History of the Internal Revenue Service

Dr. Steven P. Rosen, CPA

History of the Internal Revenue Service

Taxation has been a subject of  controversy and hostilities in the United States of America since before  its inception.  From the cries of “no taxation without representation”  to “read my lips, no new taxes”, this has been a political hot button of  never-ending disagreement.  It’s most current form started as a way to  fund the American Civil War and was interrupted by several  constitutional arguments, those resulted in taxation at the federal  level being declared unconstitutional by the United States Supreme  Court.  This left idea of the federal government levying taxes on the  citizenry in limbo until 1913 with the ratification of the 16th Amendment  to the United States Constitution.  This created many new events,  controversies and dilemmas to be sorted out by the politicians, banking,  businesses, and the electorate.  Below is a brief history of taxation  and tax collection since the ratification of the 16th Amendment:


  • 1913 – 16th Amendment ratified, taxes now constitutional.

  • 1913 – Bureau of Internal Revenue created under Department of Treasury

  • 1919 – 18th Amendment ratified and Commissioner of Internal Revenue tasked with enforcing prohibition under the Volstead Act.

  • 1930’s – Bureau of Internal Revenue established geographic regional  operations including opening of 2 international offices in London and  Paris.

  • 1930’s - Private Corporation formed for Internal Revenue and Federal  Reserve in Delaware thereby making them private contracted  organizations rather than government owned organizations under the  umbrella of the Department of Treasury as enacted by Congress.

  • 1934 – 18th Amendment was repealed and responsibility changed to administering alcohol tax and National Firearms Act.

  • 1934 – Revenue Act of 1934 starts beginning of basis for Internal Revenue Code, Revenue Regulations, and Proposed Regulations.

  • 1935 – Social Security Act Passed and added that to the scope of the Bureau of Internal Revenue.

  • 1938 – Revenue Act of 1938 passed by Congressional override of  Presidential Veto, creating what is considered the first official tax  breaks for Corporate America.

  • 1938 – Concept of Unemployment Insurance began to form with the passing of Railroad Unemployment Insurance Act.

  • 1939 – Revenue Laws codified into what is now known and the Internal Revenue Code.

  • 1942 – Revenue Act passed increasing scope and rate of taxes and created the concept of certain income tax deductions

  • 1943 & 1943 – Current Tax Payment Act (1943) and Individual  Income Tax Act (1944) passed, establishing the rudimentary form of tax  system similar to structure used today.

  • 1952 – President Truman proposed “Reorganization Plan #1” which was  later endorsed subsequently by President Eisenhower, a mistake he later  admitted to in his farewell address.

  • 1953 – Through several Treasury Orders issued by Treasury Secretary  George M. Humphrey, Bureau of Internal Revenue was changed to Internal  Revenue Service, not by act of congress. (Most specifically Treasury  Department Order 150-29)

  • 1954 – Revenue Ruling 54-172 established the concept of Private  Letter ruling starting the ability for circumvention of code on an  individual transaction basis.

  • 1959 – Enrolled Agent Program was established to allow for those not  qualified under normal regulatory qualification standards established  by Congress to practice before the IRS to do so under Treasury  Regulation
    Congress amends Internal Revenue code to make Chief Counsel and  Presidential Appointment again after Treasury Regulation was issued  making it an appointment by Director of Internal Revenue.

  • 1961 – Internal Revenue Service begins using computers with the  implementation of National Computer Center in Martinsburg, West  Virginia.

  • 1961 – ADP Redeployment Guidelines were issued further removing  control over the Internal Revenue Service from the Department of  Treasury.

  • 1961 – Congress passed law requirement of use of Social Security  Numbers and Employer Identification Numbers in the conduct of business  pertaining to all taxes.

  • 1961 – President Kennedy make public statements regarding weeding out corruption in the Internal Revenue Service.

  • 1962 – A joint Treasury/IRS taskforce was established to start  advise for the need to compile data and statistics on tax filings.

  • 1965 – IBM 360-65 computer systems become the national standard for IRS data processing.

  • 1967 – Inter-American Center on Tax Administration was formed in  Panama as way a processing and sharing tax information between countries  in the Western Hemisphere.

  • 1968 – Alcohol and Tobacco Tax Division was changed to Alcohol,  Tobacco and Firearms and was given law enforcement jurisdiction only  Omnibus Crime Control and Safe Streets Act.  Subsequently, explosives  were also added to their jurisdiction.

  • 1969 – IRS begins testing Integrated Data Retrieval System to accumulate more data.

  • 1970 – Bank Secrecy Act passed establishing controls over cash transactions.

  • 1970 – Comprehensive Drug Act passed adding responsibility of narcotics enforcement over to ATF.

  • 1972 – ATF was separated from IRS and placed under Treasury  directly, eliminating all criminal enforcement from IRS prevue as that  was by law under FBI authority.

  • 1972 – Federal-State Tax Collection Act passed allowing the IRS to  enter into agreements to collect taxes for states that closely conform  to federal tax law.

  • 1973 – IRS switched to Honeywell Systems for data processing.

  • 1974 – IRS established Federal Energy Office that it has no authority to form.

  • 1975 – IRS is brought into Cooperation with International Monetary Fund under United Nations Restructuring.

  • 1976 – New Case Inventory Control and Management system as established with direct integration with Inter-American Center.

  • 1977 – IRS implemented their Audit Information Management System worldwide.

  • 1978 – ERISA passed separating jurisdiction authority of employment matters from Department of Treasury to Department of Labor.

  • 1979 – IRS begins major system upgrade program.

  • 1980 – UNIVAC and COBOL systems come on-line at IRS.

  • 1982 – Treasury Department announced it was unable to support the legal authority of the IRS to enforce public policy.

  • 1982 – Treasury Order 150-95 restructures the IRS including claiming  authority of appointment to positions normally held by the President.

  • 1982 – UNIVAC 1100-82 systems were starting to be put into place to replace microfilm.

  • 1982 – IRS created new position of Legislative Liaison in efforts to influence Congressional decisions directly.

  • 1983 – IRS consolidates and integrates its phone systems.

  • 1986 – IRS implemented international computer system despite Treasury rejection.

  • 1986 –Tax Reform Act of 1986 passed.  125 pages of which are still  redacted or considered classified regarding expansion and control of IRS  be non-government officials.

  • 1989 – Congressional sub-committee begins looking into IRS misconduct.

  • 1990 – Treasury Integrate Management System begins implementation.

  • 1990 – Treasury Order 150-02 reorganizes IRS senior management.

  • 1998 – IRS Restructuring and Reform Act was passed still leaving it  under control of Department of Treasury and establishing what is known  as the Taxpayer’s Bill of Rights.

  • 2006 – IRS begins outsourcing collections with payments to venders for services exceeding collections at the ratio of 23-to-1.

  • 2013 – IRS investigated for politically targeting audits and determination of tax-exempt status.

  • 2015 – Major IRS data breach discovered.

  • 2017 – Major restructuring of tax code under  Tax Cuts and Jobs Act of 2017.

Other items of note:

  • Upon the formation of the United States Postal Service, a franking  agreement was established allowing the United States Government to send  parcels and correspondence through the mail system without charge.   However, as a private corporation the Internal Revenue is not entitled  to that privilege and pays for postage; documenting their actual  operating structure.

  • The Internal Revenue Service through the act of portraying  themselves as a government agency with authority and sending  correspondence through the mail is committing major infractions under  the Racketeer Influences and Corrupt Organizations Act.

  • Title 31 of United States Code disclosed that the Internal Revenue  Service, a Private Corporation, is not shown as a division, bureau, or  any part of the U.S. Treasury Department. Under USC 31, Subtitle I,  Chapter 9, Section 901 the Internal Revenue Service is not listed as an  organization, corporation, or entity owned, operated, or authorized by  the United States Government.

  • In Internal Revenue Service publications, they state that their  authority under Section 7801 of the Internal Revenue Code.  However,  this section only applies to Alcohol, Tobacco, and Firearms and the  Justice Department.  This deals directly with law enforcement powers and  investigative powers.  As been the case since 1913 as the Federal  Bureau of Investigation was specifically mandated with criminal and  investigative authority by Congress.  All matters involving the Internal  Revenue Service are de-facto civil collections matters and has no basis  for the establishment, creation, or operation of an armed enforcement  division with arrest authority in direct violation of the United States  Constitution.

  • Under the Lobbying Disclosure Act, government agencies are  restricted from lobbying directly with the Federal Government.  As such  the activities conducted by the Legislative Liaison Office are being  done under the auspices of their private corporation status.  Further,  since those activities are being done under the guises of being part of  the government, they are tantamount to fraud and in violation of  sections of this act for failure to disclose and report and additional  RICO statutes.


by Dr. Steven P. Rosen, CPA