Wednesday, September 13, 2017
Congress seems to be on an unceasing quest to undermine effective tax collection (for why I choose those words see my rant here). In what can only be described as yet another boneheaded move, Congress included a provision in the Fixing America’s Surface Transportation (FAST) Act in 2015 that required the Service to out-source collection work to private collection agencies (PCA's).
Before 2015, Congress had twice pulled this move, each effort resulting in misery and failure. The first time was in 1872. Joe Thorndike recounts the ensuing disaster in a great 2004 article in Tax Notes. The second time was in in 2004 in §881(e) of the American Jobs Creation Act, which created IRC §6306. The Taxpayer Advocate Service's 2013 study showed how that effort sucked wind.
Congress should have listened to the classic Homer Simpson advice of "if at first you don't succeed...give up" But nooooooo. Congress instead decided the problem was it had not been forceful enough. So the 2015 legislation is more mandatory and broadens the scope of what the Service is supposed to let PCAs do.
Others have explained comprehensively why privatizing collection is extremely poor public policy. Keith Fogg gave a really useful collection of reasons in a 2014 blog post, ironically titled "Private Debt Collection – An Idea Whose Time Will Never Come." Here I would just point out the obvious problem: the outsourcing creates the potential for massive confusion directed a the taxpayer population most vulnerable to that confusion. The National Taxpayer Advocate has posted a really good report on that aspect of the program.
The very thin silver lining is that many practitioner groups and individuals have gathered at the site of the upcoming train wreck to render aid. The National Taxpayer Advocate and her office has laid out all kinds of help for taxpayers in a page titled Private Debt Collection Program - What You Need to Know." Sure, it's hard to find and it's buried under two layers of webpages, but hey, it's there. And just because the taxpayers most likely subject to PCA's probably don't dive into the IRS website to find the TAS page, much less the subpages that have the help, does not mean the help may not be useful to some small portion who find their way to a Low Income Taxpayer Clinic or some other practitioner who might be more up on the issue. Similarly, those readers who will be attending the ABA Tax Section Fall Meeting in Austin will find CLE on PCA's at 9:45 am on Saturday morning at the Pro Bono and Tax Clinic committee meeting. Panelists there will be Nina Olson, the National Taxpayer Advocate Josh Beck from TAS; Bill Banowsky from the IRS; and Mandi L. Matlock from Texas Rio Grande Legal Aid.
Other individuals are writing on this topic as well. For example, Keith Fogg has an excellent post on how to help clients who are pursued by PCA's over at Procedurally Taxing earlier this year. I am sure we will see more posts on Procedurally Taxing as the PCA's expand in scope. Clint Locke (U. Ala. School of Accountancy) has posted an article here on various legal remedies taxpayers may have against improper collection from PCA's. He goes over the relevant case law under both the Fair Debt Collection Practices Act and the IRC.