Bloomberg Tax
March 28, 2019, 5:38 PMUpdated: March 28, 2019, 7:07 PM

Truce on IRS Debt Collection Program Wrapped Into Bipartisan Bill (2)

Colleen Murphy
Colleen Murphy

A tax administration bill rolled out by a bipartisan group of tax writers includes a compromise provision on the Internal Revenue Service’s contentious debt collection program.

The bill would bar the agency from referring debt to private debt collectors if a taxpayer’s income is below 200 percent of the federal poverty level. An earlier version of the legislation had set the threshold at 250 percent.

The 200 percent threshold was in the version (H.R. 7227) that the House passed last year. The five-week government shutdown quashed any chance of that legislation passing the Senate.

The House released the text March 28, following lengthy negotiations between lawmakers in both chambers; the Senate also released a companion version the same day. The income threshold for the private debt collection program would offer a reprieve to some low-income taxpayers, a group that critics of the program have said it unfairly targets.

“The fact that you have a four corners agreement means that you now have a bipartisan track that is in place at the same time,” Senate Finance Committee ranking member Ron Wyden (D-Ore.) said March 28.

Sen. Chuck Grassley (R-Iowa), chairman of the committee, told reporters that he would have preferred for the threshold to be at 150 percent, but he will settle for 200 percent. The provision would have sunset in the old version of the legislation, he said March 28.

Reworking the IRS has long been a priority for Republicans and Democrats in both chambers. Republicans proposed splitting the agency into three units and removing some of its enforcement power in a June 2016 blueprint, released in the lead-up to the 2017 tax law.

The latest legislation also says the agency can’t refer accounts to the debt collection agencies if “substantially all” of a taxpayer’s income comes from Supplemental Security Income benefits or disability insurance benefit payments.

The IRS uses four private debt collection agencies to pursue long-overdue tax debts. The program, which is required by Congress, has been controversial. One of the contracts is in Grassley’s home state: CBE Group of Waterloo, Iowa.

Sen. Ben Cardin (D-Md.) said he opposes private debt collection, but the bill shows “a nice compromise.”

A Long Road

The bill would also would create an independent appeals process at the IRS and strengthen the agency’s ability to fight identity theft and tax refund fraud.

The introduction in the House comes shortly before the tax-writing panel is expected to vote on the measure in one of two scheduled April markups.

Ways and Means Oversight Subcommittee Chairman John Lewis (D-Ga.), ranking member Mike Kelly (R-Pa.), Ways and Means Chairman Richard Neal (D-Mass.), ranking member Kevin Brady (R-Texas), and bipartisan members of the subcommittee introduced the bill in the House.

“The commonsense provisions in this bill will protect low-income taxpayers, provide sensible enforcement reforms, and ensure the IRS provides taxpayers and small businesses the assistance they deserve,” they said in a release.

—With assistance from Allyson Versprille and Robert Lee.

(Updates with Senate bill text and additional comments in 10th paragraph.)

To contact the reporter on this story: Colleen Murphy in Washington at

To contact the editors responsible for this story: Patrick Ambrosio at; Karen Saunders at