House Budget Bill would Slash Funding for IRS Collection Program

The funding for the Internal Revenue Service’s private debt collection initiative would be cut to $1,000,000 for fiscal year 2008 under a budget proposal submitted by the chairman of a Congressional subcommittee that oversees the agency. The IRS has said that it would cost $7,000,000 to run the program in fiscal 2008.

The bill, HR 2829, calls for funding of the IRS private debt collection program to be cut stating that “Not more than $1,000,000 of the funds made available [to the IRS] may be used to enter into, renew, extend, administer, implement, enforce, provide oversight of, or make any payment related to any qualified tax collection contract.”

In inserting the language to slash funding for the program, Rep. Jose Serrano, D-N.Y., Chairman of the House Appropriations’ Financial Services and General Government Subcommittee, said to the Associated Press, “I believe that it will cripple [the program] to the extent that they can’t go any further."  A spokesman for Rep. Serrano confirmed to insideARM.com this morning that the Congressman’s intent in cutting the funding was to kill the program.

Serrano stated consumer privacy and data security concerns as the primary motivation to kill the program.

Serrano’s office said that the bill is expected on the floor of the House later this afternoon.  Currently, they are not aware of any counter-amendments to the proposal that would cut off the funding.

Serrano’s move was expected by the Tax Fairness Coalition, a trade group representing private collectors involved in the IRS program. “Rep. Serrano has been a vocal opponent of the program,” said Dan Drummond, the group’s spokesperson. “Frankly, we’re a little surprised he put any funding for the program in the bill.”  Drummond could not comment on the language’s prospects for passing, but he did say that even if the bill passes the House, it still faces a battle in the Senate over the specific language.

Drummond said that the program has grossed nearly $20 million for the IRS already.

The Coalition contends the outsourcing program generates more revenues for the agency. Indeed, 25 percent of the funds from the program are authorized to pay for additional enforcement, including the hiring of additional personnel, says Drummond.

"This is a complement to what the IRS is doing," he said. “There are no IRS jobs being duplicated. They just don’t have the resources at this point.”

The IRS had planned to expand the program in 2008 to 10 agencies from the two currently collecting on its behalf. The IRS hasn’t commented on Serrano’s plan.