Senators Send Letter Supporting IRS Private Debt Collectors

Three key U.S. Senators Friday circulated a letter of support for the private debt collection agencies currently working on behalf of the Internal Revenue Service to bring in overdue taxes. The letter was in response to language that would kill the program inserted into a House omnibus spending package last week.

Addressed to Treasury Secretary Timothy Geithner and IRS Commissioner Douglas Shulman, the letter from Senators Charles Grassley (R-Iowa), Charles Schumer (D-N.Y.) and Tom Harkin (D-Iowa) urged the two to continue the program, allowing more time for evaluation before making a final decision.

The two companies currently collecting on behalf of the IRS, CBE Group and Pioneer Credit Recovery, are located in Iowa and New York.

"We remain cautiously optimistic that a PDC (private debt collection) program could be successful in helping to close the tax gap, but only if it is allowed to operate at full capacity," the Senators wrote.

The IRS is administered through the Treasury Department. Grassley is ranking member and Schumer is a member of the Committee on Finance, with jurisdiction over tax policy and the IRS.

The spending bill containing a provision that would strip the IRS private debt collection program of funding passed the House Thursday. It now goes to the Senate for consideration. Grassley said he was drafting an amendment Friday to cut the language from the bill that would eliminate the collection program. However, it was unclear whether the Democratic Senate leadership would allow amendments when the bill comes to the floor next week.

A group representing the two collection agencies currently working on the IRS debt collection contract, the Tax Fairness Coalition, said in a statement Friday, “We commend Congress for their efforts to address current market conditions and an exploding, deficit but limiting funding for the self funded IRS Private Debt Collection Program makes little sense. In fact, the IRS has confirmed that because this program is self funded, it can continue without any appropriated funding.”

Earlier last week, the National Treasury Employees Union, the main opposition group for the IRS program, said, “Some of our most vulnerable taxpayers, including low income taxpayers, those with language barriers, the elderly and the less educated will continue to be disadvantaged as a result of the IRS’s continuing use of private collection agencies to pursue tax debts. In a bleak economic landscape, with skyrocketing job losses, home foreclosures and rising credit delinquencies, the last step we should be taking is disadvantaging people who are among our most vulnerable taxpayers.”

The NTEU’s primary argument for ending the program has been that IRS employees can do the same work for less investment. But proponents of the private debt collection initiative point out that the cases currently being referred to private collectors would not get worked by government employees.

"Even if the IRS enforcement budget were significantly increased, the accounts turned over to PDC are those that would still likely be ignored by IRS collection agents,” the Senators wrote in their letter Friday.