IRS Private Collection Plan Survives Threat

The IRS got a reprieve Thursday evening from a threat to choke off funding for its private debt collection initiative after a Republican Congressman used a procedural action to remove language that would have virtually killed the program.

Earlier this week, Rep. Jose Serrano (D-NY), chair of the House Appropriations’ Financial Services and General Government Subcommittee, inserted language into a Treasury Department appropriations bill that would have cut funding next year for the private debt collection program to $1 million.

During debate of the measure Thursday, Rep. Jim McCrery, (R-LA), challenged Serrano’s addition to the proposal, saying it was in violation of House rules. Serrano conceded the point and the language was removed.

Today, a spokesperson for McCreary explained that “Serrano was legislating in an appropriations bill, a violation of House rules, so we raised a point of order on that, and he quickly conceded.”

In addition to the rules violation, Dan Drummond, spokesman for the Tax Fairness Coalition – an organization that represents the private tax collectors on Capitol Hill – pointed out that Serrano’s provision did not include an offset to compensate for the loss of revenue that would have occurred had the program been killed. 

While yesterday’s actions removed the $1 million funding limitation, there was not a specific dollar amount allocated for next year’s spending on the third-party collections program.

The initiative is now self-sustaining, with 25 percent of the money collected going back into enforcement actions at the IRS, but the agency plans to expand the program from the two agencies currently collecting to ten or more in 2008. That presumably requires more money.

Since the program began in September 2006, the collection agencies have been assigned almost 38,000 cases and collected almost $20 million. The goal is to bring in more than $2 billion over the next 10 years as the program expands.