Mr. DUNLAP. Under our present plan of operations, the Deputy Commissioner of Accounts and Collections, who supervises that, who has supervisors of accounts, and commissioners who are more or less along the line of bank examiners, checks his own offices, examines his own offices.

The same thing is true of the Deputy in Charge of Income Tax, the Deputy Commissioner of Miscellaneous Excises. The same is true of the Alcohol Tax Unit, the appellate sections-all of them check themselves. That is under our present operation.

Those well-qualified people who are now doing that examination work under separate organizations will be consolidated into one inspection service and throughout that inspection service is absolutely independent of any other office. It reports only to the Commissioner. They will do such things as examining the financial accounts, seeing that each office is operated in accordance with the laws and instructions, seeing that our personnel is examined both before they are employed and after they are employed to insure correct conduct.

They can go into any office. These guided lines with the arrows mean that they go into those offices for those purposes, so that you have instead of a scattered inspection service wherein the seven different divisions of the Bureau now inspect themselves, one agency that inspects them for the Commissioner and enables him to know that these offices are properly operated, that they have proper people in them, that they are properly conducting themselves.

So with that short explanation, I would like to go then to a more detailed chart of the Bureau itself. I am not attempting to go into too much detail, because I think your questions will probably bring those details out. I will explain briefly the operations.

(Chart 4 above referred to appears on p. 102.)

Mr. DUNLAP. This is the work that will be done in Washington. On the Washington level you would have, of course, the Commissioner of Internal Revenue, and, briefly stated, his job is to run the internal revenue service and know everything there is to know about it and see that it operates properly.

It is my opinion that he should not be a civil service employee because it is a policy-forming office. It is the only policy-forming office in the Bureau, and that is the reason, of course, that it is not recommended that it come within the civil service provisions of our laws.

Everybody else in here, though, would be a civil service employee. Under this Washington set-up you would have, first, your Assistant Commissioner of Inspection. That is the man who heads up the inspection service that I mentioned and described.

He would have his staff assistants, planning and programing, analysis and appraisal, personnel evaluation, review and liaison a small group in Washington that plans his work, plans where he is going to inspect next, appraises the inspection reports after they come in, and determines what should be done about them, investigates his people before they are hired and checks on their conduct after they are working, and people who review all of the findings of those various groups, to insure that proper action is had.

Liaison, of course, speaks for itself. That is how he keeps in touch with his field offices.

You have then the Assistant Commissioner of Operations. It will be his job to operate the field offices.

CHART 4

JANUARY 14,1952

(Numbers refer to numbered paragraphs in accompanying functional descriptions)

He will have staff assistants specializing in collection, enforcement, appellate, and administration functions.

Those people will make studies constantly of how to improve those various fields and will see that those fields are properly executed down in the divisions below.

They are staff assistants provided to make it possible for this man to perform his duties.

On this side you have the Assistant Commissioner, Technical, and he performs other functions which can only be performed in Washington; for instance, legislative and research group. That is selfexplanatory.

That is where the people are found who analyze and make the recommendations on bills that you people send down to us and want recommendations on. It is where we study our whole legislative recommendations to you and make the necessary search to reach the

answers.

Rulings and technical review. It will still be necessary for us to make rulings in Washington. We could not have 25 policies on that, ruling as to whether an organization is properly exempt under certain sections of the law. That should be made on a Nation-wide basis. Taxpayer rulings on complex questions should be made here and not. in 25 different places.

That staff is provided in order to perform those Nation-wide services on this level.

The Chief Counsel is the lawyer for the Commissioner, just as he now is. He is the man upon whom the Commissioner leans and depends for his legal advice and the other legal work which must be done in the Bureau.

Now we come down to the district commissioner's office. (Chart 5 above referred to appears on p. 104.)

Mr. DUNLAP. To my mind that is a vital operating office. It is not a layer superimposed. It is a consolidated office designed for that purpose which will enable us to give better service throughout to the entire tax field. There are not to exceed 25 district commissioners.

He will have a legal staff on his level which will enable him to answer and handle legal matters pertinent to his rank in the picture. Over here somewhere in the vicinity will be a chief inspector under that inspection service who will check his offices and all of the other offices growing out of that area.

Under him he will have an assistant district commissioner, collection division. That is an operating officer.

It is not practicable for the internal revenue service right now to adopt on account of their costs the most modern accounting procedures possible for us to use. We can do it in our larger offices because the volume is such that it justifies it. The costs per return is what we have to watch. In other parts of the country where we have small offices with small volumes, you cannot justify that type of expense. So the drudgery work of hand and mechanical operations is done here.

The field offices below send that work in where the mechanical work is performed on a consolidated basis. It is contemplated that no office will be set up except where the volume of returns would justify centralization, and there is a big field of economy right there.

CHART 5

JANUARY 14, 1952

(Numbers refer to numbered paragraphs in accompanying functional descriptions)

That is a tremendous one. It is impossible to estimate, in my opinion, how much savings could be realized by taking small hand operations and throwing them into a central machine operation, but it is possible, and that is what will be done here, returns processing and accounting branch.

You have an assistant district commissioner of enforcement, and here is where your consolidations come. Under him you have a delinquent collections and returns branch. You have an audit branch, a correspondence audit branch which merely writes the taxpayer about mechanical errors found in this mechanical process. That is all they do. It is a mechanical thing.

And you have a special investigations branch. The special investigations branch is the branch which now is known as our special agents in charge, our Alcohol Tax Unit supervisors and people like that who do specialized investigative work.

This is a staff operation, supervisors of similar set-ups in the lower echelons, and to which appeals, informal appeals, could come and where final settlements and recommendations are made in some cases. For instance, in the fraud section. I will go into that in more detail in a minute.

You have an assistant district commissioner, appellate. Now that replaces our present technical offices that were known as technical staff offices and now known as appellate divisions. That replaces those offices.

It will have two subdivisions in it, one the conference branch where the taxpayers and their attorneys hold their conferences on disputed questions on tax matters, and either come to an agreement or do not. You have there the trial branch where if the taxpayer cannot make a settlement he goes and appeals to the Tax Court. These are the attorneys that handle that type of business, just as it is now done in separate offices.

You have the assistant district commissioner, administrative. That is more or less self-explanatory. Within that would be a section which handles all of the budget and fiscal problems within the district, their cost operations and their payrolls and everything else for the entire district.

You have the personnel branch which speaks for itself, where all of the personnel records would be kept and matters of that kind handled.

You have a training branch. It would be their job to see that every field man operating out of that office and the other personnel in their various specialties were properly trained continuously to carry on their duties. We have a set-up like that now.

We have what are known as deputy collector instructors in all collector offices that devote all of their time to that service. We have schools that are held all over the country, run by instructors directly out of Washington. And we have quite a heavy training division in the Bureau, but they would have a training branch here.

Those people, a small, highly trained group of them, will constantly keep abreast of all changes in the law, circulate among the field people and hold the various schools to see that every man is brought up to date, kept up to date in the performance of his job, so that new employees coming in are adequately instructed before they are turned loose on the public.