House Cuts Funds for IRS Privatization Program

A U.S. House committee this week cut funding in next year’s IRS budget for the controversial collections privatization program, but proponents said the funds aren’t needed anymore.

The House Appropriations Subcommittee on Financial Services and General Government this week unanimously approved an $11.4 billion budget for the Internal Revenue Service in fiscal 2009 but it included no funding for private debt collections. Full committee markup of the legislation is expected to occur next week.

Subcommittee Chairman Rep. Jose Serrano, called the privatization program “misguided and wasteful,” in his presentation of the budget.

“The [bill] also contains a provision to prohibit funds from being used in support of the IRS private debt collection program,” according to the statement from the Democrat from N.Y. “Under this very misguided and wasteful program, the IRS allows private contractors to collect unpaid taxes and to keep up to 24 percent of the tax revenue they bring in. This program should be terminated.”

Program proponents dismissed Serrano’s actions as political hot air.

The program “doesn’t need appropriated funds for it to work,” said Jeff Trinca, spokesperson for the Tax Fairness Coalition, which represents the two collectors in the program, CBE Group and Pioneer Credit Recovery. The program operates through a percentage of the funds collected.

“(The) vote to limit funding for the self-funded IRS Private Debt Collection program is more political grandstanding by some members of the House Appropriations Subcommittee on Financial Services who are more interested in supporting a narrow special interest than a program that continues to benefit all taxpayers,” the coalition added in a prepared statement.

In April, the House approved a tax bill containing a provision that would end the IRS’s use of private collection agencies (“US House Passes Bill Killing IRS Privatization Program,” April 16). But that legislation, like similar legislation passed a year earlier, has yet to see any movement in the Senate.