Bill Introduced To Block IRS Debt Farm-Out
By GINGER ADAMS OTIS

The Internal Revenue Service last week pushed ahead with plans to outsource its debt collection to private companies despite growing opposition from some elected officials on Capitol Hill.

Sen. Byron Dorgan (D-North Dakota) introduced legislation Sept. 12 that seeks to prevent the agency from using private companies to pursue tax debts.

Support in Committee

The bill has eight co-sponsors, including Sen. Patty Murray (D-Washington State), ranking member of the Transportation-Treasury Appropriations Subcommittee that has jurisdiction over the IRS.

Earlier this summer, U.S. Rep. Steve Rothman (D-New Jersey) succeeded in getting a similar amendment attached to a Fiscal Year 2007 Transportation- Treasury spending bill. It passed by a vote of 406 to 22 with bipartisan support.

But the IRS last week prepared to send letters to 12,000 low-to-middle income Americans informing them that their debt collection was being turned over to a private, for-profit company. Forty thousand other cases are to be added by the end of the year. Only debts of $25,000 or less are being handled by the collection companies.

An IRS spokesman declined to comment on the recently-introduced bill from Senator Dorgan or the amendment introduced by Senator Rothman, noting that the agency doesn't discuss pending legislation.

NTEU: 'Unwise' Farm-Out

The National Treasury Employees' Union, which represents many of the Federal workers employed by the IRS, has vigorously opposed the change.

NTEU President Colleen Kelly said that "at some point the weight of all the opposition to this unwise and costly plan will be so great that even the IRS won't be able to ignore it any longer."

Along with many members of Congress, in-house IRS operations like the National Taxpayer Advocate and outside groups such as the Taxpayer Advocacy Panel - a volunteer Federal advisory body - have raised serious concerns about the program's cost and the risk to taxpayers' personal financial information. Under the plan, private debt-collectors will keep up to 24 percent of the money they collect.

'Astounded' By Move

"It is astounding that the IRS appears ready to pay nearly a quarter of every dollar collected by private collection firms," Senator Dorgan said, "when internal IRS reports suggest that it would cost the Federal Government just three pennies on the dollar to have trained IRS employees collect tax debts."

Two of the three collection agencies the IRS has hired have had past problems with the law. One of them, Pioneer, was involved in a civil case that included allegations of using unethical tactics to collect student loans.

A partner in another company, Linebarger, Goggan, Blair & Sampson, pleaded guilty in 2004 to criminal charges connected to a bribery scheme to win a collection contract.

Both companies have said those were isolated incidents and extensive steps have been taken to avoid such problems again.

IRS: Protecting Privacy

Appearing on a recent CNN show about the outsourcing plan, IRS spokeswoman Linda Stiff said the IRS had made privacy concerns a priority.

"The IRS has taken every measure. We've taken every step," she said. "We've gone above and beyond to mitigate any concerns with the privacy or security of the data, the systems, the people or the procedures that the private collection agencies will be using."

Senator Murray two weeks ago sent a letter to IRS Commissioner Mark Everson outlining her opposition.

Among her concerns, she said, is "the likely result" that the private debt collectors will pursue "the most vulnerable taxpayers in our society."

She added: "We should not allow a system to emerge where better-off taxpayers get the benefit of interacting with a professional IRS (employee), while economically-disadvantaged taxpayers are relegated to the harassing tactics of private collection agencies."