Tax Systems Modernization gets $300 million less than IRS wants

To far, the biggest systems loser in the fiscal 1996 budget
negotiations is--once again--the Internal Revenue Service.

Congress approved and President Clinton last month signed a Treasury appropriations
bill that allocates roughly $300 million less than the $1 billion the agency had requested
for its Tax Systems Modernization program. What's more, Congress created a new commission
to review the overall plans for TSM.

The 1996 budget is more generous than the appropriations for last year. For 1995, TSM
saw its request halved by Congress and faced a Senate threat of losing all funding for
electronic filing.

Of the $695 million in funding approved for TSM for this year, the conference committee
restricts IRS from spending $100 million until it receives a full accounting of the $8
billion TSM program.

Specifically, the conference committee ordered IRS to "use explicit decision
criteria to identify, evaluate and prioritize all systems investments planned for fiscal
year 1996." Additionally, the report asked the service for a schedule for correcting
deficiencies laid out by the General Accounting Office in an April report.

Finally, IRS must submit a revised schedule for every project included in the
modernization program and a plan for contracting more of the systems development work.

Though the committee set no deadline for the IRS response, it asked GAO to follow up on
IRS progress with a report in April. Plus, Congress used the $100 million carrot to elicit
a fast response.

IRS officials have no comment on the appropriation law or the conference report now,
IRS spokeswoman Jodi Patterson said. First, the service will prepare a response for
Congress, she said.

Overall, the conference committee approved $1.53 billion for Treasury Department
information systems, less than the $1.57 billion approved by the House but more than the
$1.44 billion approved by the Senate.

When it came to TSM, the House and Senate were pretty close in their reduction numbers.
The House had approved $26,000 more than the $695 million and the Senate $25,000 less.

One Senate conference aide said most members of the conference committee realize that
overhauling the government's tax systems is complex. The lawmakers do support the goals of
TSM, but they also wanted to express concern about maintaining progress, the aide said.

The conference committee approved much of the president's request because they did not
want to disrupt the program altogether, the Senate staffer said.

"While the budget for the Internal Revenue Service [el1] has risen from $2.5
billion in fiscal year 1979 to $7.3 billion in fiscal year 1996, tax returns processing
has not become significantly faster, tax collection rates have not significantly
increased, and the accuracy and timeliness of taxpayer assistance has not significantly
improved," the conference report said.

A chief beef from Congress over the years is that IRS does not focus enough on how it
does its job. That issue rose again during the conference and led to the order for the
13-member commission, which will include government and industry officials appointed by
President Clinton and congressional leaders.

The role of the commission, proposed by Sen. Bob Kerrey (D-Neb.), will be broader than
merely examining TSM, a Senate staff member said. "We want to look at the way IRS
does its business," he said.

With requests for additional funds and with little increase in efficiency, "the
present status of the IRS shows the need for the establishment of a commission which will
examine the organization of IRS and recommend actions to expedite the implementation of
TSM and improve service to the taxpayers," the conference report said.

The lawmakers suggested that one way to improve service would be to outsource more TSM
work so IRS staff can focus on the service's mission. "The IRS is a revenue
collection agency, not an automation design company, and should use contractor resources
more effectively," the report said.

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