Chapter 5 - The Roles of the Federal
Government in the Tax Process
Updates
Timely-Mailing-as-Timely-Filing:
In September 1998, the IRS updated the list of private
delivery companies that qualify as "private delivery
services" such that using them to mail documents to
the IRS will satisfy the timely-mailing-as-timely filing
requirement. Only specified services of the following
four delivery services qualify: Airborne Express, DHL
Worlwide Express, Federal Express, and United Parcel
Service. [Notice 98-47, 1998-37 I.R.B. __]
Question 3 - Status of Line Item
Veto Act: In February 1998, the U.S. District
Court (985 F. Supp 168) ruled that the Line Item Veto Act
was unconstitutional in that it violates Article I,
Section 7 of the U.S.
Constitution, regarding separation of powers. In June
1998, in Clinton, President of the U.S., et al v.
City of New York et al (No.
97-1374), the U.S. Supreme Court affirmed the
District Court opinion. The Court noted that under the
Presentment Clause of the U.S. Constitution, a bill
passed by Congress must be presented to the President.
The President will either sign it, or "return
it" (veto it). "Returning" an entire bill
before it becomes law is not the same as canceling a
portion of the legislation after it has been signed into
law. The Court also rejected the argument that exercise
of the cancellation was no different than the President
declining to spend appropriated funds or to implement a
tax measure. Per the Court, the Line Item Veto Act does
not compare because it allows the President to
unilaterally change the text of "duly enacted
statutes."
Subsequent to the Supreme Court's
decision, Senator Johnson introduced the Legislative Line
Item Rescission Act (S.
2220), a measure he had been endorsing for several
years. Unlike the line-item veto, the line-item
rescission calls for the President to propose rescissions
to a bill, which then gives Congress an opportunity to
vote to reject the rescission bill. The Senator believes
that this action is constitutional (because it does not
lead to the President, in effect, enacting legisation not
voted on by Congress) and it will expose
"controversial items of spending to the light of
day." [Cong. Rec., June 25, 1998, page S7182.]
Call for Repeal of the IRC: In
June 1998, the House of Representatives passed H.R.
3097 to repeal most of the IRC after the year 2002 -
the goal boing to more actively encurage work on a
replacement tax system. It is expected that neither the
Senate nor the Administration will support this measure.
For the past few years, there has been much talk about
replacing the federal income tax system with a flat tax
or other types of consumption taxes. This topic - major
federal tax reform, is discussed in Chapter
18 (on the Internet).
Question 10 - IRS Restructuring:
The work of the IRS Restructuring Commission culminated
in the passage of the IRS Restructuring and Reform Act of
1998 in July 1998. In addition to changes in the
management structure of the IRS, this Act also included
over 100 changes to provide taxpayers more rights in both
audit and collection matters, technical corrections to
the Taxpayer Relief Act of 1997, and some new provisions
unrelated to IRS restructuring and taxpayer rights. The
significant changes included in the Act relevant to the
IRS structure include the following items.
The IRS is to revise its mission
statement to better address serving the public.
The IRS is to reorganize to be
better poised to serve taxpayer needs. The
Commissioner has already begun this change. The
IRS will reorganize into the following four
operating units based on serving groups of
taxpayers with similar needs:
Individual taxpayers with
wage and investment income
Small business and
self-employed taxpayers
Large business taxpayers
Employee Plans/Exempt
Organizations and state and local
governments
For more information from the IRS
Commissioner on this modernization effort - click
here.
An IRS Oversight Board will be
established within the Dept. of Treasury (IRC
Section 7802). This Board will consist of 9
"private-life" members, plus the
Treasury Secretary, the IRS Commissioner, and a
full-time federal employee to represent
employees. The private-life members will be
appointed for 5-year terms by the President with
the advice and consent of the Senate, and must
have expertise in management of large
organizations, customer service, the federal tax
laws, information technology, organization
development, and needs and concerns of taxpayers
and small businesses.
The IRS Commissioner is to be
appointed for a 5-year term and may be
reappointed for more than one term. A candidate
must have experience in management. The
Commissioner may be removed at the will of the
President (IRC Section 7803).
A National Taxpayer Advocate is
to be appointed who cannot have been an IRS
employee during the 2 years prior to appointment,
and may not accept employment with the IRS for at
least 5 years following service as the Taxpayer
Advocate.
Congress is to promote paperless
filing and strive to have at least 80% of all tax
returns filied electronically by the year 2007.
Treasury is to study the feasibility of
implementing a return-free tax system for certain
individuals for tax years beginning after 2007.
Summary
of the IRS Restructuring and Reform Act of 1998 from the
Joint Committee on Taxation.
Background
on the IRS Restructuring Commission.
Links to More Information
Return to main page.
Last updated on September 1,
1998.
Tax Aspects of Business Transactions: A First Course, by
Annette Nellen
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