Home Media Center News Releases

Washington, D.C.— In a victory for U.S. taxpayers, the House of Representatives voted to repeal an Internal Revenue Service (IRS) program which contracts out tax collection to private-sector debt collectors, the leader of the union representing IRS employees said.

H.R. 3056, the Tax Collection Responsibility Act of 2007, approved by the House, repeals the IRS authority to hire private collection agencies to pursue tax debts. President Colleen M. Kelley of the National Treasury Employees Union (NTEU), who has been leading the fight against the IRS contracting program, praised the members of the House for taking the necessary step to end a misguided program that has already resulted in dozens of taxpayer complaints to the IRS.

“The Tax Collection Responsibility Act of 2007 is the most definitive declaration yet of the clear, strong and bipartisan opposition in Congress and among taxpayers to the IRS’s use of private debt collectors and a major step forward in stopping this misguided, costly program,” said President Kelley.

NTEU and America’s taxpayers owe many members of the House a debt of gratitude for their hard work on this bill, Kelley said. In particular, Ways and Means Committee Chairman and sponsor of the bill, Charlie Rangel (NY); author of the original repeal legislation and long-time leader on this issue Chris Van Hollen (MD); Oversight Subcommittee Chairman John Lewis (GA); Earl Pomeroy (ND) who managed the bill on the House floor, Appropriations subcommittee chair Jose Serrano (NY); Appropriations Committee member Steve Rothman (NJ); Ways and Means Member Bill Pascrell (NJ); and the House Leadership including Speaker Pelosi (CA); and Majority Leader Steny Hoyer (MD).

The legislation is the latest demonstration of the bipartisan opposition to the IRS program of hiring private debt collectors to pursue tax debt in exchange for a bounty of up to 25 percent of the money they collect.

“It costs more for the IRS to hire private companies to collect taxes and increasingly members of Congress and the public are learning about the outsourcing of the IRS work and becoming outraged,” said President Kelley.

Joining NTEU and lawmakers in voicing concerns over the program are the National Taxpayer Advocacy Panel, the National Taxpayer Advocate and a number of public advocacy groups. Just a day before the House vote, a coalition of six public interest groups teamed up with NTEU to issue a joint letter to representatives urging their support for H.R. 3056. “Privatizing federal tax collection is a waste of taxpayer dollars, invites overly aggressive collection techniques and jeopardizes the financial privacy of American taxpayers,” the group wrote.

The IRS program is “fiscally unsound,” the groups wrote. As IRS officials repeatedly acknowledged, in-house employees can perform the work at a far lower cost than private companies. The return on investment from using IRS employees is more than 13 to 1, while it is less than 4 to 1 when using private companies.

These serious flaws were underscored at a recent House Ways and Means Committee hearing. Along with ballooning start-up costs and high commission costs, the program has resulted in at least 72 taxpayer complaints to the IRS since last fall alone. During the lengthy hearing, lawmakers listened to audio tapes of taxpayers complaining of phone calls at inappropriate times, multiple calls to one telephone number, and calls in which taxpayers are asked to provide their social security numbers but are not told the nature of the call.

In addition to instances of taxpayer harassment, the IRS has spent $71 million so far on start-up costs, a huge jump from the $10 to $15 million the agency originally said the program would cost.

“Lobbyists for the debt collectors are making fantastic claims of record-breaking collections thus far. The reality is that collections for 2007 fall short of original projections,” Kelley said.

According to IRS reports, the program has failed to meet 2007 revenue projections by a significant amount. The companies collected only $32.13 million in gross revenue through Sept. 20, as opposed to the $45.7 to $65 million projected for the year. The commissionable revenue, or revenue that the private collection agencies actually collected, as opposed to what taxpayers paid in response to letters indicating their cases were being turned over to the companies, was even less—$25.19 million as compared to projections of $43.5 million to $61.8 million. Based on these kind of results, the program would bring in only $250 to $320 million over 10 years. Subtract the double-digit commissions and those revenues shrink to $188 to $244 million over 10 years.

“Evidence continues to mount that the IRS is paying millions of dollars for an unnecessary program that is frustrating, unfair and dangerous to taxpayers,” said Kelley. “I urge the Senate to approve this legislation to ensure that only accountable IRS employees perform the critical collection work that keeps America running.”

NTEU is the largest independent federal union, representing 150,000 employees in 31 agencies and departments.