2006-3

Provide Free Tax Filing For Low-Income, Disadvantaged, Underserved And Working Poor

Sponsored by: Assemblyman Felix W. Ortiz (NY), NHCSL President

Adopted by the Caucus on November 18, 2006

WHEREAS, a program that is important to the citizens of the United States may be in jeopardy as the result of decisions being made in the United States Congress; and

WHEREAS, over 40% of our states have banded together to find an innovative solution to meet the needs of the low income, disadvantaged, underserved and working poor taxpayers. These are the citizens that are eligible for the Earned Income Tax Credit; and

WHEREAS, this innovative solution, called the State Free File Alliance, has been developed over the last decade where Public need and Private corporate citizenship have worked together, in an era of fiscal limits and new challenges; and

WHEREAS, the State Free File tax program is based on the Policy Agreement reached between the Internal Revenue Service and the tax software industry several years ago, whereby working poor and other lower income families and individuals are able to obtain free electronic tax preparation and electronic filing for their tax returns; and

WHEREAS, the program saves the state budgets the high cost of creating an alternate tax preparation and filing service, with all the systems and costs that would be required to build, operate, maintain, and provide such a program. Twenty-one states have decided to participate in the Free File Alliance public-private partnership solution, creating Free File programs in their states. This has saved their State Governments many millions of dollars, while providing free services to those who need them; and

WHEREAS, the IRS negotiated the terms of the national Free File Agreement with the software providers, this agreement is the common basis for all the Free File programs in the twenty-one Free File states; and

WHEREAS, that same IRS Free File program has since developed some significant management and operational deficiencies that are adversely impacting the State Free File programs, as well as the Federal program, and these problems need to be urgently corrected and the program improved; and

WHEREAS, we are concerned with the IRS limitations of the Federal program to provide only free FEDERAL returns, while people using the FEDERAL program are then required to pay for their state returns; and

WHEREAS, we are concerned that the IRS rules allow companies to sell all kinds of products and services within the program from the IRS website, including but not limited to state tax returns and high interest refund loans; and

WHEREAS, we are further concerned this laissez faire marketing and selling environment hosted from the Federal Government’s website puts the public, and the Free File program, at risk; and

WHEREAS, recent efforts by the Senate Finance Committee to consider draft legislation on this subject are in many respects inadequate, and in other respects misguided. The legislation, S.832, would not end the freewheeling marketplace that the IRS website has become, nor would it require companies participating in the Federal program to offer both Federal and State returns to citizens eligible for these free services; and

WHEREAS, of equal alarm, the legislation proposes to require the IRS to build and deploy an Internet web portal for directly providing its own electronic tax preparation services to the public. The direct impact of this provision would be to end Free File and replace it with a new Government-provided program instead; and

WHEREAS, the Federal Government may have the available funds to engage in this kind of duplication of private sector capabilities, the States do not; and

WHEREAS, the State Free File programs are directly tied to the national agreement underlying the Federal Free File program. The demise of the national IRS program would immediately cascade down to the States. The States would be required to invest in State tax preparation systems to replace the lost free program.

WHEREAS, the National Hispanic of State Legislators is concerned that this imposition of unnecessary and unfunded burden on the States is totally unacceptable; and

WHEREAS, common sense management reforms would demonstrate the value of public-private partnership innovation and save the public treasuries of governments across the country many millions of tax dollars; and

WHEREAS, Free File can help people get access to the Earned Income Credit, and in so doing make a real difference in helping lift themselves and their families out of poverty. Similarly, Free File can help people get better access to Child and Elder Care Credits, and Retirement savings incentives. The private sector is best able to design and deliver the consumer tools to make it easy and simple to achieve these objectives, and that is the hope of the Free File concept; and

WHEREAS, that participating companies in the Free File program should be carefully screened, so their listing in the program really means something that people can rely on; and

WHEREAS, that the public and the States rely upon IRS vetting these companies before holding them out for use through their website; and

THEREFORE BE IT RESOLVED BY THE ANNUAL CONFERENCE OF THE NATIONAL HISPANIC CAUCUS OF STATE LEGISLATORS (NHCSL), ASSEMBLED IN San Juan, Puerto Rico on November 18th, 2006, THAT THE NHCSL strongly recommends that no sales or marketing or advertising should be allowed in the Free File program consistent with the Office of Management and Budget and General Services Administration rules governing all Federal websites; and

BE IT FURTHER RESOLVED, that tax return information cannot be traded, bartered, rented, shared or sold; and that the privacy of people’s tax return information is strictly protected, with no other use of that data either permitted or possible

BE IT FURTHER RESOLVED, that companies participating in Free File be required to meet the same time-tested Federal standards for Corporate Responsibility and Commerciality that are a basic requirements for the government’s own purchase of commercial services; and

BE IT FURTHER RESOLVED, that participating companies be required to continue to provide FREE Federal returns, while directing the IRS to encourage those companies to provide Free State returns for eligible taxpayers in those States that also have State Free File Alliances.

BE IT FURTHER RESOLVED, that copies of this Resolution, suitable engrossed, be transmitted to the President of the Senate of the United States, the Speaker of the House of Representatives, each member of the Congress of the United States; the Treasury Secretary; the President of the United States; the President of the Senate and the Speaker of the House of the 21 Free File states; and

BE IT FINALLY RESOLVED, that this Legislative Body urges the United States Congress and the President of the United States to take immediate action on this resolution.

This resolution was adopted this November 18, 2006, at the National Hispanic Caucus of State Legislators Executive Committee & BBA Annual Meeting held in San Juan, Puerto Rico.