Support Mounts to kill IRS Outsource Program

Support Mounts to End IRS Privatization Program

Key politicians and advocacy groups are lining up against an IRS program to privatize tax collections, as suspect contracts have raised further concerns about the effectiveness and transparency of the program.


OMB Watch has joined with the American Federation of State, County and Municipal Employees (AFSCME), Citizens for Tax Justice, and the National Treasury Employees Union (NTEU) to urge Congress to pass H.R. 695 and S. 335, bills that would end the IRS private tax collection program. In conjunction with these groups, OMB Watch sent letters to the House and the Senate making the case that this wasteful and dangerous program should be terminated immediately.

The IRS private debt collection program, authorized in 2004 and initiated in September 2006, contracts out the collection of tax debts that the IRS has identified but claims it does not have the resources to obtain. Contractors are allowed to keep 21 to 24 percent of all the money they collect, even though IRS employees could do the same work for one-eighth the cost.

Representatives controlling key committees have also made public their opposition to the private debt collection program. Rep. Jose Serrano☼ (D-NY), chairman of the House appropriations subcommittee on financial services and general government, repeated his intention to end the program at a March 28 hearing. At that hearing, Treasury Secretary Henry Paulson gave a muted defense of the program, acknowledging concerns about cost and taxpayer rights that Bush administration officials had previously denied. Paulson did not recommend repealing the program, but signaled he would not strongly oppose repealing it. "It's a hard one for me to feel strongly about," Paulson said in a recent TaxAnalysts article.

In addition, Chairman of the House Ways and Means Committee Charles Rangel (D-NY) has stated his intention to repeal the IRS privatization program and asked that the IRS not issue any more contracts to private debt collectors. Rangel's interest is most likely in moving forward with H.R. 695, which is co-sponsored by Reps. Chris Van Hollen (D-MD) and Steve Rothman (D-NJ) with bipartisan support.

Rangel said his immediate concerns over the program stem from a suspicious denial by the IRS to renew one of the current debt collector's contracts. The contractor — Linebarger Goggan Blair & Sampson — is a debt collector based in Texas. Some of the firm's employees have been convicted of bribing public officials, and the firm itself is currently being sued for similar behavior, as the New York Times reported in August 2006.

Neither the IRS nor Linebarger have explained why the contract was not renewed. A tax expert in San Antonio, where Linebarger has offices, speculated that Linebarger may have had trouble recovering the tax debts, making the contract less profitable. Private contractors do not have the legal authority to compel tax payment if a debtor refuses to cooperate.

IRS Taxpayer Advocate Nina Olson has found data suggesting private collectors have only successfully obtained payments from 20 percent of the cases IRS gave them. The IRS has not released information explaining what has happened to the vast majority of cases given to private collectors. Olson said that given the lack of data, it is impossible for the public to evaluate the program. On the other hand, a report by the Treasury Inspector General for Tax Administration has found that IRS has taken enough steps to protect taxpayer rights and ensure that the debt collection program is monitored for effectiveness. The report urged further action in computer security and how the IRS tracks data on taxpayers who request to deal with IRS agents instead of private contractors, among other concerns