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Online Home | Site Search | Tax News & Views |Outline of Roth's IRS Restructuring Bill UnveiledTuesday, March 24, 1998 OnLine Interest and penalties would be suspended on a questionable tax return, if the Internal Revenue Service does not contact a taxpayer within one year after the filing date, under an outline of the IRS restructuring bill that Senate Finance Committee Chairman Bill Roth, R-Del., hopes to mark up sometime during the week of March 30. The proposal does not apply to the failure to file or the failure to pay penalties, or civil tax fraud penalties, according to the outline released by the panel March 24. It often takes the IRS about a year to contact a taxpayer for an audit, so the provision would be a significant shift in the battle between the IRS and taxpayers. Roth unveiled the outline of his proposal in meetings March 24 with Senate Finance Committee members about how and when to proceed with the IRS restructuring bill. The outline will be fine-tuned over the next few days, and formal legislation is expected to be released later in the week. |
No discussion of tax increases The outline does not include a discussion of revenue offsets, which are needed to pay for the cost of the penalty relief and other items in the bill. The effective date of many of the provisions, particularly the revenue raisers, will be tied to the formal release of Roth’s mark later this week. The release of the outline is not expected to become the effective date for the tax hikes. Roth still is considering the idea of taking the IRS restructuring bill "off budget," a procedure that would mean that the bill’s revenue loss would not be subject to the budget rules mandating that tax cuts have to be offset by spending cuts or tax increases. Taking the proposal off budget would be a way to avoid the troublesome search for tax increases to make the bill revenue neutral. Other changes The IRS oversight board would have greater investigative authority under Roth’s proposal than under the House bill because the board would be granted limited authority to review specific taxpayer information. Only the IRS has such Section 6103 authority under current law. The proposal also would grant the IRS oversight board "big picture" authority over IRS law enforcement and collection procedures, according to the outline. The House bill specifically prohibited the board from getting involved in enforcement and collection issues, and the Clinton Administration raised concerns about conflicts of interest that could arise if the board had authority over such matters. Under the proposal, the burden of proof also would shift from the taxpayer to the IRS, as under the House bill, but only if the taxpayer introduces credible evidence with respect to a factual issue relevant to ascertaining income tax liability. Witnesses at Senate Finance Committee hearings expressed concern that the House bill’s burden of proof provision was drawn too broadly and could cause the IRS to step up enforcement to overcome the proposed judicial advantage that would be enjoyed by taxpayers if the provision was enacted. In the Senate’s version of the IRS bill, the current tax code provisions on innocent spouses also would be overhauled and would be replaced with a system under which each spouse would be proportionately liable for the tax he or she owes. The American Bar Association and other groups proposed proportionate liability. Vote on Education IRA Bill Expected: The Senate postponed the vote scheduled for March 24 on efforts to cut off debate on the pending education individual retirement account bill (S.1133). There is no word yet about when the vote will occur. Senate Majority Trent Lott, R-Miss., and Senate Minority Leader Tom Daschle, D-S.D., have been discussing ways to let action on the bill proceed. Past efforts to work out a deal to limit both debate, and the number of amendments to the bill, failed. Internet Tax Bill Referred to Ways and Means: The House Judiciary Committee soon will mark up the Internet tax moratorium bill (H.R. 3529), which also has been referred to the House Ways and Means Committee and Rules Committee. The bill reflects the proposal worked out with the National Governors’ Association, which objected to the five-year moratorium on state and local taxes of Internet commerce and access. It is significant that the bill was referred to the Ways and Means Committee because it potentially could become a vehicle for tax legislation later in the year. ISTEA Markup in House Planned: The House Ways and Means Committee March 26 will hold a mark up on the tax portion of the transportation authorization bill. The Senate March 12 passed its version of the bill (S.1173), which extends Highway Trust Fund excise taxes and Highway Trust Fund authority, extends income tax credits and excise tax exemptions for ethanol, and reduces the tax subsidy for ethanol. A fight between the House and Senate over the ethanol provision is possible because House Ways and Means Committee Chairman Bill Archer, R-Texas, opposes the ethanol credit. The Senate bill also provides for tax-exempt bonds for private sector highway infrastructure construction, repeals the 1.25 cents per gallon rail diesel tax, clarifies tax treatment of environmental grants, and increases employer-provided mass transit pass income exclusion. |
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