IRS Won’t Have to Furlough Employees After All, Commissioner Says

The threat of a “shutdown” at the IRS has eased, Internal Revenue Commissioner John Koskinen told a House panel on Wednesday. Prospects for one or two-day furloughs, which he predicted in December, depended on the extent of savings achieved by reducing overtime hours during filing season, he said, and sufficient economies were achieved.

At a budget hearing of the House Appropriations Financial Services and General Government Subcommittee, Koskinen again pleaded with Congress to enact President Obama’s 2016 spending proposal to raise his agency’s budget by 18 percent to $12.9 billion, following cuts of $1.2 billion over the past five years. During that time, “The number of taxpayers has increased by over 7 million, and the IRS has been given significant additional responsibilities,” he said. “These include implementation of the Foreign Account Tax Compliance Act and the Affordable Care Act.”

The tax agency has lost 13,000 employees since 2010, with 3,000 more likely to depart this year, Koskinen added, noting that 75 percent of the agency’s budget goes to personnel. “We’ve been double-sequestered,” he said, in that other agencies saw their budgets restored to pre-sequester levels. A loss in enforcement personnel reduces tax compliance, “which is not an on-off switch you can turn [back] on” after the American people get the impression that compliance is not enforced, he said. “A 1 percent drop in compliance will cost the government $30 billion a year, or $300 billion over 10 years.”

Enacting the budget hike would enable the IRS to bring the level of phone service up from the current 43 percent to 80 percent, the commissioner said. “We would also significantly increase enforcement and collection activities, generating over $2 billion more in increased government revenues.”

Appropriations Chairman Hal Rogers, R-Ky.,  though applauding Koskinen’s “competence and grace,” expressed strong opposition to a budget hike in a hearing that touched on IRS controversies including charges of political targeting, laxness on improper payments and wasteful production of videos for conferences.

Rogers said the 2011 Budget Control Act does not allow for a hike above spending caps and noted “Congress has repeatedly rejected additional funding for Obamacare,” and that the agency should prepare the eventuality that the Supreme Court strikes down the health care reform law.

“I am disappointed that the IRS requests to eliminate the three administrative provisions that have been enacted on a bipartisan basis for several years,” Rogers said. “Since the IRS’ targeting and spending scandals, appropriations bills have included prohibitions against targeting U.S. citizens for exercising their First Amendment rights, targeting groups for regulatory scrutiny based on their ideological beliefs, and making videos without advance approval.”

Nothing in the Republicans’ bills cuts customer service, Rogers added.

Subcommittee Chairman Ander Crenshaw, R-Fla., said, “Contrary to what the media reports about this committee, we are not here to simply punish the IRS, but rather to hold the agency accountable for their use of taxpayer dollars. We deliberately lowered the IRS’ funding to a level to make you think twice about what you are doing and why.”

Koskinen argued his agency had taken the targeting and spending controversies seriously. “We have cut conference spending by 80 percent,” he said. “We have established review boards for video productions and training expenses. We have ensured that those who willfully failed to meet their tax obligations are not eligible for performance awards. We are reviewing our hiring process to ensure, to the extent permissible by law, that former employees with serious prior conduct issues are not rehired. We now require that all contractors maintain the same high standards for tax compliance as employees,” he added. “And we have implemented the recommendations of the inspector general with regard to the serious management failures surrounding the review of applications by organizations to achieve social welfare status.”

Koskinen noted that the entire chain of command in the IRS’s 900-employee Exempt Organizations division -- where the targeting controversy began -- has been replaced and that he is trying to “build a culture in which every employee is a risk manager. I’ve worked 20 years in the private sector,” he added, “and this is the best workforce I’ve seen.”

Asked about the status of new proposed regulations governing nonprofits’ political activities, Koskinen declined to give a timeframe but promised they wouldn’t be released in a way that interferes with the 2016 elections. “My position is any regulation needs to have several qualities: Be fair to everybody; be clear; and be easy to administer,” he said. The agency has received 160,000 comments on an earlier version of the rule prepared jointly with the Treasury Department and Koskinen said he personally had read 1,200 pages.

Ranking subcommittee member Jose Serrano, D-N.Y., accused the Republicans of a “Groundhog Day” rehashing of old issues and unfairly tarnishing the entire agency for the actions of a few. “If taxpayers think they are not being treated equally because there are not enough resources, it’s not good for the agency, taxpayer or country,” he said.

The National Treasury Employees Union on Wednesday welcomed the announcement that furloughs have been averted. “NTEU worked with the IRS to find other ways to handle the ongoing budget cuts the agency is facing,” said National President Colleen Kelley. “The threat will return in the future unless Congress increases the IRS budget and allows the agency to hire enough staff to execute its mission.”