Who Should Control the IRS?

An independent board made up mainly of private sector executives would oversee the IRS under a plan released Wednesday by a blue-ribbon commission on restructuring the agency.

President Clinton opposes the idea, and created his own IRS oversight board by executive order this week.

The National Commission on Restructuring the Internal Revenue Service, co-chaired by Sen. Bob Kerrey, D-Neb., and Rep. Rob Portman, R-Ohio, called for IRS oversight authority to be taken away from the Treasury Department and handed to an independent board, which would include five private sector business leaders, the Secretary or Deputy Secretary of the Treasury and a representative of the National Treasury Employees Union.

The board would be in charge of strategic planning and operational decisions at the IRS, while Treasury would retain its traditional role of tax policy administration. The commission's plan also calls for a five-year term for the IRS commissioner and would give the commissioner greater flexibility to hire, fire and compensate senior IRS executives.

The day before the commission released its recommendations, President Clinton signed an executive order creating an IRS management oversight board that includes ten Treasury officials, the commissioner and deputy commissioner of the IRS, and officials from the Office of Management and Budget, the Office of Personnel Management and the National Performance Review.

The administration's management board is part of a larger administration plan for revamping the IRS that would keep oversight authority in the Treasury Department. "We don't need to, and should not, turn the IRS over to a board of outsiders," Vice President Al Gore said recently.

The commission argues in its plan that Treasury cannot "provide the necessary focus, expertise and continuity that will be necessary for the IRS to meet the legitimate expectations of the American public." Kerrey said that he is "encouraged" by the administration's continuing commitment to IRS reform but believes that the commission's recommendations offer a more effective solution to IRS's management problems.

Under the commission's plan, Congress would create a joint committee on IRS administration, composed of representatives of six committees with jurisdiction over the agency. The joint committee would be responsible for reviewing IRS business operations.

Within the IRS, the commissioner would be granted greater authority over the agency's senior executives. "If the commissioner is to be held accountable, the commissioner must have flexibility to recruit his or her own management team," the commission recommended.

Senior executives would also be held more accountable for results. The commission found that currently, the commissioner and the deputy commissioner are the only IRS officials held responsible for the agency's performance.

"Most successful $7.3 billion organizations have a larger group of top-level managers and board members accountable for the 'whole' of the organization," the commission's report said.

IRS field managers and employees told the commission Congress should stop bashing the IRS.

"They believe that broadsiding the institution for all of the difficulties and controversies surrounding federal taxes makes their jobs more difficult, particularly when Congress and Treasury are the primary sources of complexity in the tax law. The commission agrees," its report said.

However, the commission said significant cultural changes are needed within the agency. Managers, commission members said, must break down "stovepipe" operations, change the IRS's risk-averse culture, and improve performance measures for employees. The commission said Congress should give the IRS personnel flexibilities similar to those granted the Federal Aviation Administration in the areas of recruitment, salary and incentive structures.