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Compromise on IRS Reform Reported Near

By Albert B. Crenshaw
Washington Post Staff Writer
Saturday, June 20, 1998; Page A06

Leaders of the two congressional tax-writing committees said yesterday they have reached agreement on major portions of a bill that would fundamentally overhaul the Internal Revenue Service and strengthen taxpayers' rights in dealing with the agency.

The agreement retreats somewhat from costly positions taken by the Senate earlier, and is expected to cost several billion dollars less than the $18.3 billion 10-year cost of the Senate bill.

Still, Senate Finance Committee Chairman William V. Roth Jr. (R-Del.) said, the measure will be "the most comprehensive reform . . . of IRS in modern history."

House Ways and Means Committee Chairman Bill Archer (R-Tex.) said decisions were not revenue-driven and in any case the "revenue loss was incidental" because the bill halts collection of money "we should not have been collecting in the first place."

The compromise version of the bill must still be presented to the wider panel of conferees from both houses, but approval is expected. Treasury Secretary Robert E. Rubin and IRS Commissioner Charles O. Rossotti in a joint statement called the compromise bill "a major step forward toward an IRS that best serves the American people."

Key areas of compromise included:

Softening of a shift in the so-called burden of proof. Current law presumes that the IRS is correct in a dispute and requires the taxpayer to prove otherwise. The bill would shift that burden to the agency in court disputes, but includes Senate language requiring cooperation and record-keeping by the taxpayer.

The Treasury and other experts had feared that the House version would have encouraged taxpayers to destroy records and defy the IRS.

Relief for innocent spouses. The compromise allows divorced and separated spouses who had filed a joint return to opt to pay taxes only on their own share of the income, but narrows the relief for married couples.

Experts had feared broad relief would encourage abuse.

Easing of penalties and interest. Presently, penalties and interest accrue whether or not the taxpayer is aware that tax is due. The Senate would suspend penalties and interest after a year if the taxpayer has not been notified of the debt.

The compromise, which is effective for five years, gives the IRS 18 months to notify the taxpayer. After five years, the agency will have one year for notification. The IRS's computers now make the one-year limit very difficult to meet.

Lawmakers also agreed to keep the treasury secretary, IRS commissioner and a representative of IRS employees on a new board created to oversee the IRS.

However, the compromise drops a controversial waiver of conflict-of-interest rules, thus raising potential problems if the worker representative is also a union official, as originally envisioned.

Conservatives had sought to eliminate the treasury secretary and a union representative, but both the Ways and Means and Finance committees had backed their inclusion -- as did the full House and Senate.

Robert Tobias, president of the National Treasury Employees Union, said the elimination of the waiver was "based on a strong demand by" Senate Majority Leader Trent Lott (R-Miss.) "and what we're trying to do is convince Senator Lott that the Senate has already voted" to include the waiver.

"I think the Senate has already spoken clearly on the subject and his [Lott's] personal point of view should not prevail on this issue," Tobias said.

Staff writer Stephen Barr contributed to this report.

© Copyright 1998 The Washington Post Company

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