IRS nominee faces tough questions from Senate panel

Senate Finance Committee members gave a warm welcome Tuesday to President Bush's nominee to be Internal Revenue Service commissioner, then dumped on him a staggering load of problems. In addition to long-standing concerns over the enormous amount of uncollected taxes, IRS's badly antiquated computer system, mounting complexity of financial deals in a globalized economy and an aging workforce, the senators pressed the nominee, Douglas Shulman, on how he would ensure swift implementation of the economic stimulus package Congress aims to approve soon.

None of the questioning raised any doubt about easy Senate confirmation for Shulman to serve a five-year term as head of IRS, and he promised repeatedly to work closely with the committee on those issues and on an attempt at fundamental overhaul of the tax codes, which Senate Finance Chairman Baucus said he would pursue this year. While conceding that he was not well informed with many of the details of IRS operations, Shulman emphasized his experience as a manager and said that, above all, IRS must be seen as "competent, fair and impartial."

Shulman, 40, is vice president of the Financial Industry Regulatory Authority, a nongovernmental body that monitors an array of investments. More than a decade ago he served on a bipartisan commission that recommended restructuring the IRS.

But Baucus greeted Shulman with a litany of the difficulties he will face. He and Finance ranking member Charles Grassley, R-Iowa, both emphasized the "tax gap" between what is owed and what is paid, estimated at $345 billion a year. Baucus noted that at his insistence Treasury and the IRS developed a plan to close the gap. He promised to hold Shulman accountable for implementing the plan and keeping him informed on the progress.

The chairman also called on Shulman to follow through on a plan to improve customer service, to execute a major overhaul of IRS's computer system, which he said left various parts of the agency unable to share data, to act aggressively to retain trained employees and hire talented replacements for the large number of workers due to retire.

Baucus said he intends to hold "an extensive series of hearings to explore options for fundamental [tax] reform" and expected Shulman to help formulate changes and to implement them. Baucus and other members pressed Shulman to ensure that whatever tax refunds are approved in the stimulus package will be issued swiftly. Shulman noted that the IRS currently was in the midst of the normal tax-filing process but promised, if confirmed, to determine what the agency can do to expedite the stimulus program.

Baucus plans to hold a hearing Wednesday to craft a different version of the stimulus plan than what was negotiated between the Bush administration and House leaders. Sen. Charles Schumer, D-N.Y., cited his efforts to control the refund anticipation loan industry, which gives taxpayers part of their anticipated refund upfront, frequently at high discounts, and urged Shulman to prevent that from happening to the stimulus refunds. Shulman said he would work to reduce the time between filing and receipt of refunds.