The House Ways and Means Committee has thrown the latest punch in the continuing battle over IRS use of private tax debt collectors. It's a solid hit, but far from a knock-out blow.

Ways and Means, the Congressional panel responsible for originating federal tax legislation, has approved HR. 3056, The Tax Collection Responsibility Act of 2007. In keeping with its name, Representatives, at least a majority on the tax-writing panel, are demanding that the IRS resume full responsibility for bringing in federal tax money.

The bill cuts right to the chase. From the Committee's description of the measure: "The proposal repeals the authority for the IRS to enter into private debt collection contracts."

Following the 23-to-18 approval of H.R. 3056, which members also are referring to as the "Good Government Tax Bill" (let's not get carried away, fellas), Representatives who have been fighting to end the program were ecstatic.

"The private debt collection program is an insult to the American taxpayer and our Federal tax system," said Oversight Subcommittee Chairman John Lewis. "The collection of taxes is a core government function. It is the Internal Revenue Service’s (IRS) mission.

"We found that, in addition to taxpayer harassment, this program wastes tax dollars by paying a bounty up to 24 percent to the debt collectors. We were told by the IRS Commissioner that IRS employees could do the job more efficiently for less money. Enough is enough, we must stand up for taxpayers and we must stand up for IRS employees by ending this program."

The tale of the tape: The findings Lewis refers to were from a May 23 hearing, at which the Georgia Democrat lit into the president of the CBE Group, one of the IRS-hired collection agencies.

In connection with questions about whether such private bill collectors diligently follow federal law that prohibits harassment of owing individuals, Lewis played a tape recording (you can read the transcript) of a CBE agent giving a taxpayer a hard time.

According to the material presented at that hearing, the collection company employee refused to fully identify herself but nonetheless continued to demand that the taxpayer provide a Social Security number and mailing address.

When the taxpayer finally asked for the calls to stop, the collection agency representative replied, "I'm not sure what we can necessarily do to stop that."

The call ended in a standoff. The taxpayer said he would not provide any personal information until he exactly who he was talking to and why she wanted the data. The bill collector said she couldn't tell taxpayer anything more until the taxpayer verified his identity.

Nice. A perfect debt collection Catch-22, not to mention apparent violations of several provisions of the Fair Debt Collections Practices Act. You can read more on the FDCPA and ways to protect yourself against abusive bill collectors is contained in this previous blog entry.

Even CBE Group president and CEO Thomas R. Penaluna, who testified at the hearing and listened to the recording there, thought his employee went a bit overboard. Penaluna admitted that if he had been called by this particular employee, he would have acted exactly as the taxpayer did and would not have given out personal data over the phone to a stranger.

Collection cut-off: The IRS' authority to hire private collection agents would be repealed as soon as H.R. 3056 is signed into law.

OK. So that enactment factor is one little buzz kill in the overall celebration by opponents of private tax bill collectors. As noted earlier, another group of Representatives, those holding the IRS purse strings, have a totally different opinion on private collection agents.

And while Senators overseeing budget issues tend to agree with Ways and Means members on this matter, not so an influential member of the House panel's counterpart on the other side of Capitol Hill. Charles Grassley of Iowa, the leading Republican on the Senate Finance Committee, has already initiated his own personal effort to save the program.

So get ready for at least a few more bruising rounds in this legislative battle before the private tax debt collection issue is resolved, one way or the other.