Florida. I think you drove from orlando. Thats impressive. Thank you very much for your determination to be here. I know it wasnt easy. Let me pause for a moment to thank all our first responders, local government officials and Community Members who stepped up and responded to the Hurricane Irma in my home state of florida. It is impressive to see everyone working together. Im confident we will continue to Work Together in the aftermath of the storm as well. Todays hearing is another important step in the process of considering forms to the irs. I have stated previously i do not view this effort as an opportunity to degrade or discredit the good work being done by irs employees. However, im a big believer in continuous improvement. Thats been my philosophy in business. We can always get better. Government like business we should always be looking ways to improve. A system of voluntary tax compliant, even with the simplest of tax codes, there are bound to be disputed. What we hope to learn today is about the experience of those taxpayers. These are folks that have been in the trenches working with a lot of those taxpayers involved in resolving disputes with the irs. Whether there are ways to improve current process, i believe there will be. The nearly 20 years ago the last time reforms were made to the irs one of the key priorities was the creation of an independent appeal function. Congress approved the importance of an independent forum when the right to appeal so such a forum was included in the taxpayers bill of rights and codified as a responsible of the commissioner. Ensuring the independence and availability of a review process for taxpayer dispute remain a top priority of this Sub Committee. In addition to being department disputes Resolution Options need to be accessible and efficient. The process is failing if only Large Businesses with deep pockets feel equipped to dispute a determination made by the ira. Individuals and Small Businesses should not have to weigh the cost of hiring outside help against paying the assessment. For most taxpayers their only interaction with the ira is when they file their taxes once a year. When the taxpayers do not find themself in a dispute with the agency they deserve a fair and and a prompt process. I look forward to working with a Ranking Member on these issues and to the hearing from our witnesses as we continue our effort to examine reforms to the irs. I now yield to mr. Lewis for the purposes of an opening statement. Thank you, mr. Chairman. For holding this hearing resulting in taxpayers disputes with the Internal Revenue service. I welcome you back to washington, mr. Chairman. And on behalf of the citizens of the georgia and especially the citizens of the fifth district, we were able to welcome hundreds and thousands of people from florida. I went into a parking lot in downtown atlanta on saturday and there were so many cars from florida and people had their dogs, walking their dogs through the parks from florida. Were neighbors and i want to in particular welcome ms. Wilson and mr. Schenn. I have relatives that live in ft. Lauderdale. The only thing we had happen in my district for the most part was pine trees coming down. I want to thank you for being here today. Before we begin, mr. Chairman, i will like to take a moment to extend my condolences to you and the million of americans who were impacted by the recent hurricanes in the caribbeans and the southern states. As you know, the hurricane damaged homes, downed trees, closed roads and left about one million residents without power in my home state of georgia. Now our citizens, our people begin the difficult process of building their homes, their communities and their lives. I hope this committee will Work Together to do all we can to assist, to recover efforts. Mr. Chairman, oive said it before and i will say it again we must approach this effort to reform and improve the irs with a great deal of ca re and thoughtfulness. I hope el take time to i cautioned that we cannot get blood from a turnip. Congress cut the irs budget by almost 1 billion since 2010. Over the last three years, the budget for the irs appeal Office Dropped 11 . And there are about 24 fewer officers. Today weve been learning more about how these deep budget cuts have affected the ability of the agency to resolve disputes with taxpayers. Citizens expect and deserve timely and efficient services. Simply said, mr. Chairman, taxpayers will not get the level of service that they expect and deserve until we provide Adequate Funding to this agency. As you know, this is the Sub Committee forced hearing to explore how we can improve the irs. We will remain bipartisan and explore a Good Government path to determine how the irs operates and to identify possible improvement. I hope and pray that our work product will be a model for our colleagues. This afternoon we can we will also explore how to improve what can be a long and complicated appeal process. To get together, we will listen and learn about possible remedies. Some may suggest expanniding th number of states that have hearing officers, ensuring the and allowing taxpayers to have facetoface conferences throughout the appeal process chl above all i hope we will continue to Work Together as we have all year to explore and address these issues. In closing, mr. Chairman, i look forward to hearing from our witnesses and learning more about their experiences with the agency. Again, mr. Chairman, i want to thank you, my friend, for holding this hearing. Thank you, mr. Lewis. I want to thank you for your thoughts and prayers and we do have a lot of our family and people that went to georgia and other states and i appreciate your thoughts on that. You know youve got my commitment to Work Together on a bipartisan basis. We want to improve this together. Theres a lot of work to be done. I look forward to working with you. Without objection, other members Opening Statements will be made part of the record. Todays witnesses Witness Panel includes four experts, kathy, director of the irs practice and procedures at the alliance group, pete sepp, president at the taxpayers union. Byron shinn. I think hes probably got 35 years in dealing with dispute resolution with the irs. C Cassie Wilson from orlando and a member of the aicpa. The subcommittees will receive your written statements and they will be made a part of your record. Each of you have five minutes to deliver your oral remarks. You may begin when youre ready. Chairman, Ranking Member lieu skp lewis and members of the subcommittee thank you for inviting me to testify. It is an honor to provide comments today. I interact with small special medium size businesses in my work. I also spent 29 years at the ira and feel this gives me a unique perspective into the examination and appeals process. My testimony focuses on challenges that taxpayers face when dealing with the irs and what irs can do to improve the process. I raised six issues in my written testimony and id like to highlight two of those. The first issue is the appeals process. Before heading to court the final administrative step a taxpayer can take to contest an adverse termination by a revenue agent is through palappeals. Appeals is important to any business seeking a fair review of their tax purposes. Taxpayers are appreciative of the opportunity to attend the appeals conference in person. They are not thrilled about the recent change by appeals indicating that they may not be granted an inperson meeting. Appeals is made telephone and virtual conferences First Options for an appeal only granting inperson concerns and limited circumstances. We believe not granting taxpayers an opportunity to have an inperson meeting would be highly prejudicial to taxpayers, restrict the ability to adequately judge the credibility of taxpayers and make it more difficult where the appeal is of highly technical focused cases. While we have seen appeals officers flexible in granting inperson conferences, we tha believe that taxpayers should have a meet face to face. Another issue emerging in appeals is the increased involvement of irs compliance employees in appeals meetings. This change has created a perception for taxpayers that they may not get an independent hearing and decision as afforded by the taxpayer bill of rights. We believe the only involvement should have at appeal system in a preconference meeting. In a preconference the originating function can attend an pales conference to present their views on the issues, the taxpayers protest and hazards in accordance with expar ta communication rules. In a preconference setting exam would leave after their presentation but as of late rather than leaving at this point exam has been invited by appeals to stay for the taxpayers presentation. When this happens, the entire appeals atmosphere is altered and there are opportunities for this to turn into an extension of the examination process for a taxpayer. The independence of appeals is hindered when exam plays too great of a role in the appeals process. A representative recently described a situation wherein a preconference it became clear that exam had not fully addressed a position the taxpayer had brought forward in his response to the exam team. After hearing the taxpayer orally present their position at the appeals meeting the exam team made another 24 page submission to appeals to attempt further support for their position on the issue taking an alternative approach. It seems unfair that exam can attempt to continue their process when the case is assigned to an independent forum to make a decision. We disagree with appeals have unilateral Decision Making over exam participation in a conference. Taxpayers who feel as if they have already been through a grueling process with exam should be able to have the peace of mine their case is being given a fresh look by appeals and that the examination is over. Todays comments on the issue of alternative dispute resolution focus on the irs fast track settlement. This was created to provide a resolution for taxpayers to mediate their disputes during examination with an appeals official acting as a mediator. The use of fast track has the potential to be a highly effect till tool when both parties come to the table willing to reach an agreement. They welcome an opportunity to resolve as many issues as possible at the lowest level in a cooperative manner. This same sense of urgency should be felt by the irs n. Closing i commend the committee for its work and oversight in ensuring the taxpayers receive fair treatment and good service from the irs. Apply ya apply a apply ill be glad to take your questions. A number of my predecessors have actually testified in this very room on taxpayer rights issues, so im particularly honored that you would ask me here to follow in their foot steps. We need to follow in the foot steps of all of our predecessors in developing a bipartisan solution to many of the problems that have cropped up since enactment of the irs reinstructirestructure and reform act. Taxpayers triage. What you need are a number of steps, a number of options in resolving problems between the agency and taxpayers that provide a range of responses. One of them is prevention, of course. We can simplify the tax system. We can educate taxpayers about their rights in advance so they know going into the process of interacting with the irs what to expect and perhaps problems can be resolved at that level. The preconference level for example. Then theres basic care. What we have now, of course, is the appeals process and a very alternative dispute resolution process. Were going to hear a lot from the Witnesses Today about some of the malfunctioning systems within appeals and especially with the recent evolution and the Large Business and International Division of strategies like designating cases for litigation that can be very harmful to the audit process. I hope we can discuss that in further detail later. But the rise of alternative dispute resolution mechanisms around the world its relatively flat usage here in the United States actually declining at the appeals level right now suggests that we need very serious reforms if were going to make that process workable in the future. Third level of triage really is intensive care. Thats when taxpayers and the irs have to litigate an issue. And their taxpayers access to the court, beyond the tax court level, is still highly problematic. Everything from the antiinjunction act to the deck la tore relief act essentially prevents taxpayers from enforcing their rights in court in a meaningful manner. Largely their choices are confined to litigating for damages after the acts have already been committed by the agency that have deprived a taxpayer of his or her income or right to earn. The fourth level is essentially post op observation as i i will call it. Oversight. Now, current plans in several of the tax reform options being discussed would do away with the irs Oversight Board. There are flaws in the Oversight Board certainly, but i would urge this committee to very carefully consider alternatives to the current irs Oversight Board which is essentially paralyzed due to a lack of a kwa kwa quarum. Specifically i would make a few recommendations and again, we can discuss these in detail. The foundation for another taxpayer rights package really ought to be based on hr 3220 the preserving taxpayers rights act. Its a bipartisan bill. It codifies the right to appeal. It establishes a more businesslike working relationship between the irs and taxpayers. This will apply to Large Business, Small Businesses, individuals across the board. Section 3 of that bill which essentially directs the secretary to begin developing more dispute resolution procedures at appeals would pave the way for more effective use of adr in a number of situations. There are many, many other suggestions i could make that we should look at. The taxpayers bill of rights enhancement act just introduced in the senate yesterday. Hr 2901 which would expand some of the assistance and the volunteer income tax assistance program, expanding low income taxpayer clinics. All of these things need to be put into a package to Work Together to enhance the progress we have made in taxpayer bill of rights 1 t 2 and the irs restructuring and reform act. This is the committee where it all starts. Every single piece of important irs reform legislation began with members of this committee, your predecessors and you now, such as with the respect act that just passed, coming together in a bipartisan fashion to do better for taxpayers. We can do it. We must do it. I thank you for your leadership. Thank you. Mr. Shinn youre recognized. Thank you, chairman buchanan, Ranking Member lieu skpewis ands of the subcommittee. As a practicing accountant for over 38 years and a florida cpa, ive seen a lot of change. Can you speak up a little bit more in the mic. In my opinion our focus should be Taxpayer Service first, improved tone with access, consistent controls, and require fast track steps. I have a unique perspective as i have been involved in oversight of the florida cpas as a member of the board of account probable cause panel for well over a decade. Most practitioners work hard to get it right. It is a handful of marginal practitioners and aggressive taxpayers that try to push the envelope. These are the practitioners and taxpayers that need to be reviewed. First id like to discuss correspondence audits. They have been expanded. These exams require responses in a specific period of time. However the irs responses are taking considerably more time than the tax payer is given. Once the irs received the submitted responses, in several instances the taxpayers rights have been ignored by the issuance of 15 day letters and then shortly there after 90 day notice of deficiencies there by ignores the 30 day letter which grants the rights of a taxpayer for an administrative hearing and appeals and that also breaks their taxpayer bill of rights. This also prevents the fast track settlement opportunity. Therefore, i believe a standard that it should exist that the process must be maintained and the service when it jumps over process should lose the right to pursue additional revenue, follow the rules, or lose the adjustment. We also should require fast track to prevent the circumstances that are existing today. I next want to speak about field exams. The process has been very taxpayer unfriendly with an enforcement tone. Over my 38 years we have reached a new low regarding the respect that the taxpayers and their professionals have with the service. It is as if the taxpayer is guilty and have to prove the irs wrong. The agents are doing several audits at the same time and they tend to start and stop during the audit. Many of them taking much more than 12 months. This just is not right. We have new rules that are also killing the system. An example is a new partnership exam rules. Theyre brought to process to a state of total chaos. In order to close issues and reduce the time necessary, we talk about the call centers and the local office access. Unfortunately the wait time on the call centers is extremely long. Overall my experience has been good once you get to a qualified person. This shows how the Service Needs to open up access. The service should increase the Call Center Available hours making them earlier, later, and on weekends. This service has a very good e service process. However, this has been reduced due to budget cuts. This needs to be expanded back in a much broader sense. The local offices no longer allow walkins. This is just not sorry. Its not taxpayer right. Its just not taxpayer first. They need to have reasonable access. Another area of concern is foreign disclosure exams. We are