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The 1962 estimate provides for the following changes :
Cost of statutory requirements:
Within-grade promotions (Ramspeck Act)..
Total, statutory costs..---
21 attorneys GS-11, at $7,560..
Total, new salaries..
Transportation of things.
Total, miscellaneous expenses.
Total increase for 1962.
The urgent need for revenue makes it imperative that the Tax Division be in a position to act promptly in every case and matter referred to it for action. Failure to act expeditiously will result in the loss of an undetermined amount of revenue and an increase in interest costs to the Government in those cases eventually requiring a refund to taxpayers.'
Tax litigation is still on the rise," and the increased volume of revenue cases and matters the Tax Division is called upon to handle each year is uncontrollable by the Department of Justice. The volume of civil work depends upon the number of suits filed by taxpayers and the number of requests for action received from the Commissioner of Internal Revenue, while the number of criminal cases developed has a direct relation to the fraud investigation activities of the Revenue Service and to the number of recommendations for prosecution forwarded to the Department of Justice for consideration.
The principal objectives of the Division, as defined by the Attorney General, are to handle the civil tax cases and matters coming within its jurisdiction in the most efficient and expeditious manner commensurate with the best interests of the United States and taxpayers, and to prosecute vigorously criminal violations of the internal revenue laws, having in mind the deterrent effect upon future violations as well as the rights of the individuals involved.
The principal problem confronting the Division is the steady increase in the number of cases it is called upon to handle. During the fiscal year just ended, the number of cases received exceeded 6,400 for the first time in history and was more than three times the number received 13 years ago. The consistent growth
1 Among the other consequences to be avoided is a return to the practice of requesting numerous extensions and continuances, thereby adding to the already overcongested court dockets.
New work was up 4 percent in fiscal 1960 over 1959, 12 percent over fiscal 1958, 22 percent over fiscal 1957, 32 percent over 1956, and 145 percent over fiscal 1949 ; and most significant is the fact that new tax litigation increased 5 percent in the first 6 months of the current (1961) fiscal year.
: Congress authorized the employment by the Revenue Service of 2.000 additional enforcement employees. The new employees were recruited early in fiscal 1961, and the results of their work will reach the Tax Division shortly.
in the volume of tax controversies in the courts is revealed by the following table: New tax cases :
New tax cases—Continued
1, 860 1955..
4,544 There appears to be no end in sight to a continued steady rise in new tax litigation and this ascent is reflected graphically as follows:
13-7 DETAILED EXPLANATION OF ESTIMATE BY ACTIVITY While the work is divided into two main categories, i.e., civil and criminal tax litigation and matters, the Tax Division represents a single activity under the appropriation for general legal activities. Civil cases and matters comprise 85 percent of the volume of work, and criminal, the remaining 15 percent. The civil work accounts for 89 percent of the cost of operations and the criminal activty 11 percent." A. Workload data and past year's performance
Fiscal 1960 was one of the busiest and most productive in the history of the Tax Division. In the face of another rise in the number of incoming cases the Division, by meeting all deadlines and otherwise stepping up the processing of its work, placed tax litigation on a current basis; established new records in work production; reached a 15-year high in the margin of success in court decisions ; limited recovery by taxpayers in refund suits to the lowest percentage in history; and again increased collections from delinquent taxpayers.
1. Workload data and backlog.
(a) Workload and predictions: As noted, during fiscal year 1960, the volume of new business continued to increase as it has in every year except one since the conclusion of World War II. There is every indication that the upward trend will continue. (See Section on Work Pending and Anticipated, infra.)
4 The upward trend in regular tax cases, both criminal and civil, continued in the first 2 months of the 1961 fiscal year when the number of new cases' increased better than 5 percent over the first 2 months of fiscal 1960.
Twenty-four employees are assigned to criminal tax work, about 10 percent of the authorized staff. During rush periods, attorneys and clerical employees from other sections are assigned temporarily to criminal tax work.
In terms of responsibility, work and necessary expenditures, the increase in 1960 was 6 percent rather than 4 percent. Regular tax cases in court increased 6 percent while llen cases increased 3 percent and miscellaneous suit matters decreased 1 percent.
The situation is revealed by the following table, which in addition to showing the actual situation for the past 13 years, makes predictions for the current and budget years.
Workload data, actual 1948–60, estimated 1961–62
Closed : It is estimated that closings Incoming: Increase over past 10 will increase 7 percent in 1961, matchyears has averaged better than 10 per- ing receipts for that year. If the incent per year; over past 5 years has crease requested herein is authorized, averaged 7 percent per year. It is it is estimated that closings will inestimated that the trend will continue crease another 7 percent in 1962, and during 1961 and 1962, and that new the Division will again break even. work will increase at least 5 percent each year. The increase for the first half of 1961 was 5 percent.
In presenting the workload data chart with the congressional justification for the 1961 fiscal year it was predicted that the Division would receive 6,540 tax cases and matters in fiscal 1960 and close 6,670, resulting in a backlog decrease of 130 cases. As indicated, receipts totaled 6,469 (only 71 under the estimate) while closings dropped to 6,314 with the result that the pending workload increased slightly.'
(0) Backlog: For the first time in 6 years, the Division was unable to achieve a backlog reduction. For a period of 10 years (1945–54), the backlog of tax litigation increased each year until by the end of 1954 it was three times what it had been at the end of fiscal 1945. Beginning in fiscal 1955 the Division put a stop to the annual backlog increase and each year thereafter until fiscal 1960, cut into and reduced the backlog, despite a steady increase in new work in all of those years. The 5-year period (1954-59) saw a decrease in backlog of more than 2,500 cases and matters. The backlog declined from a peak of 6,770 in 1954 to 4,261 in 1959, a 37-percent decrease. This came during a time when new receipts mounted steadily from 4,544 in fiscal 1955 to 6,227 in fiscal 1959, au increase of 37 percent in new business.
While the increase in backlog for 1960 was small (155 cases and matters) and still leaves a reduction in backlog of over 2,300 cases and matters for the 6-year period (1954-60), it should not be permitted to increase further. If the addi. tional personnel and funds requested herein are granted it is estimated that, despite a 10-percent increase in new work over the next 2 years, closings will match receipts and pending work will remain steady. Because of the current
* The backlog was reduced in three of the eight major categories of work, f.e., Court of Claims, Tax Court reviews, and collection suits. The increase in pending work was very slight in the other categories, i.e., taxpayers' suits in the district court refund cases up 53. State court cases up 16, bankruptcy, receivership, and probate cases up 75, and criminal cases up 48. The 4-percent increase in new business resulted from increases in five of the eight categories, i.e., bankruptcy, receivership, and probate cases, State court cases, criminal cases, taxpayers' suits, and lien cases. Closings were down slightly, principally because work at the beginning of the year was, for the most part, on a current basis. Over 80 percent of all cases on July 1, 1959, had been pending less than 2 years and better than 60 percent less than 1 year.
status of the Division work (see section on "Current Condition of Tax Litigation," infra), a further reduction in backlog is not predicted for the 1961 and 1962 fiscal years. However, further increases in pending work must be avoided at all costs. Increased funds should keep pace with increased work and should not be delayed until the backlog has again reached dangerous proportions.
The significance of the backlog reduction is shown graphically on the following bar chart, which should be compared with bar chart (supra) sbowing receipts over the same period :
13-11 2. Work production.—There has been a substantial stepup in work production in the past 5 years. Through 1959 there had been no increase in the staff of the Division since 1956 and the increase in 1960 was slight, yet, as shown by the following figures, the output of the staff has increased sharply since 1954. For the third straight year the legal staff made more than 1,000 formal court appearances to try or argue cases, and set new records in work performance.
Tax Division attorneys conducted 85 percent of all trials and arguments in fiscal year 1960 (the same percentage as last year). Division attorneys conducted 92 percent of the civil trials and arguments (civil accounting for 90 percent of the total), while U.S. attorneys conducted 92 percent of the criminal. In addition, hundreds of court appearances were made by Division attorneys to argue motions, conduct pretrial conferences, etc. ; increased use was made of the discovery procedures provided for in the Rules of Civil Procedure, e.g., taking of depositions, serving interrogatories, requests for admissions and the production of documents; and numerous field trips were made to obtain witnesses and exhibits and to otherwise prepare cases for trial.
There was a marked increase in work production in the first 6 months of the current (1961) fiscal year, and new records in most categories may be set by the end of the year.
3. Speedup.-As a part of the Attorney General's program to eliminate delay and to relieve court congestion, the Tax Division has concentrated its efforts during the past 7 years in speeding up the handling of litigation and removing roadblocks to expeditious conclusion of court cases. Substantial progress has been made in (1) reducing the number of requests for extensions of time to file responsive pleadings and in requesting continuances; (2) shortening (by more than 20 months) the time to conclude an average case; (3) reducing considerably in the past 7 years the period required to process settlement offers ; (4) speeding up substantially the time required to process criminal tax cases; and (5) cutting the time required to get checks into the hands of taxpayers who had been successful in refund suits.
One of the principal achievements of the Division over the past 7 years has been the elimination of the delay, so prevalent prior to 1953, in bringing cases to issue because of the failure to file answers and other responsive pleadings within a reasonable time. This problem was the subject of much adverse comment among bench and bar, and often resulted in unduly large amounts of interest being paid to those taxpayers who prevailed in refund suits. Requests for extension of the time allowed for filing responsive pleadings in pending cases have been constantly reduced from an average of over two per case in 1953, to 0.06 in 1960. In 1,478 civil cases requiring the filing of responsive pleadings in 1960, only 88 requests for extensions were filed. In 1952, in 914 cases, 1,845 requests for extensions were filed.
An analysis of cases decided through the past 9 years furnishes evidence of a marked reduction in the time required to handle tax cases in the various courts, and indicated that, in addition to reducing the number of pending cases, the Division has gradually reached a position wherein its work, for the most part, is being handled on a current basis. The figures below measure the period from the time a case is first received in the Division until the particular court renders a final decision. The time during which an appeal is under consideration is included in the figures for the appellate co
Of great significance is the fact that the Division has slashed the time interval from the receipt of criminal cases until a decision is made to prosecute (at which time the case is transmitted to the U.S. attorney with detailed instructions as to its handling) or to return the case to the Revenue Service declining prosecuion. In the 4-year period (1949–52) it required, on the average, 812 months to complete this processing. In the 4-year period (1957–60) the time was cut to 2 months and 2 days.
Finally, and in an area which has caused considerable unfavorable comment in the past, we have cut in half the entire time required to process offers in compromise. In 1953, the average time from receipt of offer to final action in the Department (including time of the Revenue Service to consider offers) was 6 months. In 1960, the average had been cut to 2 months and 17 days.
4. Succe88.—By any yardstick 1960 must be considered one of the most successful years in the history of Federal tax litigation. Not only did the Gov
* Interest at 6 percent runs against the Government until refund checks are issued. Through the operation of the Litigation Control Unit and the Tax Liaison Committee the time from judgment to delivery of checks to taxpayers' counsel has been reduced from an average of 7142 months to 1 month and 7 days. Un fiscal 1960 taxpayers recovered $16 milllon (only 12 percent) of the amount sued for ($137 million). Interest on the recoveries for 6 months is $480,000, the amount saved by the general speedup in handling cases, and particularly through the operations of the Litigation Control Unit. The direct savings in interest during the 3 years' operation of the Litigation Control Unit is approximately $2.6 million,
9 In the period 1946–52, 31 percent of the cases were returned declining prosecution. In the period 1953-60 only 14 percent of the cases have been declined.