Governing Board Proposed For Irs Panel Wants Simpler Tax Code, Electronic Filing, Later Filing Dates

After a year of hearings, a congressional commission recommended Thursday transferring oversight of the Internal Revenue Service from the Treasury Department to a new board of directors - and even suggested extending the April 15 tax filing deadline.

“The reason we need to make this fairly dramatic step of truly shaking things up at the IRS and putting new management in place is because of this historical problem with the Treasury Department not giving adequate focus and expertise,” the panel’s chairman, Rep. Rob Portman, R-Ohio, told reporters.

The IRS is one of several agencies supervised by the Treasury Department.

The National Commission on Restructuring the IRS also proposed ways to simplify the tax code and better coordinate congressional oversight of the agency.

The commission’s other co-chairman, Sen. Bob Kerrey, D-Neb., said the recommendations will be put into a bill within a month that would serve as the vehicle to “reform the IRS for the first time in 40 years.”

Treasury Secretary Robert Rubin defended his agency’s oversight and rejected the key recommendation. He called the proposal for a new seven-member board “substantially flawed.”

“Running a public-sector organization is a very different exercise from running a private-sector organization,” Rubin said, citing the IRS’ major law enforcement role. “I think there are inherent conflicts of interest, both real and apparent, in having a law enforcement function report to the private sector.”

The conflicting remarks by Rubin and Portman set the stage for a possible legislative confrontation later this year as the commission tries to get Congress to enact its plan into law.

But there is little disagreement on the need to reform the IRS, which has mishandled a $3.4 billion computer modernization and suffers from such serious management flaws that the General Accounting Office considers the agency at “high risk” and keeps it under intense scrutiny.

“We believe in a culture of change at the IRS,” Rubin said.

The commission report will urge the IRS to meet a goal of having 80 percent of taxpayers file their returns electronically within 10 years. The report suggests the IRS give electronic filers an incentive by delaying the tax filing deadline from April 15 to June 15, said Portman.

The report also suggests the IRS delay the April 15 deadline a month for paper filers to May 15 in order to smooth out the deluge of paper the agency faces and give taxpayers more time to prepare their returns. “This is a win-win situation,” Portman said.

Kerrey said the panel would have the Treasury Department continue to handle tax policy, but place operational chores under the wing of the new board of directors, all appointed by the president and confirmed by the Senate. The board would hire the IRS commissioner, approve the budget and design longterm plans, such as computer modernization.

“They will have power to make decisions on what the IRS is doing,” Kerrey said.

The board’s power over IRS purse strings bothered Rubin.

“This governing board is going to control the budget so they’re going to make decisions on how much money is allocated to various enforcement activities,” Rubin said.

The commission also recommended bringing together leaders of the seven congressional committees that now oversee the IRS into a new organization that would coordinate longterm issues with the agency’s new board.

Kerrey said the panel voted 12-5 for the recommendations, which will be formally released later this month.

Kerrey recognized the board of directors will be a lightning rod for criticism, but dismissed Treasury Department criticism that the plan would undermine how the IRS administers tax policy. The Treasury has offered its own IRS reform initiatives, but it doesn’t propose giving power to outside experts.

Rubin also said this was not the time to tinker with an agency so central to the workings of the federal government.

“You can’t take the risk of having the IRS not work, because it funds 95 percent of the federal government,” he said.