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Mr. EARLY. Is this so urgent that it could not wait for your fiscal year 1978 budget request?

Mr. THORNBURGH. I do because of the feelings expressed on this subject by the justices of the Supreme Court, by the Solicitor General's office within the Department of Justice, and by the managers on an operation that is charged with the responsibility for producing this workload. We have tried to deal with this problem on a more routine basis over the last couple of years, but it simply won't work.

As recently as last week, the Solicitor's office again raised the question of our meeting our deadlines and, perhaps more importantly, continuing the high quality of work that they have come to expect out of our appellate section for Supreme Court consumption.

Mr. EARLY. You don't see it as an attempt to undermine the appropriation system where you are easing in eight positions now and then you will present a 1978 budget request and there will be a number of additional positions to do exactly the same thing?

Mr. THORNBURGH. Mr. Early, the Department will be meeting with you in the near future concerning the next fiscal year's appropriation request. It will reflect what the needs are. I do know that this specific need is acute at this time. Our reason for presenting it as part of the supplemental package is that while the amount is small and the positions are few, the impact that it has on the representation of the Government in the Supreme Court of the United States is very great. It is extremely important for this particular segment of the Department of Justice operations in order to maintain what I think the Supreme Court has become used to as a quality product. Mr. EARLY. I have no further questions.

Mr. SLACK. Mr. Cederberg?

Mr. CEDERBERG. No questions.

Mr. SLACK. Mr. Miller?

Mr. MILLER. No questions.

Mr. SLACK. Thank you very much.

WEDNESDAY, FEBRUARY 9, 1977.

TAX DIVISION

WITNESSES

MYRON C. BAUM, ACTING ASSISTANT ATTORNEY GENERAL JAMES D. O'BRIEN, DEPUTY ASSISTANT ATTORNEY GENERAL ANTHONY C. MOSCATO, SPECIAL ASSISTANT

EARLE M. McCONN, JR., ADMINISTRATIVE OFFICER

GLEN E. POMMERENING, ASSISTANT ATTORNEY GENERAL FOR ADMINISTRATION

WILLIAM D. VAN STAVOREN, ACTING DIRECTOR, MANAGEMENT PROGRAMS AND BUDGET STAFF

GILBERT M. LEIGH, JR., ASSISTANT DIRECTOR, MANAGEMENT PROGRAMS AND BUDGET STAFF

KEVIN D. ROONEY, ACTING ASSISTANT DIRECTOR, RESOURCE MANAGEMENT SERVICE

84-206 O 77 pt. 4- 35

TAX DIVISION REQUEST

Mr. SLACK. The next item is the Tax Division for which an additional amount of $660,000 is requested along with 19 additional positions.

You have a statement, I believe, Mr. Baum, with respect to this requested increase?

Mr. BAUM. Yes; I do.

Mr. Chairman and members of the subcommittee, the Tax Division appreciates the opportunity to appear in support of the supplemental request for $660,000 for fiscal year 1977. The budget provides for the following increases:

1. Reduction of lapse ($344,000). This increase is necessary because the general increase in prices and other personnel costs over the past few fiscal years has made it necessary to defer filling of positions in order to meet continuing general expense requirements. At this time, we do not have sufficient funds for the positions now authorized, thus effecting a de facto reduction in our operations. The increase in work load in the Division has made it mandatory that we have our complement of positions filled. The amount requested is necessary to enable the Division to close the gap and fill its authorized positions, and therefore more effectively perform its functions.

2. Criminal litigation (eight positions and $132,000). This increase is required to provide the necessary resources for conducting the Division's White-Collar Crime Program. In the past 3 fiscal years, receipts of new cases have been increasing at the approximate rate of 100 cases per year, which is causing a larger pending caseload each year. This impacts the Division's capabilities by delaying processing of such criminal cases from a normal period of 3 to 6 months.

3. Civil litigation (11 positions and $184,000). The increase in this area is required so that the Tax Division can meet the provisions of the Tax Reform Act of 1976. That act, in section 1205, has imposed heavy procedural burdens on the Tax Division. Under its provisions, whenever the Internal Revenue Service wishes to issue an administrative summons to a bank or similar third party, it must notify the taxpayer who is the subject of the investigation, who is given the legal right to instruct the bank not to comply. The Tax Division must then bring a proceeding in a United States District Court to enforce the summons and there must be a hearing therein.

The Administrative Officer of United States Courts has estimated. that there will be some 38,000 such proceedings after the statute becomes effective on February 28, 1977. Similarly, and without discussing the details, additional restrictions and court hearings result from the provisions of section 1204 regulating termination and jeopardy assessments. Without the increased positions in this request, we will be unable to fulfill these Tax Reform Act requirements in a timely

manner.

Our activities are important to the economy in both a direct and an indirect sense. In the direct sense, for each case we handle and win-and we have over $800 million in litigation currently on our docket-we either collect revenue or prevent its improper refund. In the indirect sense, since ours is largely a voluntary system of taxation, the visible presence of an organization whose mandate it is to enforce

both the civil and criminal revenue laws of the United States can only act as a deterrent to those who contemplate violation of the tax laws. In short, the more effective the Division is, the more effective the revenue system is in collecting all appropriate and legal tax. To hamper the Tax Division with inadequate, insufficient staffing is to hinder the capacity of the United States to collect the revenue it so desperately needs.

This concludes my statement, Mr. Chairman. I shall endeavor to answer any questions you or other members of the subcommitee may have.

[The biographical sketch of Mr. Baum follows:]

BIOGRAPHY

Name: Myron C. Baum.

Title and organizational unit: Acting Assistant Attorney General Tax Division, December 1, 1976.

Date and place of birth: October 1, 1917, New York, N.Y.

Education: City College, New York, A.B., 1936; New York University Law School, LL.B., 1940.

Work experience: 1937-41, House, Grossman, Vorhaus & Hemley, New York, N.Y., law clerk and attorney; 1941-42, Federal Works Agency, Washington, D.C., attorney; 1942-43, Office of Price Administration, Washington, D.C., attorney; 1943-44, War Manpower Commission, Washington, D.C., attorney 1944-57, Department of Justice, Office of Alien Property, Washington, D.C., Chief Trial Attorney; 1957 to present, Department of Justice, Tax Division, Washington, D.C., Assistant Chief; Chief; Deputy for Refund Litigation; Deputy Assistant Attorney General (2d Assistant); Deputy Assistant Attorney General (1st Assistant), at present-Acting Assistant Attorney General. Admitted to law practice New York, 1941; District of Columbia, 1951.

Organizations: Member, American Bar Association, Section on Taxation, Section on Litigation; Federal Bar Association.

Family Wife, Beatrice S. Baum. Children, Andrew S. and Robert M. Residence, 402 Hinsdale Court, Silver Spring, Mr. 20901.

IMPACT OF TAX REFORM ACT

Mr. SLACK. Are there any questions with respect to the Tax Division?

Mr. Smith?

Mr. SMITH. I notice the justification is sent to us because of the Tax Reform Act; it is not because you have new regulations, but additional burdens, right?

Mr. BAUM. It is to handle these 38,000 cases we expect March 1.
Mr. SMITH. You didn't have them before?

Mr. BAUM. Congress has changed the laws, Mr. Smith. The taxpayer under the old law had no right to intervene or instruct the bank not to comply. The Tax Reform Act has given them this right.

Mr. SMITH. None of this would rewrite the regulations so that they are easier to read?

Mr. BAUM. No. We do not do that.

Mr. SLACK. Mr. Early?

Mr. EARLY. With regard to the eight positions on the second page of your statement, what are these for?

Mr. BAUM. These are for trial attorneys in our criminal section. Mr. EARLY. Is it for eight lawyers?

Mr. BAUM. I believe it is six lawyers and two clerical.

Mr. EARLY. The last witness only needed $106,000 for five lawyers and three secretaries. This is $132,000. This $800 million, do you believe any of these added personnel will help in the collection of this money?

TAX LITIGATION IMPACT

Mr. BAUM. Not the eight positions you are now inquiring about in the criminal division, but in the civil section certainly it will because we are being swamped with cases.

The problem is that if we cannot give adequate attention to it, everytime we lose, the United States loses additional funds either by forcing us to give a refund or by not collecting money due and owed. Mr. EARLY. In your statement it says $800 million is owed to us

now.

Mr. BAUM. It is either owed to us or has been paid to us. We have two types of cases pending: cases in which refunds are sought and cases in which we are suing to collect taxes. They are pending in either

way.

The $80 million is a combined total of those cases. In some types of litigation you must pay the amount of the assessment before you may

sue.

Mr. EARLY. I have no further questions.

Mr. SMITH. Mr. Chairman, before somebody leaves, the Secretary of State is going to be here in a couple of weeks and we may not have more than one more meeting between now and then. While we are a quorum, I would like to move that at that time, because of the sensitive material involved, the meeting be held in executive session. Mr. SLACK. The clerk will call the roll.

[blocks in formation]

Mr. SLACK. We have a vote on the floor. Perhaps we can excuse ourselves for a moment and go down and vote. We will be right back. [A brief recess was taken.]

REIMURSABLE ARRANGEMENT

Mr. SLACK. Mr. Baum, on page 11 of the justifications you indicate that a number of attorneys that had recently been working under a reimbursable arrangement with the Watergate special prosecution force must now be funded with appropriated funds.

Were these attorneys performing work for the special Watergate prosecution force?

Mr. BAUM. Yes; we are now handling those cases.

Mr. SLACK. They are now assigned to other cases?

Mr. BAUM. Those cases and others in our division, yes, sir.

Mr. SLACK. Then it could be said that this really amounts to a program increase, does it not?

Mr. BAUM. Yes.

REDUCTION OF LAPSE

Mr. SLACK. With respect to your request to reduce the lapse, it appears that a number of positions have previously been overstated since you did not really have the funds to pay that many positions. Is that a fair statement, in your judgment?

Mr. BAUM. We were authorized 440 positions, Mr. Chairman, but we had an increase in costs, including personnel costs and others, which have forced us to impose a hiring freeze so that we could only employ 410 people. That is why we have to request the reduction in lapse funds.

Mr. SLACK. Thank you very much.

Mrs. Burke, do you have some questions?

Mrs. BURKE. No. Thank you, Mr. Chairman.

WEDNESDAY, FEBRUARY 9, 1977.

CIVIL DIVISION

WITNESSES

IRVING JAFFE, ACTING ASSISTANT ATTORNEY GENERAL
IRWIN GOLDBLOOM, DEPUTY ASSISTANT ATTORNEY GENERAL
DENNIS G. LINDER, ASSISTANT CHIEF, GENERAL LITIGATION
SECTION

NEIL R. PETERSON, ASSISTANT CHIEF, TORTS SECTION

VIRGINIA D. CORUM, ADMINISTRATIVE OFFICER

GLEN E. POMMERENING, ASSISTANT ATTORNEY GENERAL FOR

ADMINISTRATION

WILLIAM D. VAN STAVOREN, ACTING DIRECTOR, MANAGEMENT PROGRAMS AND BUDGET STAFF

GILBERT M. LEIGH, JR., ASSISTANT DIRECTOR, MANAGEMENT PROGRAMS AND BUDGET STAFF

KEVIN D. ROONEY, ACTING ASSISTANT DIRECTOR, RESOURCE MANAGEMENT SERVICE

CIVIL DIVISION REQUEST

Mr. SLACK. We will now hear from the Civil Division.

Mr. Jaffe, do you have a prepared statement?

Mr. JAFFE. Yes, sir, I do. I would like to read it.

Mr. SLACK. You may proceed.

[The full statement and biographical sketches follow:]

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