Senator Reignites Debate Over IRS Private Debt Collection Program

U.S. Senator Chuck Grassley (R-Iowa) last week sent a formal letter to IRS Commissioner nominee John Koskinen asking him to define his position on the Internal Revenue Service’s use of private debt collection agencies to recover back taxes. Grassley also asked Koskinen to commit to a decision on the program in his first 60 days should he be confirmed as IRS Commissioner.

For at least a decade, Sen. Grassley has been the strongest Congressional proponent of the private debt collection program. In 2003, the IRS announced it would start using private debt collectors to go after older and less-complicated cases involving income tax arrears. A formal pilot program launched the next year with three collection agencies winning contacts for the work.

The contract was slated to expand to 10 companies once the pilot program wrapped. But heavy opposition to the use of private collectors — primarily from the union representing IRS workers, the National Treasury Employees Union – created massive roadblocks to full implementation. The ARM community didn’t help matters when several collection agencies not chosen for the contract launched formal complaints against the procurement process.

When Democrats regained control of Congress after the 2006 mid-term elections, there were several efforts to defund the program. The final blow came in early 2009 when the IRS opted to not renew the contracts of the two remaining debt collection agencies doing work on its behalf.

Grassley was an adamant supporter of the program at every step, often arguing passionately that private collectors could bring in additional money for the government on cases the IRS did not have the resources to pursue.

His position has been bolstered over the years by various reports. In 2011, the Treasury Inspector General for Tax Administration (TIGTA) issued a paper that found that the IRS did not take action on 47 percent of a sample of unpaid tax cases returned to it from the pilot program. That report came about a year after the Government Accountability Office said the study the IRS used to support its decision to cancel the PDC program “was not soundly designed” to support that decision.

Sen. Grassley referenced the 2011 TIGTA report in his letter to Koskinen last week, as well as a new report from the group that noted a nine percent decline in IRS enforcement actions from 2011 to 2012 and a 14 percent reduction in front-line enforcement staff at the agency. Grassley feels that now is the perfect time to launch a new private debt collection program at the IRS.

“Instead of raising taxes, as the president and his supporters want, we need to do a better job of collecting taxes that are already due and owed,” Grassley said.

Grassley is a senior member and former chairman and ranking member of the Senate Finance Committee, which will consider the nomination of John Koskinen as IRS commissioner. President Obama nominated Koskinen to the post on August 1 of this year. But the confirmation process is expected to be unusually tricky, as the IRS has been recently mired in scandal over the treatment of tax-exempt status application from conservative groups. A confirmation hearing date was not set before the government shutdown earlier this week.