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Taxpayer Collection Rights as a Defense to Private Debt Collection

12 Ohio St. Bus. L.J. __ (2017)

54 Pages Posted: 25 Aug 2017  

Clint Locke

University of Alabama - Culverhouse College of Commerce & Business Administration

Date Written: July 1, 2017

Abstract

The collection of taxes is an essential component of tax administration. Government operations are dependent upon annual taxpayer deposits and federal employees are given numerous tools to ensure outstanding debts are paid. However, because of recent scandals plaguing the Internal Revenue Service (IRS), Congress has imposed budgetary sanctions on the nation’s tax collector, leaving the IRS with few resources to collect outstanding tax debts.

In 2015, Congress passed the Fixing America’s Surface Transportation (FAST) Act. The FAST Act was passed primarily to authorize federal funds for use in resurfacing, constructing, and rehabilitating America’s transportation infrastructure, but it contained several important tax provisions. Specifically, the FAST Act overhauled section 6306 of the Internal Revenue Code (Code), which controls the Department of Treasury’s use of qualified collection contracts.

One of the primary changes to this statute was the insertion of language requiring Treasury to use private debt collectors to collect inactive tax receivables. The IRS recently selected four private debt collectors to collect taxpayer debts, and such collection activities commenced in the Spring of 2017.

In light of these developing collection activities, it is vital that taxpayer rights be clarified and taxpayer remedies illuminated, to protect taxpayers from illegal private debt collection activities. This article addresses the significant changes to Code section 6306 and how certain statutory language curtails taxpayer rights. The article clarifies taxpayer rights existing under the Code and under the Fair Debt Collection Practices Act. The article concludes by discussing the remedies available to taxpayers and the current inadequacies of such remedies. Congressional amendments are proposed to improve taxpayer recoveries and ensure taxpayer rights are adequately protected.

Keywords: Tax administration, private debt collection, IRS, taxpayer rights

Suggested Citation

Locke, Clint, Taxpayer Collection Rights as a Defense to Private Debt Collection (July 1, 2017). 12 Ohio St. Bus. L.J. __ (2017) . Available at SSRN: https://ssrn.com/abstract=3025076

Clint Locke (Contact Author)

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

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