Introduction

Justice Oliver Wendell Holmes, Jr. once said that "Taxes are the price we pay for a civilized society." But are taxes being collected in a civilized manner? Most of the time, the answer is yes. But experts believe that five to ten percent of tax collection activities - affecting from 50,000 to 150,000 taxpayers per year -- are made contrary to IRS policies. The results can be devastating.

Thomas Treadway, from Pipersville, Pennsylvania, told the Senate Finance Subcommittee on IRS Oversight on April 10, 1987 that he and his trash management business were "totally destroyed" by the IRS. Treadway said the IRS presented him with an assessment of $247,000, then "stripped me of everything" and even seized $22,000 out of his girlfriend's bank account to cover his alleged tax liability, even though she owed no taxes at all. "She never even knew about the IRS liens and levies until her checks started bouncing. She had to borrow money to buy her groceries and make her mortgage payments," Treadway noted.

Later, the entire $247,000 assessment was thrown out on appeal as being "unreasonable." Yet, Treadway and his girlfriend spent over $75,000 in legal and accounting fees fighting the IRS. Although Treadway was left with nothing, the agent responsible for this tragedy got a promotion and a raise.

Not all IRS mistakes are this big. But the consequences are often quite serious, the experience trying.

General Accounting Office reports, congressional hearings, and private sector survey efforts all indicate that improvements can and should be made to safeguard taxpayers' rights, particularly in the area of collections.

The countless examples of abuses demonstrate that action needs to be taken now to protect taxpayers. Internal IRS policies have failed again and again. Why? Because of a flaw in the tax collection system. Even though there are many avenues of appeal for contesting an assessment of tax, there are no appeals and checks and balances built into the process for collecting the tax. If an IRS employee violates IRS collection policies, the taxpayer has little recourse.

There are many fine people at the IRS, and many who are dedicated to their jobs and to the idea of protecting taxpayers' rights. Yet within the Collection Division there appears to be a cancer of policy subversions and embattled indifference, so prevalent and so onerous that it can only be corrected through legislation.

Key Problems in the Tax Collection Process

The National Taxpayers Union believes that the Omnibus Taxpayers' Bill of Rights Act is a first step in the direction of true reform. This bill is absolutely necessary because of the following facts:

Fact #1 - The IRS has a long history of a negligent disregard for taxpayers' rights.

Even as far back as the mid-1960's taxpayers have been complaining of IRS actions that are abusive, arbitrary, and capricious. In February 1973 a number of witnesses appeared before a Senate subcommittee and complained of abusive and arrogant IRS treatment. In January 1976 the Administrative Conference of the United States in their report on the "Collection of Delinquent Taxes" stated that:

Congress has provided little guidance on how the IRS should use its collection powers. Nor has there been much judicial direction supplied by the Courts. The result is a large body of discretionary authority ... that is not uniformly exercised and is open to administrative abuse. As a result, the exercise of the formidable collection powers at times poses troublesome conflicts between the right of the government to exact taxes and the property rights of the individual citizen.

In that report, the Administrative Conference recommended that the IRS "establish and promulgate in the Internal Revenue Manual affirmative and specific guidelines ... that will assure judicious and even-handed application of the levy power."

In 1980, the Senate Committee on Governmental Affairs, Subcommittee on Oversight of Government Management, chaired by Senator Carl Levin, held hearings and issued a report on IRS collection policies and their impact on small business taxpayers. Almost 7 years ago, IRS's own revenue officers testified that many enforcement actions "were taken arbitrarily and unnecessarily, and in instances where the government may have suffered a revenue loss as a result" The Subcommittee's report stated that "these actions were taken to satisfy IRS managerial policies which emphasize closed case and enforcement statistics as premier indicators of effective collection efforts and individual performance, with no basis in actual taxes recovered." (p.2)

Senator Levin's subcommittee also found many other problems, including the following:

(1) "IRS group managers abuse their supervisory review authority and require revenue officers to take harsh unnecessary enforcement actions contrary to the professional judgment and individual discretion vested in revenue officers." (p.4)

(2) "IRS violates its own policy by using closed-case and enforcement statistics to impose production pressures and quotas on its own employees." (p.4)

(3) "IRS's own Internal Revenue Manual and its policy statements ... provide little additional guidance on when to employ the levy authority." (p.7)

(4) "There are no specific criteria on when not to seize or on the other factors to be considered prior to seizure." (p.11)

(5) "It is disturbing that the supervisory review mechanism of seizures has been repeatedly perverted to require revenue officers to seize in cases where their personal knowledge of the facts and professional judgment require otherwise." (p.15)

(6) "Dramatic discrepancies between formal national policy and actual field practices occur." (p.16) "This distorted interpretation of national policy is not limited to group manager instructions ... The Subcommittee received information which showed consistent misinterpretations at even higher IRS managerial levels." (p.17)

(7) "Despite this prohibition [of the use of statistics to evaluate employees or to impose production quotas], internal memoranda from IRS offices around the country show that group managers and other IRS management personnel have misconducted this national office policy."

Jack Warren Wade, an IRS revenue officer for nine years, including four years as the program manager for the nationwide revenue officer training program, wrote in his book "The Power to Tax" that:

"While the Commissioner testifies to Congress about how well IRS policy and procedure protects taxpayers' rights, the managers in the field are quietly subverting national office policy by requiring their revenue officers to follow their policy, their philosophy of collection, and their whims and moods." (p.45)

Mr. Wade also noted that revenue officer group managers, who are charged with the responsibility to "protect the revenue" and "protect taxpayers' rights" (e.g., they must approve a seizure first), are more concerned with gathering statistics for their own personal promotion. Thus "overzealous group managers have perverted the purpose of the seizure process by imposing their own macho values on their revenue officers, who are required to carry out their manager's marching orders for fear of losing their jobs."

Fact #2 - Supervisors often push revenue officers to make seizures for the sole purpose of enhancing their enforcement statistics, even if it means violating the Internal Revenue Manual or other IRS policies. As a result, there are too many instances where there is no judicious use of the levy authority.

Revenue officers are supposed to make seizures as a last resort. Almost all IRS Commissioners have said so. The General Accounting Office has said so. Everyone outside the IRS believes it to be so. Yet all too often seizure is one of the first enforcement actions.

Consider testimony given April 10, 1987 to the Senate Subcommittee on IRS Oversight by Joseph R. Smith, Jr. of Las Vegas, a former revenue officer who worked for over 18 years for the IRS:

The IRS will tell you that quality is the name of the game and that employees are not promoted on the basis of enforcement statistics. That is not true. The ability of the revenue officer to close cases, collect money and make seizures are essential elements for promotion. I have sat on many a promotion panel where the first question of panel members was, "How many seizures has the revenue officer made in the last six months?", and "What is his production rate?"

A collection division chief stood up in front of many revenue officers during one of my last conferences in 1984, and said the Las Vegas District was the lowest in production in the Western Region. His job was on the line unless the states improved significantly. He said that we had to improve production. He said that if he was removed because of the low production, and low seizure activity, he was going to take a lot of people with him.

During his testimony Smith read from a memo by an IRS manager urging her employees to "put as little space between his [the taxpayer's] back and the wall as possible."

Testimony from five veteran revenue officers June 22 to the same subcommittee confirmed these pressures. "Seizure Fever - Catch It" is a sign posted in a Los Angeles IRS office, according to revenue officer John Pepping. He reported that IRS managers in the area often reward employees with extra leave time if they have the week's best record in seizing taxpayer property.

At the hearing, Senator Pryor released a memo from a Baltimore area IRS field office branch chief dated February 17, 1987 criticizing the low seizure rate and the dearth of criminal investigation referrals. The memo warned that "your mid-year evaluations will be prepared in approximately one and one-half months ... You will be evaluated on your accomplishments or lack of accomplishments. Need I say more?"

Shirley Garcia of the Landover, Maryland IRS office said "we're still using comparative statistics ... We have to go out and make seizures to keep the pressures off the manager's back." She also reported that revenue officers are urged to believe that "the more harassment they give the public, the more money they collect -- it does look good on their daily report."

Many times seizures must be made because it is a necessary enforcement measure, but sometimes a revenue officer will seize a house, paychecks, or car solely because the group manager's seizure statistics are low for the month and the revenue officer can find an easy target.

In order to make sure that, their revenue officers are "enforcement-minded," group managers frequently give marching orders to impress their revenue officers with their "machoistic" tendencies. At the April 1987 hearing, Mr. Wade reported these recent violations of IRS policies:

One group manager in Virginia has told his revenue officers that a seizure is the first action to take on a case, instead of contacting the taxpayer first, a clear violation of Internal Revenue Manual sections 5181 and 5355.11:(2). He further states that if there is a levy source on file, then the revenue officer should first levy even though the taxpayer may not owe the tax, reasoning that the IRS could always release the levy later.

• However his collection division chief has bragged that he has never released a levy in his life. He has told his revenue officers that "once a levy is served, leave it."

• A Branch chief in Virginia told a revenue officer being interviewed for a promotion that he "Liked to see revenue officers make seizures without contacting the taxpayer first."

• Another group manager in Virginia keeps a chart of his revenue officers' enforcement statistics by ranking. He has told them that if they wanted to know what their ranking was, he would be glad to show them. The revenue officers in his group try to serve a lot of levies and make a lot of seizures so they won't be ranked last. The group manager is always showing his revenue officers comparative statistics of how well his group's statistics compare to other groups in the district. Everyone in the district is proud of their "high national ranking" for making a lot of seizures. No one knows or even cares how much money is collected.

Because a regional analyst had told one group manager in Virginia that his group's seizure statistics were down, the group manager told each of his revenue officers to make 2 seizures by a certain date or they had better have a good reason.

Fact #3 - Internal Revenue Manual procedures do not confer taxpayers any substantive rights.

In the case of "Shirley A. Lojeski v. Richard Boandl, Revenue Agent, George Jessup, Revenue Officer, et al", (U.S. Court of Appeals, 3rd Circuit, 85-1289, 85-1354, 85-1586, 85-1587, 4/22/86, vacating and revising District Court), revenue officer George Jessup conducted jeopardy and termination liens against Thomas Treadway and nominee liens and levies against his friend, Shirley Lojeski, without IRS legal counsel approval, a requirement of the Internal Revenue Manual guidelines.

The IRS pleaded absolute immunity or qualified immunity at the trial. Ms. Lojeski contended that her constitutional rights had been violated because she had been deprived of her property ($22,000) without due process in violation of the Fifth Amendment.

While the Eastern District Court in Pennsylvania (C.A. #84-3591, 1/23/85) had ruled that the process due was defined by Internal Revenue Manual (IRM) guidelines which required IRS legal counsel approval before filing notices of lien and levy on the grounds of nominee liability, the IRS argued in the 3rd Circuit Court of Appeals that the IRS Manual only establishes an internal operating procedure, not a constitutional due process standard. The 3rd Circuit Court agreed.

In the case of First Federal S&L Assn. of Pittsburgh, Plaintiff, v. Melvin & Mildred Goldman, and the IRS, defendants (U.S. District Court, West Dist. PA 85-1531, 7/29/86), the IRS levied on the Goldman's IRA account in violation of IRS policy which prohibits levies on IRAs "except when the taxpayer flagrantly disregards requests for payment." Similarly the IRS Manual concludes that levy should be made on these types of income only in flagrant and aggravated cases. It then defines the factors which are to be considered. The Goldmans contended that there was "no evidence of flagrant, aggravating, or bad faith conduct," on their part.

The IRS argued that it didn't matter if the IRS Manual guidelines were violated because "the IRM is an internal handbook and the instructions and guidelines contained therein are not mandatory and do not convey upon the taxpayer any substantive rights. The court found that:

"The procedures set forth in the IRM do not have the effect of a rule of law and, therefore, are not binding upon the IRS ... [They do not convey] upon the taxpayer any substantive right or obligation. Moreover, the provisions in the IRM are directory rather than mandatory. We conclude that the pertinent procedures of the IRM are not binding upon the IRS and convey no rights to taxpayers. Therefore, the Goldmans cannot challenge any alleged noncompliance with these procedures, and the levy of the IRAs, authorized by IRC Section 6331, was lawful."

Fact #4: Some districts do not issue Manuals to each revenue officer and many Manual guidelines are either ignored, violated, or discarded.

Under IRS's computerized Manual distribution system every revenue officer could be issued his own Manual. Without a Manual it's difficult to comprehend how a revenue officer is supposed to know what to do and what NOT to do in taking enforcement actions.

Some districts do not issue their revenue officers Manuals because they don't want the revenue officer to take the time necessary to keep it updated. Updating the Manual distracts from time that could be spent working on cases. In the Maryland district there is only one Manual per group of 12-15 revenue officers and it is usually kept behind the group manager's desk.

The Manual guidelines that are frequently violated are far too numerous to list but the most common ones are:

• Not contacting the taxpayer personally before filing a lien (IRM 5355.11:(2))     

• Levying the taxpayer's assets before personally notifying him that enforcement action will be taken (IRM 5361)

• Not honoring a Power of Attorney on file (IRM 5188)

Fact #5: There is NO avenue of appeals within the IRS Collection Division to challenge an arbitrary and capricious use of the levy authority.

If a taxpayer owes the tax and only wants to challenge the IRS's arbitrary and capricious use of the levy authority, he has nowhere to go. Section 7421(a) of the Code, commonly referred to as the Anti-Injunction Act, effectively prevents almost all taxpayers from challenging IRS collection actions.

Even administratively there is no formal appeals process within the IRS. Even though taxpayers can "appeal" to a revenue officer's group manager, this is an ineffective "appeal." Rarely does it ever accomplish anything. Very few group managers are going to override their revenue officers' enforcement actions, particularly when the group manager knows he needs the statistics.

Fact #6: The IRS imposes a double standard on the public and the tax practitioner community.

The IRS director of Practice has issued proposed regulations requiring tax preparers to exercise "due diligence" in the preparation of tax returns. In certain situations, preparers must cite 1 substantial authority" for the positions they take on tax returns. Failure to do so may result in monetary fines, disbarment from practicing before the IRS, and a full scale audit of all the preparers' clients.

Yet, IRS employees are allowed to violate IRS rules, regulations, policies, procedures, and guidelines at will and without fear of recourse. The law is so overwhelming and sweeping in its power conferred upon the tax collecting authority that there are almost no checks and balances on the exercise of that authority.

Taxpayers need more protections from the arbitrary and capricious abuses of the IRS and IRS employees should be held accountable for their violations.

It is clear that the IRS is more interested in controlling, regulating, and punishing taxpayers and practitioners for their violations than they are in controlling, regulating, and punishing their own employees for comparable infractions. If this double standard continues to exist, the compliance system as we now know it could be in serious trouble.

Reasons Why We Support this Bill

The Omnibus Taxpayers' Bill of Rights Act, S. 604, by Senator David Pryor (D-AR), contains many important safeguards to assure that taxpayers' rights will be respected. Following are some of the provisions in the bill we consider to be most important:

I. Establishing enforceable and civilized guidelines for seizures.

a) Improvements in notifying taxpayers of their rights.

Section 8 of the bill mandates that IRS notices of intent to seize would have to inform taxpayers of appeal procedures, possible alternative collection remedies, and the tax code provisions and procedures on seizure and sale of property. In 1978 the GAO reported that 25% of the taxpayers they interviewed were not aware of IRS's seizure authority and 57% were not told that seizure was the next action to be taken. While IRS's computer notices do inform taxpayers of this right to seize, the notices are not clear enough in conveying IRS's intent to seize and when seizure will occur.

The IRS would also be required to notify taxpayers of their rights under the code allowing for a redemption or release of property at the time of seizure. IRS employees are not required by any code provision, regulation, or any manual direction to notify the taxpayer of these rights. These changes are needed to prevent any misunderstanding about the taxpayer's right for return of his property after seizure.

b) Allowing adequate time for response to a demand for tax payments.

This section would also change the ten day notice and demand period to 30 days. At present, the IRS is only required to wait ten days after mailing a notice and demand of an existing tax liability before any seizure action is allowed. Ten days is insufficient time for a taxpayer to either respond or obtain sufficient funds to pay the tax. Thirty days is a more reasonable period.

c) Safeguarding the right to be self-supporting.

Section 8 also raises the exemptions for books, tools, equipment and property for a trade, business, or profession to $10,000, to better reflect the essentials needed for an individual to be able to support himself. Except for a small change made in the 1982 TEFRA tax bill, the exemptions from levy have not changed since adoption of the 1954 code. Even now, though, the amounts of exemption provide little protection for taxpayers since they do not reflect the substantial increases in the cost of living since 1954. The bankruptcy laws provide better protection for debtors than taxpayers receive from the Tax Code.

The right of an individual to be self-supporting and-thus able to pay his taxes needs to be recognized in the levy provisions of the Tax Code.

Furthermore, the section raises the exempted weekly amounts from levy upon a taxpayer's wages, salary, or other income to $150 from $75 for himself, and to $50 from $25 for each dependent or spouse. Current exemptions are too low. Few, if any, taxpayers could possibly maintain themselves or their families under such a levy. Congress intended to reform the levy provision of the Code by making continuous the levy upon wages, salary, and other income and by allowing the weekly exemption amounts from levy. But these provisions, which first originated in the Tax Reform Act of 1976, are actually more restrictive and burdensome to taxpayers than the previous levy provisions which did not allow minimum exemptions and which were not continuous.

d) Safeguards against unnecessary seizures of houses, cars used for commuting, or business tools.

Section 8 also says that levy or seizure action on a taxpayer's residence, his primary source of employment transportation, or his business assets necessary for carrying on his trade or business could only be authorized by IRS district management. An exception is made when the collection of tax is in jeopardy. The levy power of the IRS is a far-reaching authority. Next to criminal enforcement, distraint action is the most sweeping action that adversely affects taxpayers. It should not be just the decision of a collection employee and his immediate supervisor, but should represent an agency decision. Requiring approval at the District Director level will better ensure that these types of seizures are warranted.

e) Protections against harassive seizures.

The IRS would be restricted from seizing any taxpayer's property when it is apparent prior to seizure that the government's expenses incurred in seizing and selling the property exceed the estimated value of the property or the tax due. This would prevent the IRS from making purely "harassive" seizures.

The IRS would also be restricted from seizing a taxpayer's property on the same day the taxpayer is responding to a summons issued by the IRS. This would prevent, for example, the IRS from seizing a taxpayer's car in the IRS parking lot while the taxpayer is responding to the IRS summons.

Section 8 entitles taxpayers to a release of levy under certain conditions. This section should require the IRS to release a levy when: the tax liability has been satisfied; the release of the levy will facilitate the collection of the liability; the taxpayer has entered into an installment agreement; the taxpayer can substantiate grounds for financial hardship; the expenses of levy and sale of such property exceed the amount of such liability, and the value of the property exceeds such liability and the release of the levy on a part of such property could be made without burdening the collection of such liability. The provision does not restrict the IRS from making a subsequent levy on the property released under this provision.

IRS regulations currently specify certain conditions that are considered to "facilitate collection of the liability" before a release of levy can be made without full payment by the taxpayer. IRS policy imposes another condition not stated in the regulations or the Code that says "subsequent full payment must be provided for." The imposition of current IRS policy in these situations constitutes such an unreasonable burden and requirement on taxpayers as to deny them their Fourth Amendment right against unreasonable searches and seizures.

f) Providing for installment agreements and requiring the IRS to respect its agreements with taxpayers.

Section 10 authorizes the IRS to enter into a written installment agreement with a taxpayer when it will facilitate collection of the tax. It also entitles any individual taxpayer who owes the IRS less than $20,000 and has not been delinquent in the prior three years to pay his liability in installments consistent with his ability to pay. Furthermore, installment agreements are made binding provided the taxpayer provides adequate and accurate information, and procedures are set up to revise an installment agreement if a taxpayer's financial circumstances change.

There is broad evidence that the IRS has a double standard regarding the terms of the installment agreement. If a taxpayer does not comply with all the terms of the agreement, the IRS reserves the right to cancel the agreement and levy the taxpayer's property without further notifying the taxpayer.

But the IRS often revokes installment agreements, sometimes without notification to the taxpayer, even when the taxpayer has been in compliance with all the terms of the installment agreement. Such revocations usually occur when the taxpayer's case has either been transferred to a new revenue officer, or a new management official has reviewed the case and arbitrarily revoked the agreement. If the IRS considers the installment agreement a contractual arrangement to be upheld by taxpayers, then taxpayers should also have the right to expect the IRS to uphold its end of the contractual obligation.

Revenue officers frequently revoke installment agreements with nothing more substantial than an alleged belief or knowledge that the taxpayer's financial condition has changed, or improved. For this reason, taxpayers who have entered into installment agreements need Code protection from arbitrary and capricious use of IRS's powers. Section 10 allows the IRS to review a taxpayer's financial situation during the course of the installment agreement, but requires that taxpayers be given proper notification and that a hearing be held on such financial review. Thirty days for responding are provided and should be sufficient.

g) Expanding judicial review of jeopardy levies.

Section 9 expands the judicial review of jeopardy assessments to also include jeopardy levies. It gives the taxpayer 90 days to make a judicial appeal, rather than the current 30, which is far too restrictive and unreasonably short.

The Tax Reform Act of 1976 provided for judicial review of jeopardy assessments. But there is no judicial review of a jeopardy levy made without regard to the 10-day notice and demand period normally required for a levy. Under IRS policy revenue officers may request that immediate assessments be made on voluntarily filed tax returns, and that they may enforce collection without regard to the 10-day notice and demand period when certain conditions exist. These conditions are so vague that they could be applied to almost every taxpayer who can't pay in full at the time he files his return. A jeopardy levy made by the IRS could actually hinder the taxpayer's efforts to raise enough money to fully pay the liability, and could cause the taxpayer to suffer needless financial damage and losses. The jeopardy levy should be used judiciously and the IRS should be held accountable to the courts if they abuse their exercise of this power.

II. Creating an independent appeals process to ensure that collections actions are fair.

If a taxpayer owes the tax and only wants to challenge the IRS's arbitrary and capricious use of the seizure authority, he has nowhere to go.

Taxpayers should have an independent authority within the administrative channels to whom they can appeal their cases in certain circumstances. This should be outside the Collection Division, preferably in either the Appeals Division or within the Office of the Ombudsman. The taxpayers should not have to litigate and incur the risks and expenses of legal fees to protect themselves from arbitrary and capricious actions of overzealous revenue officers.

Section 12 of the bill increases the power and independence of the Ombudsman, allowing him to ensure that the IRS follows its own regulations. Upon review the Ombudsman would be able to intervene to either prevent a levy, or to release a levy.

We recommend that this appeals procedure should be limited to a specified period of time, perhaps 120 or 180 days. In combination with its restriction to specified circumstances, there is very little chance of taxpayers using this procedure to unduly forestall collection of the tax. On the contrary, the taxpayers who are experiencing unreasonable IRS actions would be entitled to an administrative appeals procedure that would protect them from enforcement actions which are improper or designed more for harassment than for collecting the tax.

We suggest that another avenue of appeal to a U.S. District Court be provided for the situations outlined in this section should the Office of Ombudsman fail the taxpayer's request.

We also believe that the IRS Ombudsman should be a political appointee, not a career IRS employee. As a political appointee, the Ombudsman would be free to be a true taxpayer advocate without worry for his career aspirations, or about how other IRS managers feel about his input into their areas of responsibility. A political appointee would come to the job independent of the restrictive mission-oriented mentality that besets so many IRS career executives. Not being ingrained with IRS philosophy and methods of operation, he would be more understanding of the rights of individual taxpayers.

The Ombudsman should also establish procedures to review and evaluate taxpayer complaints. The Ombudsman should also survey taxpayers to obtain an evaluation of the quality of the service provided by the IRS and the Ombudsman. With the IRS continually changing its procedures and tax forms, the Ombudsman can serve as a safeguard to ensure that taxpayers' rights are being respected and that taxpayers are not unnecessarily paying too much in tax.

The Ombudsman should also compile data on the number and type of taxpayer complaints in each area of the country, and the response to such complaints. The Ombudsman would submit an annual report to the congressional tax writing committees along with any recommended legislation.

III. Elimination of quota-based evaluations.

Unfortunately, many Internal Revenue Service supervisors like to keep score on seizure statistics and other collection actions performed by their personnel. Despite an alleged IRS national policy against quotas for evaluation of IRS personnel, the fact of life is that employees are measured by these statistics and quotas are set. Section 6 of the bill would prohibit IRS supervisors from basing evaluation of their employees in any way on the sums collected from taxpayers. It needs to be expanded so that it also clearly applies to collection actions.

IV. Other provisions.

The above provisions of the bill are the most vital. The bill contains many other significant provisions. The following is a summary of the bill's other sections:

Section 1. Short Title

Provides that the bill shall be referred to as the "Omnibus Taxpayers' Bill of Rights Act."

Section 2. Disclosure of Rights and Obligations of Taxpayers

Requires the IRS to prepare a brief but comprehensive statement of taxpayer rights and obligations. The statement then shall be distributed to all taxpayers along with all forms sent from the IRS.

Section 3. Office of the Inspector General

Establishes an office of Inspector General in the Treasury to investigate and audit the Internal Revenue Service.

Section 4. Procedures Involving Taxpayer Interviews

Provides that IRS interviews shall be held at a reasonable time and place convenient to the taxpayer and the IRS. Allows the taxpayer to make a record of any interview in connection with assessment of a deficiency. Requires the IRS to make a constitutional rights notification prior to any interview. Allows taxpayers to give a written power of attorney to a representative for purposes of IRS interviews.

Section 5. General Accounting Office Oversight of the Administration of the Internal Revenue Laws

Requires the General Accounting Office to conduct any special audit or investigation of the IRS when requested by any committee or member of Congress. Provides that the GAO shall submit to Congress an annual report which shall include any significant evidence of inefficiency and mismanagement in the IRS.

Section 7. Authorizing, Requiring, or Conducting Certain Investigations, etc.

Precludes the IRS from conducting any investigation or surveillance over taxpayers regarding the beliefs or associations of any individual or organization. There is an exception for organized crime activities.

Section 11. Advice of Internal Revenue Service

Disallows the IRS from collecting deficiency interest and penalties which result from its incorrect written advice.

Section 13. Administrative Appeal of Liens

Directs the Treasury to draft regulations to implement a procedure for administrative appeal of any lien imposed on taxpayer's property.

Section 14. Minimum Sale Price

Precludes the IRS from levying on property in payment of a tax liability if the expenses associated with the levy are greater than the value of the property or the liability to be satisfied.

Section 15. Limitations on Class Audits

Limits the ability of the IRS to audit taxpayers identified with respect to a particular trade, business, or profession.

Section 16. Burden of Proof in Administrative and Judicial Proceedings

Requires the IRS to carry the burden of proof in court proceedings provided the taxpayer presents the minimum amount of information necessary to support his position.

Section 17. Application of the Regulatory Flexibility Act to the Internal Revenue Service

Expressly states that the Regulatory Flexibility Act shall apply to rules and regulations issued by the IRS (the Act requires that all rules and regulations must be analyzed for their impact on small businesses).

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