TAX ADMINISTRATION

[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




 
                           TAX ADMINISTRATION

=======================================================================

                                HEARING

                               before the

                       SUBCOMMITTEE ON OVERSIGHT

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 30, 2018

                               __________

                          Serial No. 115-OS11

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
         
         
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





                   U.S. GOVERNMENT PUBLISHING OFFICE
                   
33-793                    WASHINGTON : 2019       
         
         


                      COMMITTEE ON WAYS AND MEANS

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
DEVIN NUNES, California              SANDER M. LEVIN, Michigan
DAVID G. REICHERT, Washington        JOHN LEWIS, Georgia
PETER J. ROSKAM, Illinois            LLOYD DOGGETT, Texas
VERN BUCHANAN, Florida               MIKE THOMPSON, California
ADRIAN SMITH, Nebraska               JOHN B. LARSON, Connecticut
LYNN JENKINS, Kansas                 EARL BLUMENAUER, Oregon
ERIK PAULSEN, Minnesota              RON KIND, Wisconsin
KENNY MARCHANT, Texas                BILL PASCRELL, JR., New Jersey
DIANE BLACK, Tennessee               JOSEPH CROWLEY, New York
TOM REED, New York                   DANNY DAVIS, Illinois
MIKE KELLY, Pennsylvania             LINDA SANCHEZ, California
JIM RENACCI, Ohio                    BRIAN HIGGINS, New York
PAT MEEHAN, Pennsylvania             TERRI SEWELL, Alabama
KRISTI NOEM, South Dakota            SUZAN DELBENE, Washington
GEORGE HOLDING, North Carolina       JUDY CHU, California
JASON SMITH, Missouri
TOM RICE, South Carolina
DAVID SCHWEIKERT, Arizona
JACKIE WALORSKI, Indiana
CARLOS CURBELO, Florida
MIKE BISHOP, Michigan
DARIN LAHOOD, Illinois

                     David Stewart, Staff Director

                 Brandon Casey, Minority Chief Counsel

                                 ______

                       SUBCOMMITTEE ON OVERSIGHT

                     LYNN JENKINS, Kansas, Chairman

DAVID SCHWEIKERT, Arizona            JOHN LEWIS, Georgia
JACKIE WALORSKI, Indiana             JOSEPH CROWLEY, New York
CARLOS CURBELO, Florida              SUZAN DELBENE, Washington
MIKE BISHOP, Michigan                EARL BLUMENAUER, Oregon
DARIN LAHOOD, Illinois
TOM REED, New York


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of January 30, 2018, announcing the hearing.............     2

                               WITNESSES

Representative Jason Smith, 8th District of Missouri.............    17
Representative Peter Roskam, 6th District of Illinois............    17
Representative James Renacci, 16th District of Ohio..............    24
Representative Tom Rice, 7th District of South Carolina..........    25
Representative Steve Chabot, 1st District of Ohio................    27
Representative Bill Posey, 8th District of Florida...............    28
Representative Louie Gohmert, 1st District of Texas..............    31

                       SUBMISSIONS FOR THE RECORD

Internal Revenue Service Criminal Investigation (IRS CI).........    33
Representative Patrick McHenry, 10th District of North Carolina..    34
American Institute of Certified Public Accountants (AICPA).......    35
American Payroll Association (APA)...............................    43
Nonprofit Data Project of the Aspen Institute....................    46
National Association of Tax Professionals (NATP).................    50
Small Business & Entrepreneurship Council (SBE Council)..........    59


                         LEGISLATION TO IMPROVE

                           TAX ADMINISTRATION

                              ----------                              


                       TUESDAY, JANUARY 30, 2018

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                 Subcommittee on Oversight,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 2:01 p.m., in 
Room 1100, Longworth House Office Building, Hon. Lynn Jenkins 
[Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

                       SUBCOMMITTEE ON OVERSIGHT

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
Tuesday, January 30, 2018
OS-11

                 Chairman Jenkins Announces Member Day

                   Hearing on Legislation to Improve

                           Tax Administration

    House Ways and Means Oversight Subcommittee Chairman Lynn Jenkins 
(R-KS), announced today that the Subcommittee will hold a hearing on 
Member proposals for improvements to the IRS administration of the U.S. 
tax system. The hearing will take place on Tuesday, January 30, 2018, 
in room 1100 of the Longworth House Office Building, beginning at 2:00 
p.m.
      
    Oral testimony at this hearing will be limited to Members of 
Congress who have either introduced or co-sponsored legislation related 
to improving the IRS. Members wishing to testify at this hearing should 
contact the Subcommittee at (202) 225-9263 or Liz.Navin@mail.house.gov 
by no later than noon on Friday, January 26. However, any individual or 
organization not scheduled for an oral appearance may submit a written 
statement for consideration by the Committee and for inclusion in the 
printed record of the hearing.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
written comments for the hearing record must follow the appropriate 
link on the hearing page of the Committee website and complete the 
informational forms. From the Committee homepage, http://
waysandmeans.house.gov, select ``Hearings.'' Select the hearing for 
which you would like to make a submission, and click on the link 
entitled, ``Click here to provide a submission for the record.'' Once 
you have followed the online instructions, submit all requested 
information. ATTACH your submission as a Word document, in compliance 
with the formatting requirements listed below, by the close of business 
on Tuesday, February 13, 2018. For questions, or if you encounter 
technical problems, please call (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any materials submitted for the printed record, 
and any written comments in response to a request for written comments 
must conform to the guidelines listed below. Any submission not in 
compliance with these guidelines will not be printed, but will be 
maintained in the Committee files for review and use by the Committee.
      
    All submissions and supplementary materials must be submitted in a 
single document via email, provided in Word format and must not exceed 
a total of 10 pages. Witnesses and submitters are advised that the 
Committee relies on electronic submissions for printing the official 
hearing record.
      
    All submissions must include a list of all clients, persons and/or 
organizations on whose behalf the witness appears. The name, company, 
address, telephone, and fax numbers of each witness must be included in 
the body of the email. Please exclude any personal identifiable 
information in the attached submission.
      
    Failure to follow the formatting requirements may result in the 
exclusion of a submission. All submissions for the record are final.

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available at
    http://www.waysandmeans.house.gov/

                                 

    Chairman JENKINS. The Subcommittee will come to order. 
Welcome to the Ways and Means Oversight Subcommittee Member Day 
hearing on legislation to improve tax administration. Today is 
a unique opportunity for us to hear from colleagues about their 
legislative ideas and priorities related to reforming the IRS.
    Tax administration is an issue that I have been familiar 
with for my entire professional life. As a CPA I have had many 
years of experience helping individuals and small businesses 
navigate the complexities associated with filing their taxes.
    I know the relationship between the IRS and taxpayers can 
be strained, particularly as taxpayers strive to understand 
their tax liability and the IRS struggles to communicate and 
provide help. I am looking forward to exploring ways to restore 
the relationship between taxpayers and the IRS and help the 
agency better understand and administer the tax code.
    Over the last year, through more than 10 formal hearings 
and Committee events, this Subcommittee has heard from high-
level IRS executives, the National Taxpayer Advocate, and 
agency watchdogs such as GAO and TIGTA on how the IRS is 
functioning, and where they are succeeding and where some 
assistance may be necessary. We have also heard from 
practitioners, public interest groups, small businesses, and 
individuals about the challenges they face with the IRS.
    One of the challenges I would like to highlight today is 
the dispute resolution process at the IRS. This is an 
administrative process where the agency seeks to resolve 
controversies without litigation. If a taxpayer disagrees with 
an IRS decision or assessment, Congress determined that a 
review by an independent IRS employee should be available.
    Unfortunately, over time, the process set up by the IRS has 
become less independent, and taxpayers are frustrated. Some 
express frustration at not being able to plead their case face 
to face. Others have been completely denied access to 
independent review. Taxpayers are losing faith that they will 
receive an independent and fair review of their case.
    I am looking forward to working with Ranking Member Lewis 
to address these concerns and others, as we craft a bill to 
reform the IRS.
    In addition to hearing from my Subcommittee colleagues here 
behind this dais, I am eager to hear from other non-
Subcommittee Members who have spent time and energy on bills to 
improve the way our tax code is administered. Today's hearing 
will be structured as follows.
    Members will have 5 minutes to discuss their tax 
administration legislative priorities. I would remind those 
Members that they are also able to submit written testimony in 
support of their legislation.
    I want to thank our witnesses and Members of the 
Subcommittee for taking time to be here today.
    And with that I would like to yield to the distinguished 
Ranking Member, Mr. Lewis, for the purpose of an opening 
statement.
    Mr. LEWIS. Madam Chair, thank you for holding this hearing 
on proposals to improve the administration of our Federal tax 
system.
    Let me begin by congratulating you on your appointment, and 
welcome you as our new chair. I enjoyed working with our friend 
and colleague from Florida, and I look forward to working with 
you.
    Today we will hear suggestions from our colleagues on how 
to improve IRS operations and taxpayer services. In a Nation as 
great and diverse as ours, taxpayers have unique perspectives 
and needs.
    Madam Chair, as you know, we have a voluntary tax system 
that depends on taxpayers understanding their responsibility 
and receiving timely answers to their questions. Unfortunately, 
identity theft and tax fraud continue to challenge tax 
administration. It is particularly important that all 
taxpayers, especially those who are low-income, disabled, and 
senior citizens receive fair, quality, in-person services.
    Over the past 8 years, Congress cut the agency budget by 
almost $1 billion. I said it before and I will say it again: 
You cannot squeeze blood from a turnip. We all know that the 
agency is in desperate need of more funding and staff. For 
these reasons, we must strengthen the Internal Revenue Service.
    Madam Chair, I would like to share a brief overview of my 
bill to improve taxpayer service: H.R. 2171, the Taxpayer 
Protection Act of 2017. The Democratic Members of this 
Subcommittee joined me in introducing this legislation. My bill 
would repeal the private debt collection program that costs 
three times more than it collects, and abuses thousands of low-
income taxpayers, by enrolling them in installment agreements 
that they cannot afford. The program is a shame and a disgrace, 
and it must end.
    My bill will also strengthen low-income taxpayer clinics, 
fix the offer-in-compromise program, and improve overall 
funding for taxpayer services.
    Finally, I will--it would ensure that taxpayers know 
whether the professional preparing their return is licensed and 
in good standing with the IRS. This bill proposes good, sound 
policy, and I hope our colleagues on both sides of the aisle 
will support it.
    Madam Chair, thank you again, and I ask unanimous consent 
that my full statement is included in the record. And thank you 
for holding this hearing. I look forward to the testimony of 
our colleagues, and I yield back.
    Chairman JENKINS. Without objection.
    [The prepared statement of Hon. John Lewis follows:]    
    
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    Chairman JENKINS. Thank you, Mr. Lewis. Thank you, Mr. 
Lewis, without objection.
    Other Members' opening statements will be made part of the 
record.
    Now we are going to hear from the Members of the 
Subcommittee on their priorities to improve tax administration. 
And with that I will recognize Mr. Schweikert for 5 minutes.
    Mr. SCHWEIKERT. Thank you, Madam Chairman. We have actually 
two pieces of legislation out there, and here is the basic 
concept. One is often referred to as a third-party 
verification, but let's use sort of a simple model example.
    You qualify for an earned income tax credit. And today we 
expect the IRS to do an algorithm. We have actually done 
legislation to delay the payment going out. What would happen 
if I came to you and said there is a more elegant way to do 
that, and the person who is actually under--played by the rules 
and has earned that value could get it almost immediately?
    The ability to have the tax return and a couple of the key 
fields balanced against--we will call them private commercial 
databases saying, hey, this database over here says this person 
had $200,000 worth of consumption, but they are telling us they 
made $30,000 last year. You know that should probably go into 
the pile to be looked at again.
    But if it matches instantly, it is an elegant way to use 
just a simple, high-high-speed computer match to say, yes, we 
have good data here, a good request. It--we don't see fraud. 
Send the person the resources they have earned. It is much more 
elegant.
    And I don't mean to hurt anyone's feelings who is a 
programmer at the IRS, but it is much more elegant than trying 
to design an algorithm that, as soon as you understand what the 
algorithm is looking for, you design the--you put in paperwork 
to work on--to the outskirts of the algorithm to work around 
it.
    The data is already out there. It doesn't mean you transfer 
information to a private vendor. You just look for the match. 
And so it is a red light/green light. It is simple, it is fast. 
It would be, I believe, dramatically less expensive. And over 
time we need to accept using technology to make the IRS much 
faster and much more elegant on these.
    The second one I want to share with you is how many of you 
have ever gotten a loan? You have gone out and gotten an SBA 
loan or a home mortgage or this and that. You remember filling 
out the piece of paper saying, ``IRS, please tell my lender 
what my last couple years of tax returns were''--particularly 
if you are an independent contractor.
    Do you know that, if I look on here, the technology today 
is functionally fill out this 56--or, excuse me, 4506T form, 
and then fax it. Fax it in. Come on. Let's actually sort of 
reach into this century and just ask for the 4506T, the income 
verification for our brothers and sisters who are out there 
getting a loan, that they can use this thing called the 
Internet and technology, fill out the form, turn it in. You 
know there are plenty of ways to make it much safer than a fax.
    This legislation, I believe, is Representative McHenry's, 
so it is already out there. Both of these we already have in 
bill form. And it is just the embracing of modern technology 
and this thing called the Internet to make it more efficient 
and more simple for Americans.
    And with that I yield back, Madam Chairman.
    Chairman JENKINS. Thank you, Mr. Schweikert. I will now 
recognize Mrs. Walorski for 5 minutes.
    Mrs. WALORSKI. Thank you, Chairman Jenkins, for holding 
this hearing.
    It is hard to believe that it was just literally over a 
month ago that President Trump signed the Tax Cuts and Jobs Act 
into law, yet we have already seen workers getting raises, 
bonuses, and better benefits, and companies announcing new 
investments in equipment and facilities right here in the 
United States.
    While this was the most transformative overhaul of the tax 
code in 32 years, it is easy to overlook the fact that it has 
been 20 years since Congress took a major look at the structure 
of the IRS. A lot has changed since then.
    In 1999, only 23 percent of individual returns were e-
filed. In 2016, that figure was 89 percent. With the growth in 
e-filing, fraudsters are, unfortunately, becoming more and more 
sophisticated in their techniques. And yet the IRS's IT 
infrastructure is woefully lacking. They still rely on systems 
from the Kennedy Administration. There is a clear, critical, 
and urgent need for the IRS to fundamentally overhaul its IT 
systems, but repeated mistakes, big and small, have undermined 
our trust that they will get it right.
    Consider this quote from a September 17th TIGTA report: 
``The IRS suspended the Enterprise Case Management, or ECM, 
project due to insufficient funding and staffing. In addition, 
the IRS determined that the software product selected for ECM 
could not support an enterprise-wide deployment.''
    To put it more plainly, the IRS bought the wrong product, 
and then didn't have enough money to buy the right one. I would 
be pretty upset if my husband took $20 to get gas for the car, 
but came back and said, ``Honey, I need another $20 because I 
got a new ice scraper instead. Also, we need to call a tow 
truck because I ran out of gas.''
    Unfortunately, this isn't the only failed acquisition. The 
IRS wasted $12 million on an email system that, as it turned 
out, they could not use. According to TIGTA, again, they bought 
it ``without first determining project infrastructure needs, 
integration requirements, business requirements, and whether 
the subscriptions were technologically feasible.'' But 
considering the wasted staff time in rebidding the contract, 
you are actually talking about a mistake that cost well over 
$12 million. The staff time and taxpayer dollars could have 
been devoted to other critical IT projects.
    The IRS is run by human beings, and human beings make 
mistakes. But when a mistake happens, we need to ensure that 
there is accountability, and that procedures are followed to 
prevent it from happening again.
    The IRS would also benefit from a better strategic vision 
and long-term planning. Back in 2009 the agency embarked on the 
return review program, or RRP, a new fraud detection program to 
replace legacy systems. It came in years behind schedule, and 
hundreds of millions of dollars over budget. The RRP is a long 
saga. But I want to highlight one episode in particular.
    The IRS put the project into a ``strategic pause'' in 2014. 
They cited many reasons, but here is a sampling: ``To determine 
the priority and direction from IRS senior leadership; to 
articulate and align RRP's role in the broader business vision; 
to develop a road map for future State capabilities and 
architecture for RRP; to ensure clear and concise understanding 
of scope, cost, and schedule with contractors.'' And finally, 
``budgetary constraints.''
    Looking at this list, I wonder how any project could ever 
be on time or on budget. I see things like this and I can't 
help but ask, ``Are these budgetary constraints real? Are they 
because people spend so much time spinning their wheels without 
any direction they just really run out of money?''
    Now, the RRP is more or less up and running, and that is a 
good thing. It will help catch fraud. But the process was a 
failure. Picture a basketball player on a breakaway. He trips 
on his own shoelaces, but heaves the ball up while falling and 
makes the basket. You wouldn't say, ``Good job,'' you would 
say, ``Tie your shoelaces.''
    Had the underlying planning issues that led to such a cost 
overrun and long delay with the RRP been fixed--are new 
projects like CADE too needlessly doomed to the same fate?
    Chairman Jenkins, this is the trust gap. It didn't open up 
overnight, and it won't be closed overnight, either. But we 
absolutely have to fix it. I believe, if we can instill more 
accountability, better contracting practices, and better 
strategic planning, the IRS really can get on the right path. 
Some of this can be legislative, but some involves a cultural 
shift. It is up to our next IRS Commissioner, who I hope will 
make this a priority.
    Our Committee is seeking to closely engage the IRS on 
multiple fronts to better understand these issues, too. Still, 
I look forward to this Committee's continued work in the 
overhaul on reforming the IRS. I look forward to hearing our 
colleagues' ideas today, and I yield back.
    Chairman JENKINS. Thank you.
    Mr. Bishop, you are now recognized for 5 minutes.
    Mr. BISHOP. Thank you, Madam Chairwoman. Thank you for the 
opportunity to speak today, and I would like to let you know 
that I appreciate the fact that we are holding hearings about 
the IRS, a great opportunity to discuss much-needed steps to 
improve the Service. And I look forward to working with the 
Committee to do so.
    Over the last year or so we have had a number of meetings 
with various officials at the IRS, and I am continually amazed 
and shocked to hear about its archaic technology and 
infrastructure, and how much we need to do to ensure that the 
IRS is pulled into the 21st century.
    That said, it is imperative that this Subcommittee explores 
ways to improve the IRS's technology and capabilities. 
Furthermore, when it comes to taxpayers, many of whom still 
receive paper checks that do not have access to the--we--pardon 
me a second, pardon me. Let me rewind a little bit here.
    When we talk about the IRS and its capabilities, I want to 
begin with my ongoing suggestion that we need to do whatever we 
can to address refunds. And I want to backtrack because, while 
we get a long way in this discussion about IRS reforms, one of 
the things that we talk about--that we have not talked about, I 
believe, enough is about the process of distributing refunds. 
And during the 2006 filing season the IRS issued 104 million 
refunds, 19 million of which went out by paper check.
    When refunds are issued by paper checks, it is important to 
note that it costs the government about a dollar per check. But 
if processed electronically, it costs mere cents. The potential 
savings are, therefore, abundantly clear.
    Furthermore, when it comes to the taxpayer, many receive 
these paper checks, don't have access to a bank or a credit 
union, and must resort to payday lenders or other check-cashing 
organizations, oftentimes who will charge a substantial fee and 
nullify the benefits of the refund. By enhancing the electronic 
payments, there will be fewer costs to the government. And, 
most importantly, taxpayers are able to keep more of their 
rightfully owed refund.
    Madam Chairwoman, electronic payments are simply quicker 
and more secure. And for those reasons I have been working on 
legislation to increase the number of tax refunds that are 
processed electronically. And I hope it can be included in the 
final package this Subcommittee produces.
    I would like to submit by unanimous consent, if I could, 
Madam Chairwoman, a statement that I have from the Electronic 
Transaction Association, which is an association representing 
over 500 companies that offer electronic transaction processing 
products and services. They encourage Congress to work with the 
IRS to implement electronic payments for Federal income tax 
refunds.
    And that said, Madam Chairwoman, I would ask by unanimous 
consent that we submit this into the record.
    Chairman JENKINS. Thank you, Mr. Bishop. Without objection.
    [The submission for the Record of Hon. Mike Bishop 
follows:]

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    Mr. BISHOP. On the top of the security, every day we hear 
that countless hackers and criminals are developing new schemes 
to steal taxpayer refunds, and are constantly trying to access 
the IRS's data. In an effort to combat bad actors and 
collaborate and share best practices to fight off emerging 
threats, the IRS formed the IRS Security Summit, which is a 
partnership of the IRS, State revenue agencies, and the private 
industry. By all accounts, this Summit has been beneficial for 
the parties involved, and I think we should explore more ways 
this Congress can further assist this effort.
    In closing, I wholeheartedly agree with everyone in the 
room that the IRS is in dire need of reform. We have had plenty 
of bipartisan agreement on these issues over the last year, and 
I think this is a real opportunity to improve the IRS for the 
American taxpayers and start bridging the gap, the trust gap.
    Thank you very much, and I yield back.
    Chairman JENKINS. Thank you.
    Mr. Reed, you are recognized for 5 minutes.
    Mr. REED. Thank you, Madam Chair. And I appreciate the 
opportunity to have the discussion today with our colleagues in 
regard to ways to improve the IRS.
    And I was listening to my good friend from Indiana, Mrs. 
Walorski, talking about the status of the computer programming, 
if you would, in the IRS. And I remember fondly the 
conversation I had with a prior IRS Commissioner about the 
discussion in regard to Fortran being the computer code that is 
utilized in some areas of the IRS in regard to its computer 
programming situation.
    And, for those that may not know what Fortran is--because I 
look around this room and I see many folks in this hearing room 
today that were probably born 20 years after the creation of 
Fortran--it is a 1950s, 1960s computer programming system that 
is so antiquated, my understanding in the conversations with 
the former IRS Commissioner, that it is very difficult to even 
fix that computer code because no one knows what it is. They 
have all retired or gone to the great beyond.
    So this is an area that, hopefully, with technology, as my 
good friend from Arizona had mentioned, can be improved upon in 
regard to providing better services to our constituents and to 
the American public.
    But I wanted to focus in particular, Madam Chair, on 
improvements in the IRS that I truly do believe need to occur 
in regard to serving populations in rural communities such as 
yours in Kansas, Ms. Jenkins. And one of the areas that I see, 
just some simple reforms that maybe the IRS can take heed to, 
is utilizing technology when it comes to callback features, for 
example.
    When folks call a service organization today, often they 
will be--hear a recorded message saying if you would like a 
call back, we can provide a call back to you at the phone 
number that you enter into the program. That is a simple relief 
reform that would go so far to help the needs of taxpayers 
across the country, especially in rural communities.
    In our district we have very limited live centers where 
folks can go into areas like Jamestown, New York, or Elmira, 
New York, and meet with an actual person to discuss their 
sensitive IRS matters. Using these types of phone services that 
accommodate the interests of our constituents--you know, many 
are working families, many are working mothers, working fathers 
that have difficulty trying to travel. Our district, from point 
to point across the district, is about a 5-hour drive, to be 
perfectly honest with you. It is very difficult to get to these 
centers and to have a conversation in regard to the issues 
before the IRS.
    So doing things such as that callback feature, I think, is 
a simple reform that they could implement.
    I also like the concept that is being discussed in regard 
to a year-round call center. I know the IRS, from information 
we have received, has kind of an off-season, on-season type of 
resource allocation. If we could maybe provide those resources 
on a year-round basis, many of the issues, especially as we go 
through tax reform, that many of the taxpayers deal with can be 
headed off--and have access to information sooner, rather than 
waiting potentially for an on-season staffing level that allows 
them to talk to real people.
    And then, finally, Madam Chair, you know, I think it would 
be appropriate on these issues in regard to the IRS that maybe 
we have a dedicated line to people like yourselves, who are 
CPAs, enrolled agents, and then, therefore, maybe their more 
technical, advanced questions get the resources immediately 
responded to by staffing sophistication on the other end of the 
phone that can address those inquiries, as opposed to folks 
that may just have some basic questions and information 
requests that they could potentially get through a direct line. 
Maybe this would allocate the phone system so that you are not 
on hold for a significant amount of time, you are actually 
getting to the resource from the IRS in a timely fashion at the 
level that maybe your question or inquiry deserves the matching 
of that resource on the other end of the phone line.
    So, for those simple reforms, I would advocate for the 
continuation of this hearing, and appreciate the Chairman 
putting this together and hearing from our colleagues and 
others ideas to improve services for what we all believe needs 
to be done in the IRS--better service to the people across 
America.
    Chairman JENKINS. Thank you, Mr. Reed.
    Mr. LaHood, you are recognized for 5 minutes.
    Mr. LAHOOD. Thank you, Chairwoman Jenkins, for holding this 
Subcommittee hearing today, and to my colleagues for their 
advocacy and testimony on this important topic.
    Ensuring an efficient, accountable, and transparent IRS is 
key to restoring the relationship between taxpayers and the 
agency, as well as an effective implementation of the tax code. 
Items of importance include ensuring a service-first agency, 
instilling confidence that taxpayer information is protected, 
and upgrading IRS technology for the 21st century, among other 
things.
    It has been over 20 years since major reforms were made to 
the IRS. I appreciate the work this Subcommittee has done over 
the last year, including the Better Way blueprint. As the 
newest Member of this Subcommittee, I look forward to beginning 
engaging in this important work.
    First, I would like to mention a bill that I am a cosponsor 
of, H.R. 3541, the Free File Permanence Act of 2017. This 
legislation was introduced by my colleague from Illinois, the 
Chairman of the Health Subcommittee, Peter Roskam. If enacted, 
this legislation would make permanent the IRS's Free File 
program. I have held a number of information seminars 
throughout my district on this subject, and people understand 
how important it is.
    This program is a public-private partnership between the 
IRS and tax software companies and State departments of revenue 
that enables low-income and underserved individuals to choose 
between the best tax preparation products to prepare and 
electronically file their Federal return for free. This 
actually saves the Federal Government money in the process.
    Ensuring taxpayers have access to the tools and resources 
they need to simplify the tax process, this is important and a 
major part of H.R. 1, which was just signed into law.
    Second, I would like to raise a different issue that I am 
working on to address through my own legislation. Currently, by 
law, the IRS Taxpayer Advocate Service can issue a--issue a 
taxpayer assistance order for specific case issues. While 
authorized by the Commissioner, the IRS Taxpayer Advocate 
Service does not have the same codified authority to issue 
taxpayer assistance directives for systemic issues.
    Ensuring that the IRS Commissioner is responsive in a 
timely and substantive way to both types of requests is 
important to assure that areas for improvement within the 
agency are recognized and addressed.
    In the event that the IRS Commissioner does not respond, it 
is worth considering what else can be done to ensure that the 
taxpayers' issue is fully reviewed and acknowledged. I look 
forward to continuing to find the best way to fix this 
situation, and hope to have bipartisan support on this 
legislation.
    With that, Chairwoman Jenkins, I yield back my time. Thank 
you.
    Chairman JENKINS. Thank you. I now recognize Mr. Curbelo 
for 5 minutes.
    Mr. CURBELO. Thank you, Madam Chairman, and congratulations 
on your new role. I am thrilled that we will be working 
together under your leadership to reform, modernize, and revamp 
the IRS. And I know that Members on both sides of the aisle 
will have plenty to contribute to this process.
    I want to take the opportunity today to discuss critical 
legislation I introduced with Representative Danny Davis of 
Illinois, and--which is very fitting, given what we are 
discussing today.
    Our bill, the Volunteer Income Tax Assistance Permanence 
Act of 2017, would permanently authorize the Internal Revenue 
Service to administer the Volunteer Income Tax Assistance 
matching grant program. With the VITA program, the Federal 
Government partners with the local community to provide free 
tax preparation services for individuals with an annual income 
of less than $54,000, and those with limited proficiency in 
English. The program is specifically targeted to ensure 
taxpayers have access to services where they can confidently 
file returns without fear of being scammed by fraudulent 
preparers.
    Tax return preparer fraud consistently ranks among the 
IRS's dirty dozen tax scams, and we know this problem all too 
well in South Florida. Filing a tax return is enough of a 
headache, without the added fear of being scammed. The VITA 
program helps insulate the most vulnerable populations from 
this threat.
    The legislation also ensures that VITA grant recipients 
maintain strong records of accuracy that will save taxpayers 
money. The program already boasts a 94 percent accuracy rating, 
even including returns with a complicated earned income tax 
credit. When taxpayers use VITA services to file their returns, 
they can rest assured knowing that their returns will be filed 
accurately and without the threat of fraud.
    The success of the VITA program is evident in its growth. 
The number of tax returns prepared by the VITA program was 3.8 
million in the 2016 tax filing season, up 100 percent from the 
number of returns prepared in the 2014 season. This program is 
critical to the residents of South Florida that I am honored to 
represent, where tax fraud and abuse of low-income filers is 
rampant, especially among immigrant communities.
    According to Branches, a participant in the VITA program in 
Miami-Dade County, approximately 60 percent of residents 
qualify for assistance. In 2016, Branches helped residents file 
9,845 tax returns at no cost, and secure $11.5 million in 
refunds. I look forward to visiting a VITA center operated by 
the United Way in South Florida in the very near future.
    Funding for this essential service has received bipartisan 
support under both Republican and Democratic Administrations. 
The House and Senate Appropriations Committees have continued 
to include strong funding for taxpayer services like VITA, 
regardless of which party is in the majority. The VITA 
Permanency Act would provide the longevity this program needs 
because it benefits so many.
    H.R. 2901 already has the support of 38 bipartisan Members, 
including 13 Members of this Committee. I urge my colleagues to 
join us in supporting the VITA program, which has a proven 
track record of success in assisting the most vulnerable in our 
communities.
    Thank you very much, Madam Chair, and I yield back.
    Chairman JENKINS. Thank you, Mr. Curbelo. I would like to 
recognize the Ranking Member for a few statements.
    Mr. LEWIS. Thank you very much, Madam Chair. I just want to 
recognize Mr. LaHood. Did he walk out?
    Chairman JENKINS. He did.
    Mr. LEWIS. He did. But tell him I just wanted to observe 
that he has become a Member of the Committee, and to welcome 
him. I enjoyed working with his father over the years, when he 
was a Member of the Congress.
    Chairman JENKINS. Very nice, thank you.
    We are now joined by non-Subcommittee Members who have some 
legislative ideas. We are going to just move right down the 
line.
    We have the Honorable Representatives Smith, Roskam, 
Renacci, and Rice.
    And, with that, we will yield to the Honorable 
Representative Smith from Missouri for 5 minutes.

STATEMENT OF THE HON. JASON SMITH, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF MISSOURI

    Mr. SMITH OF MISSOURI. Thank you, Chairman Jenkins. It is a 
great honor to be before your Committee.
    The passage of the Tax Cuts and Jobs Act in December 
created a pro-growth tax code for the American taxpayer. And 
folks across the Nation are starting to see the benefits of the 
lower rates in their paychecks. Just last week I visited three 
different employers in Southern Missouri who were either 
handing out bonuses, increasing hourly wages, or strengthening 
benefits as a result of the new tax code.
    An important next step following such momentous tax reform 
is to ensure that the agency tasked with administering the tax 
code, the IRS, works effectively and efficiently for the 
American taxpayer. The IRS has been rightfully scrutinized over 
the years for its mismanagement and abuses of the American 
taxpayer, targeting long wait times and unauthorized spending, 
just to name a few. We need an IRS which protects and serves 
the American taxpayer, not one which proactively seeks to harm 
them.
    Simply put, the IRS, in its current form, needs to be 
ripped out by its roots and turned on the--turned on its head 
into an entity which serves the American public, not one which 
only looks to hinder our families, farmers, and small 
businesses.
    In July of last year, I introduced bipartisan legislation 
with my colleague on the Committee, Representative Terri 
Sewell, called the Preserving Taxpayer Rights Act. This good-
government legislation would put a stop to an IRS which is 
inefficient, time consuming, and expensive for taxpayers. My 
bill takes the burden off the backs of taxpayers by allowing 
them to take certain cases to the IRS Office of Appeals, 
removes threatening tools of the IRS taking taxpayers to court, 
and protects their private and sensitive information by 
preventing outside groups from participating in audits, 
codifying into law something the President has instructed 
Treasury to do.
    The American taxpayer deserves an IRS that is less 
burdensome and more transparent. They need an IRS that would 
work for them, not against them. Madam Chairman, it is my hope 
that, as you and your colleagues on the Oversight Subcommittee 
consider legislation to overhaul the IRS, you include the 
Preserving Taxpayers Rights Act as a mechanism to make the IRS 
work better for the American taxpayer.
    Thank you again for holding this hearing, and I look 
forward to working with you on this and other issues.
    Chairman JENKINS. Thank you, Mr. Smith.
    Chairman Roskam, you are recognized for 5 minutes.

    STATEMENT OF THE HON. PETER ROSKAM, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. ROSKAM. Thank you, Madam Chairman, and Ranking Member 
Lewis. It is an honor for me to be here today, and I deeply 
appreciate the work of the Subcommittee on which I have served. 
And I am here to talk about two pieces of legislation for your 
consideration.
    The first is H.R. 3641, the Free File Permanence Act, which 
is a commonsense bill that makes the free file program 
permanent. It is a program that is a public-private partnership 
between the IRS and a group of companies which have agreed to 
offer commercial, online tax preparation and electronic filing 
services to consumers. This partnership allows free tax filing 
for any taxpayer making less than $66,000, removing a financial 
burden for taxpayers and ensuring that they are receiving 
quality guidance on how to file their taxes.
    As an added bonus, the program actually saves the Federal 
Government an estimated $13 million a year because electronic 
filings are less expensive for the IRS to process than paper 
versions.
    H.R. 3641 has 122 cosponsors, including Chairman Jenkins 
and Representatives DelBene, Walorski, Curbelo, Bishop, and 
LaHood on this Subcommittee.
    Now, the second bill that I want to bring to your attention 
is 
one that Ranking Member Lewis is very familiar with, because he 

and I were partners in uncovering this scandal at the IRS. It 
is 
H.R. 1843, the Clyde-Hirsch-Sowers RESPECT Act. And it was 
during our time when we were leading the Committee together 
where we uncovered civil asset forfeiture abuse last Congress, 
and Congressman Crowley is the lead Democrat sponsor on this 
legislation.
    Here is what happens, in a nutshell. If a person deposits 
$10,000 or more into a financial institution, that institution 
is required to submit a currency transaction report to the 
Treasury Department. Avoiding this reporting requirement by 
purposefully staying below the $10,000 limit is a Federal crime 
known as structuring. Structuring was made illegal in 1986 to 
prevent large-scale criminal enterprises, terrorists, and money 
launderers from hiding their money from authorities by 
consistently depositing just shy of the $10,000 limit.
    Okay, so far so good. It makes perfect sense. But when 
structuring is believed to have occurred, the IRS can use its 
civil asset forfeiture authority to seize funds in the bank 
accounts and force the owner of the funds to prove that they 
were obtained legally. Unfortunately, this very Subcommittee 
uncovered multiple instances where the IRS abused this 
authority, and was stealing legally-earned funds solely because 
the owners ran afoul of structuring laws.
    In some instances, the rightful owners of the money were 
told by bank tellers that depositing over $10,000 causes a 
headache of paperwork for the bank, so they deposited under 
$10,000 to be considerate, of all things.
    In another instance, a taxpayer deposited under the limit 
because their insurance policies didn't cover $10,000 in off-
premise losses.
    Finally, some taxpayers deposited under the limit simply 
because they didn't want their private information sent off to 
the IRS every time they made a deposit. The RESPECT Act limits 
the IRS's civil asset forfeiture authority. It requires that, 
in order for--to seize funds the IRS believes have been 
structured to avoid reporting requirements, the IRS must first 
show probable cause that those funds are derived from an 
illegal source or connected to some other criminal activity. 
Perfect common sense.
    It also provides important procedural protections, 
including a post-seizure hearing for people whose assets the 
IRS has seized within 30 days after the seizure, or longer if 
the asset owner requests an extension.
    We have just seen too many of these stories about the IRS 
seizing assets of honest, law-abiding taxpayers. And codifying 
these protections is something that I think should be included 
in any tax administration bill.
    The RESPECT Act passed the Ways and Means Committee 
unanimously, which means that everybody supported it except the 
newly-arrived Mr. LaHood from Illinois, and we got him when he 
voted for it on the House floor. It overwhelmingly passed the 
House. I urge its--both of these bills consideration.
    And I thank you, Madam Chairman, for the opportunity and--
or the Ranking Member, Mr. Lewis, for your work, in particular, 
on the RESPECT Act.
    I yield back. Thank you.
    [The prepared statement of Hon. Peter Roskam follows:]
    
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    Chairman JENKINS. Thank you.
    Mr. Renacci, you are recognized for 5 minutes.

   STATEMENT OF THE HON. JAMES RENACCI, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. RENACCI. Thank you, Madam Chairwoman and Ranking Member 
Lewis. I want to thank you for holding this hearing. I believe 
that reforming the IRS's ability to administrate our tax code 
is a critical next step to the--following the passage of the 
Tax Cuts and Jobs Act.
    I am pleased to discuss two pieces of legislation today 
that I believe will help the IRS better serve the American 
people, the Improper Tax Payment Reduction Act of 2017, and the 
Stolen Identity Refund Fraud Prevention Act of 2017. I will 
start with the Improper Tax Payment Reduction Act of 2017.
    This legislation addresses improper payments under the 
Earned Income Tax Credit, which is also known as EITC. The EITC 
incentivizes work, while providing a refundable tax credit to 
qualifying taxpayers. Unfortunately, the program is currently 
riddled with fraud and error. The 2016 report from the Treasury 
Inspector General estimated that nearly 1 in 4 payments are 
improper, exceeding $16 billion annually in improper payments. 
This is unacceptable.
    It is our responsibility to ensure that our constituents' 
hard-earned dollars are being properly spent. My legislation 
seeks to address this issue in four ways.
    First, it clarifies existing law to prevent overstatement 
of self-employment income.
    Next, it encourages information verification when there are 
reporting discrepancies.
    Then it allows excess credit payments in instances where it 
is impossible to resolve reporting discrepancies after 
verification requests.
    Finally, it captures information vital to fraud prevention, 
long before paying out on the EITC.
    This is commonsense legislation. It passed out of the House 
on November 16, 2017, in the first vote by the House on the Tax 
Cuts and Jobs Act, but it was not ultimately included in the 
final legislation that came out of conference due to inability 
to meet the reconciliation rules.
    I look forward to seeing the Improper Tax Payment Reduction 
Act of 2017 included within the tax administration legislation 
we are discussing today.
    The other piece of legislation I want to discuss is the 
Stolen Identity Refund Prevention Act of 2017. This bill 
combats tax-related identity theft, while also helping victims. 
Mr. Lewis was a cosponsor on this legislation.
    Not too long ago I was a victim of identity theft. I 
leveraged this experience to come up with the safeguards to 
prevent others from going through what I went through.
    Five highlights of the legislation include establishing a 
centralized point of contact at the IRS for victims of identity 
theft, making it simpler for victims to resolve tax-related 
identity theft cases.
    Requiring--number two, requiring the IRS to notify 
taxpayers when the IRS discovers unauthorized use of taxpayers' 
identification information.
    Three, requiring the IRS to submit a feasibility study 
regarding establishment of a program for identity-theft-related 
tax fraud victims to opt out of electronic filing.
    Four, establishing an information-sharing and analysis 
center to collect, analyze, and share actionable data and 
information to detect and prevent identity theft.
    Five, creating a local law enforcement liaison's role 
within the IRS to coordinate on identity theft cases with local 
police and law enforcement.
    Last spring this bill reported favorably out of the Ways 
and Means Committee by voice, and passed the House on 
suspension by voice. However, it is yet to move forward in the 
Senate. As such, I look forward to seeing the Stolen Identity 
Refund Prevention Act of 2017 included within the tax 
administration legislation we are discussing today.
    In conclusion, the IRS needs our help in order to be--more 
efficiently administer the tax code and better serve our 
constituents. I look forward to again advancing these two 
commonsense bills and working on additional reforms in 
collaboration with the IRS.
    I appreciate the Chairwoman, her staff, and my colleagues 
for working on these important issues with me last year and 
going forward. I also thank you for allowing me to participate 
in this hearing today.
    I yield back the balance of my time.
    Chairman JENKINS. Thank you.
    Mr. Rice, you are recognized for 5 minutes.

 STATEMENT OF THE HON. TOM RICE, A REPRESENTATIVE IN CONGRESS 
                FROM THE STATE OF SOUTH CAROLINA

    Mr. RICE. Thank you, Chairman Jenkins, Ranking Member 
Lewis. Thank you for holding this hearing and giving me the 
opportunity to discuss my legislative proposals to improve the 
Internal Revenue Service.
    We need to make the IRS more customer-service-oriented, an 
agency that protects taxpayer rights, and fairly and 
efficiently administers our new tax code.
    The first legislative proposal I have will help achieve the 
goal of IRS reform--H.R. 3153, the Electronic Signature 
Standards Act. This bill, which I introduced in the House on 
behalf of myself and Representative Ron Kind, would provide a 
simple, no-cost, private-sector option for small businesses and 
individual taxpayers to comply with the requirements of our tax 
system.
    The bill would require the IRS to issue guidance 
establishing uniform standards and procedures for the 
acceptance of electronic signatures on disclosure authorization 
and power-of-attorney forms.
    Currently, the IRS allows for the use of electronic 
signatures on an ad hoc basis, accepting electronic signatures 
on certain forms, while prohibiting their use on other forms. 
This lack of uniform treatment adds an extra layer of confusion 
for practitioners that are trying to help taxpayers navigate 
our tax system, while limiting filing options for taxpayers 
that increasingly rely on modern-day advancements such as 
electronic signatures.
    The IRS has acknowledged that an e-signature option would 
reduce unnecessary expenses and time spent obtaining 
physically-signed forms. Yet the IRS has still not issued 
uniform guidance for the use of these signatures. Put simply, 
H.R. 3153 would make the IRS move forward with an additional 
secure filing option that they already support.
    I would also like to discuss a proposal for legislation 
that I plan on introducing in the coming weeks that would 
provide taxpayers with more certainty and peace of mind when 
they need it most. This legislation would provide for an 
automatic 30-day reset of any IRS filing deadline that occurs 
in the wake of a major, major disaster declaration for events 
such as hurricanes or wildfires.
    Under current law, the Secretary of Treasury and the IRS 
have discretion to extend filing deadlines for certain forms of 
taxpayers dealing with the effects of major natural disasters. 
While the IRS often provides filing deadline relief to the 
affected taxpayers, it does--it usually takes days or even 
weeks for the IRS to reach that decision, leaving taxpayers in 
limbo. When Hurricane Matthew devastated my district in October 
2016, I had many constituents contact me, concerned with how 
they were going to file their tax forms--more concerned with 
how they were going to file their tax forms than with dealing 
with their flooded homes and businesses.
    The past few months served as a reminder that, in times of 
extreme need that occur in the aftermath of natural disasters, 
the last thing that Americans should be worried about is 
whether the IRS might fine them for missing a filing deadline.
    Ultimately, this proposal would ensure the IRS works for 
the American taxpayer when they need it most, the exact type of 
reform we need as we consider how to bring the agency into the 
21st century.
    I look forward to working with you and this Committee to 
achieve commonsense taxpayer-friendly reform of the IRS.
    Thank you, and I yield back.
    Chairman JENKINS. Thank you.
    I want to thank all our colleagues that joined us today. We 
are going to take a recess and go vote, and we will reconvene 
immediately following the last vote.
    [Recess.]
    Chairman JENKINS. The Subcommittee will come to order. I 
welcome everyone back to the Ways and Means Oversight 
Subcommittee Member Day hearing on legislation to improve tax 
administration. Today's hearing will continue as before, and 
Members will be given 5 minutes to discuss their tax 
administration legislative priorities.
    I also remind Members that they will have the ability to 
submit written testimony in support of their legislation.
    And I want to thank our witnesses. And this second panel 
will include Representatives Chabot, Gohmert, and Posey.
    And, with that, I would like to yield Representative Chabot 
5 minutes.

    STATEMENT OF THE HON. STEVE CHABOT, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. CHABOT. Thank you very much. Good afternoon, Chairman 
Jenkins, Ranking Member Lewis, and Members of the Subcommittee. 
Thank you for the opportunity to share a few thoughts on ways 
to improve tax administration at the IRS.
    Let me begin by congratulating your Subcommittee for its 
work on the Tax Cuts and Jobs Act. We hear on a daily basis the 
positive results this law is already generating for hard-
working Americans. From the impact on corporations to how the 
new withholding tables will affect employees, this law is 
delivering.
    As Chairman of the Committee on Small Business, I want to 
thank you for keeping small businesses front and center during 
the debate. Small businesses now have more parity when it comes 
to the tax code. With monumental tax cuts now in place, 
Congress must address how the tax code is administered. More 
specifically, I would like to discuss the treatment of the 
Nation's true job creators, small businesses.
    Two out of every three new private-sector jobs are 
generated by small businesses. With over 29 million small 
businesses in the United States, the economy is intricately 
linked to the health of our smallest firms. Unfortunately, 
small businesses often face challenges when managing their 
taxes.
    While often operating on the margins, small business owners 
do not have the resources available to hire an army of tax 
professionals to calculate their taxes. Rather, they sacrifice 
time away from growing and creating jobs to address IRS 
matters. For the economy to continue to record impressive 
marks, Main Street America must be operating at full strength.
    Moreover, the code has not kept pace with technological 
advancements that are changing how businesses operate and reach 
customers. As a result of multiple hearings exploring this 
topic, I introduced H.R. 3717, the Small Business Owners Tax 
Simplification Act of 2017, with the aim of modernizing the 
process for the Nation's small businesses, entrepreneurs, and 
start-ups. H.R. 3717 takes simple, commonsense steps to reform 
tax administration.
    For example, H.R. 3717 realigns estimated tax payment 
deadlines, which cause confusion because they currently do not 
fall when calendar quarters actually conclude. To bring further 
clarity, H.R. 3717 aligns the tax filing thresholds of the Form 
1099 Miscellaneous and the Form 1099-K.
    Next, the legislation requires the Secretary of the 
Treasury to set standards for accepting digital signatures. And 
when a direct deposit refund is in order, pre-notification 
testing is also required. To address the pace at which small 
businesses are pursuing the sharing economy, where they utilize 
technology and web-based applications to reach customers, we 
examined the important decisions small businesses make when it 
comes to independent contractors and worker classifications.
    Specifically, the legislation allows companies to enter 
into voluntary withholding agreements and offer voluntary 
training without impacting classifications. These changes can 
make a difference. At a hearing that explored this legislation, 
a witness commented that H.R. 3717 ``is a necessary first step, 
and would bring about much-
needed simplification.'' Another witness explained, ``H.R. 3717 
proposes commonsense changes to better meet the needs of the 
growing number of sharing economy operators and self-employed 
small business owners.''
    I respectfully ask the Committee to take into account these 
provisions as you address tax administration, and we look 
forward to continuing to work with you on them. We owe it to 
the small businesses and entrepreneurs and start-ups that 
define our communities and neighborhoods to simplify tax 
administration.
    We thank you very much.
    I think I finished early. And I yield back, and I will be 
happy to answer any questions.
    Chairman JENKINS. Thank you.
    Mr. Posey, you are recognized for 5 minutes.

STATEMENT OF THE HON. BILL POSEY, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF FLORIDA

    Mr. POSEY. Thank you, Madam Chair and Ranking Member.
    Chairman JENKINS. Do you want to hit your microphone on?
    Mr. POSEY. Thank you, Madam Chair and Ranking Member, for 
holding this hearing today to discuss proposals to reform the 
U.S. Internal Revenue Service administration of our tax system.
    As tax day approaches, Americans are being reminded why 
filing taxes is a dreaded experience, especially in the case of 
seniors whose retirement finances are simple, yet require a 
very complicated filing process.
    My bill, H.R. 2721, the Seniors Tax Simplification Act of 
2017, would allow for easier tax form completion for senior 
taxpayers. The IRS currently prohibits individuals over 65 
years old from filing the one-page 1040-EZ form, even if they 
have a simple return and choose not to itemize deductions. It 
really doesn't make sense.
    Specifically, the EZ form does not include lines for Social 
Security or other retirement benefits, as well as interest in 
capital gains on investments.
    The Seniors Tax Simplification Act of 2017 will direct the 
Internal Revenue Service to create a new, basic, easy-to-read 
form called 1040-SR for senior taxpayers earning Social 
Security retirement benefits, interest, and capital gains, 
while extending the common-sense convenience of the 1040-EZ 
form. The Seniors Tax Simplification Act of 2017 has recently 
been endorsed by the American Association of Retired Persons 
and the 60-Plus Association.
    I would like to ask unanimous consent to include in the 
record a January 24th letter of support from AARP and a January 
9th letter of support from the 60-Plus Association for the 
Seniors Tax Simplification Act of 2017. Thank you.
    [The submissions for the Record of Hon. Bill Posey follow:]
    
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    Mr. POSEY. Again, I thank you for the opportunity to 
testify today. The Seniors Tax Simplification Act is a simple, 
commonsense solution, which would provide a measure of relief 
for our senior citizens who deserve a tax filing option that is 
fair and simpler than allowed under current law.
    I know you all want to do something for our seniors, too. I 
look forward to working with the Committee to modernize our tax 
administration policies, and I thank you again, and I yield 
back.
    Chairman JENKINS. Thank you. I want to thank all our 
colleagues who came before us today, those on the Committee and 
those off the Committee. And with that, I see our final 
witness.
    Mr. Gohmert, you are recognized for 5 minutes.

   STATEMENT OF THE HON. LOUIE GOHMERT, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. GOHMERT. I will try to be as brief as possible. I have 
just one thing I wanted to bring to your attention today.
    I know, in prior elections, and especially in 2016, the 
idea was brought forward by a number of candidates that we 
should do away with the Internal Revenue Service.
    And some years back I was having a conversation with a guy 
I dearly love, a brilliant man, Arthur Laffer. Dr. Laffer, of 
course, was the economic advisor for Ronald Reagan. And we were 
discussing the IRS and all the power they had, the potential 
for abuse, and how wonderful it would be if there were not an 
agency, an entity in our U.S. Federal Government, that had 
their power.
    It seems that the IRS is the one agency that can legally 
just push the Constitution aside and come after folks. You are 
guilty until proven innocent. You have to pay taxes before you 
can contest them, even if the IRS is wrong. We have seen 
people--and there have been testimonies I have seen before I 
ever came to Congress--from people who were targeted by 
vengeful IRS agents.
    And I said, ``Look, I would love to get rid of the IRS, 
Art, but, as a former felony judge, I know there are going to 
be people that will cheat. You are going to have to have 
somebody that will check and make sure--keep everybody 
honest.''
    And I don't know, if you get rid of the IRS, how do we do 
that, make sure that people have an incentive to stay honest?
    And I know in the last election he talked about a flat tax 
would enable you to get rid of the IRS. But let's say we keep 
the current tax system. Dr. Laffer said the problem with the 
IRS is they have too much power. They can decide who they are 
going to audit, they can decide how thoroughly they are going 
to audit them, if they are going to demand more and more and 
more, if they are going to just keep pushing the envelope and 
what you are required to produce. And they can decide, once 
they have audited you, how--what they are going to do with the 
next step.
    Do they think there was criminal conduct? If so, do they 
pursue it as a criminal case? Do they feel they should even 
take your homestead that virtually nobody else can. They get to 
decide what happens from there. Do they pursue it as a criminal 
violation and give it to a prosecutor? From a pecuniary 
standpoint, what do they do?
    And he said, ``There is the problem. No one entity should 
ever have all of that power.''
    And so here--and I appreciate you both being here. I know 
you all are busy as can be. And Madam Chair, I appreciate your 
attentiveness, as well as that of the Ranking Member, Mr. 
Lewis.
    But he said, ``What you do is get rid of the IRS, and you 
create a small agency of CPAs. All they do is audit. And they 
never, ever get to choose who they audit. Each audit is chosen 
at random.'' And so, just because you are audited one year 
doesn't mean you won't randomly come up another year.
    So they don't get to abuse, they don't get to single people 
out because of politics or one thing or another. They are 
handed the name and address of who is to be audited, they do 
their audit as good CPAs. When they finish the audit, they turn 
in the results, and that is the end of what they can do.
    Then you have someone else make a decision. Is this 
criminal? Is this civil? What should be the ramifications? But 
it takes all of that just arbitrary power, the potential, the 
temptation to abuse somebody--and I just think that is what we 
ought to pursue. And I know it is a big step to get rid of a 
department, but that is really so serious, I would appreciate 
the Committee's considering that.
    And I yield back.
    Chairman JENKINS. Thank you, Mr. Gohmert.
    And again, I want to thank all of our Committee and non-
Committee Members that came before us today. There were a lot 
of good legislative solutions proposed, and I look forward to 
working together to include some of those in a bill to make 
reforms to the IRS.
    Please be advised that Members have 2 weeks to submit 
written questions to be answered later in writing. Those 
questions and your answers will be made part of the formal 
hearing record.
    And with that, the Subcommittee stands adjourned.
    [Whereupon, at 3:36 p.m., the Subcommittee was adjourned.]
    [Submissions for the Record follow:]
    
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