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March 28, 2014
Transcript Available of Tax Analysts' Forum on Taxpayer Bill of Rights

Full Text Published by Tax Analysts®



TAX ANALYSTS

TAXPAYERS AND THE IRS:
IS IT TIME FOR A TAXPAYER BILL OF RIGHTS?

Washington, D.C.

Thursday, March 27, 2014

PARTICIPANTS:

Moderator:


    CHRISTOPHER E. BERGIN
    President and Publisher, Tax Analysts
Speakers:

    NINA E. OLSON
    National Taxpayer Advocate, Taxpayer Advocate Service

    CHRISTOPHER S. RIZEK
    Member, Caplin & Drysdale

    ALAN J. WILENSKY
    Attorney and Former Treasury Deputy and Acting
    Assistant Secretary for Tax Policy
* * * * *

PROCEEDINGS

(9:00 a.m.)

MR. BERGIN: Good morning. Welcome to the latest in the Tax Analysts series of discussions on key issues in tax policy and tax administration.

Today's debate is about the IRS's need to adopt a taxpayer bill of rights.

I'm Chris Bergin, the president of Tax Analysts, which is the nonprofit publisher of Tax Notes, Tax Notes Today, State Tax Notes, Tax Notes International, and many other fine print and online products on federal, state, and international taxation.

We are in our 12th year of public discussions on tax policy. If you are new to our discussions, let me say: It's great to have you here.

Let me take just a moment to explain our process today. I will open things up with some brief remarks to introduce our topic. I will then introduce our distinguished panel of speakers.

Each of them will address aspects of our topic. After that, we will open up the discussion to all of you, and we encourage all of you to participate.

We are streaming live video of this event on our website -- that explains the camera in the back of the room -- so I want to welcome our "virtual" audience as well. We've now added a Q&A feature on our site that will allow the online viewers to submit their questions throughout our discussion today.

For all media purposes, we are on the record. For that reason, when I recognize you, please tell us who you are. Once I call on you, we will quickly get you one of our hand-held mics.

We are also live-tweeting this event, at hashtag T-B-O-R, as we reach more people beyond this room through social media. We invite our online viewers to send us questions via Twitter. Just tweet at the hashtag T-B-O-R. We hope to hear from you.

We will post both the webcast and a transcript of today's event next week on our website: taxanalysts.com.

Now, on to the subject at hand: the taxpayer bill of rights.

On January 9, 2014, National Taxpayer Advocate Nina E. Olson released her annual report to Congress, which highlights serious tax administration and taxpayer service issues facing the nation's tax collector. The report is delivered directly to the House Ways and Means Committee and the Senate Finance Committee, with no prior review by the IRS commissioner, the secretary of the Treasury, or the Office of Management and Budget.

This year's report urges the IRS to administratively implement a comprehensive, principle-based taxpayer bill of rights, which has been made available to each of you today.

The proposal consists of 10 rights modeled on the Constitution's Bill of Rights, plus five taxpayer responsibilities. It was designed to strengthen the IRS's ability to serve taxpayers. However, declining resources could prevent the IRS from adequately implementing these rights. The IRS lives on a pendulum that is largely influenced by Congress. It swings between enforcement and service. The Taxpayer Advocate Service was strengthened and expanded by the 1998 Internal Revenue Service Restructuring and Reform Act, which was adopted by a Congress that perceived that pendulum swinging too far toward enforcement.

Over the last decade, however, the IRS has swung back in favor of enforcement. Smaller and smaller budgets might be a factor, but some believe that it is the result of a conscious choice by IRS leadership.

So, today, we will provide a historical perspective on prior legislation, discuss recommendations for adopting a taxpayer bill of rights, and debate the timing and politics involved in its implementation.

To do so, we have put together an excellent panel. I will introduce them in the order in which they will speak. Christopher S. Rizek is a member at Caplin & Drysdale; National Taxpayer Advocate Nina E. Olson; and Alan J. Wilensky, an attorney and former Treasury deputy and acting assistant secretary for tax policy. Let me thank you all for being here. Chris, would you please get us started?

MR. RIZEK: Sure. Thank you, Chris. And I want to start by thanking Tax Analysts for sponsoring this conference and all the good work you do. I was talking to someone the other day about the scope of Tax Analysts' presence in the tax world; all the products you put out, the blogs, the website, the quality of your writers, these conferences that you sponsor, and stuff you just mentioned that I didn't even know you did like tweets because I don't tweet.

But I think Tax Analysts, everyone in this room knows, plays a critical role in the discussion of tax policy issues in this country. And you've always stood for good tax policy and good tax administration and transparency, and we appreciate that. The people in this room I know all appreciate that and hope everyone listening understands that. So thank you very much for that.

By way of background, I thought I would set the stage a little bit by talking about prior iterations of taxpayer rights legislation, and then we can talk a little bit about some of the administrative things that can be done as well because I know that's what Nina is going to talk about.

And I wanted to start with the original taxpayer bill of rights legislation in 1988, which I went back and read some of the legislation of the 1988 Act. It was, if you'll recall, part of TAMRA, the Technical and Miscellaneous Revenue Act of 1988, and that was a big bill. They'd just done 1986 tax reform. There were 200 pages in the conference report of just technical corrections. It was a lot of substance of material there.

And then there was this little, itty bitty subtitle on taxpayer rights which was sort of a consensus bill that everyone agreed on. Senator Reid at one point said there were 70 cosponsors of a version of that in the Senate and 230 in the House. I mean, that's a majority of both houses. It was very much a consensus bill, and the taxpayer rights provisions were, sort of, a really small piece of that. And they didn't even get an awful lot of attention in the actual legislative history.

There were only 20 or 23 provisions depending on how you want to count them; five of those related to Tax Court jurisdiction. That only leaves about 15 or so, 16, on procedural things, and they were mostly what I characterize as incremental or marginal changes to existing rules and policies. They weren't big, structural changes.

They fell in, sort of, the same categories we're going to be talking about here, I think. And we'll see in discussion of the other legislation. A big one is disclosures to taxpayers so the taxpayers understand their obligations, they understand the procedures the Service uses, and the procedural options available to them at various stages in the process. That's a big thing. Taxpayer education, I think, is a big taxpayer right, and that's something that is in all of these bills.

Collection seems to be the area that generates the most hostility between the Service and taxpayers, and so in each of these iterations of bills, you'll see there's a lot of reforms in the tax collection area, particularly dealing with liens and levies, obviously. A lot of times that's explanations like 6331D notices or the CDP notices. Other times that's actual (inaudible) of limitations on IRS behavior.

As we'll see in a few minutes, there were a lot more of those in '96 and '98. And then sometimes there's, sort of, procedural things the Service has to do in their interactions with taxpayers like recording in interviews and third party contact notices and things like that.

Related to those collection issues frequently another stream of consistent inadequacy has been in the area of appeal rights. Internal appeals in 1988, that was for liens, jeopardy assessments and levies, and the first taxpayer administrative order provisions were enacted in 1988 for the then ombudsman to enforce.

And then lastly I mentioned the tax court jurisdiction. If those remedies aren't sufficient, having a litigation opportunity is a really critical element of taxpayer rights legislation that we've seen all the way through.

So, when I look through this I found, you know, you get some pretty good taxpayer rights legislation if you have a consensus bill that everybody, kind of, agrees on; they work on for a long time.

I do want to just read to you the list because my third point here relates to leadership. Let me read you the list of the conferees on the '98 Act. It's totally amazing, Dan Rostenkowski, Sam Gibbons, Jake Pickle, Charles Rangel, Pete Stark, Bill Archer, and Guy Vander Jagt from the House.

From the Senate: Lloyd Bentsen, Spark Matsunaga, Pat Moynihan, Max Baucus, David Boren, and Bob Dole.

The point of reading that is not that they were giants in those days, you know, although they were. That's on anybody's list of, you know, the leaders of tax legislation over the past 50 years. But those guys knew how to do a deal. Those guys knew how to legislate. And even though they disagreed, they would work cooperatively, compromise, and pass legislation. And this bill, in '98 at least, '88 was completely nonpartisan.

MR. BERGIN: Great point.

MR. RIZEK: The Republicans controlled the White House. The Democrats still controlled the Congress. But this bill was a consensus item all the way throughout.

So, the last thing is you really have to have leadership that can put a bill together and that can work together. And if you take those lessons and apply them to '96, I think all of those are true. There were a lot of other big-ticket items on Congress's agenda that year; the Small Business Job Protection Act is about that big. And there was another bill in '97, the '97 Reform Act, which was also a big bill.

The TBOR 2 provisions, which I went to Treasury to work on, had been worked through at a staff level and even at a member level for a couple of years before I got there in '95.

I'll give a shout out to Eve Elgin. Is she here? She was my predecessor at Treasury.

So, there were, again, largely marginal, incremental changes in existing procedures. The things that were really controversial that people couldn't agree on, things like innocent spouse relief, interest netting, employee misconduct, they kicked the can down the road. They said do a study or have periodic reports to Congress or like Treasury and the IRS, just write new regulations in the area like private delivery services.

Again, largely an incremental bill. A lot of good leadership, especially from Chairman Archer and Senator Moynihan. Again, bipartisan; Congress was split, but the White House was in democratic hands. And yet, that bill was a consensus bill. There was really no controversy in getting it done.

It was enacted as a stand-alone, which is unusual. It wasn't even tacked on to other legislation. And it's the same categories; disclosures and notices, limitations on IRS behavior like the designated summons safeguards, terminating installment agreements. A lot of work in collection rights, abatement of interest, expanded OIC, installment payment rules, a considerable expansion of internal remedies in the taxpayer assistance orders, and now the taxpayer advocates office was -- that word was first used, and additional litigation remedies for failure to (inaudible) interest and so forth.

In short, the TBOR 2 process shared a lot of the characteristics of the TBOR 1 process. And now I'm going to talk about '98, which is very different.

MR. BERGIN: Mm-hmm.

MR. RIZEK: Conditions in the tax legislative area were a lot different in legislative area generally. There had been a lot of bills, as I mentioned, in '96, '97, and Congress, I think, was exhausted doing tax work. There was no big tax legislation which they could work taxpayer rights provisions into.

The atmosphere was extremely politicized. Not only was the administration still held by a different party than the two Houses of Congress by now, but, you know, they were impeaching President Clinton. I mean, they were at each other's throats on everything. And at this time, the IRS Restructuring Commission was sort of proceeding along its merry way.

And to its credit -- and I want to call out Congressman, now Senator, Portman and Senator Bob Kerrey and Jeff Trinca, the chief of staff -- realized that if they were going to have a bill focusing on restructuring the IRS, taxpayer rights should be an afterthought. They were (inaudible), you know. It was, sort of, something they said yeah, we can do this too, but this is not what we're really focused on.

Needless to say, all that dynamics really got changed after the Senate Finance hearings in the fall of 1997. I still have stripes on my back from those, and I know that anybody who worked at the IRS feels the same way. You know, you had people behind screens and paper bags and stuff. It was crazy, you know; modulated voices. It was really --

MR. BERGIN: Like a mob trial.

MR. RIZEK: Yeah. A Communist show trial. I mean, some of the subsequent investigation, among others Tax Analysts has done, has shown that a lot of those stories really didn't pan out the way they were presented.

But the bottom line is there wasn't that same, sort of, leadership consensus. There wasn't that same, sort of, agreement on what to do. And instead of the House Bill, which we had been working on as sort of improvements on the '96 Act, consensus measures largely drawn from the restructuring commission's report, again, largely incremental.

When we got to the Senate things changed dramatically, and you ended up with a lot more controversial provisions. They were not, in all instances, completely well thought out or because of Treasury and the IRS's opposition, of which I was part, I admit, they were watered down to the point that they still don't work real well literally as late as the last weekend of the conference committee.

But again, very much a lot of similar stuff; disclosures, third party contact notices, the dates on deficiency notices requiring the IRS to give contact information, limitations on their behavior, additional approval process for liens and levies, jeopardy assessments, collection rights. That's probably the biggest thing in the code that the tax court is still dealing with; collection due process.

But also (inaudible) compromise, adjusting the levy exempt amounts, a lot of things related to collection, CDP I mentioned in the appeals area also, expanding the role of the national taxpayer advocate considerably, and taking that office pretty much out of the line of treasurer and commissioner's review for a lot of the work they do, which I think has been significant in maintaining the independence of that office. And then I mentioned litigation; litigation remedies such as spousal relief in 6015E or F, the CDP rules, higher damages for collection action, and so forth.

The things that were fought out that came up in the Senate bill that didn't work out are things that we're still living with; things like the burden approve shift in 7491, I mentioned CDP, interest netting.

If anybody can here explain the interest netting rules right now to me, I would love to have a sidebar. We'll pay you for that. There's a lot of people making a lot of money messing it up.

It's very, very, very complicated.

The account client privilege in 7525; that's one of those that got changed literally the last evening of the conference.

And it was not, I think it's fair to say, exactly the same signal success that the '96, and before that '88, Act were.

In particular, some of the administrative provisions have turned out to be a little bit of a mixed bag. And we're going to talk a little bit about, I'm sure, CDP, about appeals, independence, and the ex parte rules, about the impact or lack thereof of the 10 deadly sins provisions.

And so, the differences between those two earlier periods and '98 I think you could draw some lessons from: No appetite for large tax reform or uncertainty about what to do; that sounds kind of familiar; a very highly politicized atmosphere where parties aren't working together, certainly after the Senate hearings; no leadership consensus because of that; and it's kind of a truism that success has many fathers but failure is an orphan. Nobody wants to take responsibility for what happened in the '98 era. It wasn't my fault. It wasn't my fault.

But I think what it teaches us is that to work out good taxpayer rights legislation, you have to have tax professionals talking to each other and working out carefully and well-thought-out incremental changes to existing policies. I don't think, for example, anyone serious about good tax administration would say, "We just need to scrap levies. We can't have levies."

But on the other hand, making the levy process more responsive to taxpayers, giving them appeal rights, making sure taxpayers understand what can and cannot be levied on, those sort of incremental changes, I think, everybody can work on, and you can get better legislation that way.

The last lesson, unfortunately though, is it can't be in a highly politicized atmosphere, and you have to have leadership from both the Treasury end of it and the Congressional end of it. And I'm not sure we have that right now either.

So, that's just a little bit of a background to the legislative process. I think Nina now is going to talk about the administrative process.

MS. OLSON: Thank you everyone for being here and being interested in this subject, and certainly for Tax Analysts, holding this conference. I think Chris gave a really excellent background, and I thought what I would talk about is really my thought process to arriving at recommending that we have a taxpayer bill of rights. And my first attempt at recommending it was in a legislative recommendation in my 2007 annual report, and here we are seven years later and I'm still recommending it, so there you go. That's how successful I am. But I do want to say something about the Restructuring Act. I was no one in 1998 except this little attorney in Richmond, Virginia, as the director of a low income taxpayer clinic, and slugging away in the trenches about what was happening to low income taxpayers and to some extent, middle income taxpayers by that point. And I guess I had some vague sense about how politicized the hearings were, but as a practitioner and someone who dealt with the IRS every day and who had good friends in the IRS, I also saw what the machine of the IRS did to taxpayers -- over and over and over again. And I saw so often how there were absolutely no guiding principles.

There was no exercise of common sense much less taxpayer rights since, and not because people were being nefarious, but because it was just a big machine and without oversight and without guiding principles, and constantly structuring yourself around those guiding principles, you do bad things to people who just maybe did something slightly wrong. And I viewed the restructuring hearings, leaving aside the people with bags on their heads, as a very positive thing, because it gave someone like myself who was literally no one, the opportunity to come before both the Ways and Means and the Senate Finance Committee and somebody paid attention to me, when I talked about the needs of the low income taxpayers. And there had never been any forum for that prior to that time. And some extraordinary things came out of that, namely the Low Income Taxpayer Clinic Program, so that I now administer ten million dollars a year to over 150 programs in the United States, who represent low income taxpayers. And there is no other country in the world that has a program like that. And that is something enormously important that we should be proud of.

I'd also say that when I came into the IRS, as the national taxpayer advocate beginning 2001, I inherited thousands of cases that had been referred to the Senate Finance Committee as a result of the Restructuring Commission, the Restructuring Act and the hearings. And my office worked through those cases. And although you didn't see the glaring abuses that were fused, that were levied against, lobbed against the IRS in some of those hearings, what you did see was a continual breakdown in communication. And you could always look at one of those cases and see the moment where the IRS stopped treating that taxpayer as a human being, and someone with facts and circumstances, life in all its fullness, and the machine took over, which made the taxpayer's back get up, and they stopped communicating and bad things just happened. And you could do a diagram of exactly where that was going to happen. That is the context in which I started thinking about, well how do you change that culture? Not with punitive laws, but how do you change that culture in a way that is not viewed as being put upon by somebody from outside, but that you understand what your job is, in the role of administering taxes, from a very broad perspective.

And part of that pursuit, I went around the world and I met with a lot of different tax administrations. I met with folks in Canada, with Australia, with Sweden, in Italy, in Chile, in U.K., and always in those conversations I talked to them about what rights did they give taxpayers. Because I do agree with Chris -- we have an enormous number of statutory rights. But it's very hard with an 88,000 person organization -- a 100,000 person organization, to train everybody on the statutory rights, and it's almost impossible to train taxpayers on this -- all of those statutory rights, and many, many preparers and many representatives don't know them either. So how do you get them aware of the fact that you even have rights? And I learned in many of the other countries that they have in fact, a taxpayer bill of rights or a charter or a convention.

For the European countries it's derived from the Convention on Human Rights. And then I learned in 1988 the OECD actually surveyed its member countries on what rights they had, whether they had charters, what did they have, and in 1990 it produced a published very important report on the practices and recommendations. And that got me started, as I studied that report, I started thinking that what the IRS employees needed and what taxpayers needed was a taxpayer bill of rights -- something that laid out in broad terms, what their rights were, high level. And then the OECD actually identified that there were five basic obligations or responsibilities that taxpayers had. And I thought that sort of aligns with how I think of things. There's a social contract here. The government commits to doing the following things -- taxpayers commit to coming in and providing us the information. Now I do have to say, I don't think of rights as dependent on the taxpayer fulfilling their responsibilities. I actually think that rights exist in and of themselves. And you have to do something overtly maybe, to lose some of your rights, just as we have in our entire justice system. But I don't think it's a quid pro quo, I actually don't. But there is some kind of agreement there. And getting the taxpayers' participation, I think, is dependent on the IRS respecting taxpayer rights.

I also noticed that many countries have the convention but they don't have statutory rights. So they're actually very envious of us for all of the statutory rights that we have. So they're sort of coming at it from a different direction. So then I got to the thinking about, well you know, we have the Bill of Rights, and this OECD document listed some fairly foundational things, so we have the United States Bill of Rights and the point about the United States Bill of Rights is that taxpayers -- not taxpayers, but people in the United States know that you have the right to free speech. You know, that's a very important thing. You don't know what all the court decisions say. Can you burn a flag? Can you cry fire in a crowded movie theater? Can you do pornographic speech? What are the limits to political speech? Those are all things that we develop over time. But if someone feels that their speech is being violated, they are going to say, wait; don't I have the right to free speech?

And so that begins the dialog. Well no, you can't cry fire in a crowded movie theater. Okay, but that starts it. You begin to ask the question.

And so, I sponsored some research in a national survey of people in the United States, and so it's a representative sample of people in the United States. And we ask two questions. We ask actually a bunch of questions, but the two most important were, do you believe you have rights before the IRS? Fifty-four percent of the taxpayers, or more, said they do not believe they have rights before the IRS. Not taxpayers -- United States, more than half of the taxpayers said that. When we said, do you know what your rights are, only eleven percent of the people in the United States said they knew what their rights were before the IRS. So I thought, well, we need a document that tells taxpayers in very basic ways, what their rights are. And that's what you have before us, and that's what I recommended each year -- 2007, I think it was again in 2009, or something, or maybe 2011, and now 2013. The difference is, in 2013, I decided that we didn't need to wait for legislation. There actually has been activity. The Senate passed the bill of rights, a large bill that passed the bill of rights. The House has passed this summer, on July 31st, the bill of rights completely and it was bipartisan and it charged the commissioner with ensuring that IRS employees protect these ten enumerated rights.

I think what's also important about these rights is that as we wrote them up; we also identified gaps in the remedies. We have, and I think you might have them in your materials, but it's certainly on our website -- we worked with Chief Counsel and we identified all the statutory rights that we could think of and even some of the responsibilities, and put them under the ten rights as buckets, so that you could see, here's your broad right, and here are actually the statutory rights that fall under that bucket. So once you get in the conversation -- wait, don't I have the right to an appeal, you can say, yes, in collection you do, if you've got an installment agreement, if you've got an offer of compromise, and exam -- here's where you are. Some of these are administrative positions, some of these are off code provisions, some of these are policy statements, and some of these are statutory rights. But we have a ton of stuff, and so we viewed these things as organizing principles, which also become a way for you to teach IRS employees. Not starting from -- you have to give this taxpayer a piece of paper that says you have the right to collection due process hearing, but rather -- what is the point of a collection due process hearing? It is to ensure that the IRS collects no more than the tax that is legally owing and due and that we respect the taxpayer's circumstances -- again, life in all its fullness, their ability to pay, the extenuating circumstances that might go in there so that you would abate a penalty. That's the policy behind all these statutory rights, and if you understand the policy and if IRS employees understand the policy, then when they are confronted with a new situation, where your IRM doesn't confront it or your little e-guide that you look at that tells you exactly what you're supposed to do in any given minute doesn't address it -- you can reason through it. You can at least begin to recognize that there's something going on here that you need to get guidance on, or that you can maybe even give the answer yourself because you understand the fundamental principles, and you're not deviating from them.

And then, as I said, when we did that crosswalk, we actually identified some gaps. For example, we have a right to quality service, which, by the way, over the last year we did 32 focus groups around the country in four different cities, four different geographical locations, 16 with taxpayers and 16 with preparers. And we showed them our draft publication, one with the taxpayer bill of rights and taxpayer responsibilities and we also showed them other IRS publications about collection rights, exam rights, appeal rights. And it was fascinating to hear the taxpayers say they didn't know that they had the right to retain representation. They didn't know that they had the right to pay no more than the -- that they had the right to have the IRS listen to what they were saying. They didn't know that. And as we went around the country, the one right that people had the most skepticism about was the right to quality assistance and service. They said they've had experiences, it's a joke, they don't believe it. And I thought, now, well do you just go ahead and say with that one, we're just not going to put that one in there because nobody's going to believe it, or do you put it in there and say we're holding the IRS accountable, and more importantly -- and this is a very important point -- you create these rights, then IRS has to be funded at a level in order to be able to deliver on those rights. So if you have the right to quality service, then we need to be funded at a level that we can answer more than three out of every five phone calls and taxpayers don't have to wait almost twenty minutes to get their phone call answered. And that starts creating a trajectory and a momentum to making these rights real. And I'll close with saying; again, we identified gaps in these rights. If you don't get quality taxpayer service, what's your remedy? What cure do you have for that? It's interesting, in Chile, they -- about four years ago, we went and visited them because OECD had ranked them as having the best taxpayer service in the world and I thought, wow, where did that come from? And they had been trying to get into OECD, so they had looked around the world and taken the best out of everybody, and I thought that was very interesting, and so what does that mean? And they had just created a tax court by statute and they had adopted a taxpayer bill of rights, and they have given their taxpayers the right to go to tax court when any of those ten rights are violated. So if you do not believe that you received quality service, you can file a complaint in their tax court. Now when we went down, the tax court was very new, so I need to go back to my peers in Chile and check, you know -- now you've had four years of doing your tax court -- what kinds of complaints have you had? What have been the remedies that the tax courts -- how's that working for you? But it would be really interesting to see that and we may follow up with a legislative recommendation about -- based on their experiences. It's an evolving thing, if we adopt a taxpayer bill of rights -- and I have to say, there is great interest in the IRS leadership about adopting it, and I think it would be very good for the IRS to adopt the bill of rights as a positive thing for its employees. So I think at least, if you're talking about a consensus, I think you at least have a consensus in the IRS. And the House bill was passed on a bipartisan basis, so you do have this standalone taxpayer bill of rights bill and there has been a Senate counterpart already introduced on August first. So who knows?

MR. BERGIN: Hopefully. I don't often disagree with a panelist this early, Nina, but I've known you for a long time, and I never thought of you as no one.

MS. OLSON: Oh, all right -- well, I was then, and still will go back to being no one at some point. And I look forward to that right now.

MR. WILENSKY: Thank you. First of all, I want to applaud Nina, and I -- with a one-page piece of legislation, I'm for, big on simplification, and anything that simplifies legislation, I'm for it. Someone has finally struck a blow for simplification, and that's truly hard to believe. Every law entitled Tax Reform and Simplification has, as far as I'm aware of, has further mucked up the Internal Revenue Code, and in part that's the reason why we're here. I'd also like to thank Chris. It's exciting to be a participant in a panel like this, having remembered that when Tom Field, many, many years ago, first started this organization and to see it having grown and flourished and providing so many very important services to taxpayers and the tax bar, is a wonderful thing. Which kind of gets me maybe to what I can contribute to this panel, and this might be one of the few situations where age is an advantage. Believe me, they are few and far between, but I do have the perspective of having been around the tax system for a long period of time, both in the private and government sector. In the government sector, I was first in the Office of International Tax Counsel from 1976 to 1978, a staff person. There were only four people in that office, Chris, as staff people at that time, and a Deputy on International Tax Counsel. And so I served under a -- one year -- and a Republican administration when William Simon was the Secretary of the Treasury, and then one year under the Carter Administration, when Michael Blumenthal was the Secretary, and then came back some years later, as Chris said, in a leadership position at Treasury, when it was the last year of the first Bush administration. So I've seen the political swing, pendulum swing back and forth and I would maybe offer this as a perspective as we set off into our more detailed discussions. And that is that changes can be made, and they can be implemented. If we go back, way back when, in President Nixon's enemies list we saw a politicization of the Internal Revenue Service, where the agency had really veered off course. A gentleman by the name of Don Alexander, recently deceased, came in and anybody here who knew Don and ever dealt with him -- he was -- he could veer off a course of complete honesty and probity. That was just the way he was built, sometimes to his detriment, and to personal and governmental relationships, but he really changed the culture. The culture when I saw it the second time I was in government, was also a much depoliticized structure. We had seen major tax reform come in in 1986 under the leadership of people like Bob Packwood, who himself veered off course a bit later on, but -- we haven't had a good tax scandal in a while. Why isn't anybody falling in the --

MR. RIZEK: That's not what they think of the Oversight Committee.

MR. WILENSKY: Well, a sexual scandal I guess, that's right. Other scandals, but it was a little more exciting in those days. Wilbur Mills who was a very intellectual man and the rumor was that no one would see him around town, and that he was going home and studying and reading the tax code every night, but at least on one night we know he was not reading the tax code then.

But the pendulum has swung back and forth and I found in the first Bush administration when Nicholas Brady was the Treasury -- and I put this in a piece I wrote for Tax Notes called, "The 1998 IRS Restructuring: Rearranging the Deck Chairs on the Titanic", but it was totally depoliticized. And I referred to an anecdote in there where a CEO of a major Fortune 500 company came in and talked to the Treasury Secretary about a private letter ruling they were filing and Secretary Brady simply looked at me and said Alan, it's my understanding that we do not get involved in the private letter ruling procedure. And I said, "That's correct Mr. Secretary", and he turned to the CEO, on whose ward he had served for many years prior to Treasury, and said, "I'm sorry, we'd like to help you, but we just can't do it". And it would have been so easy for him to tell me to back channel this, talk to your colleagues at the IRS, et cetera. But that just was not the way Treasury Secretary Brady operated. And so it was really depoliticized. I saw changes in the other direction after the administration changes -- and this is bipartisan if you will, because I think it not only occurred under Clinton but under Bush I, Bush II, rather as well. But I was talking about a foreign tax credit change that was clearly right intellectually and just hadn't been addressed. And I was told by a mid-level tax official that the industry that I was representing would have a lot better chance of getting this to the top of the pile, if in fact they changed their position on an environmental issue. And I kind of went back and I said, wow. This is stuff, maybe you would see at the very top of the political food chain, but not at a level like this. So as we go forward, I think depoliticizing the process is important, and I would just say a word of caution about conventional wisdom. The 1998 restructuring, Chris, which you went into -- I remember going into tax discussion groups that had -- most of the people had, in the prior 25 or 30 years, been in high tax positions, and everybody said -- yeah, that's -- oh this is a great thing. Oh we got to do it. And particularly the notion of having the IRS run by a non-tax person. And the consensus quickly turned into conventional wisdom and people, when something said, restructuring and reform, it was different, and therefore people were concluding that it was necessarily good -- and so, as with all tax legislation, one has to be careful. And the other thing I'd say about the 1998 legislation and other restructuring and reform bills -- tax lobbyists are very crafty. And from time to time, under the guise of doing well, there might be money hidden, but clearly, there are lots of abuses that occur in an organization of 85-100,000 people and it is -- I guess the other perspective I might be able to provide in this morning's discussion, is I live and practice in Minneapolis, Minnesota, not Washington, D.C. And so I see a fair amount of the real world in some of the situations, Nina, that you've outlined. And from the government's perspective, some situations, I was struck by finding people who I viewed as legitimate business-people who just hadn't gotten around to filing their taxes. So the other thing to remember here is the IRS has a difficult job. Most of the people I've dealt with, whether in the national office, in the field, are well intentioned and they have a daunting task. So getting a good bill together and getting it passed will be challenging, and particularly when one of the tax giants that Chris referred to has been sent to China. So that may diminish the prospects for major substantive tax reform, particularly in the international area. So we've got a lot to talk about.

MR. BERGIN: We have a lot to talk about, and you're all invited to ask a question. Maybe I'll start.

Nina, you know I agree with you on the funding. I blogged about it quite a lot and the reactions I've gotten have been mostly negative. (Laughter) And it -- the IRS does not have a good persona to begin with, it certainly doesn't have a good one right now. And most of the comments that I get are why would we give this agency any more money when it squanders its money -- and, you know, I don't think the Star Trek video was a mortal sin. But then I start to think that we have been in litigation -- that's ended now -- with the IRS for seven months with some expense to the government over training materials. And so I've got to concede a bit of their point. How do we overcome that?

MS. OLSON: Well, I guess I say a couple of things about that. First of all, you know, the Star Trek video and the things that went on in some of those -- they were profoundly stupid and I'm really ticked at people doing that because I'm experiencing the debt, you know, my employees are being suffering and other IRS employees are suffering. IRS training, the funding for IRS training from 2010, fiscal year 2010 to the end of fiscal year 2013 has declined by 87 percent. Let me repeat that again.

MR. BERGIN: Yeah.

MS. OLSON: An 87 percent cut in training funds at the IRS from 2010 to 2013. And if you think that's a good thing for the tax administration or any taxpayer to have an untrained IRS employee, you know, giving instructions, levying on you, examining you, you know, adjusting your accounts, well, then you really need to think again. And that's the consequence of just one stupid little, you know, Star Trek video. That's an exercise in arbitrariness and capriciousness as far as I'm concerned. And that makes my larger point, that while you see things that the IRS is doing and you can take any given thing and say that's really stupid -- and I write 700 page reports every single year pointing out things that I have problems with -- you know that I have identified as most serious problems for the taxpayers, largely as a result of IRS actions. Often, you know, there are many cases where the law is driving these things. But the point is that there is no solution to being able to answer eight out of every ten phone calls but additional funding on the taxpayer service side so that you have more bodies. Our phone calls have gone up by, I don't know, about 11 percent over the years. I mean they're just huge increases in the volume of calls. I'm sorry; I think it's 53 percent. I may be wrong on that. Is that it? Ken is saying yes, it's 53 percent since what, 2004 think it was. So that's huge.

And we -- our employees have gone down by eight percent. So, you know, part of why I propose a taxpayer bill of rights -- and the theme that we have for the taxpayer bill of rights is it is your foundation for effective tax administration. So when you're going to go and do litigation you stop and think what the underlying principles are and how does that pertain to your bill of rights. What you're saying to taxpayers, you have these rights, you have the right to expect this from your tax administration. And does this thing that you want to do conform with these foundational principles? And on the other hand when you're going to take action against the taxpayer are your actions confirming with these fundamental rights that we're giving taxpayers. We're expecting them to come back, you know, and they can blow their -- they can through their own actions -- you know, Congress has passed laws that say okay you do not get this relief because of your own actions, you know. But we can't start from that point.

MR. BERGIN: Right.

MS. OLSON: And I think, you know, to go back to -- you know, it's a large organization. I mean there's -- in my organization I can find at any given point in time somebody doing something that I'm going like, what? That's just what happens. What you have to know is that at the top of the organization and drilled down through it are these fundamental principles that you're holding everybody to, so if they stray or they go there you can say do you see how this doesn't make sense. And Congress needs to have this so it can hold the commissioner responsible for running an agency in conformity to these foundational rights.

MR. BERGIN: That's great. Chris?

MR. RIZEK: I've been very critical of the IRS in various forms and I don't intend at this point to spring to their defense but I do agree with Nina in a couple of areas. One is I think the brain drain that the Service has experienced, the inadequacy of the training of the new people and the lack of funding generally to the Service is really having an adverse effect on the way the Service conducts business and correspondingly on taxpayers. Nothing gives a practitioner like Alan or me a -- I'm always so happy when I run up against an old pro in the IRS, you know, somebody who knows the drill, who will be straightforward with me, who tells me exactly what they can and can't do and why, who's pulling the strings. Which -- you know, I had a conversation just yesterday with a client about this; I said we got a great draw on this Appeals Officer, not because he's going to roll over but because we can deal with him. He's going to tell us exactly where he's coming out and why and we can address that and we'll be able to strike a deal. So many times -- and I put some of this cultural shift in the Service not down merely to funding and brain drain but also the fact -- and I put it to the tax shelter wards. They started out with this cultural change to customer service, which I always thought was a bad description of it anyhow, but to taxpayer service in the '97, '98, '99 period. And then they took their attention off of adequate enforcement, collection basically stopped for about two years and the tax bar went nuts with shelters. And the agency's attitude towards taxpayers is right back the way it was in the early '90s; they are all evil. And it is really very unfortunate because you can talk all you want about making a cultural shift but the problem is that all the forces within the Service have driven that cultural shift the other way in recent years.

I think adequate funding and training is the most important thing you could do right now for taxpayer rights overall. Because you've got to [get] them out of that mindset, you've got to provide training so people know what the rules are. It's so frustrating to have to explain to a young Revenue Agent how the appeals process works for example, you know. They don't know that. And it's really a problem for practitioners.

MR. WILENSKY: Just to pick up on what you said, Chris. I mean I would totally agree it's always better to have a tough, smart, rational person on the other side of the table than someone who really doesn't know how the system works or how the process ought to operate. One of the things that I think is intriguing at this moment in time and maybe now -- I mean so much of what happens when -- is a product of time and circumstances and having access to a window that works. And if you go back a bit to kind of how the IRS became the symbol of big government, of course after the Republicans took Congress in 1993 Newt Gingrich and others really started beating up on the IRS as the symbol of big government. We're now in a very different situation, a different environment where massive budget deficits -- the least we have to do is collect the money that's properly owed the government, but on the other hand also balance that with some of the abuses that have been talked about. And maybe there's enough here, sort for both sides assuming that there's a political will to go forward. And Nina notes in her report that for every dollar basically that you spend on the IRS you get back a substantial multiplier effect. So if you really want to collect money you give the IRS more money. It doesn't mean that you let them squander it, but it really is an extraordinarily cost effective expenditure. So maybe this chronic underfunding of the IRS at a time of large budget deficits coupled with a taxpayer bill of rights, that may be an opportunity where you're saying on the one hand we're going to address certain fundamental rights of taxpayers and come to the taxpayers defense, but on the other hand maybe this is an opportunity to obtain substantially greater training for the IRS to hire, to train and to rebuild the organization. So on the one hand maybe higher IRS expenditures would be viewed as feeding the beast by more conservative members of Congress, but on the other hand coupled with the taxpayer bill of rights maybe this would be viewed as taming the bill of rights.

MR. RIZEK: But --

MS. OLSON: You know --

MR. RIZEK: Maybe you've been out of Washington for too long, Alan, I don't know. (Laughter) I'm very skeptical that the elements on Capitol Hill and out in society who believe in -- to use Senator Moynihan's word, starving the beast, don't think that starving the IRS is a great place to start. Because there's a hated agency that we can continue to bludgeon and the fact that it correspondingly reduces revenue is a happy by-product.

MS. OLSON: You know, what I --

MR. RIZEK: I'm very cynical about that.

MS. OLSON: At my last -- I mean something that I've been trying to say --

MR. RIZEK: You may have noticed that.

MS. OLSON: -- to the people on the Hill, and I said this when I appeared at the House Appropriations Committee, the Subcommittee over the IRS, and I think it sort of disturbed some of the members, but I did say to them, you know, if you cut IRS funding you're not punishing the IRS (laughter), you're not starving the beast, you're harming your constituents. Because all the IRS is going to do is do automated stuff, it's not going to talk to the human beings who are your constituents, and bad things will happen. And then you can have another set of hearings like 1998 and, you know, then we'll go even further into the death spiral. Is that really where you want to go? And by the way you really will start -- so you won't be able to fund, you know, medical research, you won't be able to fund defense, you won't be able to fund that bridge you want. You won't be able to fund anything because we collect, you know, more than 90 percent of the Federal revenue.

So I do want to say one thing, and then -- I didn't mean to cut -- you know, is that we spent a lot of time in this year's annual report thinking about the order, as we do in every annual report, the order of the most serious problems, in particular the top five. And we went back and forth and because I'm the NTA, the national taxpayer advocate, I get to make the final decision, you know. I like that. But we -- you know, we went back and forth whether funding of the IRS was the number one most serious problem or was it need for the taxpayer bill of rights. And I basically made the call that if you don't have a taxpayer bill of rights and you give IRS more money there's no guarantee that they won't use it in a way that I would disagree with and that maybe taxpayers of the world would disagree with. They might put it toward more automation, they might put it toward -- you know, I don't know, more of the attitude that taxpayers are bad or something. So we thought no, what you really need to have is the foundational principles. Again, taxpayer bill of rights is a foundation for effective tax administration. And when you have that in place you've gotten at least a modicum of trust. You've got, you know, a -- Congress can conduct the oversight to hold us accountable to that bill of rights. But that becomes a starting point, and then number two is funding for the IRS. And number three was the training issue. And number four was the need for training on taxpayer rights. And we really thought very hard about how that sequence had to go. Now, number five was regulation for return preparers, which is also very important.

MR. WILENSKY: Well, I was just going to add, Chris, that I've not totally lost my cynicism (laughter) and one of the things that you see in legislation generally, but particularly in something as highly charged is taxes is -- for example, we went through the debate over the estate tax for a number of years, or as somebody re-characterized it, the death tax.

MR. RIZEK: Death tax.

MR. BERGIN: Death tax.

MR. RIZEK: Next thing you know people are going to be trying to sell you death insurance instead of life insurance, although it actually is death insurance.

MS. OLSON: It is death insurance.

MR. WILENSKY: But labeling is important, but in talking to a couple of friends on the tax-writing committees, members, we talk about estate tax reform, the question many of them had in terms of the likelihood of getting something done as we went through these iterations over a great number of years, was would you rather have the result or would you rather have the issue to run on. And of course a number of Republicans wanted the total repeal and would love to run on that, so they were reluctant at different points to do the ultimate $5 million per person, $10 million per couple legislation that emerged. So one of the inherent problems, and particularly with the IRS is would you rather see things corrected or would you rather have the issue to run on.

MS. OLSON: I think the thing about the TBOR is it goes both ways. Like when you read the Congressional Record just this summer, you know, on the July 31st Congressional Record when they're talking about the TBOR and they pass it -- at the end of that, you know, the main sponsor quotes -- Doug Shulman, Commissioner Shulman quotes acting Commissioner Steve Miller as an example of they weren't, you know, paying attention to the taxpayer. In other words they weren't accepting any responsibility, and we need this to hold that Commissioner responsible. And then you have, you know, Senator Levin standing up, the Democrat -- I mean, you know, Congressman -- and saying, you know, it was Sander who was saying, you know, this is a good thing and we supported it and then they invoked my name, you know, the national taxpayer advocate recommended this, you know, back in 2007 and this is a good thing. So even though it's serving different political purposes it was a bipartisan vote. And, you know, I think you could get a bipartisan vote on just a stand-alone bill. It's whether you really want that or do you want to use this for a vehicle.

MR. RIZEK: I've floated that in some discussions we've had --

MS. OLSON: Yeah.

MR. RIZEK: -- before that, it seems to me that the one least common denominator both parties on the Hill could agree on in the tax administration area is maybe there ought to be some more taxpayer rights legislation.

MS. OLSON: Right.

MR. RIZEK: And, you know, never let a good scandal or a good crisis go to waste, right. Here you have the (c)(4) scandal on the Hill as an impetus -- even though passing the taxpayer bill of rights wouldn't necessarily do anything about that they can say hey, we did something to make the IRS more responsive. And I think that's an opportunity that maybe people ought to be thinking about coming down the pike.

MR. WILENSKY: Yeah, that's what I was suggesting as before. Maybe with taxpayer bill of rights maybe it's possible to get more substantial funding --

MS. OLSON: Mm-hmm.

MR. WILENSKY: -- by providing something for everybody but yes, Chris, that does assume some rational thinking.

MS. OLSON: You know, and in June -- I just have to say, my June report last year, I mean we did a special report on the EO crisis and, you know, in my preface to it I actually took the TBOR as it was and applied it to what we knew just from the inspector general's report. And I found that eight of the ten taxpayer rights were violated. You know, just simply the right to know where -- you know, I don't have the exact -- but to know where -- to finality. You know, what's happening with your darn return while it's sitting there, you know, your application for 18 months, you know.

MR. WILENSKY: Right.

MS. OLSON: Just there were all sorts of things that were in violation. And that's my point, that if we are going to design an initiative then we should hold IRS personnel, you know, the managers and the analysts and everybody -- use the bill of rights as a framework for, okay, you want to go after tax shelters. How do you do that in a way that conforms with these foundational principles? And tax administrations all over the world actually do that. They have frameworks where they make sure that their initiatives are meeting these standards. Certainly if you're under the Human Rights Convention there are real remedies in Europe under that if you violate their Human Rights.

MR. RIZEK: Yeah, that's what I was struck by when you mentioned the OECD report.

MS. OLSON: Yeah.

MR. RIZEK: And the situation in Chile. I mean there has been --

MS. OLSON: Yeah.

MR. RIZEK: -- a taxpayer rights declaration on the front page of Publication 1 since 1997. John Staples and I actually did the first draft of this. It initially had 10, and he thought that was too contrived, we had to go back to eight. And after it got through the forms and pubs people it was a little bit different. But the problem with this has always been that it's not enforceable.

MS. OLSON: (off mic)

MR. RIZEK: It's hortatory. And I don't think you -- it's a truism I think in the law you can't have a right unless you have a remedy, right? So --

SPEAKER: Correct.

MR. RIZEK: -- there has to be some sort of remedy mechanism for it. You know, appeal rights is a perfect example. CDP has to have been appealable to the tax court in order to force appeals to do their job right. I'm still not sure that's working, by the way. I think one of the areas that a lot of people -- needs further work within the Service and that the Service appears to be reluctant to fully adopt is a robust internal appeal for every violation of a right. You know, during the '98 act Senator Roth's staff want to take appeals out of the IRS and make them ALJs, which made the union and the IRS and the Treasury administration apoplectic. So we got that very weak sentence in the first provision of the bill that says you're entitled to an independent appeals and no ex parte communications.

MS. OLSON: Right, right.

MR. RIZEK: But there's no remedy.

MS. OLSON: Yeah.

MR. RIZEK: And, you know, ex parte communications, there were some other restrictions on appeals with coordinated issues, now with transfer pricing for example. People are very concerned that they're not going to get a fair appeal now and that it's not going to be just a repetition of the Service's position because counsel is whispering in their ear.

MR. BERGIN: Yup. And that's a commonly held belief.

MR. RIZEK: And, yeah, I have to deal with that every day. But so you've got to have some sort of remedy to fix that, merely have a lovely bill of rights --

MS. OLSON: Right.

MR. RIZEK: -- that says you should --

MS. OLSON: Right.

MR. RIZEK: -- have this doesn't mean anything --

MS. OLSON: Right.

MR. RIZEK: -- if there isn't the commitment within the organization to change it.

MS. OLSON: Right.

MR. RIZEK: And some enforcement mechanism.

MS. OLSON: Right. I do think though if you have the bill of rights and you're showing up the gaps, you're showing up where is there no remedy for this thing.

MR. RIZEK: I think it's a useful argument, I agree with you there.

MS. OLSON: And that's also the point of the crosswalk because you not see what you have but you see what you don't have.

MR. RIZEK: Mm-hmm.

MS. OLSON: And then you -- that helps build your case for some of this procedural legislation, which may take forever but at least it's another step, it's another rational step toward it.

MR. BERGIN: This is a great conversation. I want to get -- let the audience in on it.

MS. OLSON: Yeah.

MR. BERGIN: Because I see some people here. So, Monte, help set a good example on it. Tell us who you are.

MR. JACKEL: Monte Jackel, self-employed at present, although since I've been spending more time at home I think my wife has some other words (laughter) instead of spouse as self-employed.

However, I just wanted to follow up on a couple of points. I told a little bit of a person -- sorry that Chris put on his blog as a comment. I blogged a little bit on personal experience I've had with the Service. I consider myself a fairly educated taxpayer and I just wanted to just follow up on a couple of points. First on Mr. Rizek's point about, you know, hiring more qualified people. I frankly think -- I used to think that that was the solution and I think that would go a long way but not if you hire one or two people. It needs to be a large number of highly qualified, better paid people with the ability on the part of chief counsel and the Service to terminate employees without going through a tortuous process that exists today. But, you know, more to the point, the taxpayer bill of rights you proposed and the first thing -- and I actually whipped out 7811 and I looked in the regs for -- I hadn't seen them, read them in a long time and, correct me if I'm wrong, the focus appears to be almost exclusively post-assessment. Okay. Except for those taxpayers that can afford Chris's rates, my rates now are much lower, but the point of it is is that the ability pre-assessment, if you're getting treated -- even with a clear bill of rights, if things are happening pre-assessment in an audit, okay, my understanding is based on the current taxpayer advocate's ability to do anything about things like that --

MS. OLSON: I see.

MR. JACKEL: -- the answer is no and --

MS. OLSON: Absolutely, but you can come in. I mean I have -- we have -- I've -- we have over 100 issue codes and we have thousands of open exam cases, we have appeals cases, we have agreements with all parts of the operating division. In fact with appeals we have an agreement that they are to -- if TAS is involved in a case that they need to tell us what their decision is five days before they send the decision to the taxpayer so we can call the taxpayer and talk with them to see if we need to get more time for the taxpayer to come in and address what the appeals' position is. So that's really helpful for me to know that, that's a perception, but taxpayers find themselves to us at all points along the way. And in fact very soon we're going to be expanding our criteria eight, which is called best interests of the taxpayer. And sort of covers taxpayer rights-type issues. We're actually going to adopt the ten rights as saying that that is a reason to come in to TAS if you feel that your rights are violated. And that could hit anywhere in the process, pre-filing, you know, in the middle of filing and post-filing.

I have to say that I think just like Chris was noting, that in so many of the bill of rights, you know, that have gone -- the TBORs in the past and the hearings, collection was a major focus. I think that as the taxpayer ombudsman and the taxpayer advocate -- and now the national taxpayer advocate, as the legislation was written, I think they were really focusing a lot on, you know, IRS is doing -- grabbing people's money. But, you know, my point is if we can get the assessment right then maybe we won't have the collection issues down the line.

MR. JACKEL: So your ability to issue the taxpayer --

MS. OLSON: I can order the IRS to basically do anything. Now my word is not the -- and I do order the IRS to do basically anything. My word is not the final word because the Commissioner is the person who owns the final decision and I'm fine with that.

MR. JACKEL: Yeah. Because it says in 7811 --

MS. OLSON: Yeah.

MR. JACKEL: -- or at least the regs preclude the advocate from interacting with counsel?

MS. OLSON: It doesn't preclude it, it says generally.

MR. JACKEL: Okay. Because what I had -- from what I had experienced personally plus what I have seen I was thinking more like -- and this may -- I know the objections to this already, but I thought that an effective taxpayer bill of rights would really do some good if there was an ability to get an independent arbiter to -- whether it's you, whether it's a judge, in some pre-assessment forum. When the Service for example is not following their own revenue procedures on certain things that are mandatory, what is your remedy? If you do not have a deep pocket and want to spend a huge amount of bucks, what are you going to do about it?

MS. OLSON: Well, it's really interesting. Congress actually wrote that into 7811 where it said when the taxpayer advocate is considering whether to issue a taxpayer assistance order you look at whether the IRS has followed its published guidance. So then it put in parentheses, including the IRM. So you know how sometimes IRS says well, this isn't really published guidance but Congress sort of cut that off by saying for purposes of -- for the NTA and TAS, published guidance includes all those things like FAQs and IRMs. So if you're not following that -- that's actually one -- just in the OVDI with the 2009 and the infamous FAQ 35. You know, I was basically saying you're not following your own published guidance; you're not following what FAQ 35 says. And that's basis for a taxpayer assistance order.

MR. RIZEK: Yeah. And --

MS. OLSON: Taken in the light most favorable of the taxpayer.

MR. JACKEL: But you don't --

MR. RIZEK: Given that conduct, I've begun to regret backing the enforceability of the Internal Revenue manual into the TAO provisions in 1998.

MS. OLSON: Right, right.

MR. JACKEL: But with appropriate --

MR. RIZEK: There was a move on to make them --

MS. OLSON: Right, right.

MR. RIZEK: -- enforceable law.

MS. OLSON: Right, right.

MR. JACKEL: With appropriate safeguards, you wouldn't think for example -- not overburden the Judge and his colleagues for example, but you don't think for example that an ability -- let's say you're going through an audit and you think things are not being applied properly, okay -- that a forum such as pre-assessment tax court review or some other review, would that be a better solution or approach?

MS. OLSON: Well, see that's what I'm -- yeah. That's what I'm talking about Chile, is that I -- you know, they have these 10 rights and I don't know how they're being applied now and I'm very curious about it. I'd like to see, you know, because it's not just that you wait until you get your notice of deficiency and then go to the tax court or you get your claim disallowance and then you go to the refund fora. It's that you can go in between. But I don't know how that works, and since there is a living experiment going on I really want to find out more about that.

And the other thing that I have to say about going around the world and studying other tax administrations -- and I'm sure you all have felt this is that, you know, we have a very different culture than, for example, this culture in Sweden. So, you know, I spent a week with the Swedish tax agency and the Swedish tax officials, the highest -- you know, and they would say these things and I would go, that's great -- never work in the United States, you know, because of the culture. And you have to take whatever you learn and bring home what do you think will work here with our unique perspective and feelings about paying taxes.

MR. WILENSKY: Nina, I must say I find it very ironic. I think of South America as having --

MS. OLSON: I know.

MR. WILENSKY: -- a truly voluntary self assessment system (laughter), you can pay tax if you want to, that a South American country would be an example of --

MS. OLSON: Yeah, well --

MR. WILENSKY: That we could learn from.

MS. OLSON: Yeah.

MR. BERGIN: A question over here.

MR. GIBSON: Hi. I'm Stuart Gibson, in private practice. Recently retired after 36 years with Chief Counsel at the IRS and the Tax Division as Justice. I guess the question that I have is, I represented a number of the folks who got sued as a result leading into the '98 hearings and the '97 hearings. One of the things that I don't see here is addressing cultural issues at the IRS.

Back then there was such fear on the part of many people who worked at the IRS that they were willing to let things slide they shouldn't have let slide. Because they didn't want to get involved. They didn't want to expose themselves to personal liability.

The pendulum, as you said, swings, but it doesn't swing by itself. It swings because it's in reaction to decisions that adults make and leadership, and political leadership, and in administrative leadership.

The question that I have is, if you've got a culture that basically the lowest common denominator is people who are willing to follow a pre-established set of rules without thinking outside the box, without thinking in larger terms. How do you attract people like that in this culture?

So the bigger question that I have is, I think we're asking the wrong question, is it time for a taxpayer bill of rights. I'd like you to talk about is it time for a taxpayer bill of rights in the context of overall improving the administration of the tax laws. Because if you solve that and you don't solve the rest of it you haven't solved anything.

MS. OLSON: Well, you know, on November 4th I issued a report, another report to the commissioner because he gave me an assignment to write two more reports this year. I was busy. That was on improving the awareness of the current taxpayer rights. The rights of taxpayers within the IRS.

We picked up many of the recommendations from that report into our December report including the one, the most serious problem, number four, training the IRS about taxpayer rights. One of the things I said there was, and I think the House bill sort of picked this up, holding the commissioner responsible for creating a culture where rights are part of the IRS.

You know, I said looking at the training, look at the IRM. You know, right now the IRM is do this, do that, do this, do that. There's no explanation for why you're doing that, and it's insulting to the employees. If you just treat them like automatons then you're going to get a response from them. That's what they're measured on. That's what their expected behavior is. They're being told loud and clear, do not think. Do not exercise judgment. We're not even giving them any framework to exercise judgment. So it's totally paternalistic, like we can't even trust them to exercise their judgment so we don't even write it as if, you know, to give them the principles.

Our recommendation was, and I actually have a team of people right now who have completed a complete audit of the IRM, and they have identified the provisions in the IRM where we need to insert language about why this action is being done. How does this tie to a right? Here is where you need to raise the issue of ex parte communications. Here is your right. Talk to the taxpayers about the right of appeals.

We're going to go forward working with IRS functions to get that language. It'll take ages, but, you know, we'll do the key issues now and work our way. You know, the ones we think are the highest priority.

I will tell you that I think it's interesting, because I didn't think about this, but leaving aside sort of the political overtones of the House discussion, I think it's very interesting that both bill of rights bills actually place the responsibility for it at the head of the organization. You know, that they say the commissioner has to ensure that IRS employees understand and protect these rights.

If you have that then you can have performance commitments for the senior executive team to ensure that their employees are trained and have an understanding of rights. You know, you can drill it down. I mean, the IRS is a hierarchical structure. It's a delicate balance to make it not punitive. Because it's also true that right now people are really being beat up, and there's a whole morale issue. You don't want them to feel like, you know, it's back in RRA-98 days.

But, you know, you do want to move the dial here, and I think you have to place it at the top and put, you know, obligations in place on the leadership. You know, that they have to drill it through, and then you also get into the employee's guidance everywhere. Here is why you are doing this. Here is what this action does that relates back to this fundamental thing, and here's why we have this fundamental thing.

I've found when I talk to human beings that they really -- when I talk to the employees that they really want to understand. I'll shut up after I say this one thing.

Early on when I came to TAS I did a training for all of my employees. I did, like, 10 or 12 sessions. It was a road map to a tax controversy. It was basically the course I taught punches into 2 and 1/2 hours. I just did it over and over and over again, face-to-face with my employees.

I will never forget when one woman came up, because I really harped on the importance of the Tax Court, and the notice of deficiency. People in the IRS, you know, it's just a piece of a paper that you send, and you have to wait 90 days before you can assess that tax and move onto collection.

This woman came up to me and she said she worked seven years in the IRS function that processes notices of deficiency when they were told that a petition had been filed in the Tax Court. She had no idea what she was doing and why it was important. She said she now realizes how important her job was.

MR. RIZEK: Sometimes it's better if you don't understand, by the way.

MS. OLSON: I just thought, how insulting to our employees.

MR. RIZEK: But I think to Stuart's question and everything we're talking about here I just reread the IRS's mission statement and it's --

MS. OLSON: Hello. It's great.

MR. RIZEK: -- failing miserably.

MS. OLSON: Yeah, I know.

MR. RIZEK: The IRS's mission is to provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities, and by applying the tax law with integrity and fairness to all. I bet you there's no one in this room, maybe this country, who thinks they're doing that.

MR. WILENSKY: It's a good mission statement.

MR. RIZEK: It's a great mission statement.

MR. WILENSKY: I remember when it was written it was a lovely mission statement.

MR. RIZEK: Now combine that with the new logo and you'd really have something.

MR. WILENSKY: They actually did the logo at the same time.

MR. RIZEK: Well, this time every year I think we do.

MR. WILENSKY: I was taught mission statements were important.

MR. RIZEK: And it's just not happening.

MR. WILENSKY: I want to pick up on a couple of --

MR. BERGIN: I'll get right to you, Jim.

MR. WILENSKY: -- points. That is, the people who are running these organizations really make a difference, and culture really starts at the top.

I think at an organization like the IRS if you have somebody who's average the organization really goes down. If you have someone that's very good the organization muddles along, and you really need somebody great to really make an organization like that work.

I'm reminded by a conversation at lunch I had with a senior official around that time who will go unnamed. As Kissinger used to say, a senior official traveling on the Secretary's plane. I don't want to deep background, but we were talking about the tax shelters that were being produced on K Street.

In real time the IRS knew exactly what was going on. I said, 'Why don't you start to go after them?' The language, well, you kind of have to make a foundation before you build a house, et cetera, et cetera. But I think that was one example of where leadership at the top, and there are many examples, but where leadership at the top really makes a difference.

MR. RIZEK: I am going to throw out a provocative thought.

MR. BERGIN: What a surprise.

MR. RIZEK: I know that's unusual for me. I'm not making an opinion on this. I'm just going to ask the question. Is the sequence we have now had of four consecutive non-tax professionals as commissioners contributing to the IRS's failure to meets its mission statement?

MR. WILENSKY: A learned article published in Tax Notes last fall.

MR. BERGIN: I'm the moderator. I'm not going to add.

MR. WILENSKY: Lazlow suggested and made that very point.

MR. RIZEK: I've heard that before, yes.

MR. WILENSKY: That having seasoned tax professionals and the culture that used to exist before, or at least for a substantial period of time, knowledge of the tax system, duty to the system I think really makes a difference because I personally, not that it's easy to find experience tax personnel who have managerial skills. But we're not manufacturing widgets here and taxes. A very, very peculiar type of discipline. It's very complicated. As well as because of its interaction with things raised in the issue of bill of rights. It's where the rubber meets the road for the government. So I certainly would endorse that.

MR. BERGIN: And, of course, I disagree that lawyers can't run things.

MS. OLSON: My thoughts on that will just have to wait until I write my book.

MR. BERGIN: Can't wait. We have a question over here.

MR. KEIGHTLEY: Hi, Jim Keightley. I'm Jim Keightley. I was at the IRS for 27 years.

MR. BERGIN: Go on, you're fine.

MR. KEIGHTLEY: I'm on?

MR. BERGIN: You're fine, Jim.

MR. KEIGHTLEY: 27 years, and really one of the points I would like to make sort of culturally here is I don't see anybody representing the employees of the Internal Revenue Service. I was there a long time and I thought we did a first-rate job.

When I was young we 'had the best tax system in the world.' We probably still have one that collects the most money given the resources we put at it. So for probably '93, I think we alluded to when you began trashing the IRS. There are people that don't like the income tax, and if they don't like the income tax they can't get it repealed, but they're going to try and make it as ineffective as possible.

What you've seen over 20 years, you can give them all the rights in the world. Many of these people don't have any money. That's why they owe taxes. So you can give them all the rights in the world, but they still can't pay the taxes.

So if you want to give the front-line people the authority to write off liability based on charm, goodlooks, burden, whatever it may be then just give them that authority and stop discussing the Bill of Rights which is very nice, but very esoteric.

MS. OLSON: See, I --

MR. KEIGHTLEY: I mean, that's where the real problems come out is large post-assessment. I don't feel sorry for the people who are represented in the international pricing issues. I think they can defend themselves. They've got more rights than they need.

MR. WILENSKY: And more money. And more money.

MS. OLSON: I actually think that you need principles for when you decide how to compromise and when to compromise taxes even when they're -- I mean, and I'm someone who's spent her life representing low income tax payers.

If you don't have those principles then you have things that are arbitrary or whimsical. That's when you also lead to the RRA-98 because part of the accusations in RRA-98 were you had these people out there who were just deciding one way this way and one way another.

It was done without any -- what I want is for the IRS frontline employees to be empowered, educated, and understand what their -- you know, what their foundational principles are, what the rules are, so that they can apply them well, and flexibly, and where they have the square peg in a round hole they have a way to elevate that issue to say, we need better guidance, and somebody's going to pay attention to them and give them that guidance.

MR. KEIGHTLEY: With all that experience you should write down those cases and say, these are the cases where you should walk away from this case or do whatever conduct you think they're doing that's not right.

MS. OLSON: I do that all the time.

MR. KEIGHTLEY: Well, write them down.

MS. OLSON: I mean, that's what my reports are all about.

MR. KEIGHTLEY: I think those folks will follow the directions if you give it to them, and that's what I think they need. As I said, trashing the IRS is an easy thing to do.

MS. OLSON: Well, I don't think anybody here though is trashing the IRS.

MR. WILENSKY: Can I just very --

MR. KEIGHTLEY: Well, they don't fund them, let's put it that way.

MR. WILENSKY: Can I just --

MS. OLSON: Well, I think that Congress is not funding them, right.

MR. WILENSKY: Can I just very quickly put in a --

MS. OLSON: Nobody wants to handle it.

MR. WILENSKY: -- plug for the IRS which I did a little bit earlier and that is -- and particularly the national office where there have been a lot of dedicated people.

Toward the end of the administration I was in we were trying to get out, and we did get out proposed and temporary new section 42 regulations. We had a task force, nine of the people from the IRS, three from Treasury.

I'll never forget this. It was the weekend after the election, so we knew that we were going to be out of the office, and we had a finite period of time. Saturday afternoon, perfect Washington day, 70 degrees, not a cloud in the sky. Perfect fall day. We had a five-hour meeting and at a certain point, at about 4:30 I looked around, I said, geez, I've got nine people here from the IRS. I have no authority, legal or otherwise, to get them to come and give up a beautiful Saturday like that, but they were committed to getting that project done.

If most people knew stories like that and the dedication of a lot of people there would be a lot less banging on the IRS.

MR. BERGIN: Right here. One, two, Gene, you're third.

MR. BOOK: Hi. I'm Les Book. I'm a professor at Villanova Law School. I wanted to tease out a point that Chris made about focusing on remedies when there are rights. In particular thinking about notice of deficiency which was addressed in the '98 Act.

So there were two particular changes. One requiring there to be a specific date for filing a petition. Another requiring there to be contact information with taxpayer advocate service.

So as occasionally happens, IRS makes mistakes. Notices issues without either of those particular pieces of information. Courts wrestle with that and have essentially allowed IRS to have those notices continue to be issued, and not been validating this notice.

I guess the question is can there be remedies other than kind of court -- you know, what other remedies can be used or thought about other than necessarily a court stepping in and sanctioning IRS or invalidating an assessment or a notice?

You know, the Chile example's interesting in terms of what courts can do, but maybe there we should be thinking about other institutional pressures that could help in this avenue.

MR. RIZEK: Well, one of those is sitting next to me. I know Congress thought in 1998 that the national taxpayer advocate and a beefed up taxpayer assistance order of authority was intended to address situations that were out of the ordinary course that there didn't appear to be a regular remedy for.

Nina knows, because I've said it before, I thought that that authority could be used more vigorously. I think she's using it vigorously now, but I don't think the national taxpayer advocate's office grew into confidence in fulfilling that role until recent years.

MS. OLSON: Yeah, I mean, you talk about culture shifts. I mean, I've been in the position since 2001, and I think it's only been in the last two or three years that I feel that my employees have been using the taxpayer assistance order in a way that it was intended.

It wasn't that I wasn't saying all along, issue the damn TAO it was the whole culture. I mean, I've spoken about this before, but, you know, I had a meeting with 1,000 of my employees, and one of them came into the microphone and said, well, if we issue these TAOs we'll spoil our relationship with the people in the IRS, you know?

I said to them if you're worried that a taxpayer assistance order is going to spoil your relationship with the IRS then you have unrequited love. You don't have a relationship. It took me 10 years, you know, to get them to that point. You see it in a number of taxpayer assistance orders that are being issued and the way we're issuing them.

But even last week we had an issue where someone, you know, wanted a rescission of a notice of deficiency. It was is issued in error, and had no confidence that the debt -- that the IRS was actually going to, you know, stand down from it. They said they were. They agreed with the taxpayer after they issued the notice of deficiency, and before the 90 days was up.

The person was saying, you know, I want this rescinded. Our case advocate said no. You know, that landed in my email box as it should. We went out and we used it as a teachable moment for the case advocate, for the local taxpayer advocate, for everybody, and, you know, the rest happened the way it should.

It goes to the point about leadership. I mean, I view my job as making sure that my employees fulfill the statutory mission. I'm more or less successful depending on how my employees do. I --

MR. RIZEK: If it's something as simple as leaving the filing date off of a statutory Notice of Deficiency, and they nevertheless file in time. It's kind of a no harm, no foul, right? I think that's what the courts basically said. It doesn't invalidate the whole statutory Notice of Deficiency.

The problem comes when they miss a deadline, the service goes ahead and assesses. Is that a situation where maybe the taxpayer advocate ought to get involved and say, well, if the statute's still open let's have a do over, you know?

MR. BERGIN: Right here.

MR. HENCHMAN: Joseph Henchman with the Tax Foundation. I wear a number of hats, but one of them is an operations guy. So I'm with you, Nina, on the importance of laying out the principles and for the employees. Otherwise it's a free-for-all, and there's no guidance to what they're doing.

So originally my question was going to be, well, we all see the culture's broken, and that things need to change, so why hasn't this happened in the seven years that you've been recommending it? But the questioner two questions ago kind of answered that for me with this attitude of, oh, we just need to automate it more. It's a machine, and due process just lets guilty people get away with not paying taxes, and that's precisely the attitude that's led us to this problem that we have now.

So I'm going to ask a different question and try to offer a provocative solution here because it reminds me a lot of a criminal procedure which was many years ago for me at this point. But, you know, I think, Nina, I think laid out a bunch of problems we have here is that the IRS employees don't know what they're enforcing, and taxpayers don't know what their rights are, and there's no remedy.

This sounds a lot like the situation of criminal procedure before Miranda. After the Miranda decision, you know, everybody in America knows what your rights are when the cuffs are put on you, and when you're taken away. The remedy is, is that if the police doesn't follow it then the case gets thrown out. So what about a Miranda-type solution if we were able to get these into place?

MR. RIZEK: Or an exclusionary rule where everyone learns first semester of law school that the question is should the criminal go free because the constable blundered, right?

MS. OLSON: I think that when you start framing things in this -- when you start talking about a taxpayer bill of rights you start having to address those issues --

MR. BERGIN: Gene's next.

MS. OLSON: -- and that's a very positive thing. You know, that's what we need to

be talking about.

MR. BERGIN: You're three.

MR. RIZEK: I think in certain circumstances it's entirely appropriate. I mean, the IRS holds taxpayers to very strict, admittedly mostly statutory deadlines, and then frequently the service feels at liberty to make up rules as it goes along.

Take the current voluntary disclosure program where the rules over the three iterations shifted quite a lot, and, you know, there's still applying rules that you sort of hear about on these working groups on the internet that nobody knew about before, you know? Maybe that shouldn't be allowed. It's a possibility.

MR. BERGIN: A lot people want to get on in this discussion which is great, so I'm calling out numbers. Gene, one, two, three, four. Three and four are sitting next to each other, so.

MR. STEUERLE: Hi, Gene Steuerle from the Urban Brookings Tax Policy Center. Actually, gosh, almost three decades ago I was paid by the ABA, the AICPA to do a study on the IRS. I think I'm the only person in the world that the end of time decided I was so tired of IRS personnel getting attacked I dedicated the book to them.

But in that study I was asked to address some of the issues that you've talked about here, what would additional revenues do for IRS? I came to the conclusion that there was this iron triangle that had to be dealt with which gets back to the policy aspect of it.

So you can keep funding the IRS to do more and more things, but if the things they have to do are still in excess of what they can do, either if they have too much to do or because they're not administrable, you never really completely solve the dilemma.

Which some of you addressed by talking about, well, what should Congress do and policy. But to me I wonder if there's not a more proactive stance IRS can't take. I understand the argument against it. The proactive stance would be that they actually start admitting much more directly to Congress and the public just what they can administer well.

The reason they don't do that, I think, is because the principle incentive of the IRS is not to serve the public, that's the secondary incentive, the primary incentive is to stay out of the news. Because if you get in the news you get attacked and everything starts falling apart.

I think that does start at the top. I think that any commissioner would not worry greatly about it. So IRS hides the things it can't administer well. So we have issues like c4 which is already a step-child of the IRS, and tax exempt organization because it doesn't bring revenues. It's not even a tax issue for the most part.

So c4 is not well-funded. It's got a dilemma. It's got an unenforceable type of law, but it can't come out and say that. So you have all this workings underneath or we have things coming out with the Affordable Care Act. I mean, we all know when they start assessing millions of people for getting too much of a Affordable Care premium that they now have to repay we know, you know, the shit's gonna hit the fan there too. But IRS can't say that.

So the question I have is how can IRS actually try to force or encourage Congress better to address the things it really can't administer well? Not just because it doesn't have enough resource to give out, but even the things that -- just examine things. Just say these things aren't well administered or we have error rates of 40 percent and there's nothing we can do about it.

MS. OLSON: We're already planning the December report and the theme of it is actually to take a look back at some of the legislative things that Congress has told the IRS to do and say how are you doing.

As I was reading through RRA-98 some of the off-code provisions, there's an off-code provision that says it's the sense of Congress that it wants the IRS to bring up frontline employees as it's considering legislation to tell it how this legislation is administrable or not.

We're actually going to do an information document request to the IRS, that's what we do to the IRS, saying how many times have you brought a frontline employee up to Congress in the last five years when you're talking about, you know, these administrative positions like the Affordable Care Act et cetera.

But here Congress tried to legislate this, and yet we're not really successfully in that process on the Hill. It's not so much that some of the staff writers haven't tried, because I know they have tried. It's that there is this self-censorship, you know, that folks from the IRS are not really going to tell you what they think this is going to do to them, and may not be allowed to tell them, you know? Then you get things written, and then after it's written you go, oh, this is going to be a mess for us, you know?

The other thing that is -- the IRS work on a strategic plan, and we had a discussion, there was a draft of the strategic plan, the five-year strategic plan. It was so dumbed down. It was just, like, because -- it started from the assumption that we're not going to have any money, and therefore this is all we can do.

I was like, you should write a strategic plan saying this is what we need to do in our judgment, and here's the funding you need to give us. If you don't give us that funding this is all we can do. Which do you want? But make it a hard choice on people so that they have to see what they're leaving on the cutting room floor.

There's this thing that happens that they don't do it. That's happening at the senior leadership. You know, and then the employees are saying, well, why aren't we going in this direction? Why aren't we doing this? There's no money, and it's never made public what we need to deliver on that mission.

MR. RIZEK: Well, I think Nina's said several times in her reports over the last decade that the IRS has been saddled with too many non-core missions. I don't think there'd be much disagreement on that. Leave it to Gene to be the honest broker and make that point, of course.

But I don't think you're ever going to have a department or an agency of the executive branch not being politically sensitive about, you know, what they are and are not supposed to say to Congress. I think that's an inevitability that in various administrations that degree of control over who says what to Congress has been greater or lesser.

But I think it's just a political reality. I think the consequence of that is some of what you brought up, Gene, and what Nina, has to be done by persons outside the Agency. It has to be concerned tax professionals going up the Hill and saying, are you crazy giving the IRS this job? That's a really, really bad idea.

MR. WILENSKY: Let's say, just --

MR. RIZEK: And Tax Notes which does that.

MR. WILENSKY: But just a little deeper

look at that, in that it would seem to me that you're not going to do something -- the IRS is going to show those politically, alien to the White House interest, but a lot of the stuff emanates from Congress, and I wonder if to some extent it is a leadership issue at the top of the IRS. Because one of the reason the tax code is a mess is, you know, somebody on the Hill wants something in there. Somebody has an idea and they really aren't fully cognizant of how that gets translated into legislation and the enforcement issues.

And it would seem to me, notwithstanding political issues of the White House, that there will be a way, at least with strong leadership, to be more proactive on those technical issues before they are written into law.

MR. RIZEK: Yeah. One of the most frustrating things for me when I was in drafting sessions during my time with Treasury was asking the question, "Well, how was that supposed to work?" of the people whose idea it was in the drafting room and being told, "Oh. You guys will figure that out in regulations. You guys figure that out." I'm like, "No. I'm asking the question because we --

MS. OLSON: Right in the reg. Yeah.

MR. RIZEK: -- we are not going to be able to figure it out. I have no idea what we are trying to do here.

MR. WILENSKY: And one other thing, one of my pet peeves is an application of the 8020 Rule, where so much of the complexity seems to come in, and many provisions trying to get the last 20 percent of justice. And the judgment calls, depending on the area, but I think we would be so much better served if, in writing the law, instead of trying to anticipate, you know, exactly where the lines are going to be, things falling on the right or the wrong side of the line, if there were more respect paid to simplicity and administrability.

MR. BERGIN: Good point.

MR. MURRAY: Fred Murray. I might add, before I make my comment, that not all of the pressure on some of those technical problems come from the Hill. Some of them come from in Treasury. But when I was there one of my projects was to coordinate the effort to change the way in which taxpayers write the check from the Internal Revenue Service to the Department of the Treasury, because of the obvious implications of always having IRS on the check.

I worked through three successive taxpayer bill of rights, in fact helped write the legislation for Nina's office. And one of the observations I would make is that from looking at investigation after investigation, hearing after hearing, writing testimony, a lot of the other things that have occurred over the years, is that there's complete instability at the organization.

Every few years there's a reorganization in order to meet pressure from the Hill, or other complaints of one sort or another. In this past year something like 20 percent of the senior executive corps of the Service resigned because of some of the budget issues, and some of the changes in personnel rules. It's been years since there's really been any sense of where is the course, and I think some of these problems are -- there are many problems. Like, the law that can't be administered, the (c)(4) area. People that studied that area say, you know, it just can't be done given the way the law currently is structured.

I was there during the first attempt at health care during the Clinton administration, and there was no one in the building that really wanted that responsibility, but the IRS was given it anyway. They are in an impossible position, and we have to give them, to Nina's point, a longer-term time horizon to work on these issues, and we have to find a way to give them some stability in senior executive ranks to be able to form programs, to form the policies around those programs, and give them a way to communicate to employers at lower levels that this is who I am reporting to.

This is who I'm going to be reporting next year. These are the things that are important to my job. We haven't really, at least in my timeframe, I don't think I've ever seen a period like that.

MR. BERGIN: Okay. David?

MR. BRUNORI: David Brunori, Tax Analysts. Nina, I've been curious about something for many years.

MS. OLSON: Oh-oh.

MR. BRUNORI: Since the first year you put this out, 2007 or '08 --

MS. OLSON: '07.

MR. BRUNORI: -- '07. My liberal friends love the taxpayer bill of rights because the machine, as you described it, tends to run rough shod over poor people. My conservative small government friends like the taxpayer bill of rights because it's a check on the power of big government. And my question, specifically for Nina, but if Chris and Alan know the answer to this, this will be great.

Who is opposed to this idea, specifically? Has anyone ever said, that you can name, publicly, "I am opposed to this idea," and why? Because I cannot get my head around it, it may not be what we would want, there may not be sanctions, or there may not -- you know, it may be a little esoteric at times. I agree with all of that. But the principles seem sound.

MS. OLSON: Yeah. I think that when we first came out in 2007, you know, some folks on the Hill, and I'm not going to name names, you know, but they sort of had the reaction of --

MR. BRUNORI: Come on.

MS. OLSON: No.

MR. BRUNORI: Just whisper it.

MS. OLSON: No. You know, it's a gimmick.

MR. BRUNORI: It's more dangerous than what's with a name.

MS. OLSON: It's a gimmick. It's meaningless. You know, why would we do this? And we really had to do some education initially saying, "No. It's not a gimmick, and there's really meaning --" And you see that actually addressing that in the successive presentations of it in the annual report. We learned as we went along.

And that's really all we've heard negative about it. I think it really is just, no opportunity, you know, for what is blah, blah --

MR. RIZEK: I think, David, to answer your question. The answer is, no one is opposed to it in principle. It's like, a simplified tax code. Is anyone here against that? Of course not. We are all in favor of a simplified tax code, but the devil is in the details. You know, and a perfect example is the burden of proof shifting provision in 7491, that a lot of people thought it was just fundamentally unfair, that they should have to disprove a negative, you know, and the Service got the benefit of that. So, they wrote some -- and they have failed. I mean, those rules are not coherent. They don't work well.

MS. OLSON: They are not administrable.

MR. RIZEK: They are not administrable,

and the courts have struggled with them. The taxpayer is raising it all the time, and the IRS blows it off all the time, and it just doesn't work. So the devil is in the details. In principle, everybody is for it.

MS. OLSON: And interestingly enough, focus groups, one of the things that came out of that was taxpayers really wanting to know, "Just tell us how long we need to hold our records. Just tell us what we are supposed to hold." Like they just -- that's what they -- they just need it in plain common-sense language, that's what they want.

MR. RIZEK: And now you've got provisions like 6501(c)(8), where there's, if you haven't filed your 3520s, blah, blah -- there's unending statute of limitations.

MS. OLSON: Correct.

MR. RIZEK: So we have questions coming --

MS. OLSON: There is no final --

MR. RIZEK: I did this transfer to a trust in 2006, if I file it now, do I start the statute of limitations running, and what happens? Or if I don't, what happens? Congress has made a lot of these problems unsolvable for taxpayers.

MR. BERGIN: Marty?

MR. LOBEL: Marty Lobel. I'm concerned -- I'm in favor of the taxpayer bill of rights but I'm very concerned that we are going to exacerbate the two-track, or two-class system at the IRS. If you're a little guy, you have no rights as a practical matter, because most of them are pretty unsophisticated, and so forth.

On the other hand, if you're a big multinational, represented by Caplin & Drysdale, you know more about the law than the IRS does, and the IRS employees, when faced with the decision about taking on Caplin & Drysdale, or one of these big multinationals, says, "Well, you know, unless it's really clear, I'm not going to do it." And that's been happening -- it's gotten even worse. And why wouldn't this just exacerbate that, because it gives a whole new range of blah, blah --

MS. OLSON: Well, I actually think it's actually the cure for that. And our focus groups actually showed that very clearly. Where, people, when they saw our markup of it, they said, "This is great. This explains it really easily." There were some things that they didn't quite understand, and they said, we didn't know that we had that.

And when we asked them, we asked them, "When do you want to know this? Do you want to know it beforehand or do you want to know when you're having a problem?" They said, "Oh. No. This is something that everybody needs to know now." And I mean, I just can only say that in the conversations I've had with IRS, I think that at least the communications people in the IRS are just wanting this because it's a very strong message.

But from the taxpayer advocates' point of view, we have a network through the low-income taxpayer clinics, I have local taxpayer advocates in every single state, and they have a requirement to do outreach throughout the year to grassroots groups. And I just think that, I mean, we are all ready to have -- we need to have websites, brochures, places in parking garages. Reaching out to the Ad Council to do an ad camp, I mean, I'm about to do anything the minute that I can actually do this, and there's pinpoints where I've been in my arch mode, where I'm just like, "And why do we need the IRS, I'll just do it myself."

So, you know, which we may get to eventually, but the point is, if you spark that conversation it will get down there, and there are vehicles to get it down to them through all sorts of groups, and we have really talented people who are able to do that, and I think that -- you know, there's the American Bar Association, the AICPA. You know, you don't need to take even pro bono cases but you have the responsibility to educate taxpayers about that, and Tax Analysts too.

MR. RIZEK: I think one of the things in the recurrent themes of multiple iterations of taxpayer rights legislation and administrative things, is one of the most effective ones is disclosure of information and more detail in notices. The thing Les was talking about, for example. I think, you know, CDP, for example, to choose something that maybe hasn't worked perfectly, has still informed a lot of taxpayers about collection alternatives and about the right to an appeal.

And, while it may not have been the most efficient collection system, it is certainly giving taxpayers a sense that, you know, "Maybe I am getting a fairer shake than I thought after all." And I think the more of those things you can do, which Congress has done repeatedly, I mean, again, each of these Bills and the first one that she's got on here is, "You have a right to be informed." You need to know what your rights and obligations are.

MR. WILENSKY: Let me add something else, too, Marty. While I also tend to think of the tax system as being tiered, it really, to some extent, is multi-tiered, or at least there's another tier in there, where you see a lot of privately-owned businesses, of substantial size, or taxpayers of substantial net worth. I mean, multi- million dollars of net worth, and when you get outside of Washington and New York, and Chicago and Los Angeles, the ability of the tax bar goes down dramatically.

Now if you go into a Big Four office, they are going to be in touch with Washington and people et cetera, et cetera, but it is a very different thing. Sort of out in the hinterlands, if you will, where a lot of large businesses are based, in terms of knowledge of all of these rights, the procedural rights, and somebody before alluded by Miranda-type rights, and I think if people were armed right at the get-go with, more comprehensive statement of what rights they have I think that would be very helpful, because the people representing them, rightly or wrongly, are not always -- I mean they are not at the level of what you're seeing in the best and the brightest in Washington, D.C.

And I had a client who I have done little work with in California, who got very poor tax representation, and sure you can sue for malpractice, but you go through the $1 million or $2 million limit of policy, and that's assuming you get all the way down the line. So I think that kind of stuff will be helpful.

MR. RIZEK: On the flip side, just to play devil's advocate for one second, you know, the IRS does send out Publication 1 --

MS. OLSON: Mm-hmm.

MR. RIZEK: -- with the initial contact to practically every taxpayer, and practically situation. And I even assign it in my class, it's actually a very good publication, it has a lot of very useful information in it, and it goes largely unread, unfortunately.

MR. BERGIN: Wow. Time is flying. We've got three people up. In order to get all three of them, I'm going to ask you to keep your questions real short.

MR. RIZEK: We'll keep our answers.

MS. OLSON: And we'll keep our answers short.

MR. BERGIN: Thank you.

MS. OLSON: You didn't even have to say it.

MR. BEHNKE: My name is Blake Behnke, I'm a student at the Georgetown tax LLM program. Ms. Olson, in your report you talk about the obvious benefit of voluntary compliance, and of that I think 2 percent was the figure that's collected through collection actions.

MS. OLSON: Enforcement, yeah.

MR. BEHNKE: Yeah. Enforcement actions, and so my question was, to what extent, where's the connection between the publication or adoption of the taxpayer bill of rights in increasing the voluntary compliance, and to Chris' point, how do we publicize that the earlier comment of Mitch and Miranda, being known by all of America it's because of CSI -- I don't think we get a whole lot of people watching CSI IRS edition, other than those of us in the room.

MR. WILENSKY: Boston Legal, we'll call it Boston Tax Legal, that's what we need to bring back. Denny Crane as the tax lawyer.

MS. OLSON: You know, there are many minds greater than mine that have spent a lot of time thinking about the causes of compliance. And we have done a series of really interesting surveys of sole proprietors to tease out why the compliers don't comply with the law -- looking at their DIF scores, their discriminate index function scores, of the returns to identify highly-compliant, and highly non-compliant sole proprietors, and then administering the survey to the extremes of those populations, and checking the answers.

And we tried to do the questions that they weren't -- you know, completely self-serving. We didn't ask them, "Do you cheat on your taxes?" But we really went around the issue and tried to get to attitudes, and we've done a series of years of analysis and what we learned from them, particularly this year, is that taxpayer service and norms are the most influential factors driving compliance or noncompliance of sole proprietors; which I think the taxpayer service is an element of trust.

We had a whole bunch of factors that really went to trust of the system, how you're going to be treated. Or do you trust a system that you're going to get the right answer, and where you see a lot of distrust, you see a lot of noncompliance. And on the other hand, we saw the norms, the groups that they belonged to. We asked them to classify the groups that they belonged to, the attitudes of the members of the group. Do they trust the IRS? Do they trust government? Do they trust -- you know, think the tax system is fair?

And that's a very influential factor, what their perception of the members of the groups that they belong to. The attitudes of those members is a very influential factor in their own attitudes about the tax system. Now where does the bill of rights come in? I mean, you could have somebody that's so skeptical and so distrustful that they will see that bill of rights and scoff at it.

But I think that's where that would come in, is that that's where the interaction with the IRS employees, where you have someone scoffing, and yet that IRS employee adheres to the bill of rights. That's the beginning of changing that person's attitude, unless you're so far gone that nothing would change. And then by that point -- during that 2 percent we are enforcing and actions and bringing in your money.

And Australia, U.K., they are really all thinking about -- the Scandinavian countries -- they are thinking about tax administration in that way. In terms of a relationship. That doesn't mean that they are not using the various -- you know, the IRS is the most powerful creditor in the United States, it has awesome collection and assessment powers, and I'm not worried that it won't use them. Others might be, but I'm not.

You know, what I'm worried about is that we use them appropriately, and that taxpayers have some confidence that when they call the IRS, that they are not immediately going to leap to those enforcement powers. That they are going to have an opportunity that they can trust, that they can talk to the IRS and have their circumstances heard, and that we come up with an appropriate approach to their situation.

MR. BERGIN: A way to move the pendulum. We have one here.

MR. SEPP: Pete Sepp, National Taxpayers Union. There's legislation introduced by Senator John Cornyn, called the Small Business Taxpayer Bill of Rights, it has a remedy in it providing for alternative dispute resolution procedures that many small businesses are familiar with at the audit stage. I wanted to know what you thought about that provision, and more broadly, what's the one thing regarding remedies that was kicked out of the conference process on the Restructuring and Reform Act of '98, that you would resurrect today and want to see pass?

MR. RIZEK: Well, I can tell you that mandatory ADR was one of the things that was kicked out of the restructuring process in 1998. That was an idea that administration, and in particular, the Chief Council's Office, and the Tax Division, were not particularly enthusiastic about.

I'm pro-ADR though, I think more ADR is generally a good thing. To me, I think expansion of the IRS Appeals Authority, and a truly independent appeals, and I've come as, I've said, a little bit to regret having watered -- having that get watered down in the '98 Act.

I think, ex parte, it just doesn't work. I don't think there's an awful lot of confidence in the independence of Appeals these days among practitioners.

MR. BERGIN: I'm going to have to wrap this up. I get the last word, which is good. I'm for Tax Analysts, and I have to say that it's also

important once again to reiterate that we administer the tax system in a transparent way, and we can do that and protect confidentiality at the same time. That's what I was trained to think.

Thank you, all. This has been a fantastic panel. You guys have been great. Thank you for coming.


(Applause)

MR. RIZEK: Thank you. That was fun.

MR. BERGIN: Have a great day.

DR. SNOW: That was fun.


(Whereupon, the PROCEEDINGS were adjourned.)


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