    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

                      ONGOING MANAGEMENT CHALLENGES AT IRS

    =======================================================================

                                 JOINT HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                             GOVERNMENT OPERATIONS

                                    AND THE

                          SUBCOMMITTEE ON HEALTHCARE,
                       BENEFITS, AND ADMINISTRATIVE RULES

                                     OF THE

                             COMMITTEE ON OVERSIGHT
                             AND GOVERNMENT REFORM
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                OCTOBER 25, 2017

                                   __________

                               Serial No. 115-63

                                   __________

    Printed for the use of the Committee on Oversight and Government Reform

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             Available via the World Wide Web: http://www.fdsys.gov
                           http://oversight.house.gov

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                  Committee on Oversight and Government Reform

                      Trey Gowdy, South Carolina, Chairman
    John J. Duncan, Jr., Tennessee       Elijah E. Cummings, Maryland,
    Darrell E. Issa, California              Ranking Minority Member
    Jim Jordan, Ohio                     Carolyn B. Maloney, New York
    Mark Sanford, South Carolina         Eleanor Holmes Norton, District of
    Justin Amash, Michigan                   Columbia
    Paul A. Gosar, Arizona               Wm. Lacy Clay, Missouri
    Scott DesJarlais, Tennessee          Stephen F. Lynch, Massachusetts
    Blake Farenthold, Texas              Jim Cooper, Tennessee
    Virginia Foxx, North Carolina        Gerald E. Connolly, Virginia
    Thomas Massie, Kentucky              Robin L. Kelly, Illinois
    Mark Meadows, North Carolina         Brenda L. Lawrence, Michigan
    Ron DeSantis, Florida                Bonnie Watson Coleman, New Jersey
    Dennis A. Ross, Florida              Stacey E. Plaskett, Virgin Islands
    Mark Walker, North Carolina          Val Butler Demings, Florida
    Rod Blum, Iowa                       Raja Krishnamoorthi, Illinois
    Jody B. Hice, Georgia                Jamie Raskin, Maryland
    Steve Russell, Oklahoma              Peter Welch, Vermont
    Glenn Grothman, Wisconsin            Matt Cartwright, Pennsylvania
    Will Hurd, Texas                     Mark DeSaulnier, California
    Gary J. Palmer, Alabama              Jimmy Gomez,California
    James Comer, Kentucky
    Paul Mitchell, Michigan
    Greg Gianforte, Montana

                         Sheria Clarke, Staff Director
                        William McKenna, General Counsel
     Jack Thorlin, Government Operations Subcommittee Deputy Staff Director
                        Sharon Casey, Deputy Chief Clerk
                     David Rapallo, Minority Staff Director
                     Subcommittee on Government Operations

                     Mark Meadows, North Carolina, Chairman
    Jody B. Hice, Georgia, Vice Chair    Gerald E. Connolly, Virginia,
    Jim Jordan, Ohio                         Ranking Minority Member
    Mark Sanford, South Carolina         Carolyn B. Maloney, New York
    Thomas Massie, Kentucky              Eleanor Holmes Norton, District of
    Ron DeSantis, Florida                    Columbia
    Dennis A. Ross, Florida              Wm. Lacy Clay, Missouri
    Rod Blum, Iowa                       Brenda L. Lawrence, Michigan
                                         Bonnie Watson Coleman, New Jersey

                                     ------

         Subcommittee on HealthCare, Benefits, and Administrative Rules

                           Jim Jordan, Ohio, Chairman
    Mark Walker, North Carolina, Vice    Raja Krishnamoorthi, Illinois,
        Chair                                Ranking Minority Member
    Darrell E. Issa, California          Jim Cooper, Tennessee
    Mark Sanford, South Carolina         Eleanor Holmes Norton, District of
    Scott DesJarlais, Tennessee              Columbia
    Mark Meadows, North Carolina         Robin L. Kelly, Illinois
    Glenn Grothman, Wisconsin            Bonnie Watson Coleman, New Jersey
    Paul Mitchell, Michigan              Stacey E. Plaskett, Virgin Islands

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on October 25, 2017.................................     1

                                   WITNESSES

    Mr. Jeffrey Tribiano, Deputy Commissioner for Operations Support,
      Internal Revenue Service and Ms. Gina Garza, Chief Information
      Officer, Internal Revenue Service
        Oral Statement...............................................     4
        Written Joint Statement of Mr. Tribiano and Ms. Garza........     7
    The Honorable J. Russell George, Treasury Inspector General for
      Tax Administration
        Oral Statement...............................................    17
        Written Statement............................................    19
    Mr. Greg Kutz, Assistant Inspector General for Audit, Treasury
      Inspector General for Tax Administration
        Oral Statement...............................................    43

                                    APPENDIX

    Response from Mr. Tribiano, IRS, to Questions for the Record.....    66

                      ONGOING MANAGEMENT CHALLENGES AT IRS

                                  ----------

                          Wednesday, October 25, 2017

                      House of Representatives,
     Subcommittee on Government Operations, Joint with
             Subcommittee on Healthcare, Benefits, and
                                   Administrative Rules
                  Committee on Oversight and Government Reform,
                                                       Washington, D.C.
        The subcommittee met, pursuant to call, at 2:22 p.m., in
    Room 2154, Rayburn House Office Building, Hon. Jim Jordan
    [chairman of the Subcommittee on Healthcare, Benefits, and
    Administrative Rules] presiding.
        Present: Representatives Meadows, Jordan, Hice, Sanford,
    Massie, DeSantis, Grothman, Blum, Connolly, Krishnamoorthi,
    Maloney, Norton, Kelly, Watson Coleman, and Lawrence.
        Mr. Jordan. The joint subcommittee hearing will come to
    order. And we'll start by recognizing the chairman of the
    Government Operations Subcommittee, Mr. Meadows, for his
    opening statement.
        Mr. Meadows. Thank you, Mr. Chairman, for continuing your
    leadership on this particular issue.
        As we look at that, many of you, this is not your first
    rodeo. You've been here before. And, sadly, we're having to
    still address some of the major concerns that have been raised
    a number of times. Obviously, we will end up with a new IRS
    commissioner in the coming days. And as we look at that, it is
    critically important that we set the stage for making sure that
    we address these issues. There are issues that TIGTA continues
    to identify as problem areas.
        Most of my concern, I can tell you, are the things that
    continue to make headlines. You know, why do we go in and we
    rehire employees when we have specifically in there, do not
    rehire? You know, the IRS is held to a higher standard
    primarily because you hold the American taxpayer to a higher
    standard. If some of the excuses that we use as taxpayers were
    tried out in an IRS audit, they wouldn't pass the smell test.
    And I guess what I'm here to say is some of the things that I
    am still seeing happening within the IRS does not pass the
    smell test.
        Now, I've been one of the few Members of Congress who have
    had the opportunity to come and meet with some of the IRS
    employees. And I would be remiss to not acknowledge that the
    vast majority of them are excellent workers and truly are doing
    a very, very good job for the American public. However, when we
    start to see that we've got 213 employees who were fired--who
    left the IRS while under investigation for an issue of conduct
    or performance, that really was--was something that should have
    been addressed. We've got four of those employees who willfully
    failed to file even a tax return. Now, I think the message
    needs to be clear. It's time to clean house. It's time to get
    it right. We're not going to continue to have hearing after
    hearing after hearing with no accountability.
        Additionally, I'm very concerned with the number of IT
    recommendations that continue to not be fulfilled. And so I
    look forward to hearing your testimony. Because as we look at
    that, IT security at the IRS should be priority number one. And
    yet what we have found over and over again is, is that we've
    got legacy systems, we've got out-of-date systems. And
    everything wants to come running back to the financial
    concerns. But I've looked at the appropriations. I've looked at
    the numbers where they are. And there is not a linear
    correlation between the amount of money that you get funded and
    addressing those problems.
        So what I want to hear today is: How are we going to
    address the things that TIGTA has brought up? We continue to
    see some of these mismanagement areas. And, again, if we're not
    going to do it, I would rather hear under sworn testimony today
    that we're just not going to do it. I'm tired of excuses. At
    this point, let's get something on there.
        And, again, it's very easy to become critical and have all
    the IRS employees think that this is about every one of them. I
    want to be clear. This is not about every one of them. This is
    about management. This is about the failure to put in
    safeguards to address things that are important to the American
    people.
        So, Mr. Chairman, I appreciate your leadership, and I yield
    back.
        Mr. Jordan. I thank the gentleman.
        Mr. Krishnamoorthi, the ranking member, is recognized. And
    we'll recognize Mr. Connolly, when he arrives, as well.
        You are recognized for 5 minutes.
        Mr. Krishnamoorthi. Thank you, Chairman Jordan, thank you
    Chairman Meadows and Ranking Member Connolly, for convening
    today's hearing. And thank you for participating in today's
    hearing.
        A 2013 GAO study found that there were 8,400 people with
    security clearances who owed a combined total of $85 million in
    unpaid Federal taxes. Only half of this group already had a
    repayment plan with the IRS when their clearance was approved.
    Over 4,200 of these individuals were eligible for a top secret
    clearance.
        Although it may not be readily apparent, the IRS plays an
    important role in our national security apparatus. This is why
    the GAO recommended implementing additional security checks,
    including rigorous background checks, providing proof of past
    tax returns, and working more closely with the Internal Revenue
    Service to weed out potential security vulnerabilities in our
    government.
        As I'm sure everyone here is aware, financial pressure is
    one of the easiest ways for adversarial intelligence agents to
    recruit sources who will betray our country. Outstanding debts
    are an overwhelming counterintelligence vulnerability that make
    the debtor liable to pressure, seduction, blackmail, or any of
    the other tools in a spy's recruitment handbook. In general,
    substantial financial debts could be used against an
    individual, particularly--particularly if those debts are owed
    to foreign entities or individuals.
        We must do everything we can to ensure that those entrusted
    with access to our Nation's secrets are not vulnerable to any
    sort of blackmail. And we would be abdicating this
    responsibility if we did not use Congress' power of the purse
    to ensure that every agency, including the IRS, support our
    country's counterintelligence operations and has the means
    necessary to succeed.
        Given all the unknowns surrounding the President's tax
    returns and the overleveraged real estate holdings of his
    senior staff, we have an obligation to make sure the IRS is
    able to fully cooperate with the national security and
    intelligence communities to make sure they are able to assess
    and respond to counterintelligence vulnerabilities within our
    own government.
        I look forward to further exploring this GAO report and how
    the IRS works with other agencies to track these
    vulnerabilities and ensure that they are properly addressed.
        Thank you, Mr. Chairman.
        Mr. Jordan. I thank the gentleman.
        Today's hearing is entitled, ``Ongoing Management
    Challenges at the Internal Revenue Service.'' That is a nice
    way of saying the IRS has been a mess and remains a mess.
    Rehiring employees who were under investigation, rehiring
    employees who were engaged in fraud, rehiring employees who
    were violating 6103, looking at confidential taxpayer
    information, awarding a contract to Equifax in light of the
    massive data breach, 143 million Americans' data breached
    potentially.
        And never forget the backdrop. Never forget the backdrop
    here. Russell George became well known as the inspector of
    TIGTA back in 2013 when we asked him to look into the fact that
    we thought maybe the IRS was targeting conservative groups.
    And, lo and behold, they were. And never forget what happened
    when the IRS got caught with their hand in the cookie jar
    targeting conservative groups. They first denied it. Doug
    Shulman told the Ways and Means Committee way back then, no,
    it's not going on. Guarantee it's not happening.
        Lois Lerner sat in our office, met with oversight staff,
    said, oh, not happening. Then they did what everyone else does
    when they get caught doing something wrong: They tried to spin
    it. Inspector General George remembers this. He was going to
    release his report on Monday. On the Friday before, Lois Lerner
    went to a bar association speech here in town--right, Mr.
    George?
        Mr. George. That's correct.
        Mr. Jordan. --went to a bar association speech here in town
    and had a friend ask her a question, planted question. And what
    did she say? She does what everyone does when they get caught.
    Said, it wasn't me. Nope, it was those folks in Cincinnati.
    Remember this? Blame someone else. First you deny it. Then you
    try to spin it and get in front of the story, which she did.
    Then you blame someone else, say, oh, rogue agents in
    Cincinnati. And then when that didn't hold up, they even
    attacked Mr. George and TIGTA for doing their hard work, for
    just presenting us the truth. They blamed the messenger. They
    attacked the messenger.
        And, finally, they resorted to the worst of it all, in my
    judgment: They destroyed the evidence. The IRS 422 backup tapes
    containing potentially 24,000 emails that could have answered a
    lot of questions. After Lois Lerner's hard drive crashed and it
    came up missing, even though it was under subpoena, even though
    it was under a preservation order, they destroyed the evidence.
        And now here we sit, again, the IRS continues to rehire
    folks who violate 6103, look at confidential taxpayer
    information, rehire folks under investigation, rehire folks
    engaged in fraud, award a no-bid contract to Equifax in light
    of the fact that 143 million taxpayers' information was
    breached.
        But here's the good news. At least there's one element of
    good news. The long, sad chapter of John Koskinen as IRS
    commissioner comes to an end in 2-1/2 weeks, and thank the Lord
    for that.
        So I look forward to our witnesses and what they have to
    say, and particularly the work that Mr. George and his team
    have done on a number of issues related to the targeting and
    the issues that we're also going to be asking questions and
    discussing today.
        Mr. Jordan. And, with that, since Mr. Connolly is not here,
    I think we'll swear our witnesses in and proceed with their
    testimony and get right to questions.
        It's my honor to welcome today Mr. Jeffrey Tribiano, deputy
    commissioner for Operations Support at the IRS; Ms. Gina Garza,
    the chief information officer at the Internal Revenue Service;
    and, of course, the Honorable Russell George, Treasury
    Inspector General for Tax Administration; and Mr. Kutz, the
    assistant inspector general for Audit at the Treasury Inspector
    General for Tax Administration.
        Welcome to all of you. I know, Mr. George, we appreciate
    you being here. You and I have talked on the phone, and we
    appreciate you making the effort to be here today.
        The custom of this committee is to swear people in. So if
    you'll stand up, raise your right hand.
        Do you solemnly swear or affirm the testimony you're about
    to give is the truth, the whole truth, and nothing but the
    truth, so help you God?
        Let the record show each witness answered in the
    affirmative.
        And we will move right down the line there. So, Mr.
    Tribiano, you are up first. And you know how it works. You got
    5 minutes. Fire away.

                          WITNESS TESTIMONIES

                     TESTIMONY OF JEFFREY TRIBIANO

        Mr. Tribiano. Yes, sir. Well, Chairman Jordan, Chairman
    Meadows, Ranking Member Krishnamoorthi, and members of the
    subcommittee, my name is Jeffrey Tribiano, and I'm the deputy
    commissioner of Operations Support at the IRS. Joining me at
    the witness table is Ms. Gina Garza, the IRS' chief information
    officer. And we appreciate this opportunity to testify.
        Each year, the IRS collects more than $3 trillion,
    processes more than 200 million electronic tax returns, and
    answers more than 60 million calls from taxpayers as part of
    its mission. These and many other activities are accomplished
    through detailed planning and coordination across the Service.
    This includes critical support provided by the IRS' Information
    Technology organization. In allocating resources for these
    efforts, our highest priorities are the delivery of filing
    season, implementing congressional mandates, and protecting
    taxpayer data. At the same time, to the extent resources are
    available, we continue to invest in modernization of our tax
    administration systems and applications.
        To continue delivering on our priorities and modernization
    efforts, it is critical that the agency's IT infrastructure
    components be up to date. We continue to make investments in
    modernization of critical infrastructure, using managed
    services and cloud technology to the extent possible. While we
    have seen some progress over the last year, additional
    investments are needed. We are concerned that the risk of a
    catastrophic system failure is increasing as our infrastructure
    continues to age. Replacing the aging IT infrastructure is a
    high priority for the IRS, but we are challenged by our budget
    situation. Our budget is now $900 million below what it was in
    2010, and modernization at a faster pace requires significant
    additional resources for IT.
        We were also asked today to address the sole-source
    contract award to Equifax in late September after the company
    announced a major data breach. At the beginning of this year,
    we recognized the risk of using only one vendor, Equifax, to
    provide the IRS critical identity verification and validation
    services. In February 2017, we publicly announced our strategy
    to issue two competitive solicitations, one for a short-term
    12-month single-award vehicle, under GSA schedule, followed by
    a long-term 5-year, multiple-award vehicle. In July, we awarded
    a 12-month contract to Experian to provide these services.
    Equifax then filed a protest to the Government Accountability
    Office, which had up to a hundred days to render a decision.
        The protest triggered an automatic stay of contract
    performance on the awardee to preserve the status quo until GAO
    issued its ruling. At this point, overriding the statutory stay
    was not warranted under the circumstances. Equifax was
    satisfactorily providing services on the contract. There is no
    suggestion or evidence of any issues that would have caused the
    IRS to question Equifax's performance or whether Equifax's
    continued performance on the contract represented a risk to the
    government. We filed a motion at that time to dismiss the
    protest, but GAO denied our motion on August 2nd.
        Since the GAO decision was not expected until October 16th,
    and the contract with Equifax was ending on September 30th, we
    were facing a lapse in identity verification services. This had
    the potential to negatively impact up to a million taxpayers.
    We believed it was critically important to maintain the ability
    for taxpayers to authenticate their identity to receive certain
    online services, particularly electronic requests for prior
    year's tax returns. This was specifically significant for
    taxpayers preparing to file returns before their extensions ran
    out on October 16th, and for the taxpayers in the federally
    declared disaster areas.
        Several factors were considered prior to awarding the
    short-term bridge contract to Equifax on September 29, to
    include the GAO protest period, the time needed to transition
    to Experian, and the impact on taxpayers, and the results of
    our initial onsite security assessment conducted by the IRS
    team and the TIGTA special agents. However, on October 12,
    after reviewing new information on Equifax's situation, we took
    the precautionary step of temporary suspending the short-term
    bridge contract with Equifax. Now that GAO has denied the
    protest, we are moving forward with Experian.
        Lastly, we have also been asked to address the procedures
    for rehiring former employees. The IRS is committed to properly
    evaluating prior performance and conduct issues. We have in
    place procedures, which we continue to refine, to consider
    prior performance and conduct in the hiring process to the
    extent permissible by law, and this includes implementing all
    of TIGTA's recommendations by October 31st of 2017.
        This concludes mine and Ms. Garza's opening statement, and
    we are happy to take your questions.
        [Prepared joint statement of Mr. Tribiano and Ms. Garza
    follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Jordan. Thank you, Mr. Tribiano.
        Ms. Garza, is that accurate? You're good?
        Ms. Garza. [Nonverbal response.]
        Mr. Jordan. Okay. Mr. George, you're up. Thank you.

                     TESTIMONY OF J. RUSSELL GEORGE

        Mr. George. Thank you, Chairman Jordan, Chairman Meadows,
    Ranking Member Krishnamoorthi, and members of the subcommittee.
    I thank you for the opportunity to discuss IRS hiring practices
    and information technology challenges. As noted earlier,
    joining me is Greg Kutz, assistant inspector general for Audit.
        TIGTA first reported in December of 2014 that the IRS had
    rehired 824 former employees with substantiated conduct and
    performance issues. For example, the IRS hired 141 former
    employees with substantiated tax issues, including five that
    willfully failed to file their Federal tax returns. Other prior
    issues for rehired employees included unauthorized access to
    taxpayer information, leave abuse, falsification of official
    forms, and misuse of government property.
        In response to our 2014 report, the IRS said its current
    process was more than adequate to mitigate risks to the
    American taxpayer. In our followup July 2017 report, we found
    that the IRS continued to rehire former employees with conduct
    and performance issues. IRS rehired more than 200 former
    employees who were previously terminated from the IRS who had
    separated while under investigation for conduct or performance
    issues. In response to our report, IRS management agreed with
    the intent of our recommendations and cited plans to update
    current practices. Bringing in employees with a history of
    problems increases the internal threat to taxpayer data.
        This leads to my second point: Information technology
    challenges facing the IRS. Recent cyber events show that bad
    actors are continually seeking ways to exploit IRS systems and
    access taxpayer information. The recent breach at Equifax could
    further increase the risk of identity theft. IRS continues to
    take steps in response to our recommendations, including
    implementation of two-factor authentication.
        The IRS has also faced significant challenges in
    modernizing its legacy systems and hardware infrastructure. For
    example, CADE 2, which is the planned replacement of the
    Individual Master File, has been under development since 2009.
    The previous CADE initiative dates back to the late 1990s.
    Currently, there is no planned completion date for CADE 2. The
    IRS has a large and increasing amount of aged hardware
    infrastructure, some of which is three to four times older than
    industry standards. The percentage of aged hardware has
    steadily increased from 40 percent at the beginning of fiscal
    year 2013 to 64 percent at the beginning of fiscal year 2017.
    This increases the security risks to critical taxpayer data the
    IRS must protect.
        The IRS has also been challenged in responding to some high
    profile requests from Congress, the public, and the courts. The
    loss or destruction of information resulted from a combination
    of inadequate systems and policies, along with human error. For
    example, systems and record retention policies have not ensured
    that email records are automatically archived and could be
    retrieved for as long as needed.
        We reported last year that the IRS' previous attempt to
    implement a new email system was unsuccessful at a cost of at
    least $12 million. According to the IRS, its future-state email
    system was to be implemented by September 30, 2017. Until a
    solution is effectively implemented, IRS emails will remain
    difficult to retain or search.
        In conclusion, providing increased online access to
    taxpayers, while protecting their identity and their
    information from internal and external threats, is a
    substantial challenge for the IRS. In addition, modernizing
    systems would result in lower operating costs, increased
    security of taxpayer data, and improved customer service for
    taxpayers. TIGTA will continue to prioritize overseeing IRS
    hiring practices and efforts to address its information
    technology challenges.
        Thank you for the opportunity to share my views.
        [Prepared statement of Mr. George follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Jordan. Thank you, Mr. George.
        Mr. Kutz?
        Mr. Kutz. [Nonverbal response.]
        Mr. Jordan. You're good? That's what I thought.
        The gentleman from Georgia is recognized for 5 minutes.
        Mr. Hice. Thank you, very much, Mr. Chairman.
        It seems like dealing with the numerous challenges and
    crises at the IRS is a pretty regular thing around here. We've
    been through hearing after hearing in this committee. And some
    issues, such as the technology, rehiring of the employees,
    these things are ongoing. We talk about them often and rightly
    so. But sometimes there are new issues, even to the IRS, such
    as this recent debacle with Equifax, that has a lot of us
    crawling in our skin.
        The common thread in all of these issues, regardless of
    what they may be, is mismanagement. And it's not a management
    problem. It is a mismanagement problem that has been taking
    place for years. And, you know, it filters down from the top to
    the bottom and infects everywhere it goes. And as the chairman
    stated a while ago, I join in celebrating the fact that finally
    Commissioner Koskinen is leaving in a few days, and it is my
    hope that the tarnished agency that he leaves behind will
    finally get leadership that can correct the problems of
    mismanagement that are so abundant. I know there are good
    people, dedicated people, at the IRS. And I don't intend or
    mean to throw all of them under the bus, or any of those who
    are dedicated. But the mismanagement has got to come to a stop.
        Now, I mention Equifax. This is certainly a word that, at
    least now, probably everyone in America is aware of, and with
    good reason. 143 to 145 million individuals who have had their
    personal information compromised, where it walked right out the
    front door of Equifax. And the report was widely reported, as
    we all know, of what happened.
        So, Mr. Tribiano, Ms. Garza, let me just begin with you.
    The end of September, September 29th, the IRS awarded a bridge
    contract to Equifax after the data breach occurred. I'm trying
    to wrap my mind around that. Did the IRS know about the data
    breach when they made this bridge contract?
        Mr. Tribiano. Yes, sir.
        Mr. Hice. Then why in the world did you make another
    contract?
        Mr. Tribiano. We heard about the data breach the same as
    everybody else, when Equifax announced it. I believe it was on
    September 7th, in the evening. On September 8th, our chief
    privacy officer convened our incident response team, which is
    made up of some of our senior leaderships, which is our CIO,
    our head of cybersecurity, the head of our business units, our
    chief contracting officer, and then we asked our TIGTA criminal
    investigators to join us on that day. And we made a call to
    Equifax to try to determine what exactly was going on down with
    Equifax.
        Later on in the month of September, we sent that same team,
    IRS cybersecurity, IRS criminal investigators, and TIGTA
    criminal investigators, down to Equifax for a 1-day visit to
    determine what happened, what was breached, how that activity
    happened, and what the impact was where the IRS did business.
        Mr. Hice. Are you getting to my question?
        Mr. Tribiano. I am, sir. I'm explaining the decisions that
    were made up to the point where we issued----
        Mr. Hice. My question: With 145 million whose personal data
    was breached, why in the world would you go back and have
    another contract with them?
        Mr. Tribiano. Well, because they--at that point in time,
    the systems that housed where we did business was separate from
    the systems that were breached. And there was no indication and
    no security risk for where we did and exchanged information
    with Equifax.
        Mr. Hice. So you're saying that there's no fear for the
    IRS, with 145 million people whose personal information has
    been breached, you have no concern whatsoever that that may
    impact the security of the IRS-type information----
        Mr. Tribiano. No, sir.
        Mr. Hice. --of those individuals?
        Mr. Tribiano. No, sir, I'm not--I didn't say that. What I
    was referring to was the information exchange where we exchange
    information with Equifax for our eAuthentication verification.
    Part of the process that was--we had gone through also at that
    point in time was to look at the impact of the breach, of the
    143 million, the information----
        Mr. Hice. Well, Commissioner Koskinen made it--paraphrasing
    him, he said: It's no big deal for us to have another contract
    with Equifax because all these people's IDs have been breached
    already. So if they come to us, they're still breached.
        Mr. Tribiano. Sir, I can't answer for Mr. Koskinen. What I
    can----
        Mr. Hice. Well, you can answer for the IRS. This is another
    example of the mismanagement that is poisoning the entire
    agency, let alone the citizens of this country.
        And, Mr. Chairman, my time is running out. But this is
    inexcusable. And I yield back.
        Mr. Jordan. I thank the gentleman. And it is inexcusable.
        Does the gentleman from Virginia wish to be recognized now?
    Because we can go down----
        Mr. Connolly. I thank the chair. And I note that he noted
    my absence. But----
        Mr. Jordan. I knew you'd be here, brother.
        Mr. Connolly. Struggling a little bit to get here, but
    happy to be here. And I thank the chair.
        Mr. Jordan. The gentleman is recognized.
        Mr. Connolly. And I'm sorry I'm out of turn.
        The IRS has suffered severe and repeated budget cuts since
    2010. My colleague just talked about dysfunctionality at the
    IRS as if Congress had nothing to do with it. The current IRS
    budget is 20 percent less than the fiscal year 2010 funding
    level when adjusted for inflation. The IRS continues to face
    additional proposed cuts amid heightened demand for services
    and additional unfunded mandates. These drastic budget cuts
    have severely weakened the ability of the IRS to fulfill its
    mission, to enforce our Nation's tax laws, and have not sparred
    any corner of the agency.
        Most significantly, between 2010 and 2016, the IRS lost
    13,000 employees. The agency's fiscal 2017 budget noted that
    every additional dollar invested in enforcement can produce $6
    in revenue. That's not a bad return on investment, if you had
    bothered to make it. But, of course, Congress has thought
    otherwise. And the additional and direct savings from deterring
    tax evasion can be three times that amount, an 18-to-1 return
    on investment.
        However, between 2010 and 2016, the IRS was forced to
    reduce its enforcement staff by 11,600 full-time employees.
    That's a reduction of 23 percent. Even Secretary Mnuchin, at
    his confirmation hearing, expressed his concern about those
    staffing levels, saying, and I quote: I am concerned about the
    staffing at the IRS. That's an important part of fixing the tax
    gap. And also noting: If we add people, we make money. That's
    not Obama's Secretary of Treasury. That's Trump's.
        IRS employees are not the only ones affected by those
    budget cuts. The American people have felt it as well through
    diminished customer service, quality, reliability, and,
    including, of course, longer call waiting times and delayed tax
    refunds.
        I'm most alarmed with the IRS budget constraints impeding
    the ability of the agency to update its outdated IT systems,
    delaying more than $200 million in investments. IRS has legacy
    IT systems that date back to the Johnson administration. And a
    September 2017 report by the Treasury Inspector General for Tax
    Administration notes that 64 percent of the agency's IT
    hardware infrastructure is beyond its useful life. I will say,
    parenthetically, I am informed that the good news might be that
    the Chinese don't know how to hack into COBOL. It's too old.
        So IRS software is also shockingly out of date. Thirty-two
    percent of supporting software are two or more releases behind
    the industry standard, and 15 percent more than four releases
    behind. The legacy systems are a catastrophe waiting to happen,
    and it's critical they be upgraded in order to adequately
    protect taxpayer data and provide the modern services that
    taxpayers deserve.
        I understand we're not going to have political agreement in
    this committee about the role of the IRS and its importance,
    centrality to a functioning government. But, surely, it seems
    to me we could agree that modernizing IRS' IT infrastructure is
    necessary to prevent cyber hacks and will improve customer
    service, customers who are our constituents.
        I know our committee, Mr. Chairman, has led the way on IT
    modernization throughout the Federal Government. It's time we
    did the same for the IRS.
        I yield back.
        Mr. Jordan. I thank the gentleman.
        The gentleman from Illinois is recognized for his 5 minutes
    of questioning. Then we'll go to the gentleman from South
    Carolina.
        Mr. Sanford. I thank the gentleman. I guess I'd go to you,
    Mr. George.
        Mr. Jordan. That's all right.
        Mr. Sanford. I'm sorry?
        Mr. Jordan. That's fine. We'll go that way.
        Mr. Sanford. No, no. Which way?
        Mr. Jordan. I think we should probably go--because Mr.
    Connolly was doing his opening statement.
        Mr. Sanford. Oh, please.
        Mr. Jordan. So next in line is the ranking member. He's
    yielding. You can't both yield. He's yielding to you first, so
    you got to take it, man.
        Mr. Krishnamoorthi. Okay.
        Mr. Jordan. Then we'll come to Mr. Sanford.
        Mr. Krishnamoorthi. Thank you, Mr. Chairman.
        I wanted to focus a little bit more on this security
    clearance tax issue. And, you know, since 2010, as Ranking
    Member Connolly indicated, IRS funding has been cut. And, in
    fact, it's seen its funding cut by 17 percent. And it is
    performing the lowest levels of individual and business audits
    in a decade. This is at the same time that the GAO has
    recommended increased coordination between the IRS and the
    Director of National Intelligence.
        Mr. Tribiano, how have these cuts impacted the IRS' ability
    to effectively work on security issues and coordinate with
    other agencies? In its 2013 report, the GAO urged the Director
    of National Intelligence, the Office of Personnel Management,
    and the Department of Treasury, to evaluate the feasibility of
    Federal agencies obtaining data on Federal tax debt when
    evaluating security clearance applicants and monitoring current
    security clearance recipients. Could you illuminate this a
    little bit?
        Mr. Tribiano. Yes, sir. Yes, sir, I can. Any time there's
    reduced resources within the IRS, our prioritization is
    always--is making sure that we can deliver a safe and
    successful filing season. It's important to us to make sure
    that we can process the returns, get the refunds out the door,
    and complete that work. The second prioritization is always
    whatever legislative mandates that are out there that we have
    to implement. And third is obviously overriding cybersecurity
    and protecting the data that we have.
        Whatever resources we have after that then go into a
    prioritization for whatever projects we have to work on. The
    project that you're referring to, being able to provide data,
    at least the status, as security agencies are doing suitability
    assessments on possible government employees, took us awhile to
    work the funds available to start that process.
        Now, I can tell you this. We are ready to provide that
    service. The--what we do is--we don't provide taxpayer data.
    What we do is we get the name and the information from the
    projected candidate, and we tell the suitability agency whether
    or not there's a outstanding liability, not a liability, or
    there's an issue that you need to contact us about. But we
    can't release taxpayer data to them. Because a lot of these
    agencies don't have the built-in ability to protect taxpayer
    data. So we----
        Mr. Krishnamoorthi. Let me interrupt for a second. I'm
    going to lose all my time. One quick question, which is, you're
    also--on those tax returns, you would know whether there's
    income from foreign sources, right?
        Mr. Tribiano. Um----
        Mr. Krishnamoorthi. If they were disclosed to the IRS?
        Mr. Tribiano. If it's disclosed to the IRS, we would know
    that. But that's not part of the suitability--my understanding
    it's not part of the suitability. Suitability is whether
    somebody has an outstanding liability to the government that
    the IRS has on record.
        Mr. Krishnamoorthi. And if they asked you to provide
    information about income owed, or debts owed, to foreign
    actors, or income received from foreign actors, you'd be able
    to provide that, right?
        Mr. Tribiano. We are not ready to provide that. And it's a
    privacy issue, in a sense, that if we release data like that,
    there has to be protections in place on where it's going and
    what's being done with it. We just can't release taxpayer data
    without having the proper authority to do so. So that's why in
    our suitability we provide whether or not there's an
    outstanding liability to the Federal Government that the IRS
    has on record, and that the suitability professional that's
    working on security clearances takes that into account on
    whether or not that person would--you know, the information we
    provide would create an additional risk in their assessment of
    that individual's background.
        Mr. Krishnamoorthi. Okay. You know, make no mistake, in
    these situations, the IRS is as valuable an intelligence
    collecting agency as the FBI, in my opinion. I'm from Chicago,
    and it wasn't the violence or the speakeasies that brought down
    Al Capone. It was the IRS that nailed him on tax fraud. I'm
    very concerned that we're now impeding the ability of the IRS
    to protect us from threats much greater than bootleggers or
    gangsters.
        You know, Mr. Tribiano, has the IRS been cooperating with
    Special Prosecutor Mueller's team as he seeks to unwind the
    extent to which Russia has been interfering in our elections?
        Mr. Tribiano. Sir, I would have no idea. That's outside of
    my purview. And even if it was in my purview, I wouldn't be
    allowed to discuss any ongoing investigations.
        Mr. Krishnamoorthi. Are you aware of any political
    appointee, from any agency, seeking to exert pressure on the
    IRS to not cooperate with Mueller?
        Mr. Tribiano. Sir, again, I'm not subject to any of those
    activities within the IRS. You know, I can tell you the IRS has
    only two political appointees in our entire 80,000 structure.
    That's the Commissioner of Internal Revenue and the Chief
    Counsel. That's it. All other employees within the IRS are
    Federal employees.
        Mr. Krishnamoorthi. I'm just really troubled by some of
    these answers. I just don't think the IRS is doing enough to
    assess the financial liabilities of those who, you know, seek
    security clearances. We've heard repeatedly, repeatedly, about
    people on SF-86 forms with all kinds of entanglements,
    financial entanglements, of which the IRS should be aware, if
    it's not already, and I'm just troubled that this information
    is not being shared across the government.
        Thank you, Mr. Chairman.
        Mr. Jordan. I thank the gentleman.
        The gentleman from South Carolina is recognized.
        Mr. Sanford. I thank the gentleman.
        It seems to me in the back and forth that the--a fairly
    central question that's emerged has been: Has the cut in
    funding in IRS resulted in its inability to do things? And so I
    guess my question to you, Mr. George, would be this: One could
    argue, I think fairly reasonable, that, you know, the number of
    agents would impact audit capacity. I don't know that one could
    argue as reasonably that some of the cuts in funding with IRS
    would affect essential management decisions.
        And, fundamentally, when you look at this notion of
    rehiring folks that have been dismissed for a variety of
    different reasons, fundamentally, you're looking at a
    management decision rather than a capacity decision. I think
    that the cross-tabs are here especially interesting. Because
    you look, and you all had studied this issue back in 2014, and,
    at that point, roughly 11 percent of the employees that had
    been dismissed had been rehired. You studied it again in 2017,
    and 10 percent of the folks that had been dismissed had been
    rehired. In fact, with the cut in funding, actually, there had
    been a 1 percent, or almost a 2 percent, increase in lessening
    the impact of rehires of mismanaged folks.
        So it doesn't seem to me that there's any correlation
    between amount of money, and, again, one's propensity to go out
    and rehire somebody that was dismissed. Could you give me a
    little bit further thinking on that?
        Mr. George. I agree with everything that you stated,
    Congressman. I guess the only thing that could be said in
    defense of the IRS' actions is that a lot of the rehires are
    temporary IRS employees. During the filing season, in order to
    process the millions of tax returns that come in, they bring in
    people who have had experience doing that in the past.
        Mr. Sanford. But they've had fundamentally bad experience.
    They have either done wrong, committed malfeasance, not filled
    out their own tax returns, a variety of different--or they've
    been dismissive to a superior, they've been insubordinate. Go
    down the litany of different possibilities. You fundamentally
    go back and hire somebody like that to increase, quote,
    capacity? It seems to me you would diminish capacity.
        Mr. George. And it is bad decision-making on their part.
    Whether it's 400 or whether it's 1, that rehire should not have
    occurred. We agree completely. We hope the new commissioner
    will be more proactive in avoiding this in the future. But we
    will, I can assure you, sir, be on top of this issue from day
    one.
        Mr. Sanford. Again, Mr. Tribiano, again, you look again at
    the cross-tabs and the numbers, you got less money, but
    actually had fewer faulty management decisions by about 1.7
    percent in, again, the difference between 2014 and 2017. Your
    thoughts on that? I mean, fundamentally, again, it speaks on
    not to money being the issue, but management being the issue.
        Mr. Tribiano. Yes, sir. So let me first start by making
    sure I make it clear. We have an incredibly dedicated and
    talented workforce. And I want to echo what Mr. Chairman was
    saying----
        Mr. Sanford. Again, that's just saying what I think has
    been laid out by a variety of different members. I don't think
    we're questing the whole of many people who work there. We're
    questioning the management process that goes out and rehires
    folks that have been found not worthy to be in the agency that
    does have capable people in it.
        Mr. Tribiano. So let me answer your question.
        Mr. Sanford. Yeah.
        Mr. Tribiano. Because you're associating that with funding.
    And there is a funding issue. You know, when----
        Mr. Sanford. Wait, wait, wait. Again, the numbers speak for
    themselves. You had 1.7 percent less in the way of rehiring
    folks that had been dismissed after you had less money.
        Mr. Tribiano. Yes, sir. And I'm trying to get to your
    answer. There's a lot of factors that go into that. When in
    2014 TIGTA laid out the recommendations that they wanted the
    IRS to follow, they implemented those recommendations. It
    probably caused some of those numbers to drop down. But some of
    the issues are related to funding, and I don't want to discount
    that. And I can get to that in a minute. But I can tell you the
    fundamental difference now between what TIGTA recommended this
    go-around and what we are going to do to stop this process from
    happening and what TIGTA called to light for us, is we do a
    suitability check. Right? So we go by OPM standards that states
    clearly if somebody had this disciplinary issue, concern,
    problem, after X number of years, OPM tells you whether or not
    they're suitable or not suitable, whether you can take that
    into consideration or can't take that into consideration.
        Mr. Sanford. Wait. If, based on your own filings, you have
    the words do not rehire on there, and you still go out and
    rehire, that doesn't seem to me to fit with anybody's standard
    of common sense.
        Mr. Tribiano. If it fits within OPM's guidelines about
    what's suitable----
        Mr. Sanford. Would you define that as common sense?
        Mr. Tribiano. No, sir. So let me just--if I can just finish
    this statement so we're all on the same page.
        Mr. Chair, can I have a few minutes or a few extra seconds,
    please, sir?
        Mr. Jordan. Sure. Sure.
        Mr. Tribiano. Thank you.
        So, Mr. Sanford, so what we're changing in that process is
    twofold. One is, we do the suitability check and we find that
    there's an issue or concern or some type of problem with the
    employee. We now tag that when we send that to the hiring
    manager so the hiring manager knows there's a suitability issue
    with that individual. That's what TIGTA's recommendation was.
    Because that allows us to still meet the requirements within
    OPM, but notify the hiring manager that there's an issue.
    That's number one. Number two----
        Mr. Sanford. Let me just let you finish the thought. But
    since we've already gone over, this is what makes people crazy.
    In other words, you have just defined this process as being
    outside the bounds of common sense, and yet you describe a
    circuitous process by which, supposedly, it checks somebody's
    box as being okay. But it doesn't pass the common sense test,
    which I think is the ultimate test.
        Mr. Tribiano. What I described is the rules that I have to
    follow in order to meet OPM's requirements, all right, that I
    cannot operate or expect my people to operate outside of. But
    if I could just----
        Mr. Jordan. Mr. Tribiano, the point is, was it reduced
    resources that caused you to rehire someone you had said don't
    rehire? Was it reduced resources that led to a decision to give
    Equifax a no-bid contract 30 days after they said 143 million
    Americans had their data compromised? That's Mr. Sanford's
    point. And, frankly, any American who looks at that says
    there's no way reduced resources caused the IRS to make those
    decisions. They just made those decisions.
        Mr. Tribiano. The reduced resources, it affects every part
    of the IRS. It's not just our revenue agents or revenue
    officers. It affects our contracting folks. It affects our HR
    folks. So the last thing I would just like to say, we are
    seeking----
        Mr. Jordan. And it affects your ability to read. Do not
    rehire, and yet you rehired them.
        Mr. Tribiano. Sir, according to----
        Mr. Jordan. I've got to get to the other side here. Finish
    your thing, then we will get to----
        Mr. Tribiano. Thank you. I appreciate some leeway there,
    Mr. Chair.
        The one thing that we are requesting to try to get to your
    common sense approach is we're working with OPM on getting
    debarring authority to where if we can--for those items that
    reach that level that OPM will approve it, that we can debar
    those type of fractions from being part of the suitability and
    remove them from that. But that's the context of what we have
    to work in on some of those rules that are out there. So that
    debarring authority can help prevent some of these activities.
    And, again, I'm sorry that I ran over.
        Mr. Jordan. Gentleman from Virginia.
        Mr. Connolly. Thank you, Mr. Chairman.
        I guess I'm not surprised Mr. George would say something
    like I agree with everything you said, when listening to my
    friend from South Carolina. My friend from South Carolina has
    executive experience. So do I. I helped run one of the largest
    counties in the United States. And I can tell you this. At some
    point, you do less with less.
        The idea that there's no relationship--which I think I
    heard my colleague say--no relationship between resources and
    functionality, capacity, whatever, is an absurd proposition,
    and I don't think any sensible American will buy into it. And
    so we have a smokescreen going on in terms of the
    dysfunctionality of IRS and decisions made or not made. But
    where Americans really care is where they intersect with the
    IRS.
        So, Mr. Tribiano, have the cuts that have ensued since
    Republicans took over the Congress, coincidentally, in the 2010
    elections, have the cuts had a material effect on the quality
    of services by the IRS?
        Mr. Tribiano. Yes, sir. I would say any reduction in
    resources----
        Mr. Connolly. No, no, no. I'm asking specifically. I don't
    want to hear general. That's what Mr. Sanford was talking
    about. I want to hear specifically. Let's test his theory. Has
    there been a deterioration in customer service at the IRS in
    the last 7 years?
        Mr. Tribiano. Yes, sir.
        Mr. Connolly. Why?
        Mr. Tribiano. Because we don't have the resources to
    perform all the compliance reviews that we need to have. We're
    down revenue agents and revenue officers, which means we're
    doing less compliance across the board in all areas.
        Mr. Connolly. So, for example, are there fewer audits of
    tax returns?
        Mr. Tribiano. Yes, sir.
        Mr. Connolly. Why is that a bad thing? I mean, a lot of
    Americans might welcome the fact that you can't audit me as
    easily as you once could.
        Mr. Tribiano. Well, our tax system is built on voluntary
    compliance. If people don't feel that there's any repercussions
    from compliance purposes, then there's a tendency to move to--
    --
        Mr. Connolly. Isn't there also an equity issue? So people
    who are cheating don't get caught because you don't have the
    resources to do the audit to catch them, while law-abiding
    citizens are paying their fair share of taxes while someone
    else is getting away with not doing it.
        Mr. Tribiano. Yes, sir. We've had few criminal convictions
    from our criminal investigators. And it's not because there's
    less criminals out there; it's because we have less resources.
        Mr. Connolly. Do you remember what the estimate is every
    year of taxes owed but not collected? Because this committee's
    had hearings on that subject.
        Mr. Tribiano. I don't recall it right now, sir.
        Mr. Connolly. Does the figure $350 billion ring a bill?
        Mr. Tribiano. That sounds----
        Mr. Connolly. Isn't that amazing?
        Mr. Kutz. It's $450, actually.
        Mr. Connolly. I'm sorry. Thank you. 450. So we're testing
    Mr. Sanford's theory here that resources have no relationship
    to capacity or functionality. $450 billion of taxes owed, left
    on the table every year. Now, I don't know, I'm not that good
    at math, but times 10, that's $4.5 trillion. You want a down
    payment on the debt? There's a good way to start without
    raising anyone's taxes or without cutting vital investments for
    the United States.
        So what about, Mr. Tribiano, has it had a material effect
    on customer service? Have waiting times gone up when I call the
    IRS or do people pick up that phone right away on the first
    ring and whistle while they work?
        Mr. Tribiano. Waiting times have gone up. This last filing
    season, though, we allocated more resources that we had to
    that. So we did a better job in it. But if you talk to anybody
    that waits for any amount of time on the phone, it's not good
    enough.
        Mr. Connolly. Now, I talked about legacy systems and the
    lack of an investment. And, Ms. Garza, certainly pipe in if
    you'd like. What can go wrong with having legacy systems that
    are 50 years old and hardware and software that's way beyond
    the industry average in terms of life span in an agency that
    keeps data on every American in terms of financial data, paying
    their taxes?
        Ms. Garza. So the aged infrastructure, the risk, which is
    one of our biggest risks at the IRS, it creates instability in
    the systems. So you end up having----
        Mr. Connolly. But specifically, Ms. Garza--my time is
    running out--what's the risk we worry about here? If I got--are
    these systems capable, all of them, uniformly, of being
    encrypted? Isn't there a privacy concern for Americans that
    when you're dealing with aging hardware and software, they're
    more vulnerable?
        Ms. Garza. It depends on where you're talking. We have a
    perimeter, a secure boundary around our systems, that is very--
    what we call a very hard shell that protects the systems that
    are inside.
        Mr. Connolly. Yes. I think OPM thought it had one of those
    too.
        Mr. Tribiano, did you want to comment on that before my
    time ends?
        Mr. Tribiano. I agree with Ms. Garza. I can just tell you
    that I worry about system failure during filing season. That's
    my number one concern, because if we can't process returns,
    refunds aren't going out the door. And that could have a large
    effect on this economy and taxpayers. So I worry about that,
    and I also worry about cyber. And everybody in government
    should be worrying about cyber. But those are my two biggest.
        Mr. Connolly. Thank you. Thank you, Mr. Chairman. And I
    thank my colleague from South Carolina for being willing to
    test his theory.
        Mr. Jordan. I thank the gentleman from Virginia. With the
    committee's indulgence, I'm going to let Mr. Sanford respond
    just for a few minutes. And if the gentleman needs a few more
    minutes, I'll do the same, and then we'll get to our other
    questions.
        Mr. Sanford. I appreciate so much my colleague's lightning
    fast mind. Certain parts of his body may be not moving as fast
    as they have in the past, but his mind does certainly not fit
    into that description. I appreciate his intellect.
        And I'd just say two things. One is that hyperbole is often
    the way of politics. And there's a little bit of hyperbole in
    what my dear colleague is suggesting. And I even seeded the
    point, which is to his point, I think that if you look at call
    times, wait times, audits, there are a number of things that
    could be legitimately impacted by cuts within the IRS. My point
    in the rehire question--and that's why I differentiated--was to
    say that doesn't seem to be the case on the rehire question,
    given the fact that if you look at the numbers in 2014--or
    rather--yeah, 2014, you had 11.7 percent, in essence, misfire
    there, and by 2017, it had gone down to 10.65 percent, a drop
    of a little over a point, even though there was less money. And
    there seemed to be reverse correlation there. There could be a
    variety of different factors that play there. But there seemed
    to be a difference in the cross-tab.
        So I'd say that the money begs otherwise. And I would
    certainly cede the larger point to my colleague with regard to
    audit and other.
        I would also make this point. This isn't a South Carolina
    perspective. This is a perspective, and, therefore, I would ask
    you to take it up with Mr. George, that is held by the
    inspector general. My numbers are simply coming from them. I'm
    reading off the numbers that I see from the inspector general,
    and that's why I think it was so instructive. When I walked
    through my numbers, he said, I could not agree more.
        With that, I'd yield back.
        Mr. Connolly. Thank you, Mr. Chairman. And I thank my
    colleague for his clarification. And I didn't have time to go
    into the rehire issue, and I take his point. I thought Mr.
    Tribiano was trying to tell us that there are OPM rules about
    rehiring that they have to go to first. I don't know that Mr.
    Tribiano adequately addressed the chairman's point, and your
    point, Mr. Sanford, but if there was a note saying don't
    rehire, does OPM still require you to do that? Because that
    doesn't make sense to any of us.
        Mr. Tribiano. What OPM requires, sir, is a suitability.
    There's lengths of time that, after you exceed that length of
    time, that violation, issue, whatever you want to call it, is
    no longer part of the suitability check, even though you have a
    record that says an individual was AWOL from work--or absent
    without leave, I'm sorry--from work. After a certain number of
    years, that is not part of the suitability----
        Mr. Connolly. My time is going to run out, but let me ask
    this. So do we need to change the OPM regs? Because it sounds
    like they are making you do something you would prefer not to
    do.
        Mr. Tribiano. I would leave that up to Congress. I would
    say it would allow me more flexibility to be able to manage the
    agency differently. And that is why we are seeking that
    debarment authority, because that would allow us, then, to
    block out major infractions and say, look, we can use this
    debarment authority and meet those commonsense standards that
    Mr. Sanford was referring to.
        Mr. Connolly. I thank the Chair for his consideration.
        Mr. Jordan. The gentlelady from the District is recognized.
        Ms. Norton. Thank you, Mr. Chairman. I think it only fair
    to Mr. George to lay to rest notions that ran throughout this
    committee for a long time, the false narrative that the Obama
    White House had directed the IRS to target conservative groups
    for political reasons. One of my friends on the other side said
    it was, quote, basically an attempt to muscle anyone who is
    their political opponent and to use whatever power they have at
    their disposal to intimidate people they don't agree with. So
    there was an accusation that's from the top of the government,
    from the White House, that there was an attempt to,
    essentially, commit fraud, frankly, with the IRS.
        Now, in 2013, TIGTA--and you know that, of course, is the
    Treasury Inspector General--conducted an audit of the screening
    procedures used to process applications for tax exempt status,
    which is what this was all about. Is that not correct, Mr.
    George?
        Mr. George. That's correct.
        Ms. Norton. In that audit, that audit--and here I'm quoting
    from it directly--found ineffective management, allowed
    inappropriate criteria to be developed, resulted in substantial
    delays, and allowed unnecessary information requests to be
    issued.''
        As a result of that audit, therefore, Mr. George, there is
    no evidence of political motivation, is there?
        Mr. George. That is correct. And I've stated that from the
    outset.
        Ms. Norton. Yes, you did. I just want to lay this on this
    record, given the hullabaloo that went on for at least 2 years
    on this question.
        And, Mr. George, you found absolutely zero evidence of
    White House direction. Is that not correct?
        Mr. George. That is correct.
        Ms. Norton. On September 27, 2017, TIGTA released a
    followup report looking at additional material not included in
    the 2013 audit. Is that not true, Mr. George?
        Mr. George. We did.
        Ms. Norton. This new report confirms that it was both
    progressive and conservative groups that received extra
    scrutiny in the application process and that there was no
    political targeting, that groups with progressive, with occupy,
    with green energy in their names were pulled for additional
    scrutiny. They too were subject to extended delays in the
    processing of their applications, and they too received
    unnecessary questions.
        Is that not true? That whatever was this faulty management
    sense applied to groups that consider themselves liberal or
    conservative and groups that consider themselves the opposite,
    and that both were victims of this management failure at the
    IRS. Is that not true?
        Mr. George. Yes. But I need to qualify something. As it
    relates to progressives, I will agree that what you stated was
    accurate. As it relates to the other groups, especially the
    ones that you deemed conservative, we, neither in 2013, nor in
    2017, made that decision to determine the political leaning of
    any group.
        Ms. Norton. I don't understand what you're saying. You
    understood the political leaning of the left-wing groups but
    not the right-wing groups?
        Mr. George. Well, only because progressive, and through the
    work of my chief auditor on that matter, who happens to be Mr.
    Kutz, who, with your permission, I'd like to defer to----
        Ms. Norton. I'd be pleased to hear from Mr. Kutz.
        Mr. George. --elaborate on that.
        Mr. Kutz. Yeah. Congresswoman, we didn't label anyone
    anything in either report. But the criteria----
        Ms. Norton. Well, you know, I'm using quotation marks here.
    I'm not labeling them. I'm using quotation marks on the report:
    progressive, occupy, green energy.
        Mr. Kutz. Organizations with those terms in them did
    receive delays similar to the first report and did receive
    unnecessary questions. It wasn't the same magnitude. But there
    was some that did. That is a fair statement.
        Ms. Norton. In fact, none of the procedures in place at the
    time of the inappropriate criteria are still in place at the
    IRS today. Is that not correct?
        Mr. Kutz. They stopped using the be-on-the-lookout listings
    in June of 2013.
        Ms. Norton. My only reason for going over this again--and I
    thank you both for this audit--is that it did not seem
    conceivable to some of my friends on the other side that there
    was management disarray, that it had to be political. And I
    will say when you go so far as to say that the White House
    itself is directing civil servants to look into groups based on
    their political background, that is so serious that it needs to
    be laid to rest right here. And I very much appreciate your
    coming forward. I very much appreciate the second audit. I very
    much appreciate that. I believe the work you have done, which
    is objective, and always has been, as Mr. George has said--and
    he's been before us at length on this matter, now with you, Mr.
    Kutz, also involved--I believe we can put this matter to rest,
    this shameful period in the history of this committee.
        And I yield back.
        Mr. Jordan. Mr. Kutz, the 2013 audit that reflected what
    was going with Tea Party groups had a BOLO list, right?
        Mr. Kutz. That's correct.
        Mr. Jordan. And the BOLO list said this: 912 Tea Party
    conservatives. Those were the targeted terms. Is that correct?
        Mr. Kutz. Only Tea Party was on a BOLO list, but the other
    ones, IRS confirmed, were being used to pull cases for that
    bucket.
        Mr. Jordan. Those groups received extensive scrutiny. They
    were asked about what they were praying, what kind of prayers
    were given at those meetings. Isn't that correct?
        Mr. Kutz. There were seven unnecessary questions that we
    looked at.
        Mr. Jordan. Very, very unnecessary privacy invading kind of
    questions.
        Mr. Kutz. Right. Ninety-eight organizations in the first
    report received these unnecessary questions.
        Mr. Jordan. And almost all of those were conservative
    groups, correct?
        Mr. Kutz. We did not assess that.
        Mr. Jordan. No, they were. I saw the list. They were almost
    all conservative groups. We've all seen the list. Everyone
    knows it was conservatives.
        The audit that the gentlelady's referring to went clear
    back to 2004, and some of those groups that received extra
    scrutiny deserved it. ACORN-leaning groups deserved it, right?
    Wasn't that audit from 2004 to 2013?
        Mr. Kutz. The second audit covered the period 2004 to 2006.
        Mr. Jordan. Yeah. A completely different context.
        Mr. Kutz. Correct.
        Mr. Jordan. Some of those groups probably deserved
    scrutiny. And just the argument itself, oh, because liberal
    groups were also targeted, somehow it's okay? Nobody should
    have been targeted by the IRS. But we know in 2010, 2011, and
    2012, the inspector general, the investigation we asked Russell
    George and you guys to do in 2013 about that, that was totally
    focused on conservative groups. And now to say, oh, a second
    audit that went clear back to 2004 somehow justifies that, oh,
    no, everyone got caught up in this is just complete baloney,
    and everyone understands that.
        Now, to the issue at hand today, four people at the IRS
    were rehired who had been terminated or resigned. Is that--four
    people who had had some kind of violation with 6103. Is that
    right?
        Mr. Kutz. They willfully failed to file their Federal tax
    returns. That's correct.
        Mr. Jordan. Was there anything relative to looking at
    information regarding 6103--violating 6103, examining stuff
    that they shouldn't have been able to look at?
        Mr. Kutz. Yes.
        Mr. Jordan. Wasn't there four employees who had been
    involved in that?
        Mr. Kutz. Those were additional employees that had
    unauthorized access to taxpayer records, yes.
        Mr. Jordan. And were those four people who had unauthorized
    access to taxpayer records, were they terminated or did they
    resign, or how were they let go from the IRS?
        Mr. Kutz. One of the two, and then they were hired back.
    They either would have been terminated or they left before they
    got--you know, in the Federal Government----
        Mr. Jordan. So they were in the process of getting fired--
    --
        Mr. Kutz. Right. That's correct.
        Mr. Jordan. --for fraud for looking at taxpayer information
    they weren't supposed to look at, right?
        Mr. Kutz. For substantiated unauthorized access to taxpayer
    records, yes, sir.
        Mr. Jordan. So they were terminated and resigned, and they
    got rehired?
        Mr. Kutz. Yes.
        Mr. Jordan. Okay. Now, do we know anything about these
    people, these four people?
        Ms. Norton. Mr. Chairman----
        Mr. Jordan. What division did they work in?
        Ms. Norton. Mr. Chairman, are you using an additional 5
    minutes? Because you used it both to try to refute what I said
    without giving me any ability to respond, and now you've gone
    on to the second issue. I mean, how is this subcommittee being
    run, sir?
        Mr. Jordan. No. I have not taken my 5 minutes. I have not--
    I did my opening statement. I have not taken any 5 minutes of
    questions.
        Ms. Norton. So you believe you're within 5 minutes in
    what's happening here now?
        Mr. Jordan. This is my 5 minutes.
        Ms. Norman. Go ahead, Mr. Chairman.
        Mr. Jordan. The last time I checked, every member was
    entitled to 5 minutes. I've not had 5 minutes.
        Ms. Norton. Well, then be our guest, sir.
        Mr. Jordan. Well, it's not about being your guest. I happen
    to get the privilege----
        Ms. Norton. I made an inquiry. You say you're taking 5
    minutes you did not have. I was not aware of that. I was not
    aware of that, that you did not have----
        Mr. Jordan. Well, if we could stop this time now. The way
    it normally works is I gave Mr. Connolly an opening statement--
    --
        Ms. Norton. I know how it works, sir.
        Mr. Jordan. --Mr. Krishnamoorthi an opening statement, Mr.
    Meadows an opening statement, I took an opening statement. So
    we had four opening statements, ranking member and chairman. I
    have not taken 5 minutes of questioning. And now I'm taking my
    5 minutes of questioning, and somehow you say that's wrong?
    That's how it always works.
        Ms. Norton. Go ahead.
        Mr. Jordan. If you want the chairman of the committee not
    to have 5 minutes of questioning, then----
        Ms. Norton. I didn't say that, Mr. Chairman, so don't put
    that in my mouth.
        Mr. Jordan. Well, then why the interruption?
        Ms. Norton. Because I didn't--it seemed to me that you were
    over your 5 minutes. I did not realize you had not had 5.
        Mr. Jordan. Well, before you talk----
        Ms. Norton. You have spoken often this afternoon, therefore
    I did not realize you had not had your 5 minutes.
        Mr. Jordan. I've spoken to recognize the gentlelady for
    D.C.
        Ms. Norton. Well, obviously, I'm not talking about that.
        Mr. Jordan. Okay.
        So tell me about these four people. They were terminated
    and resigned. Do we know what area they worked in?
        Mr. Kutz. Actually, all 213 that were rehired in the second
    report were in the Wage and Investment Division. And they were
    positions like data transcribers, contract representatives, tax
    exam technicians. So even though some were temps, they had
    access to taxpayer records and sometimes were dealing with
    taxpayers.
        Mr. Jordan. And what was the timeframe when they were
    working and got terminated? What timeframe?
        Mr. Kutz. They were rehired between January 2015 and March
    2016. They had been terminated before that period.
        Mr. Jordan. And had they worked--the four that I'm
    concerned about who had access to unauthorized information, who
    accessed unauthorized information, were they here during the
    targeting time, during 2010, 2011, 2012, 2013?
        Mr. Kutz. I'd have to get back to you for the record on
    that.
        Mr. Jordan. Do we know if any of them had contact with Lois
    Lerner or anything like that?
        Mr. Kutz. We don't know that, no.
        Mr. Jordan. You didn't look at that?
        Mr. Kutz. We did not look at that, no.
        Mr. Jordan. It seems to me that's something we should look
    at.
        Unfortunately, my time is out, even though I lost a minute
    in a debate about something that shouldn't--we shouldn't have
    debated, so I'll come back and take a second round.
        But we will now go with the gentlelady from Illinois I
    think is recognized next.
        Ms. Kelly. Thank you, Mr. Chair.
        Under the IRS Restructuring and Reform Act of 1998,
    Congress granted IRS the authority to hire a limited number of
    individuals to staff critical, technical, and professional
    positions in the agency at salary levels greater than general
    schedule rates. Congress intended this critical pay authority
    to help the agency attract highly qualified individuals with
    advanced technical expertise who might otherwise be unavailable
    for government service at normal Federal salary levels. The IRS
    used its authority from Congress to fill a total of 168
    positions from 1998 to 2013, many of which were positions in
    critically important areas such as information technology and
    cybersecurity.
        Mr. Tribiano and Ms. Garza, does critical pay play a role
    in making Federal Government jobs more appealing to highly
    qualified technical individuals who might be interested in
    public service but could be earning a much higher salary in the
    private sector?
        Mr. Tribiano. Yes, ma'am, it does. And to emphasize, it's
    streamline critical pay. And the streamline portion of that is
    really important, because what that allows us to do is to go
    out into the private industry, find somebody that's on the
    cutting edge of technology, let's just say in cybersecurity,
    and have them sitting in the chair working for the IRS in a
    matter of weeks than the months, 4 to 6 months that it could
    take going through the normal Federal hiring process, and then
    be able to offer them a salary that maybe it doesn't meet
    industry standards, but offers them something that makes it
    worthwhile for them coming onboard.
        And that's a key aspect--and I'll let Ms. Garza get into
    this--it's a key aspect to getting, again, individuals that
    have a cyber background, architectural background, engineering
    background, those technical skills. And I can tell you a lot of
    these private sector individuals would love to come into
    government if it was easy, right, in that streamline process,
    add value for the amount of years that that authority was in
    place for and then go back to the private sector.
        Ms. Kelly. Can you tell me how big the gap is between
    Federal pay and a private sector, just a guesstimate?
        Mr. Tribiano. Well, I'm a little outdated. I've been in
    Federal service for a few years now, but when I was in the
    private sector, it was a--it's a substantial pay reduction to
    enter Federal service. You--when I came in, I came in for the
    factor to serve, and that was worth taking less money and less
    benefits in order--in order to serve.
        Ms. Kelly. Oh, I didn't know if you were going to say
    something.
        Mr. Tribiano. I was going to yield it to Ms. Garza for any
    input on the technicality.
        Ms. Garza. So on the tech--on the streamline critical pay,
    some of the areas that were of great benefit was cybersecurity.
    We had critical pay, streamline critical pay that we got off
    the street that was extremely very technical, very good, ran
    our CSIRC operations, and he's since left the IRS. Also, in our
    engineering and architecture, we had a very good group of
    streamline critical pay that really helped shape the direction
    that we were going from a technical perspective. They've all
    left the IRS at this point.
        Ms. Kelly. In testimony before this committee last year,
    IRS chief information officer Terence Milholland stated, and I
    quote: ``Making progress at a faster pace on transitioning our
    legacy systems will require significant sustained additional
    resources in the IT area.''
        Would those resources include human resources, such as
    individuals qualifying for critical pay?
        Ms. Garza. Yes. I think that's probably our biggest risk is
    the human resources that we have lost over the last several
    years.
        Ms. Kelly. I'm the ranking member on the IT Subcommittee,
    and my chair, Congressman Will Hurd, has often talked about
    what can we do to work out something public-private or some
    kind of system where maybe someone from the private sector is
    on loan to us, you know, for a little while. What do you guys
    think should happen or any ideas, besides pay?
        Mr. Tribiano. The streamline critical pay authority that we
    had in place that expired that we placed back in our 2018
    budget allowed us that capability, allowed us to bring in
    private sector individuals for shorter periods of time, and
    then they can go back out into the private sector. Or in some
    cases, some of them love Federal service and compete openly for
    Federal positions.
        I think if we continue down that path and concentrate on
    the streamline portion along with the critical pay, but to me
    it's both pieces of that, because there is an authority--
    there's an authority that OPM has out there, and I think TIGTA
    cited in their report, it's not streamlined, but it does allow
    critical pay. The issue is, and TIGTA recognizes in their
    report, although I think there's a few more, out of the 800
    positions, at the time TIGTA did their analysis, there was only
    four of them that were able to get through the process. I think
    it's a little bit greater than that now. And we initiated that
    process to try to see what it takes to offer that. But
    streamline critical pay, again, allows us that authority to get
    them in the chair quickly and then to be somewhat competitive
    with salary, but not matching the private sector comparison.
        Mr. Kutz. Yeah. The OPM program is not as attractive
    either. It only offers $207,000 of pay versus the streamline
    critical pay was $240,000. So there's two ways to deal with
    this, either give IRS streamline critical pay or strengthen
    this OPM program that has 800 positions available that only
    four are being used governmentwide.
        Ms. Kelly. I'm out of time, so thank you.
        Mr. Jordan. I thank the gentlelady.
        The gentleman from Wisconsin is recognized.
        Mr. Grothman. I'll pass for now.
        Mr. Jordan. The gentleman from Iowa is recognized.
        Mr. Blum. Thank you, Mr. Chairman. Thank you to our panel
    for being here today. I appreciate it very much.
        Mr., is it Tribiano?
        Mr. Tribiano. Yes.
        Mr. Blum. Are you responsible for the hiring and firing
    decisions in the IRS?
        Mr. Tribiano. I oversee the human capital function within
    the IRS.
        Mr. Blum. You oversee.
        Mr. Tribiano. Yes, sir.
        Mr. Blum. I've learned all kind--I'm from the private--I'm
    from the private sector. I've learned all kinds of new terms
    here. You oversee it.
        Mr. Tribiano. Yes, sir.
        Mr. Blum. So are you responsible for it or not?
        Mr. Tribiano. I am responsible for the human capital
    aspect, yes, sir.
        Mr. Blum. The human capital aspect. I was reading your bio
    here. It said, before joining the USDA, you worked in the
    private sector----
        Mr. Tribiano. Yes, sir.
        Mr. Blum. --with multiple high-growth organizations.
        Mr. Tribiano. Yes, sir.
        Mr. Blum. The question I have for you, one of the many is,
    in the private sector, would they rehire people the way the IRS
    does? People that may have been under investigation, people
    that may have been under investigation for tax fraud, people
    whose personnel file said, do not hire? How would the private
    sector--your experience been, how would they handle that?
        Mr. Tribiano. They go through a----
        Mr. Blum. Any difference?
        Mr. Tribiano. Yes, sir, there's a difference. They go
    through a process. I don't think--in my experience, and again,
    this is my experience, there's less rules and boundaries that
    you have to operate in within that. So----
        Mr. Blum. In the private sector?
        Mr. Tribiano. Yes, sir. In the private sector, there's less
    boundaries that box you into certain scenarios. So it's a
    streamline process.
        Mr. Blum. So we have more boundaries, more rules, more
    regulations than the public sector, safe to say, in hiring and
    firing, and we get worse results.
        Mr. Tribiano. I would say----
        Mr. Blum. Not saying the employees are bad, but we're
    rehiring up to 10 percent of people that have been terminated
    from the agency prior? Is that true? Is that true?
        Mr. Kutz, is that true?
        Mr. Kutz. It's 10 percent of the former IRS employees that
    were brought back. That's correct.
        Mr. Blum. That--and were they terminated with cause or
    did--that 10 percent, did they leave on their own accord?
        Mr. Kutz. Well, they either were terminated or they were
    going to be terminated and left before.
        Mr. Blum. And we--I literally, I'm from the private sector,
    can't believe this. We're going to hire back 10 percent of
    people we were going to terminate. Does that strike you an as
    incredible? Mr. Kutz.
        Mr. Kutz. Yeah. They didn't have to do it. Okay. And our
    issue was the selecting officials, the person we think should
    get the information to make the decision. I don't think it
    prevents that from happening. There are suitability issues at
    the end, but I don't think that's our big issue. Our issue is
    early in the process, we believe a selecting official should
    have the information to make a decision. That's where the bad
    decisions are being made. In fact, there's not a decision.
    You're sitting there with candidates as a selecting official
    and you don't know the derogatory information that you just
    described in making your choice.
        Mr. Blum. Does that make sense to you that they don't know
    that?
        Mr. Kutz. That's why we made the recommendation that they
    change the process.
        Mr. Blum. Mr. George, TIGTA issued a report this past July,
    correct, on the problem of IRS rehiring employees previously
    fired by the agency? This isn't the first time a report like
    that's been issued. Is that correct?
        Mr. George. That is correct.
        Mr. Blum. That report documented, that you issued, an
    instance when the IRS rehired somebody who literally on their
    personal file it said, do not hire this person. Can that
    possibly be correct?
        Mr. George. That is correct.
        Mr. Blum. I mean, it sounds like not a good situation to
    me. It doesn't sound like something--private sector is not
    perfect. It doesn't sound like something that would happen in
    the private sector.
        Did the IRS adopt your recommendations, Mr. George, on this
    topic?
        Mr. George. They have in the--in principle in the most
    recent report. Again, we issued a previous report in 2014 on
    the very same issue. They said they were going to adopt----
        Mr. Blum. They did--I'm sorry, they did in principle, is
    that what you said?
        Mr. George. In the current one, they're in process of----
        Mr. Blum. They're in the process of adopting them.
        Mr. George. Correct.
        Mr. Blum. And how is that process going? Is there a sense
    of urgency there?
        Mr. Tribiano. Yes, sir. We will have that----
        Mr. Blum. As evidenced by what?
        Mr. Tribiano. As evidence as we are going to have it
    implemented and running in October when we start our filing
    season hiring to bring back the part time, as you called them,
    but we call them seasonal employees. So we took all the TIGTA
    recommendations that came through and we are implementing them
    right now and will have them done. We are on target to have
    them done in October.
        Mr. Blum. You know, I represent the eastern part of Iowa.
    It's kind of a blue collar district. And I go up there and talk
    to the factory workers. And I tell them, you know, if you were
    terminated by this company or going to be terminated, do you
    think you'd ever get rehired again at the same company? I mean,
    that would be a laugh line.
        Can you see why people out in the real part of this country
    think what's going on here is nonsensical, why there needs to
    be change, why we need to drain the swamp? These are the things
    that I don't even want to repeat, because it's embarrassing. Do
    you understand that? I mean, do you hear that?
        Mr. Tribiano. Yes, I--I understand. I understand what this
    looks like. And we are doing everything possible right now to
    put those things--to put the recommendations from TIGTA, plus
    some additional things, like I said, about seeking debarment
    authority from the OPM to be able to put more controls in place
    to stop this from happening.
        Mr. Blum. But you said previously more controls and more
    regulations, I think you said, penned you in. And now you want
    to put more regulations----
        Mr. Tribiano. No, sir. These are not controls that come
    from OPM. I'm referring to internal controls, management
    controls that we administer at the IRS to be able to stop this
    type of activity, based on the recommendations from TIGTA, from
    happening. These are recommendations that TIGTA came forward
    with that we are adopting and implementing. And I'm stating
    that we will have that in place in October to be able to
    monitor, to provide the--what Mr. Kutz talked about, which is
    giving the hiring manager the suitability and the issues with
    prior----
        Mr. Blum. This will be in place next month?
        Mr. Tribiano. This will be in place at the end of October,
    yes, sir.
        Mr. Blum. Mr. Chairman, can we follow up to make sure this
    is in place by the end of October? Because these are the very
    reasons why there's so little confidence in the Federal
    Government out there in the real world.
        So I would say time is of the essence, and I took forward
    to you doing that.
        Mr. Tribiano. Yes, sir.
        Mr. Blum. I yield back, Mr. Chairman, the time I do not
    have.
        Mr. Jordan. I thank the gentleman for his good questions.
        The gentlelady from New Jersey is recognized.
        Mrs. Watson Coleman. Thank you, Mr. Chairman.
        A quick yes or no from you, Mr. George and Mr. Kutz, the
    IRS has a lot of improvements to do. Is it moving in a right
    direction?
        Mr. George. I would say that, especially in the wake of the
    2013 issues and a few of the other ones that occurred after
    that, that they are taking quite seriously the issues that we
    have uncovered.
        Mrs. Watson Coleman. And would it be very helpful if they
    had the resources they needed to get to modernize their
    equipment, their IC equipment, et cetera, would that certainly
    be of help?
        Mr. George. The IRS, if it had additional resources, could
    do more.
        Mrs. Watson Coleman. Thank you, sir. I am going to take us
    off into an entirely different, but I think vitally important
    area here. As the House prepares to vote on a budget resolution
    this week to begin the process for enacting massive tax cuts, I
    want to take this opportunity to question the witnesses here
    today about the proposed drastic changes to our Tax Code.
        Since unveiling their tax reform plan last month,
    Republicans have tried to claim that their proposals to cut
    taxes for the wealthiest Americans will somehow benefit the
    hardworking middle class families. But even the Treasury
    Secretary himself called his party's bluff, stating that it is,
    quote, ``very hard,'' unquote, not to cut taxes for the rich,
    and that repealing the estate tax, quote, ``disproportionately
    helps rich people,'' close quote. In fact, many of the people
    who stand to gain the most from the Republican tax plan are
    President Trump and the Cabinet.
        Would any one of the witnesses here disagree that repealing
    the estate tax, which limits the tax breaks granted to the
    wealthiest .2 percent of Americans, disproportionately helps
    rich people as the Secretary conceded? That's a yes or no.
        Mr. Tribiano. No, ma'am. Tax policy is the purview of
    Treasury and Congress and the administration.
        Mrs. Watson Coleman. You don't know the answer to the
    question?
        Mr. Tribiano. Ma'am, we are tax administration. Laws get
    passed and we administer them.
        Mrs. Watson Coleman. Thank you. In fact, 11 members of the
    Trump administration are included in the .2 percent. According
    to the Center for American Progress, repeal of the estate tax
    will position heirs to those 11 Cabinet members and the
    President's family to gain almost $3.5 billion. Just to put
    that number into context, that $3.5 billion is about one-third
    of IRS's fiscal 2018 budget. Is that correct? Yes or no.
        Mr. Tribiano. Yes, ma'am.
        Mrs. Watson Coleman. Thank you. That doesn't sound like
    helping middle class working families and hardworking men and
    women.
        The Republican plan also proposes changes to the tax on the
    income of passthrough businesses like LLCs, which are not
    subject to the standard corporate income tax. The Republican
    plan would cut the top rate on this income from 39.6 percent to
    25 percent. This is 10 percentage points lower than the top
    rate imposed on individuals, and would not benefit the 86
    percent of passthrough businesses that already pay a tax rate
    of 25 percent or lower.
        Again, this would profit only millionaires who the Center
    on Budget and Policy Priorities finds, quote,receive about 80
    percent of the tax cuts in 2018. Again, this doesn't sound like
    helping the middle class or the working class families that
    make up this middle class, but it does indeed directly help
    individuals in the Trump administration. The President stands
    to receive a tax cut of almost $23 million from this proposal,
    while senior advisor Jared Kushner, his son-in-law, could
    receive a cut of $6 to $17 million, and Secretary of Education
    Betsy DeVos, a cut of $3 to $5 million. Does that sound like
    benefiting the middle class or working families to anyone here?
    I don't think so.
        But that isn't all. Republicans want to eliminate the
    alternative minimum tax under which President Trump was forced
    to pay $31 million in taxes he could have otherwise avoided in
    2005. Of course, that was well over a decade ago, and we don't
    know how much this tax has cost the President since giving his
    refusal to release his tax forms.
        Mr. Tribiano, this is something that you can answer, I
    think, is President Trump under audit by the IRS?
        Mr. Tribiano. Ma'am, I cannot discuss any audits or
    anything of that nature. And I actually wouldn't know who's
    under audit. It's not part of my responsibilities.
        Mrs. Watson Coleman. Would you know if he actually paid any
    taxes?
        Mr. Tribiano. Ma'am, I would have no idea.
        Mrs. Watson Coleman. Is there anything that stops an
    individual under audit from releasing his tax returns or her
    tax returns? Would you know the answer to that question?
        Mr. Tribiano. No, ma'am, I do not know.
        Mrs. Watson Coleman. Would anyone know the answer to that
    question? Is there anything that stops an individual who is
    being audited from releasing his or her tax returns? Does
    anyone know the answer to that question?
        Mr. George. My understanding is there is no restriction
    on----
        Mrs. Watson Coleman. I didn't think so.
        We already know that the Republican plan will benefit the
    Cabinet members, but if the President wants anyone to take
    seriously his claim that their tax plan won't benefit them at
    the expense of working men and women and their families, then
    he can prove it just once and for all by showing America the
    money he has and releasing his own tax forms.
        And with that, I yield back. Thank you, Mr. Chairman.
        Mr. Jordan. I thank the lady.
        The gentleman from Wisconsin is recognized.
        Mr. Grothman. Sure. A couple of questions.
        Mr. Tribiano, how many employees in the IRS?
        Mr. Tribiano. Give or take pending on filing season, close
    to 80,000 employees.
        Mr. Grothman. Eighty thousand, wow. And in every year, in
    an average year, how many are terminated?
        Mr. Tribiano. I don't have that number. Sir, I can get that
    for you, though.
        Mr. Grothman. Any of you inspector general guys have a stab
    at that one?
        Mr. George. Actually no, we don't have that information,
    sir.
        Mr. Tribiano. I can get that for you and get back to you.
        Mr. Grothman. Why don't you tell me how many were maybe
    terminated right in between. Is there a probationary period?
        Mr. Tribiano. Yes, sir. All Federal employees have a
    probationary period when they enter Federal service of 1 year.
        Mr. Grothman. Well, give me two statistics. Give me the
    number who made it to their probationary period and the number,
    once you get by the probationary period, who are let go every
    year. Can you do that?
        Mr. Tribiano. Yes, sir, I can.
        Mr. Grothman. Now we're going to--we got a little
    explanation for our listeners back home. Could somebody
    describe the Taxpayer Protection Program? It's supposed to be
    something designed to strengthen catching suspicious tax return
    filers. Are you familiar with that program?
        Are you guys doing anything--you must be doing--right now
    we're looking at tax reform, and there are feelings that,
    particularly on some large refund returns, particularly earned
    income tax credit returns, that people are lying and getting
    big refunds. Are you familiar with that problem?
        Mr. Tribiano. Mr. George?
        Mr. George. We are familiar with that problem and are quite
    concerned, sir. The instructions for the Earned Income Tax
    Credit are more than 30 pages, single-spaced, double-sided.
    It's an extraordinarily difficult credit to implement, both
    from the perspective of the taxpayer and then from the
    perspective of the IRS to ensure that the information they're
    receiving is accurate.
        What we're especially concerned about, sir, is many of the
    instances in which we find that people are inappropriately
    receiving that credit are as a result of returns that have been
    prepared by professional tax preparers. So people who are
    supposedly trained and have the expertise to do this are doing
    so in a way that gives people credit or credits that they're
    not entitled to.
        Mr. Grothman. Is that the fault of the preparer or is that
    the fault of garbage in, garbage out?
        Mr. George. We have concerns that it's both, sir.
        Mr. Grothman. Okay. You said it's an overly complicated
    credit. And I can't imagine why anybody would pass a law
    requiring 30 pages of instruction, but apparently people around
    here did, and that's one of the problems the IRS has. It is not
    bad IRS employees, it's bad professional employees. Go ahead.
        Mr. Tribiano. I'm sorry, sir, but in that arena as well,
    and I would like to echo what Mr. George said, we can't do the
    verification upfront. We don't have the authority to do that,
    so the return gets processed through the system and we have to
    pick it up under compliance to see if there's an issue. We've
    been asking for and seeking correctable error authority that
    would allow us to match up when those returns come in during
    the processing cycle, match up the data that's on there with
    some of the Federal Government records and make those
    corrections while we're processing the return. Because if it
    goes in, it has to be picked up under compliance in order for
    us to----
        Mr. Grothman. And compliance means--what is that, another
    word for audit?
        Mr. Tribiano. I mean, an audit or review. Now, the PATH Act
    helped a portion of that, and it allows us that capability to
    try to match stuff up before we release refunds, but
    correctable error authority will help us go further in that
    arena.
        Mr. Grothman. If you had to guess percentage wise how many
    of those returns--say not ones where you get a little credit of
    $45 bucks or something, but say credit's in excess of $2,000--
    what percent do you think are fraudulent or they have errors in
    them?
        Mr. Kutz. Well, the overall improper payment rate for
    Earned Income Tax Credit is about 25 percent, but they don't
    all meet the criteria you just described. There could be some
    small ones and other types in there. But the overall has been
    steadily in the mid-20s for over a decade.
        Mr. Grothman. If you had any other Federal program and 20
    percent of the credits going out the door were wrong, would you
    continue that program?
        Mr. Kutz. It's not the only one. There's other credits that
    IRS have very high improper payment rates also.
        Mr. Grothman. Which other ones are those?
        Mr. Kutz. The child credit and the education credit both
    have very high im----
        Mr. Grothman. Well, we've got a Ways and Means Committee
    looking at that. Maybe those are three things we ought take out
    of there, because we're looking for ways to simplify these
    returns and get some cuts on the middle class.
        So could you give me a little or could you guys forward to
    me for me to forward to the Ways and Means Committee a little
    more information on the education credit and how you think
    people are cheating on that one, the child care credit--child
    credit or child care credit?
        Mr. Kutz. Yes. The child credit. I don't know the full name
    of it, but it's a child credit, yes.
        Mr. Grothman. Okay, the child credit. And particularly the
    Earned Income Tax Credit, because there's some people who want
    to, you know, do a tax reform around here, we might as well
    make sure we get it done right. We might as well make sure, by
    the time we're done with this, we don't operate any slipshod
    program. Thank you very much.
        Mr. Jordan. The gentlelady from Illinois is recognized. I'm
    sorry. Oh, I'm sorry.
        Representative Lawrence, the gentlelady from Michigan is
    recognized.
        Mrs. Lawrence. Thank you. I'll charge that to your head,
    not your heart.
        Mr. Jordan. I apologize.
        Mrs. Lawrence. Since 2010, the actions of the congressional
    Republicans have drastically reduced both the IRS budget and
    your workforce. The IRS has lost over $1 billion in annual
    funding and 18,000 employees since 2010. During that the same
    time, the IRS workforce has steadily increased. Over 10 million
    more tax returns are filed annually.
        This year, IRS is cutting its seasonal workforce during tax
    filing season by 2,000 people. Is that correct, Mr. Tribiano?
        Mr. Tribiano. Yes, ma'am. That sounds close to being
    accurate.
        Mrs. Lawrence. How does cutting 2,000 workers during your
    tax season affect the quality of customer service that
    taxpayers expect when they call the IRS?
        Mr. Tribiano. Well, it would definitely impact our ability
    to provide, you know, taxpayer service. This area is a little
    bit outside of my purview. It really falls in our service and
    enforcement side, the deputy commissioner that oversees that
    activity.
        Mrs. Lawrence. And who on this panel that can tell me how
    this is going to impact what the taxpayers will receive from
    the IRS? And then you talk about quality in the error rate and
    fraud rate. If you're having an increasing number of tax
    returns with significant budget reductions, who in here is
    going to tell me that the IRS has any chance of being
    effective?
        Mr. George. Congressman, they are directing people to their
    online irs.gov website to assist in areas, where in the past
    people could go to taxpayer assistance centers and/or other
    IRS-funded entities. In addition, they also refer people to
    volunteers to help complete their tax filing obligation.
        Mrs. Lawrence. And that system is fully up and running?
        Mr. George. It has been. Sitting out the volunteer aspect
    of it and, of course, the website is. But not everyone has
    access to computers and the internet, and not everyone can get
    to one of the centers or to one of the locations where the
    volunteers are. So there's no question a cut in resources, in
    the terms of human relations and employees, will affect the
    length of time and the ability of taxpayers to receive
    assistance.
        Mrs. Lawrence. How does--does the IRS have anymore plans
    for staff reduction?
        Mr. George. I'm sorry, I----
        Mrs. Lawrence. Does the IRS have any further plans to
    reduce your workforce, pursuant to the President's executive
    order that directs all agencies to create a workforce reduction
    plan?
        Mr. Tribiano. Ma'am, we've been under a workforce reduction
    plan for the last 5 years, and each year, we steadily lose our
    total head count. Our--our--we are a people-driven agency. And
    our funding, the majority of our funding goes to the workers
    within the IRS. So when we have reduced funds, we hire less in
    certain areas. And we try to focus the hiring to the greatest
    need, but we also have some constraints on our appropriation
    language. I know that's not this committee, but there's
    constraints on that that state what type of appropriations
    could be used for what type of work. And that also causes some
    imbalances in our workforce, but we've been slowly reducing our
    size.
        Now, I can tell you, ma'am, you mentioned about 18,000
    employees, and I think that's right. It's between 16,000 and
    18,000, when you count fluctuations and seasonal. I don't think
    we're ever going to get back to that and I don't know if
    there's a need to, but there is a need for more work. And we
    don't have enough staff to be able to adequately service the
    taxpayers, to have the right compliance levels out there, to
    generate revenue, and then to support that with our management
    and administrative interior support that helps support that
    activity. So I don't think there's anybody within the IRS that
    says we should go back up to the levels we had. I don't think
    that's reasonable.
        Mrs. Lawrence. I have a quick question. So if this knew Tax
    Code is passed, has any of you been at the agency long enough
    to go through tax change or Tax Code process? Doesn't that
    include the need for additional staff to implement, train, and
    to enforce new Tax Codes?
        Mr. George. At the sides, ma'am, not something as
    comprehensive as being discussed. But to their credit, the IRS
    has demonstrated an uncanny ability to implement tax law
    changes, even at the very final portion of the tax----
        Mrs. Lawrence. So, sir, if I can quote you, you're saying
    that if the proposed tax change program passed, at your
    reduction workforce plan, at your reduced--at your reduced
    level that you are at now, without the manpower to ask
    individual questions, sending them to a website, you are
    confident that the IRS will just absorb this and the world will
    continue, and you will provide the quality expectation that our
    taxpayers expect?
        Mr. Jordan. The gentleman can respond. Mr. Tribiano.
        Mr. Tribiano. No, ma'am. I am not--no, I'm not confident.
    It depends--we haven't seen the language at the IRS, because,
    again, policy is not what we're about. We're about
    administration of that policy.
        Mr. Jordan. In----
        Mr. Tribiano. But if it's complicated, it will definitely
    have an impact, right, because we have to be able--if we're
    changing the actual structure of a tax return, that has a big
    impact on our IT systems. And I can let Ms. Garza talk about
    that. But there are implications of that. And anything that's
    retroactive has a big impact on our ability to administer or
    try to get the systems.
        Mr. Jordan. The gentlelady from New York is recognized.
        Mrs. Lawrence. I just want to thank the chair. He didn't
    remember my name, he gave me an extra minute. Thank you.
        Mr. Jordan. Anyone from the great State of Michigan, even
    though I'm from Ohio, will do that.
        The gentlelady from New York is recognized.
        Mrs. Maloney. Thank you so much, Mr. Chairman.
        And I'd like to ask Mr. Tribiano, last month, Equifax
    announced it had suffered one of the largest data breaches in
    history, compromising the personally identifiable information
    of more than 145 million Americans. That's almost half the
    country now has their Social Security number and their date of
    birth compromised. And while that in itself is troubling, what
    is perhaps even more troubling is the fact that hackers roamed
    the Equifax network for more than 2 months without detection.
    And the company waited weeks, absolutely weeks to alert the FBI
    after learning about the breach. This is simply unacceptable. I
    will hope that the chairman of this committee would commit to
    holding a hearing on this matter.
        But today, I want to delve deeper into another fact of the
    issue: The IRS's contract extension with Equifax while waiting
    for a ruling on a bid protest. And I'd like to ask you, Mr.
    Tribiano, is it correct that the IRS extended a current
    contract with Equifax after the breach was revealed? How much
    was the bridge contract worth? What was the length of the
    bridge contract? What services were covered by IRS's contract
    with Equifax?
        Mr. Tribiano. Yes, ma'am. Let me start with the bridge
    contract itself was for three 3-month increments. When the
    reports came out that it was $7.3 million, that was for the
    whole 9 months. The intent of the bridge contract was to be
    able to cover the time period from the first 3 months, which
    was worth about $1.3 million. And the intent of that was to
    cover the time period between GAO either upholding the protest
    or not upholding the protest and our ability to get the new
    vendor online and up and running. So we had to have a bridge
    between those two contracts.
        Mrs. Maloney. And what services were covered by this
    contract?
        Mr. Tribiano. EAuthentication services. This is where a
    taxpayer would provide certain data that we would verify with
    Equifax to be able to verify the identify of the taxpayer. I
    mean, I'm simplifying----
        Mrs. Maloney. Okay. And it's my understanding that after
    the breach was announced, IRS personnel were sent to Equifax to
    assess whether IRS data was compromised. And, Ms. Garza, can
    you describe that assessment and its findings?
        Ms. Garza. Yes. So we reached agreement with Equifax to do
    a 1-day visit, followed by a 3-day visit, which we did conduct
    last week. On that first-day visit, the primary objective was
    to look to see if any IRS data had been compromised and also,
    working partnering with TIGTA investigations, look at what data
    had been----
        Mrs. Maloney. Was it compromised?
        Ms. Garza. No. No IRS data had been compromised.
        Mrs. Maloney. Well, that's good to hear. But I'm concerned
    that, shortly after the breach, IRS entered into a short-term
    bridge contract with Equifax. Shortly after reports of this
    sole-source bridge contract, I sent a letter to Chairman Gowdy
    and Ranking Member Cummings requesting a hearing on this $7
    million no-bid contract.
        Ms. Garza, can you elaborate on that contract? And why did
    IRS enter into it? Despite the rising concerns with the laxity
    of Equifax and their identity and theft protection to be hired
    to then verify protection further at the IRS is deeply
    concerning to me.
        Mr. Tribiano. Yes. I'll start, if I can.
        Mrs. Maloney. Okay.
        Mr. Tribiano. And then I'll turn it over to Ms. Garza for
    some of the technical aspects of that.
        So when I originally was discussing this earlier, and I
    forgot who asked me the question, I was trying to lay out the
    pattern that happened. So right now, we had a sole-source
    contract with Equifax as our sole vendor in this arena for a
    long time. We recompeted that contract, and that's the one that
    they protested, to bring other--other companies into the fold
    and have them all for their service as well. Experian met the
    qualifications from a technical perspective and put in a lower
    bid than Equifax and they won the contract. So now we have
    competitiveness. When GAO put the stay out there, and knowing
    that GAO has up to 100 days to decide on whether or not the
    protest----
        Mrs. Maloney. Well, my time is almost up, and I sort of
    know the whole line of circumstances. Can I ask, given the
    circumstances of the bid protest and the data breach, were
    there any other options the IRS had, besides extending the
    contract with Equifax and temporarily discontinuing the
    services that were being provided to consumers?
        Mr. Tribiano. Well, ma'am, we could have discontinued the
    service or we could have provided the bridge contract. What you
    heard from GAO when they talk about the authority to be able
    to--a higher authority level that you could override a protest
    or start the process of implementing something in the middle of
    a protest, we didn't reach that level to be able to exercise
    that option.
        Mrs. Maloney. My time has expired. I have further questions
    and will submit them to the record.
        Mr. Jordan. Or if you want, we can do a few more----
        Mr. Kutz, the 200--was it 213 who were fired and then
    rehired, 213?
        Mr. Kutz. Correct. Fired or left in lieu of termination.
        Mr. Jordan. Okay. Yeah. When they were rehired, there has
    to be some kind of interview process, something that goes on.
    In that interview process, does the IRS say like, oh, I see you
    were employed at the IRS before and you were let go, do they
    get into that questioning?
        Mr. Kutz. They may get to it in suitability, but they don't
    get to it when the selecting official is making the decision to
    make the offer. That person does not have the derogatory
    information in front of them, which is our primary concern
    here.
        Mr. Jordan. But someone at some time knew this person was
    fired and now they're back in front of me seeking employment at
    the very agency that fired him?
        Mr. Kutz. Yes. It's in IRS's database called ALERTS. It's
    right in there.
        Mr. Jordan. Okay. So four people were fired for looking at
    information, private taxpayer information that they were not
    entitled to look at, right?
        Mr. Kutz. Correct.
        Mr. Jordan. They were fired for that. They are now back in
    front of the IRS wanting a job, and someone says--has that
    information in front of them and says, you were fired for
    looking at confidential taxpayer information and now you want
    to come back and work for the Internal Revenue Service. And
    somehow that gets moved along to the next level, where
    supposedly they don't have this information. Is that accurate?
        Mr. Kutz. No. I think the bigger issue is they don't have
    that information. And it's the selecting official who has
    people who are best qualified, they get into their desk, and
    that person does not have the information you just described. I
    think that's what we want to happen here. We want the person
    making the hiring decision to know the derogatory information.
        Mr. Jordan. But someone in some point in the process did
    have that information?
        Mr. Kutz. They may have it after the offer's been made. But
    if it's a suitability issue, as Mr. Tribiano's described, they
    can forget about it if it's more than 5 years old or 6 years
    old or there's other circumstances where it doesn't matter. And
    that's what he's talking about----
        Mr. Jordan. How can it not matter that people were
    accessing confidential taxpayer information, were fired for it,
    are now back in front of the IRS asking for a job, and are
    going to have access to that same kind of confidential taxpayer
    information?
        Mr. Kutz. Because the OPM process for the suitability
    forgives certain things after a certain period of time. It's
    mitigated by time.
        Mr. Jordan. And there's no obligation on the part of the
    person seeking employment to give that information?
        Mr. Kutz. Well, when it gets to that point, you can't say--
    you can't reverse it. You could have reversed it earlier in the
    process, that's why we want it earlier in the process. When the
    official is making the selection, you can do it then. So they
    need to do it earlier in the process.
        Mr. Jordan. Absolutely, absolutely crazy.
        Ms. Garza, let's go back to the previous questions. The 145
    million, 143 million, that number that Equifax announced, what
    relationship does that 143 million have to people who file with
    the IRS, if any? What's the overlap? How does that relate to
    the Internal Revenue Service?
        Ms. Garza. We don't know what that overlap is. We went in
    and just looked at what data elements had been compromised.
        Mr. Jordan. I mean, it would have to be substantial,
    because there are 330 million people in the country. There's
    probably 150-, 160 million taxpayers, right?
        Mr. Kutz. Of course. There's an assumption that, you know--
    --
        Mr. Jordan. Eventually, every single taxpayer.
        Ms. Garza. A good portion of those are, you know, directly
    related to taxpayers.
        Mr. Jordan. Yeah. Maybe all of them. It would have to be
    so.
        This is announced, that there's this major breach, 143
    million Americans, and 1 month after it's announced, you do
    this no-bid contract to Equifax. Is that right?
        Mr. Tribiano. Yes, sir.
        Mr. Jordan. Okay. And, Ms. Garza, you testified before the
    Ways and Means Oversight Subcommittee that you had no knowledge
    of the short-term contract prior to it being made public.
        Ms. Garza. What I testified was that I did not know it was
    signed on the 27th.
        Mr. Jordan. Why would you not know that?
        Ms. Garza. It was not an IT contract. It was actually
    administered from the IA, identity assurance office.
        Mr. Jordan. Yeah. But you're the chief information officer,
    right? You're in charge of all this stuff.
        Ms. Garza. The contract was for professional services for
    credit bureau, and so the folks that were involved in
    establishing that contract deemed that it did not have to come
    to my organization for review.
        Mr. Jordan. Any services or equipment that are used in the
    automatic acquisition, storage, analysis, evaluation,
    manipulation, management, movement, control, display,
    switching, interchange, transmission, reception, information
    again. That's the definition of information officer. I just
    find that hard to believe you had no idea that this was
    happening.
        Ms. Garza. It was--I knew that there was a problem with
    original Equifax and there had been a protest. But I was not
    involved in any discussions about what was to occur, how we
    were going to mitigate the situation.
        Mr. Jordan. But you obviously knew there was a contract
    with Equifax at the time that they announced the breach, that
    the IRS had a contract with Equifax?
        Ms. Garza. Yes.
        Mr. Jordan. Yeah. And you knew it was up for renewal?
        Ms. Garza. Yes.
        Mr. Jordan. And it gets renewed without your knowledge?
        Ms. Garza. I did not know the specifics. And I was not
    involved in the conversations that went to making that
    decision.
        Mr. Jordan. So this is--again, this is what drives Mr.
    Hice--the first member to question today, this is what drives
    Americans crazy, we didn't know that we were rehiring people
    who committed fraud. We didn't know that we had 213 folks who
    have been terminated who are now back in front of us and we're
    going to rehire them, and they looked at confidential tax payer
    information in a way that they weren't supposed to. And we
    didn't know, even though we had a contract with Equifax, even
    though we knew it was up for renewal, even though they
    announced 143 million Americans had their data compromised, we
    didn't know and I had no part--it's like this pass--this is
    what drives them crazy.
        So again, let's hope it all clears up when Mr. Koskinen is
    stepping down and we get someone new to run the place.
        The gentlelady from D.C. is recognized, if she'd like an
    additional few minutes.
        Ms. Norton. Thank you.
        I wanted to stay to ask a question. And by the way, I'm not
    sure how the IRS is going to know anything if we keep cutting
    their budget. But I'm concerned for Federal employees that work
    at the IRS, because there have been reports of really vitriol
    well beyond--I think this question is for you, Mr. George,
    because I think that this was reported to the IG.
        It's clear that IRS employees have had increase, in fact, a
    marked increase in the number of threats. Apparently, there
    have been 1,556 investigations into possible threats since the
    beginning of the year. And there have been prosecutions,
    apparently. I was very concerned that commercial trucks--and I
    must indicate that these reports say that the Trump Hotel is
    very close to the IRS, so some of this may be people from God
    knows where protesting that or they are protesting the IRS. So
    it makes this a volatile shop--spot.
        The report, and these are news reports, said that
    commercial trucks, Ubers, and taxis are not being checked by
    canine and magnetic wands, and that they are parked, allowed to
    park and idle between the hotel and the IRS building. Employees
    say that they were particularly concerned, because all of us
    may have read about this as well, about the arrest in May of a
    man from Pennsylvania who brought a whole cache of weapons and
    90 rounds of ammunition into the Trump Hotel parking lot. So he
    was somehow caught, I'm gratified to say. He pleaded not
    guilty, but then he--and, of course, after arrest, pleaded not
    guilty, but while he was out after that awaiting trial,
    prosecutors said he posted dangerous antigovernment messages on
    social media. Now, look, I'm a First Amendment absolutist, but
    when prosecutors say that there may be a crime here, I do pay
    attention.
        I wonder, before something really serious happens, Mr.
    George, whether or not there ought not be an investigation of
    what is a very unusual number of threats against Federal
    employees who they say make it difficult to do their work. I'm
    looking to you for advice. Sometimes they don't even know who
    to complain to, the police or the IG or the FBI. Would an
    investigation help to put to rest where the problem is and what
    should be done about it?
        Mr. George. Congresswoman, that's a very important and
    timely question. And, in fact, we are currently working with
    the Internal Revenue Service's security division on that very
    issue. And so I don't know whether we will be able to report
    publicly, because we don't want to endanger--again, further
    endanger lives of IRS employees or other Federal workers or
    private citizens who are there, but we would be happy to brief
    you and the chairman and the committee on what we find in a
    nonpublic setting.
        Ms. Norton. That's very engaging--very encouraging, Mr.
    George. I would take it, though, that after a report--I mean,
    after an investigation, some kind of report that the public
    could see would be appropriate. We're not asking for reports of
    who struck John or what should be done about it, but it would
    be reassuring, just as I am reassured by knowing you are indeed
    involved in an investigation, at the end of that investigation,
    surely there is something that the IG's office could say so
    that, for example, people would know that various, various
    steps have been taken, et cetera. Is that not possible?
        Mr. George. I will certainly take that under advisement.
    And I'm certain there would be a possibility for us to issue a
    somewhat redacted version that wouldn't endanger security and
    methods and sources, but nonetheless, inform the public and the
    IRS employees about what actions have been taken.
        Ms. Norton. Thank you very much, Mr. George. I appreciate
    that kind of initiative.
        Mr. George. Certainly.
        Mr. Grothman. [Presiding.] Thank you very much.
        I'll give just one question, maybe you guys aren't
    qualified to answer, because it's really not along the same
    vein as the other questions today. But I'll try to ask you, Mr.
    Tribiano. As you know, we're working on a major tax law change,
    which may or may not come to fruition, it probably will, but
    there are people here who want to make sure it's done by the
    end of the year and make it retroactive on the 2017 returns.
    Are you familiar with how the IRS handles tax changes passed in
    November or December, retroactively?
        Mr. Tribiano. Sir, I haven't been with the IRS for a major
    tax change like this. I can tell you, though, talking to my
    colleagues--and I know Ms. Garza can add some additional
    comments on this--talking to my colleagues about this, it
    depends on the complexity of what's in this law or what gets
    passed. And if it's retroactive, it does cause us concerns
    because we don't have enough time internally to make the
    changes to the systems, to educate our phone assisters and the
    people that would--the influx of people asking the tax
    questions. Plus, our partners out there, the software companies
    that produce the software that a lot of Americans use, need
    time also to be able to build into their software whenever
    these changes----
        Mr. Grothman. Maybe I should ask Ms. Garza. What happens if
    there's even a minor change in December, because we've done
    that before, retroactive changes?
        Ms. Garza. So it really depends on the change and what
    exactly is being changed. One of the things that is probably
    the most difficult to implement is, if you change what we call
    the record, core record layout, which is kind of how the return
    is structured, it has all of the business rules associated, and
    those are all programmed. So if you're going, you know, from a
    2-page 1040 return to a 1-page or a postcard type, that's
    significant work.
        On the other--on going back in time making it retroactive,
    that is very difficult because we have to go back to our
    systems. Depending on how the language is, you know, how far
    back do we have to go and how do we apply that to things that
    have already occurred?
        One of the things that I would suggest is, and I'm sure
    it's probably already happening, is that we engage with your
    staffs to figure out what's the best approach that we can use
    to still get you to where you want to get, but make it in the
    simplest way.
        Mr. Grothman. You're going to have to come up with new
    instructions for the returns, right?
        Ms. Garza. Yes.
        Mr. Grothman. New instructions presumably for the Schedule
    C, presumably for the Schedule E, and many other schedules,
    right? How quickly in days do you think you can turn that
    around? I mean, these are not obscure schedules.
        Ms. Garza. So the development of the schedules actually
    comes out of our W&I organization, so I don't know how long
    that would take for them to do. I do think it's an extended
    period of time.
        Mr. Grothman. Why don't you--I'm a little bit afraid
    they're not doing it. I just hope that you're coordinating with
    the Ways and Means Committee. Because I used to do taxes and we
    used to make fun of Congress when they changed things for the
    prior year. But that's even on minor things where you, you
    know, can contact the licensed tax preparers. I would--I'll
    talk to the Ways and Means folks, but they should be, you know,
    dealing with you guys on a routine basis.
        But while we hope--I asked some questions, I hope we get
    answers in the future. You can tell we're very disappointed
    with, you know, some of the ways some of your people are
    hired.I mean, it's to the point of bizarre that you'd rehire
    somebody who was fired before, particularly--it's obvious it
    causes just tremendous amount of public lack of confidence in
    the IRS.
        But I would like to thank you all for appearing before us
    today. The hearing record will remain open for two more weeks
    for any member to submit a written opening statement or
    questions for the record.
        If there is no further business, I see I'm all alone here,
    without objection, the subcommittee will stand adjourned.
        [Whereupon, at 4:20 p.m., the subcommittee was adjourned.]

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