H.R. 828: Federal Employee Tax Accountability Act of 2011

H.R. 828

Federal Employee Tax Accountability Act of 2011

Date
July 31, 2012 (112th Congress, 2nd Session)

Staff Contact
Sarah Makin

Floor Situation

On Tuesday, July 31, 2012, the House is scheduled to consider H.R. 828, the Federal Employee Tax Accountability Act of 2011, under a suspension of the rules requiring a two-thirds majority vote for approval. H.R. 828 was introduced by Rep. Jason Chaffetz (R-UT) on February 28, 2011, and was referred to the Committee on Oversight and Government Reform, which held a mark-up and reported the bill, as amended, on April 13, 2011, by a voice vote.

Bill Summary

H.R. 828 would prohibit individuals who have “seriously delinquent” tax debts from being eligible for federal employment in the executive and legislative branch.  The bill would define “seriously tax delinquent” as an outstanding federal tax debt for which a notice of lien has been publicly filed.  The bill would exempt employees who are working to settle tax liabilities by excluding federal tax debts being paid in accordance with an installment agreement, offer of compromise, or wage garnishment; for which a due process hearing or request for relief from joint and several liability is requested or pending; or for which relief has been granted.

The bill would prescribe a process for conducting the tax reviews necessary to identify individuals who are seriously tax delinquent that is based on the July 29, 1977, Treasury Department Order granting the IRS Commissioner authority to undertake tax checks.  H.R. 828 would require that agencies identify individuals ineligible for employment by requiring applicants to certify they are not seriously tax delinquent.  The bill would then require agencies periodically conduct reviews of public records for liens.  If a lien is discovered, the individual submits a form to the agency authorizing the Secretary of the Treasury to disclose to the agency head information on whether or not the individual has a seriously delinquent tax debt.  Tax information disclosed to the agency head is confidential.

H.R. 828 would require the Office of Personnel Management (OPM), in consultation with the Internal Revenue Service, to establish regulations to implement the bill.  The regulations would give the individual 60 days to demonstrate their debt meets one of the exemptions, provide due process rights, and allow for a financial hardship exemption.  OPM would be required to report annually to Congress on the number of financial hardship exemptions granted.

Background

According to House Report 112-115, federal employees are called to account for paying taxes by the Code of Ethics for the Executive Branch.  The code of ethics dictates that federal employees must “satisfy in good faith their obligations as citizens, including all just financial obligations, especially those such as federal, state, or local taxes that are imposed by law.”

"The IRS urges individuals to resolve their taxpayer obligations.  Taxpayers who fail to pay all they owe receive a Notice of Tax Due and Demand for Payment, which is a bill including the tax owed plus interest and penalties.  If the taxpayer does not respond to the first notice or subsequent notices sent by the IRS, their account becomes delinquent.

"Delinquent accounts may be turned over for collection, during which time an attempt will be made to reach agreement on a payment plan.  Taxpayers who cannot pay their tax on time have a number of options, including (1) extension of time to pay; (2) installment agreement; (3) delayed collection; and (4) offer in compromise.  Taxpayers who fail to cooperate with payment options may be subject to enforced collection action.  The IRS affords individuals several avenues for reconsideration, including the right to appeal the collection action.

"During the collection process, the IRS may file a Notice of Federal Tax Lien to secure the government's interest.  Once a lien has been filed, the IRS cannot issue a Certificate of Release of Federal Tax Lien until the taxes, penalties, interest, and associated recording fees are paid in full.

"In 1992, the IRS established the Federal Employee/Retiree Delinquency Initiative (FERDI) to promote federal tax compliance among current and retired federal employees.  Under FERDI, the IRS annually identifies federal employees who are tax delinquent for appropriate follow-up action.  In addition, the IRS contacts agency Chief Human Capital Officers with general data on delinquency rates of their civilian employees.  The IRS also provides information to support employee communication on tax compliance.

"To help the IRS collect delinquent taxes more effectively, Congress included a provision in the Taxpayer Relief Act of 1997 authorizing the establishment of the Federal Payment Levy Program (FPLP), which allows the IRS to continuously levy up to 15 percent of certain federal payments made to delinquent taxpayers.  Federal payments that can be levied through the FPLP include federal salaries, federal annuities, and federal employee travel advances or reimbursements.

"In March 2011, the Chief Human Capital Officers Council met to develop strategies to reduce the number of federal employees with delinquent tax liabilities.  Agency heads discussed the federal employee delinquency rate in communications related to the 2010 tax filing deadline.  For example, Office of Personnel Management Director John Berry sent an email reminding OPM employees of their responsibility to pay their taxes.

"Despite these efforts, the percentage of federal employees with delinquent tax liabilities has increased. At the end of fiscal year 2009, the most recent year for which Internal Revenue Service (IRS) data is available, 184,240 civilian federal employees owed $1.5 billion in taxes.  Only 85,000 of the 184,240 had entered into installment agreements.  The average delinquency rate for federal civilian employees was 3.35 percent, up from 2.29 percent in fiscal year 2008.

"The Committee agrees with the General Accountability Office that “voluntary compliance with tax law, the foundation of the U.S. tax system, could be undermined if the public perceives that federal workers and former federal workers successfully evade their tax obligations.” Since the vast majority of federal workers owe taxes stemming from the income they earn, the Committee supports the legislation."

Cost

Based on information from the Office of Management and Budget, the Internal Revenue Service, and the Joint Committee on Taxation (JCT), the Congressional Budget Office (CBO) estimates that, subject to the availability of appropriated funds, implementing H.R. 828 would cost $1 million in 2012 and less than $500,000 in subsequent years to create certification forms, develop new regulations, and review records of current and prospective employees.

Pay-as-you-go procedures apply to the bill because it would affect direct spending and revenues.  JCT estimates that enacting the bill would have a negligible effect on revenues.