Government's Work

IRS push to contract out inherently federal jobs puts taxpayers at risk.

As a fuel compliance officer for the Internal Revenue Service, David Wind sets out each morning from the Pittsburgh area to help ensure that the federal government collects the more than $20 billion it is owed annually in fuel excise taxes. He is one of 140 FCOs, all highly trained and experienced employees who root out billions of dollars in fraud in the fuel distribution network.

On paper, the job seems pretty simple: Test the fuel in diesel-powered trucks that are used on our roads and highways. It involves inspecting trucks at company yards, construction sites and farms. It also involves inspecting businesses such as truck stops and wholesale fuel dealers. Only fuel on which federal and state taxes have been paid can be used to operate highway vehicles. The revenue is used to build and maintain the nation's roads and bridges.

Highway vehicles cannot be run legally on tax-free fuel, which is dyed red to distinguish it from tax-paid fuel. Red fuel is only for off-highway vehicles, such as bulldozers or back hoes.

Determining whether fuel is red might be simple, but determining who is responsible for illegal activity and who is subject to civil penalties is anything but. Here is how Wind describes a common situation: "I visit farmers who own both highway vehicles and those that never leave the farm. They often have storage tanks for both undyed tax-paid fuel [for the highway] and dyed tax-free fuel [for farm implements]. When sampling the fuel in the highway vehicles, I might find red fuel, which is illegal. If a farmer insists he has done nothing wrong, I sample the fuel out of his undyed storage tank. If I find the same shade of red, the problem could be beyond the farmer-who could have been sold tainted fuel. I would need to investigate the wholesaler. If a company knowingly sold the tainted fuel, I would propose civil penalties against the wholesaler, not the innocent farmer."

Each day, the 140 FCOs arrive unannounced at work sites and businesses and conduct searches of private property. They carry out investigations and assess taxes. They make decisions that often are unpopular and can shut down a person's livelihood. As one FCO says, "Just about every FCO has been unfortunate enough to put someone out of business."

Their diligence not only uncovers tax fraud in a billion-dollar industry, but it helps ensure voluntary compliance with tax laws. In fact, the work they do is a textbook definition of the term "inherently governmental work." Until just a few years ago, the IRS labeled FCOs as inherently governmental on annual lists that federal agencies are required to provide to Congress.

So, why is the IRS now taking steps to allow private sector companies to bid for this work? Why is the agency charged with collecting our nation's taxes and safeguarding the private financial information of U.S. citizens and business suddenly opening its doors to contractors?

The FCO is only one example in an effort at the IRS to move inherently governmental work to private companies. Strongly opposed by the National Treasury Employees Union, turning this work over to the private sector would put at risk effective and efficient tax collection, the voluntary nature of our tax system, and the personal and financial privacy of taxpayers who might soon find their private information on the open market.

Another IRS plan that would feature contractors doing inherently governmental work is to use private sector debt collectors to go after taxpayers who owe money. Not only would the IRS have to provide personal information, including Social Security numbers, to the most complained-about industry in America, but debt collectors would be paid a bounty on what they collect. This situation is ripe for abuse.

Whether they are fuel compliance officers, revenue agents or clerks, IRS employees are dedicated to their work. They have chosen public service and they are accountable to the American people. It is time for the IRS to step away from the contracting-out chopping block and let employees do their jobs.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Going Agile:Revolutionizing Federal Digital Services Delivery

    Here’s one indication that times have changed: Harriet Tubman is going to be the next face of the twenty dollar bill. Another sign of change? The way in which the federal government arrived at that decision.

  • Cyber Risk Report: Cybercrime Trends from 2016

    In our first half 2016 cyber trends report, SurfWatch Labs threat intelligence analysts noted one key theme – the interconnected nature of cybercrime – and the second half of the year saw organizations continuing to struggle with that reality. The number of potential cyber threats, the pool of already compromised information, and the ease of finding increasingly sophisticated cybercriminal tools continued to snowball throughout the year.

  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

  • GBC Issue Brief: The Future of 9-1-1

    A Look Into the Next Generation of Emergency Services

  • GBC Survey Report: Securing the Perimeters

    A candid survey on cybersecurity in state and local governments

  • The New IP: Moving Government Agencies Toward the Network of The Future

    Federal IT managers are looking to modernize legacy network infrastructures that are taxed by growing demands from mobile devices, video, vast amounts of data, and more. This issue brief discusses the federal government network landscape, as well as market, financial force drivers for network modernization.

  • eBook: State & Local Cybersecurity

    CenturyLink is committed to helping state and local governments meet their cybersecurity challenges. Towards that end, CenturyLink commissioned a study from the Government Business Council that looked at the perceptions, attitudes and experiences of state and local leaders around the cybersecurity issue. The results were surprising in a number of ways. Learn more about their findings and the ways in which state and local governments can combat cybersecurity threats with this eBook.


When you download a report, your information may be shared with the underwriters of that document.