G. IRS Personnel Flexibilities
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.
Description of Proposal
In General
The proposal would amend title 5 of the United States Code to provide certain personnel
flexibilities to the IRS. In general, the proposal would provide that the IRS exercise the personnel
flexibilities consistently with existing rules relating to merit system principles, prohibited personnel
practices, and preference eligibles. In those cases where the exercise of personnel flexibilities
would affect members of the employees' union, such employees' would not be subject to the
exercise of any flexibility unless there is a written agreement between the IRS and the employees'
union. Negotiation impasses between the IRS and the employees' union could be appealed to the
Federal Services Impasse Panel.
Senior management and technical positions
Streamlined critical pay authority
The proposal would provide a streamlined process for the Secretary of the Treasury, or his
delegate, to fix the compensation of, and appoint up to 40 individuals to, designated critical
technical and professional positions, provided that: (1) the positions require expertise of an
extremely high level in a technical or professional field and are critical to the IRS; (2) exercise of
the authority is necessary to recruit or retain an individual exceptionally well qualified for the
position; (3) designation of such positions is approved by the Secretary; (4) the terms of such
appointments are limited to no more than four years; (5) appointees to such positions are not IRS
employees immediately prior to such appointment; and (6) the total annual compensation for any
position (including performance bonuses) does not exceed the rate of pay of the Vice President
(currently $175,400).
These appointments would not be subject to the otherwise applicable requirements under
title 5. All such appointments would be excluded from the collective bargaining unit and the
appointments would not be subject to approval of the Office of Management and Budget ("OMB")
or the Office of Personnel Management ("OPM").
The streamlined authority would be limited to a period of 10 years.
Critical pay authority
The proposal would provide OMB with approval authority to increase the pay level for
certain critical pay positions requested by the Secretary. These critical pay positions would be
critical, technical and professional positions other than those designated under the streamlined
authority described above. Under the proposal, OMB would be authorized to approve requests for
critical position pay up to the highest total compensation that does not exceed the rate of pay of the
Vice President (currently $175,400).
Recruitment, retention and relocation incentives
The proposal would provide the Secretary with authority to provide recruitment, retention
and relocation incentives for certain executive and hard-to-fill positions. The authority would be for
a period of 10 years and would be subject to OPM approval.
Career-reserve Senior Executive Service ("SES") positions
The proposal would broaden the definition of a "career reserved position" in the SES to
include a limited emergency appointee or a limited term appointee who, immediately upon entering
the career-reserved position, was serving under a career or a career-conditional appointment
outside the SES or whose limited emergency or limited term appointment is approved in advance
by OPM. The number of appointments to these SES positions would be limited to up to 10 percent
of the total number of SES positions available to the IRS. These positions would be limited to a 3
year term, with the option of extending the term for 2 more 3-year terms.
Variable compensation
The proposal would provide the Secretary with the authority to provide performance bonus
awards to IRS senior executives of up to one-third of the individual's annual compensation. The
bonus award would be based on meeting preset performance goals established by the IRS. An
individual's total annual compensation, including the bonus, could not exceed the rate of pay of the
Vice President. The authority would not be subject to OPM approval.
It is anticipated that the bonuses would not be available to more than 25 IRS senior
executives annually.
General workforce
Performance management system
The proposal would require the Secretary to establish a performance management system
which would maintain individual accountability by: (1) establishing one or more retention
standards for each employee related to the work of the employee and expressed in terms of
performance; (2) providing for periodic performance evaluations to determine whether
employees are meeting the applicable retention standard; and (3) taking appropriate action, in
accordance with applicable laws, with respect to any employee whose performance does not meet
established retention standards.
The proposal would require that the performance management system provide for: (1)
establishing goals or objectives for individual, group or organizational performance and taxpayer
service surveys; (2) communicating such goals or objectives to employees; and (3) using such
goals or objectives to make performance distinctions among employees or groups of employees.
It is intended that in no event would performance measures be used which rank employees
or groups of employees based on enforcement results, establish dollar goals for assessments or
collections, or otherwise undermine fair treatment of taxpayers.
Awards
The proposal would provide the Secretary the authority to establish an awards program for
IRS employees. The program would be designed to provide incentives for and recognition of
individual, group and organizational achievements. The Secretary would have the authority to
provide awards of up to $25,000 without OPM approval.
These awards would be based on performance under the new performance management
system, and in no case would awards be made (or performance measured) based on tax
enforcement results.
Workforce classification and pay banding
The proposal would provide the Secretary with authority to establish one or more broad
band pay systems covering all or any portion of the IRS workforce, subject to OPM criteria. At a
minimum, the OPM criteria would have to: (1) ensure that the pay band system maintain the
concept of equal pay for substantially equal work; (2) establish the minimum and maximum
number of grades that may be combined into pay bands; (3) establish requirements for setting
minimum and maximum rates of pay in a pay band; (4) establish requirements for adjusting the pay
of an employee within a pay band; (5) establish requirements for setting the pay of a supervisory
employee in a pay band; and (6) establish requirements and methodologies for setting the pay of an
employee upon conversion to a broad-banded system, initial appointment, change of position or
type of appointment and movement between a broad-banded system and another pay system.
Workforce staffing
The proposal would provide the IRS with flexibility in filling certain permanent
appointments with qualified temporary employees. A qualified temporary employee would be
defined as a temporary employee of the IRS with at least two years of continuous service, who has
met all applicable retention standards and who meets the minimum qualifications for the vacant
position.
The proposal would authorize the IRS to establish category rating systems for evaluating
job applicants, under which qualified candidates are divided into two or more quality categories on
the basis of relative degrees of merit, rather than assigned individual numerical ratings. Managers
would be authorized to select any candidate from the highest quality category, and would not be
limited to the three highest ranked candidates. In administering these category rating systems, the
IRS generally would be required to list preference eligibles ahead of other individuals within each
quality category. The appointing authority, however, could select any candidate from the highest
quality category, as long as existing requirements relating to passing over preference eligibles were
satisfied.
The proposal would authorize the IRS to establish probation periods for IRS employees of
up to 3 years, when it is determined that a shorter period would not be sufficient for an employee
to demonstrate proficiency in a position.
Voluntary separation incentives
The proposal would provide authority to the IRS to use Voluntary Separation Incentive Pay
("buyouts") through December 31, 2002, without regard to the requirement regarding reductions in
full-time equivalents.
Demonstration projects
The proposal would provide the IRS with authority to conduct one or more demonstration
projects through a streamlined process. The authority would enable the IRS to test new approaches
to human resource management. The proposal would provide authority to the Secretary and OPM
to waive the termination of a demonstration project, thereby making it permanent. At least 90 days
prior to waiving the termination date OPM would be required to publish a notice of such intent in
the Federal Register and inform the appropriate Committees (including the House Ways and Means
Committee, the House Government Reform and Oversight Committee, the Senate Finance
Committee and the Senate Governmental Affairs Committee) of both Houses of Congress in
writing.
Performance measures
The IRS would be directed to develop employee performance measures that favor taxpayer
service and prohibit awarding merit pay or bonuses that are based on quotas, goals, or statistics.
Violations for which IRS employees may be terminated
The proposal would require 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) perjury (e.g., false testimony in
a taxpayer's case, failure to provide truthful information in the course of a criminal investigation,
or false information in a deposition or affidavit); (3) falsifying or destroying documents concerning
a particular taxpayer to cover-up employee mistakes; (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 proposal would provide non-delegable authority to the Commissioner to not terminate
an employee for one of the enumerated violations if the Commissioner determines that there are
factors that mitigate against terminating the employee. Whether a proposed termination should be
reviewed for mitigation factors or whether such factors exist would be in the sole discretion of the
Commissioner. The Treasury IG would be 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.
IRS employee training program
The proposal would require the IRS to place a high priority on employee training and to
adequately fund employee training programs. The proposal would also require the IRS to provide
to the Congressional tax writing committees a comprehensive multi-year plan to: (1) ensure
adequate customer service training; (2) review the organizational design of customer service; (3)
implement a performance development system; and (4) provide, in fiscal year 1999, sixteen to
twenty-four hours of conflict management training for collection employees.
Effective Date
The proposal, other than the IRS employee training program proposal, would be effective
on the date of enactment. The proposal relating to the IRS employee training program would be
effective 90 days after the date of enactment.
II. Electronic Filing
A. Electronic Filing of Tax and Information Returns
Present Law
Treasury Regulations section 1.6012-5 provides that the Commissioner may authorize a
taxpayer to elect to file a composite return in lieu of a paper return. An electronically filed return is
a composite return consisting of electronically transmitted data and certain paper documents that
cannot be electronically transmitted.
The IRS periodically publishes a list of the forms and schedules that may be electronically
transmitted, as well as a list of forms, schedules, and other information that cannot be
electronically filed.
During the 1997 tax filing season, the IRS received approximately 20 million individual
income tax returns electronically.
Description of Proposal
The proposal would state that the policy of Congress is to promote paperless filing, with a
long-range goal of providing for the filing of at least 80 percent of all tax returns in electronic form
by the year 2007. The proposal would require the Secretary of the Treasury to establish a strategic
plan to increase taxpayer use of electronic filing. The proposal would require all returns prepared
in electronic form but filed in paper form to be filed electronically, to the extent feasible, by the
year 2002.
The proposal would require the Secretary to create an electronic commerce advisory group
and to report annually to the tax-writing committees on the IRS's progress in implementing its plan
to meet the goal of 80 percent electronic filing by 2007.
Effective Date
The proposal would be effective on the date of enactment.
B. Time for Filing Certain Information Returns
Present Law
Information such as the amount of dividends, partnership distributions, and interest paid
during the calendar year must be supplied to taxpayers by the payors by January 31 of the
following calendar year. The payors must file an information return with the IRS with the
information by February 28 of the year following the calendar year for which the return must be
filed. Under present law, the due date for filing information returns with the IRS is the same
whether such returns are filed on paper, on magnetic media, or electronically. Most information
returns are filed on magnetic media (such as computer tapes), which are physically shipped to the
IRS.
Description of Proposal
The proposal would provide an incentive to filers of information returns to use electronic
filing by extending the due date for filing such returns from February 28 (under present law) to
March 31 of the year following the calendar year to which the return relates.
The proposal would also require the Treasury to issue a study evaluating the merits and
disadvantages, if any, of extending the deadline for providing taxpayers with copies of information
returns from January 31 to February 15 (Forms W-2 would still be required to be furnished by
January 31).
Effective Date
The extension of the due date for filing returns would apply to information returns required
to be filed after December 31, 1999. The Treasury study would be due on December 31, 1998.
C. Paperless Electronic Filing
Present Law
Code section 6061 requires that tax forms be signed as required by the Secretary. The IRS
will not accept an electronically filed return unless it has received a Form 8453 providing signature
information on the filer. Form 8453 is a paper form that must be received by the IRS before any
electronically filed return is complete. Form 8453 provides signature information to the IRS.
A return generally is considered timely filed when it is received by the IRS on or before the
due date of the return. If the requirements of Code section 7502 are met, timely mailing is treated
as timely filing. If the return is mailed by registered mail, the dated registration statement is prima
facie evidence of delivery. As an electronically filed return is not mailed, section 7502 does not
apply.
The IRS periodically publishes a list of the forms and schedules that may be electronically
transmitted, as well as a list of forms, schedules, and other information that cannot be
electronically filed.
Description of Proposal
The proposal would require the Secretary to develop procedures that would eliminate the
need to file a paper form relating to signature information. Until the procedures are in place, the
proposal would authorize the Secretary to provide for alternative methods of signing all returns,
declarations, statements, or other documents. A document filed using an alternative method of
signature would be treated identically, for both civil and criminal purposes, as a signature on a
paper form.
The proposal also would provide rules for determining when electronic returns are deemed
filed, and for authorization for return preparers to communicate with the IRS on matters included
on electronically filed returns.
The proposal would require the Secretary to establish procedures, to the extent practicable,
to receive all forms electronically for taxable periods beginning after December 31, 1998.
Effective Date
The proposal would be effective on the date of enactment.
D. Return-Free Tax System
Present Law
Under present law, taxpayers generally are required to calculate their own tax liabilities and
submit returns showing their calculations.
Description of Proposal
The proposal would require the Secretary or his delegate to study the feasibility of, and
develop procedures for, the implementation of a return-free tax system for appropriate individuals
for taxable years beginning after 2007. The Secretary would be required annually to report to the
tax-writing committees on the progress of the development of such system. The Secretary would
be required to make the first report on the development of the return-free filing system to the tax
writing committees on June 30, 1999.
Effective Date
The proposal would be effective on the date of enactment.
E. Access to Account Information
Present Law
Taxpayers who file their returns electronically cannot review their accounts electronically.
Description of Proposal
The proposal would require the Secretary to develop procedures not later than December
31, 2006, under which a taxpayer filing returns electronically could review the taxpayer's own
account electronically, but only if all necessary privacy safeguards are in place by that date. The
Secretary would be required to issue an interim progress report to the tax-writing committees by
December 31, 2003.
Effective Date
The proposal would be effective on the date of enactment.
