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The letter rulings program benefits the Government, the general public, and the taxpayer. It benefits the taxpayer by informing the taxpayer of tax consequences of a proposed transaction;

It benefits the Service and the general public by:

One, providing greater uniformity in the application of the tax law;

Two, decreasing the amount of litigation that the Service otherwise would be involved in;

Three, constituting a source of valuable information which keeps the Service abreast of the kinds of transactions that are being consummated or considered;

Four, highlighting unresolved issues and questions so that the Service can provide additional interpretative guidance or, through the Treasury Department, make legislative recommendations to the Congress;

Five, serving as a basis for the published revenue rulings pro

grams; and

Six, simplifying the work of revenue agents—they need only verify that the facts of the consummated transaction correspond to the facts in the ruling.

The statutory authority for user charges is 31 U.S.C. section 483A. This section grants Federal agencies the authority to recover the cost of providing special benefits to identifiable recipients. Office of Management and Budget Circular No. A-25, interpreting section 483A, provides the general policy that a reasonable charge should be made to each identifiable recipient for a measurable unit or amount of Government service or property from which the recipient derives a special benefit.

On the other hand, the circular specifically provides that no charge should be made when the identity of the ultimate beneficiary is obscure and the service or property can be primarily considered as benefitting the general public.

Because the various rulings programs have such diffuse public benefits, we believe that 31 U.S.C. section 483A does not provide sufficient statutory authority for the Service to implement the fees. Therefore, enabling legislation is needed before we may act.

The administration has proposed that the Service impose a user fee of $100 on determination letters and letter rulings. The fees are proposed to become effective October 1, 1985.

During the months since the submission of the budget, we have continued to explore the appropriate mechanism for instituting these fees. While our examination of the area is not yet complete, we suggest that the legislation enabling the Service to impose fees should provide wide discretion as to their specific form. This broad grant of authority would follow the rules of 31 U.S.C. section 483A which give agency heads the latitude to prescribe appropriate fees.

Thank you very much, Mr. Chairman. [The prepared statement follows:)

STATEMENT OF JAMES I. OWENS, DEPUTY COMMISSIONER, INTERNAL REVENUE SERVICE

Mr. Chairman and Members of the Committee, my name is James I. Owens, and I am the Deputy Commissioner of the IRS. I am here today to discuss one of the user fee proposals that appear in the President's fiscal year 1986 budget.

The Administration has proposed that the Service institute a user fee of $100 on requests for letter rulings and determination letters. I would like to take this opportunity to briefly review these various programs, their importance to the Service and the status of the user fee proposal.

THE RULINGS AND DETERMINATION LETTERS PROGRAMS

Historically, the rulings program dates back to 1938 when the Congress granted the Commissioner authority to enter into binding closing agreements with respect to prospective transactions of taxpayers. Because the closing agreement procedure was viewed as cumbersome, the Service announced commencement of the letter rulings program in 1953. Currently, the program is divided into two parts: letter rulings (including determination and opinion letters), and published revenue rulings.

A letter ruling is a written statement issued to a taxpayer which interprets and applies the tax law to a specific statement of facts. Letter rulings are generally issued by the National Office and concern prospective taxpayer transactions. Letter rulings are interpretations of the law only with respect to the specific facts presented in the ruling request and associated material. Consequently, letter rulings (previously referred to as private letter rulings) have no precedential value for other taxpayers.

There are two special categories of ruling letters that primarily concern the employee plans and exempt organizations areas—determination letters and opinion letters.

A determination letter is a written statement issued by one of 10 key districts that applies principles and precedents established by the National Office to a particular statement of facts as submitted by an individual or organization. It differs from a letter ruling only in its place of origin. These letters generally involve the exempt status of organizations, such as business leagues, or employee benefit plans. These organizations must have the Service review their applications for exemption. While church related organizations are subject to review, churches themselves have never been required to submit an application for exempt status.

An opinion letter, issued by the National Office's Employee Plans Division, expresses the Service's view on the acceptability of a master or prototytpe plan concerning employee benefits or individual retirement accounts. Unlike other ruling letters, an opinion letter is issued to a plan sponsor, such as a bank or insurance company, instead of a specific taxpayer. Once approved, the plans are marketed by the sponsor to employers or IRA holders.

We estimate that in Fiscal Year 1986, the Service will receive approximately 14,000 requests for letter rulings in the employee plans and exempt organizations areas and 26,000 requests in the corporate and individual issue areas of which 19,000 will be mandatory requests for changes in accounting methods or periods. Also, a total of 475,000 determination and opinion letter requests are expected in the employee plans and exempt organizations areas. Overall, we will be asked to respond to more than 500,000 requests.

A published revenue ruling is an interpretation of the tax law, published by the Service in the Internal Revenue Bulletin, for the information and guidance of Service employees and taxpayers. While letter rulings affect only the taxpayers that request them, the revenue ruling program has a national impact because it provides widely applicable general guidance and may be relied on by other taxpayers.

The letter rulings program benefits the Government, the general public, and the taxpayer. It benefits the taxpayer by:

1. Informing the taxpayer of the Service's position, thus enabling the taxpayer to determine the tax consequences of a proposed transaction;

2. Enabling the taxpayer to choose a course of action which will avoid future controversy and litigation with the Service; and

3. Enabling the taxpayer to properly report the transaction once consummated. It benefits the Service and the general public by: 1. Providing greater uniformity in the application of the tax law;

2. Decreasing the amount of litigation that the Service otherwise would be involved in;

3. Constituting a source of valuable information which keeps the Service abreast of the kinds of transactions that are being consummated or considered by taxpayers;

4. Highlighting unresolved issues and questions so that the Service can provide additional interpretative guidance or, through the Treasury Department, make legislative recommendations to the Congress.

5. Serving as a basis for the published revenue rulings program; and

6. Simplifying the work of revenue agents—they need only verify that the facts of the consummated transaction correspond to the facts in the ruling.

USER FEE LEGISLATION The statutory authority for user charges is 31 U.S.C. section 483A. This section grants Federal agencies the authority to recover the cost of providing special benefits to identifiable recipients. Office of Management and Budget Circular No. A-25, interpreting section 483A, provides the general policy that a reasonable charge should be made to each identifiable recipient for a measureable unit or amount of Government service or property from which the recipient derives a special benefit. On the other hand, the circular specifically provides that no charge should be made when the identity of the ultimate beneficiary is obscure and the service or property can be primarily considered as benefiting the general public.

Because the various rulings programs have such diffuse public benefits, we believe that 31 U.S.C. section 483A does not provide sufficient statutory authority for the Service to implement the fees. Therefore, enabling legislation is needed before we may act.

THE USER FEE PROPOSAL

The Administration has proposed that the Service impose a user fee of $100 on determination letters and letter rulings. The fees are proposed to become effective October 1, 1985.

During the months since the submission of the budget, we have continued to explore the appropriate mechanism for instituting these fees. While our examination of the area is not yet complete, we suggest that the legislation enabling the Service to impose fees should provide wide discretion as to their specific form. This broad grant of authority would follow the rules of 31 U.S.C. section 483A which give agency heads the latitude to prescribe appropriate fees. While a flat fee is much easier to administer than an hourly rate, the Service would like to retain the flexibility to consider a schedule of flat fees based on the type of request, its complexity and the length of time needed to process it. We also recommend that the Service be reimbursed for the costs of administering a user fee system.

I would be pleased to try to answer any questions you or the other members might have.

Mr. GIBBONS. Thank you.
Ms. Meisinger.

1

STATEMENT OF SUSAN R. MEISINGER, DEPUTY UNDER SECRE

TARY FOR EMPLOYMENT STANDARDS, DEPARTMENT OF
LABOR

Ms. MEISINGER. I would like to read a brief statement and submit longer testimony for the record.

I appreciate the opportunity to appear before your committee today to discuss the condition of the black lung disability trust fund and the changes which need to be made for

it to achieve solvency. The trust fund finances that portion of the black lung program which is administered by the Department of Labor. The fund is currently $2.5 billion in debt. Without corrective legislation that debt will not be repaid. Indeed, we project that it will grow to at least $30 billion by the year 2010.

Mr. GIBBONS. Who did you say they owed the money to?
Ms. MEISINGER. It is the Black Lung Disability Trust Fund.
Mr. GIBBONS. But who borrowed the money?
Ms. MEISINGER. The Treasury. The Treasury borrows the money.
Mr. GIBBONS. Go ahead.

Ms. MEISINGER. To resolve this problem, the Department of Labor will be submitting legislation to the Congress to temporarily increase the excise tax on coal production and limit benefit increases. The impact of the first year of the Department's proposed

legislation is reflected in our fiscal year 1986 budget, which anticipates a $235 million reduction in the advances needed for the trust fund and includes a $12 million savings in interest charges to the fund.

The Department's proposed legislation has three elements.

First, the proposal would, in stages, increase the coal tax from the current level of $1 per ton on underground coal and 50 cents per ton on surface-mined coal. Thus, in 1986, the tax rates would increase to $1.50 per ton for underground coal and 75 cents per ton for surface-mined coal, and would stay at these levels through 1990. From 1991 through 1995, those rates would increase to $1.60 and 80 cents, respectively. In 1996, the rates would drop back to $1.50 and 75 cents, to stay at those levels until the fund's debt is totally paid off and 2 full years had elapsed after the retirement of the debt with no new debt occurring. At that point, the tax rates would revert to the current levels of $1 per ton for underground coal and 50 cents for surface-mined coal.

Second, the proposal includes proportional changes in that section of the current law which limits the coal tax to 4 percent of the sales price. Thus, the sales price limitation would be increased to 6 percent in 1986 and 6.4 percent in 1991; it would then drop back to 6 percent in 1996, and 4 percent after the debt had been fully retired.

Third, the proposed legislation would temporarily sever the link between black lung benefits and Federal civilian pay. Under the current law, benefits are pegged to 3742 percent of the pay at the GS level 2. When the administration submitted its 1986 budget, it proposed a 5-percent reduction in Federal workers' pay for 1986, but included provisions to prevent black lung benefits from being reduced during that period. The Department's proposed legislation would be consistent with those parameters. The proposal would keep black lung benefits at current levels until Federal pay increased in 1988 beyond current levels. Then, the link between black lung benefits and the rate of increase in Federal pay would be reestablished. The result of this approach would be a freeze in black lung benefits for the years 1986 and 1987. In 1988, there would be a 1-percent increase. In 1989 and future years, the increases would be determined, as they are now, by looking at Federal civilian pay levels.

We are, of course, aware that the level of Federal pay over the next several years has been a matter of substantial discussion as a part of the fiscal year 1986 budget process. To the extent that the result of this process changes the expected levels of Federal pay, we would be prepared to examine alternative benefit level provisions for our black lung proposal.

Mr. GIBBONS. Thank you, ma'am. [The prepared statement follows:] STATEMENT OF SUSAN R. MEISINGER, DEPUTY UNDER SECRETARY FOR EMPLOYMENT

STANDARDS, DEPARTMENT OF LABOR Mr. Chairman and members of the committee, I appreciate this opportunity to appear before your Committee today to discuss the condition of the Black Lung Disability Trust Fund and the changes which need to be made for it to achieve solvency. The Trust Fund finances that portion of the Black Lung Program which is administered by the Department of Labor. The Fund is currently $2.5 billion in debt. Without corrective legislation that debt will not be repaid. Indeed, we project that it will grow to at least $30 billion by the year 2010.

To resolve this problem, the Department of Labor will be submitting legislation to the Congress to temporarily increase the excise tax on coal production and limit benefit increases. The impact of the first year of the Department's proposed legislation is reflected in our FY 1986 budget, which anticipates a $235 million reduction in the advances needed for the Trust Fund and includes a $12 million savings in interest charges to the Fund.

The Department's proposed legislation has three elements. First, the proposal would, in stages, increase the coal tax from the current level of $1.00 per ton on underground coal and $.50 per ton on surface-mined coal. Thus, in 1986, the tax rates would increase to $1.50 per ton for undergroun coal and $.75 per ton for surface-mined coal, and would stay at these levels through 1990. From 1991 through 1995 those rates would increase to $1.60 and $.80, respectively. In 1996, the rates would drop back to $1.50 and $.75, to stay at those levesl until the Fund's debt is totally paid off and two full years had elapsed after the retirement of the debt with no new debt occurring. At that point, the tax rates would revert to the current levels of $1.00 per ton for underground coal and $.50 for surface-mined coal.

Second, the proposal includes proportional changes in that section of the current law which limits the coal tax to 4 percent of the sales price. Thus, the sales price limitation would be increased to 6 percent in 1986 and 6.4 percent in 1991; it would then drop back to 6 percent in 1996, and 4 percent after the debt had been fully retired.

Third, the proposed legislation would temporarily sever the link between Black Lung benefits and Federal civilian pay. Under the current law, benefits are pegged to 3742 percent of the pay at the GS level 2. When the Administration submitted its 1986 budget, it proposed a 5 percent reduction in Federal workers' pay for 1986, but included provisions to prevent Black Lung benefits from being reduced during that period. The Department's proposed legislation would be consistent with those parameters. The proposal would keep Black Lung benefits at current levels until Federal pay increased in 1988 beyond current levels. Then, the link between Black Lung benefits and the rate of increase in Federal pay would be reestablished. The results of this approach would be a freeze in Black Lung benefits for the years 1986 and 1987. In 1988, there would be a 1 percent increase. In 1989 and future years, the increases would be determined, as they are now, by looking at Federal civilian pay levels.

We are, of course, aware that the level of Federal pay over the next several years has been a matter of substantial discussion as a part of the FY 1986 budget process. To the extent that the result of this process changes the expected levels of Federal pay, we would be prepared to examine alternative benefit level provisions for our black lung proposal.

Mr. Chairman, I would like to briefly describe the background of this Black Lung law that has led to the current situation. The Federal Coal Mine Health and Safety Act was enacted in 1969 to protect the health and safety of the Nation's coal miners. Title IV of that Act established a Black Lung benefits program to provide monthly cash payments to victims-and the survivors of victims-of black lung disease resulting from working in underground mines. For claims filed before December 31, 1972, this program was to be operated by the Social Security Administration (SSA) and financed by Federal revenues; the Department of Labor was given responsibility for claims filed after that date. In 1972, however, the law was amended to postpone for an additional six months the Department of Labor's responsibility for black lung claims, and to add a new provision requiring the payment of black lung related medical care. The 1972 amendments also expanded coverage to include surface mines.

The law was amended again in 1978 to liberalize black lung eligibility criteria and to change the financing of the benefits. In relation to program financing, the basic purpose of these amendments was to assign liability for payment of black lung benefits to the coal industry when a responsible coal operator could not be identified, rather than to the general revenues of the United States, as had previously been the case. Therefore, the Act created a Federally administrated Trust Fund to pay benefits in two situations: (1) where the eligible miner's last coal mining employment occurred prior to January 1, 1970; and (2) in all cases whether before or after January 1, 1970, where no responsible mine operator can be found. The Fund is financed by a tax on coal sold by producers after March 31, 1978.

The liberalized eligibility criteria contained in the amendments enacted in 1978 greatly expanded the beneficiary population handled by the Department of Labor, which rose from 6,000 to over 80,000 within the next two years and also led to grow

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