The bill signed into law by President Clinton is the most wide-ranging overhaul of the Internal Revenue Service since the agency was created in its current form nearly a half-century ago. (See the July 23, 1998 Post story.)

Here is a list of some of the measure's more significant provisions and a comparison to previous law, along with reasoning behind the changes, according to congressional hearings, members' comments and experts' analysis.

Agency Structure

	Old Law	New Law	Reason for Change
Oversight Board	The agency operates under supervision of the secretary of the treasury.	A nine-member board, including six private-sector individuals, will oversee administration, management and direction of the IRS.	Provide consistency of oversight, while bringing in outside expertise and making the agency less insular.
Organization	The IRS has a three-tier structure – national, regional and district offices – organized on geographic lines.	The commissioner will create a new structure, following functional lines. A plan currently being studied will create divisions devoted to individual taxpayers, small businesses, large corporations and other groups of taxpayers with related concerns and issues.	With an increasingly complicated economy and tax code, both good taxpayer service and sophisticated enforcement require more of a specialized response from the IRS.
Personnel	IRS rules for hiring, firing, pay and other matters are governed by the general federal laws covering federal employees. Most IRS workers are classified under the General Schedule (GS) or Senior Executive Service (SES).	The agency will have additional flexibility to hire, pay and transfer certain workers. The IRS will have "critical pay authority" to pay as many as 40 workers salaries as high as the vice president's, now $175,400, for certain technical and professional positions. It will be able to pay bonuses of up to $25,000 to a small number of workers, and it will have more freedom to transfer workers.	The agency is having difficulty hiring and retaining technical experts, especially in computers, at a time when it is trying desperately to upgrade its electronic systems. Also, past efforts to reorganize have been hampered by restrictions on shifting workers from job to job.

Agency Culture

	Old Law	New Law	Reason for Change
Taxpayer Advocate	The taxpayer advocate, which replaced the taxpayer ombudsman in 1996, is appointed by and reports to the IRS commissioner. The advocate is supposed to assist taxpayers in resolving problems with the IRS and to identify general problem areas and propose solutions.	The position is renamed the national taxpayer advocate, and the occupant is appointed by the treasury secretary. He or she cannot have been an IRS employee for the previous two years and must agree not to go to work for the agency for five years after leaving the post. Local problem resolution officers are renamed local taxpayer advocates and report to the national taxpayer advocate. The circumstances are expanded under which taxpayer assistance orders – which halt or otherwise restrict IRS actions against a taxpayer – may be issued.	The taxpayer advocate is regarded as not sufficiently independent of the agency and its leaders to be effective. Also, the old law governing assistance orders was viewed as too narrow.
Inspector General	Responsibility for oversight of IRS operations is divided between the Treasury Office of Inspector General and the IRS Office of Chief Inspector.	A Treasury inspector general for tax administration is created within the Treasury Department. This office will take over the duties of the main Treasury IG with respect to the IRS as well as the duties of the chief inspector. Some 900 of the chief inspector' s workers would be transferred to the new IG, while the IRS would retain 300 to carry out internal audits.	Under the old system, most of the resources were under the chief inpsector, so many complaints were handled by the chief inspector; other complaints that originally went to the Treasury IG ended up back with the chief inspector. This created a perception that complaints were not investigated independently.
Performance Standards	Subject to general federal personnel law, agencies design standards of performance for firing, promotion, and related decisions.	The agency is directed to devise new standards of performance to refocus the IRS personnel system on the overall mission of the IRS. The standards are to evaluate workers more fully than merely "pass/fail," and to make meaningful distinctions among employees based on performance. The standards are not to be based on enforcement results, money collected, or any other measure that might lead to unfair treatment of taxpayers. .	IRS workers charged during Senate hearings that they were judged on how many seizures of taxpayer assets they made, how much money they collected and other similar criteria. At the same time, the IRS seemed to have little way of rewarding or even identifying workers who helped taxpayers or otherwise provided excellent service.

Taxpayer Rights

	Old Law	New Law	Reason for Change
Burden of Proof	In disputes with the IRS, there is a "rebuttable presumptionÓ that the IRS' s determination of tax liability is correct. In other words, it is up to the taxpayer to show that the agency is wrong.	In court proceedings, the burden of proof will be on the IRS with respect to a factual issue if the taxpayer produces credible evidence to support his or her position. However, the taxpayer must be able to substantiate his or her position, have kept reasonable records and have cooperated with the agency during the audit.	The burden of proof is on the government in criminal cases – and in criminal tax cases, for that matter – and members said they felt taxpayers ought to be treated the same way, even though most tax disputes are civil.
Innocent Spouses	Married couples who file joint returns are jointly liable for all the taxes due. Often after a divorce or separation, it comes to light that one spouse, for example the husband, has done something improper and the wife finds the IRS dunning her for late taxes. To qualify for relief, the wife has to pass a tough, four-part test.	Many former or separated spouses will be able to choose to be liable for taxes arising only from their own income and deductions. It will also be easier for innocent spouses to qualify for relief even if they are not eligible for separate liability. The IRS also is given expanded power to grant relief in situations.	There have been widespread complaints from taxpayers, mostly ex-wives, that their former spouses hid their financial dealings from them and only after the divorce did they realize something was wrong. There have also been complaints that the IRS has sometimes not tried very hard to find the ex-husband or the ex-husband' s assets and has been content to seize the ex-wife' s income or assets.
Penalties and Interest	Taxpayers who underpay are charged interest at a rate equal to the short-term Treasury bill rate plus three percentage points. Those who overpay are paid interest at a rate one percentage point less. If a taxpayer overpays in one year and underpays in another, he or she can end up owing interest even if the over- and underpayments are the same. Also, taxpayers who cannot pay in full when their returns are due and who pay in installments are subject to a failure-to-pay penalty while they are making their payments.	The net interest rate will be zero where over- and underpayments are equivalent so no interest will be due on many past cases. The future interest rate on over- and underpayments will be the same. Also, the failure-to-pay penalty during installment agreements is reduced by half – to 0.25 percent on the unpaid amount from 0.5 percent.	It seemed unfair that taxpayers whose net tax liability was zero would still be assessed interest. Likewise, heavy failure-to-pay penalties on taxpayers paying in installments struck many members as unfair.
IRS Responsiveness	Penalties and interest are assessed from the date a return is due, regardless of whether the taxpayer knows there is a tax liability.	Penalties and interest stop accruing after 18 months if the IRS has not sent the taxpayer a notice of the existence of a liability. The provision applies separately to each separate item on a return, and the interest and penalties resume 21 days after the IRS sends a notice. Beginning in 2004, the IRS will have only one year to send a notice to taxpayers before penalties and interest stop accruing.	The IRS is often slow to process returns, and penalties and interest are high. Thus, a taxpayer with a modest underpayment of tax could be hit with a big bill derived mostly from IRS delay.
Liens and Levies	Levy is the IRS' s administrative authority to seize a taxpayer' s property for unpaid taxes. The agency can seize property if a lien has been attached to it. Liens arise automatically where a tax assessment has been made, the taxpayer has been notified and yet has failed to pay.	The IRS would be required to notify a taxpayer that a lien has been filed and the taxpayer has a right to a hearing after a lien is filed. Likewise, the agency will be required to notify taxpayers of its intent to levy and the taxpayer can demand a hearing.	Taxpayers complain that their property is seized without proper notice or for taxes they do not owe. Seizure of business assets, even if later reversed, can be fatal to a business. Thus, more due process protections were viewed as necessary.