRS
conduct or terminate an
audit or otherwise investigate or terminate the investigation of any particular
taxpayer with respect to the tax liability of that taxpayer. The prohibition
applies to the President, the Vice President, and employees of the executive
offices of either the President or Vice President, as well as any individual
(except the Attorney General) serving in a position specified in section 5312
of Title 5 of the United States Code (these are generally Cabinet-level
positions). The prohibition applies to both direct requests and requests made
through an intermediary. In the case of a law enforcement action authorized by
the Attorney General, discussions involving specified persons with respect to
that law enforcement action shall not be considered to be requests made through
an intermediary.
Any request made in violation of this rule must be reported by the IRS
employee to whom the
request was made to the Chief Inspector of the IRS
. The Chief Inspector
has the authority to investigate such violations and to refer any violations to
the Department of Justice for possible prosecution, as appropriate. Anyone
convicted of violating this provision will be punished by imprisonment of not
more than 5 years or a fine not exceeding $5,000 (or both).
Three exceptions to the general prohibition apply. First, the prohibition does
not apply to a request made to a specified person by or on behalf of a taxpayer
that is forwarded by the specified person to the IRS. This exception is
intended to cover two types of situations. The first situation is where a
taxpayer (or a taxpayer's representative) writes to a specified person seeking
assistance in resolving a difficulty with the IRS
. This exception
permits the specified person who receives such a request to forward it to the IRS
for resolution without
violating the general prohibition. The second situation that this first
exception is intended to cover is an audit or investigation by the IRS
of a Presidential
nominee. Under present law (sec. 6103(c)), nominees for Presidentially
appointed positions consent to disclosure of their tax returns and return
information so that background checks may be conducted. Sometimes an audit or
other investigation is initiated as part of that background check. The
Committee anticipates that any such audit or investigation that is part of such
a background check will be encompassed within this first exception.
The second exception to the general prohibition applies to requests for
disclosure of returns or return information under section 6103 if the request
is made in accordance with the requirements of section 6103.
The third exception to the general prohibition applies to requests made by the
Secretary of the Treasury as a consequence of the implementation of a change in
tax policy.
Effective Date
The provision applies to violations occurring after the date of enactment
(after July 22, 1998
).
Revenue Effect
The provision is estimated to have no effect on Federal fiscal year budget
receipts.
G. IRS Personnel Flexibilities
(secs. 1201-1205 of the Act and new chapter 95 of Title 5, U.S.C.)
Violations for which IRS employees may be
terminated
The Act requires the IRS
to terminate an
employee for certain proven violations committed by the employee in connection
with the performance of official duties. The violations include: (1) willful
failure to obtain the required approval signatures on documents authorizing the
seizure of a taxpayer's home, personal belongings, or business assets; (2)
providing a false statement under oath material to a matter involving a
taxpayer; (3) with respect to a taxpayer, taxpayer representative, or other IRS
employee, the violation
of any right under the U.S. Constitution, or any civil right established under
titles VI or VII
of the Civil Rights Act of 1964, title IX of
the Educational Amendments of 1972, the Age Discrimination in Employment Act of
1967, the Age Discrimination Act of 1975, sections 501 or 504 of the
Rehabilitation Act of 1973 and title I of the Americans with Disabilities Act
of 1990; (4) falsifying or destroying documents to conceal mistakes made by any
employee with respect to a matter involving a taxpayer or a taxpayer
representative; (5) assault or battery on a taxpayer or other IRS
employee, but only if
there is a criminal conviction or a final judgment by a court in a civil case,
with respect to the assault or battery; (6) violations of the Internal Revenue Code,
Treasury Regulations, or policies of the IRS (including the Internal
Revenue Manual) for the purpose of retaliating or harassing a taxpayer or other
IRS employee; (7) willful misuse of section 6103 for the
purpose of concealing data from a Congressional inquiry; (8) willful failure to
file any tax return required under the Code on or before the due date
(including extensions) unless failure is due to reasonable cause; (9) willful
understatement of Federal tax liability, unless such understatement is due to
reasonable cause; and (10) threatening to audit a taxpayer for the purpose of
extracting personal gain or benefit.
The Act provides non-delegable authority to the Commissioner to determine that
mitigating factors exist, that, in the Commissioner's sole discretion, mitigate
against terminating the employee. The Act also provides that the Commissioner,
in his sole discretion, may establish a procedure to determine whether an
individual should be referred for such a determination by the Commissioner. The
Treasury IG is required to track employee terminations and terminations that
would have occurred had the Commissioner not determined that there were
mitigation factors and include such information in the IG's annual report.
The provision is effective on the date of enactment (July 22, 1998).
TITLE III . TAXPAYER PROTECTION AND RIGHTS
A. Burden of Proof (sec. 3001 of the Act and new sec. 7491 of the
Code)
Present and Prior Law
Under present law, a rebuttable presumption exists that the Commissioner's
determination of tax liability is correct.
33 "This presumption in favor of
the Commissioner is a procedural device that requires the plaintiff to go
forward with prima facie evidence to support a finding contrary to the
Commissioner's determination. Once this procedural burden is satisfied, the
taxpayer must still carry the ultimate burden of proof or persuasion on the
merits. Thus, the plaintiff not only has the burden of proof of establishing
that the Commissioner's determination was incorrect, but also of establishing
the merit of its claims by a preponderance of the evidence."34
The general rebuttable presumption that the Commissioner's determination of tax
liability is correct is a fundamental element of the structure of the Internal
Revenue Code. Although this presumption is judicially based, rather than
legislatively based, there is considerable evidence that the presumption has
been repeatedly considered and approved by the Congress. This is the case
because the Internal Revenue Code contains a number of civil provisions that
explicitly place the burden of proof on the Commissioner in specifically
designated circumstances.
Under prior law, there was no statutory provision that generally provided
burden of proof rules.
Reasons for Change
The Congress was concerned that individual and small business taxpayers
frequently are at a disadvantage when forced to litigate with the Internal
Revenue Service. The Congress believed that the prior-law burden of proof rules
contributed to that disadvantage. The Congress believed that, all other things
being equal, facts asserted by individual and small business taxpayers who
cooperate with the IRS
and satisfy relevant
recordkeeping and substantiation requirements should be accepted. The Congress
believed that shifting the burden of proof to the Secretary in such
circumstances would create a better balance between the IRS
and such taxpayers,
without encouraging tax avoidance.
The Congress believed that it is inappropriate for the IRS
to rely solely on
statistical information on unrelated taxpayers to reconstruct unreported income
of an individual taxpayer. The Congress also believed that, in a court
proceeding, the IRS
should not be able to
rest on its presumption of correctness if it does not provide any evidence
whatsoever relating to penalties.
Explanation of Provision
The Act provides that the Secretary has the burden of proof in any court
proceeding with respect to a factual issue if the taxpayer introduces credible
evidence with respect to the factual issue relevant to ascertaining the
taxpayer's specified tax liability. The provision applies to income,
35 estate, gift, and
generation-skipping transfer taxes. Four conditions apply. First, the taxpayer
must comply with the requirements of the Internal Revenue Code and the
regulations issued there under to substantiate any item (as under prior law).
Second, the taxpayer must maintain records required by the Code and regulations
(as under prior law). Third, the taxpayer must cooperate with reasonable
requests by the Secretary for meetings, interviews, witnesses, information, and
documents (including providing, within a reasonable period of time, access to
and inspection of witnesses, information, and documents within the control of
the taxpayer, as reasonably requested by the Secretary). Cooperation also includes
providing reasonable assistance to the Secretary in obtaining access to and
inspection of witnesses, information, or documents not within the control of
the taxpayer (including any witnesses, information, or documents located in
foreign countries36 ). A necessary element of cooperating
with the Secretary is that the taxpayer must exhaust his or her administrative
remedies (including any appeal rights provided by the IRS). The taxpayer is not
required to agree to extend the statute of limitations to be considered to have
cooperated with the Secretary. Cooperation also means that the taxpayer must
establish the applicability of any asserted privilege. Fourth, taxpayers other
than individuals or estates must meet the net worth limitations that apply for
awarding attorney's fees (accordingly, no net worth limitation would be
applicable to individuals). Corporations, trusts,37 and partnerships whose net worth
exceeds $7 million are not eligible for the benefits of the provision. The
taxpayer has the burden of proving that it meets each of these conditions,
because they are necessary prerequisites to establishing that the burden of
proof is on the Secretary.
The burden will shift to the Secretary under this provision only if the
taxpayer first introduces credible evidence with respect to a factual issue
relevant to ascertaining the taxpayer's income tax liability. Credible evidence
is the quality of evidence which, after critical analysis, the court would find
sufficient upon which to base a decision on the issue if no contrary evidence
were submitted (without regard to the judicial presumption of IRS
correctness). A
taxpayer has not produced credible evidence for these purposes if the taxpayer
merely makes implausible factual assertions, frivolous claims, or tax
protestor-type arguments. The introduction of evidence will not meet this
standard if the court is not convinced that it is worthy of belief. If after
evidence from both sides, the court believes that the evidence is equally
balanced, the court shall find that the Secretary has not sustained his burden
of proof.
Nothing in the provision shall be construed to override any requirement under
the Code or regulations to substantiate any item. Accordingly, taxpayers must
meet applicable substantiation requirements, whether generally imposed
38 or imposed with respect to specific
items, such as charitable contributions39 or meals, entertainment, travel,
and certain other expenses.40 Substantiation requirements include
any requirement of the Code or regulations that the taxpayer establish an item
to the satisfaction of the Secretary.41 Taxpayers who fail to substantiate
any item in accordance with the legal requirement of substantiation will not
have satisfied the legal conditions that are prerequisite to claiming the item
on the taxpayer's tax return and will accordingly be unable to avail themselves
of this provision regarding the burden of proof. Thus, if a taxpayer required
to substantiate an item fails to do so in the manner required (or destroys the
substantiation), this burden of proof provision is inapplicable.42
In the case of an individual taxpayer, the Secretary has the burden of proof in
any court proceeding with respect to any item of income which was reconstructed
by the Secretary solely through the use of statistical information on unrelated
taxpayers.
Further, the provision provides that, in any court proceeding, the Secretary
must initially come forward with evidence that it is appropriate to apply a
particular penalty to the taxpayer before the court can impose the penalty.
This provision is not intended to require the Secretary to introduce evidence
of elements such as reasonable cause or substantial authority. Rather, the
Secretary must come forward initially with evidence regarding the
appropriateness of applying a particular penalty to the taxpayer; if the
taxpayer believes that, because of reasonable cause, substantial authority, or
a similar provision, it is inappropriate to impose the penalty, it is the
taxpayer's responsibility (and not the Secretary's obligation) to raise those
issues.
Effective Date
The provision applies to court proceedings arising in connection with
examinations commencing after the date of enactment (after July 22, 1998
). In any case in which
there is no examination, the provision applies to court proceedings arising in
connection with taxable periods or events beginning or occurring after the date
of enactment. An audit is not the only event that would be considered an
examination for purposes of this provision. For example, the matching of an
information return against amounts reported on a tax return is intended to be
an examination for purposes of this provision. Similarly, the review of a claim
for refund prior to issuing that refund is also intended to be an examination
for purposes of this provision.
B. Proceedings by Taxpayers
1.
Expansion of authority to award costs and certain fees (sec.
3101 of the Act and sec. 7430 of the Code)
2.
Present and Prior Law
Any person who substantially prevails in any action by or against the United
States in connection with the determination, collection, or refund of any tax,
interest, or penalty may be awarded reasonable administrative costs incurred
before the IRS
and reasonable litigation costs incurred in
connection with any court proceeding. Reasonable administrative costs are
defined as (1) any administrative fees or similar charges imposed by the IRS
and (2) expenses, costs
and fees related to attorneys, expert witnesses, and studies or analyses
necessary for preparation of the case, to the extent that such costs are
incurred after the earlier of the date of the notice of decision by IRS
Appeals or the notice
of deficiency. Net worth limitations apply.
Reasonable litigation costs include reasonable fees paid or incurred for the
services of attorneys, except that, under prior law, the attorney's fees were
not reimbursed at a rate in excess of $110 per hour (indexed for inflation)
unless the court determined that a special factor, such as the limited
availability of qualified attorneys for the proceeding, justified a higher
rate.
Rule 68 of the Federal Rules of Civil Procedure (FRCP) provides a procedure
under which a party may recover costs if the party's offer for judgment was
rejected and the subsequent court judgment was less favorable to the opposing
party than the offer. The offering party's recoverable costs are limited to the
costs (excluding attorney's fees) incurred after the offer was made. The FRCP
generally apply to tax litigation in the district courts and the United States
Court of Federal Claims.
Code section 7431 permits the award of civil damages for unauthorized
inspection or disclosure of return information. The Federal appellate courts were,
under prior law, split over whether a party who substantially prevails over the
United States
in an action under Code
section 7431 is eligible for an award of fees and reasonable costs.
Reasons for Change
The Congress believed that taxpayers should be allowed to recover the
reasonable administrative costs they incur where the IRS
takes a position
against the taxpayer that is not substantially justified, beginning at the time
that the IRS
establishes its initial position by issuing a
letter of proposed deficiency which allows the taxpayer an opportunity for
administrative review by the IRS
Office of Appeals.
The Congress believed that the pro bono publicum representation of taxpayers
should be encouraged and the value of the legal services rendered in these
situations should be recognized. Where the IRS
takes positions that
are not substantially justified, it should not be relieved of its obligation to
bear reasonable administrative and litigation costs because representation was
provided the taxpayer on a pro bono basis.
The Congress was concerned that the IRS
may continue to
litigate issues that have previously been decided in favor of taxpayers in
other circuits. The Congress believed that this places an undue burden on
taxpayers that are required to litigate such issues. Accordingly, the Congress
believed it is important that the court take into account whether the IRS
has lost in the courts
of appeals of other circuits on similar issues in determining whether the IRS
has taken a position
that is not substantially justified and thus liable for reasonable
administrative and litigation costs.
The Congress believed that settlement of tax cases should be encouraged
whenever possible. Accordingly, the Congress believed that the application of a
rule similar to FRCP 68 is appropriate to provide an incentive for the IRS
to settle taxpayers'
cases for appropriate amounts, by requiring reimbursement of taxpayer's costs
when the IRS
fails to do so.
The Congress believed that when the IRS
violates taxpayer's
right to privacy by engaging in unauthorized inspection or disclosure
activities, it is appropriate to reimburse taxpayers for the costs of their
damages.
Explanation of Provision
The Act:
(1) Moves the point in time after which reasonable administrative costs can be
awarded to the date on which the first letter of proposed deficiency that
allows the taxpayer an opportunity for administrative review in the IRS
Office of Appeals is
sent;
(2) Raises the hourly rate to $125 per hour, which parallels the rate utilized
under the Equal Access to Justice Act (the statute that authorizes the awarding
of attorney's fees in non-tax Federal cases). This new cap will continue to be
indexed for inflation (as under prior law). Provides that the difficulty of the
issues presented or the unavailability of local tax expertise can be used to
justify an award of attorney's fees of more than the statutory limit of $125
per hour;
(3) Permits the award of reasonable attorney's fees to specified persons who
represent for no more than a nominal fee a taxpayer who is a prevailing party;
(4) Provides that in determining whether the position of the United States was
substantially justified, the court shall take into account whether the United
States has lost in other courts of appeal on substantially similar issues;
(5) Provides that if a taxpayer makes an offer after the taxpayer has a right
to administrative review in the IRS
Office of Appeals, the IRS
rejects the offer, and
later the IRS
obtains a judgment against the taxpayer in an
amount that is equal to or less than the taxpayer's offer for the amount of the
tax liability (excluding interest), reasonable costs and attorney's fees from
the date of the offer would be awarded; and
(6) Clarifies that the award of attorney's fees is permitted in actions for
civil damages for unauthorized inspection or disclosure of taxpayer returns and
return information. Fees are payable by the United States
only when the United States
is the defendant and
the plaintiff is a prevailing party. Also, individual defendants (such as State
employees or contractors) may be liable for attorneys' fees and costs in cases
where the United States
is not a party,
whenever they are found to have made a wrongful disclosure.
Effective Date
The provision is effective with respect to costs incurred and services
performed more than 180 days after the date of enactment (after January 18, 1999
).
Revenue Effect
The provision is estimated to have no effect on Federal fiscal year budget
receipts in 1998, and to reduce Federal fiscal year budget receipts by $11
million in 1999, $12 million in 2000, $13 million in 2001, $14 million in 2002,
$16 million in 2003, $18 million in 2004, $19 million in 2005, $20 million in
2006, and $22 million in 2007.
2. Civil damages for collection actions (sec. 3102 of the Act and
secs. 7426 and 7433 of the Code)
Prior Law
A taxpayer could sue the United States
for up to $1 million of
civil damages caused by an officer or employee of the IRS
who recklessly or
intentionally disregards provisions of the Internal Revenue Code or Treasury
regulations in connection with the collection of Federal tax with respect to
the taxpayer.
Reasons for Change
The Congress believed that taxpayers should also be able to recover economic
damages they incur as a result of the negligent disregard of the Code or
regulations by an officer or employee of the IRS
in connection with a
collection matter. The Congress also believed that taxpayers should be able to
recover civil damages they incur as a result of a willful violation of the
Bankruptcy Code by an officer or employee of the IRS
. As third parties may
also be subject to IRS
collection actions, the
Congress believed it appropriate to afford them the opportunity to recover
damages for unauthorized collection actions.
Explanation of Provision
The Act permits recovery of up to $100,000 in civil damages caused by an
officer or employee of the IRS
who negligently
disregards provisions of the Internal Revenue Code or Treasury regulations in
connection with the collection of Federal tax with respect to the taxpayer. The
provision also permits recovery of up to $1 million in civil damages caused by
an officer or employee of the IRS
who willfully violates
provisions of the Bankruptcy Code relating to automatic stays or discharges.
The provision also provides that persons other than the taxpayer may sue for
civil damages for unauthorized collection actions.
Effective Date
The provision is effective with respect to actions of officers or employees of
the IRS
occurring after the date of enactment (after July 22, 1998
).
IRS Notice 99-27, I.R.B. 1999-21, 4, May 5, 1999
SECTION I.
PURPOSE
Section 1203 of the Internal Revenue
Service Restructuring and Reform Act of 1998 (the “RRA”) provides generally
that IRS
employees must be terminated from
Federal employment if they violate certain rules in connection with the
performance of their official duties. The statute also allows the Commissioner
to mitigate the sanction of termination. This Notice requests public comments
on the proper interpretation of section 1203.
SECTION II. BACKGROUND
The basic rules governing
disciplinary actions against federal civilian employees are set forth in
Chapter 75 of Title 5 of the United States Code. In general, these rules permit
discipline, up to and including termination of employment, to be imposed for
such cause as will promote the efficiency of the federal service. Agencies
generally have discretion as to whether to impose disciplinary action and as to
the form and severity of the action to be imposed, based upon the facts and
circumstances of the situation. Most agency decisions concerning the imposition
of discipline are subject to review by parties outside the agency, e.g.,
in arbitration or by an appeal to the Merit Systems Protection Board.
RRA section 1203 made significant
changes in these general rules as applied to IRS
employees. Specifically, section
1203 provides that an IRS
employee must be terminated from employment if there is a
final administrative or judicial determination that the employee violated any
of the rules set forth in sections 1 203(b)(1 )-(1 0) in the performance of
official duties. In addition, section 1203(c) of the statute provides that the
Commissioner may decide to take a personnel action other than removal if
certain mitigating factors are present; however, this decision may only be made
by the Commissioner personally and is not subject to review in any
administrative or judicial proceeding. The full text of section 1203 is attached
at Appendix A.
SECTION III
. INTERPRETATION OF SECTION 1203
The Internal Revenue Service requests comment with
respect to the following matters under RRA section 1203:
A. Existing personnel law and
procedures will be applied in interpreting section 1203, unless explicitly
provided otherwise. For example, current procedural requirements of personnel
law, including advance written notice, an opportunity for an oral and written
reply, and a right to appeal the substance of the charges, will be provided
employees who are subject to discipline under section 1203.
B.
The current personnel law definition
of “employee” will be applied in interpreting section 1203. Section 1203 is
triggered with respect to “any employee” of the IRS
. In implementing section 1203, the IRS
will apply the definition of
“employee” in 5 U.S.C. 2105, that is, an individual who is appointed in the
civil service, engaged in the performance of a Federal function under authority
of law, and subject to the supervision of an individual already appointed in
the civil service while engaged in the performance of the duties of the
position. As a consequence of this definition, and since section 1203 applies
only to acts or omissions of an employee of the IRS
, any acts or omissions that
occurred prior to the individual becoming an “employee” of the IRS
would not be within the scope of
section 1203.
C.
Acts or omissions of IRS
employees committed “in the
performance of the employee’s official duties” include only those acts or
omissions listed under section 1203(b) that have a nexus to an employee’s
position in the IRS
. To establish nexus, a clear and direct relationship must
be demonstrated between the act or omission of the employee that constitutes
the grounds for the employee’s removal and either the employee’s ability to
accomplish his or her duties satisfactorily or some other legitimate
governmental interest promoting the “efficiency of the service,” as required by
5 U.S.C. 7513(a). See, Doe v. Hampton
, 566 F.2d 265, 272 (D.C. Cir. 1977).
Example 1. While at home after duty hours,
an IRS
employee becomes involved in a
physical argument with his neighbor. The neighbor sues the employee for assault
and battery and a court finds the employee liable for civil assault and
battery. Is the agency mandated to terminate the employment of the employee
pursuant to section 1203?
Answer. No. Section 1203 is triggered only
with respect to acts or omissions committed in the performance of the
employee’s official duties. Under the facts presented here, the IRS
employee’s conduct was off-duty
conduct having no connection to the IRS
. Therefore, the civil judgment
finding the employee liable for assault and battery on his neighbor would not
fall under section 1203(b)(5). Additionally, the assault and battery was not
“on a taxpayer, taxpayer representative, or other employee of the IRS
,” as is required by section 1
203(b)(5). See F. for a discussion of the meaning of taxpayer and
taxpayer representative.
Example 2. A taxpayer tells the Internal
Revenue Agent who is auditing the taxpayer that the Agent is incompetent. While
off duty, the Agent sees the taxpayer at a restaurant and tells him that he did
not appreciate the comment. The Agent pushes the taxpayer. A court finds the
Agent liable for civil assault and battery. Is the agency required to terminate
the employment of the employee pursuant to section 1203?
Answer. Yes. Under the facts presented, the
physical altercation, while occurring off-duty, resulted from the Agent’s
interaction as an IRS
employee with the taxpayer. Thus, the Agent’s off duty
conduct has a nexus, or a clear and direct relationship, to the efficiency of
the service. Therefore, the civil judgment finding the employee liable for
civil assault and battery would fall within the scope of section 1203(b)(5).
D.
Acts or omissions of Internal
Revenue Service employees will be subject to the discipline prescribed by
section 1203 only if those acts are taken, or those omissions are made, with
some degree of intent.
Some of the acts or omissions specified in section 1203 that
are subject to the discipline prescribed by that section appear to be based
upon standards that are found in the Internal Revenue Code (IRC). Thus, section
1203 (b)(8) mandates removal of an IRS
employee whose “failure to file any
return of tax required under the Internal Revenue Code ... on or before the
date prescribed therefore” was “willful.” This language mirrors that found in
IRC section 7203. Similarly, section 1203 (b)(9) mandates removal of an
employee whose “understatement of Federal tax liability” was “willful.” This
language implicates concepts found in IRC section 7201. The IRS
will employ standards similar to
those applicable to these IRC provisions in implementing sections 1 203(b)(8)
and 1203(b)(9). To support an action under either of these sections, the IRS
must prove by a preponderance of
the evidence that the IRS
employee’s act or omission was a voluntary, intentional
violation of a known legal duty.
Section 1 203(b)(1) requires removal of an IRS
employee who willfully fails to
obtain signatures on documents authorizing the seizure of certain types of
property. Section 1203(b)(7) requires removal of employees who engage in
“willful” misuse of IRC section 6103 “for the purpose of concealing information
from a congressional inquiry.” In order to support an action under either of
these provisions, the IRS
must prove by a preponderance of the evidence that the
employee’s act or omission was made with actual knowledge of the failure to
comply with, or with a reckless disregard of, the requirements for obtaining
approval signatures or for disclosing information in response to a
congressional inquiry, as the case might be.
E.
A final administrative or judicial
determination pursuant to section 1203(a) is a determination concerning an
individual in a proceeding in which the individual is granted full rights to
participate as a party to the action or proceeding. Such a determination
becomes final when:
(1) if a judicial proceeding, all appeals have been
exhausted or, if no appeals are taken, the time for all appeals has expired; or
(2) if an administrative proceeding:
(i)
all
appeals have been exhausted, or if no appeals are taken, the time for all
appeals has expired, or
(ii)
a
disciplinary decision is made by the deciding official at the conclusion of a
process that included an advance written notice to the individual of the
proposed action to be taken.
Example 1. A finding is made in an EEO case
that an IRS
employee has been discriminated
against in violation of Title VII
of the Civil Rights Act of 1964. Is the finding of
discrimination a final administrative determination such that section 1203(a)
would require the removal of all IRS
employees whose conduct may have
contributed to the finding of discrimination?
Answer. No. Equal Employment Opportunity
cases are filed against the agency, and not against specific individual
employees. Therefore, IRS
employees, other than the complainant, are not parties to
the proceeding, and consequently are not afforded the opportunity to submit
evidence or to call or cross-examine witnesses. The finding in the EEOC
decision concerning discrimination is not a final administrative determination
within the meaning of section 1203 with respect to IRS
employees whose conduct may have
contributed to the finding.
However, in every case in which
there is a finding of discrimination, the finding will be reviewed by the
Office of the National Director, EEO and Diversity, pursuant to specific
procedures established by the IRS
. These procedures will require that the Office of
the National Director, EEO and Diversity, determine whether to refer the matter
to the appropriate office for further action. If management makes a
determination that any employee committed an act or omission within the
coverage of section 1203(b), the employee will be issued advance written notice
of the proposal to remove the employee from the IRS
. The statutory and regulatory
requirements of Title 5, United States Code, and Title 5, Part 752, Code of
Federal Regulations (CFR
), must be followed in terminating the employment of the
employee under section 1203. Moreover, the final decision to remove the
employee from the IRS
is subject to appeal, such as to the Merit Systems
Protection Board (MSPB). While the employee may challenge the charges, a
reviewing body may not mitigate the adverse action of removal if the facts
establish a violation of section 1203.
Example 2. An IRS
employee files a formal complaint
of discrimination, alleging that his manager has retaliated against him by
giving him a low performance evaluation because of the employee’s prior EEO
activity. The case is settled, and a settlement agreement is signed. Is this a
final administrative determination that the manager has violated section
1203(b)?
Answer. No. A settlement agreement is not a
determination that discrimination has occurred. Further, the manager was not a
party to the discrimination complaint process or to the settlement agreement.
The parties are the agency and the employee alleging discrimination. Therefore,
the analysis set forth in Example 1 is also applicable to this situation.
In addition, cases in which an
allegation of discrimination is raised, but there is no finding or settlement,
will be referred to an appropriate office to determine whether there should be
further action.
F. “Taxpayer,” “taxpayer representative,” and “person” will have the
following meanings:
A “taxpayer” means any person
subject to any internal revenue law, and with respect to whom an act or
omission is undertaken because of that person’s status as a taxpayer.
A “taxpayer representative” means
any person who acts in a representative capacity
to a taxpayer, and with respect to whom an act or omission is undertaken
because of that person’s status as a representative of a taxpayer.
A “person” includes an individual,
trust, estate, partnership, association, company or corporation.
Example 1. An IRS
employee is stopped by a police
officer for speeding. The employee tells the police officer that he will be
audited if the employee receives a ticket. The police officer does not have an
open, ongoing dispute with the IRS
. Does the employee’s conduct come within the scope
of section 1 203(b)(1 0)?
Answer. Yes. The definition of taxpayer does
not require that the person have an ongoing dispute with the IRS
. The police officer fits the
definition of a taxpayer since the employee’s conduct is directed toward the
police officer because that officer is subject to the internal revenue
laws. Additionally, the purpose of the IRS
employee’s conduct was to extract
personal gain or benefit. Based on these facts, a nexus would also exist (see C. above).
Example 2. A taxpayer service representative is
driving her car and sees an empty parking spot. Before the taxpayer service
representative can pull into that parking space, another driver parks her car
there. Unknown to the employee, the other person represents taxpayers. The
employee, unable to control her anger, shoves the taxpayer representative and
is eventually criminally convicted of assault and battery. Does the employee’s
conduct come within the ambit of section 1203(b)(5)?
Answer. No. The employee’s conduct, although
directed against someone who represents a taxpayer, was not directed against
that individual because she represents a taxpayer. The employee did not
know the individual represented taxpayers, and even if she had known, her
conduct toward the representative was unrelated to that individual’s capacity
as a representative. Therefore, the employee’s conduct does not constitute an
assault and battery upon a taxpayer representative.
G.
The false statement referred to in
subsection 1203(b)(2) must be with respect to a material matter involving a
taxpayer or taxpayer representative, as those terms are defined in F. To
be material, the false statement must be one that would have a natural tendency
to influence, or be capable of influencing, a decision on the matter involving
a taxpayer or taxpayer representative.
Example 1. A Revenue Agent intentionally
falsely states under oath that a taxpayer had shown him receipts to document a
particular deduction when he had not seen any such receipts. Is this false
statement within the coverage of section 1203(b)(2)?
Answer. Yes. The Revenue Agent’s false sworn
statement that the taxpayer had shown him receipts to document a particular
deduction would have a natural tendency to influence, or the capacity to
influence, a decision on the matter involving the taxpayer or taxpayer
representative. Thus, it is within the coverage of section 1203(b)(2).
Example 2. A Revenue Officer is being
questioned about his use of annual leave. The Revenue Officer provides a
statement to the Treasury Inspector General for Tax Administration, under oath,
in which he intentionally falsely states that he was at the office all day each
of the prior six Fridays. Is this false statement within the coverage of
section 1 203(b)(2)?
Answer. No. The Revenue Officer’s false
statement to the Treasury Inspector General for Tax Administration does not
have a natural tendency to influence, or the capacity to influence, a decision
on a matter involving a taxpayer or taxpayer representative. Therefore, it
would not be within the coverage of section 1203(b)(2). However, even though
the IRS
would not be required to terminate
the employment of the Revenue Officer pursuant to section 1203(b)(2), the IRS
may discipline the Revenue Officer
up to and including termination from Federal service.
H.
Section 1203 applies only to acts or
omissions occurring on or after July 22, 1998
. This position is based on existing
law regarding the retroactivity of civil statutes. See, Taylor
v. Rubin, No. 97-2398 (W.D. LA Sept. 21, 1998
). In general, where statutory provisions are
substantive, in that they create new rights or impair vested rights, impose new
duties, or attach new disabilities regarding past transactions, as opposed to
merely procedural provisions, the rule is that the provision will not apply
retroactively absent a clear congressional intent otherwise. Landgraf v. USI Film Products, 114 S.Ct. 1483 (1994) (holding that
punitive and compensatory damages provision of the 1991 Civil Rights Act
amending Title VII
did not apply retroactively to a case that was pending when
the statute was enacted, since there was not clear congressional intent
concerning retroactivity). See also Hughes
Aircraft Co. v. U.S. Ex Rel. Schumer, 117 S.Ct. 1871, 1876 (1997)
(The Court affirmed the “time-honored” presumption against giving retroactive
effect to legislation unless Congress had clearly manifested its intent to the
contrary, holding that a 1986 amendment to the qui tam statute which would deprive defendant of a defense,
did not apply retroactively).
SECTION V. COMMENTS
Comments are requested on the
matters discussed in this notice and on any other provisions of section 1203.
Comments should be submitted by June 30, 1999
. Written comments may be submitted
to the Internal Revenue Service, P.O. Box 7604, Ben Frank
lin Station, Attention: CC:DOM
:CORP:R (Notice 99-27), Room 5226,
Washington, DC 20044. Submissions may be hand-delivered between the hours of 8 a.m.
and 5 p.m.
to: CC:DOM
:CORP:R (Notice 99-27), Courier’s
Desk, Internal Revenue Service, 1111 Constitution Avenue NW
,
Washington
,
DC
. Alternatively, taxpayers may
submit comments electronically via the Internet by selecting the “Tax Regs”
option on the IRS
Home Page, or by submitting comments directly to the IRS
Internet site at:
http://www.irs.ustreas.gov/prod/tax_regs/comments.html Comments will be
available for public inspection and copying.
For further information regarding
this notice, contact Lee Patton of the Office of Associate Chief Counsel
(Finance & Management), General Legal Services Division, at 202-283-7900
(not a toll-free call).
APPENDIX A
SEC. 1203. TERMINATION OF EMPLOYMENT
FOR MISCONDUCT
(a)
IN
GENERAL.– Subject to subsection (c), the Commissioner of Internal Revenue shall
terminate the employment of any employee of the Internal Revenue Service if
there is a final administrative or judicial determination that such employee
committed any act or omission described under subsection (b) in the performance
of the employee’s official duties. Such termination shall be a removal for
cause on charges of misconduct.
(b)
 ACTS OR OMISSIONS.– The acts or
omissions referred to under subsection are–
(1)
willful failure to obtain the
required approval signatures on documents authorizing the seizure of a
taxpayer’s home, personal belongings, or business assets;
(2)
providing
a false statement under oath with respect to a material matter involving a
taxpayer or taxpayer’s representative;
(3)
with
respect to a taxpayer, taxpayer representative, or other employee of the
Internal Revenue Service, the violation of–
(A)
any right under the Constitution of the United States
; or
(B)
any civil right established under–
(i)
title VI or VII
of the Civil
Rights Act of 1964;
(ii)
title IX of the Education Amendments of 1972;
(iii)
the Age
Discrimination in Employment Act of 1967;
(iv)
the Age
Discrimination Act of 1975;
(v)
section 501 or 504 of the Rehabilitation Act of 1973; or
(vi)
title I of the
Americans with Disabilities Act of 1990;
(4)
falsifying
or destroying documents to conceal mistakes made by any employee with respect
to a matter involving a taxpayer or taxpayer representative;
(5)
assault or battery on a taxpayer, taxpayer representative,
or other employee of the Internal Revenue Service, but only if there is a
criminal conviction, or a final judgment by a court in a civil case, with
respect to the assault or battery;
(6)
violations
of the Internal Revenue Code of 1986, Department of Treasury regulations, or
policies of the Internal Revenue Service (including the Internal Revenue
Manual) for the purpose of retaliating against, or harassing, a taxpayer,
taxpayer representative, or other employee of the Internal Revenue Service;
(7)
willful
misuse of the provisions of section 6103 of the Internal Revenue Code of 1986
for the purpose of concealing information from a congressional inquiry,
(8)
willful failure to file any return
of tax required under the Internal Revenue Code of 1986 on or before the date
prescribed therefore (including any extensions), unless such failure is due to
reasonable cause and not to willful neglect,
(9)
willful
understatement of Federal tax liability, unless such understatement is due to
reasonable cause and not to willful neglect, and
(10)
threatening
to audit a taxpayer for the purpose of extracting personal gain or benefit.
(c) DETERMINATION OF COMMISSIONER.--
(1)
IN GENERAL.– The Commissioner of
Internal Revenue may take a personnel action other than termination for an act
or omission under subsection (a).
(2)
DISCRETION.–
The exercise of authority under paragraph (1) shall be at the sole discretion
of the Commissioner of Internal Revenue and may not be delegated to any other
officer. The Commissioner of Internal Revenue, in his sole discretion, may
establish a procedure which will be used to determine whether an individual
should be referred to the Commissioner of Internal Revenue for a determination
by the Commissioner under paragraph (1).
(3)
NO
APPEAL.– Any determination of the Commissioner of Internal Revenue under this
subsection may not be appealed in any administrative or judicial proceeding.
(d) DEFINITION.– For purposes of the
provisions described in clauses (i), (ii), and (iv) of subsection (b)(3)(B),
references to a program or activity receiving Federal financial assistance or
an educational program or activity receiving Federal financial assistance shall
include any program or activity conducted by the Internal Revenue Service for a
taxpayer.
MEMORANDUM OF UNDERSTANDING
BETWEEN
THE INTERNAL REVENUE SERVICE
AND
THE TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
REGARDING INVESTIGATIVE RESPONSIBILITY
Section
I.
Purpose
This Memorandum of
Understanding (MOU) constitutes an agreement between the Internal Revenue
Service (IRS
) and the Office of the Treasury Inspector General for Tax
Administration (TIGTA) to clarify the responsibility of the IRS
and TIGTA to investigate conduct
involving IRS
employees and/or potential offenses under the Internal Revenue laws or
related statutes.
For purposes of definition,
"IRS
CI" refers to special agents
and other employees, as appropriate, of the IRS
Criminal Investigation function.
"TIGTA" refers to special agents and other employees, as appropriate,
of TIGTA.
While this MOU’s purpose is
to delineate investigatory responsibility, the fact that a particular
investigation and/or prosecution recommendation was accomplished contrary to
the provisions of this MOU will not constitute a defense for any person.
Section II.
Responsibilities
It is understood and agreed
that IRS
CI has responsibility to
investigate violations of the Internal Revenue Code’s substantive criminal tax
provisions, such as, § 7201 attempted evasion, § 7203 failure to file or pay, §
7206 subscription of false documents, § 7212(a) corrupt endeavors to obstruct
or impede the administration of the Internal Revenue Code, with exceptions
noted below, and § 7212(b) forcible rescue of seized property; the Bank Secrecy
Act 31 U.S.C. § 5311 et seq.; and the money laundering forfeiture and criminal
provisions in 18 U.S.C. §§1956 and 1957.
Similarly, it is understood
and agreed that TIGTA has responsibility to protect the IRS
against attempts to corrupt or
threaten IRS
employees. TIGTA investigates conduct violations by IRS
employees, and other allegations
regarding their integrity, such as disclosure violations punishable under
I.R.C. § 7213, unauthorized inspection of returns or return information
punishable under I.R.C. § 7213A, unlawful acts punishable under I.R.C. § 7214,
wrongful disclosure or use of information by other persons made punishable
under I.R.C. § 7216, unlawful influence over taxpayer audits and other
investigations punishable under I.R.C. § 7217, and the money laundering
provisions in 18 USC
§§1956 and 1957 where the underlying conduct is
specifically subject to investigation by TIGTA. Additionally, TIGTA has
responsibility to investigate acts, such as filing harassing liens, done to
intimidate, influence, tamper with or retaliate against Service employees and
their families, and other related persons such as witnesses and informants,
punishable under I.R.C. § 7212(a).
During the course of
investigating allegations within the investigative responsibility of one
bureau, the investigation may disclose information indicating the commission of
an offense within the investigative responsibility of the other bureau. Except
as otherwise provided in this MOU, the relevant information will be promptly
provided to the other bureau for investigation.
Some investigations by
their nature involve allegations within the responsibility of both bureaus,
including employee misconduct involving substantive tax statutes, certain tax
preparer cases, etc. Cases involving allegations of substantive criminal tax
violations by employees will be jointly investigated by TIGTA and IRS
CI. Where information indicates the
involvement of an IRS
CI employee in any such offense, the responsible TIGTA
Regional Inspector General for Investigations and the responsible IRS
CI Director of Investigations will
ensure that the investigation is conducted by IRS
CI personnel from a district other
than the district to which the targeted IRS
CI employee is assigned.
The remainder of this
section addresses responsibilities in particular situations.
A. Armed Escort Duties. IRS
CI has primary responsibility for
providing armed escorts as appropriate for Service personnel, informants and
witnesses, and other eligible persons. TIGTA is available to assist CI in
providing armed escorts in emergency circumstances or when otherwise necessary.
B. Assaults and Threats. Assaults upon and threats to
Service employees or their families, as well as to informants and witnesses,
done to intimidate, influence, tamper with or retaliate against such persons,
in violation of 26 U.S.C. § 7212(a), are primarily the investigative responsibility
of TIGTA. However, when the assault or threat occurs in the course of IRS
CI armed escort assignments or
during the execution of search or arrest warrants, IRS
CI may take appropriate enforcement
action, such as place the attacker under arrest. CI will promptly notify TIGTA
and provide documentation concerning the incident and action taken. TIGTA will
determine what investigation by TIGTA is warranted and will initiate
appropriate processing of Potentially Dangerous Taxpayer determinations.
C. Corrupt Endeavors to
Impede. Allegations
of corrupt interference with tax administration involve the violation of the
"omnibus clause" of 26 U.S.C. § 7212(a). Consistent with Service and
Department of Justice Tax Division policy, the "omnibus clause" of §
7212(a) is appropriate in cases involving efforts to secure an unlawful
advantage or benefit for someone; examples of such conduct include acts done to
impede an audit, examination or investigation such as destruction of records or
creation of false records, actions to harass or intimidate Service employees or
other relevant persons, and acts done with undercover agents that will not
support conspiracy charges under 18 U.S.C. § 371.
TIGTA has investigative
responsibility of § 7212(a) corrupt interference allegations which involve
actions designed to harass IRS
employees or interfere with activities or functions of IRS
personnel such as filing of
harassing liens which are designed to intimidate, influence, tamper with or
retaliate against Service employees and their families, or other related
persons such as witnesses and informants. Criminal Investigation has
investigative responsibility for § 7212(a) corrupt interference allegations
which involve substantive tax violations of non-employees or interference with other
activities within the responsibility of IRS
CI.
D. Forcible Rescue. Forcible rescues of property from
the Service, in violation of 26 U.S.C. § 7212(b), will be the investigative
responsibility of IRS
CI. Assaults and threats in connection with such forcible
rescues will be addressed, as described in section B above.
E. Bribery. TIGTA will have investigative
responsibility in cases involving allegations of bribery, including attempted
bribery of IRS
employees and cases where Service employees are suspected of soliciting
or receiving bribes. Additionally, TIGTA will have responsibility in cases
where non-Service personnel are alleged to have solicited or received bribes
while employed by the Service. In cases where such bribe offers occur in the
course of raids or arrests executed by or at the behest of IRS
CI, IRS
CI will take appropriate action and
notify TIGTA of the event as soon as possible.
Certain allegations of
bribery (such as those involving return preparers) may be indicative of
potential substantive tax violations (refund schemes, etc.). Other
investigations which uncover evidence that bribes have been paid in the past
could also be indicative of potential money laundering or Bank Secrecy Act
violations. As with all investigations, evidence of commission of an offense
within the investigative jurisdiction of IRS
CI will be promptly provided by
TIGTA to IRS
CI for investigation.
F. Return Preparer
Cases. Consistent
with the principles set forth in the introductory paragraphs of Section II, allegations
of misconduct by Service personnel will be investigated by TIGTA. If, in
addition, there are any indications of substantive tax violations, such as,
preparing or filing, or assisting in preparing or filing false documents,
attempts to evade assessment or payment of tax, by an IRS
employee, the investigation will be
conducted jointly by TIGTA and IRS
CI.
IRS
CI and TIGTA acknowledge that there
will be joint interest and investigative responsibility in cases alleging
access to or influence over Service personnel where there are also allegations
of substantive tax, Bank Secrecy Act, and/or money laundering violations by
non-Service personnel. IRS
CI and TIGTA will coordinate investigative activities in
these cases. Evidence of commission of an offense within the investigative
jurisdiction of the other bureau will be promptly provided to that bureau for
investigation.
By the very nature of their
profession, illegal tax activities involving return preparers, where there is
no substantive evidence of Service personnel involvement, will fall within IRS
CI’s area of responsibility. Such
illegal return preparer activities often engender immediate harm to the tax
system’s financial integrity. Therefore, IRS
CI will be notified, in writing,
whenever TIGTA determines that a return preparer is potentially involved in
illegal activities. Upon discovery, TIGTA will telephonically notify IRS
CI, in addition to the written
notification. Timeliness of notification is particularly important during the
filing season. This notification will be made at no lower than the first line
supervisory level.
G. Harassing Liens. Consistent with the discussion at
section II, item C above, TIGTA has primary responsibility in cases where
Service employees or other persons associated with tax administration are
victimized by persons filing meritless liens or other documents designed to
harass or intimidate Service employees. TIGTA will refer such violations to the
Tax Division, Department of Justice, as violations of IRC § 7212(a), in accordance
with existing procedures. In such cases, if information is obtained suggesting
substantive tax violations have also been committed, TIGTA will request
assistance of IRS
CI who will have responsibility to investigate such allegations and
coordinate findings with TIGTA. Tax violations will be processed through IRS
District Counsel for referral to
DOJ Tax Division.
H. Disclosure
Violations. TIGTA
will have investigative responsibility over allegations of disclosures of or
unauthorized inspection of returns or return information by Service personnel
or other persons, in violation of I.R.C. § 7213, § 7213A or § 7216.
I. Tax and Financial
Crime-Related Employee Misconduct. Allegations of misconduct by Service employees are the
investigative responsibility of TIGTA. Although IRS
CI has been delegated
responsibility to investigate substantive tax offenses and related offenses,
the overriding goal of the Service to maintain the integrity of its workforce
mandates that disputes involving joint investigations regarding Service
personnel ultimately be resolved by the TIGTA, as detailed in section III
.
In cases where Service
employees are allegedly committing substantive tax or financial offenses, e.g.,
filing false returns or other documents, willfully failing to file returns or
pay taxes, willfully attempting to evade assessment or payment of taxes, filing
false claims for refunds, conspiring to defraud the United States or to commit
an offense against the United States ("Klein conspiracy"), TIGTA will
contact IRS
Criminal Investigation to obtain
assistance in investigating the tax and financial aspects of any allegations.
TIGTA will request and IRS
CI will provide a Special Agent to assist in evaluating
and, if appropriate, conducting the investigation for substantive tax or
financial offenses. TIGTA's request for assistance in such investigations will
normally be made by the TIGTA Supervisor in Charge to the IRS
CI Group Manager. The IRS
CI special agent will have
responsibility to investigate such allegations pursuant to delegated
responsibilities to investigate substantive tax offenses and related offenses.
In any tax or financial crime investigation independently initiated by IRS
CI which is found to involve an IRS
employee, IRS
CI will immediately notify TIGTA of
the allegations. A recording memorandum will be placed into the investigative
file denoting the notification.
If, after initial review of
an employee tax allegation, the IRS
CI special agent working with TIGTA believes that no
criminal violation has occurred, the special agent should consult with IRS
CI management for concurrence and
advise TIGTA accordingly. If TIGTA concurs that no criminal violations have
occurred, the IRS
CI special agent will share investigative findings with TIGTA and
provide a report to TIGTA summarizing the tax issues and investigative activity
to date. The IRS
CI special agent will not include conclusions or recommendations in the
report. If approved by TIGTA management, the report will become an attachment
to the Report of Investigation (ROI). This same process will be followed if IRS
CI conducts an investigation but
does not believe there is a reasonable probability of conviction. However, if
tax charges are recommended by IRS
CI and agreed to by TIGTA, the report will be submitted
through normal IRS
CI channels to the appropriate TIGTA Regional Inspector
General for Investigations (RIGI). The RIGI will be responsible for forwarding
the report to IRS
District Counsel.
If employee tax violations
are alleged to have been committed by an IRS
CI employee, the information will
be provided by the responsible TIGTA RIGI to the responsible IRS
CI Director of Investigations. The IRS
CI DI will ensure that the assigned
IRS
CI special agent is from a district
other than the district to which the targeted IRS
CI employee is assigned.
J. Impersonation of IRS Employee. TIGTA has investigative
responsibility in all cases in which non-employees are impersonating or
otherwise holding themselves out to be IRS
employees or wrongly using IRS
seals or other identifying marks,
e.g., under 31 U.S.C. § 333(d).
K. Coordination of
Investigation and Referral. In cases in which either TIGTA or IRS
CI becomes aware that they are
investigating the same person, entity, or conduct as the other, they will confer
and coordinate to assure that the investigations do not conflict. In all such
cases, if the tax investigation involves a Service employee, the investigation
of that subject shall fall within the purview of TIGTA with an IRS
CI special agent assigned as previously
defined.
Section III. Resolution of Disagreements
TIGTA personnel will have
the final authority to investigate and/or recommend prosecution to IRS
Counsel of IRS
personnel for tax violations.
However, TIGTA will rely heavily on IRS
CI’s expertise to investigate the
tax issues. Disagreements between IRS
CI and TIGTA personnel regarding
authority to investigate, the investigative process, and/or disposition of a
particular case will initially be considered by the responsible IRS
CI Group Manager and the TIGTA
Supervisor in Charge. Matters unresolved at this level will be referred through
each bureau's designated chain of authority, in the following sequence, until
reaching a level at which agreement is reached:
(1) to the IRS
CI Branch Chief and TIGTA Deputy
Regional Inspector General for Investigations;
(2) to the Chief, IRS
CI, in consultation with the IRS
District Director, and the TIGTA
Regional Inspector General for Investigations;
(3) to the IRS
CI Director of Investigations for
the appropriate region, and the TIGTA Deputy Assistant Inspector General for
Investigations;
(4) to the IRS
Assistant Commissioner (Criminal
Investigation) and the TIGTA Assistant Inspector General for Investigations;
(5) if the matter is left
unresolved, the matter will be referred to the Treasury Inspector General for
Tax Administration, who will have final authority to resolve the matter.
Section IV. Amendment
This MOU may be amended by
deleting or modifying any of its provisions, or adding new provisions, upon the
written agreement of both parties.
Section V. MOU and
Investigation Review
One year from the date this
agreement is enacted, a representative of the IRS
Assistant Commissioner (Criminal
Investigation) and a representative of the TIGTA Assistant Inspector General
for Investigations will meet to review the provisions of the MOU and
investigations in which IRS
CI special agents were involved. This review will consider,
but will not be limited to, consideration of the number, type and complexity of
the investigations; and the results of the investigations including the number
of successful prosecutions. Within 90 days of the anniversary date of this MOU,
the reviewers will make recommendations to their respective organizations for
modification to or continuance of this MOU. A lack of agreement on amendments
or continuance of the MOU by the IRS
AC CI and the TIGTA Assistant
Inspector General for Investigations within 180 days of the anniversary date of
this MOU will result in automatic termination of the MOU. Subsequent reviews
will occur on a bi-annual basis. Modifications or termination during each
bi-annual review will meet the aforementioned time frames.
Section VI. Termination
This MOU can be terminated
by either party upon 60 days written notice.
Section VII. Approval
This MOU becomes effective
when signed by the Commissioner of Internal Revenue and the Treasury Inspector
General for Tax Administration.
/s/Charles O. Rossotti
2/9/99
_________________________________________
_________
Commissioner of Internal Revenue Service
Date
_________________________________________
_________
Treasury Inspector General for Tax Administration
Date
TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
Improvements Should Be Made to
Better Control and Report Internal Revenue Service Restructuring and Reform Act
of 1998 Section 1203 Information
September 2001
Reference No. 2001-10-188
Executive Summary
The Internal Revenue
Service (IRS
) Restructuring and Reform Act of 1998 (RRA 98) Section (§) 1203
provides the IRS
Commissioner with the authority to terminate the employment of IRS
employees for certain proven
violations committed in connection with the performance of official duties. The
IRS
Commissioner also has the authority
to determine whether mitigating factors exist that weigh against termination.
One example of an RRA 98 § 1203 violation is the willful failure to obtain the
required approval signatures on documents authorizing the seizure of a
taxpayer’s property. Employees may appeal the charges of § 1203 misconduct
throughout the administrative process. However, once all appeals have been
exhausted and the IRS
Commissioner makes a final decision that an employee
committed one of the § 1203 provisions, the final decision cannot be appealed
and the employee is removed from Federal service, as required by the RRA 98.
RRA 98 § 1102(a) added Internal Revenue Code § 7803(d)(1)(E) (Supp. IV 1998) to
require the Treasury Inspector General for Tax Administration (TIGTA) to
annually report to the Congress any termination or mitigation under RRA 98 §
1203.
The objectives of this
audit were to determine if RRA 98 § 1203 complaints were properly controlled by
the IRS
and the TIGTA and if RRA 98 § 1203
complaint information was accurately reported in the TIGTA Semiannual Report to
the Congress.
Results
The IRS
and the TIGTA Office of
Investigations can better ensure that RRA 98 § 1203 complaint information is
properly controlled and accurately reported in the TIGTA Semiannual Report to
the Congress. In general, complaints referred from one office to another within
the TIGTA Office of Investigations, or from one office to another within the IRS
, were accounted for and arrived at
their final destination. However, at the time of our review, management could
not locate 9 of the 173 complaints in our sample, and management information
systems did not contain current information for 22 of the 173 complaints in the
sample. We also identified 28 allegations outside of our sample
where the § 1203 violation code had been removed from the Investigations
Management Information System (IMIS) based on the procedures in effect prior to
June 2000. This resulted in information being inconsistently reported in the
TIGTA Semiannual Report to the Congress. Additionally, we
identified two required § 1203 items that were reported incorrectly in a Fiscal
Year (FY) 2000 TIGTA Semiannual Report to the Congress and five items not
required to be reported that were overstated in two FY 2000 semiannual reports.
Section 1203 Complaints
Could Not Always Be Located and Management Information Was Not Always Current
or Consistent
For
31 of the 173 complaints in our sample, either the complaints could not be
located from information recorded on the computer databases (9 complaints) or
the computer databases did not contain current information about the complaints
(22 complaints). We
projected our findings to the total population of 1,213 open § 1203 complaints
on the IRS
and TIGTA databases as of September
30, 2000
.
According to the projection, casework may not have been completed for an
estimated 38 complaints (? 1.93 percent) and the computer databases may
not contain current information for another 125 complaints (? 4.23 percent).
After we brought these issues to the attention of IRS
and TIGTA Office of Investigations
management, they began taking corrective actions to locate the
9 complaints and update the computer systems for the 22 complaints.
Section 1203 Complaint
Information Reported in the Semiannual Reports to the Congress Was Not Always
Accurate and Did Not Represent All Complaints
We compared § 1203 complaint
information reported in the FY 2000 TIGTA Semiannual Reports to the Congress to
§ 1203 complaint documentation obtained from the IRS
Commissioner’s Complaint Processing
and Analysis Group (CCPAG) and from the TIGTA Complaint Management Division. Two
required § 1203 items were reported incorrectly in one FY 2000 Semiannual
Report and five items not required to be reported were overstated in two FY
2000 Semiannual Reports.
Summary of
Recommendations
We recommend that IRS
CCPAG and TIGTA Office of Investigations
management locate and complete necessary actions for the remaining RRA 98 §
1203 complaints that could not be located, correct the computer databases for
those § 1203 complaints where the information was not current, ensure
compliance with existing procedures for processing § 1203 complaints, devise a
method to ensure § 1203 complaints can be located in the future, and ensure
that § 1203 complaint information is accurately reported in the TIGTA
Semiannual Report to the Congress.
Management’s Response: IRS
CCPAG and TIGTA Office of
Investigations management agreed with the observations and recommendations in
the report. Both offices took immediate action to resolve the remaining
complaints we could not locate and to correct the computer databases where the
information was not current. In addition, controls will be strengthened to
ensure compliance with existing procedures for processing § 1203 complaints and
to ensure that § 1203 complaint information is accurately reported in the TIGTA
Semiannual Report to the Congress.
IRS
and TIGTA management’s complete
responses to the draft report are included as Appendices VI and VII
, respectively.
|