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The Internal Revenue Service plans to notify Pioneer Credit Recovery Inc. and the CBE Group Inc., by March 6, whether their contracts to collect delinquent taxes for the federal government will be terminated or renewed for one year.
The IRS will not make a decision before reviewing the results of an independent study on the effectiveness of the private debt collection program.
Colleen Kelley, president at the National Treasury Employees Union, is confident that such a study will find the program has been a failure, she tells Collections & Credit Risk, adding that she does not kno details of the review and has concerns about whether it will be fair.
The collection program was authorized by Congress in 2004; the agency officially launched it in 2006, hiring three firms. The agency renewed two years ago renewed contracts with CBE Group, based in Waterloo, Iowa, and Pioneer Credit, based in Arcade, N.Y.
The program, which allows IRS to outsource certain of its collection activities, has staunch defenders on the Hill. Supporters say it recovers millions in taxes that would otherwise go uncollected.
"Forty states already have private debt collection programs, and 25 use them for unpaid taxes," Dan Drummond, a spokesperson for the Tax Fairness Coalition, which represents the two participants in the program, told Collections & Credit Risk. "And there's a 10-year statute on collecting unpaid taxes. ... Every year is another year that billions more vanish."
Meanwhile, congressional Democrats and the Treasury employees' union increased the pressure on IRS to end the controversial program. "Today's notice is disappointing," Rep. John Lewis, D-Ga., who chairs the House Ways and Means Oversight Subcommittee, said in a statement. "The program is fundamentally unfair, and privatization of core government responsibilities must end."
Lewis this week introduced legislation that repeals authority for IRS to hire private debt collection firms.
If the program is terminated, it could have financial consequences for the Treasury. The National Taxpayer Advocate's office projects that ending the program could result in the loss of $1.1 billion in revenues over the next decade.
