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.

Description of Proposal

In general

The proposal would amend title 5 of the United States Code to provide certain personnel flexibilities to the IRS. In general, the proposal would provide that the IRS exercise the personnel flexibilities consistently with existing rules relating to merit system principles, prohibited personnel practices, and preference eligibles. In those cases where the exercise of personnel flexibilities would affect members of the employees' union, such employees' would not be subject to the exercise of any flexibility unless there is a written agreement between the IRS and the employees' union. Negotiation impasses between the IRS and the employees' union could be appealed to the Federal Services Impasse Panel.

Senior management and technical positions

Streamlined critical pay authority

The proposal would provide a streamlined process for the Secretary of the Treasury, or his delegate, to fix the compensation of, and appoint up to 40 individuals to, designated critical technical and professional positions, provided that: (1) the positions require expertise of an extremely high level in a technical or professional field and are critical to the IRS; (2) exercise of the authority is necessary to recruit or retain an individual exceptionally well qualified for the position; (3) designation of such positions is approved by the Secretary; (4) the terms of such appointments are limited to no more than four years; (5) appointees to such positions are not IRS employees immediately prior to such appointment; and (6) the total annual compensation for any position (including performance bonuses) does not exceed the rate of pay of the Vice President (currently $175,400).

These appointments would not be subject to the otherwise applicable requirements under title 5. All such appointments would be excluded from the collective bargaining unit and the appointments would not be subject to approval of the Office of Management and Budget ("OMB") or the Office of Personnel Management ("OPM").

The streamlined authority would be limited to a period of 10 years.

Critical pay authority

The proposal would provide OMB with approval authority to increase the pay level for certain critical pay positions requested by the Secretary. These critical pay positions would be critical, technical and professional positions other than those designated under the streamlined authority described above. Under the proposal, OMB would be authorized to approve requests for critical position pay up to the highest total compensation that does not exceed the rate of pay of the Vice President (currently $175,400).

Recruitment, retention and relocation incentives

The proposal would provide the Secretary with authority to provide recruitment, retention and relocation incentives for certain executive and hard-to-fill positions. The authority would be for a period of 10 years and would be subject to OPM approval.

Career-reserve Senior Executive Service ("SES") positions

The proposal would broaden the definition of a "career reserved position" in the SES to include a limited emergency appointee or a limited term appointee who, immediately upon entering the career-reserved position, was serving under a career or a career-conditional appointment outside the SES or whose limited emergency or limited term appointment is approved in advance by OPM. The number of appointments to these SES positions would be limited to up to 10 percent of the total number of SES positions available to the IRS. These positions would be limited to a 3 year term, with the option of extending the term for 2 more 3-year terms.

Variable compensation

The proposal would provide the Secretary with the authority to provide performance bonus awards to IRS senior executives of up to one-third of the individual's annual compensation. The bonus award would be based on meeting preset performance goals established by the IRS. An individual's total annual compensation, including the bonus, could not exceed the rate of pay of the Vice President. The authority would not be subject to OPM approval.

It is anticipated that the bonuses would not be available to more than 25 IRS senior executives annually.

General workforce

Performance management system

The proposal would require the Secretary to establish a performance management system which would maintain individual accountability by: (1) establishing one or more retention standards for each employee related to the work of the employee and expressed in terms of performance; (2) providing for periodic performance evaluations to determine whether
employees are meeting the applicable retention standard; and (3) taking appropriate action, in accordance with applicable laws, with respect to any employee whose performance does not meet established retention standards.

The proposal would require that the performance management system provide for: (1) establishing goals or objectives for individual, group or organizational performance and taxpayer service surveys; (2) communicating such goals or objectives to employees; and (3) using such goals or objectives to make performance distinctions among employees or groups of employees.

It is intended that in no event would performance measures be used which rank employees or groups of employees based on enforcement results, establish dollar goals for assessments or collections, or otherwise undermine fair treatment of taxpayers.

Awards

The proposal would provide the Secretary the authority to establish an awards program for IRS employees. The program would be designed to provide incentives for and recognition of individual, group and organizational achievements. The Secretary would have the authority to provide awards of up to $25,000 without OPM approval.

These awards would be based on performance under the new performance management system, and in no case would awards be made (or performance measured) based on tax enforcement results.

Workforce classification and pay banding

The proposal would provide the Secretary with authority to establish one or more broad band pay systems covering all or any portion of the IRS workforce, subject to OPM criteria. At a minimum, the OPM criteria would have to: (1) ensure that the pay band system maintain the concept of equal pay for substantially equal work; (2) establish the minimum and maximum number of grades that may be combined into pay bands; (3) establish requirements for setting minimum and maximum rates of pay in a pay band; (4) establish requirements for adjusting the pay of an employee within a pay band; (5) establish requirements for setting the pay of a supervisory employee in a pay band; and (6) establish requirements and methodologies for setting the pay of an employee upon conversion to a broad-banded system, initial appointment, change of position or type of appointment and movement between a broad-banded system and another pay system.

Workforce staffing

The proposal would provide the IRS with flexibility in filling certain permanent appointments with qualified temporary employees. A qualified temporary employee would be defined as a temporary employee of the IRS with at least two years of continuous service, who has met all applicable retention standards and who meets the minimum qualifications for the vacant position.

The proposal would authorize the IRS to establish category rating systems for evaluating job applicants, under which qualified candidates are divided into two or more quality categories on the basis of relative degrees of merit, rather than assigned individual numerical ratings. Managers would be authorized to select any candidate from the highest quality category, and would not be limited to the three highest ranked candidates. In administering these category rating systems, the IRS generally would be required to list preference eligibles ahead of other individuals within each quality category. The appointing authority, however, could select any candidate from the highest quality category, as long as existing requirements relating to passing over preference eligibles were satisfied.

The proposal would authorize the IRS to establish probation periods for IRS employees of up to 3 years, when it is determined that a shorter period would not be sufficient for an employee to demonstrate proficiency in a position.

Voluntary separation incentives

The proposal would provide authority to the IRS to use Voluntary Separation Incentive Pay ("buyouts") through December 31, 2002, without regard to the requirement regarding reductions in full-time equivalents.

Demonstration projects

The proposal would provide the IRS with authority to conduct one or more demonstration projects through a streamlined process. The authority would enable the IRS to test new approaches to human resource management. The proposal would provide authority to the Secretary and OPM to waive the termination of a demonstration project, thereby making it permanent. At least 90 days prior to waiving the termination date OPM would be required to publish a notice of such intent in the Federal Register and inform the appropriate Committees (including the House Ways and Means Committee, the House Government Reform and Oversight Committee, the Senate Finance Committee and the Senate Governmental Affairs Committee) of both Houses of Congress in writing.

Performance measures

The IRS would be directed to develop employee performance measures that favor taxpayer service and prohibit awarding merit pay or bonuses that are based on quotas, goals, or statistics.

Violations for which IRS employees may be terminated

The proposal would require 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) perjury (e.g., false testimony in a taxpayer's case, failure to provide truthful information in the course of a criminal investigation, or false information in a deposition or affidavit); (3) falsifying or destroying documents concerning a particular taxpayer to cover-up employee mistakes; (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 proposal would provide non-delegable authority to the Commissioner to not terminate an employee for one of the enumerated violations if the Commissioner determines that there are factors that mitigate against terminating the employee. Whether a proposed termination should be reviewed for mitigation factors or whether such factors exist would be in the sole discretion of the Commissioner. The Treasury IG would be required to track employee terminations and terminations that would have occurred had the Commissioner not determined that there were mitigating factors and include such information in the IG's annual report.

IRS employee training program

The proposal would require the IRS to place a high priority on employee training and to adequately fund employee training programs. The proposal would also require the IRS to provide to the Congressional tax writing committees a comprehensive multi-year plan to: (1) ensure adequate customer service training; (2) review the organizational design of customer service; (3) implement a performance development system; and (4) provide, in fiscal year 1999, sixteen to twenty-four hours of conflict management training for collection employees.

Effective Date

The proposal, other than the IRS employee training program proposal, would be effective on the date of enactment. The proposal relating to the IRS employee training program would be effective 90 days after the date of enactment.

The IRS periodically publishes a list of the forms and schedules that may be electronically transmitted, as well as a list of forms, schedules, and other information that cannot be electronically filed.

During the 1997 tax filing season, the IRS received approximately 20 million individual income tax returns electronically.

The proposal would require the Secretary to create an electronic commerce advisory group and to report annually to the tax-writing committees on the IRS's progress in implementing its plan to meet the goal of 80 percent electronic filing by 2007.

Effective Date

The proposal would be effective on the date of enactment.

The proposal would also require the Treasury to issue a study evaluating the merits and disadvantages, if any, of extending the deadline for providing taxpayers with copies of information returns from January 31 to February 15 (Forms W-2 would still be required to be furnished by January 31).

Effective Date

The extension of the due date for filing returns would apply to information returns required to be filed after December 31, 1999. The Treasury study would be due on December 31, 1998.

A return generally is considered timely filed when it is received by the IRS on or before the due date of the return. If the requirements of Code section 7502 are met, timely mailing is treated as timely filing. If the return is mailed by registered mail, the dated registration statement is prima facie evidence of delivery. As an electronically filed return is not mailed, section 7502 does not apply.

The IRS periodically publishes a list of the forms and schedules that may be electronically transmitted, as well as a list of forms, schedules, and other information that cannot be electronically filed.

The proposal also would provide rules for determining when electronic returns are deemed filed, and for authorization for return preparers to communicate with the IRS on matters included on electronically filed returns.

The proposal would require the Secretary to establish procedures, to the extent practicable, to receive all forms electronically for taxable periods beginning after December 31, 1998.

Effective Date

Effective Date

The proposal would be effective on the date of enactment.

Effective Date

The proposal would be effective on the date of enactment.