SOI, it's beginning to 1992 If it seems like you have been paying income taxes forever, you probably have. Last year, the Nations income tax law turned 80 years old and this year we will be releasing the first income and tax statistics from the tax returns for 1992, the 80th year. In recognition of this august occasion, this issue of the Bulletin will have a historical tint to it. Each of the Bulletins over the next year or so will feature special articles in each of the major subject areas, augmented by historical tables and information about changes in the tax laws since their inception. To kick things off, this issue begins with a special article entitled Turning Administrative Systems into Information Systems, by Fritz Scheuren and Tom Petska. It summarizes the current status of Statistics of Income (SOI) and provides a vision of our plans for the future. Later Bulletins will deal specifically with international tax returns, individual income tax returns, corporation income tax returns, tax-exempt organizations, estate tax returns and personal wealth, partnerships and sole proprietorships. Other special articles may also be included from time to time. But first, some background: it all began on February 25, 1913, when the Sixteenth Amendment to the Constitution was ratified, authorizing Congress to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration. Three years later, Congress passed the Revenue Act of 1916, which included a provision requiring the annual preparation of statistics of income with respect to the operation of the tax law. This provision, with practically no change, has been repeated in each major re-write of the tax law since then, most recently in the Internal Revenue Code of 1986. The first SOI report, based on income tax returns filed by individuals and corporations for Tax Year 1916, was released in 1918. However, this first report also contained what data there were from the income tax returns for 1913-1915. (In case you wondered, fewer than 500,000 individual income tax returns were filed for 1916, although by 1917 there were more than 3.5 million. Currently, the number is about 115 million.) Then, as now, the data were used primarily for tax research and revenue estimation, especially by the Office of the Secretary of the Treasury. The Internal Revenue Service itself (then, the Bureau of Internal Revenue) was also a major user, since the earlier reports contained a great deal of data by State that were used to help administer the tax laws. It wasnt until the 1930s that the Commerce Department recognized the vast potential for using tax return data as a source for information that could be used in the newly-created system of national accounts. To this day, Commerce continues to be one of the primary customers. Of course, both technology and methodology have also changed dramatically since the first SOI reports were released. SOI processing began as a vastly manual an labor-intensive operation. Our first computer was a then, brand new Remington Rand UNIVAC, which we helped the Bureau of the Census purchase in the mid-1950s, in return for processing time (on the night shift). We have since moved away from punchcard-based technology into a modern interactive computer environment, with on-line processing of tax returns. Needless to say, corresponding advances in statistical methods have also been incorporated along the way, to improve the quality and timeliness of the data we produce. Similarly, the types of annual data available have also grown substantially. Initially, the SOI reports focused almost entirely on individual and corporation income tax returns. Since then, user needs and new provisions in the tax laws have led to the production of data on about 60 different topics, including data needed for special Treasury reports required by Congress on high-income individuals, capital gains, international boycott participation, corporate income from U.S. possessions, income of citizens working abroad, the foreign tax credit and the operations of Foreign Sales Corporations. These remarks just touch on a few of the highlights from these past 80 years. As mentioned above, over the next year or so the Bulletin feature articles will focus on historical changes in specific areas. In addition, readers interested in this perspective may wish to look up the following: the 75th Anniversary issue of the Bulletin (volume 8, number 2); Individual Income Tax Shares and Average Tax Rates, Tax Years 1951-1850, by Fritz Scheuren and Janet McCubbin (Bulletin, Volume 8, Number 3). Individual Income Tax Shares and Average Tax Rates, Tax Years 1951-1986, by Janet McCubbin and Fritz Scheuren (Bulletin, Volume 8, Number 4). We hope we have interested you enough to also want to review the supplement to this issue of the Bulletin Board, which recounts the history of SOI. The SOI Publications Team wishes to thank Marty Bloom, Keith Gilmour and Howie Wilson, all retired former SOI employees (Howie Wilson is a former assistant director); and Dave Paris, Chief, Individual Income Tax Statistics Branch, for their contributions to this chronology. Selected historical data also appear in the back of each Bulletin. Other collections of SOI data covering several years include those found in the various SOI compendiums produced on international income and taxes, on tax- exempt organizations and, soon, on estate tax returns and personal wealth. They can all be obtained by contacting the SOI Statistical Information Services staff on (202) 874-0410 or FAXing them on (202) 874-0922. We hope this look backwards and ahead will be of interest and use to you as custmers of our data. Perhaps our stroll down memory lane will help provide greater insight into the changes our data have gone through and a better sense of where we need to go. As always, we welcome both your reminiscences about the past as it relates to SOI data and your suggestions for the future. The following are some of the articles planned for inclusion in upcoming issues of the SOI Bulletin: Early Economic Estimates, Individual Income Tax Returns, 1992; Excise Taxes, Fiscal Year 1992; Sole Proprietorships, 1991; and Partnerships, 1991. The SOI program highlights presented here focus on events that have had an impact on the organization, the studies conducted and the technologies employed. These highlights are not meant to encompass all the significant events during the past 80 years, nor to overlook the names of individuals who made it all happen; only the names of SOI Division Heads (Directors) are mentioned. The Beginning After an 18-year lapse in the Federal income tax, the 16th Amendment to the Constitution became effective early in 1913. This Amendment gave Congress the authority to tax incomes. 1913 On October 3, Congress enacted the first modern income tax law, which imposed a tax on the net income of both individuals and corporations. 1916 On September 8, Congress enacted the Revenue Act of 1916, which, in addition to increasing tax rates and creating an estate tax, provided for ...the preparation and publication of statistics reasonably available with respect to the operation of the income tax law and containing classifications of taxpayers and of income...and any other facts deemed pertinent and valuable... Reports were to be made annually by the Commissioner of Internal Revenue with the approval of the Secretary of the Treasury. (A similar statement has appeared in each major rewrite of the tax laws since 1916, most recently in the Internal Revenue Code of 1986.) The Early Years, 1917-1929 In this period, the new organization produced its first SOI reports, one for each year. Early on, each was preceded by a preliminary report. Sampling of tax returns was introduced as the basis for the individual income tax return statistics, and punchcard equipment was installed for use in data processing. 1917 The Statistical Division was created. 1918 The first Head of IRS statistical operations, Dr. Edward White, was selected. The first SOI report, relating to personal and corporate income tax returns filed for 1916, was released in June. This report contained some earlier-year statistics on the income tax back to 1913. The Annual Report of the Commissioner of Internal Revenue for 1918 provides the reasons for the extensive geographic data that appear in the early SOI reports (continuing into the late 1920s): The value of comparative statistical data, classified by states and collection districts relating to collection from particular sources can hardly be overestimated. Such compilations will reveal, subject to the weight that must be given to known differences in economic conditions, the states and collection districts in which the enforcement of the tax laws is exceptionally efficient. Furthermore, analysis of these compilations are almost indispensable to controlling expenditures for various administrative purposes in the several collection districts. The extensive geographic tabulations by collection district was also a carryover from earlier years when annual collections served as the basis for determining the salaries of district directors. Sampling of lower-income individual income tax returns for SOI was instituted. 1919 From the 1919 Annual Report of the Commissioner of Internal Revenue. The preparation of the publication Statistics of Income, a compilation of statistics based on the data selected from the returns of income and profits, involves continuously a large amount of work on the part of the Statistical Division of the Income Tax Unit, which is also required from time to time to undertake special statistical studies related to the work of the unit. The Statistics of Income for 1917 were published in time for their utilization at the October 6 industrial conference in Washington. A large amount of work was required for the compilation of medians for use in the application of the statutory provision (c-2 of section 311, Revenue Act of 1918) for determining the war profits credit of corporations which were not in existence during the whole of at least one calendar period. The first SOI data on sole proprietorships were published for 1917. (Sole proprietorship data were then published, in varying detail, for each year through 1939. Thereafter, they were produced only occasionally until 1956, when the annual program was revived.) 1922 As a result of a reorganization, the Statistical Division was renamed the Statistical Section (although it remained in the Income Tax Unit, the organization through which tax returns were routed for audit purposes). 1923 The SOI report for 1921 (and several others that followed) presented counts of individual income tax returns by county and city based on index cards maintained in each district office. 1925 Complete income statements were published for corporations for the first time for 1922. The first SOI data were published on estate tax returns, for 1916-1922. (The estate tax return program then continued on an annual basis for more than 25 years. It was then changed to an occasional program before, again returning to an annual program; see below.) 1926 The use of systematic stratified sampling was described in the SOI report for 1925 as follows: a fair average sample of the returns filed by persons having net income of less than $5,000 approximating 250,000 returns are sent in to the Bureau by the 64 collectors offices and are analyzed for information bearing on this income class, the data fairly representing the distribution of income of all the returns filed having net income of less than $5,000. The first gift tax return statistics were published, based on returns filed in 1925, following enactment of the gift tax in 1924. (This program continued almost annually until 1966. During the 1950s, the statistics were generally published together with estate tax return data in a separate SOI report.) 1928 Balance sheet statistics for corporations were published for the first time for 1926, following a change in the tax return form that required the reporting of assets and liabilities. The first Source Book of corporation income tax return data was compiled. It provided data for 1926 by more detailed industry groupings than were published, by size of net income. (The Source Book was compiled each year thereafter, except for 1952. For the more recent years, it presents detailed industry data by size of total assets.) 1929 It is not known exactly when punchcards and machine tabulating equipment were introduced, but mention of their use is noted in the SOI report for 1928, most of the processing for which occurred in 1929. (Up until then, data were compiled either manually or on mechanical equipment.) The Depression Years, 1930-1939 A major expansion in the uses of SOI occurred during this decade, principally as a result of new programs and studies. The Work Projects Administration (WPA) and the institution of the first U.S. system of national accounts were especially important. 1934 - In response to a need for more detailed income statistics, not only for use in tax research but also 1936 as benchmarks for the national income accounts, two voluminous studies were conducted principally for 1934 and 1936. These studies were produced in Philadelphia under the direction of the Treasury Departments Division of Tax Research (the forerunner of the present Office of Tax Analysis) and financed by the Work Projects Administration (WPA). The project broke new ground in terms of producing data that were more relevant for revenue estimation and tax legislative purposes than data previously produced. These included cross-tabulations and more detailed information on the distribution and sources of income and on patterns of income than were available in SOI, by detailed size and geographical classifications. Included was an early study of capital gains and losses, with data by asset types and length of holding period. Four separate SOI supplemental reports of individual income tax return data summarized the results. For corporations, cross-classifications of data were produced by industry and size and extensive use was made of frequencies. Included was the only comprehensive SOI study to date comparing book and tax profits. All tabulations were manually compiled and hand-posted. The design of many of these tabulations became the prototypes of tables which were presented annually or periodically in later SOI reports, especially in those of the 1950s and 1960s. 1936 For the first time, two separate SOI reports were issued for 1934, one for individuals and one for corporations. The War Years and the Aftermath, 1940-1949 Substantial changes were made in the tax laws of the early 1940s to increase revenue in order to finance additional expenditures incurred as a result of the war effort. There was a major increase in tax rates; a broadening of the individual income tax base so that for the first time it covered nearly all of the population, instead of just the wealthy; a reduction in personal exemptions; and a sharp growth in income. As a result, the decade that ended in 1949 witnessed a tremendous growth in the filing of individual income tax returns, from fewer than 8 million for Tax Year 1939 to almost 52 million for Tax Year 1949. 1940 The first fiduciary income tax returns statistics were published for 1937. (Previously, income and tax reported by taxable estates and trusts were reported on individual income tax returns. The fiduciary income tax return program continued on an annual basis until 1952; since then, it has been repeated only on a cycled or occasional basis.) 1943 The increased workload caused by the growth in individual income tax returns filings led to the adoption of more sophisticated sample designs and stratified systematic sampling as it is known today was implemented for the first time. Measures of sampling variability were also computed for the first time and published in the 1943 SOI. 1945 The first detailed partnership statistics were published for 1939. (The partnership program was regarded only as a special study, to be undertaken on an occasional basis. It became an annual program starting with 1956.) 1946 The first Head of SOI, Dr. Edward White, retired in 1946 after 28 years and was replaced by James Turner, an IRS employee credited with the development of the standard deduction. At this time, the name of the organization was changed from Statistical Section to Statistical Division. 1949 Bryce Bratt replaced James Turner as Head of the Statistical Division. The Advent of Automatic Data Processing (ADP), 1950-1959 One of the major effects of the rapid growth in the number of returns filed was a delay in the publication of the annual SOI reports. There was a tremendous backlog of work in the years immediately following World War II. In addition, the SOI programs had expanded to cover other types of returns, the tax laws had grown more complicated and so had the tax returns as a result, and the number of data items required by the Treasurys Tax Analysis Staff had increased substantially. More detailed tabulations were required that exceeded the capabilities of the tabulating equipment then being used. These detailed tabulations were often based on schedules in support of totals reported elsewhere in the tax return. In addition, samping, which had been limited to individual income tax returns, was extended to corporation income tax returns and then returns used for other SOI programs. 1951 Sampling of corporation income tax returns was instituted for the first time for Tax Year 1951. 1953 Ernest Engquist, a statistician with the Bureau of the Census, was hired as the Director of the renamed Statistics Division to replace Bryce Bratt. Under Dr. Engquist, an organization of professional statisticians, grouped along subject matter lines, gradually replaced the previous organization which was largely clerical. A staff of mathematical statisticians with experience in sampling and other statistical techniques was added. The sizes of the individual and corporate samples were gradually reduced and sampling was extended to most other SOI programs. The sample selection process was improved with the cooperation of the IRS field offices in which the returns were located. However, all returns selected for SOI continued to be transmitted to the Statistics Division in Washington, D.C., for processing. Publications were streamlined as a means of improving their timeliness. Gradually, the backlog of statistical processing and SOI reports was reduced so that, by the late 1950s, the program was again on schedule. 1954 The Bureau of the Census purchased two UNIVAC I computers; the Statistics Division assisted by funding half the cost of one of them for use in SOI. (This was the first IRS computer and the first IRS computer application.) A staff of computer programmers and systems analysts was gradually added to the Division. The advent of the computer was to revolutionize SOI processing. Congress enacted the Internal Revenue Code of 1954 which was to dictate, to a large extent, the scope and size of SOI programs for years to come. 1955 The first early IRS area service center, in Kansas City, Missouri, was created for administrative processing of individual income tax returns. This was later followed by centers in Lawrence, Massachusetts, and Ogden, Utah. Although SOI processing continued to be centralized in Washington, the Lawrence area center began to assist in keypunching and other clerical work. 1956 The first taxpayer usage study was undertaken. For these studies, a small sample of tax returns was selected early in administrative processing to provide IRS with a quick glimpse of the reporting practices of taxpayers during the filing season. These intermittent studies covered different types of tax returns. (Starting with 1969, taxpayer usage studies of individual income tax returns became annual.) 1957 The first SOI report on farmers cooperatives was published for 1953. (The publication was issued only once thereafter, for 1963.) 1958 At the request of the Joint Committee on Internal Revenue Taxation, special tabulations of individual income tax return data were compiled starting with 1957, based on an early cutoff of sample receipts. These Advance Data tabulations enabled the first statistics for a given tax year to become available before the end of the year in which the returns were filed; these early tabulations continue to this day. (The sample used then became the basis for the SOI preliminary statistics.) 1959 Most of the manual processing of individual income tax returns was transferred to the three area service centers. Keypunching had already been transferred, starting with 1957. Meeting Treasury Needs and the First Tax Model, 1960-1969 The 1960s were characterized by the increased need for data for use in revenue estimating and for determining tax policy, both within and outside the Treasury Department. Pre-conceived tables could no longer meet the need for ad-hoc tabulations, and a demand grew for the capability to produce estimates based on simulations. To meet these requirements, as well as the Office of Tax Analysis need for special studies of capital gains, depletion and depreciation, the professional staff of the Statistics Division doubled in the early 1960s. The 1960s also witnessed the virtual completion of the movement of manual statistical processing from the Statistics Division to field locations, as well as the shift of SOI computer operations to the new Detroit Data Center. The early 1960s were followed by a period of generally shrinking budgets. Balance had to be struck between the available resources and the increased workload that resulted from the growing number of returns filed and the program expansion that had occurred in the early 1960s in response to the increase in Treasury requests for special studies. Many of these studies have continued to the present. The impact of special studies on the regular programs was such that these programs began to slip behind schedule, again. Adapting to (and having to deal with problems associated with) the new decentralized system of processing continued to have a negative impact on the schedule for publishing the SOI reports. 1960 The third annual SOI report, U.S. Business Income Tax Returns, was introduced for 1957. It was based on new annual programs on sole proprietorships and partnerships, authorized and funded by the then Budget Bureau to support Commerce Department data needs for the national income accounts. Also instituted were special tabulations of corporate data based on an early cutoff of sample receipts, also for use in the national accounts. The first results of these three studies were produced for 1956 in the unpublished annual Selected Financial Data series. (The corporate sample used for this purpose was then also used to produce the published preliminary statistics for 1962-1980.) 1961 A variety of special Treasury studies was implemented in anticipation of tax reform. Included were the corporate foreign tax credit, sales of capital assets, depreciation and depletion, all of which placed a strain on the existing programs and staff. For this purpose, the SOI budget was increased, and the SOI professional staff needed to plan and manage these projects doubled. 1962 At the request of the Office of Tax Analysis, SOI developed its first so-called tax model, based on 1960 individual income tax returns. The model concept involved creation of a computer file of statistically sampled tax returns associated with a generalized computer program capable of simulating the probable results of a wide variety of possible tax law changes, singly or in combination. (Later, the tax modeling function was transferred to the Office of Tax Analysis, with SOIs role limited to that of providing a data file based on the SOI sample of returns; it was this file that was input to the model. This same file became the basis of the first SOI public use file of tax returns for statistical use, sanitied to protect taxpayer confidentiality.) Public Law 87-870 was enacted, enabling IRS, including SOI, to receive reimbursement for special studies, compilations and services. Over the years, SOI reimbursable work has expanded considerably, now including projects undertaken for the Commerce Department in support of the national accounts. The first formal SOI quality control program was initiated concurrent with complete implementation of decentralized manual processing. It was characterized by independent verification by the SOI Division of samples of work done in the field, and continuous feedback; the field sites were also required to perform continuous systematic reviews. This was in addition to the computerized validity checks of the transcribed data that began in the 1950s. (Previously, data had been manually checked, generally by 100-percent verification.) The first individual income tax returns supplement on sales of capital assets was published for 1959 (although a somewhat similar report had been published as a by-product of a Work Projects Administration study for 1936; sales of capital assets continue to be a special SOI study to this day). 1962 A reorganization separated the responsibility for most IRS internal management statistics 1965 from that of the basic SOI program. (Among the projects transferred was the Annual Report of the Commissioner of Internal Revenue, preparation and publication of which was formerly an SOI responsibility.) 1963 W. Edwards Deming, the noted authority on quality, conducted a study of SOI sampling and sampling procedures. 1964 One of the several physical moves the Statistics Division made during its long history was to the aging Pension Building in downtown Washington, D.C., where it was located for about 4 years. The screams of statistical clerks were not unusual when an occasional rat was noticed scurrying beneath the desks; pigeons often flew in through the open or broken windows near the high-vaulted ceiling, requiring some to keep umbrellas open over their desks during the day (and to cover their desks at night with sheets). 1964 - 1965 Dr. Engquist died early in 1964, and was replaced as SOI Director by Vito Natrella, a statistician formerly with the Securities and Exchange Commission. 1965 IRS Data Center in Detroit (now the Detroit Computing Center) became operational. All SOI computer work was gradually transferred to the Data Center in succeeding years. Manual processing for many studies, including that for corporations and partnerships, was also shifted to that location. (In recent years, there has been a shift back to SOI Division of most of the systems development and computer operations. With the advent of personal computers, this trend is expected to continue.) 1966 With the advent of ADP nationwide in all IRS service centers, the use of the computer to identify the returns to be selected for the SOI individual income tax return sample became possible; formerly this operation was manual. (Computer designation was gradually extended to other SOI programs and enabled more sophisticated designs to be implemented. This helped offset some of the effects of the sample reductions necessitated by budget considerations.) A special SOI supplement on depletion claimed for 1960 was issued. This was a one-time study. 1967 The first SOI estimates of personal wealth were published, based on estate tax returns for 1962. (This program continues, as a by-product of the estate tax return SOI program.) The first corporation SOI supplemental report on the foreign tax credit was published for 1961. (This program has continued on a cycled basis.) 1969 A geographic supplement to the individual income tax return statistics was published for 1966, by ZIP Code area. This report was based on the Master File of all taxpayers. (The initial report was roundly criticized by many as a misuse of the ZIP Code which would only promote junk mail. A few years later, data by county were published, based on the county identification then required on the tax return for use in the revenue sharing program with the States.) The first corporation SOI supplemental report on Controlled Foreign Corporations was published for 1962. (This program has continued on a cycled basis.) The Era of Increased Special Studies, 1970-1979 During the 1970s, the focus of the SOI program was increasingly directed to fulfilling the requests for special statistics by Treasurys Office of Tax Analysis. The data were needed to help evaluate specific domestic and foreign tax policy issues and many resulted from Congressionally-mandated requirements for Treasury reports to evaluate the effectiveness of various new provisions of the tax law. As a result of these initiatives, the dimensions of the overall SOI program were widened to encompass such topics as high-income taxpayers, income of citizens working abroad, taxation of corporate income from U.S. possessions, international boycott participation, employee benefit plans and private foundations. During the 1970s, the relative size of the SOI budget continued to decline. SOI samples were generally reduced in size, partly for this reason and partly because resources had to be found with which to fund the new statistics needed by the Office of Tax Analysis. Frequently, schedules for completing the regular individual and corporate programs suffered. 1974 The concept of a Master File was adopted by IRS in the late 1950s and was implemented nationwide in the case of individual income taxpayers in the late 1960s. Files for other taxpayers followed. It was not until 1974, however, that it was considered practicable to use some of the administrative data recorded in the Master File system for returns included in the SOI sample. These data were used either to augment or replace individual income tax return data that previously had been processed independently, although in some cases the administrative data had to be edited for statistical use. When this process proved to be cost effective, additional data items for these returns were obtained in a similar manner. (Use of Master File data for the partnership SOI program did not begin until Tax Year 1981, followed by corporations and the other SOI programs starting in the mid-1980s.) 1979 Steps were begun to assure that a degree of longitudinality was built into the SOI sample of individual income tax returns, partly to improve the statistical estimates of year-to-year change and partly to meet an Office of Tax Analysis need to be able to trace the tax behavior of identical taxpayers over time. Systems and Program Changes, 1980-Present The period starting with 1980 has been characterized by the need to accommodate new program demands with only minimal increases in budget. To do this, fundamental changes have had to be made  in the SOI samples, in content of certain programs, in program cycles and publications, and in manual and ADP processing. The beginnings of these latter changes had already taken place when data from the Master File system began to be used for SOI individual income tax return program; during the early- and mid-1980s, this practice was extended to the corporation and other SOI programs as well. The next change, from manual to electronic data retrieval, again, revolutionized the nature of SOI processing. The great increase in the Divisions hands-on accessibility to computers has been one of the keystones. The new environment utilizes new technology, on-line processing in the IRS service centers (whereby all steps in statistical processing were accomplished in a single operation), and quality reviews that emphasize problem prevention and improved training. Projects on sole proprietorships and partnerships in support of the national accounts, heretofore funded at the same level as that originally established in the 1950s, have been placed on a reimbursable basis, with part of the cost charged to the Commerce Department. Preliminary corporation data were dropped, only to be revived in the early 1990s, mainly in support of the national accounts, with funding provided by the Commerce Department. Based on user priorities, farm data have been cancelled. The publications program has been revised to eliminate the preliminary reports for corporations and individuals, the publications covering unincorporated businesses and all SOI supplemental reports. A new quarterly report, the Statistics of Income Bulletin, has been created as the vehicle for publishing more limited data on topics formerly covered by these separate reports, as well as to provide results of the growing number of special projects. It was evident that SOI was publishing far more data than most users could absorb, that this was contributing to the publications being behind schedule, and that the principal Federal Government customers often preferred having access to the underlying tax return data (when they were allowed a choice), rather than the detailed aggregates in table form. The published output of the individual and corporate programs has therefore been streamlined, improving timeliness of the publications, and bringing them back on schedule, again. The cost of producing data for publications containing a reduced number of tables and consisting of more general-purpose statistics has been far less than it formerly was, and is far less time-consuming to produce. These tables (together with the reports, themselves) are now readied for publication through electronic techniques, enabling SOI to produce high-quality publication-ready tables itself. 1980 Fritz Scheuren, a statistician formerly with the Social Security Administration, was selected as SOI director, following the retirement of Vito Natrella after 15 years. It became Dr. Scheurens responsibility to come up with innovative solutions to modernize SOI and its processing technology, while accommodating the additional data requirements of its principal customers at the least possible cost to the IRS. The first meeting of the Statistics of Income Consultants Panel convened. The Panel was charged with commenting on the current SOI program, emphasizing future directions and changes. A major objective was to involve customers who were academics and business representatives (in addition to tax policymakers) in the SOI work processes. 1987 One of the methods chosen to improve SOI processes was to create quality planning teams ; one of the first was charged with working with customers to improve the individual income tax return sample design. This successful initiative was implemented for 1988. One of the results is that tax families are now represented in the sample, linked together by the social security numbers of dependents reported on the tax return. 1988 SOI adopted the total quality organization (TQO) concept. Under TQO, problem prevention and a focus on customer needs are stressed and the total organization (people, processes, facilities, equipment and environment) is considered. The main strategy is working with utside customers and suppliers to assure that the goals and needs of all are taken into account (in terms of quantity, quality and timeliness), while at the same time satisfying the needs of internal customers (employees). A TQO plan is drawn up each year that identifies vital business issues and key activities which are addressed by manager/employee cross-functional teams. 1989 To improve service to customers, a centralized statistical information office was created to answer telephone and written requests for SOI data. 1992 The SOI Division instituted an electronic bulletin board to help meet customer requests for data.