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The legal environment
There are two components to the relevant legal environment that affects the e-file program; and tax reform law and information policy in the United States. First, the tax law. . The IRS RRA of 1998 (Public Law 105-206) was a major piece of legislation affecting the management and processes of the IRS vis the taxpayer. This act was signed into law on July 22,1998 by President Clinton. One of the key components of the RRA was the objective of making e-file a routine business process. The Act directs the IRS to reorganize from its then current structure into a structure that serves groups of taxpayers with similar needs--a customer orientation, in line with the Clinton administration initiative to transfom government via the National Partnership for Reinventing Government (formerly the National Performance Review). The NPR had an overarching goal of service to the citizens and customers of the U.S. federal government, and strongly promoted the use of information technology (IT) to create a fast, free, seamless information and business environment with the federal agencies.

The RRA was a significant piece of tax reform legislation. The key sections of the RRA that affect the e-file program are:

Section 2001c -- Promotion of Electronic Filing.

Congress has determined that there is a need for the implementation of a comprehensive strategy which will actively encourage the use of electronic filing in the tax paying and tax preparation communities. This provision authorizes the use of mass communication, such as radio, television, and print media and other means to promote e-filing by focusing on the benefits or such a program.

Section 2003d -- Internet Availability.

While the IRS had already made provisions for access to some publication at its web site, this provision of the RRA requires a more robust attention to Internet access to documents. In specific, after December 31, 1998, the IRS must ensure that all tax forms, publications, guidance, and instructions for taxpayers must be contained in a publically searchable electronic database. This most occur in conjunction with the issuance of any paper products

Section 2003e -- Procedures for Authorizing Disclosure Electronically.

This section covers the authorization from tax prerarers to communicate with the IRS regarding all electronically filed returns. This requires that the IRS have a full disculosre and consent process for taxpayers to enable approved third parties to discuss their tax returns.

Section 2005 -- Online Access to Account Information.

By December 31, 2007, the IRS must make available to tax payers the ability to review their accounts with the IRS, online. All necessary safeguards to privacy must be insured by the IRS.2

In the area of information policy, a number of laws, including the Paperwork Reduction Act of 1995 (Chapter 35 of Title 44, U.S.C.), the Clinger-Cohen Act of 1996 (P.L. 104-106), and the Government Paperwork Elimination Act of 1999 (P.L. 105-277, Title XVII), have had influence on the creation, development and deployment of the e-file. A major influence government-wide for the management of information resources is the Paperwork Reduction Act of 1995 (PRA); a lengthy and wide-ranging law, first enacted in 1980. It was revised in 1986 with some changes, and then underwent major revisions in 1995. The PRA was enacted to reduce the paperwork burden on private citizens and businesses that interact with the government. It emphasizes the effective and efficient use of IT to achieve paperwork reduction.

The U.S. Congress signed the Government Paperwork Elimination Act (GPEA)(P.L. 105-277 Title XVII) into law October 1998. The defining features of this piece of legislation included the following:

  • SEC. 1702. Authority of OMB to provide for acquisition and use of alternative information technologies by executive agencies;
  • SEC. 1703. Procedures for use and acceptance of electronic signatures by executive agencies;
  • SEC. 1704. Deadline for implementation by executive agencies of procedures for use and acceptance of electronic signatures;
  • SEC. 1705. Electronic storage and filing of employment forms;
  • SEC. 1706. Study on use of electronic signatures;
  • SEC. 1707. Enforceability and legal effect of electronic records; and
  • SEC. 1708. Disclosure of information3.

In short, GPEA enables citizens to file and receive information electronically with the federal government. By 2003, the federal agencies must provide alternatives for electronic public access to their documents with electronic filing of documents by the public also in place. Thus, GPEA creates a framework for the acceptance of electronic records as legal, valid and enforceable. It encourages federal agencies to promote electronic recordkeeping, filing, maintenance, submission, and archiving. This opens up a wide array of possible types of electronic information interactions including those of a transactional nature.4

Another law that helped set the stage for electronic government and cross-agency partnerships is the Information Technology Management Reform Act of 1996 (later renamed the Clinger-Cohen Act). As introduced by Senator Cohen, the intent of the Act was to be:

A bill to facilitate, encourage, and provide for efficient and effective acquisition and use of modern information technology by executive agencies; to establish the position of Chief Information Officer of the United States in the Office of Management and Budget; to increase the responsibility and public accountability of the heads of the departments and agencies of the Federal Government for achieving substantial improvements in the delivery of services to the public and in other program activities through the use of modern information technology in support of agency missions; and for other purposes. (S.946)

Coincident with the passage of the Clinger-Cohen Act was Executive Order 13011, "Federal Information Technology" of July 16, 1996. This policy integrates provisions of the Clinger-Cohen Act of 1996, the Paperwork Reduction Act of 1995, and the Government Performance and Results Act of 1993. More importantly, it put the Presidential "seal of approval" on the value and importance of information and its attendant technologies to government. This Executive Order is but one of many information-focused policies created during the Clinton Administration. The creation of the National Performance Review on March 3, 1993 (later renamed the National Partnership for Reinventing Government) represented the Administration's visible intent to use information technology to create a more responsive and fast-acting government.

The current Bush Administration is also on record to facilitate the move to an electronic federal government. The President's Management Agenda of 20015 has electronic government as a major administration objective. The 2003 Budget of the United States places new and more thorough attention on information technology and the implementation of electronic government projects.

2For a more complete look at the RRA and its implications, access the IRS website at, and connect to the "tax regulations" page.
3Government Paperwork Elimination Act; October 15, 1998. Congressional Record--Senate; S12627.
4Government Paperwork Elimination Act; October 15, 1998. Congressional Record--Senate; S12627.