Nominee to Lead IRS Criticizes Recent Agency Budget Cuts

In a hearing truncated by a wrinkle in Senate rules, President Obama’s nominee to lead the troubled Internal Revenue Service criticized recent spending reductions but won support from the top two members of the Senate Finance Committee, in part through promising to cooperate with the panel’s ongoing probe of the agency’s handling of applications from groups seeking tax-exempt status.

John Koskinen, a private-sector turnaround specialist who was deputy director of the Office of Management and Budget during the Clinton administration, pledged to Chairman Max Baucus, D-Mont., and Ranking Member Orrin Hatch, R-Utah, that he would continue the cooperation in producing documents and making agency witnesses available demonstrated over the past six months by acting IRS chief Danny Werfel.

Werfel, an OMB veteran who is leaving his temporary IRS post at the end of the month, was praised by both Baucus and Hatch for handling the job with “skill and dignity.”

Baucus quoted a famous sportswriter’s invocation of the “judicious daily exercise of good judgment.” He said Koskinen was “the right person” to help push through tax reform, implement the 2010 Affordable Care Act and “win back the trust of the American people by undoing the damage” from the May inspector general’s report that triggered what some call the IRS scandal over the alleged targeting of primarily conservative nonprofits by delaying processing of their applications. “It’s not the most glamorous job but it’s certainly one of the most important,” Baucus said.

“The IRS is feared and loathed by millions of Americans,” Hatch said. “It must maintain credibility and can be damaged by any hint of impropriety.” He cited a more recent inspector general’s report on the risk of improperly claimed subsidies under the Affordable Care Act, and called the IRS’ troubles over the targeting of nonprofits “mostly self-inflicted.”

Koskinen was not shy, however, about mimicking earlier IRS leaders’ pleas for an end to the budget cuts. Since 2010 the reductions have amounted to $1 billion a year while costing the government $8 billion it could have redeemed through enforcing compliance with tax laws, he said.

“I don't know any organization in my 20 years of experience in the private sector that has said ‘I think I'll take my revenue operation and starve it for funds to see how it does,’ ” Koskinen said in his prepared testimony. “The IRS will have 11,000 fewer people working during this upcoming filing season while processing the largest number of returns in its history.”

Koskinen also praised the 95,000 IRS employees for their experience and “great tradition of public service” and pledged, if confirmed, to “create a working environment that allows employees to reach full their potential.” Good management, he said, requires that the IRS chief “listen to employees and see them not as part of the problem but part of a solution.” Employees are the ones who know the problems and the ones who will go out and execute the solutions, Koskinen added. “I want to create a system where information flows freely, across silos,” he said. “Consistent messaging and participation, I have found, energizes people.”

The nominee referenced his other “best friends” in the inspector general’s office and Government Accountability Office as well as the National Taxpayer Advocate and the IRS whistleblower office. He promised to look for important patterns in congressional inquiries -- one of the sore points among lawmakers that emerged during this spring’s IRS controversies.

Koskinen declined to take a position -- pending receipt of public comments -- on the Treasury Department and IRS’ recent proposed rule to clarify criteria for determining whether social welfare nonprofits are devoting too much of their agenda to politics. Hatch complained that the proposal released early this month “hammers social welfare groups but lets unions slip by,” while Baucus called the proposal a “positive step.” The nominee said that, “Overall, what is needed is clarity for all organizations so that in the future they know what they can do to be comfortable” they’re within the law.

Though both the top senators said they expect Koskinen to be confirmed, Hatch had hoped the confirmation hearing could have been postponed until the committee’s investigation of the targeting problem was complete. Baucus said “it’s time to move” because filing season is approaching and the IRS has been without a permanent commissioner for more than a year.

After being interrupted for floor votes, the hearing was cut short because Republicans invoked a rule allowing them to object to having such a hearing within two hours of the Senate returning from a recess. So Baucus recessed the hearing “until the appropriate time.”