Bloomberg News

Obama Pick for IRS Chief Pledges to Rehabilitate Tax Agency (3)

December 10, 2013

IRS Commissioner Nominee John Koskinen

Internal Revenue Service commissioner nominee John Koskinen, then chairman of Freddie Mac, arrives at the White House in Washington, D.C., on March 27, 2009. Photographer: Nicholas Kamm/AFP via Getty Images

John Koskinen, President Barack Obama’s nominee to run the U.S. Internal Revenue Service, said at a Senate panel’s confirmation hearing that he would work to restore the public’s trust in the tax agency.

The IRS, lacking a confirmed commissioner for more than a year, has been struggling with budget cuts and the political reverberations from its admission that it applied tougher scrutiny to Tea Party groups applying for tax-exempt status.

“With 95,000 employees and the range of challenges the agency faces, mistakes will happen,” Koskinen said today in prepared testimony for the Senate Finance Committee in Washington. “So the realistic goal is to find problems quickly, make sure they stay fixed and be transparent about the entire process.”

Only two senators questioned Koskinen before the hearing recessed for floor votes. Republicans, who object to Democrats’ easing the requirements to confirm most nominees, then invoked a rule that bars committees from meeting more than two hours after the Senate starts work, which shut down the session.

Senator Charles Grassley, an Iowa Republican, said Republicans may be expressing “resentment” after Democrats changed Senate rules to require a majority vote, instead of a 60-vote threshold, for confirmation of nominees except to the U.S. Supreme Court.

Senate Finance Committee Chairman Max Baucus said the committee will reconvene at 9:15 a.m. tomorrow on the Koskinen nomination.

Nonprofit Groups

In addition to continuing congressional investigations into its treatment of politically oriented nonprofit groups, the IRS faces an aging workforce, budget constraints and congressional mandates to administer parts of the 2010 health-care law.

The IRS hasn’t had a Senate-confirmed commissioner since November 2012, when Douglas Shulman left upon his term’s expiration.

The panel hasn’t set a vote on Koskinen’s nomination, though Baucus, a Montana Democrat, today said he wants action quickly. The committee’s top Republican, Orrin Hatch of Utah, said he would back Koskinen.

Obama forced out acting commissioner Steven Miller in May after the agency apologized for its treatment of Tea Party groups. Danny Werfel, the controller of the Office of Management and Budget, has been running the tax agency. Werfel plans to leave the IRS at the end of this month, Baucus said.

Obama nominated Koskinen, 74, on Aug. 1, more than a year after Shulman announced that he didn’t want another term. If confirmed, Koskinen would serve until November 2017.

Freddie Mac

Koskinen is a former chairman of Freddie Mac who developed a reputation as a turnaround specialist in the public and private sectors. He led the federal government’s efforts to prepare for problems in case computers with space for two-digit years acted as if 1900 followed 1999, and he was city administrator in the District of Columbia.

The congressional investigations into the Tea Party issue have shown that the IRS also applied scrutiny to some Democratic-leaning groups. A complete picture of what the IRS did and didn’t do hasn’t emerged, and Baucus and Hatch are still investigating.

The agency is proposing tighter rules to limit the political activity of nonprofits, organized under section 501(c)(4) of the tax code, that don’t disclose their donors.

Koskinen said Congress needs to reverse IRS budget cuts that he said have reduced the workforce by 11,000 employees.

Success ‘Recipe’

“I don’t care how efficient you become,” he said. “That is not a recipe for success or improved compliance and taxpayer service.”

House Republicans proposed a spending plan earlier this year that would cut the IRS budget by 24 percent from the $11.9 billion it received in fiscal 2013. The Obama administration has proposed a $1 billion increase.

According to disclosures he filed this year, Koskinen’s net worth is from $7.1 million to $27.4 million. In those disclosures he said he would resign his position as a director of AES Corp. (AES:US) and American Capital Ltd. (ACAS:US) and sell stock holdings.

Among Koskinen’s holdings are many of the largest U.S. companies that are subject to audit by the IRS, including Apple Inc., Chevron Corp. (CVX:US) and Google Inc.

Since the beginning of 2007, Koskinen has donated $25,600 to Democratic candidates and causes, including $7,300 to Obama and $3,000 to the Democratic Congressional Campaign Committee, according to Federal Election Commission records.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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Companies Mentioned

  • AES
    (AES Corp/VA)
    • $14.1 USD
    • 0.17
    • 1.21%
  • ACAS
    (American Capital Ltd)
    • $14.88 USD
    • -0.07
    • -0.47%
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