[House Report 114-66] [From the U.S. Government Publishing Office] 114th Congress } [ Report HOUSE OF REPRESENTATIVES 1st Session } [ 114-66 =================================================================== PREVENT TARGETING AT THE IRS ACT _______ April 13, 2015.--Committed to the Committee of the Whole House on the State of the Union and ordered to be printed _______ Mr. Ryan of Wisconsin, from the Committee on Ways and Means, submitted the following R E P O R T [To accompany H.R. 709] [Including cost estimate of the Congressional Budget Office] The Committee on Ways and Means, to whom was referred the bill (H.R. 709) to provide for the termination of employment of employees of the Internal Revenue Service who take certain official actions for political purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended do pass. CONTENTS Page I. SUMMARY AND BACKGROUND............................................2 A. Purpose and Summary................................... 2 B. Background and Need for Legislation................... 2 C. Legislative History................................... 2 II. EXPLANATION OF THE BILL...........................................3 A. Termination of Employment of Internal Revenue Service Employees for Taking Official Actions for Political Purposes (sec. 2 of the bill and sec. 1203(b) of the Code)................................................ 3 III.VOTES OF THE COMMITTEE............................................5 IV. BUDGET EFFECTS OF THE BILL........................................5 A. Committee Estimate of Budgetary Effects............... 5 B. Statement Regarding New Budget Authority and Tax Expenditures Budget Authority........................ 5 C. Cost Estimate Prepared by the Congressional Budget Office............................................... 5 V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE........6 A. Committee Oversight Findings and Recommendations...... 6 B. Statement of General Performance Goals and Objectives. 6 C. Information Relating to Unfunded Mandates............. 6 D. Applicability of House Rule XXI 5(b).................. 7 E. Tax Complexity Analysis............................... 7 F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff Benefits.............................. 7 G. Duplication of Federal Programs....................... 7 H. Disclosure of Directed Rule Makings................... 8 VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED.............8 A. Text of Existing Law Amended or Repealed by the Bill, as Reported.......................................... 8 B. Changes in Existing Law Proposed by the Bill, as Reported............................................. 10 The amendment is as follows: Strike all after the enacting clause and insert the following: SECTION 1. SHORT TITLE. This Act may be cited as the ``Prevent Targeting at the IRS Act''. SEC. 2. TERMINATION OF EMPLOYMENT OF INTERNAL REVENUE SERVICE EMPLOYEES FOR TAKING OFFICIAL ACTIONS FOR POLITICAL PURPOSES. (a) In General.--Paragraph (10) of section 1203(b) of the Internal Revenue Service Restructuring and Reform Act of 1998 is amended to read as follows: ``(10) performing, delaying, or failing to perform (or threatening to perform, delay, or fail to perform) any official action (including any audit) with respect to a taxpayer for purpose of extracting personal gain or benefit or for a political purpose.''. (b) Effective Date.--The amendment made by this section shall take effect on the date of the enactment of this Act. I. SUMMARY AND BACKGROUND A. Purpose and Summary H.R. 709, reported by the Committee on Ways and Means, clarifies that an employee of the Internal Revenue Service (``IRS'') may be terminated for using the employee's position for a political or personal purpose by performing, delaying, threatening or failing to perform any official action (including an audit). B. Background and Need for Legislation In 1998, Congress enacted the IRS Restructuring and Reform Act of 1998 (Pub. L. 105-206), which included a list of ``10 Deadly Sins,'' conduct for which an IRS employee must be terminated unless such dismissal is overruled personally by the IRS Commissioner. Under current law, an IRS employee who has been found to have threatened to audit a taxpayer for the purpose of the employee's personal gain or benefit is subject to dismissal. The bill expands grounds for termination of employment of an IRS employee to include an IRS employee performing, delaying, or failing to perform any official action (including an audit) for the purpose of extracting personal gain or benefit, or for a political purpose. In the course of the Committee's investigation of IRS's targeting of certain social-welfare organizations, it was apparent that there is a gap in the law such that an IRS employee's use of his or her official position for political purposes does not constitute misconduct requiring mandatory termination. C. Legislative History Background H.R. 709 was introduced on February 4, 2015, and was referred to the Committee on Ways and Means. The same legislation, H.R. 2565, passed the House of Representatives in the 113th Congress under suspension of the rules by voice vote on July 31, 2014. Committee action The Committee on Ways and Means marked up H.R. 709, the ``Prevent Targeting at the IRS Act,'' on March 25, 2015, and ordered the bill, as amended, favorably reported (with a quorum being present). Committee hearings The need for reform of the rules governing IRS employee conduct to prevent political targeting was discussed during multiple Committee hearings during the 113th Congress:Full Committee Hearing on IRS Targeting Conservative Groups (May 17, 2013). Full Committee Hearing Organizations Targeted by Internal Revenue Service for Their Personal Beliefs (June 4, 2013). Full Committee Hearing on the Status of Internal Revenue Service's Review of Taxpayer Targeting Practices (June 27, 2013). Oversight Subcommittee Hearing on the IRS Exempt Organizations Division Post-U.S. Treasury Inspector General for Tax Administration Audit Report (September 18, 2013). Oversight Subcommittee Hearing with IRS Commissioner Koskinen (February 5, 2014). Oversight Subcommittee Hearing on the IRS Operations and the 2014 Tax Return Filing Season (May 7, 2014). Full Committee Hearing with IRS Commissioner Koskinen (June 20, 2014). II. EXPLANATION OF THE BILL A. Termination of Employment of Internal Revenue Service Employees for Taking Official Actions for Political Purposes (sec. 2 of the bill and sec. 1203(b) of the Code) PRESENT LAW The IRS Restructuring and Reform Act of 1998 (the ``Restructuring Act'')\1\ 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 take an official action, such as an audit, or delay or fail to take official action with respect to a taxpayer for the purpose of extracting personal gain or benefit. --------------------------------------------------------------------------- \1\Pub. L. No. 105-206, sec. 1203(b), July 22, 1998. --------------------------------------------------------------------------- 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 Inspector General (``IG'') is required to track employee terminations and terminations that would have occurred had the Commissioner not determined that there were mitigating factors and include such information in the IG's annual report. REASONS FOR CHANGE The Committee has found examples of IRS employees selecting taxpayers for examination or taken other adverse official actions with respect to taxpayers on the basis of their names or policy positions. Such conduct is unacceptable, yet present law does not clearly provide for the Commissioner to dismiss employees on the basis of such conduct, although similar conduct motivated by personal gain is within the scope of the offenses for which the Restructuring Act prescribes termination of employment. The Committee believes it is imperative that the public trust that actions of the IRS are not politically motivated, and that such trust is undermined by the lack of clear direction to the Commissioner that such conduct is punishable by termination. EXPLANATION OF PROVISION The provision amends the Restructuring Act to expand the scope of the violation concerning an IRS employee threatening to audit a taxpayer for the purpose of extracting personal gain or benefit to include actions taken for political purposes. As a result, the provision requires the IRS to terminate an employee who, for political purposes or personal gain, undertakes official action with respect to a taxpayer or, depending on the circumstances, fails to do so, delays action or threatens to perform, delay or omit such official action. Official actions for purposes of this provision include audits or examinations. EFFECTIVE DATE The provision is effective on the date of enactment. III. VOTES OF THE COMMITTEE In compliance with clause 3(b) of rule XIII of the Rules of the House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of H.R. 709, the ``Prevent Targeting at the IRS Act,'' on March 25, 2015. The Chairman's amendment in the nature of a substitute was adopted by a voice vote (with a quorum being present). The bill, H.R. 709, as amended, was ordered favorably reported to the House of Representatives by a voice vote (with a quorum being present). IV. BUDGET EFFECTS OF THE BILL A. Committee Estimate of Budgetary Effects In compliance with clause 3(d) of rule XIII of the Rules of the House of Representatives, the following statement is made concerning the effects on the budget of the bill, H.R. 709 as reported. The bill, as reported, is estimated to have no effect on Federal budget receipts for fiscal years 2015-2025. Pursuant to clause 8 of rule XIII of the Rules of the House of Representatives, the following statement is made by the Joint Committee on Taxation with respect to the provisions of the bill amending the Internal Revenue Code of 1986: the gross budgetary effect (before incorporating macroeconomic effects) in any fiscal year is less than 0.25 percent of the current projected gross domestic product of the United States for that fiscal year; therefore, the bill is not ``major legislation'' for purposes of requiring that the estimate include the budgetary effects of changes in economic output, employment, capital stock and other macroeconomic variables. B. Statement Regarding New Budget Authority and Tax Expenditures Budget Authority In compliance with clause 3(c)(2) of rule XIII of the Rules of the House of Representatives, the Committee states that the bill involves no new or increased budget authority. The Committee further states that there are no new or increased tax expenditures. C. Cost Estimate Prepared by the Congressional Budget Office In compliance with clause 3(c)(3) of rule XIII of the Rules of the House of Representatives, requiring a cost estimate prepared by the CBO, the following statement by CBO is provided. U.S. Congress, Congressional Budget Office, Washington, DC, April 3, 2015. Hon. Paul Ryan, Chairman, Committee on Ways and Means, House of Representatives, Washington, DC. Dear Mr. Chairman: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 709, the Prevent Targeting at the IRS Act. If you wish further details on this estimate, we will be pleased to provide them. The CBO staff contact is Matthew Pickford. Sincerely, Keith Hall, Director. Enclosure. H.R. 709--Prevent Targeting at the IRS Act H.R. 709 would amend federal law to expand the reasons that Internal Revenue Service (IRS) employees may be terminated to include taking official actions for political purposes. CBO estimates that enacting the bill would have no significant impact on the federal budget. Under current law, there are 10 violations that, if proven, can lead to the termination of an IRS employee. The decision to terminate an employee is subject to the discretion of the IRS commissioner who can determine if mitigating factors exist. H.R. 709 would expand the violations to include targeting taxpayers for political purposes. CBO estimates that implementing the legislation would have no significant impact on the federal budget because we expect the bill's provisions would apply to a small number of employees. CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting the bill would not affect direct spending or revenues; therefore, pay-as-you-go procedures do not apply. CBO and JCT have determined that H.R. 709 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would not affect the budgets of state, local, or tribal governments. The CBO staff contact for this estimate is Matthew Pickford. The estimate was approved by Theresa Gullo, Assistant Director for Budget Analysis. V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE A. Committee Oversight Findings and Recommendations With respect to clause 3(c)(1) of rule XIII of the Rules of the House of Representatives (relating to oversight findings), the Committee advises that it was as a result of the Committee's review of the provisions of H.R. 709 that the Committee concluded that it is appropriate to report the bill, as amended, favorably to the House of Representatives with the recommendation that the bill do pass. B. Statement of General Performance Goals and Objectives With respect to clause 3(c)(4) of rule XIII of the Rules of the House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizes funding is required. C. Information Relating to Unfunded Mandates This information is provided in accordance with section 423 of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104- 4). The Committee has determined that the bill does not contain Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental mandate on State, local, or tribal governments. D. Applicability of House Rule XXI 5(b) Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ``A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not be considered as passed or agreed to unless so determined by a vote of not less than three-fifths of the Members voting, a quorum being present.'' The Committee has carefully reviewed the bill, and states that the bill does not involve any Federal income tax rate increases within the meaning of the rule. E. Tax Complexity Analysis The following statement is made pursuant to clause 3(h)(1) of rule XIII of the Rules of the House of Representatives. Section 4022(b) of the Internal Revenue Service Restructuring and Reform Act of 1998 requires the staff of the Joint Committee on Taxation (in consultation with the Internal Revenue Service and the Treasury Department) to provide a tax complexity analysis. The complexity analysis is required for all legislation reported by the Senate Committee on Finance, the House Committee on Ways and Means, or any committee of conference if the legislation includes a provision that directly or indirectly amends the Internal Revenue Code and has widespread applicability to individuals or small businesses. Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House of Representatives, the staff of the Joint Committee on Taxation has determined that a complexity analysis is not required under section 4022(b) of the IRS Reform Act because the bill contains no provisions that amend the Internal Revenue Code and that have ``widespread applicability'' to individuals or small businesses, within the meaning of the rule. F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff Benefits With respect to clause 9 of rule XXI of the Rules of the House of Representatives, the Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not contain any congressional earmarks, limited tax benefits, or limited tariff benefits within the meaning of the rule. G. Duplication of Federal Programs In compliance with Sec. 3(g)(2) of H. Res. 5 (114th Congress), the Committee states that no provision of the bill establishes or reauthorizes: (1) a program of the Federal Government known to be duplicative of another Federal program, (2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111-139, or (3) a program related to a program identified in the most recent Catalog of Federal Domestic Assistance, published pursuant to the Federal Program Information Act (Public Law 95-220, as amended by Public Law 98-169). H. Disclosure of Directed Rule Makings In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), the following statement is made concerning directed rule makings: The Committee estimates that the bill requires no directed rule makings within the meaning of such section. VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED A. Text of Existing Law Amended or Repealed by the Bill, as Reported In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of the House of Representatives, the text of each section proposed to be amended or repealed by the bill, as reported, is shown below: Text of Existing Law Amended or Repealed by the Bill, as Reported In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of the House of Representatives, the text of each section proposed to be amended or repealed by the bill, as reported, is shown below: SECTION 1203 OF THE INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998 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 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. (e) Individuals Performing Services Under a Qualified Tax Collection Contract.--An individual shall cease to be permitted to perform any services under any qualified tax collection contract (as defined in section 6306(b) of the Internal Revenue Code of 1986) if there is a final determination by the Secretary of the Treasury under such contract that such individual committed any act or omission described under subsection (b) in connection with the performance of such services. B. Changes in Existing Law Proposed by the Bill, as Reported In compliance with clause 3(e)(1)(B) of rule XIII of the Rules of the House of Representatives, changes in existing law proposed by the bill, as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, existing law in which no change is proposed is shown in roman): Changes in Existing Law Made by the Bill, as Reported In compliance with clause 3(e)(1)(B) of rule XIII of the Rules of the House of Representatives, changes in existing law proposed by the bill, as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, and existing law in which no change is proposed is shown in roman): SECTION 1203 OF THE INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998 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 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.] (10) performing, delaying, or failing to perform (or threatening to perform, delay, or fail to perform) any official action (including any audit) with respect to a taxpayer for purpose of extracting personal gain or benefit or for a political purpose. (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. (e) Individuals Performing Services Under a Qualified Tax Collection Contract.--An individual shall cease to be permitted to perform any services under any qualified tax collection contract (as defined in section 6306(b) of the Internal Revenue Code of 1986) if there is a final determination by the Secretary of the Treasury under such contract that such individual committed any act or omission described under subsection (b) in connection with the performance of such services. [all]