IRS Collection Program Threatened in both House and Senate

After parrying attacks over the past few weeks, supporters of the IRS private debt collection initiative are facing challenges in both the U.S. House of Representatives and Senate this week.

A proposal that would repeal the authority Congress granted to the IRS in 2004 to hire private debt collectors is included in a bill that will be heard by the House Ways and Means Committee today. The bill, H.R. 3056 -- titled the “Tax Collection Responsibility Act of 2007” -- is sponsored by Charles Rangel (D-NY), the committee chairman. The bill specifically repeals the authority given to the IRS in 2004 to contract with private debt collectors.

The electronic publication CongressDaily reported yesterday that Republicans are lining up to thwart the repeal of the private debt collection program. The ranking Republican member of the House Ways and Means Committee, Jim McCrery from Louisiana, blocked a House effort last month to choke off funds for the program.

On the Senate side, the Senate Appropriations Committee last week approved similar language in its version of the same Treasury Department appropriations bill that McCrery successfully blocked last month.  Like in the House’s version, a member of the committee, Sen. Dick Durbin (D-IL), inserted a proposal that would limit the funding used for the IRS private debt collection program in 2008 to $1 million. The IRS has said that the program will cost at least $8 million to operate in the 2008 fiscal year.

The Senate bill has been placed on the chamber’s calendar for consideration by the full Senate or referral to another committee, most likely Financial Services.

If the funding cap is passed, uncertainty will surround the collection program.  While the program is currently financially self-sustaining, plans call for the program to expand to at least 10 collectors from the current two in March 2008.  It is widely believed that $1 million will not be enough to expand the program, although the IRS has declined commented on that point.