U.S. Senator Charles Grassley (R-Iowa) is reviving a fight over using private collection agencies to help collect tax debts.
Grassley wrote late last month to John Koskinen, the nominee for Internal Revenue Service commissioner, asking for his view on private collection agencies and seeking a commitment from him to rely on outside contractors within his first 60 days as IRS commissioner if he wins confirmation, Bloomberg BNA reported. The issue threatens President Obama's nomination of Koskinen.
The program ended in 2009 amid objections from Democratic lawmakers. Grassley and program backers believe contractors should be used to work on smaller, low-yielding tax debts that arent a priority for IRS employees. Grassley has been a longtime proponent of the program.
Grassleys push could re-ignite the battle over private debt collection that pitted him and other Senate Republicans against the Democrats, the National Treasury Employees Union and consumer advocates.
The private collectors brought in $68.8 million in tax debts from 2006 to 2009. As criticism of it mounted, though, the effort was shut down in 2009 after a study by the Mitre Corporation concluded that given similar resources, IRS collection was more cost effective. When the program shut down, CBE Group, based in Waterloo, Iowa, and Pioneer Credit Recovery, based in Arcade, N.Y., were working on IRS contracts.
Grassley, serving his sixth term, is a senior member of the Senate Finance Committee that is considering Koskinen for the IRS job. Koshinen, 74, was nominated for the IRS post Aug. 1. He is a former deputy director of the Office of Management and Budget under President Clinton and led the governments efforts to prepare for converting computer systems for the year 2000. He served as chairman of U.S.-owned mortgage financier Freddie Mac from 2008-2011, during which at various times he also served as its CEO, its chief financial officer and its chief operating officer.
Under the program, the collection agencies were paid 24% of what they collected, and IRS was allowed to keep 25% of the money for its own uses.
In his letter to Koskinen, Grassley stressed the programs ability to bring much-needed dollars into IRS coffers without additional federal appropriations. Tax delinquent accounts continue to increase with the amount in the queue growing by 46% over the past five years, he wrote. With IRS under fiscal constraints, the answer cannot solely be ever larger appropriations from Congress."
IRS enforcement actions yielded $50.2 billion in fiscal year 2012, a 9% drop from 2011 in part because of budget cuts, according to a report by the Treasury Inspector General for Tax Administration released last month.
Calling tax collection an inherent role for government, the opponents of the privatization program that had been authorized in 2004 said the efforts could be performed cheaper and more efficiently by IRS employees.
The collection of federal taxes is a core government function that should only be performed by the IRS, Representative John Lewis, a Georgia Democrat, said during the 2009 debate on the program. The Ways and Means Committee has received testimony from a number of sources, including former IRS officials, that the IRS can collect federal taxes cheaper and more efficiently than the private collection agencies."