Senate bill delays IRS reforms

Shortly after Congress heard a plea to push back the deadline to reform the Internal Revenue Service so that the tax agency can focus on its Year 2000 problem, the Senate last week passed a bill that would delay some parts of a dramatic overhaul of the IRS.

The Internal Revenue Service Restructuring and Reform Act would require the IRS to be more responsive to and lenient with taxpayers by changing the agency's work processes to accommodate such services as offering the name and number of an IRS case worker on taxpayer notices or forgiving penalties if taxpayers in payment-installment plans fail to pay.

But reprogramming IRS computer systems to accommodate these changes could divert valuable resources that the IRS needs to convert its large computer systems so that they can properly process dates after 1999, said IRS Commissioner Charles Rossotti.

"The administration has serious concerns with provisions of the IRS-restructuring legislation that require changes to IRS computer systems in 1998 and 1999," Rossotti told the House Ways and Means Committee's Oversight Subcommittee hours before the Senate passed its IRS bill May 7.

"Mandating these changes according to the schedule currently in the bill would make it virtually impossible for the IRS to ensure that its computer systems are Year 2000-compliant by Jan. 1, 2000, and would create a genuine risk of a catastrophic failure of the nation's tax-collection system in the Year 2000," he said.

After Rossotti's testimony, the Senate attached an amendment to its reform bill that delays the deadlines for completing some of the bill's reforms, such as a requirement that the IRS notify taxpayers that they may appeal certain decisions. The deadline for these reforms was pushed back to Dec. 31, 1999.

But the bill, H.R. 2676, left unchanged several reform deadlines that may require the IRS to reprogram its systems, including deadlines that require the agency to provide annual statements to taxpayers who are on payment-installment plans. Differences between the Senate bill and the House version now will be reconciled in a conference committee.

The IRS declined to comment on the bill, saying it does not comment on pending legislation.

Members of industry supported the IRS' claims that the reforms would hamper the agency's Year 2000 work. "With systems already committed to the limit, Congress must show flexibility in asking the IRS to maintain existing systems, introduce changes to the tax laws [and to] modernize and conduct the Year 2000 conversion," testified Harris Miller, president of the Information Technology Association of America.

Irene Dec, vice president of the Year 2000 program at The Prudential Insurance Co. of America, told members of the subcommittee that one of the best approaches for an organization battling Year 2000 is to stop all other computer systems projects. "There is no time for applications or systems that are not Year 2000-related," she said.

IRS officials estimated that the Year 2000 fix will cost them $454 million in fiscal 1998 and $140 million in fiscal 1999. So far the agency has repaired the Year 2000 problem in only 83 of its 127 mission-critical systems.