Confidentiality protection

Confidentiality Protection Introduced in the House

R ecent House legislation would curtail the unwarranted use of summons authority by the Internal Revenue Service. The Taxpayer Confidentiality Act of 1997 (HR 2563), sponsored by Jennifer Dunn (R-Wash.) and John S. Tanner (D-Tenn.), is intended to provide more balance between the level of authority the IRS requires to enforce the tax code and the right of taxpayers to confidentiality for personal information and tax advice.

Currently, the IRS has the authority not only to obtain factual information necessary to determine taxpayer compliance but also nonfactual personal and proprietary information such as advice, analysis and opinions taxpayers receive from their tax advisers. Taxpayers can protect nonfactual information if they have legal counsel; however, this practice results in unequal treatment of taxpayers based on their financial resources or choice of tax professional.

HR 2563 would limit the IRSs scope of authority to the factual information on which a return is based and information used to document gross income in routine audits. According to the bill, the IRS would not have access to thought processes, theories, analyses, opinions and mental impressions. However, if the IRS has reasonable suspicion based on evidence that a taxpayer failed to fully report income, it would be given broader authority to summon other relevant factual information.

According to Congresswoman Dunn, the conversations between a taxpayer and a preparer should not be grist for an IRS auditors mill without an indication of unaccounted-for income or questionable deductions. Every taxpayer, regardless of economic status, should have the same rights of privacy and confidentiality when dealing with the IRS, said Dunn. It should not matter who advised you on your tax return, whether its a tax attorney, a CPA or your sixth cousin.

HR 2563 has been endorsed by the American Institute of CPAs, the National Federation of Independent Businesses and the National Association of Enrolled Agents.

IRS Overhaul: White House Supports Private-Sector Board

T he Clinton administration said it would support legislation drafted by the House Committee on Ways and Means chairman, Bill Archer (R-Texas), to create an 11-member Internal Revenue Service oversight board. Treasury Secretary Robert E. Rubin said in a formal statement that the administration had worked with members of Congress to resolve differences and create legislation we can support.

Under the Archer bill, the IRS Restructuring and Reform Act of 1997 (HR 2676), the oversight body (composed of 8 private-sector members, the secretary of the treasury, a representative from a union representing a substantial number of IRS employees and the IRS commissioner) would oversee IRS administration, management, conduct, direction and supervision of the execution and application of the Internal Revenue Code. The board would have no responsibilities or authority over federal tax policy, IRS law enforcement activities (such as criminal investigations, examinations and collections) and specific procurement activities (such as selecting vendors or awarding contracts).

Multinational Concerns

The board, which would meet at least once a month, would be required to report each year to the president and Congress regarding the conduct of its responsibilities.

The Rubin announcement marked an important reversal in policy for the Clinton administration, which had criticized earlier legislation intended to create a private-sector oversight board on the basis it would remove the IRS from executive branch governance. Instead, the administration had proposed creating an IRS board of trustees (to include the treasury deputy secretary, the IRS commissioner, a member of the National Treasury Employees Union and 5 private-sector members) that would not have managerial authority but, rather, would have served as a formal conduit for private-sector input while a management board made up of 20 government officials would have continued to govern the agency.

That plan did not satisfy Archer, who had said the administrations proposal to create a board of trustees maintained the status quo by keeping political appointees in charge.

New IRS Assistant Commissioner

R obert E. Barr, former vice-president of government programs for Intuit, became the Internal Revenue Service assistant commissioner, eletronic tax administration, in October. He replaces Terence H. Lutes, who had been acting assistant commissioner.

Barr is the principal operations adviser to the IRS on all electronic tax administration matters. He will direct electronic filing, payment and communications programs as well as compliance and systems support. According to an IRS release, Barr will focus on increasing the range of electronic interactions taxpayers have with the IRS.

Barr has been involved in information systems, including programming, systems analysis, marketing and general management, throughout his career. Before working for Intuit, he was manager of information services for the South Carolina Tax Commission. With his electronic filing experience in both the private sector and state government, Barr is a very important addition to our leadership team, said Michael P. Dolan, acting IRS commissioner.

Barr received a bachelor of science degree from the University of South Carolina and a masters degree in business administration from the Wharton School, University of Pennsylvania.

    Lets Make a Deal
  • House Ways and Means Committee Chairman Bill Archer (R-Texas), calling on President Clinton to include in his next budget a proposal that would prevent the individual alternative minimum tax (AMT) from applying to an ever-growing number of taxpayers, pledged to work with Clinton if he did so. The Joint Committee on Taxation estimates the number of tax filers paying the AMT will grow to 8.4 million in 2007 from 605,000 in 1997.

    Deducting Dust Collectors

  • According to the National Association for the Exchange of Industrial Resources (NAEIR), corporations that are holding nonmoving or slow-selling inventory can turn it into a federal income tax deduction by donating it to a qualified charity. C corporations may deduct the cost of the inventory donated, plus half the difference between cost and fair-market value. S corporations, partnerships and sole proprietorships earn a straight cost deduction. For a free guide to this deduction, contact the NAEIR at 800-562-0955.

    International Tax Debates

  • Registration is still open for the Tenth Annual Institute on Current Issues in International Taxation, sponsored by the Internal Revenue Service and George Washington University. The institute, designed for professionals in international tax law, will be held December 11-12 at the J. W. Marriott Hotel in Washington, D.C. Those interested in attending should call university conference management services at 202-973-1110.

    Eliminating Marriage Cons

  • House Speaker Newt Gingrich and Congressmen Jerry Weller (R-Ill.) and David McIntosh (R-Ind.) announced their support of a measure to eliminate the marriage tax penalty. According to a statement by Weller, the marriage penalty punishes working couples who file income taxes jointly by pushing them into higher tax brackets. According to a report by the Congressional Budget Office, more than 21 million American couples incurred an average marriage penalty of $1,400 in 1996.

    Pricing Penalty

  • The Internal Revenue Service imposed its first penalty under revised Internal Revenue Code Section 6662(e), Net Section 482 Transfer Price Adjustment. According to John Lyons, assistant IRS commissioner-international, this is likely the first of many penalties to be issued. In August 1993, Congress lowered statutory thresholds for section 6662 penalties for tax years after December 31, 1993.


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