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April 11, 2000

H.R. 4163 - Taxpayer Bill of Rights 2000
(Houghton (R) NY and 25 cosponsors)

The Administration is committed to strengthening taxpayer rights and will continue to work with Congress and the IRS to ensure that taxpayers receive the best service possible. Many of the provisions of H.R. 4163 represent important advances since the Internal Revenue Service Restructuring and Reform Act of 1998 was signed into law by the President. Moreover, the Administration remains committed to protecting taxpayer privacy and confidentiality, which form the foundation of our system of voluntary compliance. The Administration will work with Congress to ensure the enactment of these provisions.

The Administration opposes section 102 of the bill, which allows an exclusion from income for interest received on overpayments of tax. Section 102 would create a tax-exempt, Federally-guaranteed, risk-free obligation that would bear an artificially high interest rate (three percentage points above the comparable rate for Treasury bills). Taxpayers thus would have an incentive to "invest" with the Internal Revenue Service by intentionally overpaying their taxes in order to receive this tax-free interest. The provision in the bill that would allow the Secretary of the Treasury to remove the exemption in cases of "abuse" is not administrable.

The Administration has concerns with certain other provisions of H.R. 4163 (e.g., interest abatement, disclosure of IRS "working law", third-party return disclosures, and other aspects of Title II of the bill) and looks forward to working with Congress to address them during the legislative process. Many of these concerns can be addressed by modifications to the bill to provide clarity and objective criteria for application. In addition, the ability of the Internal Revenue Service to implement the provisions in a timely fashion must be taken into account in fashioning the final provisions.

Pay-As-You-Go Scoring

H.R. 4163 would affect receipts; therefore, it is subject to the pay-as-you-go requirements of the Omnibus Budget Reconciliation Act of 1990. The Administration has not yet completed its scoring of the bill, but it is evident that the magnitude of the proposed tax cut ($2.1 billion over FYs 2001-2005, according to the Joint Committee on Taxation) and the absence of any offsets could cause a significant sequester of Federal resources.