IRS chief defends implementation of health care law

In his first Capitol Hill appearance since the U.S. Supreme Court’s June ruling on the health care reform law, Internal Revenue Service Commissioner Doug Shulman defended his workforce and its preparations for implementing the Affordable Care Act against angry Republican charges that the IRS illegally reinterpreted the law, took on too large a task and risked compromising taxpayer privacy.

Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, called the Thursday hearing to “address concerns about the Big Brother process” created through the implementation of “Obamacare,” which “is all about taxes,” he said. Issa said he wanted to explore whether the IRS is equipped for the “massive staffing and technology ramp-ups” that will be required to deliver satisfactory service and to examine “the legality of rules it will enforce and questions about the sacrosanct privacy of personal information once held only by the IRS but now shared with state exchanges.”

Republican lawmakers and two witnesses offered harsh criticisms of a recent IRS rule interpreting a complex section of the 2010 Affordable Care Act to mean that the federal government could deliver the law’s premium tax credits to individuals even in states that declined to set up a health insurance exchange and allowed the federal government to step in. As drafted, the law appears contradictory on this question.

“This wasn’t in the bill, and you were tasked with cleaning up their mess after states didn’t sign up” for the exchanges, said Rep. Scott DesJalais, R-Tenn., a physician, suggesting the IRS “bypassed Congress and wrote a new tax law.”

But Shulman defended the interpretation. “Based on a reading of the entire act, our legal experts came down on our side,” he said.

Rep. Ann Marie Buerkle, R-N.Y., a former nurse, referred to the law as containing the “largest tax increase in the history of our nation -- if you think you’re going to the IRS to get health care improvements, access to health care or reduced costs, you are out of touch with reality,” she said. She referred to the agency as “difficult to deal with and unresponsive” and warned that it could not properly handle personal information that taxpayers will be required to report on their health insurance coverage.

Shulman said he wanted to “clear up some misconceptions” and that the risk of privacy violations is being “way overstated.” Under the new law, taxpayers will be required simply to complete a form telling the IRS whether they have coverage, how much they pay and who the insurer is, he said. “IRS takes data security very seriously, and we have an excellent track record. It’s not something new to IRS, it’s a cornerstone of the tax system.” He mentioned past experience protecting data on child support and Medicaid.

He said his agency began preparing staff and computer systems and reaching out to businesses as soon as the law was enacted. Further public communication involving social media, letters and coordination with paid tax preparation services is under way.

Rep. Danny Davis, D-Ill., faulted Republicans for saying the new law represented “an unprecedented expansion of IRS powers,” noting the agency under the George W. Bush administration delivered millions of dollars in stimulus checks. He asked Shulman if recent comments by the governor of Maine comparing the IRS to the Gestapo were damaging to the agency.

That was “unhelpful rhetoric,” Shulman replied, but “our agency has a good track record interacting with the American people in a respectful way.” He noted the IRS has reached a best-ever 73 percent approval rating in a recent customer satisfaction survey. Confronting other “misconceptions,” he dismissed reports that his agency would hire 16,000 new agents. “Revenue agents are trained in complex tax issues [and] are not the ones deciding these” health care issues, he said. “IRS has a long tradition of nonpartisan agencies implementing laws Congress passes. My commitment and the agency’s is to do it in a way that minimizes the burden on business and facilitates the flow of information.”

National Taxpayer Advocate Nina Olsen said she had heard that 800 to 860 new full-time employees might be needed to make the law work. “It’s not an unprecedented expansion of IRS power, but it is an unprecedented expansion of IRS work,” she said.

Reports by Olsen’s office, the Government Accountability Office and the Treasury Inspector General for Tax Administration have generally said the IRS is doing a good job implementing the new law, she said. But she raised a few concerns, such as the need to speed communication to the public and to train staff on coaching taxpayers on how to report their insurance status to state exchanges.

Former IRS Commissioner Mark Everson expressed worries that the law had created “so much confusion, so many moving pieces,” that a failure might damage IRS general tax administration. He also was concerned about privacy violations, citing recent hacking of credit card companies and the scandal over WikiLeaks’ publication of secret government documents.