SHOW US THE INHERENT LAW: The Document "The Truth About Frivolous Tax Arguments" Has No Author

Sunday, August 05, 2007

The Document "The Truth About Frivolous Tax Arguments" Has No Author

Click on this link and up comes the entire PDF file which originated from....

....at this link.

We The People Foundation For Consitutional Education has brought this question up before and, to date, has received no answer: Who/what is the author/authority behind this document?

Has anybody figured out the answer to this question?

Labels: ed elaine brown irs tyranny show the law tom cryer

3 Comments:

TrueLogic said...: http://www.irstaxattorney.com/irs_misconduct/irs_misconduct.html

IRS Misconduct

Sec. 7214. Offenses by officers and employees of the United States

(a) Unlawful acts of revenue officers or agents

Any officer or employee of the United States acting in connection with any revenue law of the United States -

(1) who is guilty of any extortion or willful oppression under color of law; or

(2) who knowingly demands other or greater sums than are authorized by law, or receives any fee, compensation, or reward, except as by law prescribed, for the performance of any duty; or

(3) who with intent to defeat the application of any provision of this title fails to perform any of the duties of his office or employment; or

(4) who conspires or colludes with any other person to defraud the United States ; or

(5) who knowingly makes opportunity for any person to defraud the United States ; or

(6) who does or omits to do any act with intent to enable any other person to defraud the United States ; or

(7) who makes or signs any fraudulent entry in any book, or makes or signs any fraudulent certificate, return, or statement; or

(8) who, having knowledge or information of the violation of any revenue law by any person, or of fraud committed by any person against the United States under any revenue law, fails to report, in writing, such knowledge or information to the Secretary; or

(9) who demands, or accepts, or attempts to collect, directly or indirectly as payment or gift, or otherwise, any sum of money or other thing of value for the compromise, adjustment, or settlement of any charge or complaint for any violation or alleged violation of law, except as expressly authorized by law so to do; shall be dismissed from office or discharged from employment and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both. The court may in its discretion award out of the fine so imposed an amount, not in excess of one-half thereof, for the use of the informer, if any,who shall be ascertained by the judgment of the court. The court also shall render judgment against the said officer or employee for the amount of damages sustained in favor of the party injured, to be collected by execution.

(b) Interest of internal revenue officer or employee in tobacco or liquor production Any internal revenue officer or employee interested, directly or indirectly, in the manufacture of tobacco, snuff, or cigarettes, or in the production, rectification, or redistillation of distilled spirits, shall be dismissed from office; and each such officer or employee so interested in any such manufacture or production, rectification, or redistillation or production of fermented liquors shall be fined not more than $5,000.

(c) Cross reference

For penalty on collecting or disbursing officers trading in public funds or debts of property, see 18 U.S.C. 1901.

-SOURCE- Aug. 16, 19 54, ch. 736, 68A Stat. 856; Pub. L. 85-859, title II,Sec. 204(5), Sept. 2, 19 58, 72 Stat. 1429; Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976 , 90 Stat. 1834.)
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ACT SEC . 1203 of the Internal Revenue Service Restructuring and Reform Act of 1998 - TERMINATION OF EMPLOYMENT FOR MISCONDUCT.

(a) IN GENERAL.--Subject to subsection (c), the Commissioner of Internal Revenue shall terminate the employment of any employee of the Internal Revenue Service if there is a final administrative or judicial determination that such employee committed any act or omission described under subsection (b) in the performance of the employee's official duties. Such termination shall be a removal for cause on charges of misconduct.

(b) ACTS OR OMISSIONS.--The acts or omissions referred to under subsection (a) are--

(1) willful failure to obtain the required approval signatures on documents authorizing the seizure of a taxpayer's home, personal belongings, or business assets;

(2) providing a false statement under oath with respect to a material matter involving a taxpayer or taxpayer representative;

(3) with respect to a taxpayer, taxpayer representative, or other employee of the Internal Revenue Service, the violation of--

(A) any right under the Constitution of the United States ; or

(B) any civil right established under--

(i) title VI or VII of the Civil Rights Act of 1964;

(ii) title IX of the Education Amendments of 1972;

(iii) the Age Discrimination in Employment Act of 1967;

(iv) the Age Discrimination Act of 1975;

(v) section 501 or 504 of the Rehabilitation Act of 1973; or

(vi) title I of the Americans with Disabilities Act of 1990;

(4) falsifying or destroying documents to conceal mistakes made by any employee with respect to a matter involving a taxpayer or taxpayer representative;

(5) assault or battery on a taxpayer, taxpayer representative, or other employee of the Internal Revenue Service, but only if there is a criminal conviction, or a final judgment by a court in a civil case, with respect to the assault or battery;

(6) violations of the Internal Revenue Code of 1986, Department of Treasury regulations, or policies of the Internal Revenue Service (including the Internal Revenue Manual) for the purpose of retaliating against, or harassing, a taxpayer, taxpayer representative, or other employee of the Internal Revenue Service;

(7) willful misuse of the provisions of section 6103 of the Internal Revenue Code of 1986 for the purpose of concealing information from a congressional inquiry;

(8) willful failure to file any return of tax required under the Internal Revenue Code of 1986 on or before the date prescribed therefor (including any extensions), unless such failure is due to reasonable cause and not to willful neglect;

(9) willful understatement of Federal tax liability, unless such understatement is due to reasonable cause and not to willful neglect; and

(10) threatening to audit a taxpayer for the purpose of extracting personal gain or benefit.

(c) DETERMINATION OF COMMISSIONER.--

(1) IN GENERAL.--The Commissioner of Internal Revenue may take a personnel action other than termination for an act or omission under subsection (a).

(2) DISCRETION.--The exercise of authority under paragraph (1) shall be at the sole discretion of the Commissioner of Internal Revenue and may not be delegated to any other officer. The Commissioner of Internal Revenue, in his sole discretion, may establish a procedure which will be used to determine whether an individual should be referred to the Commissioner of Internal Revenue for a determination by the Commissioner under paragraph (1).

(3) NO APPEAL.--Any determination of the Commissioner of Internal Revenue under this subsection may not be appealed in any administrative or judicial proceeding.

(d) DEFINITION.--For purposes of the provisions described in clauses (i), (ii), and (iv) of subsection (b)(3)(B), references to a program or activity receiving Federal financial assistance or an education program or activity receiving Federal financial assistance shall include any program or activity conducted by the Internal Revenue Service for a taxpayer.

Section 4303 of Title 5, United States Code, authorizes an agency to remove an employee for "unacceptable performance," as defined in Section 4301 of Title 5. In addition, Section 7513 of Title 5 authorizes an agency to discipline an employee (by applying specified sanctions ranging from furlough to removal, as set forth in Section 7512) only for such cause as will promote the efficiency of the IRS . In general, the courts have interpreted this provision to require a showing that (1) the employee is engaged in misconduct and (2) there is a connection between such misconduct and the efficiency of the service. See, King v. Frazier, CA-DC, 77 F.3d 1361. However, the decision regarding whether to take, and the form of, any disciplinary action is largely left up to the particular agency.

Under both of these provisions, employees subject to removal are generally entitled to certain procedural safeguards including advance written notice, a hearing and a right of appeal.

IRS Restructuring and Reform Impact

Acts requiring termination.--The IRS must terminate an employee (absent direct intervention by the IRS Commissioner as explained below) if there is a final administrative or judicial determination that, in the course of his or her official duties, the employee:

(1) willfully failed to obtain the required approval signatures on documents authorizing the seizure of a taxpayer's home, personal belongings, or business assets;

(2) provided a false statement under oath with respect to a material matter involving a taxpayer or a taxpayer representative;

(3) violated the rights of a taxpayer, taxpayer representative or other employee of the IRS under the U.S. Constitution or under specified civil rights acts (see below);

(4) falsified or destroyed documents to conceal mistakes made by any employee with regard to a matter involving a taxpayer or taxpayer representative;

(5) assaulted or battered a taxpayer, taxpayer representative or other employee of the IRS , but only if there is a criminal conviction or a final civil judgment to that effect;

(6) violated the 1986 Code, Treasury regulations, or IRS policies (including the IRS Manual) for the purpose of retaliating against or harassing a taxpayer or other employee of the IRS ;

(7) willfully misused the provisions of Code Sec. 6103 (regarding confidentiality of returns and return information) for the purpose of concealing information from congressional inquiry;

(8) willfully failed to file any tax return required under the Code on or before the required date, unless the failure is due to reasonable cause and not willful neglect;

(9) willfully understated federal tax liability, unless such understatement is due to reasonable cause and not willful neglect; or

(10) threatened to audit a taxpayer for the purpose of extracting personal gain or benefit (Act Sec. 1203(a) and (b) of the IRS Restructuring and Reform Act of 1998).

An employee who is terminated for any of the foregoing reasons will be considered removed for cause on charges of misconduct (Act Sec. 1203(a) of the 1998 Act).

The Conference Committee expanded paragraph (3) above to include constitutional violations in addition to violations of civil rights. Moreover, the prohibition against civil rights violations was clarified by reference to the following laws:

(i) Title VI or VII of the Civil Rights Act of 1964;

(ii) Title IX of the Education Amendments of 1972;

(iii) the Age Discrimination in Employment Act of 1967;

(iv) the Age Discrimination Act of 1975;

(v) Section 501 or 504 of the Rehabilitation Act of 1973; or

(vi) Title I of the Americans with Disabilities Act of 1990.

The Act also makes it clear that, for purposes of the provisions described in (i), (ii) and (iv) above, references to a program or activity receiving federal financial assistance or an education program or activity receiving federal financial assistance includes any IRS program or activity conducted for a taxpayer (Act Sec. 1203(d) of the 1998 Act).

Discretion of the Commissioner.--As an additional safeguard, the Commissioner may decide to take a personnel action other than mandatory termination (Act Sec. 1203(c) of the 1998 Act). According to the Senate Finance Committee report, the purpose of this exception is to allow the Commissioner to take into account any mitigating factors. However, such a decision is at the sole discretion of the Commissioner and may not be delegated to any other officer. Moreover, the Commissioner's decision on this matter is final and may not be appealed in any administrative or judicial proceeding (Sec. 1203(c)(3) of the 1998 Act).

Act Sec. 1203. IRS personnel flexibilities (termination of employment for misconduct)

Senate Committee Report (S. REP . NO. 105-174)

Present Law

The IRS is subject to the personnel rules and procedures set forth in title 5, United States Code. Under these rules, IRS employees generally are classified under the General Schedule or the Senior Executive Service.

Reasons for Change

The Committee believes that as part of restructuring the IRS , the Commissioner should have the ability to bring in experts and the flexibility to revitalize the current IRS workforce. The current hiring practices often inhibit the ability of the Commissioner to change the IRS ' institutional culture. Commissioner Rossotti has indicated that in order to maximize efforts to transform the IRS into an efficient, modern and responsive agency, the ability to recruit and retain a top-notch leadership and technical team is critical.

The Committee believes the IRS needs the flexibility to recruit employees from the private sector, to redesign its salary and incentive structures to reward employees who meet their objectives, and to hold non-performers accountable. Personnel and pay flexibilities are necessary prerequisites for larger fundamental changes in the IRS .

The Committee wants to support the Commissioner's initiatives to reposition the current IRS workforce as part of implementing a new organization designed around the needs of taxpayers.

Explanation of Provision

* * *

Violations for which IRS employees may be terminated

The bill requires the IRS to terminate an employee for certain proven violations committed by the employee in connection with the performance of official duties. The violations include: (1) failure to obtain the required approval signatures on documents authorizing the seizure of a taxpayer's home, personal belongings, or business assets; (2) providing a false statement under oath material to a matter involving a taxpayer; (3) falsifying or destroying documents to avoid uncovering mistakes made by the employee with respect to a matter involving a taxpayer; (4) assault or battery on a taxpayer or other IRS employee; (5) violation of the civil rights of a taxpayer or other IRS employee; (6) violations of the Internal Revenue Code, Treasury Regulations, or policies of the IRS (including the Internal Revenue Manual) for the purpose of retaliating or harassing a taxpayer or other IRS employee; and (7) wilful misuse of section 6103 for the purpose of concealing data from a Congressional inquiry.

The bill provides non-delegable authority to the Commissioner to determine that mitigating factors exist, that, in the Commissioner's sole discretion, mitigate against terminating the employee. The bill also provides that the Commissioner, in his sole discretion, may establish a procedure which will be used to determine whether an individual should be referred for such a determination by the Commissioner. The Treasury IG is required to track employee terminations and terminations that would have occurred had the Commissioner not determined that there were mitigation factors and include such information in the IG's annual report.

* * *

Effective Date

The provision, other than the IRS employee training program provision, is effective on the date of enactment. * * *

Senate Floor Debate for Amendment No. 2376 (144 CONG. REC. 56, S4486)

* * * Mr. GRAMM.--* * * Basically, we have in the bill a list of offenses for which an employee of the Internal Revenue Service may be terminated. In light of concerns that have arisen since we had the bill before the committee. I want to add two offenses to the list.

One has to do with testimony we heard where members of the Internal Revenue Service were said to be threatening to audit people for personal gain. We heard an assertion that a police officer had stopped an IRS agent and was going to write him a ticket, and the IRS agent allegedly had told the officer that if he wrote the ticket, he was going to get audited.

The second provision has to do with a knowing and willful failure of an IRS agent to file a tax return or pay taxes or declare income. Both of these fit, I think, perfectly into the list of very strong offenses that we have in the bill. * * *

Mr. KERRY.--Mr. President, the National Restructuring Commission included this provision in our bill. It is in the House bill, or at least provisions in it that dictate that an employee who does a number of things would be automatically terminated.

What the Senator from Texas has done is identified some additional things that ought to be on the list and once again has carefully drawn it--I believe the language is "willful" and--what was the other word, I ask the Senator? "Willful" and "intentionally."

This would not be a situation where an individual accidentally underpays taxes or misses a deadline or something like that. This is a much higher standard, a much more difficult standard. And I think it is a quite reasonable provision to add to the list of things that would force and require automatic termination.

In general, this legislation is attempting to change the culture by saying here are some things that, if you do it, there are going to be severe penalties. This is obviously a severe penalty. Punitive damages for damages, we have an expanded right for legal fees.

What we are trying to do is change the culture so that there is a new seriousness given to actions taken by the IRS . And all of us understand the penalty needs to be sufficient to meet the offense. I think the amendment of the distinguished Senator from Texas is a reasonable one and I urge its adoption.

* * *

Conference Committee Report (H.R. CONF. REP . NO. 105-599)

Senate Amendment

* * *

Mandatory employee terminations

The Senate amendment requires the IRS to terminate an employee for certain proven violations committed by the employee in connection with the performance of official duties. The violations include: (1) failure to obtain the required approval signatures on documents authorizing the seizure of a taxpayer's home, personal belongings, or business assets; (2) providing a false statement under oath material to a matter involving a taxpayer; (3) falsifying or destroying documents to avoid uncovering mistakes made by the employee with respect to a matter involving a taxpayer; (4) assault or battery on a taxpayer or other IRS employee; (5) violation of the civil rights of a taxpayer or other IRS employee; (6) violations of the Internal Revenue Code, Treasury Regulations, or policies of the IRS (including the Internal Revenue Manual) for the purpose of retaliating or harassing a taxpayer or other IRS employee; (7) willful misuse of section 6103 for the purpose of concealing data from a Congressional inquiry; (8) willful failure to file any tax return required under the Code on or before the due date (including extensions) unless failure is due to reasonable cause; (9) willful understatement of Federal tax liability, unless such understatement is due to reasonable cause; and (10) threatening to audit a taxpayer for the purpose of extracting personal gain or benefit.

The Senate amendment provides non-delegable authority to the Commissioner to determine that mitigating factors exist, that, in the Commissioner's sole discretion, mitigate against terminating the employee. The Senate amendment also provides that the Commissioner, in his sole discretion, may establish a procedure which will be used to determine whether an individual should be referred for such a determination by the Commissioner. The Treasury IG is required to track employee terminations and terminations that would have occurred had the Commissioner not determined that there were mitigation factors and include such information in the IG's annual report.

* * *

Conference Agreement

The conference agreement follows the Senate amendment, with modifications. * * *

With respect to mandatory terminations of employees for certain proven violations committed by the employee in connection with the performance of official duties, the conference agreement modifies the definitions of some of the violations. The definitions of the other violations are the same as the Senate amendment. The modified definitions are: (1) willful failure to obtain the required approval signatures on documents authorizing the seizure of a taxpayer's home, personal belongings, or business assets; (2) assault or battery on a taxpayer or other IRS employee, but only if there is a criminal conviction or a final judgment by a court in a civil case, with respect to the assault or battery; (3) falsifying or destroying documents to conceal mistakes made by any employee with respect to a matter involving a taxpayer or taxpayer representative; and (4) with respect to a taxpayer, taxpayer representative, or other IRS employee, the violation of any right under the U.S. Constitution, or any civil right established under titles VI or VII of the Civil Rights Act of 1964, title IX of the Educational Amendments of 1972, the Age Discrimination in Employment Act of 1967, the Age Discrimination Act of 1975, sections 501 or 504 of the Rehabilitation Act of 1973 and title I of the Americans with Disabilities Act of 1990.

* * *

Cumulative Bulletin Notice 99-27, I.R.B. 1999-21, 4, May 5, 1999 .

Internal Revenue Service: IRS Restructuring and Reform Act of 1998: IRS employees: Termination and discipline of employees for misconduct. The IRS has requested comments regarding the interpretation of Sec. 1203 of the IRS Restructuring and Reform Act of 1998 (P.L. 105-206), which concerns discipline of employees who violate certain rules while performing official duties. Section 1203 of the act provides that an IRS employee must be terminated if there is a final administrative or judicial determination that the employee has violated any rule set forth in that section in the performance of his or her official duties. The Commissioner may mitigate termination.

SECTION I. PURPOSE

Section 1203 of the Internal Revenue Service Restructuring and Reform Act of 1998 (the "RRA") provides generally that IRS employees must be terminated from Federal employment if they violate certain rules in connection with the performance of their official duties. The statute also allows the Commissioner to mitigate the sanction of termination. This Notice requests public comments on the proper interpretation of section 1203 .

SECTION II. BACKGROUND

The basic rules governing disciplinary actions against federal civilian employees are set forth in Chapter 75 of Title 5 of the United States Code. In general, these rules permit discipline, up to and including termination of employment, to be imposed for such cause as will promote the efficiency of the federal service. Agencies generally have discretion as to whether to impose disciplinary action and as to the form and severity of the action to be imposed, based upon the facts and circumstances of the situation. Most agency decisions concerning the imposition of discipline are subject to review by parties outside the agency, e.g., in arbitration or by an appeal to the Merit Systems Protection Board.

RRA section 1203 made significant changes in these general rules as applied to IRS employees. Specifically, section 1203 provides that an IRS employee must be terminated from employment if there is a final administrative or judicial determination that the employee violated any of the rules set forth in sections 1203(b)(1) -(10) in the performance of official duties. In addition, section 1203(c) of the statute provides that the Commissioner may decide to take a personnel action other than removal if certain mitigating factors are present; however, this decision may only be made by the Commissioner personally and is not subject to review in any administrative or judicial proceeding. The full text of section 1203 is attached at Appendix A.

SECTION III . INTERPRETATION OF SECTION 1203

The Internal Revenue Service requests comment with respect to the following matters under RRA section 1203 :

A. Existing personnel law and procedures will be applied in interpreting section 1203 , unless explicitly provided otherwise. For example, current procedural requirements of personnel law, including advance written notice, an opportunity for an oral and written reply, and a right to appeal the substance of the charges, will be provided employees who are subject to discipline under section 1203 .

B. The current personnel law definition of "employee" will be applied in interpreting section 1203 . Section 1203 is triggered with respect to "any employee" of the IRS . In implementing section 1203 , the IRS will apply the definition of "employee" in 5 U.S.C. 2105, that is, an individual who is appointed in the civil service, engaged in the performance of a Federal function under authority of law, and subject to the supervision of an individual already appointed in the civil service while engaged in the performance of the duties of the position. As a consequence of this definition, and since section 1203 applies only to acts or omissions of an employee of the IRS , any acts or omissions that occurred prior to the individual becoming an "employee" of the IRS would not be within the scope of section 1203 .

C. Acts or omissions of IRS employees committed "in the performance of the employee's official duties" include only those acts or omissions listed under section 1203(b) that have a nexus to an employee's position in the IRS . To establish nexus, a clear and direct relationship must be demonstrated between the act or omission of the employee that constitutes the grounds for the employee's removal and either the employee's ability to accomplish his or her duties satisfactorily or some other legitimate governmental interest promoting the "efficiency of the service," as required by 5 U.S.C. 7513(a). See, Doe v. Hampton, 566 F.2d 265, 272 (D.C. Cir. 1977).

Example 1. While at home after duty hours, an IRS employee becomes involved in a physical argument with his neighbor. The neighbor sues the employee for assault and battery and a court finds the employee liable for civil assault and battery. Is the agency mandated to terminate the employment of the employee pursuant to section 1203 ?

Answer. No. Section 1203 is triggered only with respect to acts or omissions committed in the performance of the employee's official duties. Under the facts presented here, the IRS employee's conduct was off-duty conduct having no connection to the IRS . Therefore, the civil judgment finding the employee liable for assault and battery on his neighbor would not fall under section 1203(b)(5) . Additionally, the assault and battery was not "on a taxpayer, taxpayer representative, or other employee of the IRS ," as is required by section 1203(b)(5) . See F. for a discussion of the meaning of taxpayer and taxpayer representative.

Example 2. A taxpayer tells the Internal Revenue Agent who is auditing the taxpayer that the Agent is incompetent. While off duty, the Agent sees the taxpayer at a restaurant and tells him that he did not appreciate the comment. The Agent pushes the taxpayer. A court finds the Agent liable for civil assault and battery. Is the agency required to terminate the employment of the employee pursuant to section 1203 ?

Answer. Yes. Under the facts presented, the physical altercation, while occurring off-duty, resulted from the Agent's interaction as an IRS employee with the taxpayer. Thus, the Agent's off duty conduct has a nexus, or a clear and direct relationship, to the efficiency of the service. Therefore, the civil judgment finding the employee liable for civil assault and battery would fall within the scope of section 1203(b)(5) .

D. Acts or omissions of Internal Revenue Service employees will be subject to the discipline prescribed by section 1203 only if those acts are taken, or those omissions are made, with some degree of intent.

Some of the acts or omissions specified in section 1203 that are subject to the discipline prescribed by that section appear to be based upon standards that are found in the Internal Revenue Code (IRC). Thus, section 1203(b)(8) mandates removal of an IRS employee whose "failure to file any return of tax required under the Internal Revenue Code . . . on or before the date prescribed therefore " was "willful." This language mirrors that found in IRC section 7203 . Similarly, section 1203(b)(9) mandates removal of an employee whose "understatement of Federal tax liability" was "willful." This language implicates concepts found in IRC section 7201 . The IRS will employ standards similar to those applicable to these IRC provisions in implementing sections 1203(b)(8) and 1203(b)(9). To support an action under either of these sections, the IRS must prove by a preponderance of the evidence that the IRS employee's act or omission was a voluntary, intentional violation of a known legal duty.

Section 1203(b)(1) requires removal of an IRS employee who willfully fails to obtain signatures on documents authorizing the seizure of certain types of property. Section 1203(b)(7) requires removal of employees who engage in "willful" misuse of IRC section 6103 "for the purpose of concealing information from a congressional inquiry." In order to support an action under either of these provisions, the IRS must prove by a preponderance of the evidence that the employee's act or omission was made with actual knowledge of the failure to comply with, or with a reckless disregard of, the requirements for obtaining approval signatures or for disclosing information in response to a congressional inquiry, as the case might be.

E. A final administrative or judicial determination pursuant to section 1203(a) is a determination concerning an individual in a proceeding in which the individual is granted full rights to participate as a party to the action or proceeding. Such a determination becomes final when:

(1) if a judicial proceeding, all appeals have been exhausted or, if no appeals are taken, the time for all appeals has expired; or

(2) if an administrative proceeding:

(i) all appeals have been exhausted, or if no appeals are taken, the time for all appeals has expired, or

(ii) a disciplinary decision is made by the deciding official at the conclusion of a process that included an advance written notice to the individual of the proposed action to be taken.

Example 1. A finding is made in an EEO case that an IRS employee has been discriminated against in violation of Title VII of the Civil Rights Act of 1964. Is the finding of discrimination a final administrative determination such that section 1203(a) would require the removal of all IRS employees whose conduct may have contributed to the finding of discrimination?

Answer. No. Equal Employment Opportunity cases are filed against the agency, and not against specific individual employees. Therefore, IRS employees, other than the complainant, are not parties to the proceeding, and consequently are not afforded the opportunity to submit evidence or to call or cross-examine witnesses. The finding in the EEOC decision concerning discrimination is not a final administrative determination within the meaning of section 1203 with respect to IRS employees whose conduct may have contributed to the finding.

However, in every case in which there is a finding of discrimination, the finding will be reviewed by the Office of the National Director, EEO and Diversity, pursuant to specific procedures established by the IRS . These procedures will require that the Office of the National Director, EEO and Diversity, determine whether to refer the matter to the appropriate office for further action. If management makes a determination that any employee committed an act or omission within the coverage of section 1203(b) , the employee will be issued advance written notice of the proposal to remove the employee from the IRS . The statutory and regulatory requirements of Title 5, United States Code, and Title 5, Part 752, Code of Federal Regulations ( CFR ), must be followed in terminating the employment of the employee under section 1203 . Moreover, the final decision to remove the employee from the IRS is subject to appeal, such as to the Merit Systems Protection Board (MSPB). While the employee may challenge the charges, a reviewing body may not mitigate the adverse action of removal if the facts establish a violation of section 1203 .

Example 2. An IRS employee files a formal complaint of discrimination, alleging that his manager has retaliated against him by giving him a low performance evaluation because of the employee's prior EEO activity. The case is settled, and a settlement agreement is signed. Is this a final administrative determination that the manager has violated section 1203(b) ?

Answer. No. A settlement agreement is not a determination that discrimination has occurred. Further, the manager was not a party to the discrimination complaint process or to the settlement agreement. The parties are the agency and the employee alleging discrimination. Therefore, the analysis set forth in Example 1 is also applicable to this situation.

In addition, cases in which an allegation of discrimination is raised, but there is no finding or settlement, will be referred to an appropriate office to determine whether there should be further action.

F. "Taxpayer," "taxpayer representative," and "person" will have the following meanings:

A "taxpayer" means any person subject to any internal revenue law, and with respect to whom an act or omission is undertaken because of that person's status as a taxpayer.

A "taxpayer representative" means any person who acts in a representative capacity to a taxpayer, and with respect to whom an act or omission is undertaken because of that person's status as a representative of a taxpayer.

A "person" includes an individual, trust, estate, partnership, association, company or corporation.

Example 1. An IRS employee is stopped by a police officer for speeding. The employee tells the police officer that he will be audited if the employee receives a ticket. The police officer does not have an open, ongoing dispute with the IRS . Does the employee's conduct come within the scope of section 1203(b)(10) ?

Answer. Yes. The definition of taxpayer does not require that the person have an ongoing dispute with the IRS . The police officer fits the definition of a taxpayer since the employee's conduct is directed toward the police officer because that officer is subject to the internal revenue laws. Additionally, the purpose of the IRS employee's conduct was to extract personal gain or benefit. Based on these facts, a nexus would also exist (see C. above).

Example 2. A taxpayer service representative is driving her car and sees an empty parking spot. Before the taxpayer service representative can pull into that parking space, another driver parks her car there. Unknown to the employee, the other person represents taxpayers. The employee, unable to control her anger, shoves the taxpayer representative and is eventually criminally convicted of assault and battery. Does the employee's conduct come within the ambit of section 1203(b)(5) ?

Answer. No. The employee's conduct, although directed against someone who represents a taxpayer, was not directed against that individual because she represents a taxpayer. The employee did not know the individual represented taxpayers, and even if she had known, her conduct toward the representative was unrelated to that individual's capacity as a representative. Therefore, the employee's conduct does not constitute an assault and battery upon a taxpayer representative.

G. The false statement referred to in subsection 1203(b)(2) must be with respect to a material matter involving a taxpayer or taxpayer representative, as those terms are defined in F. To be material, the false statement must be one that would have a natural tendency to influence, or be capable of influencing, a decision on the matter involving a taxpayer or taxpayer representative.

Example 1. A Revenue Agent intentionally falsely states under oath that a taxpayer had shown him receipts to document a particular deduction when he had not seen any such receipts. Is this false statement within the coverage of section 1203(b)(2) ?

Answer. Yes. The Revenue Agent's false sworn statement that the taxpayer had shown him receipts to document a particular deduction would have a natural tendency to influence, or the capacity to influence, a decision on the matter involving the taxpayer or taxpayer representative. Thus, it is within the coverage of section 1203(b)(2) .

Example 2. A Revenue Officer is being questioned about his use of annual leave. The Revenue Officer provides a statement to the Treasury Inspector General for Tax Administration, under oath, in which he intentionally falsely states that he was at the office all day each of the prior six Fridays. Is this false statement within the coverage of section 1203(b)(2) ?

Answer. No. The Revenue Officer's false statement to the Treasury Inspector General for Tax Administration does not have a natural tendency to influence, or the capacity to influence, a decision on a matter involving a taxpayer or taxpayer representative. Therefore, it would not be within the coverage of section 1203(b)(2) . However, even though the IRS would not be required to terminate the employment of the Revenue Officer pursuant to section 1203(b)(2) , the IRS may discipline the Revenue Officer up to and including termination from Federal service.

H. Section 1203 applies only to acts or omissions occurring on or after July 22, 1998 . This position is based on existing law regarding the retroactivity of civil statutes. See, Taylor v. Rubin, No. 97-2398 (W.D. LA Sept. 21, 1998 ). In general, where statutory provisions are substantive, in that they create new rights or impair vested rights, impose new duties, or attach new disabilities regarding past transactions, as opposed to merely procedural provisions, the rule is that the provision will not apply retroactively absent a clear congressional intent otherwise. Landgraf v. USI Film Products, 114 S.Ct. 1483 (1994) (holding that punitive and compensatory damages provision of the 1991 Civil Rights Act amending Title VII did not apply retroactively to a case that was pending when the statute was enacted, since there was not clear congressional intent concerning retroactivity). See also Hughes Aircraft Co. v. U.S. Ex Rel. Schumer, 117 S.Ct. 1871, 1876 (1997) (The Court affirmed the "time-honored" presumption against giving retroactive effect to legislation unless Congress had clearly manifested its intent to the contrary, holding that a 1986 amendment to the qui tam statute which would deprive defendant of a defense, did not apply retroactively).

SECTION V. COMMENTS

Comments are requested on the matters discussed in this notice and on any other provisions of section 1203 . Comments should be submitted by June 30, 1999 . Written comments may be submitted to the Internal Revenue Service, P.O. Box 7604, Ben Frank lin Station, Attention: CC: DOM :CORP:R (Notice 99-27 ), Room 5226, Washington, DC 20044. Submissions may be hand-delivered between the hours of 8 a.m. and 5 p.m. to: CC: DOM :CORP:R (Notice 99-27 ), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC. Alternatively, taxpayers may submit comments electronically via the Internet by selecting the "Tax Regs" option on the IRS Home Page, or by submitting comments directly to the IRS Internet site at:

http://www.irs.ustreas.gov/prod/tax_regs/comments.html

Comments will be available for public inspection and copying.

For further information regarding this notice, contact Lee Patton of the Office of Associate Chief Counsel (Finance & Management), General Legal Services Division, at 202-283-7900 (not a toll-free call).

APPENDIX A

SEC . 1203. TERMINATION OF EMPLOYMENT FOR MISCONDUCT

(a) IN GENERAL.--Subject to subsection (c), the Commissioner of Internal Revenue shall terminate the employment of any employee of the Internal Revenue Service if there is a final administrative or judicial determination that such employee committed any act or omission described under subsection (b) in the performance of the employee's official duties. Such termination shall be a removal for cause on charges of misconduct.

(b) ACTS OR OMISSIONS.--The acts or omissions referred to under subsection (a) are--

(1) willful failure to obtain the required approval signatures on documents authorizing the seizure of a taxpayer's home, personal belongings, or business assets;

(2) providing a false statement under oath with respect to a material matter involving a taxpayer or taxpayer's representative;

(3) with respect to a taxpayer, taxpayer representative, or other employee of the Internal Revenue Service, the violation of--

(A) any right under the Constitution of the United States; or

(B) any civil right established under--

(i) title VI or VII of the Civil Rights Act of 1964;

(ii) title IX of the Education Amendments of 1972;

(iii) the Age Discrimination in Employment Act of 1967;

(iv) the Age Discrimination Act of 1975;

(v) section 501 or 504 of the Rehabilitation Act of 1973; or

(vi) title I of the Americans with Disabilities Act of 1990;

(4) falsifying or destroying documents to conceal mistakes made by any employee with respect to a matter involving a taxpayer or taxpayer representative;

(5) assault or battery on a taxpayer, taxpayer representative, or other employee of the Internal Revenue Service, but only if there is a criminal conviction, or a final judgment by a court in a civil case, with respect to the assault or battery;

(6) violations of the Internal Revenue Code of 1986, Department of Treasury regulations, or policies of the Internal Revenue Service (including the Internal Revenue Manual) for the purpose of retaliating against, or harassing, a taxpayer, taxpayer representative, or other employee of the Internal Revenue Service;

(7) willful misuse of the provisions of section 6103 of the Internal Revenue Code of 1986 for the purpose of concealing information from a congressional inquiry,

(8) willful failure to file any return of tax required under the Internal Revenue Code of 1986 on or before the date prescribed therefor (including any extensions), unless such failure is due to reasonable cause and not to willful neglect,

(9) willful understatement of Federal tax liability, unless such understatement is due to reasonable cause and not to willful neglect, and

(10) threatening to audit a taxpayer for the purpose of extracting personal gain or benefit.

(c) DETERMINATION OF COMMISSIONER.--

(1) IN GENERAL.--The Commissioner of Internal Revenue may take a personnel action other than termination for an act or omission under subsection (a).

(2) DISCRETION.--The exercise of authority under paragraph (1) shall be at the sole discretion of the Commissioner of Internal Revenue and may not be delegated to any other officer. The Commissioner of Internal Revenue, in his sole discretion, may establish a procedure which will be used to determine whether an individual should be referred to the Commissioner of Internal Revenue for a determination by the Commissioner under paragraph (1).

(3) NO APPEAL.--Any determination of the Commissioner of Internal Revenue under this subsection may not be appealed in any administrative or judicial proceeding.

(d) DEFINITION.--For purposes of the provisions described in clauses (i), (ii), and (iv) of subsection (b)(3)(B), references to a program or activity receiving Federal financial assistance or an educational program or activity receiving Federal financial assistance shall include any program or activity conducted by the Internal Revenue Service for a taxpayer.

Act Sec. 3701. Cataloging complaints

House Committee Report (H.R. REP . NO. 105-364, pt. 1)

[Act Sec. 3701]

Present Law

The IRS is required to make an annual report to the Congress, beginning in 1997, on all categories of instances involving allegations Of misconduct by IRS employees, arising either from internally identified cases or from taxpayer or third-party initiated complaints. 44 The report must identify the nature of the misconduct or complaint, the number of instances received by category, and the disposition of the complaints.

Reasons for Change

The Committee believes that all allegations of misconduct by IRS employees must be carefully investigated. The Committee also believes that the annual report to Congress will help develop a public perception that the IRS takes such allegations of misconduct seriously. The Committee is concerned that, in the absence of records detailing taxpayer complaints of misconduct on an individual employee basis, the IRS will not be able to adequately investigate such allegations or properly prepare the required report.

Explanation of Provision

The bill requires that, in collecting data for this report, records of taxpayer complaints of Previous Termmisconduct by IRS employees shall be maintained on an individual employee basis. These individual records are not to be listed in the report, but they will be useful in preparing the report. The Committee intends that these records be used in evaluating individual employees.

Effective Date

The requirement is effective on the date of enactment.

Conference Committee Report (H.R. CONF. REP . NO. 105-599)

Senate Amendment

Same as the House bill.

Conference Agreement

The conference agreement follows the House bill and the Senate amendment.

Effective Date

January 1, 2000.

Records of Taxpayer Complaints

Background

The IRS is required to make an annual report to the House Ways and Means Committee and the Senate Finance Committee on all instances involving allegations of misconduct by IRS employees. This requirement was instituted in 1996 by the Taxpayer Bill of Rights 2 (P.L. 104-168, Act Sec. 1211). The report must identify categories of any misconduct allegations during the past year, the numberof instances in each category, and the disposition during the year of any complaints, regardless of when the misconduct occurred. The report covers misconduct identified internally by the IRS as well as cases arising from taxpayer or third-party complaints.

The IRS has not been required to record allegations of misconduct against particular employees. In order to increase the public perception that the IRS is taking allegations of misconduct seriously, the House Committee Report for the IRS Restructuring and Reform Bill suggested requiring personnel details to be recorded. In the absence of records containing details about taxpayer complaints of misconduct against individual employees, the IRS would not be able to adequately investigate the allegations or properly prepare its report to Congress.

IRS Restructuring and Reform Impact

Records of complaints against individual IRS employees.--In collecting data for the IRS 's annual report to Congress on allegations of IRS employee misconduct, the IRS is required to maintain records of taxpayer complaints on an individual-employee basis (Act Sec. 3701 of the IRS Restructuring and Reform Act of 1998). According to the House Committee Report, individual records are not to be listed in the IRS 's annual report to Congress on instances of employee misconduct (this report is required by Act Sec. 1211 of the Taxpayer Bill of Rights 2, P.L. 104-168). However, according to the House Committee Report, records of misconduct relating to individual IRS employees are to be used in evaluating individual employee performance.

* Effective date. No specific effective date is provided by the Act. The provision is, therefore, considered effective on July 22, 1998, the date of enactment. Individual records must be maintained beginning not later than January 1, 2000.

ACT SEC . 3701. CATALOGING COMPLAINTS.

In collecting data for the report required under section 1211 of Taxpayer Bill of Rights 2 (Public Law 104-168), the Secretary of the Treasury or the Secretary's delegate shall, not later than January 1, 2000 , maintain records of taxpayer complaints of misconduct by Internal Revenue Service employees on an individual employee basis.

* * *

Disclosure of Return Information by Whistle-Blowers

Background

The IRS is required to disclose taxpayer return information to the Chair of the Senate Finance Committee, House Ways and Means Committee, or Joint Committee on Taxation upon written request from the Chair (Code Sec. 6103(f)(1) ). Information that directly or indirectly identifies a particular taxpayer may only be furnished to a committee sitting in closed session, unless the taxpayer consents in writing to making the information available in open committee meetings.

There was no avenue for average IRS employees to reveal return information in the course of reporting misconduct or taxpayer abuse to a congressional committee. One consequence of this rule was that employees were prevented by the taxpayer confidentiality provisions from reporting suspected politically motivated audits to the tax-writing committees, or from responding to congressional allegations that particular audits were politically motivated.

Testimony in IRS oversight hearings on abusive IRS management practices revealed several instances in which whistle-blowers faced retaliation for reporting managerial misconduct ( CCH Tax Day Reports, May 1, 1998 ). In light of these allegations, increased protection for whistle-blowers was deemed desirable.

IRS Restructuring and Reform Impact

Disclosures in the course of alleging IRS employee misconduct or taxpayer abuse.--Any person with current or prior authorized access to taxpayer return information is permitted to disclose the information in the course of reporting IRS employee misconduct or taxpayer abuse to the House Ways and Means Committee, the Senate Finance Committee, or the Joint Committee on Taxation (Code Sec. 6103(f)(5) , as added by the IRS Restructuring and Reform Act of 1998). Whistle-blower information may also be disclosed to any agents of these congressional committees or agents of the Chief of Staff of the Joint Committee on Taxation who are authorized to inspect return information under Code Sec. 6103(f)(4)(A) . Disclosure is permissible if the person believes that the return information being disclosed may be related to possible misconduct, maladministration, or taxpayer abuse. Written approval from the committee chair is not needed prior to the disclosure.

* Effective date. The provision is effective on July 22, 1998 (Act Sec. 3708(b) of the IRS Restructuring and Reform Act of 1998).

Records of Taxpayer Complaints

Background

The IRS is required to make an annual report to the House Ways and Means Committee and the Senate Finance Committee on all instances involving allegations of misconduct by IRS employees. This requirement was instituted in 1996 by the Taxpayer Bill of Rights 2 (P.L. 104-168, Act Sec. 1211). The report must identify categories of any misconduct allegations during the past year, the numberof instances in each category, and the disposition during the year of any complaints, regardless of when the misconduct occurred. The report covers misconduct identified internally by the IRS as well as cases arising from taxpayer or third-party complaints.

The IRS has not been required to record allegations of misconduct against particular employees. In order to increase the public perception that the IRS is taking allegations of misconduct seriously, the House Committee Report for the IRS Restructuring and Reform Bill suggested requiring personnel details to be recorded. In the absence of records containing details about taxpayer complaints of misconduct against individual employees, the IRS would not be able to adequately investigate the allegations or properly prepare its report to Congress.

IRS Restructuring and Reform Impact

Records of complaints against individual IRS employees.--In collecting data for the IRS 's annual report to Congress on allegations of IRS employee misconduct, the IRS is required to maintain records of taxpayer complaints on an individual-employee basis (Act Sec. 3701 of the IRS Restructuring and Reform Act of 1998). According to the House Committee Report, individual records are not to be listed in the IRS 's annual report to Congress on instances of employee misconduct (this report is required by Act Sec. 1211 of the Taxpayer Bill of Rights 2, P.L. 104-168). However, according to the House Committee Report, records of misconduct relating to individual IRS employees are to be used in evaluating individual employee performance.

* Effective date. No specific effective date is provided by the Act. The provision is, therefore, considered effective on July 22, 1998 , the date of enactment. Individual records must be maintained beginning not later than January 1, 2000.

ACT SEC . 1211. REPORTS ON MISCONDUCT OF IRS EMPLOYEES.

On or before June 1 of each calendar year after 1996, the Secretary of the Treasury shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report on--

(1) all categories of instances involving the misconduct of employees of the Internal Revenue Service during the preceding calendar year, and

(2) the disposition during the preceding calendar year of any such instances (without regard to the year of the Previous Termmisconduct).

* * *

JCT General Explanation of 1998 Tax Legislation (Blue Book), JCS-6-98

November 24, 1998

105th Congress

[JOINT COMMITTEE PRINT]

GENERAL EXPLANATION OF TAX LEGISLATION ENACTED IN 1998

PREPARED BY THE STAFF OF THE JOINT COMMITTEE ON TAXATION NOVEMBER 24, 1998 U.S. GOVERNMENT PRINTING OFFICE

SUMMARY CONTENTS

PART TWO: INTERNAL REVENUE SERVICE - RESTRUCTURING AND REFORM ACT OF 1998 (H.R. 2676) 14

E. Treasury Office of Inspector General; IRS Office of the Chief Inspector (secs. 1102 and 1103 of the Act, sec. 7803(d) of the Code, and secs. 2, 8D, and 9 of the Inspector General Act of 1978)

Present and Prior Law

Treasury Inspector General

In general

The Treasury Office of Inspector General ("Treasury IG") was established in 1988 and charged with conducting independent audits, investigations and review to help the Department of Treasury accomplish its mission, improve its programs and operations, promote economy, efficiency and effectiveness, and prevent and detect fraud and abuse. The Treasury IG derives its statutory authority under the Inspector General Act of 1978, as amended ("IG Act of 1978").

Appointment and qualifications

The IG Act of 1978 provides that the Treasury IG is selected by the President, with the advice and consent of the Senate, without regard to political affiliation and solely on the basis of integrity and demonstrated ability in accounting, auditing, financial analysis, law, management analysis, public administration, or investigations. The Treasury IG can be removed from office by the President. The President must communicate the reasons for such removal to both Houses of Congress.

Duties and responsibilities

The Treasury IG generally is authorized to conduct, supervise and coordinate internal audits and investigations relating to the programs and operations of the Treasury, including all of its bureaus and offices.29 Special rules apply, however, with respect to the Treasury IG's jurisdiction over ATF, Customs, the Secret Service and the IRS --the four so-called "law enforcement bureaus." Upon its establishment, the Treasury IG assumed the internal audit functions previously performed by the offices of internal affairs of ATF, Customs and the Secret Service. Although the Treasury IG was granted oversight responsibility for the internal investigations performed by the Office of Internal Affairs of ATF, the Office of Internal Affairs of Customs, and the Office of Inspections of the Secret Service, the internal investigation or inspection functions of these offices remained with the respective bureaus. The Treasury IG did not assume responsibility for either the internal audit or inspection functions of the IRS Office of the Chief Inspector. However, it was directed to oversee the internal audits and internal investigations performed by the IRS Office of the Chief Inspector.

The Commissioner and the Treasury IG have entered into two Memorandums of Understanding ("MOUs")30 to clarify the respective roles of the IRS Office of the Chief Inspector and the Treasury IG in two primary areas: (1) the investigation of allegations of wrongdoing by IRS executives and employees in situations where the independence of the Office of the Chief Inspector could be questioned, and (2) oversight by the Treasury IG of the IRS Office of the Chief Inspector.31 Pursuant to the 1990 MOU, the Commissioner agreed to transfer 21 FTEs and $1.9 million from the IRS appropriation to the Treasury IG appropriation to be used for the following purposes: (1) oversight of the operations of the Office of the Chief Inspector; (2) conduct of special reviews of IRS operations; (3) investigation of allegations of misconduct concerning the Commissioner, the Senior Deputy Commissioner, and employees of the IRS Office of the Chief Inspector; and (4) investigation of allegations of misconduct where the independence of the IRS Office of the Chief Inspector might be questioned. With respect to item (4), the Commissioner and Treasury IG agreed that all allegations of misconduct involving IRS executives and managers (Grade 15 and above), as well as any other allegation involving "significant or notorious" matters were to be referred to the Treasury IG, and that investigations arising out of such referrals generally would be conducted by the Treasury IG.

In general, under the IG Act of 1978, Inspectors General are instructed to report expeditiously to the Attorney General whenever the Inspector General has reasonable grounds to believe there has been a violation of Federal criminal law. However, in matters involving criminal violations of the Internal Revenue Code, the Treasury IG may report to the Attorney General only those offenses under section 7214 of the Code (unlawful acts of revenue officers or agents, including extortion, bribery and fraud) without the consent of the Commissioner.

Authority

The Treasury IG reports to and is under the general supervision of the Secretary of Treasury, acting through the Deputy Secretary. In general, the Secretary cannot prevent or prohibit the Treasury IG from initiating, carrying out, or completing any audit or investigation or from issuing any subpoena during the course of any audit or investigation.

However, section 8D of the IG Act of 1978 grants the Secretary authority to prohibit audits or investigations by the Treasury IG under certain circumstances. In particular, the Treasury IG is under the authority, direction, and control of the Secretary with respect to audits or investigations, or the issuance of subpoenas, which require access to sensitive information concerning: (1) ongoing criminal investigations or proceedings; (2) undercover operations; (3) the identity of confidential sources, including protected witnesses; (4) deliberations and decisions on policy matters, including documented information used as a basis for making policy decisions, the disclosure of which could reasonably be expected to have a significant influence on the economy or market behavior; (5) intelligence or counterintelligence matters; (6) other matters the disclosure of which would constitute a serious threat to national security or to the protection of certain persons. With respect to audits, investigations or subpoenas that require access to the above-listed information, the Secretary may prohibit the Treasury IG from carrying out such audit, investigation or subpoena if the Secretary determines that such prohibition is necessary to prevent the disclosure of such information or to prevent significant impairment to the national interests of the United States. The Secretary must provide written notice of such a prohibition to the Treasury IG, who must, in turn, transmit a copy of such notice to the Committees on Government Reform and Oversight and Ways and Means of the House and the Committees on Governmental Affairs and Finance of the Senate.

Access to taxpayer returns and return information

The Treasury IG has access to taxpayer returns and return information under section 6103(h)(1) of the Code. However, such access is subject to certain special requirements, including the requirement that the Treasury IG notify the IRS Office of the Chief Inspector (or the Deputy Commissioner in certain circumstances) of its intent to access returns and return information.

Reporting requirements

Under the IG Act of 1978, the Treasury IG reports to the Congress semiannually on its activities. Reports from the Treasury IG are transmitted to the Committees on Government Reform and Oversight and Ways and Means of the House and the Committees on Governmental Affairs and Finance of the Senate.

Resources

For fiscal year 1997, the Treasury IG had 296 FTEs and total funding of $29.7 million. 174 FTEs were assigned to the Treasury IG's audit function and 61 were assigned to the investigative function. The remaining FTEs were divided among the following functions: evaluations, legal, program, technology and administrative support. Of the total Treasury IG FTEs, approximately 23 were used for IRS oversight activities in fiscal year 1997.

IRS Office of Chief Inspector

The IRS Office of the Chief Inspector (also known as the "Inspection Service") was established on October 1, 19 51, in response to publicity revealing widespread corruption in the IRS . At the time of its creation, President Harry S. Truman stated, "A strong, vigorous inspection service will be established and will be made completely independent of the rest of the Internal Revenue Service."

In general

The Act establishes a new independent, Treasury Inspector General for Tax Administration ("Treasury IG for Tax Administration") within the Department of Treasury. The IRS Office of the Chief Inspector is eliminated, and all of its powers and responsibilities are transferred to the Treasury IG for Tax Administration. The Treasury IG for Tax Administration has the powers and responsibilities generally granted to Inspectors General under the IG Act of 1978, without the limitations that currently apply to the Treasury IG under section D of the Act. The role of the existing Treasury IG is redefined to exclude responsibility for the IRS . The Treasury IG for Tax Administration is under the supervision of the Secretary of Treasury, with certain additional reporting to the Oversight Board and the Congress.

Duties and responsibilities of Treasury IG for Tax Administration

The Treasury IG for Tax Administration has the present-law duties and responsibilities currently delegated to the Treasury IG with respect to the IRS . In addition, the Treasury IG for Tax Administration assumes all of the duties and responsibilities currently delegated to the IRS Office of the Chief Inspector. The Treasury IG for Tax Administration has jurisdiction over IRS matters, as well as matters involving the Board.

Accordingly, the Treasury IG for Tax Administration is charged with conducting audits, investigations, and evaluations of IRS programs and operations (including the Board) to promote the economic, efficient and effective administration of the nation's tax laws and to detect and deter fraud and abuse in IRS programs and operations. In this regard, the Treasury IG for Tax Administration specifically is directed to evaluate the adequacy and security of IRS technology on an ongoing basis. The Treasury IG for Tax Administration is charged with investigating allegations of criminal misconduct (e.g., Code sections 7212, 7213, 7214, 7216 and new section 7217), as well as administrative misconduct (e.g., violations of the Taxpayer Bill of Rights and the Taxpayer Bill of Rights 2, the Office of Government Ethics Standards of Ethical Conduct and the IRS Supplemental Standards of Ethical Conduct).

Effective Date

The provision is effective 180 days after the date of enactment (January 18, 1999).32

Revenue Effect

The provision is estimated to have no effect on Federal fiscal year budget receipts.

F. Prohibition on Executive Branch Influence Over Taxpayer Audits (sec. 1105 of the Act and new sec. 7217 of the Code)

Present and Prior Law

There was no prior-law explicit prohibition in the Code against high-level Executive Branch influence over taxpayer audits and collection activity.

The Internal Revenue Code prohibits disclosure of tax returns and return information, except to the extent specifically authorized by the Internal Revenue Code (sec. 6103). Unauthorized disclosure is a felony punishable by a fine not exceeding $5,000 or imprisonment of not more than five years, or both (sec. 7213). An action for civil damages also may be brought for unauthorized disclosure (sec. 7431).

Reasons for Change

The Congress believed that the perception that it is possible that high-level Executive Branch influence over taxpayer audits and collection activity could occur has a negative influence on taxpayers' views of the tax system. Accordingly, the Congress believed that it is appropriate to prohibit such influence.

Explanation of Provision

The provision makes it unlawful for a specified person to request that any officer or employee of the IRS conduct or terminate an audit or otherwise investigate or terminate the investigation of any particular taxpayer with respect to the tax liability of that taxpayer. The prohibition applies to the President, the Vice President, and employees of the executive offices of either the President or Vice President, as well as any individual (except the Attorney General) serving in a position specified in section 5312 of Title 5 of the United States Code (these are generally Cabinet-level positions). The prohibition applies to both direct requests and requests made through an intermediary. In the case of a law enforcement action authorized by the Attorney General, discussions involving specified persons with respect to that law enforcement action shall not be considered to be requests made through an intermediary.

Any request made in violation of this rule must be reported by the IRS employee to whom the request was made to the Chief Inspector of the IRS . The Chief Inspector has the authority to investigate such violations and to refer any violations to the Department of Justice for possible prosecution, as appropriate. Anyone convicted of violating this provision will be punished by imprisonment of not more than 5 years or a fine not exceeding $5,000 (or both).

Three exceptions to the general prohibition apply. First, the prohibition does not apply to a request made to a specified person by or on behalf of a taxpayer that is forwarded by the specified person to the IRS . This exception is intended to cover two types of situations. The first situation is where a taxpayer (or a taxpayer's representative) writes to a specified person seeking assistance in resolving a difficulty with the IRS . This exception permits the specified person who receives such a request to forward it to the IRS for resolution without violating the general prohibition. The second situation that this first exception is intended to cover is an audit or investigation by the IRS of a Presidential nominee. Under present law (sec. 6103(c)), nominees for Presidentially appointed positions consent to disclosure of their tax returns and return information so that background checks may be conducted. Sometimes an audit or other investigation is initiated as part of that background check. The Committee anticipates that any such audit or investigation that is part of such a background check will be encompassed within this first exception.

The second exception to the general prohibition applies to requests for disclosure of returns or return information under section 6103 if the request is made in accordance with the requirements of section 6103.

The third exception to the general prohibition applies to requests made by the Secretary of the Treasury as a consequence of the implementation of a change in tax policy.

Effective Date

The provision applies to violations occurring after the date of enactment (after July 22, 1998 ).

Revenue Effect

The provision is estimated to have no effect on Federal fiscal year budget receipts.

G. IRS Personnel Flexibilities (secs. 1201-1205 of the Act and new chapter 95 of Title 5, U.S.C.)

Violations for which IRS employees may be terminated

The Act requires the IRS to terminate an employee for certain proven violations committed by the employee in connection with the performance of official duties. The violations include: (1) willful failure to obtain the required approval signatures on documents authorizing the seizure of a taxpayer's home, personal belongings, or business assets; (2) providing a false statement under oath material to a matter involving a taxpayer; (3) with respect to a taxpayer, taxpayer representative, or other IRS employee, the violation of any right under the U.S. Constitution, or any civil right established under titles VI or VII of the Civil Rights Act of 1964, title IX of the Educational Amendments of 1972, the Age Discrimination in Employment Act of 1967, the Age Discrimination Act of 1975, sections 501 or 504 of the Rehabilitation Act of 1973 and title I of the Americans with Disabilities Act of 1990; (4) falsifying or destroying documents to conceal mistakes made by any employee with respect to a matter involving a taxpayer or a taxpayer representative; (5) assault or battery on a taxpayer or other IRS employee, but only if there is a criminal conviction or a final judgment by a court in a civil case, with respect to the assault or battery; (6) violations of the Internal Revenue Code, Treasury Regulations, or policies of the IRS (including the Internal Revenue Manual) for the purpose of retaliating or harassing a taxpayer or other IRS employee; (7) willful misuse of section 6103 for the purpose of concealing data from a Congressional inquiry; (8) willful failure to file any tax return required under the Code on or before the due date (including extensions) unless failure is due to reasonable cause; (9) willful understatement of Federal tax liability, unless such understatement is due to reasonable cause; and (10) threatening to audit a taxpayer for the purpose of extracting personal gain or benefit.

The Act provides non-delegable authority to the Commissioner to determine that mitigating factors exist, that, in the Commissioner's sole discretion, mitigate against terminating the employee. The Act also provides that the Commissioner, in his sole discretion, may establish a procedure to determine whether an individual should be referred for such a determination by the Commissioner. The Treasury IG is required to track employee terminations and terminations that would have occurred had the Commissioner not determined that there were mitigation factors and include such information in the IG's annual report.

The provision is effective on the date of enactment (July 22, 1998).

TITLE III . TAXPAYER PROTECTION AND RIGHTS

A. Burden of Proof (sec. 3001 of the Act and new sec. 7491 of the Code)

Present and Prior Law

Under present law, a rebuttable presumption exists that the Commissioner's determination of tax liability is correct.33 "This presumption in favor of the Commissioner is a procedural device that requires the plaintiff to go forward with prima facie evidence to support a finding contrary to the Commissioner's determination. Once this procedural burden is satisfied, the taxpayer must still carry the ultimate burden of proof or persuasion on the merits. Thus, the plaintiff not only has the burden of proof of establishing that the Commissioner's determination was incorrect, but also of establishing the merit of its claims by a preponderance of the evidence."34

The general rebuttable presumption that the Commissioner's determination of tax liability is correct is a fundamental element of the structure of the Internal Revenue Code. Although this presumption is judicially based, rather than legislatively based, there is considerable evidence that the presumption has been repeatedly considered and approved by the Congress. This is the case because the Internal Revenue Code contains a number of civil provisions that explicitly place the burden of proof on the Commissioner in specifically designated circumstances.

Under prior law, there was no statutory provision that generally provided burden of proof rules.

Reasons for Change

The Congress was concerned that individual and small business taxpayers frequently are at a disadvantage when forced to litigate with the Internal Revenue Service. The Congress believed that the prior-law burden of proof rules contributed to that disadvantage. The Congress believed that, all other things being equal, facts asserted by individual and small business taxpayers who cooperate with the IRS and satisfy relevant recordkeeping and substantiation requirements should be accepted. The Congress believed that shifting the burden of proof to the Secretary in such circumstances would create a better balance between the IRS and such taxpayers, without encouraging tax avoidance.

The Congress believed that it is inappropriate for the IRS to rely solely on statistical information on unrelated taxpayers to reconstruct unreported income of an individual taxpayer. The Congress also believed that, in a court proceeding, the IRS should not be able to rest on its presumption of correctness if it does not provide any evidence whatsoever relating to penalties.

Explanation of Provision

The Act provides that the Secretary has the burden of proof in any court proceeding with respect to a factual issue if the taxpayer introduces credible evidence with respect to the factual issue relevant to ascertaining the taxpayer's specified tax liability. The provision applies to income,35 estate, gift, and generation-skipping transfer taxes. Four conditions apply. First, the taxpayer must comply with the requirements of the Internal Revenue Code and the regulations issued thereunder to substantiate any item (as under prior law). Second, the taxpayer must maintain records required by the Code and regulations (as under prior law). Third, the taxpayer must cooperate with reasonable requests by the Secretary for meetings, interviews, witnesses, information, and documents (including providing, within a reasonable period of time, access to and inspection of witnesses, information, and documents within the control of the taxpayer, as reasonably requested by the Secretary). Cooperation also includes providing reasonable assistance to the Secretary in obtaining access to and inspection of witnesses, information, or documents not within the control of the taxpayer (including any witnesses, information, or documents located in foreign countries36 ). A necessary element of cooperating with the Secretary is that the taxpayer must exhaust his or her administrative remedies (including any appeal rights provided by the IRS ). The taxpayer is not required to agree to extend the statute of limitations to be considered to have cooperated with the Secretary. Cooperation also means that the taxpayer must establish the applicability of any asserted privilege. Fourth, taxpayers other than individuals or estates must meet the net worth limitations that apply for awarding attorney's fees (accordingly, no net worth limitation would be applicable to individuals). Corporations, trusts,37 and partnerships whose net worth exceeds $7 million are not eligible for the benefits of the provision. The taxpayer has the burden of proving that it meets each of these conditions, because they are necessary prerequisites to establishing that the burden of proof is on the Secretary.

The burden will shift to the Secretary under this provision only if the taxpayer first introduces credible evidence with respect to a factual issue relevant to ascertaining the taxpayer's income tax liability. Credible evidence is the quality of evidence which, after critical analysis, the court would find sufficient upon which to base a decision on the issue if no contrary evidence were submitted (without regard to the judicial presumption of IRS correctness). A taxpayer has not produced credible evidence for these purposes if the taxpayer merely makes implausible factual assertions, frivolous claims, or tax protestor-type arguments. The introduction of evidence will not meet this standard if the court is not convinced that it is worthy of belief. If after evidence from both sides, the court believes that the evidence is equally balanced, the court shall find that the Secretary has not sustained his burden of proof.

Nothing in the provision shall be construed to override any requirement under the Code or regulations to substantiate any item. Accordingly, taxpayers must meet applicable substantiation requirements, whether generally imposed38 or imposed with respect to specific items, such as charitable contributions39 or meals, entertainment, travel, and certain other expenses.40 Substantiation requirements include any requirement of the Code or regulations that the taxpayer establish an item to the satisfaction of the Secretary.41 Taxpayers who fail to substantiate any item in accordance with the legal requirement of substantiation will not have satisfied the legal conditions that are prerequisite to claiming the item on the taxpayer's tax return and will accordingly be unable to avail themselves of this provision regarding the burden of proof. Thus, if a taxpayer required to substantiate an item fails to do so in the manner required (or destroys the substantiation), this burden of proof provision is inapplicable.42

In the case of an individual taxpayer, the Secretary has the burden of proof in any court proceeding with respect to any item of income which was reconstructed by the Secretary solely through the use of statistical information on unrelated taxpayers.

Further, the provision provides that, in any court proceeding, the Secretary must initially come forward with evidence that it is appropriate to apply a particular penalty to the taxpayer before the court can impose the penalty. This provision is not intended to require the Secretary to introduce evidence of elements such as reasonable cause or substantial authority. Rather, the Secretary must come forward initially with evidence regarding the appropriateness of applying a particular penalty to the taxpayer; if the taxpayer believes that, because of reasonable cause, substantial authority, or a similar provision, it is inappropriate to impose the penalty, it is the taxpayer's responsibility (and not the Secretary's obligation) to raise those issues.

Effective Date

The provision applies to court proceedings arising in connection with examinations commencing after the date of enactment (after July 22, 1998 ). In any case in which there is no examination, the provision applies to court proceedings arising in connection with taxable periods or events beginning or occurring after the date of enactment. An audit is not the only event that would be considered an examination for purposes of this provision. For example, the matching of an information return against amounts reported on a tax return is intended to be an examination for purposes of this provision. Similarly, the review of a claim for refund prior to issuing that refund is also intended to be an examination for purposes of this provision.

B. Proceedings by Taxpayers

1.

Expansion of authority to award costs and certain fees (sec. 3101 of the Act and sec. 7430 of the Code)
2.

Present and Prior Law

Any person who substantially prevails in any action by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty may be awarded reasonable administrative costs incurred before the IRS and reasonable litigation costs incurred in connection with any court proceeding. Reasonable administrative costs are defined as (1) any administrative fees or similar charges imposed by the IRS and (2) expenses, costs and fees related to attorneys, expert witnesses, and studies or analyses necessary for preparation of the case, to the extent that such costs are incurred after the earlier of the date of the notice of decision by IRS Appeals or the notice of deficiency. Net worth limitations apply.

Reasonable litigation costs include reasonable fees paid or incurred for the services of attorneys, except that, under prior law, the attorney's fees were not reimbursed at a rate in excess of $110 per hour (indexed for inflation) unless the court determined that a special factor, such as the limited availability of qualified attorneys for the proceeding, justified a higher rate.

Rule 68 of the Federal Rules of Civil Procedure (FRCP) provides a procedure under which a party may recover costs if the party's offer for judgment was rejected and the subsequent court judgment was less favorable to the opposing party than the offer. The offering party's recoverable costs are limited to the costs (excluding attorney's fees) incurred after the offer was made. The FRCP generally apply to tax litigation in the district courts and the United States Court of Federal Claims.

Code section 7431 permits the award of civil damages for unauthorized inspection or disclosure of return information. The Federal appellate courts were, under prior law, split over whether a party who substantially prevails over the United States in an action under Code section 7431 is eligible for an award of fees and reasonable costs.

Reasons for Change

The Congress believed that taxpayers should be allowed to recover the reasonable administrative costs they incur where the IRS takes a position against the taxpayer that is not substantially justified, beginning at the time that the IRS establishes its initial position by issuing a letter of proposed deficiency which allows the taxpayer an opportunity for administrative review by the IRS Office of Appeals.

The Congress believed that the pro bono publicum representation of taxpayers should be encouraged and the value of the legal services rendered in these situations should be recognized. Where the IRS takes positions that are not substantially justified, it should not be relieved of its obligation to bear reasonable administrative and litigation costs because representation was provided the taxpayer on a pro bono basis.

The Congress was concerned that the IRS may continue to litigate issues that have previously been decided in favor of taxpayers in other circuits. The Congress believed that this places an undue burden on taxpayers that are required to litigate such issues. Accordingly, the Congress believed it is important that the court take into account whether the IRS has lost in the courts of appeals of other circuits on similar issues in determining whether the IRS has taken a position that is not substantially justified and thus liable for reasonable administrative and litigation costs.

The Congress believed that settlement of tax cases should be encouraged whenever possible. Accordingly, the Congress believed that the application of a rule similar to FRCP 68 is appropriate to provide an incentive for the IRS to settle taxpayers' cases for appropriate amounts, by requiring reimbursement of taxpayer's costs when the IRS fails to do so.

The Congress believed that when the IRS violates taxpayer's right to privacy by engaging in unauthorized inspection or disclosure activities, it is appropriate to reimburse taxpayers for the costs of their damages.

Explanation of Provision

The Act:

(1) Moves the point in time after which reasonable administrative costs can be awarded to the date on which the first letter of proposed deficiency that allows the taxpayer an opportunity for administrative review in the IRS Office of Appeals is sent;

(2) Raises the hourly rate to $125 per hour, which parallels the rate utilized under the Equal Access to Justice Act (the statute that authorizes the awarding of attorney's fees in non-tax Federal cases). This new cap will continue to be indexed for inflation (as under prior law). Provides that the difficulty of the issues presented or the unavailability of local tax expertise can be used to justify an award of attorney's fees of more than the statutory limit of $125 per hour;

(3) Permits the award of reasonable attorney's fees to specified persons who represent for no more than a nominal fee a taxpayer who is a prevailing party;

(4) Provides that in determining whether the position of the United States was substantially justified, the court shall take into account whether the United States has lost in other courts of appeal on substantially similar issues;

(5) Provides that if a taxpayer makes an offer after the taxpayer has a right to administrative review in the IRS Office of Appeals, the IRS rejects the offer, and later the IRS obtains a judgment against the taxpayer in an amount that is equal to or less than the taxpayer's offer for the amount of the tax liability (excluding interest), reasonable costs and attorney's fees from the date of the offer would be awarded; and

(6) Clarifies that the award of attorney's fees is permitted in actions for civil damages for unauthorized inspection or disclosure of taxpayer returns and return information. Fees are payable by the United States only when the United States is the defendant and the plaintiff is a prevailing party. Also, individual defendants (such as State employees or contractors) may be liable for attorneys' fees and costs in cases where the United States is not a party, whenever they are found to have made a wrongful disclosure.

Effective Date

The provision is effective with respect to costs incurred and services performed more than 180 days after the date of enactment (after January 18, 1999).

Revenue Effect

The provision is estimated to have no effect on Federal fiscal year budget receipts in 1998, and to reduce Federal fiscal year budget receipts by $11 million in 1999, $12 million in 2000, $13 million in 2001, $14 million in 2002, $16 million in 2003, $18 million in 2004, $19 million in 2005, $20 million in 2006, and $22 million in 2007.

2. Civil damages for collection actions (sec. 3102 of the Act and secs. 7426 and 7433 of the Code)

Prior Law

A taxpayer could sue the United States for up to $1 million of civil damages caused by an officer or employee of the IRS who recklessly or intentionally disregards provisions of the Internal Revenue Code or Treasury regulations in connection with the collection of Federal tax with respect to the taxpayer.

Reasons for Change

The Congress believed that taxpayers should also be able to recover economic damages they incur as a result of the negligent disregard of the Code or regulations by an officer or employee of the IRS in connection with a collection matter. The Congress also believed that taxpayers should be able to recover civil damages they incur as a result of a willful violation of the Bankruptcy Code by an officer or employee of the IRS . As third parties may also be subject to IRS collection actions, the Congress believed it appropriate to afford them the opportunity to recover damages for unauthorized collection actions.

Explanation of Provision

The Act permits recovery of up to $100,000 in civil damages caused by an officer or employee of the IRS who negligently disregards provisions of the Internal Revenue Code or Treasury regulations in connection with the collection of Federal tax with respect to the taxpayer. The provision also permits recovery of up to $1 million in civil damages caused by an officer or employee of the IRS who willfully violates provisions of the Bankruptcy Code relating to automatic stays or discharges. The provision also provides that persons other than the taxpayer may sue for civil damages for unauthorized collection actions.

Effective Date

The provision is effective with respect to actions of officers or employees of the IRS occurring after the date of enactment (after July 22, 1998 ).; 4:39 PM
Scott Haley said...: The IRS dwebes are violating their own Manual---

The word "frivolous" can only be used in conjunction with a Return, or a document purporting to be a Return...according to their operational Manual.

Since 1998 the IRS HAS TO follow the rules in their Manual as if the Manual was Law...and they cannot go beyond the instructions in that document.; 5:05 PM
Bleap said...: The Truth About Frivolous Tax Arguments as well as our response to it can be downloaded at:

http://www.esnips.com//web/bleap/; 8:06 PM

SHOW US THE INHERENT LAW

Sunday, August 05, 2007

The Document "The Truth About Frivolous Tax Arguments" Has No Author

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