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On The Floor  »  Ending Private Tax Collection

Ending Private Tax Collection

On October 10, 2007, the House passed the Tax Collection Responsibility Act of 2007, H.R. 3056, to repeal the use of private debt collection companies to collect federal income taxes, delay the application of an onerous three percent withholding requirement on government payments, and discourage individuals who renounce their U.S. citizenship to avoid paying taxes.

Repeals IRS authority to enter into private debt collection contracts. The provision would repeal the 2004 provisions that give the IRS’s authority to enter into contracts with private companies to collect federal income taxes. Numerous cases have been identified that illustrate taxpayer harassment, abusive calling, and violations of taxpayer rights, the Fair Debt Collection Act, and taxpayer return disclosure protections.  For example, one elderly couple was called 150 times, including five times a day, asking for a taxpayer.  Within the first five calls, the debt collector knew that the taxpayer did not reside at the home.  Calls continued for 27 more days with 1-7 calls per day.  Other cases involve people in nursing homes, those serving in Iraq, innocent spouses and those subject to identity theft.  The Federal Trade Commission has 130 complaints likely to involve the private tax debt contractors, and the Taxpayer Advocate has many more. With bipartisan support, the House has twice passed legislation to stop the private collection of federal taxes, most recently in the Roth amendment to the fiscal year 2007 Treasury Appropriations bill. 

Delays withholding requirement on certain governmental payments for goods and services. The provision would delay, for one year (to December 31, 2011), the application of the three percent withholding requirement on government payments to contractors and small businesses for goods and services.

Stops tax benefits for expatriates who renounce their citizenship. The bill would impose an immediate tax on individuals who renounce their U.S. citizenship and would mark-to-market gains on property of expatriating individuals. Some people relinquish their U.S. citizenship or terminate their long-term U.S. residency to avoid U.S. taxes.  The bill strengthens current law to ensure that certain high net-worth taxpayers cannot renounce their U.S. citizenship or terminate their U.S. residence in order to avoid U.S. taxes. Except for those with modest incomes, net worth, the bill would tax individuals on appreciation over $600,000 in their assets when they renounce their citizenship or terminate their long-term U.S. residency. 

Increases penalties for failing to file certain returns.  The bill includes a scaled-back version of the Treasury Department’s proposal to increase penalties (per return and annual cap) on failures by independent contractors to provide Form 1099 information returns.

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