History of the Internal Revenue Service
Dr. Steven P. Rosen, CPA

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1934 – 18th Amendment was repealed and responsibility changed to administering alcohol tax and National Firearms Act.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