7 May 1998
Source: http://www.access.gpo.gov/su_docs/aces/aaces002.html

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[Congressional Record: May 6, 1998 (Senate)]
[Page S4428-S4432]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
[DOCID:cr06my98-129]


     INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998

  The Senate continued with the consideration of the bill.

                           Amendment No. 2343

  Mr. ASHCROFT. Mr. President, I thank Senator Roth and Senator
Moynihan for having accepted the Leahy-Ashcroft amendment which will
provide electronic access to the IRS information on the Internet. This
amendment will require the IRS to maintain its web site with current
forms, instructions and publications so people anywhere with access to
the Internet can have access to those forms.
  To allow the public to have easy, efficient electronic access to all
the IRS information that may be needed to adequately prepare a tax
filing is a real benefit to the people, and I thank Senator Roth and
Senator Moynihan for accepting the Leahy-Ashcroft amendment which will
provide electronic access to the IRS information on the Internet. And I
thank Senator Leahy for his involvement in that measure.
  Mr. President, I am pleased that the bipartisan amendment introduced
by Senator Leahy and me has been adopted into the current legislation.
This amendment will give individuals the ability to access a great deal
of material from the IRS. Revenue rulings,

[[Page S4429]]

treasury regulations, internal revenue bulletins, and IRS general
counsel memorandum are just a few of the documents that will routinely
be made available in an easy to use format. This information should
provide for an easier and more understandable approach to tax planning
and preparation. Individuals will be able to see rulings that may be
similar to a situation they are in currently and plan accordingly.
  A central idea that I have carried from the time I was elected as a
U.S. Senator was that the federal government be open and accessible to
the public. I spent time traveling around Missouri, and visited every
county, to demonstrate to students how they could access information
about the federal government through my website. To rural and urban
areas the power of the Internet is tremendous--so much that was far
from reach is now accessible. This amendment moves IRS information
closer to the public in an orderly educational way.
  As has been mentioned here, the tax code has become increasingly
complex and onerous. My wife is a tax attorney, she even teaches tax
law at Howard University, and we do not even prepare our own tax forms.
My hope is that this modest effort will provide the public with timely,
reliable information that may assist in their efforts to prepare their
taxes.
  The effort is clearly a first step, that along with the rest of the
provisions of this piece of legislation should provide the taxpayer
with much more protection than they currently enjoy. Again, I thank the
Finance Committee for its work, and Senator Leahy for his advocacy on
this issue.
  Mr. President, I ask that the pending amendment be set aside and that
I be allowed to send an amendment to the desk for consideration.
  The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.

                           Amendment No. 2348

 (Purpose: Striking the presumption that electronic verifications are
       treated as actually submitted and subscribed by a person)

  Mr. ASHCROFT. I send the amendment to the desk.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The legislative clerk read as follows:

       The Senator from Missouri [Mr. Ashcroft], for himself and
     Mr. Leahy, proposes an amendment numbered 2348.

  Mr. ASHCROFT. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 261, strike lines 4 through 7, and insert ``and
     subscribed''.

  Mr. ASHCROFT. Mr. President, the amendment which I have just sent to
the desk, known as the Ashcroft-Leahy amendment, would strike a one-
sentence provision that holds taxpayers as guilty until proven
innocent. The IRS would deem a minimum level of security of a personal
identification number code assigned each taxpayer for purposes of
electronic filing as actually more binding than an analog signature.
  Let me just sort of put that in ordinary language. Ordinarily, it is
the responsibility of the IRS in seeking to act upon a tax return to
prove that the signature is actually the signature of the person who
purportedly signed it. For those individuals signing electronically,
this provision would be reversed so that a person who signs
electronically would be discriminated against as compared to an
individual who signs in analog form.
  That is a problem, but it is really not nearly the problem that comes
when you just open the door to the legal nightmare for taxpayers who
might be victims of electronic identity theft, where their identity is
stolen electronically, whose pin codes or real electronic signature is
fraudulently used. And secondly, not only does it subject people to
that kind of risk, but it makes very bad technology policy. As we begin
to welcome the use of technology to alleviate the kind of burden that
is both on taxpayers and on the individuals in the bureaucracy, it is
time for us to welcome the kind of technology which would provide valid
authentication but not to switch to individuals who provide their tax
returns via the Internet or via electronic filing a kind of
discrimination which would be a disincentive for them to use the
program.
  The IRS is wedded to technology that is decades old. The kind of
things they are talking about, the PIN code system would only make
matters worse. A PIN code that anyone can type is not a secure means of
authenticating documents. As we proceed into the future of electronic
signatures with the use of a wide variety of technologies that will
provide for authentication, it is important that we not, in the law,
place this prejudice against the use of technology.
  Currently, the Internal Revenue Service plans to implement electronic
filing by means of a taxpayer PIN code that would actually be more
authoritative than a written signature, so the person filing with a
written signature would not undertake some of the responsibilities and
liabilities people do with the electronic filing. That disparity in the
way people are treated is not reasonable, it is not appropriate, and it
is counterproductive. The IRS should use the best technology available
for protection of such sensitive information and help to ensure the
future of electronic commerce.
  So we offer this Ashcroft-Leahy amendment which simply would strike
the one-sentence provision that reverses, in terms of signatures on the
Internet, the normal burdens of proof and the normal responsibility of
the person proving up the document to prove the authenticity of the
signature. To change in this respect for those who file electronically
would be to repudiate hundreds of years of legal tradition, in terms of
those seeking to prove up documents, that they prove the signature when
they prove up the document.
  Madam President, the Finance Committee version of this bill would
establish a presumption against taxpayers filing electronically signed
tax returns which does not exist for paper returns and which could have
devastating consequences. Unless the Senate strikes this presumption,
and opposes a similar provision in the House-passed version of this
legislation, we will be leaving open the very real possibility that
taxpayers who have been the victims of electronic identity theft will
find themselves presumed guilty. Do we really want the innocent victim
of a malicious computer hacker, forging spouse, a conniving business
partner, or an embezzling accountant, to be confronted with a
potentially insurmountable evidentiary hurdle when they assert that
they either did not sign a tax document, or that the document has been
materially altered since they signed it? What is worse is that this
provision only places this burden on those who file electronically--
another bias against technology.
  Electronic tax filing is clearly the wave of the future and is the
best method for both the IRS and taxpayers. For tax year 1997 24.2
million returns--one in five--were filed electronically, up from 19
million in the preceding year. Electronic filing is more efficient and
accurate for all parties, but taxpayers should not be asked to give up
rights in order to use this better technology. Certainly we did not ask
for a greater burden to be placed on taxpayers who use a typewriter
instead of a pen to prepare their taxes.
  This language in the IRS bill is the first federal statutory language
dealing with the authentication of electronic interaction between
citizens and the Federal government. It is very important that we set
the right precedent. But this presumption is completely at odds with
the view of legal experts on electronic commerce and evidence and would
set precisely the wrong precedent. If this presumption becomes law
inevitable ``horror stories'' will result. For many Americans,
electronic authentication of their tax returns will be their first
experience with an all-electronic transaction. We must be careful that
we do not permit situations to occur which will cause the public to
feel that electronic commerce and transactions should be avoided if
they want to preserve their rights.
  This presumption is antithetical to the jurisprudence developing in
the area of cyberlaw. There are several measures being considered in
Congress dealing with broad issues of electronic signatures, and none
of them proposes to set such an adverse evidentiary standard against
those who employ electronic authentication. The drafting committee of
the National Conference

[[Page S4430]]

of Commissioners on Uniform State Laws, which is laboring to produce a
model Electronic Authentication Act for consideration by state
legislatures, has just voted to delete any presumptions pertaining to
electronic signatures from that civil law measure. The Committee
on Cyberspace Law of the American Bar Association's Business Law
Section discussed this IRS presumption at their last meeting and voted
to authorize communications to the Senate opposing the provision.
Additionally, the Working Groups on Evidence and on Law and Regulation
of the Information Security Committee of the ABA's Science and
Technology Section recommended that no presumptions as to identity and
intent should attach to an electronic signature.

  With many of the experts in this developing legal area reaching
consensus that presumptions should not operate against electronic
signatories even in a civil law context, how can we justify
establishing one which can be utilized against taxpayers in criminal
prosecutions?
  Let's be clear on what this legislation does in its present form. It
authorizes the IRS to develop procedures for the acceptance of
signatures in digital and electronic form so that electronically filing
taxpayers no longer have to send a signed paper form 8453 to the IRS.
That is good policy. It establishes the principle that an
electronically signed tax document shall be treated for all civil and
criminal purposes as a paper document. And that too is good policy. But
it permits the IRS to provide for alternative means of subscribing to
electronic documents until it adopts procedures for digital and
electronic signatures. And it would allow any IRS-authorized method of
subscription to create a presumption that the taxpayer actually
submitted and subscribed to the tax document--a presumption in both
civil and criminal cases.
  Worse yet, the legislative history of this provision, in both the
House and Senate bills, is silent as to the minimum standards for
authentication technologies that can be adopted by the IRS as well as
to the evidentiary burden which must be overcome by taxpayers who
allege that they have been victims of identity theft. What, in fact, is
the IRS planning to use for authentication of electronic tax documents?
Their plans are public, and they consist of issuing a PIN number to
taxpayers and relying on that as the primary means of electronic
authentication through the year 2007. A PIN number is not generally
recognized as an electronic or digital signature for electronic
commerce purposes, and it is certainly not secure or reliable.
  The Finance Committee recently held hearings on the plight of
innocent spouses, many of whom were caught up in tax disputes when
their spouse forged their name on a fraudulent tax return. This
provision would make it easier for such a fraud to be perpetrated in
the future, as the malicious spouse would simply have to type their
marriage partner's PIN number on an electronic return rather than forge
their signature on paper. And the victimized spouse would be worse off,
because they would have to overcome an evidentiary presumption which
does not exist for an ink signature. This presumption is dangerous.
  We have not only failed to require that the IRS utilize only secure
and reliable authentication methodologies, but we have also given it
carte blanche to determine what burden a taxpayer must bear to overcome
this evidentiary hurdle. This is completely at odds with other
provisions of the bill which seek to alter the burden of proof in tax
disputes in favor of taxpayers. It has been observed that proving a
negative can be an impossible task. Yet this provision would let the
IRS require taxpayers to somehow prove that they did not place their
PIN number, not a digital signature, on a tax document which they may
well have never seen.
  Striking this presumption will in no way diminish the ability of the
IRS to rapidly implement an all-electronic tax system. It will simply
compel the IRS to choose secure and reliable authentication
technologies and associated procedures for signing tax documents which
create strong evidence of identify and intent. Electronic signatures do
not require any assist from an evidentiary presumption to meet the
legal requirements of a binding signature. To the contrary, electronic
and digital signature technologies are already available which provide
better evidence than an ink signature on paper. Further, these
technologies not only provide superior authentication, but they also
accomplish something that no pen on ink signature can--they provide
irrefutable evidence as to non-repudiation by demonstrating that not a
single word on a document has been altered, added, or deleted since the
time it was signed. With such technologies readily available at
reasonable cost, why should we permit the use of insecure and
unreliable methodologies coupled to an anti-taxpayer presumption? After
striking this presumption an electronic tax document will still have
the same legal standing as a paper document. It will still constitute
prima facie evidence as an authentic and reliable writing. But, if
questions arise regarding the genuineness of an electronic signature,
or under the current IRS plan a mere PIN number, and the intent with
which it was attached, they will be resolved on the basis of the
available evidence and will not be prejudged by a presumption against a
taxpayer.

  This amendment is already supported by several groups, including the
Electronic Frontier Foundation, Americans for Tax Reform, Eagle Forum,
Citizen's For A Sound Economy, National Taxpayer's Union, the Chamber
of Commerce, the Association of Concerned Taxpayers, Black America's
PAC, Citizens Against Higher Taxes, Regulatory Policy Center, and the
Seniors Coalition. These are groups that have had the vision to look to
the future of electronic commerce and electronic interaction with our
government and have seen that bad precedent now will severely damage
efforts in the future. I also want to thank Senator Leahy and his staff
for their quick response and solid work on this important provision.
  This may seem like an esoteric issue. It is an evidentiary concern
within a tax bill regarding procedures and technologies with which most
of us are not yet very familiar. But a massive shift to electronic
commerce, transactions, authentication and evidence is underway which
will soon revolutionize the manner in which the public and private
sectors conduct their business. That is why it is so important that we
take the correct first steps. I urge my colleagues to join me and act
to delete this dangerous presumption from the IRS bill. This
legislation will only fulfill our goal of enhancing taxpayer rights if
we adopt the principle that those rights should be identical regardless
of whether taxpayers file physical or virtual documents.
  I want to especially thank the Senator from Vermont, Senator Leahy,
for his involvement in these issues and his sensitivity to the need to
have a forward-looking, future-oriented policy expressed towards
electronics, electronic data transmission, the filing electronically of
tax returns. I personally thank Senator Burns of Montana, who has asked
that he be added as an original cosponsor of the Ashcroft-Leahy
amendment.
  I ask unanimous consent that Senator Burns be included as an original
cosponsor of the amendment.
  The PRESIDING OFFICER (Mrs. Hutchison). Without objection, it is so
ordered.
  Mr. ASHCROFT. I yield the floor.
  The PRESIDING OFFICER. The Senator from Vermont.
  Mr. LEAHY. Madam President, I strongly support the amendment offered
by my friend from Missouri and commend the Senator from Missouri for
what he has just said.
  I am proud to cosponsor this effort. It strikes the one sentence in
this IRS reform bill that I believe takes away the rights of a
taxpayer. I know that is not the intent of the sponsors of this
legislation. They have done a very good job trying to reform the IRS. I
think we can correct this error.
  The bill as currently written would create a rebuttable presumption
by the Internal Revenue Service that any tax return which has been
signed by electronic or digital means has actually been submitted by
the person associated with the virtual signature. That is a rebuttable
assumption that is unnecessary. It is adverse to the taxpayers'
interests. But worse, it is likely to deter taxpayers from accepting
all-electronic tax filing.
  More and more things are being done online, more and more things are
being

[[Page S4431]]

done electronically, and more and more taxpayers are getting used to
doing a lot of their commercial transactions electronically. And they
should be able to do the same with the one thing that every one of us
has to do at least once a year, and that is file a tax return. We may
or may not order from an electronic catalog, we may or may not buy
things over the Internet, but sometime during the year we have to pay
our taxes. If we are used to using things electronically, we should be
able to file our tax return electronically.
  But unless the sentence we are talking about is removed from this
bill, a taxpayer filing an all-electronic tax document will face a
greater evidentiary burden in any subsequent dispute with the IRS than
a taxpayer who signed a paper return with pen and ink. An electronic
signature should have no less and no greater status in the tax context
than a physical signature.
  The presumption would provide unintended assistance to perpetrators
of tax frauds, forgeries, and electronic identity thefts such as the
``innocent spouse'' cases recently reviewed by the Finance Committee.
It could even reverse the presumption of innocence and due process of
taxpayers in criminal prosecutions by the IRS. None of us want to do
that.
  We have laws regarding authentication of electronic and digital
signatures, but they are in their infancy. Several States, including my
home State of Vermont, are crafting legislation to promote secure and
reliable digital signatures. Senator Ashcroft and I, by working
together to craft bipartisan Federal legislation on digital signatures,
are trying to do precisely that. Congress should not be giving the
Internal Revenue Service unrestricted authority in this emerging area
of cyberspace law.
  If you adopt the Ashcroft-Leahy amendment, then, if you have an
electronically authenticated tax document, it will still be treated
under the bill, for all civil and criminal purposes, the same as a
paper return. That principle of equality is the correct standard.
Citizens should not be required to forfeit rights to use new
technology.
  If somebody is used to using the Internet, if they are used to using
their computers in electronic commerce, they should not suddenly have a
roadblock go up to say, ``But not on your tax returns. You have to go
the old-fashioned way.'' If people are going into the computer and
digital age, they ought to be able to do that for their tax returns,
too.

  I commend what Senator Roth, the distinguished chairman of the
Finance Committee, and Senator Kerrey and Senator Moynihan and Senator
Grassley have done here to bring us into the electronic age and to
bring us to a more modern system with the IRS. What the Senator from
Missouri, Mr. Ashcroft, and I are trying to do is to make sure we go
even further into the modern age. Our amendment is supported by such
diverse groups as the U.S. Chamber of Commerce, the Electronic Frontier
Foundation, and Americans for Tax Reform.
  So I hope my colleagues will support the Ashcroft-Leahy-Burns
amendment.
  Madam President, I yield the floor.
  Mr. BURNS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BURNS. Madam President, I congratulate my colleagues, Senator
Ashcroft and Senator Leahy. Senator Leahy and I have been on many
issues with regard to the Internet. I think Senator Leahy, whenever we
talk about this issue, what we want to do with it, also understands
another issue called encryption and how important security is. We have
been around to see this thing grow and blossom. They go hand in hand,
basically, as we use this technology more.
  My friend from Missouri being very interested in this, as chairman of
the Subcommittee on Communications, we will continue to work on these
kind of issues. This should be an easy amendment for this body to
support--in fact, for this Congress to support. If you want to continue
to use the same burdensome and bureaucratic methods that we have used
in the past, then don't support this amendment. Don't support this
amendment if you like the status quo. If we, as a voice of our
constituents, are truly interested in IRS reform for taxpayers, then we
need to support it. More and more Americans are becoming Internet
savvy, and the day is not far off when most of the business and
personal transactions will take place on the Internet. We are already
banking; we are handling financial transactions on the Internet. So why
should this not be one that we can use, at least once a year?
  The Internet is just not for surfing anymore. If you want to surf, I
guess you can go to California. But in Montana and rural areas, our
connection to these kinds of services is going to come through that
medium.
  We need electronic commerce. It is going to be the future of the new
way, and we have to accept that and learn to use it.
  Adopting this amendment will encourage the American taxpayer that we
are interested in reforming the way the IRS does business. There is no
reason to treat electronic tax filers any different than taxpayers
using the traditional filing methods.
  The deployment of electronic commerce will ultimately save American
taxpayers not only time, but it will save them money. Such
discriminating treatment makes no sense and has a far-reaching negative
impact in delaying the benefits to both the U.S. Government and
citizens in conducting business electronically.
  The amendment at issue is a perfect example of that. What possible
justification is there in placing the presumption upon the taxpayer
improving a case simply because he chose to file his tax return
electronically instead of putting it in an envelope? It is just
unproductive.
  If we are not supposed to look to the future, then what are we
supposed to be doing around here? Are we not supposed to make our
Federal Government friendlier and more accessible to the taxpayer? I
would say yes, we are. Are we not supposed to have a visionary agenda
regarding the IRS? I say we should.
  We in Congress should strive for a consistent treatment for
functionally equivalent transactions, and I believe this will be one of
our most significant challenges as we move into the next century.
  More and more businesses, and communications generally, will be
transacted over the Internet. That is why I am a cosponsor of this
amendment. It will level the playing field for all taxpayers,
regardless of the method they choose in filing their taxes.
  The Internet offers unlimited opportunity to both business and
personal transactions. We need to foster those opportunities. We need
to make it easier for taxpayers to file their taxes.
  Our antiquated understanding of how transactions have to be treated
historically is not the way we can do things in the future. This is why
I am an advocate of a variety of different measures that would foster
and encourage commerce and communication over the Internet, including
the Internet Tax Freedom Act. And the use of encryption comes into this
also, because the technology itself will never bloom until we can have
some confidence in the security of the information that we send over
the Internet. We have to work on that just as much. The continuing
buildout of broadband infrastructure is very important. We will
continue to develop that to make sure that it is accessible to every
American and not just a chosen few, regardless of geographic location.
  Madam President, I ask support of this amendment because I think it
is very important if we are really serious about changing the way the
IRS does business.
  I thank the Chair. I yield the floor.
  Mr. KERREY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. KERREY. Madam President, in spite of what the Senator from
Montana just said, I continue to support his amendment. There is no
rebuttable presumption on my part. I believe it is a good amendment,
and I am prepared to accept it.
  I want to comment before the distinguished chairman of the committee
rises to accept the amendment. I call to your attention that this title
I consider to be one of the most important ones in the bill. I
appreciate this may be the only amendment on this title. Congressman
Portman and I put a lot of time and attention into it. I call to your
attention that it starts off by saying:

[[Page S4432]]

       It is the policy of the Congress that--
       (1) paperless filing should be the preferred and most
     convenient means of filing tax and information returns, and
       (2) it should be the goal of the Internal Revenue Service
     to have at least 80 percent of all such returns filed
     electronically by the year 2007.

  The House actually mandates 80 percent. This just says the goal.
Later, I will try to get an amendment, and I urge you to look at it--I
will get you copies of it--which will add a third item which would say
``the Internal Revenue Service should work cooperatively and not
competitively with the private sector to increase electronic filing of
such returns consistent with the Office of Management and Budget
Circular A-76.''
  If this is going to develop correctly, I believe the IRS has to
manage the competition with the private sector. We have to write the
rules so the private sector can be called upon to answer the questions
of how to use the technology correctly. I hope we can get an amendment
adopted which will instruct the IRS not to compete but to work
cooperatively with the private sector to get this done.
  Mr. ROTH. Madam President, as my distinguished colleague indicated,
this matter has been cleared with both sides. The amendment is
acceptable.
  The PRESIDING OFFICER. If there is no objection, the amendment is
agreed to.
  The amendment (No. 2348) was agreed to.

                      Unanimous Consent Agreement

  Mr. ROTH. Madam President, I ask unanimous consent that
notwithstanding the previous consent agreement, the following
amendments also be considered in order to H.R. 2676, the IRS reform
bill, with all other provisions of the previous agreement still in
effect: Grassley, refund offset; Grassley, Iowa pilot project;
Grassley, taxpayer advocate council; Nickles, relevant. I ask unanimous
consent for these additions.
  The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
  Mr. ROTH. Mr. President, I ask unanimous consent that at 9:30 a.m. on
Thursday, the Senate resume consideration of the Thompson amendment No.
2356, and that the time until 10 o'clock a.m. be equally divided in the
usual form. I further ask unanimous consent that at 10 o'clock a.m.,
the Senate proceed to a vote on, or in relation to, the Thompson
amendment, and that no amendments be in order to the Thompson amendment
prior to its disposition.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. KERREY. Madam President, the distinguished chairman of the
Finance Committee, Senator Roth, and I will try to manage this bill so
we can get it done tomorrow. There are what, 15 amendments
approximately now on both sides. In order to get it done, Members who
have amendments, I hope after we have our vote tomorrow morning, will
stay on the floor and offer them so we can finish this bill. If we
don't, it is likely there will be an extremely late session tomorrow
night. Most of the controversial items on this piece of legislation
really have been dealt with. We have the Treasury employees
representative amendment to be dealt with tomorrow. We have the
Treasury Secretary to be dealt with tomorrow. Most of the controversial
stuff has already been resolved. I hope Members who have amendments
will come down here with them as quickly as possible so we can finish
this important piece of legislation tomorrow.

  Mr. ROTH. I want to underscore what the distinguished Senator just
said. It is important that we complete consideration of this
legislation tomorrow. But in order to do so, it is of critical
importance that those with amendments come down early so that we can
dispose of them expeditiously.

                          ____________________