Step 1. 56.25-75 multiplied by 0.75 direct man-years available for target case examinations. Step 2. The 56.25 direct man-years translates to 14,175 direct man-days, as 14,175 56.25 multiplied by 252 man-days per man-year. Step 3. 306 target cases can be examined by the Audit Division since 30614,175 divided by 46.3 direct man-days applied to a target case. The estimate of 46.3 direct man-days applied to a target case is obtained as follows: From fiscal year 1972 through the first six months of fiscal year 1975, we have, excluding time applied to work in process, direct man-days applied to target plus related cases 64.704 number of target plus related cases examined 1,396 46.3 Step 4. The 306 target cases corresponds with the examination of 765 target returns, as 765-306 multiplied by an assumed 2.5 returns per target case. Note that these examinations have gone through the review process but have not been necessarily closed by the Audit Division. Step 5. 502 returns from NTP targets could be closed by the Audit Division as 502-765 muitiplied by 0.66 where 0.68=800 NTP cases closed by Audit Division in fiscal year 1972 through fiscal year 1974 divided by 1,218, the total number of target plus related cases examined through review not necessarily closed by the Audit Division during this same period. News For Release: Upon Delivery Department of the Treasury Tel. (202) 964-4021 REMARKS BY DONALD C. ALEXANDER COMMISSIONER OF INTERNAL REVENUE THE EXECUTIVE COMMITTEE OF THE TAX SECTION NOTE: This text is the basis of Commissioner Alexander's oral remarks. It should be used with the understanding that some material may be added or omitted during presentation. THE ROLE OF THE INTERNAL REVENUE SERVICE IN THE LAW ENFORCEMENT COMMUNITY This year, the first year after the Watergate-related disclosures, is the year for investigating the investigators. The interest of the media is apparent to anyone who watches television or reads newspapers, and Congressional committees with overlapping jurisdiction are inquiring into what the investigative agencies do, how they do it, and whether they should do it. The Internal Revenue Service has not gone unnoticed; thus far this year I have testified 13 times before various Congressional committees, and the 14th, 15th, and 16th appearances are already scheduled. Moreover, two television networks have devoted an hour each of prime time this Spring to examining the tax system and the papers have been full of articles about the IRS and how it conducts (or conducted) its business. Now I can't say that all this is enjoyable, but I can say that much of it is healthy and necessary. Tax administration is too important to leave to the administrators alone. Of course, we would prefer to have a few less quarterbacks and at least a few rooters in the stands. Well before this current interest in investigative agencies, the IRS was engaged in a basic reexamination of itself. I outlined much of this in a speech last August to the American Bar Association Section of Taxation. The reexamination involved determining what is the work of the IRS, what are the resources available to do this work, and what are the ways in which this work should be done. We start with the basic proposition that the administration and enforcement of the tax laws of the United States is an undertaking of enormous proportions and the resources assigned to the IRS to accomplish its task are insufficient for this purpose unless the general public assists by believing in, and complying with, the tax system. Such belief and compliance by the public have been the case in the United States, and I surely hope and believe they will continue. Continuance, however, depends upon the public's belief in the basic fairness of the tax laws and in the basic fairness and efficiency of tax administration, and the public's confidence in and goodwill towards the tax administrator. We then review the resources of the IRS. First, we find that the IRS has a vast store of confidential personal and financial information supplied to it voluntarily by millions of taxpayers. Second, the IRS has powers granted to no other investigative agency to secure the additional information necessary to administer and enforce the tax laws. Third, the IRS has powers to take property by levy or seizure, by preemptory action without advance judicial determination of its right to levy or seize. The IRS has the authority to terminate taxable years and make jeopardy assessments where it believes collection of the revenues would be otherwise endangered. Finally, the IRS has people -- over 15,000 revenue agents and over 2,500 special agents who are trained and skilled financial investigators. And its people are good. - It is hardly surprising, therefore, that those charged with the general responsibility for law enforcement or particular responsibility for the conduct of one or more of the wars in which law enforcement officers are periodically engaged, i.e., the war on organized crime or the war against narcotics traffickers, should seek to enlist the IRS, with its information, its powers, and its people, in their battalions. In the past IRS has been a willing recruit. We are now examining and being examined on, whether the IRS has been too willing. The Narcotics Program is an excellent example. On June 17, 1971, the then President Nixon announced a "new, all-out offensive" upon drug abuse, "America's public enemy No. 1 ..., In order to fight and defeat this enemy. "The IRS was instructed to participate in this war and was given some additional money to enable it to do so. Under the direction of various Treasury officials, the IRS, with considerable reluctance on the part of some senior career people, proceeded to engage in the war. Among the weapons used were the powers of seizure, terminations of taxable years, and jeopardy assessments. Although a disproportionate amount of IRS Intelligence and Audit resources were assigned to this program and large assessments were made, collections were small. From the inception of the program in Fiscal Year 1971 through the close of Fiscal Year 1974, the Service expended approximately 53 million dollars on the program, but revenue collections were only 35 million dollars. It should not be necessary to point out that this ratio of costs to collection is quite the opposite of that of the general IRS program. More significant than the question of mis-assignment of resources is the question of misuse of powers. Those engaged in wars are not inclined to delay the use of a weapon until the propriety of its use has been fully debated. The application of the powerful enforcement measures intended for extreme tax exigencies to the goal of attacking the perceived public enemy resulted, as might be expected, in some counteractions by the courts. Judge Clark of the Fifth Circuit Court of Appeals stated inWillits v. Richardson, "The IRS has been given broad power to take possession of the property of citizens by summary means that ignore many basic tenets of pre-seizure due process in order to prevent the loss of tax revenues. Courts cannot allow these expedients to be turned on citizens suspected of wrongdoing not as tax collection devices but as summary punishment to supplement or complement regular criminal procedures. The fact that they are cloaked in the garb of a tax collection and applied only by the Narcotics Project to those believed to be engaged in or associated with the narcotics trade must not bootstrap judicial approval of such use." - The IRS has already taken steps to apply the same standards to narcotics traffickers' cases as those applied generally. We are aware of our responsibility to see to it that those who deal in narcotics meet their tax obligations fully, and we intend to fulfill that responsibility. We cannot, however, use the tax laws as a means of effecting forfeitures. - The Narcotics Program is perhaps an extreme example of the use of IRS, its information, its people and its powers, as a tool or a weapon to achieve ends other than those of tax administration and tax enforcement. More basic and difficult questions arise in the relationship of IRS to the Federal strike forces against organized crime and to the general law enforcement community. One aspect of this question has been explored at some length in recent weeks the need of other law enforcement agencies for the assistance of skilled IRS agents in the fight against organized crime and political corruption. But there are other needs to be considered: the need of the IRS for public confidence, the need of the nation for an effective tax administration system, and the need of us all to limit invasions of our privacy. These needs impose competing pressures on the use of Internal Revenue's investigative powers and personnel, and on access to its records. They must all be weighed in determining the proper role of the IRS in nontax criminal law enforcement. Before turning to an evaluation of these needs, it is worth taking a moment to make clear what is not in issue. The issue is not whether -organized crime figures should be called upon to meet their tax obligations and should be prosecuted if they engage in criminal violations of the tax laws; it is clear that they should be. The issue is not whether political corruption must be punished and deterred; it must. The issue is the extent to which the IRS can participate in these endeavors without rendering itself incapable of effectively carrying out its task of administering the tax system. A subsidiary issue is how, and whether, one can distinguish between the use of the tax system to investigate political corruption and the use of the tax system to investigate political opponents. The need of the IRS for public confidence flows from the fact that ours is a self-assessment tax system, and the fact that IRS necessarily intrudes into the private financial affairs of every taxpayer. For the selfassessment system to be effective, Internal Revenue must have the complete confidence of the taxpaying public. In the words of Mr. Justice Jackson, concurring in United States v. Kahriger, 345 U. S. 22, 36 (1952): "The United States has a system of taxation by confession. That a people so numerous, scattered and individualistic annually assesses itself with a tax liability... is a reassuring sign of the stability and vitality of our system of self government It will be a sad day for the revenues if the good will of the people toward their taxing system is frittered away in efforts to accomplish by taxation moral reforms that cannot be accomplished by direct legislation. The allegations of recent months about activities of IRS employees assisting in the carrying out of general law enforcement programs, or other non-tax related activities, have created the risk if not the fact of impairing "the good will of the people toward their taxing system." Although "Operation Leprechaun", "IGRS" and the "Special Service Staff" may not be everyday terms to many members of the tax bar, they are constantly in the minds of the tax administrators these days. |