Taxpayer rights legislation passes in House

Once again on Tax Day, April 15, lawmakers in the House of Representatives, approved by a vote of 238 to 179 a measure designed to simplify the tax code and make it more fair, according to the bill's sponsors, Rep. John Lewis (D-GA) and Rep. Charles Rangel (D-NY), chairman of the House Ways and Means Committee. Among other provisions, the bill, called the Taxpayer Assistance and Simplification Act of 2008, prohibits the use of private debt collectors by the Internal Revenue Service (IRS).

"This program violates the public trust and must end," Lewis said about the debt collection program.

The bill also provides that distributions from a health savings account (HSA) for qualified medical expenses would be excluded from gross income, only to the extent those expenses are substantiated.

Republicans in the Senate are expected to oppose the HSA and debt collection provisions in the law, and the White House has announced that the president will veto the bill, the Washington Post reports.

Senator Charles E. Grassley of Iowa, the top Republican on the Senate Finance Committee, which must approve the bill, has expressed strong opposition to the provision ending the private debt collection program. One of the two private debt collectors still used by the IRS, CBE Group of Iowa, is based in Grassley's home state, money.CNN.com reports.

"The program is still relatively new. It should have a fair chance to succeed or fail on its merits before Congress rushes to kill it in the cradle," Grassley said in a letter to Sen. Byron Dorgan, (D ND) a member of the Finance Committee, who is sponsoring similar legislation in the Senate. The Finance Committee has not scheduled a hearing on the bill.

Other provisions in the bill would protect taxpayers from identity theft by requiring the IRS to notify taxpayers if it suspects identity theft and strengthening efforts to fight scams such as phishing schemes. The legislation also prohibits the misuse of the Treasury Department's names and symbols on Web sites, fcw.com reports.

Rangel noted that the bill followed recommendations made by the IRS National Taxpayer Advocate, Nina Olson, who said in testimony before Congress in March that the use of private collection agencies could cost $81 million more in foregone tax revenue in 2008 than if the IRS staff handled the cases, money.cnn reports.

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