IRS Reform on Its Way to Becoming Law

The CPA Journal, July 1998 | Go to article overview

IRS Reform on Its Way to Becoming Law


With the Senate unanimously approving IRS restructuring legislation on May 7th, the bill is certain to become law. At press time, differences between last year's Housepassed bill (with an overwhelming 426-4 vote) and the Senate's version have to be worked out, and most political analysts do not predict major problems. President Clinton announced following the Senate's vote that he was "very pleased" with that body's action and that the White House will work with House and Senate conferees in crafting the final version of the legislation. Both political parties are motivated to move the legislation from Congress to the White House, so look for quick work from conferees.

Among the Senate bill's provisions that are of particular interest to the CPA profession are the following:

Expanded Confidentiality Rights for Taxpayers.

The accounting profession has fought hard for this provision, which, in short, grants a form of privilege protection for tax advice taxpayers receive from anyone who is authorized to practice before the IRS. Attorneys tend to oppose the extension of professional privilege to the clients of CPAs; nevertheless, the provision appears to have taken on a life of its own. One limitation placed on the newly proposed privilege is that it will only come into play for civil matters. If a matter turns criminal, the privilege falls away. It also would only apply to matters in which the IRS is a party.

IRS Oversight Board. The oversight board is granted authority to set policy and review IRS operations. The majority of the board's members will be from the private sector, although seats on the board are reserved for the Secretary of the Treasury, the IRS Commissioner, and an IRS employee representative. The AICPA supported establishment of the oversight board. The Senate bill goes further than the House in defining the board's role, giving it the authority to recommend nominees for commissioner to the President and review the compensation packages of senior IRS executives.

Burden of Proof Despite opposition from the tax practice community, the Senate included language shifting the burden of proof from the taxpayer to the IRS in court cases, provided the taxpayer kept proper records. …

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