A bill that would prohibit delinquent tax debtors from receiving federal loans or contracts would place a heavy burden on the Internal Revenue Service and other federal agencies, witnesses told a House Government Reform subcommittee Tuesday.
Representatives of the General Accounting Office, the Office of Management and Budget and the Treasury Department expressed support for improved federal debt collection, but voiced concerns about H.R. 4181, introduced in April by Rep. Jim Turner, D-Tex., a member of the Subcommittee on Government Management, Information, and Technology.
Turner's bill expands the Debt Collection Improvement Act of 1996, which currently only applies to non-tax debt-such as housing, business and student loans-to include tax debt as well.
The bill would require the IRS to report the tax status of all applicants-individuals and businesses-for federal loans, loan guarantees, and contracts to the agency granting the loan or issuing the contract-a task many witnesses cautioned would overburden the already beleaguered tax agency.
"IRS currently does not have the systems that would enable it to consistently provide federal agencies with timely, accurate, and complete information on an individual's or business's tax delinquency status," said Cornelia M. Ashby, associate director of tax policy and administration issues at GAO.
"We could support the application of H.R. 4181 to the federal acquisition process only after IRS is able to determine in a matter of hours whether prospective federal contractors have delinquent tax debt," Ashby said.
According to the Treasury Department, delinquent tax debts amounted to $68.3 billion as of January 1999.
The bill defines delinquent tax status as any federal tax debt that hasn't been paid within 90 days of assessment.
Most witnesses suggested implementing a pilot program initially to help the IRS and other agencies figure out the best way to deal with the new administrative tasks required by the legislation.
Witnesses also cautioned members on the effect the bill could have on small businesses.
"Cash flow is an everyday problem for all businesses and especially small businesses. While large businesses have plentiful lines of credit, small businesses do not have the same access," testified Deidre A. Lee, acting deputy director for management at OMB.
Nearly 50 percent of delinquent businesses-most of them small businesses-were delinquent for more than one tax period, Ashby said.