One of the most controversial areas in recent years has been the rights of taxpayers amid charges of abuse by the Internal Revenue Service (IRS).(1) Taxpayers have been plagued by everything from rude IRS employees to erroneous assessments.(2) The horror stories taxpayers have recounted before the House of Representatives and the Senate Finance Committee occupied much of the news for weeks and were televised nationally as Congress wrestled with ways to restructure an organization plagued by delay, inefficiency, and abuse.(3)
This problem is not novel.(4) Stories of problems with the IRS have been around for decades.(5) The trend toward reform began in the 1970s when the Problem Resolution Program (PRP) was established.(6) Ten years later, the debate began anew.(7)
Three major bills passed in the last decade have attempted to address these problems. In 1988, Congress passed the first such bill, entitled the Omnibus Taxpayer Bill of Rights (TBOR).(8) Among its other provisions, TBOR strengthened the authority of the taxpayer ombudsman, the precursor to the Taxpayer Advocate.(9) In July 1996, President Clinton signed the second major bill, known as the Taxpayer Bill of Rights (TBOR2).(10) TBOR2 improved a number of procedural rights of taxpayers in dealing with the IRS.(11) In addition, this bill established the national taxpayer advocate (NTA).(12) The final major bill, the 1998 IRS Restructuring and Reform Act (1998 Act),(13) includes a new Taxpayer Bill of Rights (TBOR3)(14) that strengthens the NTA and enables the advocate to bring about substantial reform within the IRS.(15)
Although the establishment of the NTA is an understandable step, the potential for the NTA to foment real change within the agency is limited. As currently established, the NTA is an unnecessary waste of valuable resources and faces a serious conflict between the goals of the office and the desires of the IRS. The main problems with the office are the procedural problem resolution provisions (taxpayer representation) and the substantive reform provisions requiring a report to Congress on the top ten litigation problems per category of taxpayer.
This Note examines these problems in four sections. The first section discusses the history of the NTA and the programs leading up to its creation, including the necessity for some form of taxpayer advocate and an independent reviewing authority for disputes between taxpayers and the IRS. The second section of this Note sets out the current provisions of the 1998 Act dealing with the establishment of the NTA, specifically those new provisions in the 1998 Act that strengthen the office. The third section analyzes the duties of the Taxpayer Advocate, the problems that Congress has yet to address, and advocates a different focus for dealing with taxpayer complaints from a more practical point of view. Finally, this Note concludes that the NTA should be viewed solely as an interim measure and should be charged primarily with the restructuring of the IRS and the retraining of its employees.
THE HISTORY OF THE NTA
In cases involving substantive interpretations of law, the place for a taxpayer to be is in the judicial system.(16) In the case of procedural disputes, however, courts are not the proper place to work out the details.(17) Because no method existed to resolve procedural disputes between the United States taxpayer and the IRS, short of full-blown litigation, many taxpayers were without recourse prior to 1976.(18)
In response to this concern, Congress established the PRP in 1976 to serve as a neutral body within the IRS to investigate problems and complaints, and mediate or recommend solutions.(19) The implementing guidelines of PRP instructed the district directors to set up Program Resolution Offices to be run by a Program Resolution Officer (PRO).(20) PROs lacked the authority to impose final solutions, but they could request that IRS actions be stopped to allow time to investigate the unresolved problems of the taxpayers and recommend possible ways to work out procedural details with the complaining taxpayer. …