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FOR IMMEDIATE RELEASE Press Release #105-377

July 10, 1998

ROTH FLOOR STATEMENT ON IRS REPORTS

WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) today said two reports prepared by the Internal Revenue Service and released today validated his findings about problems at the agency. The investigative reports were prepared by the agency's Chief Inspector's office and had been requested by Roth in December 1997 following the Finance Committee's fall hearings.

The reports looked at the Examination Division's use of performance measures and statistics and the use of seizure authority in collections, two areas that the Finance Committee's hearings found to be especially troublesome.

Roth delivered the following statement on the Senate floor today:

"Mr. President, yesterday's 96 to 2 vote to reform the Internal Revenue Service was a victory for the American people. I am grateful for the cooperation we received from ours colleagues. I am grateful for the support that came from our constituents. And I very much appreciate the willing participation that came from individuals within the Internal Revenue Service itself.

"From the beginning of our intensive investigation, and throughout our hearings, I made it clear that the IRS is filled with hard-working, honorable men and women. We depend on these individuals, on their integrity and expertise to carry out a complex and often thankless task -- yet a task that is fundamentally important to the welfare and future of America. Had it not been for those within the IRS who were concerned about the abuses they witnessed -- had they not come

forward to speak with us -- there would have been no hearing. There would have been no reform effort -- no change. And the abuses would have continued.

"What our investigation focused on was the culture of the agency. It focused on an environment that had been allowed to establish itself because of rules that granted excessive license to those inclined to abuse power -- an environment that lacked sufficient oversight. This was the culprit. And I am grateful that after an attempt early on in our investigation to circle the wagons concerning the Finance Committee's efforts, the IRS -- under the fine leadership of Commissioner Charles Rossotti -- determined to work with us, not against us.

"Two reports issued today speak volumes about the spirit of cooperation Commissioner Rossotti demonstrated. They validate each of the concerns raised in our investigation. They are filled with examples that support those that we heard from the courageous witnesses who addressed our committee. They remove any question concerning the appropriateness or necessity of the extensive investigation we undertook. And they make it clear that our conclusions, and consequently our legislative outcome, were right on target.

"I appreciate the honesty and candor that is contained in these two internal audits. Prepared by the agency's Chief Inspector's office at my request, they offer a thorough and objective analysis of serious problems within the agency's culture. Among other things, these reports paint a vivid picture of how the IRS' Examination Division used performance measures and statistics, compelling auditors and examination personnel to inflate taxpayer liabilities. They show how the Collections Division abused seizure authority, in one case turning a taxpayer's life upside down for the grand sum of four dollars and seventeen cents!

The reports even documented the most troubling issue of how the Internal Revenue Service would often go after taxpayers who were most vulnerable -- those suffering from medical problems or severe financial setbacks. According to the internal audits, "the seizure[s] demonstrated insensitivity to the taxpayer's current situation or [were] conducted to enhance statistical measures."

"These reports are astonishing in the scope of the taxpayer abuse they confirm and in the fact that they come from the agency itself. In the case of the man whose business was seized and sold to net the IRS four dollars and seventeen cents, the report states clearly that, "The revenue officer did not use sound... judgment when conducting this low dollar seizure."

"And this is only one of many such cases documented, Mr. President. In these two reports, Americans will find a stunning array of similar abuses. The reports make it clear that the agency's focus on goals and statistics came at the

expense of quality service and fair treatment of taxpayers. They came at the expense of fairness to IRS employees. One report admits that a full 74 percent of group manager evaluations contained references to enforcement statistics. The evaluations cited dollars per hour, hours per return, and dollars recommended for collection.

"The reports make it clear that districts routinely communicated goals and enforcement statistics to group managers and employees. In fact, the agency admits that such statistics were "communicated in all 12 districts through newsletters, monthly reports of Examination activity, group meetings, and similar methods. Enforcement statistics," the report continues, "were often in reference to how group managers and employees were doing in relation to district or group goals."

"Case after case is cited in these reports to illustrate how these activities within the agency adversely influenced the lives of taxpayers. In one example, collections officers did not even attempt to contact the taxpayer prior to seizing his property. The revenue officer confirmed the taxpayer's address and ownership of assets two days before seizing them. And what did the IRS seize? The tools the taxpayer needed to provide for his family. Even the taxpayer's 11-year-old daughter pleaded with the collections officer to halt the action, but the activity proceeded -- the seizure producing a measly net proceed of $20!

"Again, Mr. President, these stories are not coming from witnesses whose credibility might be challenged. They are admissions made by the Internal Revenue Service itself. Nearly half of the seizures examined in these reports indicate that improper or abusive tactics were used against the taxpayer. Not only does this validate our findings, but the very existence of these internal audits demonstrate that a new era is dawning on an agency that for far too long has been operating in darkness. It looks to be an era of openness -- of cooperation -- and accountability. I laud the current leadership, Commissioner Rossotti, and those who support him in what will be an historic turning point in the life of the agency. What a legacy they will leave!

"And again, I express my gratitude to colleagues who stood firm in our effort to change the way the IRS does business. Our reform legislation, which I expect will be signed by the President in the very near future, will go a long way toward preventing the types of abuses chronicled in these reports. We are increasing oversight of the agency and holding employees accountable for their actions. We are ensuring that taxpayers have due process protections in collections activities. We are prohibiting the IRS from using enforcement statistics.

"This is a moment in which we can all be proud. The successful passage of reform legislation yesterday, the bipartisan spirit that marked our investigation and subsequent debate, the willingness of the agency, itself, to cooperate -- all of these are to be credited."

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