    [Senate Hearing 117-810]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 117-810

      FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL
                                   YEAR 2023

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

                                    HEARINGS

                                    BEFORE A

                              SUBCOMMITTEE OF THE

                COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

                               H.R. 8254/S. 4685

        AN ACT MAKING APPROPRIATIONS FOR FINANCIAL SERVICES AND GENERAL
    GOVERNMENT FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2023, AND FOR OTHER
                                    PURPOSES
                                   __________

                           Department of the Treasury
                            Internal Revenue Service
                                   __________

             Printed for the use of the Committee on Appropriations

                      [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

            Available via the World Wide Web: http://www.govinfo.gov

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE

    46-656 PDF                WASHINGTON : 2024

                          COMMITTEE ON APPROPRIATIONS

                        PATRICK LEAHY, Vermont, Chairman

    PATTY MURRAY, Washington             RICHARD C. SHELBY, Alabama, Vice
    DIANNE FEINSTEIN, California             Chairman
    RICHARD J. DURBIN, Illinois          MITCH McCONNELL, Kentucky
    JACK REED, Rhode Island              SUSAN M. COLLINS, Maine
    JON TESTER, Montana                  LISA MURKOWSKI, Alaska
    JEANNE SHAHEEN, New Hampshire        LINDSEY GRAHAM, South Carolina
    JEFF MERKLEY, Oregon                 ROY BLUNT, Missouri
    CHRISTOPHER A. COONS, Delaware       JERRY MORAN, Kansas
    BRIAN SCHATZ, Hawaii                 JOHN HOEVEN, North Dakota
    TAMMY BALDWIN, Wisconsin             JOHN BOOZMAN, Arkansas
    CHRISTOPHER MURPHY, Connecticut      SHELLEY MOORE CAPITO, West
    JOE MANCHIN, III, West Virginia          Virginia
    CHRIS VAN HOLLEN, Maryland           JOHN KENNEDY, Louisiana
    MARTIN HEINRICH, New Mexico          CINDY HYDE-SMITH, Mississippi
                                         MIKE BRAUN, Indiana
                                         BILL HAGERTY, Tennessee
                                         MARCO RUBIO, Florida

                       Charles E. Kieffer, Staff Director
               Shannon Hutcherson Hines, Minority Staff Director

                                     ------

           Subcommittee on Financial Services and General Government

                      CHRIS VAN HOLLEN, Maryland, Chairman

    CHRISTOPHER A. COONS, Delaware       CINDY HYDE-SMITH, Ranking Member
    RICHARD J. DURBIN, Illinois          JERRY MORAN, Kansas
    JOE MANCHIN, III, West Virginia      JOHN BOOZMAN, Arkansas
    PATRICK LEAHY, Vermont,              JOHN KENNEDY, Louisiana
      (ex officio)                       RICHARD C. SHELBY, Alabama,
                                           (ex officio)

                               Professional Staff

                                  Ellen Murray
                             Diana Gourlay Hamilton
                                  Reeves Hart

                            Andrew Newton (Minority)
                            Alley Adcock (Minority)

                             Administrative Support

                                  Teri Curtin
                           Sydney Crawford (Minority)

                                C O N T E N T S

                                  ----------

                                    hearings

                             Wednesday, May 3, 2022

                                                                       Page

    Internal Revenue Service.........................................     1

                            Wednesday, June 14, 2022

    Department of the Treasury.......................................    39

              Statements and Letters of Nondepartmental Witnesses

    Nondepartmental Witnesses........................................    69

                                  ----------

                                  back matter

    List of Witnesses, Communications, and Prepared Statements.......    97

    Subject Index:

        Department of the Treasury...................................    99

        Internal Revenue Service.....................................    99

      FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL
                                   YEAR 2023

                                  ----------

                              TUESDAY, MAY 3, 2022

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.

        The subcommittee met at 2:43 p.m., in room SD-124, Dirksen
    Senate Office Building, Hon. Chris Van Hollen, (Chair)
    presiding.
        Present: Senators Van Hollen, Coons, Durbin, Manchin, Hyde-
    Smith, Moran, Boozman, and Kennedy.

                            INTERNAL REVENUE SERVICE

                 opening statement of senator chris van hollen

        Senator Van Hollen. Good afternoon. This hearing will come
    to order. And I want to start by welcoming our witness, IRS
    Commissioner Charles Rettig.
        Commissioner Rettig, thank you for your service. Thank you
    for being here. And I also want to take this opportunity to
    thank your staff for their professionalism and partnership,
    both preparing for the hearing, but throughout this Congress.
        The IRS has been consistently receptive to the work of our
    Committee, and my team and I are grateful to you and your team
    for your cooperation.
        At the outset I would like to highlight your diligent
    efforts over the past 2 years to implement several new COVID
    relief programs, especially those we passed under the American
    Rescue Plan. And because of the American Rescue Plan nearly
    three million Maryland families received direct relief payments
    of $1,400 a person, over one million Maryland children
    benefited from new tax cuts for families, you know, through the
    expansion of the Child Tax Credit, and over 250,000 Maryland
    workers got a tax break through the expansion of the Earned
    Income Tax Credit.
        The IRS played a key role in delivering these funds to
    Americans across the country. You did that while also working
    tirelessly to protect your own employees from COVID-19. The
    obstacles were enormous, but you and your agency delivered. And
    I want to salute you and the good men and women of the IRS who
    helped get that vital relief out the door.
        We also know that the agency, the IRS, continues to be
    underfunded and understaffed. And the massive tax return
    processing backlog at the IRS is the resultant, you know, we
    will talk some about that today.
        Many of my constituents are frustrated that they are still
    waiting for their 2021 and 2020 refunds. Just last month I
    heard from a mother of two in Maryland, who has to move homes,
    and is counting on her 2021 refund to cover the cost of a
    security deposit and the first month's rent. Her tax forms are
    stuck in the backlog, along with millions of others.
        Mr. Commissioner, I know you have made it a priority to
    address that backlog by hiring new staff at your processing
    centers, and by detailing experienced staff from other parts of
    the IRS to help with the backlog.
        I commend you for these efforts, and I want to make sure
    that this subcommittee is working with you to address this
    issue as fast as possible.
        As the Chairman of the Committee, I have made IRS funding a
    top priority, and I want to thank Ranking Member Hyde-Smith,
    for working together on these issues, so that we can help the
    IRS replace outdated technology and hire more staff.
        Less than 2 months ago, this subcommittee provided the IRS
    with its biggest funding increase in 20 years to do just that,
    to help serve our constituents, your clients.
        I look forward to seeing that investment improve service
    for working families, cut down on hold times, and reduce the
    backlog. As we work to improve customer service, we also need
    to improve IRS enforcement. Right now, as you, yourself, had
    pointed out Mr. Commissioner, there is anywhere from $500
    billion to $1 trillion in taxes, each year, that are owed but
    not paid, what is commonly referred to as the tax gap.
        These are billions of dollars that are legally due and
    owing under current tax law, while everyday Americans have
    their taxes withheld, and pay what they owe, we cannot allow
    the super-wealthy to evade the system. By enhancing the
    capacity of the IRS to track down wealthy individuals' unpaid
    taxes, and big businesses who sidestep their tax
    responsibilities, we can raise more revenue without changing
    the tax law. Those who refuse to meet their obligations, or
    avoid their obligations make everybody pay instead.
        I am proud of the work we have done to increase the IRS
    budget to meet these goals, but despite our efforts to
    prioritize IRS resources in this subcommittee, as a result of
    the overall caps, the funding we secured this year was less
    than you requested. And I believe less than you need, and we
    look forward to working with you this year so you can meet your
    mission.
        I have heard from some of my colleagues who say that the
    IRS problems we are seeing are not a budget issue at all. They
    just say that the IRS needs to hire more customer service
    agents, and upgrade their IT systems, and everything will be
    fine. Well, that would improve things, but that does cost
    money. And while money is not the only solution, it is a big
    part of the answer.
        Commissioner Rettig, I know that you understand the IRS'
    problems, and want to solve them. I will hope that this hearing
    is an opportunity for us to discuss how we can help the IRS
    access the tools it needs to delivery topnotch taxpayer
    services, and beef up enforcement of the super-wealthy who are
    not paying their fair share.
        But before we move to your testimony, I would like to
    return to Senator Hyde-Smith, and again thank her for her
    partnership on this subcommittee, and for her opening
    statement.

                   opening statement of hon. cindy hyde-smith

        Senator Hyde-Smith. Thank you, Mr. Chairman, for that very
    kind welcome. And I certainly appreciate the opportunity to
    serve as the Ranking Member on this very important
    subcommittee, and I look forward to continuing to work with you
    in crafting responsible funding legislation for fiscal year
    2023.
        And I want to welcome the IRS Commissioner to our hearing
    today. And thank you for your service, and we look forward to
    your testimony this morning.
        The IRS entered this year's tax-filing season with a
    historically high backlog of unprocessed paper returns, and
    correspondence. When such issues arise, the IRS usually speaks
    about the need for more funding. However, the IRS received more
    than $3 billion in supplemental funding since 2020. Today, more
    than $1 billion of this amount remains unavailable and--I mean
    available and unobligated.
        Moreover, in this current fiscal year the IRS received
    $12.6 billion, its largest funding increase in two decades.
    Despite this robust funding, critical IT modernization projects
    lag, the tax gap remains wide, the backlogs remain high, and
    the customer service is at an all-time low.
        The IRS requests a total of $14.1 billion for the upcoming
    fiscal year. And I believe it is time for these funding
    increases to be met with fiscally responsible decisionmaking,
    decisionmaking that prioritizes that everyday taxpayer, and
    efficiency.
        I want to ensure that money appropriated to the IRS is no
    longer diverted away from measures and programs devoted to
    improving taxpayer services and enforcement. It is my hope that
    during today's hearing our priorities align to ensure utmost
    efficiency and fiscal responsibility with the IRS going
    forward.
        Mr. Commissioner, I know you have made some tough choices
    in responding to additional responsibilities placed on the
    agency. I thank you for your service. And I look forward to
    your testimony today.
        Senator Van Hollen. Thank you, Senator.
        Our first witness and only witness today is IRS
    Commissioner, Charles P. Rettig. Prior to his confirmation in
    September 2018, Commissioner Rettig worked in private practice
    for 36 years, representing thousands of individuals and
    businesses before the IRS. The Department of Justice Tax
    Division, Federal and State Courts, and State taxing
    authorities.
        He received a B.A. in Economics from the University of
    California, Los Angeles, as well as a JD from Pepperdine
    University, and an LLM in Taxation from New York University.
        Commissioner, thank you for coming back. I know that you
    have testified in front of a number of committees already this
    season, but we look forward to your testimony, and hope you can
    help us as we work with you to make sure you have the tools you
    need to do your job, and serve the American people.
    Commissioner Rettig?
    STATEMENT OF HONORABLE CHARLES P. RETTIG, COMMISSIONER,
                INTERNAL REVENUE SERVICE
        Commissioner Rettig. Yes. We have had a lot of hearings
    this year, but I should say that my wife appreciates it,
    because she likes to watch the hearings, so she knows exactly
    where I am, what I am saying, and it gives us a 3- or 4-hour
    discussion each evening as she critiques what I said, what I
    didn't say.
        It is an honor and a privilege to be in this role. It is an
    honor and a privilege to be in front of each of you. And
    Chairman Van Hollen, Ranking Member Hyde-Smith, and Members of
    the Subcommittee, thank you for the opportunity to discuss the
    Internal Revenue Service operations, the current filing season
    and the fiscal 2023 budget.
        As you know fiscal 2021 gross receipts for the Internal
    Revenue Service were approximately $4.1 trillion which
    translates to approximately 96 percent of the gross revenue of
    the United States of America. I would like to start by
    indicating the importance of the IRS, not only to Members of
    Congress, and not only to taxpayers in this country, but really
    to the rule of law, to the country that we have, and the
    support of the country.
        We don't make decisions as to the expenditure of the funds
    collected, but the importance of the IRS in supporting this
    country, from a financial perspective, at 96 percent of the
    total gross revenue of the country simply cannot be ignored. We
    need a fully functioning, successful, Internal Revenue Service
    to have a fully functioning, successful United States of
    America.
        And you know, I am a proud American. You are all proud
    Americans. That is why we are here. We are willing to give of
    ourselves to make this country continue as the greatest country
    on the planet. I believe that, and that is why I came. And I
    believe in the people of the Internal Revenue Service.
        The people of the Internal Revenue Service have given
    extraordinary efforts during the pandemic, and we look forward
    to oversight. From my confirmation hearing through today, I
    have welcomed all types of oversight. We do have oversight in
    certain lanes. Obviously, we have a Treasury Inspector General
    for Tax Administration, we have GAO, we have media, we have
    taxpayers, we have professional associations, we have Members
    of Congress.
        Oversight should not be a concern. We welcome that; I
    welcome that; I believe every Commissioner after me should
    welcome that. My term, as you are aware, is a statutory term,
    and it concludes November 12 of this year. It has been a
    privilege to be here, a privilege to interact. I want to bring
    that in because presumably this might be my last appearance
    before you.
        The employees of the Internal Revenue Service are the
    strength of the Agency, and they will continue to be the
    strength of the Agency, and collectively, we need to support
    them in the efforts going forward.
        I believe that the President's budget proposal for fiscal
    2023, supports the employees of the Internal Revenue Service,
    supports the mission. Again, we request oversight, because I
    think that that is a privilege for the tax administration
    agency to have people understand what it is, and specifically
    what it is not, for transparency, for people to see what we do,
    and what we don't do.
        I have read a lot of articles since I have been in this
    position that I can't wait to contest once I am no longer in
    this position. We are here, collectively, and I am speaking to
    both of you, but as well as to everybody else, to get this
    right so that we can proudly walk out the door and say, we are
    here supporting the United States of America.
        And I say that as a proud member of a military family. As
    you know, my son is a Major in the United States Army. I
    couldn't be more proud of his service, of what he does,
    literally, on a daily basis. And I think that most people
    should feel like that.
        I am more than willing to have discussions with respect to
    the ARP spend plan. We provided a detailed summary of what we
    are doing with respect to the spend plan on February 12 and we
    got an Omnibus Budget on March 15, so we are adjusting our
    spend plan. We will come back to you with an adjustment to
    that, so you can see how we are spending the balance of the ARP
    funds, but we have obligated about $966 million of those funds
    to date.
        But know that we have been in more than 100 continuing
    resolutions since 2001. It is impossible to build out a robust,
    meaningful, technology infrastructure without multi-year,
    timely, consistent funding. When we get our funding halfway
    through each fiscal year, it is impossible for us to plan
    multi-year expenditures.
        So with that, and not to go further over my time, I will
    turn it back to you. I am certainly available for questions. I
    am also available for meetings individually, with Members of
    this Committee, or with staffs of this Committee, with or
    without Members of the Committee.

        [The statement follows:]
              Prepared Statement of Charles P. Rettig Commissioner
                                  introduction
        Chairman Van Hollen, Ranking Member Hyde-Smith and Members of the
    Subcommittee, thank you for the opportunity to discuss the filing
    season and the IRS budget.
        Taxpayer service remains the most significant IRS priority, and we
    have implemented many new, innovative strategies in an effort to
    improve our overall level of service and processing of our
    unprecedented current and projected inventories. The pandemic presented
    the IRS with a confluence of novel and critical demands at a time when
    we lacked the stable, long-term funding needed to appropriately serve
    the American people. Given these significant challenges, although we
    may not have always gotten it right or supported the important
    priorities of some, our employees have worked extremely hard to respond
    as best we could to a never-ending string of compounding challenges.
        I am pleased to report the 2022 filing season has gone well in
    terms of tax return processing and the operation of our information
    technology (IT) systems. Through April 15, the IRS processed more than
    118 million individual Federal tax returns and issued more than 78
    million refunds totaling more than $242,000,000,000. We worked
    diligently to open the filing season earlier this year than last, on
    January 24, 2022, compared to February 12, 2021. A detailed discussion
    of the filing season is provided later in this testimony.
        While the filing season has presented no major disruptions or
    surprises, we know we have a great deal of work to do in many other
    areas of the IRS. The IRS continues to focus on working to reduce paper
    correspondence inventory and process paper tax returns from 2021 as
    well as improve our response to an unprecedented level of phone
    demand--situations that have been compounded by the pandemic and
    related issues. For example, in fiscal year 2021, we received more than
    15 million individual paper returns. We also had a significantly higher
    error rate on individual returns due in large part to challenges
    associated with reconciling funds received through important stimulus
    programs like Economic Impact Payments (EIPs). We received far more
    than 10 million returns where the taxpayer did not properly reconcile
    the two EIPs received in 2020 to the amount of the Recovery Rebate
    Credit (RRC) stated on their return filed in 2021. Similarly, more than
    10 million individuals reported unemployment compensation on their
    return that was subject to the exclusion enacted during the 2021 filing
    season. In addition, millions of taxpayers elected to use 2019 rather
    than 2020 as the base year for determining their EITC (and the
    legislative change for that was enacted after our IT development for
    the 2021 filing season had been completed). Each of these returns
    required a manual review and resolution by an IRS employee.
        We will continue to do our best as we face new challenges. Our
    workforce is strong and remains our most important resource, with
    substantially all of our employees engaged on a full-time basis. We
    have taken numerous steps to address these challenges, and we continue
    to look for other ways so that we can improve these operations and get
    healthy by the end of the year.
        The IRS is serving more people and entities in a global environment
    than ever before, while handling new and bigger responsibilities. This
    was the case before the pandemic and has only increased since then. At
    the same time, we have experienced delays in updating our IT systems,
    which means the IRS and taxpayers must continue to use certain paper-
    based processes. This use of paper processes can result in significant
    delays, contributing to IRS inventories and limiting taxpayers' ability
    to know the status of their cases.
        We are in this position because we have not had the sustained
    sufficient multi-year investment for IT modernization necessary to
    improve our technology and operating systems. I am here to tell you
    today that nothing is more important than having those resources in
    place to make it possible for us to appropriately serve the American
    people. Absent consistent, timely, multi-year funding we have largely
    been a paper-based organization operating in a digital world
    environment. In 2022, IRS employees should not be transcribing paper
    returns by hand. Taxpayers should not have to wait and wait on the
    phone--often to no avail. I want to better serve the American people--
    and so do the dedicated employees at the IRS. They will finally be able
    to do so if you, and your colleagues, provide us the stable, multi-year
    funding we need.
        Like all Federal agencies, the IRS is best able to accomplish our
    mission when we receive the resources necessary to do so. And that
    mission is vital to the functioning of our government: The fact that
    the IRS collects approximately $4.1 trillion in gross revenue per year,
    representing about 96 percent of the gross revenue of the U.S., clearly
    shows that the success of our Nation is closely tied to the success of
    the IRS. The President's fiscal year 2023 budget proposal, which
    provides $14.1 billion for the IRS, will allow the agency to take
    important steps forward in improving taxpayer service, modernizing our
    systems and ensuring fairness in the tax system. But for the IRS to
    truly be able to deliver for the American people, it needs stable,
    multi-year funding to be in place to allow the agency to rebuild.
        Over the course of the last decade, the IRS's budget has decreased
    by more than 15 percent in real terms. Because of this decrease, in
    fiscal year 2021 we realized less than 79,000 full-time equivalents
    (FTEs), which is close to 1974 levels. Since 2010, IRS Enforcement FTEs
    have decreased by 30 percent, while the Nation's real Gross Domestic
    Product has increased by 29 percent, and the filing population has
    increased by 14 percent. Over the next 6 years, we estimate we will
    need to hire 52,000 employees just to maintain our current levels.
    Every measure that is important to effective tax administration has
    suffered tremendously in recent years, with profound deficiencies
    resulting from underinvestment in human capital and information
    technology.
        Although the IRS appreciates the $675,000,000 increase to our
    budget in the fiscal year 2022 Omnibus, sufficient funding remains a
    constraint to addressing the current paper inventory and supporting our
    IT operations adequately. For example, this year's funding left our
    Operations Support account, the account that funds all of the hiring,
    rent, laptops, and telecom for taxpayer services and enforcement
    employees, $100,000,000 short of our inflationary cost increases.
    Without shifting the funds to the appropriate accounts, we are left
    depleting resources from one less-visible program to pay for another
    essential program, which causes us to slow or stop work on updates to
    our systems that must be modernized to provide digital services that
    citizens expect from us. Mandatory multi-year, consistent funding would
    help us deliver meaningful services to taxpayers, conduct critical
    enforcement initiatives and support long-term modernization efforts to
    improve both service and compliance for the Nation.
        When we are confronted with long-term Continuing Resolutions (CRs),
    we typically freeze nearly all external hiring. We take this action to
    ensure we have funds to pay all employees, including any applicable pay
    raises. Last fall, we increased staffing despite the CR, hiring at risk
    without the funding in place to support these positions, but assuming
    future resources would be provided by the eventual enactment of the
    fiscal year 2022 appropriation, to help address our inventory. The full
    fiscal year 2022 President's budget request would have allowed us to
    maintain current staffing levels and fund 4,200 additional full-time
    equivalent employees. The Omnibus increased our Taxpayer Services
    account by $193,000,000 from fiscal year 2021, which covered the
    inflationary increases in Taxpayer Services (what we refer to as
    ``maintaining current levels"), and about 42 percent of our requested
    program increases. We will now be required to use other funding sources
    to cover our remaining needs, including requesting an inter-
    appropriation transfer, redirecting user fees, and realigning American
    Rescue Plan (ARP) funds. Although the Omnibus reflects an important
    down payment on the necessary investments in the IRS, it is far, far
    from what the dedicated IRS employees need to serve the American people
    they way they deserve.
        Even with appropriate funding, the IRS continues to experience
    significant challenges recruiting talent to support the critical work
    the agency does for taxpayers and our Nation, particularly in the
    current labor market. With our limited funding, we have been hard at
    work to do all we can to bring talent on board. For example, we have
    major processing center operations in Austin, TX, Kansas City, MO, and
    Ogden, UT, where we are working to attract eligible applicants for more
    than 5,000 vacant positions. We have been holding both in-person and
    virtual job fairs in Austin, TX, Kansas City, MO, and Ogden, UT where,
    using recently received Direct Hiring Authority (DHA), we have been
    able to make more than 2,500 conditional offers at the conclusion of
    the interviews.
        IRS employees want to do more to help taxpayers. We want to be able
    to answer the phones and respond to questions. We want to be ready,
    whenever crisis hits, to deliver economic relief quickly--as our
    employees demonstrated repeatedly during the current pandemic, working
    long hours to deliver crucial programs. During this challenging period,
    the IRS has been operating in an ``all-hands-on deck'' approach,
    leaving nothing off the table for consideration to improve overall
    service.
        Our employees continue to expend every effort to balance the
    confluence of multiple, unprecedented demands--including successfully
    starting the current filing season and working our inventory of
    unprocessed tax returns, as well as looking for additional ways to
    minimize burden for taxpayers, tax professionals and businesses. We
    will continue to rapidly adapt to changing circumstances when
    appropriate to do so. We remain committed to ensuring the tax system is
    administered fairly and impartially and that every American receives
    the nature and quality of services they deserve.
             effects of the covid-19 pandemic and the irs response
        This unprecedented pandemic illustrates the significant role that
    the IRS plays in the overall health of our country. We have been called
    to provide economic relief during this national crisis while also
    fulfilling our routine responsibilities of tax administration. The
    IRS's response to COVID-19 includes issuing more than $1.5 trillion in
    combined historic economic relief and individual refunds over the past
    2 years. This effort shows the level of dedication of our workforce and
    illustrates how important the IRS is to the functioning of our
    government and the success of the Nation.
        IRS employees have worked hard since March 2020 to implement major
    provisions of the Coronavirus Aid, Relief and Economic Security (CARES)
    Act, ARP and other COVID-related relief legislation. This work included
    delivering more than $800,000,000,000 in EIPs to help Americans cope
    with the financial effects of COVID-19--which involved creating the
    internal processes to accomplish this effort. The Treasury Inspector
    General for Tax Administration (TIGTA) noted in a report released March
    21, 2022, that the IRS computed the correct payment amount for more
    than 99 percent of the 175 million payments issued for the third round
    of EIPs. Our work also included delivering (and creating the internal
    processes for) more than 200 million advance payments of the Child Tax
    Credit totaling $93,000,000,000 that were made to eligible families
    between July and December of last year.
        Congress provided critical help to support our ability to implement
    the third round of EIPs and the advance CTC payments by appropriating
    $1.86 billion in supplemental funding for the agency under the ARP.
    These funds represent important 3-year funding (expiring fiscal year
    2023) and have provided, and will continue to provide, critical
    assistance in our effort to better serve taxpayers. As of April 12,
    2022, the IRS has obligated $928,000,000 of the total; we are
    continuing to use the funds over the remaining 2 years of the
    expenditure window provided by Congress in ways that are intended to
    maximize taxpayer service, including responding to taxpayer questions
    about EIPs and advance CTC payments. As identified in our ARP Spending
    Projections provided to Congress in February 2022, these funds are
    allowing us to help taxpayers efficiently obtain the payments they are
    rightfully due, with additional frontline staffing, systems and
    technology improvements to create safe and secure platforms, and with
    investments in long-term modernization enhancements that will pave the
    way for long-needed system improvements going forward.
        For both the third round of EIPs and the advance CTC payments, the
    IRS made an extensive effort to ensure we reached as many people as
    possible who might be eligible for these benefits. We worked with
    thousands of community groups, non-profits, associations, education
    groups and anyone else with connections to people with children to
    share critical information about EIPs, the CTC and other important
    benefits. As noted above, we are continuing to work this filing season
    to ensure that anyone eligible who did not receive an EIP understands
    they can claim the RRC on their return, and we continue reminding
    recipients of the advance CTC of the need to reconcile those amounts on
    their returns.
    Reducing Inventory of Paper Returns and Correspondence
        The combination of the pandemic, new tax laws and numerous other
    factors led to an unprecedented amount of unprocessed tax returns and
    correspondence remaining in the IRS inventory during 2021.
        The IRS pursued significant actions during the 2021 filing season
    to address the return and correspondence inventory. But due to resource
    issues and numerous unique factors tied to new legislation and the
    pandemic, we have entered the 2022 filing season with a significant
    inventory of unprocessed returns and correspondence and, to date, the
    inability to meet our hiring goals. We must continue pursuing
    innovative strategies to fulfill our commitment to return inventories
    to a healthy level before entering the 2023 filing season.
        To reduce the current and projected inventory, we are taking
    aggressive actions that include:

      --Surge Teams. We presently have more Customer Service
            Representatives (CSRs) onboard than ever before. We have
            retained temporary CSRs on a permanent basis to concentrate on
            the inventories. We took this risk in the context of an
            uncertain funding environment, hoping the annual appropriation
            process would deliver funding; however, this effort has not
            been sufficient to reduce the current and projected inventories
            The IRS is deploying surge teams, which are groups of employees
            across the agency organized to temporarily assist with urgent
            issues. For example, we temporarily moved approximately 900
            employees with previous relevant experience back into key areas
            from other organizations. In addition to this accounts
            management surge team, which is now in place, we have assembled
            a similar surge team for our submission processing area with
            700 employees who started on this critical work in April.
      --Direct Hire Authority (DHA). Working with Treasury, the Office of
            Personnel Management, and the National Treasury Employees
            Union, the IRS recently secured direct hiring authority for a
            total of 10,000 positions--5,000 employees with the goal of
            onboarding them in the next several months, as well as an
            additional 5,000 new hires to be made over the course of the
            next year. Congress also helpfully provided hiring
            flexibilities in the Omnibus to further expedite hiring in
            critical positions. Due to the challenges of hiring during the
            pandemic and competition from other employers for the same
            talent, this environment is an exceptionally difficult one for
            hiring. DHA may improve our ability to be competitive in cities
            where these employees are most needed. We are extremely hopeful
            to satisfy our hiring goal over the coming months. Also, for
            the first time, we have partnered with the Military Spouse
            Employment Program and are engaging contractors while
            aggressively pursuing our hiring goals. We are grateful for the
            specific direct hiring authority language included in the
            recent Omnibus (Consolidated Appropriations Act, fiscal year
            2022) that will enable us to bring talent on-board more swiftly
            in needed locations.
      --Mandatory Overtime. We have implemented mandatory overtime and are
            offering authorized overtime to certain employees to help with
            the reduction in inventory, and we are doing so for the first
            time in certain functions.
      --Increased access to online self-service tools. Over the last
            several months, more than 10 million individuals have created
            their individual online account through IRS.gov. Reducing call
            volumes through increased online service allows us to devote
            more resources to the inventories.
      --EIP/CTC letters. We sent more than 250 million letters to help
            taxpayers match IRS records to prevent delays in processing.
            IRS Letter 6475, Your Third Economic Impact Payment, and IRS
            Letter 6419, 2021 Advance Child Tax Credit, set forth the
            amounts that individuals received in 2021. Individuals can also
            verify these amounts by accessing their individual online
            account through IRS.gov. Given that more than 10 million
            returns failed to properly reconcile two EIP payments received
            in 2020 on their returns filed during the 2021 filing season,
            it is critical that individuals (and their preparers) verify
            the possibly six to eight payments received in 2021 before
            submission of a 2021 return this year.
      --Innovating to expedite case closures. We are employing new tools to
            help IRS employees review and process tax returns that include
            errors and manual reviews, a piece that is already helping
            taxpayers receive refunds quicker in 2022. These efforts have
            already demonstrated positive results.
      --Expanded Saturday openings of certain Taxpayer Assistance Centers
            (TACs) to assist taxpayers this filing season in more than 90
            cities around the country. TACs provide important front line,
            in-person taxpayer assistance. We maintain 358 TACs but, due to
            attrition and resource limitations, 39 are presently not
            staffed on a full-time basis (24 TACs presently provide a
            virtual service delivery alternative to an in-person visit).
            All staffed TACs offer appointments as well as the ability to
            walk in.
      --Enhanced the EITC Assistant tool on IRS.gov to make it more user
            friendly for individuals to determine their potential
            eligibility (intended to reduce resources being dedicated to
            erroneous EITC claims). This important tool serves taxpayers
            and reduces erroneous claims, freeing up resources to help
            process our inventories.
      --VITA/TCE. We are also continuing to notify taxpayers about ``Free
            Tax Return Preparation for Qualifying Taxpayers'' by
            encouraging use of the IRS's Volunteer Income Tax Assistance
            (VITA) and Tax Counseling for the Elderly (TCE) programs, which
            offer free basic tax return preparation to qualified
            individuals.
      --Created and expanded self-service portals for taxpayers to
            implement an Online Payment Agreement, request payment
            transcripts, request an Identity Protection Personal
            Identification Number (IP PIN), update their personal
            information, etc. These efforts reduce call volume, which
            releases resources to help process our inventories.
      --Expanded ``Customer Callback'' to approximately 70 percent of our
            toll-free telephone demand. During fiscal year 2022, we have
            offered this option to more than 5.3 million taxpayers with an
            acceptance rate exceeding 57 percent. We estimate this feature
            has saved taxpayers more than 1.7 million hours.
      --Implemented Online Live Assistance, Voice Bots and Chat Bots (in
            English and Spanish) to better enable taxpayers to interact
            with IRS. Online Live Assistance leverages limited employee
            resources allowing a single employee to respond to multiple
            taxpayers at a time. Our Advance CTC Voice Bot launched
            February 18, 2022 (delivered 6-8 weeks ahead of schedule) and
            handles the top 27 Advance CTC topics (English only at present,
            but the Spanish version is coming soon) to assist callers who
            need help reconciling the credits on their 2021 tax return. The
            IRS, in recent weeks, has deployed Voice and Chat Bots in
            English and Spanish for phone lines that assist taxpayers with
            tax payment issues or understanding an IRS notice they may have
            received. In addition to the payment lines, Voice Bots help
            people calling the EIP toll-free line, providing general
            procedural responses to the most frequently asked questions.
            Voice Bots are software powered by artificial intelligence (AI)
            that allow a caller to navigate an interactive voice response
            (IVR) system with their voice, generally using natural
            language. Chat Bots simulate human conversation through web-
            based text interaction, also using AI-powered software to
            respond to natural language prompts. Taxpayers who request to
            speak with a CSR are placed in queue for English or Spanish
            telephone assistance. These efforts reduce call volume,
            releasing resources to help process our inventories.
      --Reduced the percentage of our outdated hardware from more than 60
            percent a few years ago to approximately 10 percent at present.
            Funding provided by Congress has allowed us to pursue these
            efforts, reducing the risk associated with an interruption to
            our delivery of meaningful services.

        These steps are making a difference. Refunds for tax returns and
    amended tax returns in the inventory continue to flow out to taxpayers.
    We continue to consider and pursue additional relief measures while
    balancing the many other demands for our time and limited resources.
        We also instituted additional relief measures for taxpayers, such
    as:

      --On January 27, we announced the suspension of notices in situations
            where we have credited taxpayers for payments but have no
            record of the tax return being filed. Given that in some
            situations the return is still waiting to be processed,
            suspending this notice will help avoid confusion.
      --On February 9, we announced the suspension of more than a dozen
            additional notices, including automated collection notices
            normally issued when a taxpayer owes additional tax or has no
            record of filing a tax return. As a result, we have now
            suspended all known notices that are associated with
            unprocessed original return inventory. Specifically, any
            notices that are still being sent to taxpayers are associated
            with ongoing programs and services that are not associated with
            the unprocessed returns. Note that many other IRS notices are
            statutorily required to be issued within a certain timeframe to
            be legally valid.

        We are evaluating penalty relief options; however, we must also
    determine if systemic programming changes or manual intervention are
    required for the considered relief. Manual intervention would require
    re-direction of resources from processing original returns and amended
    tax returns, which complicates this area.
    Other Taxpayer Assistance Offerings
        Important Update Information Available at IRS.gov. The IRS
    workforce is working hard to reduce current and projected inventories,
    meet taxpayers' continuing needs and provide relief or assistance
    whenever possible. We have issued various announcements available on
    IRS.gov outlining important steps we've taken this filing season to
    assist taxpayers with the aim of reducing current and projected future
    inventories. On February 14, we issued a news release titled, ``IRS
    launches resource page on IRS.gov with latest details and information
    for taxpayers during filing season,'' (IR-2022-32, February 14, 2022)
    with a link to this important resource page ( ``Help for taxpayers and
    tax professionals: Special filing season alerts'' ).
        The IRS is continuing to assess other changes and system
    modifications to assist taxpayers on an array of issues. We have
    redeployed and reallocated resources throughout the IRS and have
    implemented innovative strategies in an ongoing effort to provide a
    meaningful reduction in our inventories. As we make additional
    adjustments, we will continue to make information available to
    taxpayers throughout the filing season and beyond.
        Important Steps for Current Filers to Get Their Refund as Quickly
    as Possible. To prevent future inventory problems, the IRS has also
    worked diligently to encourage people to take extra precautions this
    year so they can get their refund quickly and avoid processing delays.
    For this filing season, refunds on error-free electronically filed
    returns continue to be processed within approximately 21 days.
    Requesting direct deposit accelerates receipt of the refund by the
    taxpayer. There are three important steps people can take to get their
    refund as quickly as possible:

      --File electronically;
      --File an accurate return (verify amounts reflected as received for
            the EIP and advance CTC payments), and;
      --Request a direct deposit of their refund.

        These steps are critical to accelerating delivery of the refunds
    people deserve and the IRS employees want to get out as quickly as
    possible. We have engaged in extensive outreach with community-based
    and professional organizations to reduce the otherwise manual review of
    returns that fail to reconcile these amounts. We're also encouraging
    taxpayers with questions to turn first to online resources, since we
    anticipate a continued high call volume again this year.
    Responding to Unprecedented Demand for Phone Assistance
        The IRS provides phone service to individuals, businesses, tax
    professionals and tax-exempt entities. We have specialty lines for the
    hearing impaired, identity theft victims, the taxpayer protection
    program, and for making appointments at our TACs. We also offer over-
    the-phone translation services in 350 languages.
        Taxpayer Service Remains Our Top Priority. The long-term erosion of
    our budget has depleted every function of the IRS. Even though our Wage
    & Investment division--which is where the current and projected
    inventories exist--remains the most well-staffed function of the entire
    IRS, it is well below the levels necessary to deliver the service we
    aspire to achieve. We have implemented several approaches to reducing
    current and projected inventories and reducing call volumes which
    allows us to devote more resources to the inventories.
        Our customer service representatives (CSRs) operate from 10 main
    campus sites and 14 smaller satellite locations across all mainland
    United States time zones, plus Puerto Rico. The CSRs work 7 a.m. to 7
    p.m. shifts staggered nationally according to time zones. When we
    temporarily closed most of our facilities in March 2020 to protect
    employees from COVID-19, our IT operation worked rapidly--within
    weeks--to provide our CSRs with laptops, related equipment and training
    so they could work remotely in a virtual environment.
        Against that backdrop, IRS phone operations have faced an unusually
    challenging environment over the past year, with an unprecedented level
    of phone assistance demand. In 2021, we answered four million more
    taxpayer calls than the year before but had a lower level of service
    than prior years because demand was so high. In the first half of 2021
    alone, we received more than 199 million calls--about 400 percent more
    calls than we get in an average year. For comparison, we received a
    total of 42 million calls in all of 2018, 40 million calls in 2019, and
    55 million calls in 2020. On March 15, 2021, we received 8.6 million
    calls on just that one day, which is an average of about 1,500 calls
    per second. The high call volume has significantly hampered our ability
    to manage telephone demand.
        At the same time, the average duration of each call has also
    increased due to the complexity of COVID-related tax law changes and
    because taxpayers have personally endured a great deal throughout the
    pandemic. Our average time per call was 12 minutes for calendar year
    2019. Thus far in 2022 (through April 16) the average time per call is
    16 minutes. Spending more time on each call to provide the needed
    customer service limits the CSRs' ability to handle more calls during a
    shift.
        We attempted to ease these challenges by starting the CSR hiring
    process for the 2021 filing season months earlier than normal. We
    repeated this approach for the 2022 filing season. During the pandemic,
    we transitioned into an entirely virtual recruiting and onboarding
    process for new employees to speed up the process. While we were able
    to hire an additional 3,800 CSRs, clerks and other support staff for
    the 2021 filing season, it was short of our goal of 5,000. While we did
    slightly better thus far in the 2022 filing season, we still have been
    able to hire just 4,131 of our overall goal of 5,000. The pandemic
    caused significant hiring challenges, including low applicant pools in
    some locations, delays in fingerprinting due to closed facilities, and
    delays in processing applicants virtually. And we routinely find
    ourselves being able to offer candidates significantly less than what
    the private sector can. We are trying innovative training approaches to
    get new CSRs ready to work the phones in less than the usual 14-week
    timeframe. Working with NTEU, OPM and Congressional Appropriators, we
    are also thrilled to have secured direct hire authority, discussed
    previously, which will allow us to be more successful in recruiting top
    talent by increasing the speed with which new employees can be
    onboarded.
                        update on the 2022 filing season
        The IRS successfully opened the 2022 tax season on January 24--two
    weeks earlier than the year before--giving taxpayers more time to file
    returns and delivering more than 1 million refunds in the first days of
    processing. Getting underway in January has given taxpayers as much
    time as possible to meet the Federal tax filing deadline, which this
    year was April 18 for most taxpayers.
        Due to many factors, the 2022 tax filing season has been a complex
    and challenging one for taxpayers, tax professionals and for the IRS as
    well. During this tax season, taxpayers faced a number of issues
    resulting from critical tax law changes that took place in 2021, as
    well as ongoing challenges related to the pandemic. Our dedicated
    workforce has done everything it can to prepare for the April 18
    deadline, and our focus has been on simplifying the taxpayer filing
    experience by streamlining the process, answering as many questions as
    possible and reducing the inventories mentioned earlier in this
    testimony.
        Our system that allows electronic filing of returns, Modernized
    eFile (MeF), took a major step forward this filing season. We made the
    latest in a series of changes that over time have made MeF more
    efficient, standardized and robust. This latest change expanded the
    availability of MeF so that our external partners who transmit returns
    electronically can access the system 24 hours a day, seven days a week.
    This upgrade is a win not only for the transmitters and ultimately
    taxpayers, but also for the IRS, because it allows us to perform MeF
    maintenance during the week, enabling more rapid deployment of critical
    updates.
    Providing Help to Navigate a Challenging Filing Season
        We believe the filing season has gone the smoothest for taxpayers
    who file electronically, file accurate tax returns and request direct
    deposit of their refund.
        In fact, filing electronically with direct deposit has been more
    important than ever this year, given the additional complexities on
    many returns, such as those who were eligible for an EIP but did not
    receive it and are now claiming the RRC, as well as those who need to
    reconcile advance CTC payments on their return.
        During the filing season we have worked to ensure families who
    added a dependent--such as a child, a parent, a nephew or niece, or a
    grandchild--on their 2021 income tax return who was not listed as a
    dependent on their 2020 income tax return to know they may be eligible
    to receive a 2021 RRC of up to $1,400 for this dependent. Additionally,
    all eligible taxpayers with qualifying children born or welcomed
    through adoption or foster care in 2021 have been encouraged to claim
    the CTC--worth up to $3,600 per child- on their 2021 tax return.
        Another important credit we've been highlighting is the Child and
    Dependent Care Credit, which was expanded for 2021. This means that
    more taxpayers will qualify this year than ever before, and the credit
    will be worth more. We've been working to remind people who pay
    expenses for the care of a qualifying person while working or looking
    for work that they may qualify for this important tax credit. Depending
    on their income, taxpayers can get a credit worth 50 percent of their
    qualifying child care expenses. For tax year 2021, the maximum eligible
    expense for this credit is $8,000 for one qualifying person and $16,000
    for two or more.
        We realize that taxpayers who are still waiting for their 2020
    return to be processed may be wondering whether they should wait to
    file their 2021 return. Our message to these individuals has been to
    file their 2021 return when they are ready. If a taxpayer is
    electronically filing their 2021 tax return and we have not yet
    processed their 2020 tax return, they should validate their 2021
    electronic tax return by entering $0 (zero dollars) as their prior year
    adjusted gross income (AGI). If a taxpayer used the Non-filer Sign Up
    tool in 2021 to register for advance CTC payments or an EIP, they will
    instead enter $1 as their prior year AGI.
        Given that incredibly high call volume has continued again this tax
    season, we understand the filing experience has been more difficult for
    taxpayers who need to interact with us. But we continue to make
    improvements and are confident this work will have us trending in the
    right direction. We are also encouraging taxpayers with questions to
    turn first to online resources. This area has been a huge focus for the
    IRS, and critical tools are available that people may overlook. These
    options range from the Where's My Refund online tool to several other
    automated tools now available through the Online Account on IRS.gov.
    For many, there are ways to get help without calling.
    Improving Service to Diverse Communities
        Amid the challenges posed for the agency by the pandemic and new
    tax law changes, the IRS has continued to focus on improving service to
    diverse communities. An important way we serve these taxpayers is by
    communicating with them in their most comfortable language. We are
    committed to enhancing the experience of all taxpayers, including those
    who have limited English proficiency. We know that these taxpayers
    respond to our efforts--as just one example, there were nearly 90
    million visits to non-English pages on IRS.gov last year. Already this
    year, through April 10, there have been about 17.7 million visits to
    non-English pages.
        Since 2021, the IRS has taken important steps to further improve
    the amount of service we offer in multiple languages:

      --Provided the Form 1040 in Spanish during the 2021 filing season for
            the first time.
      --Gave taxpayers the opportunity to indicate on new Schedule LEP
            (Limited English Proficiency) whether they want to be contacted
            by us in a language other than English. This schedule, filed
            with the 1040, allows taxpayers to select one of 20 languages
            in which to receive communications from the IRS. During
            calendar year 2021, the IRS received approximately 326,000
            Schedule LEPs.
      --Made Publication 1, Your Rights as a Taxpayer, available in 20
            languages.
      --Issued a new, streamlined version of Publication 17, Your Federal
            Income Tax, that is available in seven languages.

        These efforts continue this year. We've completed conversion of 34
    Spanish notice inserts to Braille, text, audio and large print as of
    January. We also recently converted Form 1040 and its main schedules,
    as well as Form 1040 NR, Form 1040 SR, Form W-4 and six publications,
    into Spanish Braille, text, and large print. We continue working to
    increase our communications and outreach materials--including
    information shared on social media channels--into additional languages.
    To ensure that taxpayers can easily provide their preferences in this
    area, we also released new Form 9000, Alternative Media Preference,
    this filing season. This form allows taxpayers to tell us they want to
    receive notices in Braille, large print, audio, or text, and can be
    filed alone or with the 1040.
        While those steps are all important, the IRS is continuing to do
    more to enhance the taxpayer experience for those who are more
    comfortable using a language other than English. We are, for example:

      --Pursuing efforts to translate website applications for these
            taxpayers. We have already identified 17 of the most frequently
            used applications for translation into additional languages.
      --Exploring opportunities to employ machine translation to help us
            add more multilingual content. This is a significant challenge,
            given how complex many tax terms are. We will need to carefully
            evaluate automated translation tools, so we anticipate this
            effort will be ongoing for several years.
                        update on modernization efforts
        One of my highest priorities as Commissioner is ensuring the
    agency's IT infrastructure remains on a path toward modernization.
    Modernization is vital to all our core functions: successfully
    delivering the annual tax filing season, ensuring the health of the
    Nation's tax system and supporting the Federal Government's financial
    strength. Today, we do not have the steady, consistent multiyear
    funding to support these efforts the way we need to in order to deliver
    appropriately for the American people.
        We have long sought levels of funding that would enable necessary
    IT investments. As noted above, absent consistent, timely, multi-year
    funding we have largely been a paper-based organization operating in a
    digital environment. It is difficult to modernize a significant IT
    portfolio to improve processing and delivery of important taxpayer
    services when constantly funded through a CR.
        Until recently, we were operating under a CR for fiscal year 2022.
    This year's Omnibus (Public Law 117-103) represents the largest funding
    increase for the agency in two decades. But the agency's needs are much
    deeper. Unfortunately, because our budget has fallen so significantly
    in real terms over the course of the last decade, we have lost
    foundational staff at the agency and need to rebuild. From a
    modernization perspective, many of our priorities, including upgrading
    the Individual Master File, one of the oldest IT systems in the Federal
    Government, are multi-year efforts. This situation means we have not
    been able to invest in modernizing and integrating our technological
    infrastructure, which processes the more than 160 million returns we
    anticipate receiving this year. The situation also affects other
    important interests of tax administration. Modernized technology would
    significantly improve the ability of the IRS to respond to a crisis,
    pandemic-related or otherwise.
        Since the initial release of our Modernization Plan in 2019, our
    operations and infrastructure have changed significantly. We have
    received only limited funding for our efforts: from fiscal year 2019
    through fiscal year 2021, we received only 57 percent of the planned
    Business Systems Modernization funding. But within the funding
    received, we have delivered critical technology improvements and at the
    same time responded to unprecedented demand due to the pandemic. We
    accelerated the development of our digital services. We expanded
    customer callback availability on our toll-free telephone lines. We
    created new web applications such as ``Get My Payment'' to track EIPs.
    We also created the Child Tax Credit Update Portal to help people
    manage advance CTC payments, a first-of-its-kind endeavor. And in
    another milestone, we also achieved the long-time goal of making it
    possible for individuals to e-file their amended tax return.
        Another example of modernization at work involved creating a tool
    last year to help eliminate several steps in the process an IRS
    employee is required to do to reconcile RRC discrepancies between the
    two EIPs that were made in 2020 and what the taxpayer reported on their
    tax return. Prior to the automation, an employee could reconcile about
    100 returns per day. Once we completed the modernization improvement,
    the employee can now process 600 per day. Not only does this
    improvement speed up the ability for the taxpayer to receive their
    refund, but it also avoids adding further to the backlog of inventory.
        We continue to investigate new ways of doing business to optimize
    the important work of IRS employees and improve the taxpayer
    experience; for example, we hope to be able to scan in a paper form and
    file it electronically later this summer, which will help us identify
    the potential for this approach to be used for other forms in the
    future. We are also looking into our ability to leverage an approach
    that we call Scanning-as-a-Service, where we may be able to
    significantly increase the availability of digital images for IRS
    employees to use to perform their work without owning and maintaining
    expensive equipment or paying to store the paper records. Both efforts
    seem straightforward on the surface, and although we are cautiously
    optimistic of their progress to date, it is important to note that they
    are not a sure thing, and a significant amount of work remains to
    confirm the viability of these pilots, as well as their ability to
    scale to other use cases.
        In addition to the above, we continue taking steps to safeguard
    taxpayer data while modernizing platforms to improve taxpayers'
    experiences. Investments in cybersecurity are essential. In 2017, IRS
    was experiencing just over 1 million cyberattacks per day. Today, we
    sustain more than 1.5 billion attacks each year. While IRS network
    defenses mitigate threats and keep our core tax processing systems
    secure, we must continue to advance our cyber capabilities, so we stay
    one step ahead of the bad actors who are attacking IRS systems.
    IRS Online Account
        An important focus of our efforts has been the development of IRS
    Online Account, which allows taxpayers to interact with us online and
    perform various types of transactions in a secure environment. For
    example, they can view their payment history, make a payment online or
    request previous years' tax information. Since the initial launch of
    IRS Online Account in 2016, we helped taxpayers securely access the
    information and services they need, with more than 23 million sessions
    and 8.37 million new users in fiscal year 2021. We are continually
    working to expand the transactions taxpayers can conduct through the
    online account.
        In July of last year, we launched a new online feature that allows
    individual taxpayers to authorize their tax practitioner to represent
    them before the IRS with a Power of Attorney (POA), and to view their
    tax accounts with a Tax Information Authorization (TIA). Tax
    professionals can go to the Tax Pro Account on IRS.gov to digitally
    initiate POAs and TIAs. Over time, we will continue building
    functionality so that other transactions involving tax professionals
    can be completed online in a secure digital environment.
        As we expand our digital options, security is always an important
    consideration. For that reason, in February we announced steps to
    change the way taxpayers authenticate their identities when signing on
    to their online accounts. Specifically, we began transitioning away
    from using a third-party service for facial recognition. The IRS is
    working closely with partners across government to roll out Login.Gov
    as an authentication tool for us. The General Services Administration
    is currently working with the IRS to achieve the security standards and
    scale required of Login.Gov, with the goal of moving toward introducing
    this option later this year.
                       efforts to improve tax compliance
        The IRS remains committed to doing everything we can, with our
    limited resources, to track down those who willfully refuse to fulfill
    their tax obligations or who commit tax fraud. We want to maintain a
    strong, visible, robust tax enforcement presence to appropriately
    support taxpayers who comply voluntarily. When taxpayers file their
    returns, they should feel confident others are doing the right thing
    too.
        Our efforts to ensure compliance with the tax laws cover a broad
    range of groups--individuals, small businesses, tax-exempt
    organizations and large entities. In our challenging resource
    environment, large entities are of particular concern because this
    group includes very sophisticated taxpayers--major U.S. corporations,
    multinational companies and complex multi-tiered partnerships--all of
    which require us to have highly trained, highly skilled enforcement
    personnel with special accounting and tax law skills, who can
    understand the issues raised by these returns, root out instances of
    noncompliance and litigate issues where necessary.
        We will continue emphasizing a number of special areas in our
    enforcement activities. This strategy includes keeping a focus on high-
    income taxpayers engaged in offshore noncompliance, failure to file,
    unreported and improperly reported virtual currency transactions and
    abusive tax shelters, such as syndicated conservation easements and
    micro-captive insurance shelters, as well as monetized installment
    sales and Malta pension abuses.
        In this challenging environment, the IRS continues working to
    improve coordination of enforcement activities across the agency. In
    fact, the IRS's Office of Fraud Enforcement (OFE), which we created in
    March 2020, is actively encouraging and ensuring this coordination
    across the IRS, promoting compliance, strengthening the IRS' response
    to fraud and working to mitigate emerging threats. The Office of
    Promoter Investigations (OPI), created last year, is helping us better
    identify issues that involve abusive tax shelters as well as
    individuals promoting abusive tax transactions.
        It is vital that we improve our ability to identify and deter
    promoters, and that we do so more quickly--before they are able to
    widely market their transactions, as we have seen with syndicated
    conservation easements and micro-captive insurance. We are seeing many
    aggressive transactions being promoted on social media and the
    Internet, and we continually work to identify and evaluate potentially
    abusive trends and transactions to determine whether they need further
    enforcement actions. I have challenged OPI to lead our efforts against
    not only those who promote abusive tax avoidance transactions we know
    about, but to find the transactions that are being concocted today, and
    to coordinate our efforts to stop those promoters quickly and
    efficiently.
    Recent Accomplishments
        We have made progress in a number of enforcement areas. For
    example, over the past 2 years, we have shifted significant examination
    resources and technology to increase our focus on high-income and high-
    wealth taxpayers. As a result, examination coverage of the taxpayers in
    the highest income category (taxpayers with over $10,000,000 of total
    positive income) increased to over 8 percent coverage for Tax Year (TY)
    2018, the most recent year for which complete statistics are available.
    This level is the highest coverage rate of this growing population
    since TY 2014, and we expect the TY 2019 numbers will show this level
    of coverage continued.
        Substantially all experienced examiners--those who are the most
    highly trained with substantial accounting and tax law skills--are
    almost entirely focused on tax returns that include complex issues,
    such as high-income taxpayers, pass- through entities, multi-national
    taxpayers involving international tax issues, large pension plans,
    private foundations and the most egregious situations. We also continue
    to focus on employment tax cases where employers have failed to pay
    over taxes withheld from employees or have failed to file their
    employment tax returns.
        An IRS initiative announced in 2020 involves improving tax
    compliance by increasing visits to those generally with incomes above
    $100,000 who failed to file tax returns. These Revenue Officer
    Compliance Sweeps (ROCS) focus on the most egregious non-filers. A
    partnership between our Field Collection operations, the OFE and our
    Criminal Investigation (CI) division also worked to identify common
    attributes of successful fraud referrals resulting in recommendations
    for criminal investigation for non-filers.
        Another example of our accomplishments involves the development of
    a comprehensive, coordinated enforcement strategy to address abusive
    syndicated conservation easement transactions, and we have worked
    closely with the U.S. Department of Justice to shut down the promotion
    of them. Subsequently, the U.S. Tax Court held in the government's
    favor in a number of conservation easement cases, supporting the IRS's
    position on the abusive nature of the underlying deductions in these
    cases. While continuing to investigate these transactions, the IRS has
    also made settlement offers to certain taxpayers with docketed cases at
    the Tax Court involving this type of transaction.
        Our efforts have also borne fruit in another important area--
    employment tax fraud. Non-compliance in this area means employers cheat
    the system and their employees without consequence. In so doing, they
    gain an unfair advantage over their honest competitors. We continue to
    work with the Justice Department's Tax Division to identify
    opportunities to better address non-compliance. These opportunities
    include using data analytics to identify egregious noncompliant
    employers. To cite one instance, we used our Innovation Lab's Data
    Analytics Program to identify thousands of taxpayers who reported wages
    on their individual income tax returns where the employer who paid
    those wages did not file their W-2 forms with the Social Security
    Administration and neither filed employment tax returns nor remitted
    taxes withheld from their employees. Seriously noncompliant employers
    were further investigated by the IRS examination, collection and CI
    organizations. This agency-wide commitment ensures consistent treatment
    of taxpayers and fair application of the tax law.
        The IRS's enforcement efforts have extended to preserving COVID-
    related financial relief for those legitimately in need of financial
    support during this crisis. For example, the IRS has been working
    diligently to thwart scams related to COVID-19 by alerting taxpayers
    and tax professionals to these scams--especially calls and email
    phishing attempts tied to the EIPs. The IRS and our partners throughout
    the country have been publicizing these scams. Another example involves
    the OFE's efforts to prevent ineligible claimants from obtaining $1.2
    billion in COVID-related employer credits. The credits were intended to
    help employers retain employees who would otherwise be unable to work
    during the pandemic, but bad actors saw an opportunity to exploit the
    program for their own financial gain. Working collaboratively with
    teams of seasoned enforcement employees who identified the questionable
    claims, OFE investigated the suspect claims and either administratively
    disallowed the claims and/or referred cases for further investigation.
        In noting accomplishments on enforcement, I continue to be
    extremely proud of the investigative work done by CI. To take just one
    recent example, CI's Cyber Crimes Unit played a key role in the largest
    cryptocurrency seizure ever recorded for the Federal Government, valued
    at more than $3.6 billion. In February 2022, the Justice Department
    announced the arrest of two individuals in connection with an alleged
    conspiracy to launder cryptocurrency stolen during a 2016 hack of
    Bitfinex, a virtual currency exchange. IRS-CI Cyber Crimes Unit special
    agents were critical in unraveling a sophisticated laundering
    technique, enabling them to trace, access and seize the stolen funds.
    As well as being the largest cryptocurrency seizure, this was also the
    largest single financial seizure recorded by the Federal Government.
        In regard to recent events, CI is prepared to support the U.S.
    government's efforts to impose sanctions on Russia. CI has a track
    record of successfully rooting out and stopping illegal kleptocracy
    money flowing into or through the U.S. CI's special agents expertly
    target those who launder money, including active investigations
    involving Russian oligarchs and politicians, as well as those who
    facilitate the illicit movement of money on behalf of sanctioned
    individuals or organizations. Agents on the Global Illicit Financial
    Team and throughout CI are not only experts in tracing assets and
    understanding the complex global financial world; they also work
    seamlessly with our domestic and global law enforcement partners to
    ensure the integrity of the U.S. financial system on behalf of U.S.
    taxpayers.
    Resource Challenges
        Despite the progress we have made, our ability to enforce the tax
    laws against non-compliant taxpayers with complex returns continues to
    be hampered by a lack of resources. We can no longer audit a
    respectable percentage of large corporations, and we are often limited
    in the issues reviewed among those we do audit. These corporations can
    afford to spend large amounts on legal counsel, drag out proceedings
    and bury the government in paper. We are, quite simply, ``outgunned''
    in our efforts to assure a high degree of compliance for these
    taxpayers. It is unacceptable for the Nation's tax administrator to be
    outgunned when appropriately challenging the return positions of some
    of the most sophisticated taxpayers. We must receive the resources to
    hire and train more specialists across a wide range of complex areas to
    assist with audits of entities (taxable, pass-through and tax-exempt)
    and individuals (financial products; engineering; digital assets;
    cross-border activities; estate and gift planning; family offices;
    foundations; and many others).
        A lack of resources also threatens to reduce the effectiveness of
    our criminal investigative work. Much like other operating divisions in
    the IRS, CI is close to its lowest staffing level in the past 30 years.
    With fewer agents, we have fewer cases and fewer successful
    convictions. A strong, robust criminal tax enforcement presence
    provides significant deterrence to those willing to evade their lawful
    obligations to our country. Without adequate resources, we risk sending
    a much less powerful message to would-be and active tax evaders.
        Because of our current funding and staffing limitations across our
    enforcement functions, we are forced to make difficult decisions
    regarding priorities, the types of enforcement actions we employ, and
    the service we offer. Limited IT resources preclude us from building
    adequate solutions for efficiently matching or reconciling data from
    multiple sources. As a result, we are often left with manual processes
    to analyze reporting information we receive. Such is the case with data
    from the Foreign Account Tax Compliance Act (FATCA). Congress enacted
    FATCA in 2010, but we have yet to be appropriated any significant
    funding for its implementation. This situation is compounded by the
    fact that when we do detect potential non-compliance or fraudulent
    behavior through manually generated FATCA reports, we seldom have
    sufficient funding to pursue the information and ensure proper
    compliance. We have an acute need for additional personnel with
    specialized training to follow cross-border money flows. They will help
    ensure tax compliance by improving our capacity to detect unreported
    accounts and income generated by those accounts, as well as the sources
    of assets in offshore accounts.
        In other programs, we have information but are unable to select all
    high-risk cases identified due to resource and funding constraints. In
    these situations, to the detriment of tax administration, we must make
    difficult enforcement decisions based on resources, return on
    investment, coverage of all types of taxpayers, and other high priority
    work. For example, our information document reporting programs are
    identifying potential discrepancies with taxpayers who have received
    Form 1099-K, Payment Card and Third-Party Network Transactions
    (including potential non-filers), but not all of these have been
    addressed due to resource constraints.
        As we make enforcement decisions, we try to balance resource
    limitations across a number of factors, including evaluating overall
    compliance effect and focusing resources into special projects. For
    example, we currently have fewer than 2,000 revenue officers, the
    lowest number of field collection personnel since the 1970s, and we
    have over 100,000 collection cases in active inventory. In addition to
    our active inventory, we have over 1.5 million cases (more than 500,000
    of which are considered high priority) awaiting assignment to these
    same 2,000 revenue officers. We have classified roughly 85 percent of
    those cases as high priority, many of which involve delinquent business
    employment taxes.
        In discussing our resource situation, another major concern is our
    ability to investigate and take enforcement actions against abusive
    transactions. While we are doing our best with the resources available
    to us, it is important to point out that the lack of funds and staffing
    makes it increasingly difficult for us to keep up with--much less stay
    ahead of--those who promote abusive transactions and the tax evaders
    who engage in them. Shelter promoters continue to innovate and invent
    new ways of gaming the system. We continue working to find them and
    identify their methods, but in order to ensure we can take meaningful
    enforcement actions against them, it is critical that we receive
    adequate resources.
        It is becoming easier for tax shelter promoters to pitch their
    wares to the wealthy, and we are concerned such pitches are taking
    hold. While we are doing what we can, we need more resources if we hope
    to keep these activities in check and continue our efforts to inform
    taxpayers about the problems with these transactions so they will be
    dissuaded from participating in them. These activities shift the
    required funding of our country onto the backs of wage earners.
    Everyone should pay their fair share, and no one should be able to
    inappropriately avoid their obligations.
             looking to the future: irs taxpayer experience office
        Along with our day-to-day efforts to help taxpayers and enforce the
    tax laws, our agency is also committed to delivering on the promise of
    a new IRS. We are continuing the work begun in 2019 with passage of the
    Taxpayer First Act (TFA) to develop an innovative approach to the
    future of tax administration that will better serve everyone, including
    those in underserved communities. The IRS is using the implementation
    of the TFA to make significant improvements in the way we serve
    taxpayers, enforce the tax laws in a fair and impartial manner, and
    ensure our workforce collaborates and is well-trained.
        A key driver of these efforts is our Taxpayer Experience Office,
    launched last year to unify and expand the work being done across the
    agency to serve taxpayers. The Taxpayer Experience Office sets the
    strategic direction for improving the taxpayer experience and
    identifies opportunities to make continuous improvements in real time
    for taxpayers and the tax professional community.
        The Taxpayer Experience Office will identify changing taxpayer
    expectations and industry trends, focus on customer service best
    practices, and promote a consistent voice and experience across all
    taxpayer segments by developing agency-wide taxpayer experience
    guidelines and expectations. The office will be adding staff in the
    coming months to help support the effort.
        Some of the areas of improvement in the near term include expanding
    customer callback, expanded payment options, secure two-way messaging
    and more services for multilingual customers. These activities build on
    recent improvements such as digital tools to support EIPs and advance
    CTC payments, online chat and the online tax professional account.
                    the president's fiscal year 2023 budget
        The President's fiscal year 2023 budget proposal for the IRS
    provides $14.1 billion, an increase of $2.2 billion, or 18 percent more
    than the fiscal year 2022 Annualized Continuing Resolution level of
    $11.9 billion, to administer the Nation's tax system fairly, collect
    more than $4 trillion in gross taxes to fund the government, and
    strengthen tax compliance. Because the Administration drafted the
    fiscal year 2023 budget submission ahead of the enactment of the fiscal
    year 2022 Omnibus, the submission was not able to reflect the final
    enacted fiscal year 2022 funding levels. The budget includes
    initiatives to improve the taxpayer experience that should ultimately
    lead to increased voluntary tax compliance. The request also aims to
    ensure we stay current with the paper inventory and improve telephone
    and in-person service; facilitates better oversight of high-income and
    corporate tax returns; and accelerates the development of digital tools
    to enable smarter communication with taxpayers. In addition, the
    Administration continues to support a multiyear investment in IRS
    enforcement to increase tax compliance. An appropriate level of funding
    for the IRS will allow the agency to continue enhancing the taxpayer
    experience, narrowing the tax gap to ensure equitable administration of
    the tax code, protecting IRS systems and taxpayer data, and modernizing
    our information technology systems.
    Specific Funding Areas
        The fiscal year 2023 budget requests a total program increase of
    $1.31 billion, including the following:

      --Putting Taxpayers First: $320,200,000 to continue implementing the
            Taxpayer First Act [TFA], which requires the IRS to put in
            place a Taxpayer Experience Strategy to improve the taxpayer
            experience with the IRS. The IRS's Taxpayer Experience Office,
            in partnership with key internal and external stakeholders and
            subject matter experts, identified certain areas of focus to
            inform development and implementation. The fiscal year 2023
            request focuses on: continuing to protect taxpayer data;
            increasing outreach and taxpayer education efforts; developing
            strategies to reach underserved communities; and providing
            human resources support for implementing the TFA.
      --Enhancing Taxpayer Service: $389,100,000 for increasing the
            telephone Level of Service (LOS) and enhancing information
            technologies to improve taxpayer services. This investment will
            build on the IRS's efforts to improve telephone services for
            the underserved, such as those who are deaf or hard of hearing,
            limited English proficiency communities, and victims of
            identity theft. This investment provides a projected LOS of 85
            percent in fiscal year 2023 assuming phone demand returns to
            pre-pandemic levels and the IRS can provide in-person services
            at pre-pandemic levels. The increase in funding also will
            improve the ways taxpayers interact with the IRS by enhancing
            and expanding the range of modern, digital tools provided by
            the IRS to deliver a service experience comparable to that
            available in the private sector. By empowering taxpayers to
            address certain needs without requiring live assistance,
            development of these tools is essential to the IRS's long-term
            success in satisfying taxpayer expectations and meeting the
            ongoing growth in demand for assistance.
      --Increasing Compliance to Ensure Fairness: $469,300,000 to allow the
            IRS to continue improving upon its compliance strategies and
            enforcement activities--including examination, collection and
            investigation--to ensure fairness in the tax system and narrow
            the tax gap. We continue to develop innovative approaches to
            understanding, detecting, and resolving potential
            noncompliance, which helps to maintain taxpayer confidence in
            the tax system. It is important to note the IRS has an overall
            enforcement return on investment (ROI) of about $5 for every $1
            invested compared to the IRS appropriated budget, not including
            significant deterrence effects.
      --Maintaining Critical IT Operations: $39,500,000 to sustain these
            operations to maintain optimum network performance and
            functionality. The IRS continues to transform its technological
            landscape, and it has made progress on its modernization
            journey to provide taxpayers with a seamless customer
            experience, while empowering employees with the tools and
            systems needed to provide top quality services and enforce the
            tax law. These successes have increased the need to sustain
            critical IT operations to maintain optimum network performance
            and functionality. The IRS continues to deploy and incorporate
            new, modernized tools for taxpayers, tax professionals and
            employees. Taxpayer service improvements (additional digital
            services, up-to-the-minute account information, etc.),
            enterprise efficiency advances (automation, artificial
            intelligence, machine learning, etc.) and new employee tools
            (case management, collaboration, learning platforms, etc.) all
            require additional bandwidth to sustain a high volume of users
            processing digitalized capabilities.
      --Fostering Economic Development in Underserved Communities:
            $10,200,000 to allow the IRS to cultivate new opportunities for
            adults and students in underserved communities. One focus of
            our efforts is the Mississippi Delta Region, which currently
            has the highest rate of poverty in the United States, excluding
            the U.S. territories. As an initial step, we are opening a new
            Automated Collection System (ACS) call site in Clarksdale,
            Mississippi, and have announced plans to hire contact
            representatives to work at the call site. Initiatives in other
            regions are already underway, including a significant staffing
            increase for our ACS operation in Puerto Rico. We have
            increased staff at this site from approximately 79 employees in
            fiscal year 2020 to more than 400 as of February 2022. We plan
            to add another ACS call site in Puerto Rico during 2022 that
            will accommodate an additional 400 employees. The expansion
            offers employment to Puerto Rico residents and allows for a
            significant increase in bilingual ACS employees to better serve
            taxpayers with limited English proficiency.
    Structural Changes to IRS Appropriations to Improve Mission Delivery
        The President's budget also proposes a change to the appropriations
    language that would allow Taxpayer Services and Enforcement funding to
    be used for certain associated support costs that are currently
    reserved for Operations Support funding. Currently, Taxpayer Services
    and Enforcement funding only pays for an employee's labor cost, not the
    cost to hire the employee nor the IT equipment and space needed to make
    them productive. There are significant benefits to this change: By
    including support costs, future IRS budgets would reflect the full cost
    of Taxpayer Services and Enforcement. The changes would also prompt IRS
    business units to be more efficient with their support costs because
    they would stand to directly benefit from savings.
        In addition to the IRS's fiscal year 2023 budget request, stable,
    multi-year funding for the IRS is necessary to facilitate the types of
    longer-term investments that the agency needs to make to adequately
    serve the American people and enforce the tax laws.
        legislative proposals in the president's fiscal year 2023 budget
        Along with the funding requested in the President's fiscal year
    2023 budget request, we are also asking for Congress' help
    legislatively in several important areas that would improve tax
    administration, including the following:

      --Information reporting by financial institutions and digital asset
            brokers. Over time, the U.S. has established a broad network of
            information exchange relationships with other jurisdictions
            based on established international standards. The information
            obtained through those relationships has been central to recent
            successful IRS enforcement efforts against offshore tax
            evasion. The ability to exchange information reciprocally is
            particularly important in connection with the implementation of
            the Foreign Account Tax Compliance Act (FATCA). Currently,
            however, the U.S. provides less information to foreign
            governments than we receive from them. The proposal would
            expand reporting by financial institutions and digital asset
            brokers in a number of ways--for example, by requiring
            financial institutions to report the account balance for all
            financial accounts maintained at a U.S. office and held by
            foreign persons. These new reporting requirements would enable
            the IRS to provide equivalent levels of information to
            cooperative foreign governments in appropriate circumstances to
            support their efforts to address tax evasion by their
            residents. The proposal would be effective for returns to be
            filed after December 31, 2023.
      --Require reporting by certain taxpayers on foreign digital asset
            accounts. Section 6038D(b) of the Internal Revenue Code
            contains an annual reporting requirement for individuals in
            regard to two categories of foreign financial assets, but there
            is no reporting requirement under this section for digital
            assets. Against this backdrop, tax compliance and enforcement
            with respect to digital assets is a rapidly growing problem.
            The global nature of the digital assets market offers
            opportunities for U.S. taxpayers to conceal assets and taxable
            income by using offshore digital asset exchanges and wallet
            providers. The proposal would amend section 6038D(b) to require
            reporting with respect to a new third category of asset: that
            is, any account that holds digital assets maintained by a
            foreign digital asset exchange or other foreign digital asset
            service provider. Reporting would be required only for
            taxpayers that hold an aggregate value of all three categories
            of assets in excess of $50,000. The proposal would be effective
            for returns required to be filed after December 31, 2022.
      --Extend the statute of limitations for certain tax assessments.
            Section 6501 of the Internal Revenue Code generally requires
            the IRS to assess a tax within 3 years after the filing of a
            return. But for complex audits in the largest cases, critical
            issues may not be identified until late in the process of an
            examination, and in many cases these issues cannot be pursued
            further due to time and resource constraints. The proposal
            would amend section 6501 to extend the 3-year statute of
            limitations to 6 years if a taxpayer omits from gross income
            more than $100,000,000 on a return. This change would give the
            IRS enhanced agility and flexibility in evaluating and staffing
            its case inventory and appropriately allocating its limited
            enforcement resources.
      --Increase oversight of paid tax return preparers. Paid tax return
            preparers have an important role in tax administration because
            they assist taxpayers in complying with their obligations under
            the tax laws. The proposal would amend Title 31, U.S. Code
            (Money and Finance) to provide the Secretary with explicit
            authority to regulate all paid preparers of Federal tax
            returns, including by establishing mandatory minimum competency
            standards. The proposal would be effective on the date of
            enactment.
      --Expand and increase penalties for return preparation and e-filing.
            Inappropriate behavior by paid tax return preparers harms
            taxpayers through the filing of inaccurate returns, erroneous
            refunds and credits and personal tax return noncompliance. Tax
            return preparer misconduct continues, in part, because the
            amounts of the penalties under current law do not adequately
            promote voluntary compliance. The proposal would increase the
            amount of the tax penalties that apply to paid tax return
            preparers for willful, reckless or unreasonable
            understatements, as well as for forms of noncompliance that do
            not involve an understatement of tax.
      --Expand authority to require electronic filing for forms and
            returns. Under this proposal, electronic filing would be
            required for returns filed by taxpayers reporting larger
            amounts or that are complex business entities, including: (1)
            income tax returns of individuals with gross income of $400,000
            or more; (2) income, estate, or gift tax returns of all related
            individuals, eStates, and trusts with assets or gross income of
            $400,000 or more in any of the three preceding years; (3)
            partnership returns for partnerships with assets or any item of
            income of more than $10,000,000 in any of the three preceding
            years; (4) partnership returns for partnerships with more than
            10 partners; (5) returns of real estate investment trusts, real
            estate mortgage investment conduits, regulated investment
            companies and all insurance companies; and (6) corporate
            returns for corporations with $10,000,000 or more in assets or
            more than 10 shareholders. Further, electronic filing would be
            required for the following forms: (1) Forms 8918, ``Material
            Advisor Disclosure Statement"; (2) Forms 8886, ``Reportable
            Transaction Disclosure Statement"; (3) Forms 1042, ``Annual
            Withholding Tax Return for U.S. Source Income of Foreign
            Persons"; (4) Forms 8038-CP, ``Return for Credit Payments to
            Issuers of Qualified Bonds"; and (5) Forms 8300, ``Report of
            Cash Payments Over $10,000 Received in a Trade or Business.''
            Return preparers that expect to prepare more than 10
            corporation income tax returns or partnership returns would be
            required to file such returns electronically. The Secretary
            would also be authorized to determine which additional returns,
            statements, and other documents must be filed in electronic
            form in order to ensure the efficient administration of the
            internal revenue laws without regard to the number of returns
            that a person files during a year.
      --Improve reporting for payments subject to backup withholding. The
            proposal would treat all information returns subject to backup
            withholding similarly. Specifically, the IRS would be permitted
            to require payees of any reportable payments to furnish their
            TINs to payors under penalty of perjury. The proposal would be
            effective for payments made after December 31, 2021.
                                   conclusion
        Chairman Van Hollen, Ranking Member Hyde-Smith and Members of the
    Subcommittee, thank you again for the opportunity to update you on the
    filing season and IRS operations.
        We continue to balance multiple unprecedented demands, including
    continuing the filing season and work on important new tax provisions.
    We remain focused on numerous taxpayer-related issues, and we have
    pursued innovative ideas and processes not previously deployed by the
    IRS in an effort to make improvements to the current inventory and
    provide meaningful taxpayer services.
        The reality at the IRS is that we know we need to do better; we're
    committed to doing better, and we are trending in a positive direction.
    We appreciate your patience and understanding and the many expressions
    of gratitude we have received for the efforts of our employees, who
    have consistently stepped forward despite their own health and safety
    concerns. Our employees are doing everything they can. But we need
    Congress to help us by providing adequate resources and a sustained,
    multiyear investment in the agency.
        I continue to be extremely proud of our workforce and their
    dedication to helping American taxpayers fulfill their tax
    responsibilities and resolve tax issues.

        Senator Van Hollen. Thank you. Thank you, Mr. Commissioner.
    I think we will do 6-minute rounds, and we may have more than
    one round. I don't know if other Members of the Committee will
    be joining us at this point or not. And I want to start my
    first round of questions, focused on the backlog and customer
    service issues.
        So Mr. Commissioner, you and I were talking a little bit.
    Can I confirm that it is your goal to eliminate the backlog by
    the end of this calendar year?
        Commissioner Rettig. It is my commitment to you,
    individually and as Commissioner of the Internal Revenue
    Service, for the IRS to eliminate the backlog, and you will
    hear us use and see us use in print is ``get healthy,'' which
    means through the eyes of the taxpayer, doing what they expect
    us to do by the end of this year.
        Senator Van Hollen. Got it. And one of the tools we gave
    you, in the last session, was Direct Hire Authority. I know you
    are using that, right?
        Commissioner Rettig. Absolutely. Congress rescued us. There
    is no other way for me to say that, with Direct Hiring
    Authority. It was part of the Omnibus budget, March 15. On
    March 16, we started with job fairs at our three big processing
    centers. For the last 2 weeks of March we went out on the
    ground, held job fairs and they have been extraordinarily
    successful. We are looking to hire 5,000 people this year and--
    5,000 people next year, for a total of 10,000.
        To give you an example we went to the three processing
    centers, Ogden, Utah; Kansas City, Missouri, and; Austin,
    Texas. We went into Austin, Texas and we had 500 people show up
    with resumes, meaning their package is complete. We made 500
    offers on the spot. We have about a 93 percent offer rate to
    people who show up at our job fairs on the spot.
        We are also doing virtual job fairs. And in the next 30
    days, we are doing another round of job fairs at these same
    locations. They have been very successful. They have received a
    lot of local press, in a good way. The government is coming in
    and giving jobs, Federal jobs, to the community.
        Without the Direct Hiring Authority that we got in the
    budget I would not be able to report anything really positive.
    We cannot hire people at $15- to $17 an hour in these
    communities when we are competing with Amazon. We are competing
    with Target, that is $20 an hour. Walmart recently announced
    they are hiring 50,000 people. Walmart recently announced truck
    driver positions at $110,000 a year, and we come in $15 an hour
    Federal jobs. So we need to be able to hire on the spot.
        Senator Van Hollen. Good. Well, thank you for making use of
    that authority. And now just in terms of the, sort of the--and
    I know you have made some progress already, but the mountain
    that we need to tackle in order to achieve your goal, just so
    we are on the same page, and just quick yes or no answers, if
    you can, to confirm the numbers I have got. I am looking at a
    status of unopened mail and backlog inventory issued April 26.
    So it should be pretty current.
        Paper returns waiting to be processed, the calendar year
    2021, over 2.5 million; those received in calendar year 2022,
    just over 8.9 million, for a total of 11.5-plus million, is
    that the system----
        Commissioner Rettig. The paper returns for 2021, as of
    April 21, 2022, are at 1.8 million, received in 2022 are 4
    million, which somebody might dispute whether those were
    backlogged or not. We just concluded the April 18 filing date.
        Senator Van Hollen. Okay.
        Commissioner Rettig. The total paper returns that we are
    sitting on as of April 21, 2022 is 5.8 million.
        Senator Van Hollen. All right, let me stop you there. So
    whoever, just whatever information I have got here is obviously
    incorrect, I thought it came from the IRS but--I guess I have
    got some of the----
        Commissioner Rettig: I am reading the individual returns.
        Senator Van Hollen. Yes. Yes.
        Commissioner Rettig. And if you went to the right, you
    might be reading the total returns. It is the side with this--
    --
        Senator Van Hollen. Oh. I am sorry. You are right. I am
    reading--I am reading the total individual in business; you are
    right. I have got--I guess the document that I have got, Status
    of Unopened Mail and Backlog Inventory, issued April 26th,
    2022, is the most up-to-date information?
        Commissioner Rettig. Correct.
        Senator Van Hollen. Yes. I got it. Thank you. So, you know,
    one of the frustrations, and I know you understand this, that a
    lot of taxpayers have, is they, if they get a Notice of
    Deficiency, and they want to get somebody on the line to
    explain it--let me modify that.
        They want to get in contact with somebody quickly, and as
    you well know, given the volume of phone calls that come in
    versus the operators and folks you have got answering them, it
    is really hard to get through by phone. So online,
    communication seems to be the answer. That is the way most
    people do a lot of business in the United States. I mean, you
    can communicate with your bank. You can communicate with other
    entities that way. When will a taxpayer be able to communicate,
    in real time, with someone at the IRS online?
        Commissioner Rettig. There are different levels of
    communication that we have online, but taxpayers can create a
    taxpayer online account, that they can go in and monitor their
    account, and they can change information. They can, on their
    own, without interacting with anybody at the IRS, enter into an
    installment payment arrangement if they owe less than $50,000.
        But we are also mindful that we live in a country where
    there are tens of millions of people who do not have broadband
    access, who cannot go online, who don't have a smartphone. So,
    it is critical that our resources also be deployed in our
    Taxpayer Assistance Centers, which are really our frontline
    retail operations, where somebody can walk in--we prefer by
    appointment--but even unannounced as well as telephone access.
        The driver of the inventories is, for the most part, that
    people who answer the phones also are responsible for
    conducting resolution of paper that we are left with. So, we
    have made various decisions. We leave people on the phones, and
    then in theory, when the phone volume would come down, they
    would move to the paper.
        We have not had either of those volumes come down in 2
    years. We currently have moved people into the paper
    processing, trying to answer the phones the best we can trying
    to get people to interact with us, it is just----
        Senator Van Hollen. Right, and just--thank you for giving
    me your commitment and goal in terms of an-end-of-year deadline
    for the backlog. Can you give us a sense of when I, as a
    customer, as a, you know, one of my constituents who has a
    question for the IRS about, you know, their tax return, when
    they are going to be able to communicate online with the IRS?
        Commissioner Rettig. It depends upon what they are looking
    for, but we get tens of millions of online contacts currently,
    and those operate seamlessly and successfully. Where we really
    want to be, we are about 5 years from being what the Agency
    should be in terms of the ability of the folks who want to just
    interact with us online, to do everything with us online, with
    the exception of filing a return.
        We don't have pre-populated returns, but otherwise to
    provide and interact with us online, I would say that we are
    about 5 years away from that. It could be a little more,
    depends upon the funding that we get, and it depends upon
    technologies that develop.
        Senator Van Hollen. Thank you. Ranking Member Hyde-Smith.
        Senator Hyde-Smith. Thank you very much. Mr. Commissioner,
    we have heard a lot about the historically high backlog, and we
    have discussed your recent pledge that the backlog would be
    resolved by the end of 2022, in large part, due to the IRS'
    ambitious plan to onboard thousands of new employees. How is
    the challenging labor market affecting that hiring plan for
    you?
        Commissioner Rettig. Well, thanks to Congress, we got
    Direct Hiring Authority, so we are in a different world now
    than we were before March 15 when we received that authority.
    And what we are talking about is onboarding folks at our
    Submission Processing and our Accounts Management facilities
    around the country. Submission Processing is dealing with
    paper, whether that is mail or paper returns; Accounts
    Management is resolving a taxpayer issue that they may have
    with respect to an already-filed return.
        We have over 2,500 people coming on board, but we have also
    done a lot of other things that we have not previously done, to
    bring these volumes down. And simply, the way I summarize it is
    to say, we are trending in a good direction. I am comfortable
    sitting here today telling you that we are committed to--and I
    am committed to--being healthy by the end of this year.
        But obviously, not to play lawyer games, but another COVID
    or unforeseen circumstances could interrupt that. But where we
    are today, I am committed to doing that. If we see unforeseen
    circumstances, some type of a surge, whether it is COVID, or
    some other non-COVID-related issue that impacts us, I would
    come back up and let you know that I need to adjust.
        This is my reputation with you, our reputation with you,
    and we want you to see what we are doing. We have also engaged
    contractors to do what contractors could do, about 2,500 people
    coming in. I think it is well known, it has been played up a
    lot that we did surge teams. We brought back employees who have
    been in these two lanes within the last 2 years. We brought
    them back in to do that processing.
        And now we are going for the employees who left within 3 or
    4 years to bring more back in, and all the efforts that we have
    made show that we are trending in a good direction. And
    similarly, with respect to the current filing season, which
    just concluded - without extensions--on April 18.
        We did a lot of messaging and have lessons learned from
    filing season 2021 to filing season 2022, which we are in
    currently. We did a lot of messaging encouraging people to file
    electronically, file an accurate return, file for direct
    deposit. There was one large transmitter of returns for people
    that I heard. I am a tax guy, I came in from the tax
    community--and I heard in a roundabout way that one large
    transmitter was telling its franchisees to start submitting
    returns on January 4.
        I reached out and I said, do not submit returns on January
    4. You need to reconcile the Advanced Child Tax Credits, and
    the Economic Impact Payment that these folks receive before a
    return is filed. We sent out 200 million letters telling people
    what they got for an EIP. We sent out 57 million letters
    telling people who are under the Advanced Child Tax Credit. We
    encourage people to look into their online account and verify
    those amounts, because accurate, electronically filed returns
    where people requested a direct deposit, those are going
    seamlessly.
        Senator Hyde-Smith. Okay. And about the employees that you
    are bringing in, the on board, how many of those you are going
    to have to train? Because I know it can take several weeks to
    train people once you get them there. But you are saying the
    ones you are bringing on are basically already trained?
        Commissioner Rettig. No.
        Senator Hyde-Smith. The fact that they have been out of the
    system?
        Commissioner Rettig. No. Let me give you sort of a summary.
    And then if you want me to back it up and give you the
    individual information that. I think you might be inquiring
    about. All these efforts, when are you going to see an impact
    with trained people in these rooms, processing this
    information? It is going to be in the June range. But we have
    figured that in. When I am telling you we will be current by
    the end of this year, we know the process.
        And some of the people that we are onboarding are going to
    need 2 or 3 days to train. Remember, we are opening envelopes.
    We have people who open envelopes. We have people who monitor
    electronic accounts. It is a broad range of talent that we are
    looking at.
        But when I tell you the end of the year, it is on the
    assumption that these people are in, on board, in the June
    range, and trained. It doesn't help us to put an untrained
    person in these facilities.
        Senator Hyde-Smith. But our information is telling us it
    could be 8 weeks to 37 weeks to properly get someone trained.
        Commissioner Rettig. Not at all. I don't know who told you
    37 weeks. I would like to meet with that person.
        Senator Hyde-Smith. So you, when you come in by June, I
    mean, this is being May.
        Commissioner Rettig. Yes.
        Senator Hyde-Smith. You are going to have all of these
    employees already trained?
        Commissioner Rettig. We don't have 37 weeks left in this
    year, I believe.
        Senator Hyde-Smith. So they will all be trained by June? Or
    is that realistic, or?
        Commissioner Rettig. That is where we are with the people
    coming in. If the people continue to come in at the rates that
    they are coming in, the June range, having our people in the
    seats, trained and handling it, is realistic.
        Senator Hyde-Smith. So you can have them--everybody trained
    in a month?
        Commissioner Rettig. Keep in mind, when we do these surge
    teams, these are already trained people that are just getting
    refreshed--that is a matter of days.
        Senator Hyde-Smith. And that is the majority of the ones
    coming in, there is not newly hired?
        Commissioner Rettig. There is both.
        Senator Hyde-Smith. That has never worked for the IRS
    before?
        Commissioner Rettig. There is both. We are doing every
    lane.
        Senator Hyde-Smith. But you feel confident even those who
    have never worked for the IRS before you can have them trained
    by June.
        Commissioner Rettig. The person who has never worked for
    the IRS before is not going to on board and adjust some
    taxpayer's account because they reported unemployment
    compensation as non-taxable when it wasn't. That would be a
    different category. We have a broad category of people that we
    are bringing in for different levels of work.
        And if I may? If it is different, you will hear from me.
        Senator Hyde-Smith. Okay. It is just an aggressive plan for
    hiring people, and have them all trained and ready to roll.
        Commissioner Rettig. Both of you and this country deserve
    an aggressive plan. We have done a lot of innovative things
    behind the scenes to make things work. We have used our ARP and
    other money for technology that radically improved our ability
    to process certain things, that in a different world we
    probably wouldn't have been able to do, or had the support to
    do it.
        We have also considered things that we did not implement
    because it didn't look like it was going to get us to where we
    needed to be or was more complex. We cannot add complexity when
    we are in the situation we are in.
        I think we have done as each of you would do if you were in
    this seat. We entertained and continue to entertain everything
    that we can to get this right. And we are not done being
    innovative where it will be helpful. We can't be innovative if
    it shorts us on what we are trying to do.
        Senator Hyde-Smith. Thank you.
        Commissioner Rettig. Thank you.
        Senator Van Hollen. Thank you. Thank you, Mr. Commissioner.
    I have one final question on the issue of, you know, the
    backlog and taxpayer service, and then I am going to turn to
    enforcement issues.
        Paper returns, I know your life at the IRS would be made
    much easier if more taxpayers filed electronically, but we also
    know that we have to keep open the option for people filing
    paper returns. If you look at the backlog, as you have
    indicated, it is essentially those paper returns.
        And I am sure you are aware that the Taxpayer Advocate has
    said that, quote, ``Paper is the IRS' kryptonite, and the IRS
    is buried in it.'' And the Taxpayer Advocate has recommended
    that the IRS implement the 2D bar coding, and/or the optical
    character recognition technology to speed up the processing of
    paper returns.
        What plans, if any, do you have to implement this new
    technology that the Taxpayer Advocate argues would speed up the
    process?
        Commissioner Rettig. The technology is not new. We actually
    requested funding in our Congressional Budget Justification in
    2013, and then again in 2014, again in 2015, again in 2016,
    again in 2017, for 2D bar-coding, and we never got the funding.
    And so in 2018 the agency shifted to an emphasis on electronic
    filing.
        We are currently running about 95-96 percent--for the
    current filing season--of the individual returns that we are
    receiving e-filed. There are some returns and some forms that
    cannot be electronically filed. We need to get those so the
    taxpayers have the ability to e-file those. That is a
    technology draw. And we move our resources to areas that are
    there.
        But we are looking at this, and you will see our response
    to the Taxpayer Advocate Directive that was issued. This is not
    new, and it is not new for the agency.
        Senator Van Hollen. Right. Let me just ask you, because I
    agree, and I do appreciate your efforts to move people toward
    electronic filing for the reasons we have discussed. But do you
    agree with the Taxpayer Advocate's recommendations? I
    understand that you have asked for it in past budget requests,
    this new technology, and you haven't received it.
        I don't know if it is in your current request. I don't
    believe it is. And so I guess my question is: What is your
    current assessment of the Taxpayer Advocate's recommendation?
        Commissioner Rettig. I appreciate the efforts of the
    Taxpayer Advocate, and you will see us move in a direction that
    is expansive in this regard.
        Senator Van Hollen. In terms of deploying these
    technologies?
        Commissioner Rettig. It may not be these technologies. If
    we were asking for it in 2013, we are 10 years, essentially,
    technology wise beyond that.
        Senator Van Hollen. Right. Okay. So put aside the specific
    technologies, but I guess the question is, you would be looking
    for technologies that would allow you to convert a paper return
    much more quickly, to be processed rather than having to sort
    of keypunch every item; is that right?
        Commissioner Rettig. Absolutely.
        Senator Van Hollen. Okay.
        Commissioner Rettig. We have a digitalization office that
    is not only doing this--which is outward facing--we are doing
    it inward-facing too to help our employees.
        Senator Van Hollen. Got it.
        Commissioner Rettig. You know, transferring information.
        Senator Van Hollen. Good. Let me turn to enforcement, and
    you have spoken eloquently about the tax gap, and the need to
    get at it. Some have argued that, you know, we should not
    provide you with more authority to close the tax gap. And
    again, I remind people, this is collecting taxes that are doing
    owing; that we should not give you additional tools to do that
    because you are going to go after the little guy, you are going
    to go after small businesses. Is that in your intention, and
    that if you were given these resources what would you do? And
    what would the impact be?
        Commissioner Rettig. I note it is National Small Business
    Week too. I think the Committee should note that I was born and
    raised into a small business. I'm very respectful, and
    understand that small businesses, in my mind, are the backbone
    of this country. The folks that might not have another
    opportunity, employment-wise, tend to open a small business. So
    the respect there is huge.
        The resources that we are looking at when we talk about
    enforcement are at the high-end level. It is the big, and
    super-big corporations. We have cases where we have $10- $15
    billion of tax at issue. We get outgunned in those routinely,
    by the professionals they are able to hire, and the resources
    we are able to bring in, that it can come down.
        And the statistic I use frequently is: last year we had
    over 4 million partnership returns filed. I have 6,500
    frontline Revenue agents all in, and they are all currently,
    and would remain so, dedicated to the high end, most complex
    returns that we receive.
        And so the concept that we would expand examination
    resources to small businesses, or lower-income people, and the
    administration has called for nothing under $400,000. $400,000,
    quite frankly, if you look at where we are, it would be nothing
    under a number significantly greater than $400,000. Typically,
    for taxpayers with up to about a million dollars, we have
    information reporting; we have either W-2s or 1099s.
        When you go to a million dollars plus, you are talking
    about entrepreneurs that use multiple-layered entities, and
    that is where we should be. And it is where we are currently.
        Senator Van Hollen. Thank you. No, I appreciate that
    commitment. I just wanted to underscore that point. Let me ask
    you about conservation easements. These are one mechanism that
    are, if it is used for very wealthy people to escape their tax
    obligations. Can you talk about that particular device?
        Commissioner Rettig. There are criminal indictments in the
    conservation easement cases. There are cases in the United
    States Tax Court, civil cases, where we have amended petitions
    to assert civil fraud penalties that should be indicative of
    what the IRS and Department of Justice believe about the
    syndicated easements.
        We support the intent of Congress with respect to the
    purpose of conservation easements. The syndicated easements are
    different. They have been categorized as an abusive
    transaction. If you read any of the tax court opinions that are
    out there, you will see why, and notwithstanding, we have put a
    lot of resources into this space, from a counsel perspective,
    appeals, and exam perspective.
        We have listed this transaction in 2016, giving people
    notice that we believe this was an abusive transaction and
    notwithstanding our efforts, we have not had an impact on
    essentially slowing the volume of these transactions that we
    receive currently. We need Congressional help. We need a
    statute to help us curb this activity.
        Senator Van Hollen. Well, thank you for that distinction
    between legitimate and important uses of conservation
    easements, and the abuses that you mentioned.
        I do have some additional questions on enforcement, but my
    time is up with this round. And I will turn it again to the
    Ranking Member.
        Senator Hyde-Smith. Thank you, Mr. Chairman.
        You had mentioned the 2D barcodes on tax forms, and the
    efficiencies that are associated with those things. Can you
    speak about the IRS' progress in implementing that on those tax
    form bar codes? Wouldn't the associated cost of implementing
    these--this technology be largely offset by the savings from no
    longer having to pay employees to manually enter this data?
        Commissioner Rettig. No, ma'am. 2D bar coding still
    requires us to receive a paper return that needs to be opened
    and processed. It is a paper return concept. Also with respect
    to transmitters and other returns, there is not a system that
    allows the IRS to seamlessly take the equivalent of a Xerox
    copy or a fax kind of a concept, that drops it into our system
    seamlessly, and all the numbers drop in.
        We still have a lot of manual provisions that we require,
    but we did seek funding to get into this arena. And we are
    going into the direction of being able to automate paper
    returns. As you indicate, it would help from a staffing
    perspective, it would help from a cost perspective, and I think
    it would help across the board in terms of shortening the tail
    on when we can get these returns processed, and get refunds
    out.
        Senator Hyde-Smith. But it wouldn't offset the cost that
    much is what you are saying, although you get the technology?
        Commissioner Rettig. There is not a perfect system that the
    IRS can buy today without a significant cost, both in terms of
    human cost and resources to get us to where we need to be. But
    we are definitely going in that direction.
        Senator Hyde-Smith. Okay. The IRS recently ended the
    practice of requiring individuals to provide biometric data in
    order to create an online account, and the IRS changes course
    by giving taxpayers the option to verify their identity through
    the biometric verification, or during a live, virtual
    interview.
        What level of confidence do you have that the biometric
    data that has already been provided, or will be provided, is
    protected?
        Commissioner Rettig. The biometric data that is provided to
    ID.me, and our memorandum of understanding, the agreement with
    ID.me,-- I think Congress has copies of those agreements--the
    information that somebody would provide currently is destroyed
    within 24 hours.
        Information that was provided prior to the time that we
    shifted was to be destroyed within 30 days. The only pieces
    that are not are where there--are indications of identity
    fraud, and there is considerable amount of identity fraud
    associated in the taxpayer world. We shifted to providing that
    option also with the recognition that we are looking at other
    options to provide taxpayers. And there have been a lot of
    questions as to why the IRS went to ID.me.
        We were receiving about a million visits a week, of people
    trying to create online accounts. The system we had before had
    about a 40 percent authentication rate. Taxpayers who would try
    to authenticate that, yes, this is Chuck Rettig. About 60
    percent were not getting into the system, and had to walk into
    a site, or had to call in, which when we are on our heels from
    an inventory perspective, is not a meaningful thing for the
    people in this country. They deserve better.
        With ID.me, the authentication rate is far in excess of 70
    percent, both on the biometrics part, which is facial
    recognition, but taxpayers have the alternative to get online
    with a live ID.me person. On the facial recognition, that is
    offered in eight different languages; the in-person is offered
    in more than thirty different languages.
        And I think you are aware that we have moved significantly
    from a service perspective, into our multilingual efforts have
    really been there. The last part is Login.gov can handle about
    less than 30 transactions per second. We need more, about 1,500
    transactions per second. We need a level two authentication
    that once this person is in, this is the person.
        We are looking at other alternatives, but know, as the
    level of authentication may come down, people that don't want
    facial recognition or the in-person, what we were hoping to get
    to, and I think the people in the country would help us to get
    to is, once I know this is you, that is your account, I can
    open up a whole list of services that you can do automatically
    online.
        When that authentication level might be different, we have
    to pull back because of the levels of fraud that we encounter.
    And some people think fraud is somebody sitting in their
    backyard, but we are up against nation states. And I think you
    are aware that we get about a 1.8 billion cyber attacks per
    year. And so, to protect the data that people trust us with, we
    have to be at a higher authentication level, or not have so
    many options available.
        And we will explain to you as we get there. These are some
    of the many difficult choices that have to be made, because I
    think, collectively, we all want the person who is capable of
    going online to be able to do 100 percent of their interactions
    with the IRS, online, seamlessly. If we open it up for one, we
    end up opening it up for all. So those are some of the
    decisions that have to be made.
        Senator Hyde-Smith. Okay. Let us talk about the dollar
    figure. Do you know how much money has been spent to date on
    the IRS contract with the ID.me, and what is the status of that
    contract?
        Commissioner Rettig. I could get you the information on
    that.
        Senator Hyde-Smith. You don't have a----
        Commissioner Rettig. I think the contract provided for up
    to something like $88 million, if I am not mistaken, but I can
    get you the information within a day.
        Senator Hyde-Smith. And you had mentioned the Login.gov.
        Commissioner Rettig. Mm-hmm.
        Senator Hyde-Smith. Of the fiscal year 2023 request seeks
    $27 million for user authentication. And how does the IRS plan
    to spend this increase? Will this funding be used to support
    that, the Login.gov?
        Commissioner Rettig. Well, we are----
        Senator Hyde-Smith. On the 2023 request?
        Commissioner Rettig. We are where we are with ID.me. There
    is still facial recognition with an option for the interview.
    We actually are working with Login.gov to try to get their
    transaction-per-second rate up, and to try to get their
    authentication level up to a NIST Standard 2, IAL2 I think is
    the actual terminology. It is a higher authentication.
        And I believe we have the best IT people on the planet, and
    I have asked our people to coordinate with Login.gov. It is not
    an IRS agency, it is another agency.
        Senator Hyde-Smith. Mm-hmm.
        Commissioner Rettig. But it would benefit all agencies. And
    we should bring the best talent there. And if they get to the
    point, I think that we have already indicated that we would
    shift. You would want us to shift, and I am not saying you
    personally, but people of the country want us to have the best
    system, seamlessly helping the people who want to go in that
    lane, and provide as many services as we can. And that is our
    desire as well.
        Senator Hyde-mith. Thank you.
        Senator Van Hollen. Thank you. And just to follow up on
    that. I mean, I understand the authentication challenges you
    have got, given the fraud situation. I do appreciate your
    moving to a volunteer system when it comes to facial
    recognition, but the more people can sort of volunteer into
    your authentication systems, you know, the better off the
    overall process, I think, will be.
        I want to go back to a couple of enforcement issues,
    because, we saw from a recent Treasury Department Report that
    one of the mechanisms that some employers--and I just want to
    address ``some''--use to avoid paying their payroll taxes that
    are due owing, it is employee misclassification.
        They found that, you know, workers being misclassified as
    independent contractors, contributed to a significant tax gap,
    and avoidance of paying the Social Security, Medicare, and
    other payroll taxes.
        What role, if any, do you believe the IRS has in
    addressing, employee misclassification?
        Commissioner Rettig. Well, certainly, people categorized as
    an employee receive wages through a W-2, that is the
    information reporting to the IRS that is withholding the
    accuracy in filing for those folks is typically around 99
    percent. When you get into a lack of withholding, and maybe a
    lack of 1099 type of thing, which gets you into the independent
    contractor status, it drops down below 50 percent, sometimes
    significantly below 50 percent.
        There is a significant issue here, because these are issues
    I was aware of on the outside. An employer would like to
    categorize a worker as a non-employee, so they don't have to
    pay the employer's portion of the employment tax regime that we
    have. So it is less expensive for the employer to do that.
        They might not be providing certain insurance, et cetera.
    But the person might actually be an independent contractor, and
    so that is a determination that the IRS needs to make, through
    a facts and circumstances test.
        There is a form that people can file, the SS-8, and on that
    form they indicate why they believe somebody is or is not, or a
    category of employees are or are not, an employee, and we don't
    get a lot of those forms each year. My reaction is, that
    employers don't want to hear that somebody is categorized as an
    employee, and they would probably rather take the risk.
        But to give you some numbers, in fiscal year 2021, we
    received 2,387 SS-8s, which is the request for a determination
    of employee status. We closed 1,953 of those with an average
    cycle time of about 240 days, which is exactly the cycle time
    we had in fiscal year 2018, meaning that those are not
    backlogged. But quite frankly, in a country the size that we
    have, and the number of workers that we have 2,387 for a fiscal
    year.
        Senator Van Hollen. Right. So I mean, but right now, and as
    I understand it, and the only mechanism, at least via the IRS,
    is this voluntary, mechanism of filing an SS-8 Form. I mean,
    you don't take other steps to try to resolve this; do you?
        Commissioner Rettig. Well, we do. I get all the statistics
    around the country, probably a day doesn't go by that I read
    about somebody either being sentenced or convicted for
    employment tax-related fraud. And all of those start in-house
    with our IRS Criminal Investigation Division.
        We are very aggressive in that arena. Essentially, in that
    case, if I withhold from an employee, withhold the payroll that
    I am supposed to--the taxes I am supposed to pay over to the
    Government, but I don't, and I go and buy a motor home or
    whatever, and that employee files a tax return, the government
    gives that employee credit for the amounts that I stole.
        So, we are hugely aggressive in those arenas. And once a
    person gets indicted, sentenced, and et cetera, those cases
    become public, and they hit the newspapers in the local
    communities and, typically, these are the cases where you do
    see somebody withheld X-dollars, and they have the trips, the
    motor homes, the houses.
        Senator Van Hollen. Right, but you are--these are the wage
    theft cases you are referring to.
        Commissioner Rettig. Yes.
        Senator Van Hollen. I am referring also, though, to these
    employee misclassifications in it.
        Commissioner Rettig. There are some----
        Senator Van Hollen. And I know they are related. Let me
    move on quickly, because I do want to ask you about the
    provisions in current law that says that if you want to be a
    government contractor, you have to be up to date on your tax
    payments. And I know that we have been working with you, and I
    know the IRS has initiative to be able to quickly determine
    whether somebody who is one of your contractors at the IRS,
    meets the test, that they have made their tax payments on time.
        But we want to extend that provision government-wide, and
    facilitate other agencies of being able to quickly determine
    whether or not a proposed government contractor that they would
    do business with, has met these requirements. Where does
    everything--where do we stand on that?
        Commissioner Rettig. Yes as you know, there is a provision,
    and Congress gave us the task to do it but there is not a
    waiver under 6103, which makes every taxpayer's information
    private and confidential. We created what we believed was a
    workaround that does not violate 6103, where a company could,
    essentially, come in and get a certificate from us. And we
    would issue a certificate that they would then take to the
    agency where they want to contract. And it would say: This
    person is current with their tax obligations.
        We are still talking to certain other agencies, but there
    are other agencies that believe that is too much of a burden on
    the taxpayer who is doing a government contract, to actually
    have to go into the system, they can do this automatically, and
    get this certification.
        And we cannot violate 6103, so we are working with the
    other agencies. You know, some Congressional assistance in this
    space I think would help get through the log jam. This needs to
    happen. I mean, I think we all would agree that somebody
    contracted with the United States Government should not be tax
    delinquent.
        Senator Van Hollen. Yes. And, we appreciate the efforts you
    are----
        Commissioner Rettig. We actually do it ourselves for our
    own contractors.
        Senator Van Hollen. Right, I know--I know you are dealing
    with that.
        Commissioner Rettig. And it is effective, so yes.
        Senator Van Hollen. We just want to make sure that the
    benefit of your expertise is shared with the rest of the
    Federal Government.
        And Ranking Member.
        Senator Hyde-Smith. Thank you so much. And going back to
    the issues that my office gets calls on. You know, the high
    backlog, all of it. And you know, the call-answer rate that is
    at 20 percent now, and the customers having to wait an average
    of 28 minutes to speak to someone. Your budget request includes
    a $3.4 billion ask for its taxpayers' services appropriation.
    How will this money be used differently than in the past to
    address these customer service failures?
        And one of the things is: ``Where's My Refund'' tool that
    we hear about. So what is going to be different to address them
    in spending this money?
        Commissioner Rettig. One, I wouldn't say it is a failure.
    We did not get in the situation that we are in because of any
    issue for IRS employees' desire and dedication. We got here
    with changed legislation on these when we had already done our
    technology. During tax season confusion for taxpayers on the
    exclusion of the $10,200, et cetera, et cetera. And the
    inability of taxpayers to reconcile, which we have done better
    this year, and we sent out these letters too.
        We have done the best that we could with what we have. But
    with taxpayer service, what happens is that we have buckets,
    and part of this provision asks for the ability to change the
    buckets. I am where you are on what is referred to as an IAT,
    Inter Account Transfer, not taking money from enforcement every
    year and supporting taxpayer service or operations support.
        If Congress tells us it should be in that lane, that
    bucket, we have four distinct buckets: Taxpayer service,
    Operations Support, Modernization, and Enforcement, and
    Congress tells it should be there. We have an IAT that allows
    us to transfer, I think, up to 5 percent between those, but we
    need to be respectful to that.
        In the taxpayer service lane, what is going to be
    different? Where are we going to go? One, if we get our levels
    current, the taxpayer service funds combined with the
    modernization funds, this year we added a customer call back to
    70 percent of our toll-free lines, which is the lines people
    call when they have an issue. And they get a call back within
    the same business day.
        When I heard it initially, I thought, okay, so we plugged
    something into the system. We had to redo our telephone
    infrastructure to be able to bring that into the system that we
    have.
        There are a lot more complexities to what we have than
    necessarily just plugging something in. But also adding people,
    we received phone calls at the rate of 1,500 per second at
    various points in time during the year. We receive 400 percent
    more phone calls this year than any other year.
        If the country gets back to normal - and we are not
    organizing ourselves for normal, we are organizing ourselves
    that we need to be providing the services that we should be
    providing in the environment that we are currently in--if we
    got 10,000 more employees, but these sort of COVID-related
    issues subsided, I need to find a place to put those 10,000
    employees inside the IRS, to be respectful for the funds that
    we use to hire the people. We are looking at all of that, and
    that is really what we are talking about.
        Bottom line, what you want us to do is to answer the
    phones, open the mail, have our Taxpayer Assistance Centers
    open. We have 358 Taxpayer Assistance Centers which are our
    frontline retail operations. Some of them are in malls; some
    are associated with other agencies.
        You want the ability of any American to walk in and ask a
    question of somebody at the IRS, and have that person be
    trained and capable of answering that question there, whether
    they go into the system or otherwise. So we need to fully staff
    our Taxpayer Assistance Centers, we need to train the people
    who are in those. We are a long way from that. Attrition is
    significant with us. So that is another avenue and there is a
    whole list of needs.
        We need to do better in every lane. I am sure every
    Commissioner has asked for what I have asked for--but I combine
    it with oversight. We are not here to spend money and not have
    people see how we are spending it, or moves that we are
    thinking and making. But the funding concepts for an agency
    that touches literally every American, there are significant
    issues to be able to operate the agency, to the extent that I
    think you all want, but also that every American deserves.
        We touch more Americans than anybody on the planet. And
    during the pandemic, let it be known that Congress called on
    us, not the VA, not Social Security, not some other agency, to
    distribute over $1.5 trillion during the pandemic in three
    rounds of Economic Impact Payments, two rounds of Form 1040
    refunds, and another $93 billion in Advanced Child Tax Credit
    payments, which were distributed over a 6-month period.
        We had to create the vehicles to do that during a pandemic
    and handle the filing season. We are in our third COVID filing
    season. That is where I come to.
        You know I am the end of the runway. It is not my choice to
    leave, but it is the statutory term, November 12, but the end
    of the runway is there.
        And you will hear from me throughout this year and next
    year. Employees of the IRS, they are dedicated, they want to do
    it. And we have all levels. I will close with this. I met a
    lady my first year, in Covington, 61 years with the Internal
    Revenue Service. She showed up every single day at 6:30 a.m. to
    open envelopes. And when I went up and said, hi, I am Chuck.
    She was crying. She was so proud to be there.
        That is the employees that we have. Our employees, we're
    the front line for the United States Government in touching
    taxpayers who lost a spouse, who lost a family member, who had
    somebody in the hospital. One of the issues on phones, people
    are saying, the average time, or the difficulty to pick up, but
    I encouraged our employees to stay on that call.
        If somebody called in on an EIP, or a tax issue, stay on
    that call, because every one of those calls flipped to: I lost
    my husband. I don't want our employees, being representative of
    the United States Government saying, I have got ten more calls
    I have got to go answer.
        I want our employees to be human and say you lost your
    husband. That must be hard and wind that call down. We do this
    thing, Talk Story, where on Zoom I meet with 100-150
    employees--it is scheduled for an hour, and the shortest one we
    have done is about two-and-a-half hours. And we do them weekly,
    all around the country. I talk to employees in Guam.
        And I see our employees get emotional when they tell me the
    stories they are getting from taxpayers, but know that it is
    IRS employees, that we are touching people in their homes
    suffering from COVID during the pandemic, and it is IRS
    employees that made these distributions. And Congress asked us
    to do so as rapidly as possible, three times.
        I have told our employees--don't correct me if I am wrong--
    but I have told our employees, Congress respects you. You only
    ask people once, twice, three times, four times when you know
    they can meet that challenge. And I am going to tell you today,
    and I will tell you after my term, our employees will meet that
    challenge.
        We have people on mandatory overtime. I have 6,000
    employees in mandatory overtime for far beyond what we should
    be asking these people to do. And I have 10,000 employees on
    authorized overtime. The reason I say ``far beyond'' is that at
    some point this creates morale issues.
        I am about ready to do a sort of tour to these campuses and
    go and sit with our employees, a thank you kind of a thing.
        I apologize for the long-winded response but we are proud
    of who we are, and we are going into communities. You are well
    aware of our initiatives. We are coming down into Mississippi.
    We went to Puerto Rico. No other agency is going into the
    communities we are going to. We are going to these communities;
    it is the right thing to do. We are not brick and mortar, we
    are not an institution, we are people helping people, but we
    are going to communities that have three and four generations
    unemployed, to bring in and train job skills. We are bringing
    Federal time----
        Senator Hyde-Smith. I am over my time limit.
        Commissioner Rettig. So am I. And I apologize.
        Senator Van Hollen. Mr. Commissioner, first of all, I
    appreciate your initiative in going into underserved
    communities, I know you have 10 million in the budget
    specifically for that purpose and, look forward to working with
    you as you implement that.
        I have one last question for you here, I will submit the
    others for the record, and then I will ask the Ranking Member
    if she has any final questions, and then we will wrap it up. So
    my final question relates to cryptocurrency, as you know, in
    the Bipartisan Infrastructure Bill that we passed last year, we
    had a provision to raise some funds by extending financial
    reporting requirements on brokers to include cryptocurrency
    transactions.
        I have heard estimates that the annual tax gap due to non-
    reporting of cryptocurrency gains is estimated at approximately
    $77 billion a year. My question to you Mr. Commissioner is:
    What steps have you taken to implement the provision from last
    year's bill? And how would you assess that figure I just gave
    you with respect to the tax gap in crypto transactions?
        Commissioner Rettig. Let me start by saying that the market
    cap for virtual currency fluctuates between $1.5- and $2.5
    trillion, depending upon if it is Wednesday, Thursday, or
    Friday. Last year there were $14 trillion in transactions in
    virtual currencies, if you do a GNP of the United States, of
    the world's GNP, we are somewhere between 30 and 40 percent of
    possibly $14 trillion in transactions.
        They are based on affidavits in John Doe summons cases, and
    we have done about five or six of these, where we have gone for
    the information, and we received information about taxpayers in
    certain exchanges that have indicia of U.S. contacts. So, we
    know there is a very significant compliance issue there.
        We need information reporting in the virtual currency
    space. We got FATCA as legislation, but we never got the
    funding to implement and modernize the systems to take care of
    the information that we get. It does not make sense to me to
    give us information reporting if we don't get the funding to
    put a system together to do that.
        You want it, and we want it, and we should not end up in
    the same place with virtual currencies. I think we have to have
    virtual currency reporting. We have to have the ability to use
    that information in a meaningful manner. And I am not saying,
    to be able to go after people. If we have the ability to match
    information, we will not go after people as much as we would go
    after unreported transactions.
        The people who report it don't need to hear from us, and we
    should be able to check that on our end before we send out a
    notice. So, it works both ways. Technology helps us know where
    not to go, as well as to know where to go.
        Senator Van Hollen. No, I appreciate that. I mean, this is
    not to prevent innovation in this space. This is, as you say,
    is simply to be able to, you know, collect gains that have been
    made that--that should be taxed like other gains in the
    economy.
        Senator Hyde-Smith, any final questions?
        Senator Hyde-Smith. Yes. I do have a few more. And because
    I have a few more, if you could be brief with your answers----
        Commissioner Rettig. And I will try.
        Senator Hyde-Smith [continuing]. That will be very much
    appreciated.
        Commissioner Rettig. And I apologize for--yes.
        Senator Hyde-Smith. The fiscal year 2023 requests $10.2
    million to establish the Mississippi Delta Hiring Initiative.
    And can you discuss your vision for this initiative, including
    the benefits it will bring to the Mississippi Delta region?
        Commissioner Rettig. I expect the IRS to be the agency that
    revamps the Mississippi Delta region. I think you are aware; we
    are already open to hiring. We did an announcement for 15
    positions in a presently existing facility in Clarksdale. We
    had a tremendous response, which shows that we are headed in
    the right direction.
        We have people on the ground. I had more than a handful of
    people who spent the week there meeting with local officials,
    looking at sites, which GSA would handle. I would love to come
    to talk to you one-on-one with what we envision for
    Mississippi.
        We tried to hire 2,000 people in Austin, Texas, and we had
    100 qualified people. We went into Puerto Rico and did a
    hiring, and we would look for 500, and we got 600.
        So for the Mississippi Delta, your question might be: Well,
    why did this kid from L.A. running IRS in Washington, D.C., get
    to the Mississippi Delta? The equation is pretty simple. We
    looked at the EITC hot map. Where are the most EITC claims that
    we are dealing with? It is in the Delta. We are going to the
    Delta to bring Federal jobs into the Delta.
        What we are doing is pairing up with 4-year and 2-year
    universities and colleges, to bring job skills. It is unfair of
    us to say that every 26-year-old needs a 4-year degree to work
    for the IRS. You need some job skills, which we will do through
    these 2- and 4-year schools.
        And then somebody said to me, well what about what they
    think about the IRS?
        We have over a hundred high schools in this country that
    have VITA programs. We are bringing VITA programs to high
    schools in these communities, so that people understand the
    benefits of giving back to the community. People understand
    what IRS does, and then sort of build the pipeline.
        It is probably, and there is no magic to this, 6-year
    project, but my goal is that in the communities that we go
    into, rather than seeing subsidized housing, where somebody is
    painting an older building, that we see the developers come in
    with new housing, because you have got people with Federal
    jobs. And it is looking like we are going to make this a
    reality, and we are on the ground there.
        Senator Hyde-Smith. And we appreciate that. And can you
    tell me the percentage of your workforce that is still working
    from home?
        Commissioner Rettig. Some of our workforce always works
    from home. We have people who have been telework eligible
    forever, but 99 percent of our workforce is working.
        Senator Hyde-Smith. 99 percent of?
        Commissioner Rettig. Is working, but we have taken----
        Senator Hyde-Smith. But you don't know the percentage that
    is working from home? I mean, what was the normal percentage 3
    years ago that was working from home?
        Commissioner Rettig. I would say that we are probably not
    that far away from where we are today. We have thousands and
    thousands of employees who are telework eligible, and some----
        Senator Hyde-Smith. I mean, that the information I am
    getting is 50 percent work from home; is that accurate
    information?
        Commissioner Rettig. I would say that that is low for where
    we are.
        Senator Hyde-Smith. It is higher than that who are working
    from home?
        Commissioner Rettig. You know, our frontline Revenue agents
    don't need to go into an office. Our frontline Revenue
    officers, our IT people will stay at home. Those are telework-
    eligible people. We have a bargaining agreement with the
    National Treasury Employees Union as to who is telework
    eligible, and we abide by that agreement. We have all different
    categories.
        Senator Hyde-Smith. Okay. But it is more than 50 percent is
    what you are saying? That that is a low number that works from
    home for the IRS?
        Commissioner Rettig. I would not hesitate to ask you
    something, but also where somebody is working, the physical
    location is mostly irrelevant, quite frankly, other than our
    people who are processing paper.
        Senator Hyde-Smith. That doesn't hinder the process that
    you are trying to accomplish now?
        Commissioner Rettig. Zero. Those folks were back in June of
    2020 socially distanced, working split shifts. The people who
    process the paperwork split shifts, they have been in their
    facilities since June of 2020. The people on the phones are
    telework-eligible. We went into the pandemic with only 3,000 of
    15,000 telephone staff being telework eligible, and then,
    within 2 months, 15,000 of 15,000 people were telework
    eligible.
        Where that helped us was when we had hurricanes,
    earthquakes, snow, where we would shut down IRS facility, our
    employees continued to work from home on the phones, who were--
    --
        Senator Hyde-Smith. but that is inaccurate, more than 50
    percent are still working at----
        Commissioner Rettig. I don't have that number. We will get
    you that number.
        Senator Hyde-Smith. Okay.
        Commissioner Rettig. If you want it, either as a question
    for the record, or we will just get it back to you.
        Senator Hyde-Smith. Yes. When you said that was a low
    number, that there is--that that concerned me.
        Commissioner Rettig. I just know where the people are, and
    they are all working.
        Senator Hyde-Smith. And the 2019----
        Commissioner Rettig. If the question is, how many of our
    people are working, more than 99 percent.
        Senator Hyde-Smith. 2019 Report from the Office of
    Personnel Management found that the IRS employees spent
    hundreds of thousands of hours doing taxpayer-funded warrant
    for their labor union. Are you aware of the hours IRS employees
    spend on union time now? That was in 2019.
        Commissioner Rettig. I am not. But we just concluded our
    union contract. We can get you that, but we are locked into
    that by a contract.
        Senator Hyde-Smith. And the IRS employees that dedicate
    time to union activities on the job; is that fair, instead of
    addressing the backlog of returns of unanswered calls? And
    making sure that that is the best way their time is spent?
        Commissioner Rettig. I would like to have every employee
    who is capable of answering phones, or opening or processing
    mail, doing that. I don't know the category of the folks in
    that. And again, all I can say is, we have a union contract
    that I am required to abide by.
        Senator Hyde-Smith. Okay. And the religious freedom is one
    of the greatest cornerstones of our country. And I am really
    troubled to learn of Federal agencies, including Treasury and
    the IRS, tracking Federal employees who request religious
    exemptions. Can you confirm that the IRS is tracking this
    information on religious exemptions? Are you tracking that
    info?
        Commissioner Rettig. This is the first I have heard that we
    are tracking this. The only reason that we had issues with
    exemptions was under the mask mandate, or when we had a mandate
    that people had to be vaccinated or terminated; we had medical
    and religious exemptions. But I have no more information, and
    you can ask me a question for the record.
        Senator Hyde-Smith. Okay, but----
        Commissioner Rettig. But you are the first I have heard of
    it, and I would oppose us tracking any religious information.
        Senator Hyde-Smith. Okay. Well, my time is out again.
        Senator Van Hollen. Well, thank you. Thank you, Senator
    Hyde-Smith.
        Mr. Commissioner, thank you for being here today; I want to
    also take this opportunity to thank you for your service. I
    don't know if you will appear before this subcommittee again,
    but I am grateful for your testimony, and for the ongoing
    partnership with you and your staff.
        And believe that you were committed to doing the very best
    job you can on behalf of the American people in tough times.

                         ADDITIONAL COMMITTEE QUESTIONS

        Our Members will have one week to submit questions for the
    record. Those are due May 10th. And I would appreciate if you
    could--and your team--could get back to us as quickly as
    possible in response to any of those questions.
        With that, this subcommittee meeting is adjourned.
        [The following questions were not asked at the hearing, but
    were submitted to the Internal Revenue Service for response
    subsequent to the hearing:]
        No questions were submitted.
        Senator Van Hollen. Thank you all.

                              SUBCOMMITTEE RECESS

        [Whereupon, at 3:51 p.m., Tuesday, May 3, the subcommittee
    was recessed, to reconvene subject to the call of the Chair.]

      FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL
                                   YEAR 2023

                                  ----------

                             TUESDAY, JUNE 14, 2022

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.

        The subcommittee met at 2:37 p.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Chris Van Hollen (Chairman)
    presiding.
        Present: Senators Van Hollen, Coons, Manchin, Hyde-Smith,
    and Boozman.

                          U.S. DEPARTMENT OF TREASURY

                 OPENING STATEMENT OF SENATOR CHRIS VAN HOLLEN

        Senator Van Hollen. All right. Good afternoon. The hearing
    will come to order. And I want to start by saying I am pleased
    to be joined by my Ranking Member, Senator Hyde-Smith, also
    just joined by Senator Manchin, and Senator Coons, I think will
    be returning soon. I want to welcome our witness, Deputy
    Secretary of the Treasury, Wally Adeyemo.
        And Mr. Deputy Secretary, thank you so much for being here
    today and for your work at the Department of Treasury. This
    subcommittee oversees the annual budget for the Department of
    Treasury, including funding for the IRS.
        Just a few months ago, our subcommittee provided the IRS
    with its largest funding increase in 20 years in order to cut
    down on the tax return processing backlog, which continues to
    need to be addressed and to improve service for working
    families. It was a big step forward.
        We know that we need to continue that effort this year. For
    today's hearing, we are going to zero in on the budgets of two
    specific agencies within the Department of Treasury to help
    keep money out of the hands of terrorists, criminals, and other
    bad actors, and help to keep Americans safe.
        The first is the Office of Terrorism and Financial
    Intelligence, also known as TFI. The second is the Financial
    Crimes Enforcement Network, also known as FinCEN. At the
    outset, I would like to cover the special importance of these
    two agencies to America's safety and security, and to the
    safety and security around the world.
        The Office of Terrorism and Financial Intelligence has been
    cracking down on terrorist funding and financing for over a
    decade. The mission of TFI is simple, identify, disrupt, and
    disable criminals, terrorists, and other National Security
    threats to the United States and protect the U.S. financial
    systems from abuse by illicit actors. That work has taken
    center stage in the wake of Vladimir Putin's brutal invasion of
    Ukraine.
        The men and women of TFI have been leading America's effort
    to implement our sweeping sanctions against Russia in concert
    with our allies. Because of the work of TFI and your colleagues
    at the Department of Commerce and State, we have made
    significant strides in cutting Russia off from the world
    financial system.
        Hundreds of international companies have left Russia and
    the IMF projects that Russia's economy will shrink by more than
    8 percent in the year 2022. But Mr. Deputy Secretary, we know
    you know that Vladimir Putin and his cronies will do everything
    in their power to evade the sanctions and to hold on to their
    ill-gotten gains, no matter the risk. Which is why the work of
    the second agency we are here to focus on, FinCEN, is more
    important than ever.
        Since its creation in 1990, FinCEN has been dedicated to
    combating money laundering and safeguarding our financial
    system from abuse. That mission has gained fresh urgency as
    Russian entities and oligarchs attempt to evade America
    sanctions by laundering money and hiding their assets across
    the world. FinCEN is one of the main tools we have to stop that
    from happening.
        So we can see how both TFI and FinCEN are working hand-in-
    hand to hold Russia to account. I am pleased and proud of the
    actions that Congress has taken to supply these agencies with
    additional resources that they need to do that job. The omnibus
    bill from fiscal year 2022 included $44 million in emergency
    supplemental funding to help TFI and FinCEN respond to the
    situation in Ukraine.
        And the Ukraine supplemental bill passed this April
    provided an additional $23 million for FinCEN. That is on top
    of the $20 million increase the subcommittee secured for the
    annual TFI budget and the $48 million increase the subcommittee
    secured for the annual FinCEN budget. With those funds,
    Congress increased the budgets of TFI and FinCEN over fiscal
    year 2021 by 26 percent and 76 percent, respectively.
        Today, I hope to hear more about how those monies are being
    put to use. I am proud of the work that the Department is doing
    and that you are doing, Mr. Deputy Secretary, to push back
    against Putin's brutal war, and I want to thank you for your
    leadership. You know as well as anybody that the fight is far
    from over.
        And today, I look forward to discussing how we can
    strengthen sanctions against Russia, avoid leakage in our
    current sanctions, and ensure other countries and foreign
    companies are not taking advantage of the strong sanctions for
    their own financial gain and windfall. Unfortunately, we
    continue to see new reports every day of countries and
    companies that are not just maintaining but actually increasing
    their trade or economic relations with Russia, including
    increased imports of Russian oil.
        We cannot stand by while these countries and foreign
    corporations engage in war profiteering that further lines
    Putin's pockets at the expense of everybody else. I think we
    need to be doing more in this area.
        And as you know, Mr. Deputy Secretary, we are in the
    process of drafting legislation focused on secondary sanctions
    to provide additional muscle and ammunition to this effort. And
    we look forward to any input that you and your team have, not
    just today, but in the coming days.
        These are important topics, and I know Russian sanctions
    have been front page news recently, but it is also a fact that
    TFI and FinCEN's work goes beyond Russia, it is worldwide, and
    I want to thank the men and women at these agencies for the
    work they are doing.
        Just 2 years ago, Congress passed the Anti-Money Laundering
    Act of 2020, which requires FinCEN to establish uniform
    beneficial owner reporting requirements for corporations,
    limited liability companies, and other similar entities, and to
    develop a database so that information can be easily reported
    and shared with law enforcement.
        The basic goal of that effort is to ensure who the real
    owners are often behind anonymous shell companies and prevent
    criminals and others from abusing U.S. corporations to launder
    their money and hide their ill-gotten gains. It is a major new
    undertaking, and the subcommittee provided FinCEN with an
    increase of $34 million to your annual budget in the omnibus
    bill for fiscal year 2022 to address these responsibilities.
        It was the right thing to do, but we all know our work is
    not over. We must continue to support funding for these
    agencies. And I and the Ranking Member have indicated to both
    TFI and FinCEN that they should let us know when they need
    additional resources.
        And that is true as well for you, Mr. Deputy Secretary, and
    the Department. We have got a lot of work to do. Look forward
    to the discussion in this hearing. And let me now turn it over
    to the Ranking Member, Senator Hyde-Smith, for her opening
    statement.

                 OPENING STATEMENT OF SENATOR CINDY HYDE-SMITH

        Senator Hyde-Smith. Thank you, Mr. Chairman. And we are
    glad to have you back. Also welcome the Treasury Deputy
    Secretary to our hearing today, and I certainly enjoyed our
    conversation we had on the telephone. We look forward to your
    testimony this afternoon. And today, we will review the fiscal
    year 2023 budget request for the Treasury Department's Office
    of Terrorism and Financial Intelligence and the Financial
    Crimes Enforcement Network, two very critical areas that are
    very important.
        Both offices play a crucial role in collecting and
    analyzing financial intelligence, as well as implementing U.S.
    sanctions. Treasury is requesting significant increases for
    these offices in fiscal year 2023 compared to the fiscal year
    2022 enacted levels.
        This additional funding would be on top of funding received
    from both of the Ukraine supplemental packages and I hope we
    hear more today about how these funds are being spent,
    particularly those that are used to counter Russian aggression.
    And you have publicly stated that the overarching goal of the
    Administration's foreign policy strategy is to end the invasion
    in Ukraine, but right now it appears to be no end in sight,
    even after imposing hundreds of sanctions.
        Several months after invading Ukraine, Vladimir Putin has
    not reversed course and even appears to have doubled down. It
    has become clear that the previously enacted sanctions have
    failed to make Putin feel the pain and that more must be done.
    I would like to reiterate my and the Committee's commitment to
    helping Ukraine and our NATO allies, and I look forward to
    hearing from you today about the proposed budgets and how we
    may actually stop Russian aggression that we all thought would
    only last a few days.
        I cannot end without acknowledging record high inflation
    hardworking Americans are facing and the Treasury Department's
    repeated denial of the state of the economy. I hope today we
    can discuss the current economic outlook and the inflationary
    impacts of this Administration's spending and energy policies.
    Thank you, Mr. Chairman.
        Senator Van Hollen. Thank you, Senator. And as you can see,
    we don't have a court reporter in the room, but it is been a
    live stream. And I understand the court reporter is doing their
    job from offsite. With that, Mr. Deputy Secretary, welcome
    again and the floor is yours.
    STATEMENT OF HON. WALLY ADEYEMO, DEPUTY SECRETARY,
                DEPARTMENT OF THE TREASURY
        Mr. Adeyemo. Well, let me start out by saying thank you,
    Mr. Chairman, and also to Senator Hyde-Smith for the time you
    took to speak with me yesterday, but also for your leadership
    of the subcommittee.
        I recognize that the issues that you deal with in the
    subcommittee are important. They are both about the domestic
    economy, but also about our National Security. And I want to
    thank you and the Members of this Subcommittee for not only
    your leadership, but your support of the Treasury Department
    and for the funding that you provided both in the omnibus bill,
    but also in the supplemental legislation that has been passed
    over the course of this year.
        And as you well know, we meet today at a moment of historic
    significance, facing the largest land war in Europe since World
    War II, as well as making progress in our fight against the
    public health and economic consequences of the most significant
    pandemic in more than 100 years.
        The hardworking men and women of the Treasury Department
    play a central role in addressing these challenges. I want to
    thank these dedicated public servants for what they do every
    day to advance our mission of creating strong economic growth
    and strengthening our National Security across Administrations.
        Over the past 6 months, Treasury has taken swift and bold
    action to hold Russia accountable for its brutal war of choice.
    We view sanctions in service of two objectives. First, denying
    the Kremlin access to the resources needed to prop up Russia's
    economy or invest in its military.
        And second, degrading Russia's ability to project power.
    Sanctions fundamentally are a tool. They are a part of a larger
    foreign policy strategy. And as a tool, these sanctions have
    had an effect on Russia's economy. You need only listen to
    President Putin, or their central bank governor talk about how
    degraded their economy is and the fact that they are going to
    need to transform it in response to the sanctions that we have
    levied today.
        But there isn't--but what we have made very clear is that
    as long as Russia's aggression continues in Ukraine, we are
    going to continue to take sanctions actions to further degrade
    their ability to fight the war in Ukraine, but also to project
    power into the future, and also trying to take steps that will
    deny them access to revenues that they can use to prop up their
    economy going forward or to continue to build out their
    military industrial complex.
        This work is done primarily by individuals at the Treasury
    Department, both in our TFI unit, which is led by Brian Nelson,
    but also by the dedicated men of our Office of Foreign Assets
    Control, as well as FinCEN. In addition to the work that we do
    at Treasury, we have worked internationally to build up
    coalitions that have done things to not only implement our
    sanctions, but also go after sanctions evasion.
        Efforts like the multilateral Russian elite's proxies and
    oligarchs task force have enabled us to identify and seize the
    assets of those supporting Putin and his war, even where those
    assets are hidden using novel and complex structures. These new
    actions and initiatives require substantial resources, from the
    personnel to conduct the analysis needed to target the right
    entities, to the technology and systems needed to mount a
    global response.
        It is critical that the Treasury as a whole be properly
    resourced to carry out these responsibilities, and we are
    grateful for the funding that you have provided us over the
    course of the last year. But in order to continue this work
    into the future, the President's fiscal year 2023 budget
    request includes a $49 million increase in funding for FinCEN
    to add personnel required to implement the Anti-Money
    Laundering Act and to continue to build the systems we need to
    track beneficial ownership and leverage that information to
    pursue critical National Security objectives.
        Second, the fiscal year 2023 budget request includes an
    increase of $50 million for the Treasury Department offices,
    and $135 million for a system wide investment in cybersecurity.
    The budget also includes an increase of $17 million for the
    Office of Terrorism and Financial Intelligence, which oversees
    our National Security priorities, as well as sanctions.
        These funds will be used to add critical staff and make key
    investments in our classified information systems and other
    tools we use to execute U.S. sanctions policy. But of course,
    we know that fiscal resources are finite, and we do not ask for
    these funds lightly. As the Federal agency tasked with managing
    our national--Nation's finances, we at Treasury are acutely
    aware of the need to raise the revenues needed to fund our
    Government.
        That is why we are asking Congress to properly fund the IRS
    and provide it with the resources needed to enforce our
    Nation's tax laws, especially against those who use tax
    shelters, loopholes, and accounting tricks to starve our
    country of the fiscal resources needed to pay for our domestic
    and National Security priorities.
        Today, economists estimate that more than $160 billion is
    lost every year from taxes the wealthiest 1 percent of
    Americans choose not to pay. In total, we will lose
    approximately $7 trillion in tax revenues over the next decade
    due to unpaid taxes. Unfortunately, it is easy to see how the
    situation developed.
        The IRS budget has decreased by more than 15 percent in
    real terms over the last decade, and its workforce is roughly
    the same size as it was in 1974, even though the U.S.
    population has grown by 60 percent and the complexity of our
    economy has increased exponentially. Moreover, the IRS's
    technology is decades out of date, written in a programming
    language no longer taught, and incredibly expensive to
    maintain.
        The master file that under-grids the tax system dates back
    to the 1960s, when there was no Internet, no cell phones, and
    no spreadsheets or automatic payments. To begin to remedy this
    mismatch between the IRS responsibilities and its resources,
    the President's fiscal year 2023 budget request an increase in
    the IRS budget of 12 percent from total fiscal year 2022
    enacted levels.
        We want to thank this Committee for the increase that
    occurred last year, which was the largest increase in more than
    20 years. But we recognize that more needs to be done to bring
    the IRS into the 21st century going forward.
        And we know that working with you, Members of this
    Committee, we can do that in order to make sure that the money
    that we collect at the IRS can be used to fund the priorities
    we have, including our military, our infrastructure, and
    providing for our children.
        I look forward to the conversation and the opportunity to
    answer your questions and work together to make sure that we
    address the Treasury Department's needs and our country's needs
    at large. Thank you.
        Senator Van Hollen. Well, thank you, Mr. Deputy Secretary.
    We are now going to start questions. We will start with 5
    minute rounds. We may go to longer rounds later. And we are
    going to start with Senator Manchin. Senator Manchin.
        Senator Manchin. Thank you for the consideration, Chairman.
    I thank you very much. I have to run to another committee
    meeting, but I would like to ask a question, a couple. The
    Financial Crimes Enforcement Network or FinCEN was first
    established by the Bank Secrecy Act in 1970.
        Since that time, it has found a careful balance in
    successfully monitoring, prosecuting, money laundering and
    other major financial crimes while also maintaining the privacy
    that we need to feel safe entrusting our money to the American
    financial system.
        Last year, I reintroduced my See Something, Say Something
    Act with Senator John Cornyn, which requires social media
    companies to report suspicious activity to law enforcement,
    similar to the way that the banks are required to report
    suspicious transactions over $10,000 or others that might
    signal criminal activity.
        It also creates an Office in the Department--DOJ, to act as
    a clearinghouse for these reports of major crimes, which is
    similar to FinCEN. So, given that my bill adopts the same
    approach as FinCEN for Internet crime, what are some of the
    lessons that you have learned in information sharing that we
    could apply for sharing information about drug trafficking and
    other major crimes online?
        Mr. Adeyemo. Well Senator, let me start out by saying that
    we support the goal that you have outlined there. And I think
    some of the most important lessons that we have learned in
    terms of FinCEN is one around the idea of, as you put it,
    maintaining privacy, but also making sure that the information
    is available to law enforcement widely.
        So the FinCEN database is available to more than 400 law
    enforcement entities throughout the country in order to help
    them connect the dots. Because ultimately the goal for FinCEN--
    --
        Senator Manchin. With that, what--sorry to interrupt you.
    With that, what are you all seeing in regards to terrorist
    financing through the social media and the dark web? Since you
    are sharing that information, what are you receiving back?
        Mr. Adeyemo. So, Senator, the place where we have the best
    insight is probably when it comes to the dark web. And I think
    that what we are seeing is that both criminals and those who--
    and terrorists and those who want to use illicit finance are
    trying to use every means to get around the formal financial
    system.
        So the more that we can shine a light on these activities,
    the better we are able to protect our citizens against the
    activities that they are taking there.
        Senator Manchin. That leads me right into the next one on
    cryptocurrency. So there is regulations for virtual currency.
    Many financial regulations can still be evaded if money is
    converted to crypto, as you know.
        So my question would be, in addition to the aforementioned
    reporting, what is the Treasury doing to help account for the
    practice and be able to apply current financial regulations on
    cryptocurrency? And what would be your recommendations on
    putting guardrails on crypto?
        Mr. Adeyemo. Senator I think this is one of the places
    where I am increasingly focusing my attention, and I think
    there are some places where we are going to need to work with
    you in terms of legislation when it comes to crypto.
        When it comes to illicit financing, I do think we have some
    rulemaking authority around things like, how do we make sure
    that some un-hosted wallets are regulated, and we make sure
    that we extend a know your customer regime that currently
    exists for traditional banking sector to cryptocurrency.
        In light of what they do, I think it is going to be
    important for us to think through this carefully, but we are
    going to need to do it in order--
        Senator Manchin. But Treasury has always been pretty good
    at people, you know, find people illegally laundering money. We
    have had a pretty good network and be able to check that back.
    FBI has been pretty successful that.
        Crypto has an awful lot of illicit applications, if you
    will, and there are people that have learned to use it very
    effectively. I am sure you all have been watching that to give
    us some recommendations on what you would suggest would be just
    adequate guardrails that would protect the citizen but also
    bring it into mainstream currency. Do you believe there is
    going to be a mainstream currency?
        Mr. Adeyemo. Senator, I have my doubts that it will ever be
    a mainstream currency, but I do think that it is going to be
    used by all kinds of actors, including some people who want to
    illicitly move money. And I think one of the things that we
    have done so far is that we have sanctioned some of these
    crypto exchanges.
        But I think going beyond sanctions, we do need to make sure
    that our regulatory rules expand in order to cover them. And
    where we find that we can expand our rules, we are going to
    want to work with you to design legislation that gives us more
    authority.
        Senator Manchin. Thank you, Mr. Chairman. Appreciate it.
        Senator Van Hollen. Senator--Senator Hyde-Smith.
        Senator Hyde-Smith. Thank you, Mr. Chairman. And Mr.
    Adeyemo, as we have discussed, I remain really concerned about
    the number of employees on telework status, and it is the
    utmost importance that we bring these employees back to the
    office, as we discussed on the phone.
        And it really leads from another incident that happened
    with another agency this week when I realized there are so many
    people at home and I have constituents tell me that no one is
    answering the phone in these other agencies. But what
    percentage of Treasury employees are currently teleworking?
    Does that include the IRS?
        Mr. Adeyemo. So, Senator, in terms of Treasury employees,
    at the moment, we have every employee has a plan--every
    employee at the Departmental offices is required to have a plan
    in terms of how often they will be in the Treasury Department.
        Senator Hyde-Smith. So how many are teleworking?
        Mr. Adeyemo. So Senator, I can't tell you today how many
    employees are in the office versus which ones are teleworking.
    But what I can tell you is that any employee that needs to be
    in the Department, anyone who works on National Security or
    anyone who needs to be in the office, is in the office.
        What I can say is that before even the pandemic, a number
    of employees of the Treasury Department either had telework
    plans or work from alternative locations. For example, if you
    worked on IT, you didn't necessarily work in the Treasury
    Department building. Sometimes you worked in an offsite
    location.
        But for example, anyone who is working on any of the
    National Security issues that we are discussing today, those
    individuals have to be in the office because you can't do that
    work from home. So they are there on a regular basis. Even
    before I came back to the Treasury Department last year,
    Treasury employees were coming back into the office.
        For example, at the IRS, individuals who opened the mail,
    they came back to work, back to the office in July of 2020,
    long before we had a vaccine, and since then, they have been
    ramping up the number of people who have been in IRS offices
    throughout the country. In addition to those employees, we have
    employees who have been back since the summer of the pandemic
    helping to do things like print currency.
        And today, our goal is to make sure that we are having
    every employee who needs to be in the office, in the office,
    and that we are making sure that we are monitoring
    productivity. My goal is to try and optimize what we are
    getting out of our employees so that the employees we need in
    the office are in the office--
        Senator Hyde-Smith. Okay, my time is running a little short
    here, if you don't mind me interrupting you. And what was the
    pre-pandemic percentage of Treasury employees that teleworked?
    Before COVID and anybody had the need to do that, what was the
    percentage of your employees or the employees at the Department
    that were working from home before the pandemic? Not the
    ability to, but the ones that were doing it.
        Mr. Adeyemo. So Senator, I can get you that data, but I
    think that my understanding is less than 20 percent of
    employees were working from home before the pandemic. And
    today, I think that you probably find that we are in the same
    neighborhood in terms of people who full time work from home is
    probably still less than 20 percent of time.
        We do have a number of employees who have hybrid schedules,
    who come into the office maybe 3 to 4 days a week and work from
    home maybe 1 day a week. But the thing that we have now that is
    better than before the pandemic is we have better technology
    that allows us to both make sure that they are fully engaged in
    their work, but also allows us to make sure that we don't need
    to request additional space.
        Because one of the challenges we have at Treasury is that
    we have limited space. So by being able to have a bit of
    flexibility, we are also able to manage our space better so
    that we don't have to rent additional space.
        Senator Hyde-Smith. Do you intend for the Department to go
    full time, no one working from home unless it is absolutely
    necessary? Or do you continue to plan to have about 20 percent
    at home?
        Mr. Adeyemo. So, Senator, I don't have a target in terms of
    the percentage. My goal is to make sure that anyone we need in
    the office to do their job is in the office full time, and then
    for other employees to make sure that they are in the office as
    needed, partially because I think that from my standpoint, that
    gives us the flexibility to both optimize space, but also to
    optimize retention.
        What we found was in some of the positions when we required
    them to be full time, for example, in some of the HR
    operational functions, we were losing some of those employees
    to places where they would have flexibility in their
    employment.
        So if we had the ability to give flexibility because we
    don't need the person to be in the office, they are working in
    HR, they are working in IT and things where they don't need to
    interact with other employees, we may give them flexibility
    going forward. But my goal and the thing that I appreciate is
    making sure that when we need people in the office, we have
    them in the office full time.
        Senator Hyde-Smith. Well, I just feel the FT, when they
    fill out that application means full time and in the office for
    any Federal Government employee unless it is absolutely
    necessary that they are not there.
        Because we just had a lot of issues with constituents in my
    office dealing with people who are not at work. And I just hope
    you have got the controls in place to ensure that they are
    working when they are teleworking. And how do you monitor that?
        Mr. Adeyemo. So one of the things that we have had to do is
    do training with managers to make sure that they are monitoring
    employees who are working from home to ensure that they are
    working.
        But in addition, one of the things that we did when we came
    into this Administration was we made investments in
    technologies like Zoom so that instead of just doing conference
    calls, we would be able to see people to make sure that when we
    are in meetings, we can see them in order to make sure that
    they are engaging.
        If, Senator, there are issues that your constituents have
    with regard to Treasury employees, please feel free to bring
    them to me. But I think one of the things that we have been
    very focused on is making sure that we are training our
    managers to supervise employees who may be in the office 1 day,
    may not be in the office the next day in order to make sure
    that we are able to do things in a hybrid fashion.
        I think that you are right that this is one of the
    challenges we face, but it is frankly a challenge that
    private--when I talk to CEOs, all of them are dealing with this
    as well in terms of how do I have a hybrid workforce, because
    that is the only way we are going to be able to recruit the
    talent that we need.
        But I want to reassure you that for positions where people
    need to be in the office, we are requiring them to be in the
    office full time.
        Senator Hyde-Smith. But does that give the managers extra
    duty that they are having to spend extra time on it to go to
    this training and to spend the time to ensure they are working
    from home? Doesn't that make the manager have more
    responsibilities throughout the day?
        Mr. Adeyemo. My sense as a manager myself in the
    institution is that, no, I don't think it increases your
    duties. What it does is, for example, how do you run a hybrid
    meeting? And it is something that we have had to do regardless.
        You are going to have to learn how to do regardless,
    because frankly, we never--at Treasury, all of the same people
    don't work in the same building. So if you are a manager, you
    may be managing people who work in main Treasury, but they may
    also have employees who work in West Virginia or work out of
    State or work in a foreign country if you are working
    international sections.
        So you have had to do this work already in terms of having
    to deal with some employees who are sitting in front of you,
    and some employees were sitting in different offices. Now,
    instead of sitting in a different office, they may be sitting
    in their home. But ultimately, the type of responsibilities are
    the same. We have increased the training because now we have
    new technology that is helping to make that easier to do.
        For example, you are not just talking to them on the phone
    anymore. Now you are able to talk to them on Zoom or use other
    products. But ultimately, these are the type of
    responsibilities that if you are a manager in a global business
    or in a global--in a global Federal agency like the Treasury
    Department, you are going to need in order to advance.
        Senator Hyde-Smith. Okay. One last thing. So you are
    telling me that about 20 percent were working from home before
    the pandemic and you have got about 20 percent that are
    currently working from home now, is that correct?
        Mr. Adeyemo. So, Senator, I want to get you the precise
    number. Please give me time to come back to you. That is what I
    believe--that is where I would estimate it to be. But I want to
    make sure that I give you precision on that. And I am committed
    to coming back to you with that after this hearing.
        Senator Hyde-Smith. Thank you.
        Senator Van Hollen. Thank you, Senator. And the Ranking
    Member anticipated the fact I was going to go to 8 minute
    rounds next. And so we will do that back and forth just so that
    we can get into some in-depth questioning, which I think is
    helpful. Mr. Deputy Secretary, as you know, in order to ensure
    that Putin's invasion of Ukraine is seen as a strategic failure
    by history, we are going to require a sustained effort.
        And that means making sure that Ukrainians have the
    military support they need, and it also means making sure we
    have an effective sanctions regime. So I want to cover a couple
    areas where I am very worried about leakage in sanctions. Some
    of the--we don't have secondary sanctions in place right now
    for the most part, but it seems to me we want to explore that
    option going forward.
        So I want to start with military, supporting countries or
    entities around the world that may be supporting the Russian
    military. You, at the Department of Treasury, have already
    applied a list of sanctions. As we gather here today, do you
    know of any countries or companies, foreign companies that are
    violating our sanctions regime with respect to support of the
    Russian military?
        Mr. Adeyemo. Senator, as I sit here in front of you today,
    I can't speak to any companies that I know of that are
    wittingly assisting Russia in violating our sanctions regime.
    But what I do know is that Russia is attempting to find ways
    around our sanctions regime by setting up trusts and proxy
    companies that would allow them to purchase the things that
    they are not allowed to purchase legitimately.
        Senator Van Hollen. So as of today, you don't know, for
    example, whether any Chinese entities are supplying Russia with
    weapons systems or components that are sanctioned by the United
    States?
        Mr. Adeyemo. No, I don't.
        Senator Van Hollen. And I understand that we need to, you
    know, track the efforts by the Russian military to set up, you
    know, front groups and other entities to disguise their
    efforts. The Department of Commerce, of course, also has a list
    of components that we are preventing the export to Russia of,
    and that has a sort of long arm impact.
        And I saw in June that they would put together an expanded
    entities list of companies, countries that would be barred from
    export of certain U.S. origin items. Does the Department of
    Commerce have any authorities, or do you have any role in
    implementing the Department of Commerce's sanctions, or is that
    done strictly through the Department of Commerce and DOJ?
        Mr. Adeyemo. So, Senator, that is done by the Department of
    Commerce, and I believe with assistance from DOJ. But in lots
    of circumstances, what we have done is work together with
    Commerce to figure out where export controls can play a role
    and where sanctions can play a complementary role. So if they
    put something on the export list, we may also go out and
    sanction companies that produce that thing in order to make
    sure that we help best address evasion.
        Senator Van Hollen. All right. Let me turn now to the
    energy sector, because, as you know, energy exports represent a
    large part of the Russian economy. Do you have a ballpark
    figure of what portion of the Russian economy is reflected in
    those exports, coal, gas, oil?
        Mr. Adeyemo. So in terms of Russian exports, the vast
    majority of them come from commodities, Senator.
        Senator Van Hollen. So we, of course, in the United States
    have now, you know, borrowed our--we are not importing Russian
    oil. We know that the EU is working diligently, I believe,
    toward trying to phase out their dependence on Russian oil. We
    need to move on the gas front as well.
        But there are countries that are not only continuing to
    maintain imports of Russian oil at the levels they were before
    the war but are increasing their overall imports of Russian
    oil. Can you talk about some of the countries that are at the
    top of that list?
        Mr. Adeyemo. So, Senator, it is--one of the challenges we
    have is that we don't have direct data in terms of what this
    looks like because a great deal of the oil is sent in means
    that don't allow us to produce it. But we know that the data we
    have seen is that countries that have traditionally imported a
    great deal of Russian oil include Europe, but also China,
    India, Japan, and South Korea, and Turkey.
        Senator Van Hollen. Right. But I am looking specifically at
    countries that have increased their volume of oil imports from
    Russia. And as I look at the list, China is on the list, India
    is on the list. Maybe a few other countries are on the list. Do
    you know of any other countries that have increased their
    volume of imports of Russian oil since the war began?
        Mr. Adeyemo. No, I don't. Senator.
        Senator Van Hollen. Okay. And would you agree that those
    countries that have increased their volume of imports of
    Russian oil are, in a sense, engaging in war profiteering? That
    they are benefiting from the fact that countries like our EU
    partners have reduced their imports of Russian oil.
        Mr. Adeyemo. So, Senator, I think part of what we--so, I
    think that what I would say is that right now we are in a place
    where what our goal has got to be is to find ways to limit the
    amount of revenue that Russia is making off the sale of its
    oil, partially because one of the challenges with oil is that
    you don't always know where it is coming from.
        So there may be--some of these countries may be aware that
    the oil that they are getting is directly from Russia. But what
    we have seen in the context of other sanctions programs is that
    countries do, once sanctions extend to energy, they try and
    disguise where the energy is coming from.
        So the thing that I am increasingly focused on is what can
    we do not only to stop Russian oil from flowing to our country
    and to other countries that are in our alliance, but as it
    continues to flow, how do we reduce the revenue that Russia is
    making?
        What we know today is that Russia is selling less oil in
    terms of per barrel than they were before the invasion. But
    because of the increase in price, they may be making more
    profit. So the goal for us is really to reduce that revenue
    level even as countries may purchase Russian oil going forward.
        Senator Van Hollen. So how do you do that, right. I mean,
    can you talk about your plan? Because, you know, right now we
    have a situation, whereas I indicated, and there is plenty of
    public reporting on countries that have increased their imports
    of Russian oil since the war began, and they are buying it at a
    discount, right.
        So, you know, consumers in that country are benefiting from
    the discounted oil prices, while consumers in other countries
    that are not importing as much Russian oil compared to their
    pre-war levels are seeing higher prices.
        How can we make sure that some consumers around the world
    aren't benefiting getting a windfall from reduced prices of
    Russian oil while others are paying more? How do we do that?
        Mr. Adeyemo. Yes, I think, Senator, the challenge, of
    course, is that while they are paying a discount, the truth is
    that they are paying more today from Russian oil than Russia is
    making off of their oil before the invasion because the price
    of oil in general has went up. So one of the things that we
    need to do is increase production, which is something we have
    been focused on.
        But I think that there are a number of options in terms of
    reducing Russia's revenue. There are things like introducing a
    price cap, which has been talked about in the academic
    literature in terms of a price cap, in terms of how much can be
    paid for Russian oil. There is also the idea of over time
    limiting the amount of Russian oil that can be sold.
        But all of this from our standpoint, the chief objectives
    that we have are, one, celebrating the fact that Europe has
    taken this important step in their six package to limit their
    dependance on Russian oil. Number two is, what can we do to
    limit the amount of revenue that Russia is making?
        And our final goal is making sure that we don't spike the
    price of oil overall in order to make sure that our consumers
    don't bear the cost of what we are doing here. And I think
    there are ways for us to do that in terms of looking at things
    like potential capping the price of Russian oil going forward,
    or over a period of time, reducing the amount of Russian oil
    that is able to be sold.
        But we want to make sure we do that in a manner that is
    consistent with our allies and partners. I think the fact that
    Europe is taking this important step over the next several
    months is going to put us in a position to make sure that
    Russia can't use oil as a strategic weapon against Europe going
    forward.
        Senator Van Hollen. Thank you. Senator Boozman.
        Senator Boozman. Thank you, Mr. Chairman. Thank you,
    Ranking Member--I got to get situated--Hyde-Smith, for having
    this hearing. Thank you, Mr. Secretary, for being here. I would
    like to start by asking you a few questions about beneficial
    ownership and FinCEN rulemaking. As I am sure you would agree,
    complex definitions of beneficial ownership will be hard for
    small businesses to implement. Is this something FinCEN is
    considering in its rulemaking?
        Mr. Adeyemo. Senator, yes, it is top of mind for us in the
    rulemaking is making sure that we in term--we think about the
    regulatory burden on small businesses all over the country.
        Senator Boozman. Very good. Will FinCEN work to more
    closely align the beneficial ownership definitions with those
    that currently exist and that businesses already have
    experience providing information on?
        Mr. Adeyemo. Yes. Yes, Senator. And I know that we, as you
    know, we put out a proposed rule. And as part of that, we
    received comments from small businesses and their associations.
    And we are currently considering those because we want to make
    sure that the final rule addresses some of these comments that
    we have received.
        Senator Boozman. Very good. Also, will you work to minimize
    the reporting burdens on small businesses by allowing financial
    institutions to rely on the registry for their beneficial owner
    collection and verification requirement?
        Mr. Adeyemo. So, Senator, we share that--we share your goal
    in terms of reducing the burden. I think that there is one
    rulemaking that we have already done. The second one is around
    CCD--CDD.
        And I think we want to make sure that we align those as
    closely as possible, but we are still going through the
    rulemaking process. But I can tell you that we share the goal
    in terms of making sure that people don't have to report
    numerous times the same information or slightly different
    information going forward.
        Senator Boozman. Good. Thank you. Let's talk a little bit
    about the Treasury market. As you know, the Treasury market has
    been described as the biggest, deepest, and most essential bond
    market on the planet.
        Historically, investors view treasuries as risk free or
    near cash assets and safe havens during market crisis. However,
    the resiliency of the Treasury markets has been called into
    question by recent disruption events in which market price
    volatility increased and the amount of available liquidity
    decreased.
        As a result, some market observers have called for
    structural and regulatory changes to enhance the capacity and
    resiliency in the market. While the Treasury Department
    continues to study possible reforms, it is important to ensure
    that reforms do not harm the market and do not cause unintended
    ancillary effects.
        I believe that any proposals or recommendations on any
    structural regulatory changes should be vetted and supported by
    investors. In that light, where is the Department in its review
    of Treasury market structure? Do you expect to put out reforms
    or recommendations? And if so, how far are you in the process?
        Mr. Adeyemo. Senator, to your point, I agree that we want
    to make sure that we consult with stakeholders as we think
    through these reforms. That is why we announced recently that
    we are going to put out a request for information which will
    give the private sector and other stakeholders an opportunity
    to provide us with advice as we think through our reform agenda
    going forward.
        Late last year, we put out a framework in terms of the
    areas that we are looking to focus on with regard to reform,
    with the idea being that you are right, that the Treasury
    markets are the deepest, most liquid in the world.
        The United States takes a great deal of benefit from this.
    And what we want to do is make sure that the reforms we make
    will only strengthen those markets. And in order to do that, we
    want to make sure that we rely on information from market
    participants as we go forward.
        Senator Boozman. Do you have any ideas how you will
    actually get the views of the investors?
        Mr. Adeyemo. Yes, Senator. I think one of the things we are
    going to do is that we are going to put out a request for
    information where they can formally provide us with detailed
    feedback in terms of how they think we should think about
    reform through an open process that they can formally use.
        But in addition to doing that, we are, of course, speaking
    to market participants on a regular basis to hear from them in
    terms of the reform agenda as well, and working closely with
    the regulators as well.
        Senator Boozman. Very good. I also wanted to touch on anti-
    money laundering, AML. As you know, FinCEN recently issued an
    RFI reviewing AML regulations and guidance under Section 6216
    of the Anti-Money Laundering Act.
        What are your intended steps, and can you preview some of
    the proposals you will be making in your Congressional report
    to eliminate outdated, redundant, or non-risk based AML
    expectations?
        Mr. Adeyemo. So, Senator, I think part of our goal here is
    to implement what U.S. Congress passed as part of the in terms
    of the anti-money laundering and beneficial ownership laws. But
    as we do that, to also step back and to think through now that
    we are building out this regime, which is going to allow us to
    be comprehensive, what does it allow us to do in terms of
    eliminating some of the things that we have done previously as
    stopgaps?
        And what we are hoping to do is that as we build--we have
    at the moment two more--we are going to put out a final rule
    with regard to the beneficial ownership rule we were talking
    about earlier. And we are also going to put out information in
    terms of how we are going to build out the database. And I hope
    that at that point it will put us in a position where we can
    look back and say, based on this, how do we think through our
    regulatory approach going forward?
        We look forward to working with you and the Committee on
    this and providing greater information to industry and to
    stakeholders in terms of what this will look like going forward
    once we have completed the rule makings regarding beneficial
    ownership.
        Senator Boozman. Very good. I am also concerned about
    potential rule makings around artificial intelligence in the
    insurance industry. As I am sure you know, is used in insurance
    to price risk, manage operations more efficiently, and detect
    and predict fraud.
        All of these are aimed at inclusivity in the market and
    work in tandem with the use of actuarial risk based pricing,
    and ensures all policyholders are paying the lowest possible
    premium. Further, since AI affects a consumer's insurance
    coverage, insurers are already highly regulated and are
    obligated to explain and justify decisions to customers.
        Significantly, the EU is currently in the process of
    finding finalizing a regulation designed to harmonize rules on
    AI. According to the EU, the purpose of the regulation is to
    improve the functioning of the internal market by laying down a
    uniform legal framework for the development, marketing, and use
    of AI in conformity with EU values.
        My concern is that creating new regulations for AI used by
    insurers who are already subject to regulatory frameworks which
    address the concerns would lead to regulatory duplication that
    ultimately hurts policyholders. I guess the question is, does
    Treasury have any plans to engage with the EU on this topic?
        Mr. Adeyemo. So Senator, this is a topic that I am not
    familiar with, but now that you have raised it, I am committed
    to going back to my staff and talking about it and finding out
    where we are with regard to the EU, and then we will follow up
    with you.
        Senator Boozman. Well, based on your answers to the other
    questions and the good job you have been doing, I am surprised
    that we caught you in one that you didn't have any knowledge
    of.
        Mr. Adeyemo. Well, I appreciate you bringing it up to me,
    because it does sound like an important issue and one that I
    will pay attention to and come back to you shortly on.
        Senator Boozman. No, we appreciate that. Thank you, Mr.
    Chairman.
        Senator Van Hollen. Thank you, Senator. And thank you, Mr.
    Deputy Secretary. I want to push you a little bit more where we
    left off in our question with respect to Russian oil revenues.
    I am looking at a piece that was in The New York Times
    yesterday titled, Russia's Oil Revenue Soars Despite Sanctions
    Study Finds.
        And they cite a study from the Center for Research on
    Energy and Clean Air out of Helsinki, Finland, that points out
    that while the EU reduced its imports of Russian crude by 18
    percent in May, that dip was made up by India and the United
    Arab Emirates, leading to no net change in Russia's oil export
    volumes.
        And they point out that China continues to be the largest
    importer of Russian fossil fuels overall over the 100 day
    period they looked at. And as you know, Secretary Yellen has
    been talking about this idea that you referenced today about
    essentially, you know, countries forming a bloc that would
    negotiate, demand a price reduction in Russian oil, because
    right now we have the totally unfair situation where some
    countries are getting bargain prices by increasing their
    volumes and helping offset the pressure on Russia that the EU
    and others have put in place.
        So could you just talk a little bit more about how this
    design would work? Because we need to figure this out pretty
    quickly. And if not, we are going to have to be applying
    secondary sanctions and maybe having to apply secondary
    sanctions as part of getting more countries on board. Can you
    just spell out in a little more detail what you are thinking of
    at the Department?
        Mr. Adeyemo. Yes, I am happy to do that, Senator. I think
    part of this I will reserve for maybe a classified setting, but
    I am happy to talk to you about this in detail. But I think
    part of the goal here is that fundamentally at the moment, as
    you know, energy prices are far higher post-invasion than
    before invasion.
        And even if you are buying Russian crude at a discount, the
    price you are paying for Russian crude today is higher than you
    paid pre-invasion. So even there, if there is a discount, the
    truth is that Russia is making more today off of crude than
    they were pre-invasion.
        And our analysis at least tells us this is slightly
    different than what you have seen in The New York Times, that
    Russia is probably not producing as much crude as they were
    pre-invasion, but they are potentially making more resources--
    more revenues because they are selling at a higher price.
        So the goal is to make sure that you reduce the price that
    they are able to gain from selling their crude going forward by
    working with other countries to agree to a certain level that
    you will pay for Russian crude going forward.
        It really is trying to make sure that you are in a place
    where Russia is not benefiting from the fact that because of
    their invasion of Ukraine, prices of not only Russian crude,
    but crude in general have gone up.
        This is something that we are talking about with our allies
    and partners. And I think I am happy to brief you in more
    detail about in terms of where those conversations stand in a
    classified setting.
        Senator Van Hollen. Okay. Let me turn to the sanctions that
    we have imposed on Russian oligarchs who have been complicit
    with Putin and other corrupt actors. And as you know, this is
    also an area where sanctions are only as effective as our
    ability to stop those oligarchs from being able to hide their
    assets in other places. Sometimes they do it surreptitiously.
        Sometimes they do it in countries that are willing to look
    the other way. Can you talk a little bit more about that
    effort? To my knowledge, we have not imposed any secondary
    sanctions on any other countries or entities. I know we have
    given some warnings, but I continue to read about
    circumvention.
        In fact, you were yourself quoted in the May 13 New York
    Times piece saying that you have seen a number of Russian
    yachts move from ports in countries that have extended
    sanctions to countries that haven't.
        And that same article mentioned the UAE, especially Dubai,
    as one of these destination points. What are we doing to make
    sure that we are having an effective sanctions regime on
    oligarchs who can, you know, take their yacht from port to
    port?
        Mr. Adeyemo. And Senator, what I will do is I will make
    sure we send this to you. But a few weeks ago, we actually put
    sanctions on a yacht servicing company. So this was us using
    the material support provision of our sanctions to go after a
    company that we found that was providing material support to
    the yachts of those who had already been sanctioned.
        So we have actually went after companies in third countries
    where we have seen them providing material support to those who
    have been sanctioned, using our--using the sanctions authority
    that has been given to us by Congress and by the President.
        I think what we have been trying to do, in addition to
    using our material support provision, is building a coalition
    with other countries that will not only be in a position to
    freeze some of these assets, but actually to seize them going
    forward. And we have seen the seizure of a number of property
    tied to many of these Russian elites, not only here in the
    United States, but around the world, which is different in kind
    than what we have seen in other sanctions programs.
        And our goal here is to make sure that we strengthen this
    coalition so that it is not just our traditional allies, but we
    also have partners that are joining us in this effort so that
    these Russian elites know that there is not a place where they
    can hide their assets outside of the realm of the sanctions
    that we and 29 other countries have implemented.
        So we have already started to take action in third
    countries. We are planning to take more. Part of our goal is to
    have conversations with not only financial institutions,
    because I think what we have found is that financial
    institutions understand the scope of our sanctions. We haven't
    largely seen financial institutions that have been willing to
    do business with individuals or entities that have been
    sanctioned.
        But when it comes to other companies in an economy, be it
    companies that help service yachts or planes or deal in real
    estate that aren't as familiar with our sanctions regime, that
    is the place where we have had to act, and we have had to spend
    time with authorities and also with those companies to explain
    to them that ultimately the providing material support to an
    individual or an entity that has been sanctioned could make you
    subject to sanction.
        And we have used that authority already in third countries,
    and we think that doing that has sent a clear message to these
    companies that ultimately, if you provide material support, no
    matter where you are, we are going to be willing to use our
    sanctions authority to go after you.
        Senator Van Hollen. All right. I look forward to following
    up with you and your team. I am about to turn to another
    category of questions, so why don't I--Senator Hyde-Smith, I
    don't--let me turn it over to you. I don't know if you have
    another round of----
        Senator Hyde-Smith. I do.
        Senator Van Hollen. Absolutely.
        Senator Hyde-Smith. Thank you very much. Let's talk about
    the Bank Enterprise Program. It is pretty popular in
    Mississippi, and it is well received by local banks and credit
    unions because it allows them to leverage their own assets to
    invest in the small businesses and the startups, which gives
    them the ability to support job creation and retention in areas
    that really need it in a lot of States.
        But I was really disappointed to see that the budget cuts
    from the Bank Enterprise Program by $11 million from the fiscal
    year 2022 enacted level. What were the reasons for these cuts?
        Mr. Adeyemo. Senator, let me start out by sharing your
    commitment to these communities where the Bank Enterprise
    Program has been effective in helping. And I think what we are
    trying to do is figure out where we can most effectively put
    the limited dollars that we have available to have the impact
    that we both care about.
        As you know well, in many of these communities, you have
    CDFIs and MDIs that are also doing business there. And what we
    have done, based on the funding that Congress provided us, is
    provide a great deal of capital to these institutions. So more
    than 9--about $9 billion of capital through the Emergency
    Capital Investment Program went to CDFIs over the course of
    this year that we have placed in them.
        In order to make sure that that money is invested well, we
    have asked for additional money for the CDFI program to help
    monitor but also provide resources to those institutions. I
    think I am happy to talk to you about how we are thinking about
    this, but I think our goal largely is to make sure that we are
    building up an ecosystem there that is based on providing
    resources to those lenders, then also ensuring that we have
    provided support to them.
        So it wasn't--our goal is not to step away from these
    communities, but rather to try to most effectively to provide
    funding to them going forward.
        Senator Hyde-Smith. So I think he just answered the program
    is oversubscribed compared to other programs because it is so
    popular. But how do you intend to support investments in
    economically distressed areas with reduced funding? I mean, you
    are saying you are going in another direction and how do you
    expect that to compensate?
        Mr. Adeyemo. Well, Senator, I think our goal is to make
    sure that on top of the public money that Congress has provided
    to these communities, that we attract private money as well. So
    the--our goal, similar to what we are doing with the Small
    Business Credit Initiative, is to make sure that we attract
    private investment into these communities, because we know that
    that is the sustain--is a sustainable way to make sure that
    they have the access, the resources they need.
        We think that we have a real opportunity to do that,
    working closely through our CDFI office with the money that you
    have already provided. And that is what we would want to do
    here, is to ensure that in areas where there is a need for
    additional capital because all these programs are
    oversubscribed, that we would work to attract private capital.
        Senator Hyde-Smith. And what is the status of the 2022
    grants right now?
        Mr. Adeyemo. Senator, I would have to get the team to
    provide you with an update on where we are in the grant making
    process at the moment, but we haven't completed it. But I am
    happy to get you--to provide you with an update after this
    hearing.
        Senator Hyde-Smith. Has it been implemented well, or I
    mean, do you have any idea if it has been beneficial or----?
        Mr. Adeyemo. So my view is that, as you know well, this is
    a program that has been very popular and has been implemented
    well by staff across Administrations, and that continues to be
    the case. I think my overarching goal is to make sure that
    across the suite of programs that Congress has authorized, we
    take your resources, and we try and find creative and
    interesting ways to try and pull the private sector in as well
    to crowd in private capital.
        Because ultimately, what we know about these communities
    where we have these programs right now is that they have
    unfortunately been starved of the type of private capital that
    is needed to building housing, to starting small businesses, to
    making sure that those small businesses can thrive.
        So a big push from my standpoint, from Secretary Yellen's
    standpoint, is what can we do to take the resources you have
    provided and use them in a way that attracts private capital to
    join them in a way that is sustainable over time?
        Senator Hyde-Smith. And the--one other thing I wanted to
    talk about was the, in February, Treasury received the $61
    million in the supplemental funding to address the war in
    Ukraine and the Russian invasion. About a month ago, an
    additional $52 million was provided to the Treasury in the
    second Ukraine supplemental appropriations package. So how much
    of these funds right now have been obligated?
        Mr. Adeyemo. So, Senator, I don't have the precise number
    in terms of the obligated amount today, but I am happy to get
    that to you. But I can tell you that money has been used. We
    have done really two things with that funding. One, is invest
    in additional personnel, and two, is invest in technology.
        On the personnel front, one of the things that we have
    needed is additional people to help, not just in the
    traditional areas where we have dealt with sanctions in the
    past but given the complexity of Russia's economy and how
    interconnected it is with the global economy, we need
    additional staff in places like economic policy to help us do
    economic analysis on how we can better target Russia's economy
    while mitigating the impact on our economy.
        Given how interconnected Russia is to the financial system,
    we have needed additional resources in domestic finance so we
    can understand the interconnections between Russia's financial
    system and our own financial system.
        When it comes to technology, a big deal--a great deal of
    what we have had to do is invest in technology in places like
    FinCEN, because one of the things we want to make sure is that
    the information that we are collecting on Russia and on the
    illicit behavior that they are conducting is analyzed and
    provided to law enforcement in our country, but also to our
    partners around the world.
        So we have made huge investments both in personnel and in
    technology, in order to put us in a position to better address
    what is happening in Russia, Ukraine, and also in prosecuting
    some of the criminal enterprises that we are seeing develop
    around this.
        As I mentioned earlier, one of the things that Russians
    have perfected in terms of evading our sanctions is setting up
    proxies and trust companies that allow them to get around our
    sanctions, and that is around the world. So we are doing
    everything we can to go after those as well.
        Senator Hyde-Smith. So you have done a lot. So would you
    think that over 50 percent have been allocated--obligated so
    far?
        Mr. Adeyemo. So, Senator, I think--I want to make sure that
    I come back to you with a precise number in terms of how much
    has been obligated. But I do know that one of the things that
    we have been focused on is both getting the technology in place
    as fast as possible and hiring people as quickly as possible.
    In terms of when that has gone from being in the budget to
    actually being obligated, I want to get you precise numbers.
        Senator Hyde-Smith. Thank you.
        Senator Van Hollen. Thank you, Senator. Mr. Deputy
    Secretary, we have talked a little bit in this hearing about
    the updated Corporate Transparency Act, as well as the broader
    Anti-Money Laundering Act, which I think are important
    authorities and tighten the regime that we have to prevent
    people from anonymous ownership of different companies in the
    United States.
        But I am concerned about what I see as a loophole in that
    overall architecture with respect to private investment
    companies like hedge funds who are exempt from reporting
    information on the identity of their clients, as we require for
    banks, mutual funds, and other parts, other segments of the
    financial sector.
        As I understand it in any way, under current law, a hedge
    fund manager can manage large sums of money without knowing the
    real identity of their investors, which would allow corrupt
    actors to evade sanctions.
        My understanding is the Department of Treasury has
    authority to require these private entities to report on the
    identity of their clients. Let me first ask if that is your
    understanding. Do you have that authority?
        Mr. Adeyemo. So Senator, my understanding is that in the
    legislation, Congress did provide an exception for certain
    businesses. I think the scope of that exemption is something
    that we are still working through in terms of the rule writing
    process.
        My goal, of course, is to try and cover as much of the
    world as possible with regard to the beneficial ownership rule,
    because the last thing we want is to create avenues for illicit
    money to flow. But I don't want to get ahead of the rulemaking
    process. What I can commit to you is that we are going to be as
    expansive as we are legally permitted to do.
        And if we find that ultimately we can't get at some of the
    companies that exist in our ecosystem, and we think that there
    is--that that is a place where illicit money might flow, we
    will come back to Congress and request that you take additional
    action.
        Senator Van Hollen. Well, let me ask you, how do we know?
    Do we have any idea what the magnitude of this loophole might
    be?
        Mr. Adeyemo. So, I think the real question, Senator, is how
    broadly can we define--how broadly are we legally permitted to
    define this? And then the question becomes, how big is the
    ecosystem that exists outside? It is going to be hard to know
    how much illegal money is flowing into that part of the
    economy. And the thing that we also know is that, if there are
    things that aren't covered by the beneficial ownership rule
    making, it is more likely that illicit finance will flow in
    that direction.
        So we are going to be in a place where, no matter what, I
    think we are going to need to come back to you as we see this
    develop to talk to you about whether we are going to have to
    further change the rule. And if we don't have the ability to
    change the law because we lack the legal authority, what
    additional legal authority that we need.
        But what I can say is that because of the legislation that
    you have passed, we are in a better position to make sure that
    we root out illicit finance within our country. But we also
    know based on other countries that have put in place beneficial
    ownership systems, is that at the edges where the rulemaking
    doesn't allow you to go is where illicit finance will start to
    flow. So we are going to need to think about this in multiple
    approaches.
        One is finalizing the rule based on the authority that
    Congress has already given us, and then seeing if we have the
    ability to use other rulemaking authorities to get at places
    where we see potentially illicit finance flowing. And if we
    don't, coming back to you and the members in terms of getting
    additional authorities.
        Senator Van Hollen. No, I appreciate that, right. Because
    you can shut one door and just opens the other door. And as you
    point out, if you are an illicit actor, you are going to look
    for the other open door and push on that.
        Can you give us an idea, your timeline here in terms of the
    rule and your determination of the extent of your authorities
    under existing law and what other authorities, if any, you may
    need? Your timeline there.
        Mr. Adeyemo. As you would expect, our notice of proposed
    rulemaking, we got a lot of comments from industry and our goal
    is to make sure that we carefully consider each one of those as
    we finish up the rulemaking.
        I have asked the staff to complete the rulemaking as soon
    as possible, with my hope being that before the end of this
    year that we will finalize the rule. But we also, as you know,
    have a number of other rule makings tied to setting up the
    beneficial ownership system. They are also looking to complete
    as quickly as possible as well.
        Senator Van Hollen. Thank you. In December, Secretary
    Yellen also, as she was discussing the updated CDA--CTA said,
    and I quote, ``we are also ensuring a similar principle applies
    to real estate because many corrupt actors can hide their money
    in Miami or Central Park's skyscrapers the same way they do in
    shell companies.''
        What actions are you taking? Is that part of the rulemaking
    or is that a separate effort with respect to making sure that
    real estate companies are not used as conduits for any illicit
    financing?
        Mr. Adeyemo. So it is both related but also separate in
    terms of the way we are thinking about this. And I think that
    our view is that we need to make sure that, and this speaks to
    the conversation we are just having, that people can't find
    other avenues for illicitly storing resources.
        And we know that real estate is a place where a number of
    people have bought in the past. And we want to make sure that
    both in terms of as we are thinking about beneficial ownership
    at large, we are doing everything we can in terms of rulemaking
    to prevent that from being a place where illicit finance can
    live in this country.
        Senator Van Hollen. So in this category of questions, there
    is just one final question, which is that, is there a feedback
    mechanism between FinCEN and law enforcement that lets you and
    the folks at FinCEN know the extent to which the information
    they are providing is being useful and actionable.
        Because obviously we are, you know, providing additional
    resources, as Senator Hyde-Smith mentioned, to--for the
    reporting mechanism. It would be, I think, important to have
    some back and forth so that we can be assured that the
    information that is being gathered is actually being put to
    effective use.
        Mr. Adeyemo. And I think, Senator, my--the best example of
    this, I think, is the repo task force, which I mentioned
    earlier. The repo task force, as you know, was established both
    by Secretary Yellen and the Attorney General.
        And we work very closely with the Department of Justice
    with regard to the repo task force and share the data and
    information that is coming in from FinCEN and from Treasury
    closely with DOJ. And it has helped in terms of helping take
    some of the actions that we have already taken, but also in
    terms of building cases.
        So I think the best example of the impact of the funding
    that you have already provided is some of the law enforcement
    cases that have already taken place, but also some of the law
    enforcement cases that are being developed today. Ultimately,
    the goal for us is to make sure that we have this information
    in order to both help our National Security agencies, but also
    our law enforcement agencies going forward.
        And I think if you speak to them, they have found the
    information that FinCEN has provided, as well as OFAC, has
    provided quite useful in terms of thinking about how we can use
    our criminal authorities going forward. And the final thing
    that I mention is that one of the things that we have been able
    to do through the repo task force is improve information
    sharing among some of our closest allies.
        It had existed long before Russia's invasion of Ukraine,
    but I think that the attention that Congress has put on this,
    as well as the importance of this issue, has allowed us to
    strengthen those information exchanges so that we are in a
    place where the information we have here in the United States
    is being shared with our allies and partners.
        But in addition to that, we are getting and requesting more
    information from them in order to get a holistic picture as to
    how Russian elites and oligarchs are attempting to hide their
    wealth, not just here in the United States, but around the
    world.
        Senator Van Hollen. Thank you. Senator Hyde-Smith.
        Senator Hyde-Smith. Continuing somewhat on that, can
    cryptocurrencies like Bitcoin, can that be used to evade
    Russian sanctions?
        Mr. Adeyemo. So, Senator, I think that what we found is
    that those who are looking to use any means can find a way to
    use cash, can use cryptocurrencies to try and evade Russian
    sanctions. What I can say is to date we haven't seen this to be
    a main route of evasion.
        But what we do know is that Russia itself is a--has been a
    host to a number of cyber criminals who have been using
    cryptocurrencies as a means to further their criminal
    enterprises.
        That is why we have used sanctions authorities to go after
    exchanges that exist in Russia. And we are committed to
    continuing to do so where we see illicit finance, where people
    are attempting to use crypto to evade our sanctions.
        Senator Hyde-Smith. Have you seized any crypto assets?
        Mr. Adeyemo. Oh, we have not--we have frozen exchanges and
    we have went--we have used our sanction authority against
    exchanges. But in terms of seizure at the Treasury Department,
    we, of course, have the right to freeze things, Senator, but we
    don't have the right at Treasury to seize things.
        Senator Hyde-Smith. And are you worried about the overuse
    of sanctions?
        Mr. Adeyemo. I am, Senator. And I think one of the things
    that I did before the Russia, Ukraine--Russia invaded Ukraine
    was Secretary Yellen asked me to do a review of the use of
    sanctions, and I conducted a review of the sanctions use from
    after 911 to this year. And I am happy to provide that
    information to you.
        But one of the things--many of the findings of that review
    have influenced the way that we have used sanctions with regard
    to Russia, Ukraine. And in the United States alone, we have
    placed a thousand sanctions on Russian entities and individuals
    over the course of Russia's invasion.
        I think one of the most important things we learned from
    the review was that sanctions were best placed when we did them
    in a multilateral fashion for a number of reasons, one being
    they had much more of an economic effect, and that is what we
    are seeing in Russia today. But it also meant that by doing it
    that way, you also had a bigger political effect, and you
    protected the U.S. economy from taking on--taking this on its
    own.
        So one of the things we have done at the President's
    direction is make sure that we do everything as much as
    possible in a multilateral way. The second point was that we
    wanted to make sure that we did serious analysis before we put
    sanctions in place, so we understand the economic consequences
    on the target, but also the economic downsides on the United
    States.
        And I want to thank you and the Members of this Committee
    for the money you provided in the supplemental, because that
    has helped us greatly to get the type of people into Treasury
    that have helped us through from economic policy to
    international affairs to domestic finance, to do a more robust
    economic analysis as we have put sanctions in place against
    Russia.
        In addition to doing that, there is a number of other steps
    that we are taking based on that sanctions review to ensure
    that we don't, to your point--or we use sanctions in a way that
    is the most effective without overusing them.
        Senator Hyde-Smith. And can you specifically tell us how
    Russia's economy, how it has affected it or how it has changed
    since Treasury's sanctions were imposed? What is the condition
    of their economy right now because of this?
        Mr. Adeyemo. To put it simply, Senator, the economy is
    smaller today than when they started the invasion of Ukraine
    because of our sanctions. And it is getting smaller every day.
    And it is also becoming harder for Russia to produce the things
    that it needs for its military, but also for its economy.
        Today, Russia--two of Russia's top tank producers, are not
    operating because of our sanctions and export controls. We know
    that it is harder for them to produce the missiles that they
    need to continue the war in Ukraine, but also to project power
    into the future.
        The Kremlin has been forced to introduce economic stimulus
    to help both their pensioners, but also others in the economy
    who are suffering.
        But the thing that we want to make clear to the Kremlin is
    that as long as the invasion of Ukraine continues, we are going
    to continue to use sanctions and export controls to constrain
    their ability to prop up their economy and to invest in their
    military going forward. And we continue to have a number of
    ways to do that in partnership with our allies and partners.
        Senator Hyde-Smith. And as horrible as this invasion has
    been and as many people that have lost lives there, why has the
    Treasury and the Administration not imposed a full trade
    embargo yet to force Putin's hand?
        Mr. Adeyemo. So, Senator, there is actually very little
    trade between the United States and Russia. We are not a major
    trading partner of the Russian Federation. The biggest trading
    partner for Russia is Europe. China is also a major trading
    partner. So what we have done is that we have taken significant
    actions here in the United States.
        For example, the President announced a ban on Russian
    energy coming into the United States. Europe is taking the
    steps to do that as well as they work towards energy
    independence.
        And our goal ultimately is to try and find additional ways
    to constrain Russia's economy going forward by going after the
    key inputs to their economy and the things that they need to
    prop up the economy and also to continue to build out their
    military industrial complex. And the best way to do that is to
    do that in collaboration, in coalition with our partners and
    allies, especially in Europe.
        Senator Hyde-Smith. So you don't think a trade embargo
    would increase that? That it is not needed?
        Mr. Adeyemo. So I think my--the thing that we are trying to
    do, Senator, is make sure that any action we take, we take it
    in concert with our allies and partners in Europe. The biggest
    economic impacts on Russia are felt by actions that are taken
    in this way, because Russia's biggest trading partner is
    Europe.
        The United States has very little trade with Russia. And we
    have taken a number of steps to limit that even further. For
    example, blocking the import of Russian energy into the United
    States and preventing many goods and services from coming from
    Russia to the United States, which leaves us in a place where
    we can continue to use our sanctions authorities and our export
    controls, but I do think that a full trade embargo from the
    United States would have a marginal impact on Russia's economy
    at best.
        Senator Hyde-Smith. And how do you analyze or how do you
    measure the effectiveness of that? Is it just truly a dollar
    amount or another reduction that you see in something? How do
    you analyze?
        Mr. Adeyemo. The way I think about it, Senator, is what
    will it do to economic growth, inflation, and Russia's economic
    future. Those are the things that I look to in terms of the
    impact.
        So the things we have tried to do is take actions that have
    reduced the amount of revenue that Russia is taking in in order
    to make sure that we are forcing them to have harder and harder
    choices to make, choices between whether you invest in propping
    up your economy or whether you invest in your military
    industrial complex.
        Every day, because of the sanctions we have already put in
    place, those choices are harder for the Kremlin, and they know
    they are going to get harder over time because they don't have
    key inputs to their economy. When you think about our export
    controls regime, for example, what we did was we built a regime
    where we prevented Russia from being able to get access to key
    technologies that they need to continue to build out their
    economy.
        And these are technologies that China doesn't have, so
    China can't give it to them. The only people who have these
    technologies are ourselves and our allies in Europe and our
    allies in Asia. So ultimately, the thing we are looking to is,
    how do we further constrain their economy and make their
    choices harder in terms of where they make investments.
        Senator Hyde-Smith. And my time is up. Thank you.
        Senator Van Hollen. Thank you, Senator. So, Mr. Deputy
    Secretary, just to follow up on that point a little bit. As you
    said at the outset, sanctions are just one tool among many. And
    I agree with you entirely. They are more effective when they
    are put in place multilaterally. Of course, the Iran sanctions
    was an example where secondary sanctions ended up having a
    multilateral effect because other countries did comply.
        Obviously, Iran is not Russia. But I do think that is an
    example of where secondary sanctions proved effective in
    achieving the goal of bringing Iran to the table to negotiate
    back in the day. And as you have pointed out, we have been
    working with our European partners. We have gotten--well, they
    also undertook the effort to reduce their reliance on Russian
    energy, especially oil, and looking for other sources of gas
    going forward.
        But when other countries increase their overall imports of
    Russian oil above what they were pre-Ukraine war, that is a
    pressure reliever on Russia. So I--true, that Russia is still
    selling that oil at a higher price than before, but it is still
    a discount to those countries and Russia is able to sell more.
        So I look forward to continuing that conversation. I just
    have about 5 minutes for questions. I want to turn to North
    Korea. And thank you. You and I got together months and months
    ago to discuss the sanctions on North Korea. You know, another
    example, whether they are an imperfect tool, but one of the
    things that we have available to increase pressure on North
    Korea.
        Thank you for taking a look at the leakage in that
    sanctions regime and the measures you took with respect to the
    two Russian banks under the authority of the Otto Warmbier on
    North Korea Nuclear Sanctions Act of 2019 that was coauthored
    by myself and Senator Toomey.
        So I appreciate your attention to that. As we discussed,
    the UN panel of experts issues an annual report, I believe,
    they issued one in March of this year, that documented a number
    of other entities and categories of entities that contribute to
    leakage in the North Korea sanctions regime. They pointed
    specifically to China based entities in shipbuilding and
    shipping. And so I would encourage you to use that as a guide.
        I recognize that in order for us to impose sanctions, that
    we have to do a lot of due diligence and make sure we dot our
    I's and cross our T's. But can you assure me that you are
    continuing to look at that UN report with an eye toward seeing
    whether they qualify for U.S. sanctions?
        Mr. Adeyemo. Let me say a word of thanks to you, Senator,
    for providing that authority. That is a mandatory authority.
    And I can commit to you that our staff is looking very closely
    at that report, as well as any information we have to see what
    we can do in terms of imposing additional sanctions on North
    Korea in light of their destabilizing activity. As you
    mentioned recently, we did place sanctions on a number of
    entities that we had discussed previously and the team that
    continues to do research and work to identify additional
    targets.
        Senator Van Hollen. I appreciate that. I would just ask you
    to look at the China based entities only because they are front
    and center and they--in terms of being identified by the UN
    panel of experts. So my last question relates to something that
    we have covered a little bit, but in a different form, which is
    ransomware.
        I know you have been very focused on this issue. Can you
    talk a little bit about what the Department of Treasury is
    doing specifically? Obviously, we have lots of Federal agencies
    that are interested in cybersecurity.
        But what the Treasury Department is doing, what you are
    doing to recover funds that have been paid to some of the
    ransomware attackers, what we are doing to prevent future
    attacks, and the role of cyber currency in this effort.
        Mr. Adeyemo. So, Senator, I think this is an issue of grave
    importance to our entire economy, and it is a global issue. And
    one of the things and something that I have been focused on, I
    think what we are trying to do is increase the cost to cyber
    criminals in terms of their criminal activity by taking apart
    the ecosystem that allows them to operate.
        In some of those cases, that ecosystem does flow through
    cryptocurrency exchanges. We have taken action against some of
    those exchanges in particular, some of them that exist in
    Russia by sanctioning them, but also by thinking through what
    we can do to better make sure that companies that are subject
    to these cyber criminals are reporting the information to us,
    so we better understand the typologies of the attacks that are
    taking place and that we are in a position to best inform
    others in industry of what is happening.
        So a big piece of this for us is both working with the DOJ
    and with the other agencies in the Federal Government to make
    sure that we are taking actions with our relevant authorities,
    which includes sanctions at Treasury, but also in terms of
    providing guidance both from OFAC and FinCEN and collecting
    information.
        So at FinCEN, as we have talked about previously, they are
    doing a great deal in order to collect information from
    industries that have been targeted by cyber criminals,
    especially those using ransomware, in order to put us in a
    position to go after those criminals, but also to go after the
    networks and ecosystems that allow them to conduct these crimes
    going forward.
        I think this is a challenge that we feel as if the goal
    will be--the goal has to be working in partnership with the
    private sector. And the thing that we need to get the private
    sector to do is to work with us in order to improve the
    cybersecurity of their systems.
        As you know, Treasury is tasked with being the agency that
    works closely with the financial services sector. And this is
    not just our biggest institutions, but it is small institutions
    all over the country as well.
        And I am spending a great deal of time with these
    institutions, making sure that they are taking the steps to
    protect themselves from ransomware attacks, but also to make
    sure that we are sharing information, because ultimately the
    goal has got to be to better understand where these criminals
    are coming from so that we can go after them.
        So it is a holistic strategy at Treasury that we have
    developed that includes enforcement, information sharing,
    working closely with not only our partners here in the United
    States Government, but also with our allies abroad in order to
    make sure that we are protecting the system.
        Senator Van Hollen. I appreciate, and I agree that we have
    to have partnerships with the private sector as well as others
    overseas. Thank you. Senator Hyde-Smith.
        Senator Hyde-Smith. I want to talk about the FinCEN's
    beneficial ownership database. We have gotten a few calls about
    this because the new regulation means that the banks, credit
    unions, and all the financial institutions, they have to gather
    this information and verify this information about the
    individuals who run a business before a new account can be
    opened, any new account.
        You know, even if it is a new account for a current
    customer. So there is a lot of concern out there about this.
    But Treasury estimates the proposed rules to implement this
    Act, the Corporate Transparency Act, will require more than 25
    million existing small businesses to spend an aggregate amount
    of more than $4 billion to submit their reports on the
    beneficial owners to the Financial Crimes Enforcement Network.
        Is this an accurate estimate of the cost of the compliance
    for small businesses? And being that small businesses are the
    backbone of the economy, is it really wise to place more
    mandates on them at a time when we are just on the verge of a
    major recession? So do you think that is accurate?
        Mr. Adeyemo. So Senator, my understanding is that the costs
    to the average small business will be quite modest. You are
    right that those numbers in terms of total small businesses in
    our country is quite large, which I think is something that we
    want to grow at the Treasury Department.
        We want to create room for more small businesses in the
    country rather than less. And what we are going to do is make
    sure that we set up this regulatory regime in a way that is as
    scaled to the challenge as possible, so that small businesses
    reporting requirements are as modest as possible in light of
    the requirements that Congress has provided us with.
        Our goal is not to create a regime that will ask for more
    information than is needed, but rather to be in a position
    where we are able to protect the National Security for those
    small business--all the small businesses in this country as
    well.
        So we are happy to--we are going to continue to work with
    small businesses who submitted a great deal of comments to make
    sure that we set up a regime that is best suited to the
    challenges that they face going forward. And we are not looking
    to set up something that is overly robust.
        Senator Hyde-Smith. When do you think that they will have
    to start complying with this rule?
        Mr. Adeyemo. So Senator, I think we are going to continue
    to work through that. I don't want to--I don't have a sense at
    the moment as to when compliance will be required. But our goal
    is to try and put out the final rule as soon as possible and to
    build a database that is useful, frankly, to law enforcement
    going forward.
        Ultimately, I know that the thing that small businesses
    that I have talked to about this rulemaking but about
    regulation in general that they view is, they want to make sure
    that they can do what they can to help protect our country as
    well. But they want to make sure that the information they
    provide is actually going to be useful to helping to protect
    people in their community and around the country.
        So in addition to putting out the rule, we want to make
    sure that we create a database that is going to be useful to
    law enforcement in their communities, but around the country,
    and also to our National Security community. So we want to make
    sure that whatever we are collecting is going to be used and it
    is going to be used effectively going forward.
        Senator Hyde-Smith. Can you talk about any exceptions?
        Mr. Adeyemo. Exceptions to the rule----
        Senator Hyde-Smith. That they would not have to comply? Is
    there any exceptions that a business would not have to comply?
        Mr. Adeyemo. So, Senator, I think the goal for us is to
    make sure that we build a database that is inclusive of as many
    companies as possible in order to protect the National
    Security. To the conversation I was having with Senator Van
    Hollen, the challenge we have is that when we create
    exceptions, what then happens is that those who want to
    illicitly move money than simply create companies that fit
    within that exception.
        So our goal really is to try and find a way to make
    something that is comprehensive, but in which the reporting
    requirements are as modest as possible in order to make it as
    easy as possible for companies to comply and for us to have a
    holistic database in this country.
        Senator Hyde-Smith. A lot of people really see this just as
    an extra mandate and as extra work. So I hope that it does
    prove to be a very beneficial tool in addressing this issue
    because it will be extremely burdensome for a lot of people.
    Thank you.
        Mr. Adeyemo. So Senator, our goal is to take your feedback
    and the feedback of countless people to mind in terms of how we
    design this to make sure that we reduce the burden as much as
    possible.
        Because we know that ultimately the reason a bipartisan
    majority of Congress passed this legislation was because they
    cared deeply about our National Security. But they also want to
    make sure that we don't overly burden our small businesses. And
    we have kept those two things in mind as we think about the
    design of this regulation.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Van Hollen. Well, thank you, Senator. Thank you,
    Deputy Secretary Adeyemo. Thank you for your service. Thank you
    for being here today, for this hearing. Our Members, the
    Members of this Subcommittee will have one week to submit
    questions for the record. They are due June 21.
        Mr. Deputy Secretary, appreciate it if your office could
    respond to those questions once they are submitted as soon as
    possible. Again, thank you for being here.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
        No questions were submitted.
        Senator Van Hollen. Thanks for your service and the
    subcommittee meeting is adjourned.

                               SUBCOMMITEE RECESS

        [Whereupon, at 4:06 p.m., Tuesday, June 14, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

      FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL
                                   YEAR 2023

                                  ----------

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.

                           NONDEPARTMENTAL WITNESSES

        [Clerk's note.--The subcommittee was unable to hold
    hearings on nondepartmental witnesses. The statements and
    letters of those submitting written testimony are as follows:]
      Prepared Statement of the American Friends Service Committee (AFSC)
        Chairman Van Hollen, Ranking Member Hyde-Smith, and Members of the
    Committee, thank you for the opportunity to submit testimony. My name
    is Daniel Jasper and I am the Asia Public Education and Advocacy
    Coordinator for the American Friends Service Committee (AFSC). We are a
    peace and social justice organization that has worked for over a
    hundred years to address the root causes of violence and conflict
    throughout the world. We appreciate the opportunity to address the use
    of sanctions before the subcommittee today, as this foreign policy tool
    now serves as a primary response to geopolitical conflict.
    Specifically, my testimony addresses (1) report language addressing the
    need for the Government Accountability Office (GAO) to conduct impact
    assessments on comprehensive sanctions regimes, and (2) the need for
    the Treasury Department's Office of Foreign Assets Control (OFAC) to
    conduct regular and comprehensive reporting on licensing procedures.
        The urgency and importance of conducting impact assessments on
    comprehensive sanctions regimes cannot be understated. In 2021, The
    Treasury Department's sanctions review found that sanctions
    designations have risen from 912 to 9,421 in the last two decades,
    representing an increase of 933%.\1\ However, despite this accelerating
    rate of usage, government agencies have indicated that the impact of
    sanctions is often unclear.
        According to a 2019 GAO report, implementing and relevant agencies
    only conduct ad hoc assessments and do not monitor ``the overall
    effectiveness of existing sanctions programs in achieving broad policy
    goals.'' The report found that officials only ``informally'' evaluate
    the overall efficacy of these measures. However, given the immense
    impact of sanctions on ordinary civilians and the global economy,
    informal evaluations are grossly insufficient. Notably, officials
    indicated that one major reason for the lack of comprehensive
    assessments is that ``there is no policy or requirement'' for this type
    of analysis.\2\ It's clear, then, that until Congress enacts such a
    policy, the executive branch is unlikely to undertake such critical
    assessments on its own accord.
        Throughout AFSC's more than one hundred-year history, the
    organization has accompanied countless communities under sanctions
    regimes and borne witness to the varied impacts of these measures. Our
    organization, for instance, was among the first to support South
    Africans in their call to sanction the apartheid regime. While the case
    of South Africa has been considered a success, we have found that
    critical to that success was that it was led by the impacted
    communities themselves.
        Conversely, we have seen that the impacts of these measures are far
    more damaging when implemented unilaterally and without the support of
    the local population. In recent decades, the U.S.' propensity to
    unilaterally impose comprehensive sanctions without the support of
    local civil society efforts has created large pockets of vulnerable
    communities throughout the world.
        These communities--in many cases entire nations like the Democratic
    People's Republic of Korea (or ``North Korea''), Iran, Venezuela, and
    Cuba--are left in a State of arrested and reversing development. Given
    the mounting global challenges such as the COVID-19 pandemic and global
    food supply chain disruptions, these communities represent an open
    wound on the collective body of humanity. It is in these conditions
    that viruses mutate, conflict arises, human rights are violated,
    humanitarian crises develop, and violent ideologies take root. It is,
    therefore, imperative that the subcommittee act to fill this immense
    gap in monitoring and evaluation as policymakers must understand the
    true impacts of these widespread tools.
        Here, I would like to stress that while administration officials
    have stated that there are humanitarian exemptions for comprehensive
    sanctions regimes, in practice these exemptions are insufficient for
    aid operations and peacebuilding initiatives.
        For instance, AFSC has operated the longest-standing NGO program in
    North Korea since 1980. Prior to the pandemic, our program worked to
    improve conservation agricultural techniques in four cooperative farms
    outside of the capital city of Pyongyang. These activities had over
    84,000 direct and indirect beneficiaries as we worked to improve food
    access for local communities.
        We have witnessed many impacts of sanctions in our work on the
    ground in places like North Korea such as a chronic shortage of basic
    supplies, increases in manual labor, decreases in the availability of
    transportation and fuel, and a general attitude of resentment toward
    the U.S. government. A recent and dramatic example of the impact of
    sanctions was the increasingly restricted space for the delivery of
    humanitarian assistance since 2017.
        As a consequence of the U.S.' ``maximum pressure'' campaign and a
    U.S.-led UN sanctions resolution, we witnessed deeply disturbing
    situations where lifesaving assistance to North Korea was delayed or
    denied by bureaucratic procedures. In at least 42 instances, aid
    operations were severely disrupted even in cases where agencies
    obtained the correct paperwork. This resulted in patients undergoing
    surgery without anesthesia, children going without nutritional
    assistance, and increased mortality risks for a population already on
    the margins. While some of these issues have been resolved, the damage
    to key humanitarian channels had been done; relationships and
    operations were largely unable to recover in the years leading up to
    the pandemic.\3\
        As the COVID-19 outbreak erupted in China in early 2020, North
    Korea largely closed its borders to incoming travel and cargo and has
    continued these border closures throughout the first half of 2022.
    Despite a ``maximum pressure'' campaign and over 2 years of a self-
    imposed embargo, North Korea's missile and weapons development
    programs--a primary target of sanctions measures--continue unabated.
    Instead, AFSC has witnessed that it is the ordinary people, who have no
    say in their government's actions, that often bear the true cost of
    sanctions.
        In 2019, Korea Peace Now, a global movement of women mobilizing to
    end the Korean War, commissioned one of the few assessments of the
    impact of sanctions on citizens. The study found that ``[s]anctions
    destabilize North Korean society in ways that have a disproportionate
    impact on women, resonating with patterns observed in other sanctioned
    countries. The resulting economic pressure tends to exacerbate rates of
    domestic violence, sexual violence, and the trafficking and
    prostitution of women.'' \4\ These types of impacts on the human rights
    and humanitarian situations of local communities are seldom captured by
    the ``informal'' impact assessments offered by administration
    officials.
        At the beginning of the Biden administration, 55 nongovernmental
    organizations--representing over 65 million supporters--sent a letter
    to the President outlining urgently needed sanctions reforms. Among the
    key recommendations included in the letter was the need to institute
    ``ongoing reporting protocols that monitor the impact and human cost of
    sanctions.'' \5\
        The administration has not taken action on these reforms to date,
    and with millions of lives in the balance, Congress must champion the
    voice of civil society and institute common sense monitoring policies.
    We strongly urge the subcommittee to adopt report language requesting
    impact assessments on all comprehensive sanctions regimes from the GAO.
        In many heavily sanctioned contexts such as North Korea, it is now
    routine for aid operations to go through extensive OFAC licensing
    procedures to send aid shipments. Throughout my tenure at AFSC, I have
    seen this process take anywhere from 9 months to 2 years.
        The application process is strenuous--often filled with vague
    guidance on high-stakes procedures. Communication and status updates
    are typically infrequent from OFAC and the process requires the aid of
    expensive legal counsel. Further, OFAC staff turnover and/or the sheer
    volume of applications mean that we are continuously educating
    policymakers and bureaucrats about our work. This means that in moments
    of humanitarian crisis (and sometimes in moments of geopolitical
    opportunity), aid workers are spending precious moments navigating red
    tape and re-hashing the most basic elements of longstanding programs
    instead of responding to critical situations.
        Consistent with the Treasury Department's commitment to
    ``modernizing'' sanction regimes and supporting legitimate humanitarian
    actors,\6\ OFAC must begin regular and transparent reporting on
    licensing procedures. Moreover, making this data publicly available
    would improve the speed and consistency of these processes, reduce
    humanitarian response time, and improve our collective understanding of
    the impacts of sanctions on civilians.
        Amid increasing global security challenges, sanctions have emerged
    as a primary tool of the U.S. in dealing with its adversaries. These
    tools are sometimes enacted with an alarmingly cavalier attitude toward
    their potentially devastating human impact, and with a severe lack of
    oversight. Given the widespread nature of these instruments, their
    impact on the global economy, and the hundreds of millions of lives
    they impact, we urge you to support these proposals in order for the
    U.S. government and public to fully understand the consequences of
    these policies.
    ---------------------------------------------------------------------------
        \1\ 2021 Sanctions Review. U.S. Department of Treasury, Oct. 2021,
    https://home.treasury.gov/system/files/136/Treasury-2021-sanctions-
    review.pdf.
        \2\ Economic Sanctions: Agencies Assess Impacts on Targets, and
    Studies Suggest Several Factors Contribute to Sanctions' Effectiveness.
    U.S. Government Accountability Office, Oct. 2019, https://www.gao.gov/
    assets/gao-20-145.pdf.
        \3\ Jasper, Daniel. ``Why the World Should Care about the COVID
    Outbreak in North Korea--38 North: Informed Analysis of North Korea.''
    38 North, 27 May 2022, https://www.38north.org/2022/05/why-the-world-
    should-care-about-the-covid-outbreak-in-north-korea/.
        \4\ ``The Human Cost and Gendered Impact of Sanctions on North
    Korea.'' Korea Peace Now. Oct. 2019, https://koreapeacenow.org/wp-
    content/uploads/2019/10/human-costs-and-gendered-impact-of-sanctions-
    on-north-korea.pdf.
        \5\ ``Civil Society Groups Call on Biden to Provide Immediate
    Sanctions Relief and Legal Reform.'' American Friends Service
    Committee, 26 Mar. 2021, https://www.afsc.org/newsroom/civil-society-
    groups-call-biden-to-provide-immediate-sanctions-relief-and-legal-
    reform.
        \6\ 2021 Sanctions Review. U.S. Department of Treasury, Oct. 2021,
    https://home.treasury.gov/system/files/136/Treasury-2021-sanctions-
    review.pdf.
    ---------------------------------------------------------------------------
                                     ______

         Prepared Statement of Coalition for a Prosperous America (CPA)
        Dear Chairman Van Hollen and Ranking Member Hyde-Smith:

        For the reasons outlined below, the Coalition for a Prosperous
    America (CPA) strongly urges the subcommittee on Financial Services and
    General Government to approve an increased appropriation for the
    Financial Crimes Enforcement Network (FinCEN) to $210.3 million for the
    Fiscal Year 2023. CPA is concerned the Corporate Transparency Act (CTA)
    will not be implemented promptly without these resources. The CTA
    prioritized our National security by denying the most egregious means
    of obscuring the actual owners of different types of property.
        The Coalition for a Prosperous America is a nonprofit, nonpartisan
    organization that represents the interests of domestic producers across
    the country engaged in agricultural production, agribusiness, and many
    manufacturing supply chains. We are concerned about foreign
    intellectual property theft, offshoring of industry, and the decline of
    the quality of jobs in the US due to the loss of supply chains.\1\
            fincen needs to implement the corporate transparency act
        The FinCEN, tasked with codifying and implementing the CTA, has
    already missed deadlines due to resource shortages.\2\ Therefore, CPA
    strongly supports the subcommittee on Financial Services and General
    Government approving increased appropriations for the Financial Crimes
    Enforcement Network (FinCEN) to $210.3 million for the Fiscal Year
    2023.
        Congress passed the Corporate Transparency Act in 2020 as part of
    the Anti-Money Laundering Act. This bipartisan landmark legislation
    sought to improve anti-money laundering laws and deny the benefits of
    anonymous shell companies.
        Hidden `beneficial' owners include foreign kleptocrats and
    criminals who pose a grave security threat to the United States. Our
    recent attempts to hold Russian kleptocrats accountable for the
    invasion of Ukraine exposed our vulnerability and our need to
    strengthen our economic' borders.' American producers need information
    regarding the competition they face from autocratic non-market foreign
    owners.
             kleptocracy threatens america's financial independence
        The FinCEN advisory on Kleptocracy and Foreign Public Corruption
    (FIN-2002-A001), released on April 14, 2022, specified that
    ``Kleptocratic regimes and corrupt public officials may engage in
    bribery, embezzlement, extortion, or the misappropriation of public
    assets, among other forms of corrupt behavior, to advance their
    strategic, financial, and personal goals.'' \3\
        These behaviors are not limited to the country of the foreign
    kleptocrats. Once a US financial enterprise becomes involved with these
    tainted funds, the enterprise has a vested interest in promoting a
    continued relationship for the sake of management of this ``property.''
    The vested self-interest divides the financial enterprises' allegiance
    from the United States' competitive economy, moral values, and even the
    Nation's national security interests.
        Consider the problems concerning London's enmeshing with Russian
    kleptocrats. A former Russian correspondent, Oliver Bullough, gives
    ``kleptocracy tours'' in the capital of the United Kingdom, showing how
    illicit funds affected the city.\4\ Despite criminal activities,
    including the 2018 poisoning of Sergei Skripal and his daughter on
    United Kingdon soil by Russia's leader Putin, British elected officials
    took few actions against the Russian kleptocrats until the invasion of
    Ukraine. In effect, London's political class was a willing hostage
    because it had become dependent on kleptocrat money.
        With a GDP of over 500 Billion (just under $650
    billion) in 2020,\5\ London's economic size did not guarantee
    protection against this form of foreign political manipulation. In
    2020, only 10 of our 50 American States had a greater GDP than
    London.\6\ It is no small leap to assume entire American States are
    vulnerable when we do not know the identities of the beneficial owners
    of investments in the United States.
        Meanwhile, our intended sanctions revealed how ill-prepared the US
    financial system is to respond to actions like Russian aggression. When
    the White House announced its comprehensive legislative package to hold
    the Russian government and oligarchs accountable for President Putin's
    war against Ukraine, Russian forces had invaded Ukraine for over 2
    months.
        The White House proposal had to take time to streamline specific
    ways to enable the seizure and implementation of the sanctions because
    they had been playing a game of whack-a-mole with Russian kleptocrat
    funds. In the future, these mechanisms should be easy to implement and
    clearly outlined against any hostile power. FinCEN's work is essential
    to simplifying the knowledge of foreign-based beneficial ownership in
    the United States.
        Despite the successful bipartisan efforts to pass the Corporate
    Transparency Act, its implementation must be accelerated, not
    restricted. FinCEN is too underfunded to be effective in its current
    funding state, and that weakness in our economic infrastructure must
    end.
        Russian kleptocrats are not the final concern as a price for our
    lack of financial transparency. Any autocratic government seeking to
    manipulate the United States would have good reason to use their
    wealthy kleptocrats to invest in it. Chinese ``greenfield'' investments
    have already been a significant concern to members of the Senate.\7\
    These Chinese-held subsidiary investments can use corporate anonymity
    to disguise non-market intent.
        The Coalition for a Prosperous America contends that the US
    underestimates our National producers' competition with non-market
    firms that sacrifice market-based results in exchange for future
    monopoly dominance or illicit political capital due to a lack of
    information.
        The Coalition for a Prosperous America does not directly oppose
    foreign financial investment. But it is crucial to know which foreign
    citizens of autocratic regimes own what property, how much is held, for
    what purpose, and how much wealth ends up in foreign jurisdictions.
        Therefore, the Coalition for a Prosperous America urges the
    subcommittee on Financial Services and General Government to approve an
    increased appropriation for the Financial Crimes Enforcement Network
    (FinCEN) to $210.3 million for the Fiscal Year 2023. The Corporate
    Transparency Act (CTA) prioritized our National security, but the
    necessary regulation and enforcement need these resources to implement
    the will of Congress as soon as possible.

        Sincerely,
        David Morse, Tax Policy Director
        Coalition for a Prosperous America
    ---------------------------------------------------------------------------
        \1\ About page Coalition for a Prosperous America. https://
    prosperousamerica.org/about/.
        \2\ Das, Himamauli, US Treasury FinCEN Acting Director, Statement
    before U.S. House of Representatives Financial Services Committee.
    April 28, 2022. https://financialservices.house.gov/uploadedfiles/hhrg-
    117-ba00-wstate-dash-20220428.pdf.
        \3\ Advisory on Kleptocracy and Foreign Public Corruption. US
    Treasury, FinCEN April 14th, 2022. https://www.fincen.gov/resources/
    advisories/fincen-advisory-fin-2022-a001.
        \4\ Keefe, Patrick Radden. How Putin's Oligarchs Bought London. New
    Yorker Magazine. March 28th, 2022. https://www.newyorker.com/magazine/
    2022/03/28/how-putins-oligarchs-bought-
    london.
        \5\ Gross domestic product of the United Kingdom in 2020, by region
    (in million GBP). Statista. https://www.statista.com/statistics/
    1004135/uk-gdp-by-region/.
        \6\ Gross Domestic Product by State, 4th Quarter 2020 and Annual
    2020 (Preliminary). US Commerce, Bureau of Economic Analysis. https://
    www.bea.gov/sites/default/files/2021-03/qgdpstate0321.pdf.
        \7\ Senator John Kennedy. Kennedy introduces bill to increase
    scrutiny over Chinese investments on U.S. soil. Press Release. October
    21, 2021. https://www.kennedy.senate.gov/public/2021/10/kennedy-
    introduces-bill-to-increase-scrutiny-over-chinese-investments-on-u-s-
    soil.
    ---------------------------------------------------------------------------
                                     ______

                 Prepared Statement of Coalition for Integrity
    Dear Chairman Van Hollen and Ranking Member Hyde-Smith:

        We at Coalition for Integrity support and encourage the
    subcommittee on Financial Services and General Government to approve
    increased appropriations for Financial Crimes Enforcement Network
    (FinCEN) in line with the President's budget request for the 2023
    fiscal year.\1\
        Coalition for Integrity is a non-profit, non-partisan 501(c)(3)
    organization. We work in coalition with a wide range of individuals and
    organizations to combat corruption and promote integrity in the public
    and private sectors both in the United States and internationally. An
    important area of focus for us is ending impunity for corrupt public
    officials and oligarchs around the world. We have previously submitted
    comments to FinCEN on a proposed rule that would address the
    vulnerability of the U.S. real estate market to money laundering and
    other illicit activity.\2\ We have also submitted comments on notice of
    proposed rulemaking (NPRM) to implement the beneficial ownership
    reporting requirements in the Corporate Transparency Act (CTA).\3\
        FinCEN remains one of the leaders entrusted with combatting illicit
    finance and addressing deficiencies in the anti-money laundering regime
    in the first U.S. Strategy on Countering Corruption.\4\ FinCEN's work
    is critical to keep the proceeds of corruption and other crimes from
    being laundered through the U.S. financial system. Deputy Secretary of
    the Treasury Wally Adeyemo expressed during his testimony before the
    subcommittee on Financial Services and General Government, the U.S.
    Treasury has ``taken unprecedented measures . . . [but] these new
    actions and initiatives require substantial resources'' to conduct the
    necessary analysis and produce a global response.\5\ These remarks echo
    FinCEN Acting Director Himamauli Das' testimony before the House
    Financial Services Committee where he explained that ``while the AML
    Act made significant improvements to the AML/CFT framework, these
    improvements come at a cost. FinCEN employs a team of about 300
    dedicated employees, including intelligence analysts, investigators,
    AML/CFT policy strategists, enforcement and compliance officers,
    outreach specialists, data analysts, regulators, and economists . . .
    [yet] FinCEN has significant staffing requests that remain unfunded.''
    \6\
        The Strategy on Countering Corruption recognizes the real estate
    and private investment sectors are vulnerable to abuse by illicit
    actors seeking to launder the criminal proceeds.\7\ FinCEN is
    responsible for rulemaking in these sectors as well as implementing the
    beneficial ownership transparency rule of the CTA.\8\ FinCEN's role
    continues to grow as it follows the money.\9\
        The Coalition for Integrity urges the subcommittee on Financial
    Services and General Government to approve the full $210.3 million in
    order for FinCEN to fulfill its duties to combat money laundering and
    its related crimes such as terrorism and promote national security.\10\
    Coalition for Integrity also endorses FACT Coalition's letter in
    support of increased FY 2023 appropriations for FinCEN.
        Thank you for your time and consideration. Please contact me with
    any questions at sshah@coalitionforintegrity.org.

        Sincerely, Shruti Shah
        President & CEO Coalition for Integrity
    ---------------------------------------------------------------------------
        \1\ The White House, Budget of the U.S. Government: Fiscal Year
    2023, Feb. 2022, https://www.whitehouse.gov/wp- content/uploads/2022/
    03/budget_fy2023.pdf.
        \2\ The letter was written in response to FinCEN's request for
    comment. See Letter from Shruti Shah, President & CEO, Coalition for
    Integrity, to Himamauli Das, Acting Dir., FinCEN, U.S. Department of
    the Treasury (Feb. 21, 2022), https://www.coalitionforintegrity.org/wp-
    content/uploads/2022/02/C4I-FinCEN-Comments-Feb-21-Real-Estate-
    Final.pdf; see also FinCEN, 86 Fed. Reg. 69, 589 (Dec. 8, 2021),
    https://www.govinfo.gov/content/pkg/FR-2021-12-08/pdf/2021-26549.pdf.
        \3\ See Letter from Shruti Shah, President & CEO, Coalition for
    Integrity, to Himamauli Das, Acting Dir., FinCEN, U.S. Department of
    the Treasury (Feb. 7, 2022), https://www.coalitionforintegrity.org/wp-
    content/uploads/2022/02/FinCEN-Comments-Feb-7-Final.pdf.
        \4\ The White House, U.S. Strategy on Countering Corruption, Dec.
    2021, https://www.whitehouse.gov/wp-content/uploads/2021/12/United-
    States-Strategy-on-Countering-
    Corruption.pdf.
        \5\ U.S. Department of the Treasury, Testimony of Deputy Secretary
    of the Treasury Wally Adeyemo before the subcommittee on Financial
    Services and General Government, Committee on Appropriations, U.S.
    Senate, June 14, 2022, https://home.treasury.gov/news/press-releases/
    jy0815.
        \6\ Statement by Himamauli Das Acting Director Financial Crimes
    Enforcement Network U.S. Department of the Treasury before Committee on
    Financial Services, U.S. House of Representatives, 12 (April 28, 2022),
    https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstate-
    dash-20220428.pdf.
        \7\ Supra note 4 at 22.
        \8\ FinCEN, 86 Fed. Reg. 69, 589 (Dec. 8, 2021), https://
    www.govinfo.gov/content/pkg/FR-2021-12-08/pdf/2021-26549.pdf.
        \9\ FinCEN, What We Do, https://www.fincen.gov/what-we-do.
        \10\ FinCEN, Mission, https://www.fincen.gov/about/mission.
    ---------------------------------------------------------------------------
                                     ______

          Prepared Statement of Congressional Fire Services Institute
    Dear Chairman Van Hollen and Ranking Member Hyde-Smith:

        On behalf of the Nation's fire and emergency services, we write to
    urge your support for vital funding to enhance life safety across the
    country by preventing illness and death related to carbon monoxide
    exposure. As you consider the Fiscal Year (FY) 2023 Financial Services
    and General Government (FSGG) Appropriations bill, we urge you to
    provide $10 million to the Consumer Product Safety Commission (CPSC)
    for grants required by section 204 of the Nicholas and Zachary Burt
    Memorial Carbon Monoxide Poisoning Prevention Act of 2022 (Public Law
    117-103).
        Carbon monoxide (CO) poisoning is a proven threat to Americans
    across the country, claiming at least 430 lives annually. Additionally,
    approximately 50,000 people are sent to emergency rooms every year due
    to unintentional poisonings, according to the Centers for Disease
    Control and Prevention (CDC).\1\ Since CO is an odorless, tasteless,
    and colorless gas, many people are initially unaware they are even
    being poisoned.
    ---------------------------------------------------------------------------
        \1\ https://www.cdc.gov/nceh/features/copoisoning/index.html.
    ---------------------------------------------------------------------------
        Carbon monoxide poisoning can result in death, but it can also
    cause lifelong neurological and cardiac issues, in addition to other
    harmful, long-term health conditions. While anyone can be harmed by
    exposure to CO, it is especially dangerous for babies, children,
    elderly individuals, and individuals with preexisting chronic health
    conditions, such as cardiovascular disease, anemia, and respiratory
    issues.
        The Nicholas and Zachary Burt Memorial Carbon Monoxide Poisoning
    Prevention Act established a grant program at CPSC to help States and
    local governments implement CO alarm installation programs and ensure
    that families across America are protected from CO poisoning. It is
    critical that this program is adequately funded to help mitigate the
    harmful-and even fatal-effects of CO poisoning.
        Our organizations look forward to working with you on funding this
    important public safety grant program.

        Sincerely,

        Congressional Fire Services Institute
        International Association of Fire Chiefs
        International Association of Fire Fighters
        International Code Council
        National Association of State Fire Marshals
        National Fallen Firefighters Foundation
        National Fire Protection Association
        National Volunteer Fire Council

        [This statement was submitted by Michaela Campbell, Director of
    Government Affairs for the Congressional Fire Services Institute]
                                     ______

                     Prepared Statement of Demand Progress
    Dear Chairman Van Hollen, Ranking Member Hyde-Smith, and Members of the
    subcommittee:

        Thank you for the opportunity to submit written testimony regarding
    the FY 2023 Financial Services and General Government Appropriations
    Bill. My organization, Demand Progress, conducts research and engages
    in advocacy focused on strengthening Congress's ability to legislate
    and conduct oversight. In furtherance of this mission, I urge the
    Committee to direct the public disclosure of in-person and virtual
    visitors to the White House and the Vice President's residence, which
    would further Congress's oversight role and greater governmental
    accountability.
                     disclosure of white house visitor logs
        Disclosure of White House visitor logs--records of in-person
    visitors to the White House--is an important element of government
    accountability and serves as a proxy for disclosure of meetings by
    lobbyists and special interests with government officials. These
    records of in-person meetings are generated by the activity of the
    United States Secret Service, which monitors visitors and clears them
    to the White

    House complex using records from two automated systems.\1\ These
    records track visitors from the initiation of a request that they be
    cleared for access until the point that they exit the White House
    complex.
        On September 15, 2009, the Obama administration began voluntarily
    disclosing the majority of the information in the White House visitor
    logs to settle then-ongoing litigation brought by civil society
    organizations over the issue of public access to these records under
    the Freedom of Information Act.\2\ In doing so, the White House
    recognized the ``right'' of ``Americans'' to ``know whose voices are
    being heard in the policymaking process.'' As implemented, the posted
    records included names of visitors, the dates and times they entered
    and exited the White House compound, and the names of the White House
    staff requesting that they be cleared for access. (Ultimately, the
    Federal courts held the records are not legally Secret Service
    property, but rather White House records, and are thus covered by the
    Presidential Records Act and not the Freedom of Information Act.)
        Under its disclosure policy, the Obama administration released
    nearly 6,000,000 records, which opened a new window into the
    functioning of the White House and helped inform the public, directly
    and through countless news stories, about who was going into the White
    House to meet with administration officials. This also offered
    opportunities for civil society groups to analyze the data in an effort
    to hold the administration accountable.
        Experience under the Obama administration's voluntary disclosure
    policy demonstrates how important these records are for public
    accountability. The Washington Post reported that the visitor records
    released by the Obama administration included ``scores of lobbyists.''
    \3\ For example, one news report examining records from an
    ``unremarkable'' day in January 2012 revealed the ``regular presence''
    of lobbyists at the White House, with ``lobbyists with personal
    connections to the White House enjoy[ing] the easiest access.'' \4\ At
    the same time, the Obama disclosure policy protected the interests of
    the president, his family, and the Nation by excluding purely personal
    guests of the president's family, records implicating national security
    interests, and records of particularly time-sensitive meetings that
    were temporarily withheld.
        Eight years later, President Trump closed that window when he came
    into the White House, leaving the public in the dark about who was
    going into ``the people's house'' and fueling multiple lawsuits.
    Regardless of who is president, information about White House visitors
    should continue to be publicly available. These records help inform
    Congress and the public about those individuals and entities that seek
    to influence presidential decision-making and Executive branch
    policies, and the basic day-to-day workings of our government--the
    information the FOIA was designed to access and the voluntary
    disclosure policy was meant to address.
        The Biden administration has chosen to reverse the Trump
    administration's decision to discontinue the voluntary disclosure
    policy. This is a welcome development, but one granted at the
    sufferance of the current administration and liable to reversal at any
    time. Congress must step in to guarantee access for itself and the
    American people.
        To that point, the House of Representatives included language in
    the Protecting Our Democracy Act, Section 2203 of H.R. 5314 (117th
    Congress), which establishes ``not later than 90 days after the date of
    enactment of this act, the President shall establish and update, every
    90 days thereafter, a publicly available database that contains covered
    records for the preceding 90-day period, on a publicly available
    website in an easily searchable and downloadable format.'' While the
    House passed H.R. 5315 on December 9, 2021, it has yet to see any
    action in the Senate. The measure paralleled legislation introduced by
    Rep. Mike Quigley in section 602 of the Transparency in Government Act
    over multiple Congresses.\5\
        Appropriators routinely require the administration to provide to
    Congress records appropriate for legislative oversight of Executive
    branch activities, including requiring the public disclosure of these
    records. White House visitor logs are quintessential oversight records.
    The House has already given its blessing for requiring White House
    visitor log disclosure and the Appropriations Committee is best
    positioned to vindicate Congress's will. I urge you to ensure
    uninterrupted congressional and public visibility into visitors to the
    White House and the Vice President's residence regardless of who
    occupies the White House. The policy adopted by the White House with
    respect to which records to disclose and which ones may be withheld is
    reasonable, by and large, and should be put into law. To that end, I
    recommend the following bill language that codifies the current White
    House policy and vindicates Congress's oversight needs and the public's
    right to know:

            White House Visitor Logs.--Not later than 30 days after the
            date of enactment of this act and updated every 30 days
            thereafter, the White House Office of Administration shall
            report to the Congress, the Senate Homeland Security and
            Governmental Affairs Committee, the House Committee on
            Oversight, and make contemporaneously available online, a
            searchable, sortable, downloadable database of visitors to the
            White House and the Vice President's residence compiled in the
            White House Worker and Visitor Entry System that includes the
            name of each visitor, the name of the individual who requested
            clearance for each visitor, and the date and time of entry for
            each visitor. Notwithstanding this requirement, the White House
            Office of Administration, after consultation with the United
            States Secret Service and the President or his designee, may
            exclude from the database any information that would (1)
            implicate personal privacy or law enforcement concerns or
            threaten national security, or (2) relate to a purely personal
            guest. In addition, with respect to a particular sensitive
            meeting, the White House Office of Administration shall
            disclose each month the number of records withheld on this
            basis and post the applicable records no later than 365 days
            later.
                 disclosure of white house virtual visitor logs
        As described above, the Biden Administration reinstated the Obama
    administration's policy to disclose the vast majority of records of
    visitors to the White House. However, many White House meetings are
    taking place virtually and are not covered under that policy. The move
    from in-person to virtual meetings in response to COVID-19 could not
    have been anticipated when the disclosure policy was first implemented
    in 2009.
        The Financial Services and General Government FY 2022
    Appropriations Bill Report (H. Rept. 117-79, p. 37) requested ``[t]he
    Executive Office of the President to explore the feasibility of
    disclosing 'virtual' visitors to the Executive Office of the President
    in a manner that provides similar information as provided for other
    visitors and that is retroactive to January 20, 2021'' and ``directs
    EOP to provide a briefing on this topic no later than 120 days after
    enactment of this act.''
        I applaud this action from the Committee and believe access to
    ``virtual'' visitor disclosures should become a permanent practice. I
    encourage the Committee to move forward to direct the Executive Office
    of the President to provide a report on the cost and implementation of
    making ``virtual'' visitor log disclosures permanent. To that end, I
    recommend the following bill language:

            White House Virtual Visitor Logs.--The White House Executive
            Office of the President, within 60 days of enactment of this
            legislation, shall provide a report to Congress on how it
            recommends implementing a requirement to make contemporaneously
            available online on at least a biweekly basis a searchable,
            sortable, downloadable database of ``virtual visitors'' to the
            White House and the Vice President's residence. A virtual
            visitor is a person who meets with Executive branch office
            staff whose normal place of work is at the White House or the
            Vice President's residence. This list should include the name
            of each visitor, the name of each person they met with, and the
            date and time of each meeting. This is intended to be an
            analogue for disclosure of White House Visitor Logs.

        As part of its report to Congress, the Executive office of the
    President may evaluate whether to include a provision that would
    exclude from the biweekly public disclosure any information that would
    (1) implicate personal privacy or law enforcement concerns or threaten
    national security, or (2) relate to a purely personal guest. In those
    instances, the Executive Office of the President shall still disclose
    the total number of records on a biweekly basis, but withhold the
    applicable record for no more than 365 days.
        The report shall also address the costs of implementing such a
    system.
        Thank you again for the opportunity to submit written testimony.
    ---------------------------------------------------------------------------
        \1\ 18 U.S.C. Sec. Sec. 3056, 3056A.
        \2\ Peter Baker, The White House Will Disclose Visitor Logs, New
    York Times, Sept. 4, 2009, available at https://
    thecaucus.blogs.nytimes.com/2009/09/04/the-white-house-will-disclose-
    visitor-logs/.
        \3\ John Wagner, Trump will keep list of White House visitors
    secret, Washington Post, Apr. 14, 2017, available at https://
    www.washingtonpost.com/news/post-politics/wp/2017/04/14/trump-to-
    discontinue-obama-policy-of-voluntarily-releasing-white-house-visitor-
    logs/.
        \4\ T.W. Farnam, White House Visitor Logs Show Lobbying Going
    Strong, Washington Post, May 20, 2012, available at https://
    www.washingtonpost.com/politics/2012/05/20/gIQA2ok4dU_
    story.html.
        \5\ See, e.g., H.R. 2055 (117th Congress).

        [This statement was submitted by Hajar Hammado, Policy Advisor]
                                     ______

              Prepared Statement of Harbor Bankshares Corporation
        Chairman Van Hollen, Ranking Member Hyde-Smith, and members of the
    subcommittee, good afternoon. Thank you for inviting me to discuss the
    important work of Community Development Financial Institutions (CDFIs).
        My name is Joseph Haskins. I am a founding Director, Chairman and
    CEO of Harbor Bankshares Corporation, headquartered in Baltimore,
    Maryland.
                                  bank history
        The Harbor Bank of Maryland (Harbor Bank) opened its door for
    business in September of 1982. The Bank had its origin dating back to
    the early 1970s when Baltimore's African American leadership was
    seeking ways to enhance economic opportunities for minority communities
    in Baltimore City.
        One of the major issues identified as limiting economic
    opportunities was the lack of access to capital and more importantly
    access to banking. To address these issues Harbor Bank was found.
        Harbor Bank focused on providing banking services in the following
    areas:
      --Minority Business/Commercial Lending
      --Faith Based (Church Financing)
      --Residential Mortgages

        Increased demands for financial services coupled with increasing
    bank regulations required and expanded operations.
        In 1992, Harbor Bank formed a holding company, Harbor Bankshares
    Corporation (The Corporation), allowing for additional financial
    services.
        Establishing the holding company led to the formation of three (3)
    subsidiaries and a non-profit Community Development Corporation (CDC).
        Today, The Corporation oversees a $350 million Bank and
    subsidiaries that directly and indirectly control another $300 million.
    While the Bank remains the primary subsidiary, the other operations
    provide the Baltimore community with access to more diverse capital and
    financial services.
        Some of the expanded services include:
      --Lower priced loans
      --Equity investment support
      --Financial literacy programs
      --Real estate development programs
      --Specialized tax benefits

        Over the past thirty-nine (39) years, the significance of the
    Corporation and Bank to the development/revitalization of communities
    is evidenced by:
      --The development of the Inner Harbor East where Harbor Bank was the
            first money to help build a hotel, office building, and
            residential housing.
      --The Canton Community where Harbor Bank was the first money to
            support a residential housing project and the converting of old
            warehouses to office and retailed space.
      --East Baltimore Development Inc. (EBDI), a non-profit, was aided by
            Harbor Bank's seed money to help an 88-acre community known for
            poverty and crime to be revitalized and become livable. Johns
            Hopkins Science Park is a part of this community's
            revitalization. This community is now a national model.
      --University of Maryland at Baltimore (UMAB) Science Park where
            Harbor Bank was the first money to support land and project
            development West of Martin Luther King Boulevard.

        As a corporation in the financial services space, our role evolved
    to that of being a catalyst and advocate for revitalizing and restoring
    abandoned, forgotten, and disregarded communities in Baltimore.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 the cdfi role
        The Corporation and Bank seeking to enhance financial services and
    bring more resources to the Baltimore Community applied over 20 years
    ago to become certified Community Development Financial Institutions
    (CDFI). Today, the Corporation and two of its subsidiaries are CDFIs.
    Also, The Corporation's non-profit CDC is a certified CDFI.
        Under the Department of Treasury's CDFI Program, the Corporation
    and its subsidiaries have participated in several of funds programs and
    have successfully won/earned:
      --13 Bank Enterprise Awards (BEA) totaling $3,893,753 which helped to
            increase lending in lower income communities. The BEA Award is
            important to CDFI Banks because of its leverage capacity.
            Records show that 90 percent of BEA monies go to the lowest
            income census tracts.
      --Financial Assistance (FA) award totaling $649,000. ($500,000 was
            for loans and $149,000 persistent poverty).
      --Nine rounds of New Market Tax Credit (NMTC) awards totaling $384
            million helping to leverage over $3 billion of development and
            create 4,000 jobs. Projects include science buildings,
            community schools, and healthcare facilities.

        Many projects involve multiple level of participation from The
    Corporation. A project could include New Market Tax Credit (NMTC),
    Harbor Bank loan and advisory services.
                                maryland profile
      --The programs of the CDFI Fund are very important to the state of
            Maryland. Maryland is home to 15 CDFIs, two of which are banks
            or bank holding companies, while two additional CDFI banks
            based in the District of Columbia provide significant services
            within the state.
        --In 2020, Maryland-based CDFIs and CDFI banks serving Maryland
                (Maryland and D.C. based) received $6.7 million in CDFI
                Financial Assistance (FA) and Technical Assistance (TA)
                awards. CDFI banks serving Maryland received $202,898 in
                BEA funds.
        --In the past 3 years Maryland-based CDFIs and CDFI banks serving
                Maryland have received $31.4 million in FA and TA awards,
                while CDFI banks serving Maryland have received $1.15
                million in BEA funds.
        --Since the CDFI Fund's inception in 1996, Maryland-based CDFIs and
                CDFI banks serving Maryland have received $119.5 million in
                total awards. In that same period, CDFI banks serving
                Maryland have received $14.5 million in BEA funds.

      --Maryland is among the poorest States in the Nation. Like other
            States with persistent poverty, Maryland has a lot to lose if
            the CDFI Fund and BEA Program do not have adequate funding.
        --Approximately 9.1 percent of all Marylanders live in poverty--
                with the poverty rate in 8 counties (Somerset, Baltimore,
                Dorchester, Allegany, Wicomico, Garrett, Kent and
                Washington) equal to or exceeding the 12.3 percent United
                States total
        --Baltimore City, Maryland's USDA designated persistent poverty
                county, has a poverty rate 160 percent higher than the
                United States total. Somerset County has a poverty rate 190
                percent higher than the United States total.
                               covid-19 pandemic
        The crisis of COVID-19 highlighted the importance of CDFI banks and
    other community based financial institutions. CDFI banks reached and
    helped the businesses that required loans to survive, the ones
    disproportionately operating in low to moderate income communities and
    desperate for banking services and in particular financial assistance.
    The government offered stimulus programs--especially the Paycheck
    Protection Program (PPP) proved to be a lifeline to many of these
    businesses, especially in the distressed communities.
        Harbor Bank stepped to the front of the line providing assistance
    through the PPP program. Harbor Bank met and assisted over 1,000
    potential PPP applicants and processed 674 applications totaling $67.5
    million. Adjusting out the 10 largest borrowers, the average size of
    Harbor's PPP loan was $52,000.
        The government met the economic call from the community and Harbor
    Bank was a part of the delivering channel.
        In summary, the Treasury's CDFI Program is vital to the growth and
    restoration of the communities that have been depressed or deprived for
    years. It is difficult to provide the capital that these communities
    need without a CDFI Program. My fear today is that the absence of the
    PPP Program will render businesses incapable of continuing on the
    survival path.
        I urge the members of the subcommittee to recognize the significant
    economic benefits of funding the CDFI Fund programs. Not only do these
    programs provide access to capital in historically disadvantaged
    regions of the country, but they do so by leveraging private
    investment. The CDFI Fund programs are a market-based strategy for
    addressing chronic economic challenges.
        I thank Chairman Van Hollen, Ranking Member Hyde-Smith, and the
    members of the Committee for the opportunity to tell you the story of
    Bank of Anguilla, the work we do, and the communities that we serve.

        [This statement was submitted by Joseph Haskins, Jr., Chairman and
    Chief Executive Officer]
                                     ______

    Prepared Statement of Leadership Engagement of the National Congress of
                                American Indians
        On behalf of the National Congress of American Indians (NCAI),
    thank you for this opportunity to provide testimony on FY 2023 funding
    for the Office of Management and Budget (OMB), Department of the
    Treasury (Treasury), the Small Business Administration (SBA), and the
    Federal Communications Commission (FCC). A brief history of Native
    American policy in the United States contextualizes the need for
    increased and improved financial services in Indian Country and greater
    representation in OMB. Specifically, the U.S. legacies of genocide,
    isolation, forced assimilation, complete termination of Tribal
    government recognition, revocation of Tribal government jurisdictional
    authority, and forced conversion of Tribal lands, contribute to the
    systemic negative socio-economic conditions in Tribal communities,
    including a lack of access to deposit and credit services in Indian
    Country. Policies failing to consider that Tribal Nations and their
    citizens do not have the same capital equity as other American
    governments and citizens cause Federal programs and initiatives to be
    less successful than intended. Federal spending policy for programs
    that benefit Native Americans must be considered holistically across
    appropriations subcommittee jurisdictions and recognize the unique
    historical and political position that was forced upon Tribal Nations
    by the United States.
        For example, other governments in this country can raise revenue
    through tax-exempt debt. The issuance of tax-exempt bonds are a
    valuable tool to raise capital because they have a longer payback
    period and lower interest, in general. Tribal Nations do not have
    parity in access to issuance of tax-exempt bonds because of the
    ``essential government function'' test, which requires a Tribal Nation
    to prove that it is going to use the money for an essential government
    function. However, the Department of the Treasury (Treasury) has not
    defined what it means, nor has the Internal Revenue Service (IRS). Tax-
    exempt debt used to be a market in Indian Country, but without an
    essential government function definition, banks backed out of those
    sort of activities. So, when Tribal governments raise capital for
    economic purposes, the same purposes we are uniquely reliant on to
    generate revenue, we are not able to use tax-exempt debt. Tribal
    governments are not able to use it for housing and other activities
    that, again, have other collateralized asset barriers when they take
    place on Trust lands. Indian Country needs patient capital. Changing
    this discriminatory practice around the issuance of tax-exempt debt
    would free up a lot of capital that other governments take for granted.
        Another example can be found in alignment of a banking and credit
    deserts map with a map of Tribal communities, which reveals a crisis
    for Tribal citizens and governments attempting to access cost-effective
    capital and banking services.\1\ Unbanked and underbanked areas in the
    United States are known as ``banking deserts.'' \2\ According to a 2013
    national survey of unbanked and underbanked households by the FDIC,
    16.9 percent of American Indian/Alaskan Native households did not have
    an account at an insured institution (unbanked) and 25.5 percent with
    an account also had to obtain financial services and products from non-
    banks, alternative financial services providers, in the prior 12 months
    (underbanked).\3\ The general U.S. population is unbanked at about 7.7
    percent and underbanked at about 20 percent.\4\ Access to credit,
    especially for small businesses, declines as the distance between the
    bank and borrower increases.\5\
        The President's FY 2023 Budget Request to Congress calls for a
    historic shift in the paradigm of Nation-to-Nation relations that seeks
    to restore the promises made between our ancestors and the United
    States in several key programs. It includes requesting mandatory
    funding for: Indian Health Service, Department of the Interior Contract
    Support Costs and Section 105(l) Tribal Leases, and water settlements
    operations and maintenance; along with a myriad of investments in
    Indian healthcare, education, public safety, natural resource
    management, and infrastructure. The Biden-Harris request represents the
    most revolutionary presidential budget and policy proposals for Tribal
    programs ever, which have long been advocated for by Tribal leaders,
    are long overdue, and are prepaid for by our ancestors. The President's
    FY 2023 Budget for Federal agencies within this subcommittee's
    jurisdiction is largely a continuation of the status quo that results
    in Native Americans ranking near the bottom of all Americans in terms
    of health, education, and employment \6\ and the persistence of banking
    deserts that inhibit economic development, but this subcommittee can
    make a substantial difference by providing critical funding for
    programs beyond the norm.
        Cross-referencing OMB Native American Crosscut data with
    Appropriations Committee reports reveals that FY 2022 spending for
    Native American programs represents approximately 0.43% of total
    regular appropriations budget authority within this subcommittee's
    jurisdiction. With Federal investment metrics such as these, it is no
    surprise that Indian Country is in a State of catastrophe by national
    standards. Despite this chronic underinvestment, Indian Country is an
    important economic driver in the U.S. Economy.\7\ Collectively, Tribal
    Nations comprise the 13 largest employers in the United States, with
    Tribal businesses employing more than 700,000 employees, providing
    economic opportunity for both Native and non-Native workers.\8\
    Evidence indicates that where Tribal Nations are successful with
    economic development that poverty rates, arrest rates, and health issue
    rates are lower, while educational outcomes and real per capita income
    are higher. Further, revenue generated on Tribal lands results in a
    spillover effect that supports local workforces and generates tax
    revenue.\9\ Ultimately, prosperity for Indian Country increases market
    penetration across sectors and productivity in the American labor
    market, as well as improves outcomes associated with other Federal
    spending that maximize value ratios of Federal input to desired
    output--in simple terms, good governance. As such, an investment in
    Indian Country is an investment in America for all Americans.
                        office of management and budget
        The United States has a unique legal relationship with Tribal
    governments--a Nation-to-Nation relationship that extends to all
    Federal agencies. On April 26, 2021, OMB released its Tribal
    Consultation Plan of Actions to: improve executive branch compliance
    with Executive Order 13175; consider establishment of a Tribal affairs
    advisor; conduct regular consultations with Tribal Nations and Tribal
    officials; develop an OMB Consultation Policy; consider providing
    additional information on Tribal funding; review its policies and
    procedures; and identify legislation of potential interest to Tribal
    Nations. Yet, OMB reports zero Federal funding for programs that
    benefit Native Americans in its FY 2015 through FY 2023 Native American
    Funding Crosscuts. Dedicated offices to promote and fulfill the Federal
    Government's trust and treaty obligations are a proven policy mechanism
    to reduce programmatic inefficiencies and improve outcomes, making
    government work better with and for Tribal Nations. Congress must
    provide OMB the resources to establish this ongoing expertise and must
    break down the historic institutions of discriminatory gatekeeping that
    harm Tribal Nations. It is a matter of fulfilling its trust
    responsibility. Congress can promote this government-wide efficiency by
    providing $2.5 million to OMB for an Office of Tribal Affairs to be
    bureaucratically located within and report directly to the OMB
    Director. The crosscutting nature of Tribal spending and policy
    throughout the Federal Government necessitates that this expertise be
    within the Office of the OMB Director.
                           department of the treasury
        Treasury maintains a long standing and significant role in matters
    that substantively impact the sovereignty and welfare of Tribal
    Nations. Treasury invests in economic development and financial
    services for Indian Country, primarily through funding and technical
    assistance for Community Development Financial Institutions (CDFIs).
    However, Treasury has other programs that make decisions affecting
    Tribal Nations and their citizens, such as the Internal Revenue
    Service, the Office of the Comptroller of the Currency (OCC), and the
    Office of Recovery Programs. The Native American Community Development
    Financial Institutions Fund Assistance Program (the NACA Program) has
    been successful and effective in infusing desperately needed financial
    capital into low-income Tribal communities through technical and
    financial assistance grants; however, the CDFI bond guarantee program,
    and the New Market Tax Credits program have not had the same success.
    Native CDFIs provide a wide range of loans to microenterprises, small
    businesses, consumers, and homeowners; financial education and
    entrepreneurial development training; small business planning and
    homebuyer education; and counseling on credit, foreclosure prevention,
    debt relief, and other ways to improve financial capacity. Due to
    limited funding, far fewer Native CDFI applications are approved than
    submitted. Barriers to capital access, aggravated by the COVID
    pandemic, necessitate greater funding for existing Native CDFIs and
    awards to more grant applicants to generate more loans, financial
    literacy, and entrepreneurial development counseling in Indian
    communities.
        Although regular appropriations funding levels for Treasury
    programs increased in FY 2021 for the first time in more than a decade,
    the increase has not kept pace with CDFI and Native CDFI growth during
    that same period, resulting in lost economic opportunities throughout
    Indian Country. Even with the increase in FY 2021 (which was flat-
    funded for FY 2022), cross-referencing OMB Native American Crosscut
    data with Appropriations Committee reports reveals that FY 2022
    spending for Native American programs represents approximately 0.15% of
    total regular appropriations budget authority provided for Treasury
    within this subcommittee's jurisdiction. The subcommittee should
    provide at least $30 million to the CDFI Fund Program Account for
    Native CDFIs and $2.5 million for an Office of Tribal Affairs within
    the Office of the Secretary of the Treasury. Establishment of a
    permanent Office of Tribal Affairs within the Office of the Secretary
    of the Treasury will promote institutional expertise and guidance
    across Treasury policy and activity. Congress and Treasury should
    welcome this opportunity to reduce costs and increase efficiencies
    associated with necessary operations of the agency, while
    simultaneously maximizing the American taxpayer's investment in this
    country and growing local, regional, and national economic
    productivity.
                         small business administration
        SBA focuses on capital access, contracting, and entrepreneurial
    development. The SBA's Entrepreneurial Development budget includes a
    small line item for Native American Outreach that funds the Office of
    Native American Affairs (ONAA) which coordinates all SBA program
    activities to help Tribal Nations and Native-owned businesses navigate
    SBA contracting, business assistance and lending programs. In the COVID
    pandemic's wake, the ONAA needs more outreach funding to engage in
    multi-agency workshops and Native supplier initiative events, encourage
    greater use of SBA loan guarantees, assist Native recipients of
    Paycheck Protection Program loans and disaster loans, and strengthen
    Native contractors' participation in the SBA's 8(a), HUB Zone, and
    other small business contracting programs. In order to provide
    meaningful services, outreach, and education that is national in scope
    to Tribal Nations and Native-owned businesses, this subcommittee should
    provide at least $5 million for the SBA's ONAA.
                       federal communications commission
        Tribal lands experience lower rates of both fixed and mobile
    broadband deployment as compared to non-Tribal areas of the United
    States, particularly in rural areas.\10\ The FCC Office of Native
    Affairs and Policy (FCC-ONAP) States that, ``[u]nderstanding the
    complexity of the digital divide in Indian Country requires an
    appreciation of the unique challenges facing Tribal Nations, which
    include deployment, adoption, affordability, and access to spectrum, as
    well as lack of investment dollars and access to credit and start-up or
    gap financing.'' Through this Tribal engagement, the FCC has revamped
    regulations to assist in bridging the digital divide on Tribal lands.
    However, the FCC-ONAP office was created without dedicated funding, and
    it was not until passage of the FY 2014 Omnibus that the Office
    received $300,000 to support its Tribal consultation and training
    directives, an amount that is not commensurate with the scope of the
    mission tasked. This subcommittee should expressly provide $2.5 million
    to FCC-ONAP to promote an office with the resources to address barriers
    that exacerbate the digital divide in Indian Country.
                                   conclusion
        Our people have paid for every penny obligated to Indian Country
    hundreds of times over by providing this nation with our land. In order
    to uphold this Nation's promises to its people, it must first uphold
    its promise to this land's First People. We expect to continue to be
    treated as sovereign nations and with governmental parity. When we work
    together we can achieve so much. We must now continue down that path of
    Nation-to-Nation growth, and only then will all of our people be able
    to fully flourish.
    ---------------------------------------------------------------------------
        \1\ Native American Finance Officers Association (NAFOA), Comments
    Re: Community Reinvestment Act Modernization, Docket ID: OCC-2018-0008,
    2.
        \2\ Donald P. Morgan, Maxin L. Pinkovskiy, and Bryan Yang, Banking
    Deserts, Branch Closings, and Soft Information, March 7, 2016, https://
    libertystreeteconomics.newyorkfed.org/2016/03/banking-deserts-branch-
    closings-and-soft-information.html.
        \3\ Federal Deposit Insurance Corporation, 2013 Federal Deposit
    Insurance Corporation National Survey of Unbanked and Underbanked
    Households, 16, https://www.fdic.gov/householdsurvey/2013report.pdf.
        \4\ Id.
        \5\ Id.
        \6\ U.S. Commission on Civil Rights, Broken Promises: Continuing
    Federal Funding Shortfall for Native Americans, 1, available at:
    https://www.usccr.gov/files/pubs/2018/12-20-Broken-
    Promises.pdf, accessed on: May 25, 2022.
        \7\ Patrice H. Kunesh, Getting real about Indian Country--
    surprising progress in the heartland, https://indiancountrytoday.com/
    opinion/getting-real-about-indian-country-surprising-progress-in-the-
    heartland, Accessed: April 6, 2022.
        \8\ Id.
        \9\ Id.
        \10\ See FCC, Fixed Broadband Deployment Data from FCC Form 477,
    available at https://www.fcc.gov/general/broadband-deployment-data-fcc-
    form-477; FCC, Mobile Deployment Form 477 Data, available at https://
    www.fcc.gov/mobile-deployment-form-477-data.

        [This statement was submitted by Larry Wright, Jr., Director]
                                     ______

                     Prepared Statement of Lincoln Network
    Chairman Van Hollen, Ranking Member Hyde-Smith, and Members of the
    subcommittee:

        We are writing on behalf of Lincoln Network to encourage this
    subcommittee to provide additional funding to the Federal Trade
    Commission (FTC) and to direct funds for the hiring of additional staff
    technologists.
        In March, Congress passed the Consolidated Appropriations Act that
    appropriated $376.5 million to the FTC for FY 2022.\1\ The FTC
    requested that this subcommittee appropriate $490 million for FY 2023,
    an increase of $139 million.\2\
        The report language from the House Appropriations Committee for FY
    2023 recommended fully funding the FTC's requested budget at $490
    million.\3\ This report also encourages the Commission to address
    several concerns related to the technology industry, including
    deceptive data collection practices, fraud related to cryptocurrencies,
    online misinformation, and online privacy for children. Addressing
    these concerns requires deep technical expertise that is currently
    lacking at the FTC.
        In its own appropriations bill, the subcommittee should fully fund
    the FTC's FY 2023 budget request and specify that a significant portion
    of this funding should go toward bolstering technical expertise at the
    Commission.
                                   background
        The FTC, in conjunction with the Department of Justice Antitrust
    Division, is primarily responsible for enforcing laws related to unfair
    and deceptive business practices and other anticompetitive activity.
    Over the past few decades, the Commission has increasingly exercised
    its authority over the technology industry. The Commission regularly
    scrutinizes the business practices of tech firms and reviews mergers
    and acquisitions in the technology sector. As the size and complexity
    of the tech industry have grown, it is essential that the FTC has
    sufficient technical expertise to properly evaluate consumer impacts in
    this sector.
        Recently, the FTC has taken dozens of enforcement actions against
    tech firms, particularly regarding user privacy and data security
    practices.\4\ The Commission has settled cases against Google,
    Facebook, Twitter, and several other tech companies recently for
    privacy violations and for violating previous orders. Perhaps most
    significantly, the FTC is currently engaged in litigation against
    Facebook (now Meta), alleging that the company has abused its
    ``monopoly power'' to implement ``an anticompetitive scheme that
    prevented differentiated and innovative firms from gaining scale, thus
    enabling Facebook to maintain its dominance.'' \5\ All of these actions
    require the Commission to have a firm grasp of the technical issues at
    play in addition to legal and economic factors.
        The FTC's technical expertise, while great, tends to lag behind
    other global enforcement agencies. For example, the FTC's Division of
    Privacy and Identity Protection has 40-45 employees. The United
    Kingdom's and Ireland's enforcement agencies have over 700 and 150
    employees, respectively.\6\ While this comparison is imperfect,
    comparing one Division to entire foreign agencies, this analysis
    highlights that the FTC's technical staff deserves to be fully funded.
        Increasing technical expertise at the FTC will not necessarily
    result in more cases being brought against tech firms. The primary
    value-add for investing in technical expertise at the Commission is to
    help its lawyers and economists more accurately evaluate potential
    consumer harms, establish enforcement priorities, and develop
    technological solutions to operational challenges.
                  the need for technical expertise at the ftc
        The FTC has long recognized the need for expanded technical
    capacity, both for enforcement and general operations. In its FY 2023
    budget request, the Commission asked Congress to increase its
    appropriation by $65.4 million to hire 300 additional full-time
    equivalent employees. Among other areas, this increase would go to
    support increasing technology enforcement capacity and developing
    technological solutions to casework and litigation challenges.\7\ With
    regard to enforcement, the Commission further explained:

            In FY 2020, the Commission established the Bureau of
            Competition's Technology Enforcement Division (TED) to
            reinvigorate and refocus BC's
            commitment to identifying and challenging anticompetitive
            mergers and conduct in complex and increasingly pervasive
            technology markets. While pursuing this work, FTC staff are
            severely outmatched by the resources that dominant technology
            firms can deploy, such that the number of attorneys and experts
            working for defendants can outmatch FTC by ten to one.\8\

        Federal agencies are often outgunned when engaging in enforcement
    actions against tech firms. Giving the FTC the resources it needs to
    hire more technical experts for the TED and other tech-focused
    departments would undoubtedly help it more effectively and efficiently
    police anticompetitive activity in tech markets.
                  the need for qualified economists at the ftc
        The Bureau of Economics is crucial to the Commission's antitrust
    and consumer protection missions. It ``helps  . . .  evaluate the
    economic impact of  . . .  actions by providing economic analysis for
    competition and consumer protection investigations and rulemakings.''
    \9\ The Bureau employs numerous Ph.D. economists, research analysts,
    accountants, and other staff necessary to support the analysis it
    provides to the Commission.\10\ Throughout the decades, the Bureau's
    responsibilities have increased to include analysis supporting
    antitrust investigations, merger review, and support for other types of
    investigations and cases.
        In addition to increased technical staffing levels, the FTC's
    budget justification requests that Congress provide funding for 20
    full-time employees to ``provide increased support and economic
    analysis  . . .  and to increase the amount of economic analysis that
    guides the Commission's consumer protection and competition policies
    and enforcement.'' \11\ Within the justification document, the
    Commission expresses a desire for the prospective full-time employees
    to be economists focused on antitrust, including ``merger and nonmerger
    enforcement investigations and litigation, and research to help the FTC
    focus antitrust enforcement to maximize the agency's ability to
    maintain competitive markets.'' \12\
        The Commission's primary role is protecting consumers, not solely
    competition. Even the competition model should ask the question of
    whether the presence or absence of competition harms consumers. The
    Commission and Bureau should be focused on ensuring that government
    practices do not harm consumers by restricting entry, limiting
    competition, chilling innovation, or restricting choices.\13\
        Given the Bureau's nature supporting the Commission's work, the
    core request seems appropriate. However, this subcommittee should focus
    on the Bureau and Commission's broader work. While additional staff
    should help the Commission's antitrust efforts, this subcommittee
    should make it clear that any new staff should be used to support the
    Bureau's broader mission of protecting consumers.
                                recommendations
        This subcommittee should fully fund the FTC's FY 2023 Budget
    Request.
        As we have argued previously, complex technical challenges and
    increased workloads at the FTC necessitate additional resources.\14\
    Just as their House counterparts did, this subcommittee should fully
    fund the FTC's FY 2023 budget request of $490 million. While funding
    alone is insufficient, granting the Commission the resources to expand
    its technical capacity would result in more effective supervision of
    tech markets and more efficient operations at the FTC.
        This subcommittee should include language in the FY 2023
    appropriations bill that directs funds toward hiring additional
    technical staff.
        The need for additional technical capacity at the FTC is clear and
    immediate, and it is incumbent upon appropriators to ensure that the
    Commission has the resources it needs to address this challenge.
    Specifically, this subcommittee should direct the necessary funds of
    the $65.4 million requested for additional, full-time employees toward
    hiring individuals with technical or economics expertise. These new
    roles could help close capacity gaps within the Technology Enforcement
    Division, Division of Privacy and Identity Protection, Office of
    Technology Research and Investigation, Bureau of Economics, regional
    offices, and other relevant parts of the FTC. In all cases, this
    subcommittee should also ensure that the Commission remains committed
    to its original and statutory purposes of protecting consumers, with a
    focus both on government practices and private sector practices that
    harm consumers.
    ---------------------------------------------------------------------------
        \1\ Consolidated Appropriations Act, 2022, Public Law 117-103
    (2022).
        \2\ Federal Trade Commission, Federal Trade Commission Fiscal Year
    2023 Congressional Budget Justification (March 2022), p. 8, https://
    content.mlex.com/Attachments/2022-04-04
    _X75ZUQW17T5GT2LS/FTC%20-%20FY23%20CBJ.pdf.
        \3\ Financial Services and General Government Appropriations Bill,
    2023, p. 69-72, (2022), https://docs.house.gov/meetings/AP/AP00/
    20220624/114951/HMKP-117-AP00-20220624-SD002.pdf.
        \4\ Federal Trade Commission, FTC Report to Congress on Privacy and
    Security, (Sept. 13, 2021), p. 2 (focusing on efforts on health apps;
    accuracy of data for housing, employment, and credit;
    videoconferencing; and education technology, https://www.ftc.gov/
    system/files/documents/reports/ftc-report-congress-privacy-security/
    report_to_congress_on_privacy_and_data_
    security_2021.pdf).
        \5\ Federal Trade Commission v. Facebook, Inc., 1:20-cv-03590-JEB
    (2021).
        \6\ Ibid., p. 7.
        \7\ Federal Trade Commission, Federal Trade Commission Fiscal Year
    2023 Congressional Budget Justification (March 2022), p. 10, https://
    content.mlex.com/Attachments/2022-04-04_X75ZUQW17T5GT2LS/FTC%-
    %FY23%CBJ.pdf.
        \8\ Ibid.
        \9\ Federal Trade Commission, ``Bureau of Economics,'' https://
    www.ftc.gov/about-ftc/bureaus-
    offices/bureau-economics.
        \10\ Michael Salinger and Paul Pautler, ``The Bureau of Economics
    at the US Federal Trade Commission,'' Federal Trade Commission, April
    2006, https://www.ftc.gov/sites/default/files/
    attachments/careers-bureau-economics/06beover.pdf.
        \11\ See 2023 Budget Justification, p. 9-10.
        \12\ Ibid., p. 13.
        \13\ Paul A. Pautler, ``A History of the FTC's Bureau of
    Economics,'' September 8, 2015, p. 82, https://papers.ssrn.com/sol3/
    papers.cfm?abstract_id=2657330.
        \14\ ``Providing Resources for the Federal Trade Commission to
    Promote Healthy Digital Markets and U.S. Leadership in Technology
    Governance'' (2021), https://lincolnpolicy.org/wp-content/uploads/2021/
    02/FTC-approps-letter-final.pdf.

        [This statement was submitted by Jonathon Hauenschild, M.A., J.D.,
    Policy Counsel and Luke Hogg, Policy Manager]
                                     ______

         Prepared Statement of the National Association of Drug Court
                                 Professionals
        Chairman Van Hollen, Ranking Member Hyde-Smith, and distinguished
    members of the subcommittee, I am Meg Kaiser, prevention associate with
    the Harford County Office of Drug Control Policy in Maryland. I am
    honored to have the opportunity to submit my testimony on behalf of
    40,000 treatment court professionals working in adult drug courts,
    family treatment courts, juvenile drug treatment courts, Tribal healing
    to wellness courts, impaired-driving courts, and veterans treatment
    courts. I am requesting Congress provide level funding of $3 million to
    the authorized Drug Court Training and Technical Assistance Program
    (Public Law 115-271) at the Office of National Drug Control Policy for
    fiscal year 2023.
        Across the country and in my home state of Maryland, treatment
    courts are on the front lines of saving lives, reuniting families,
    cutting crime, and saving money. They unite public health and public
    safety to transform the justice system's response to substance use and
    mental health disorders by offering an evidence-based alternative to
    incarceration that combines individualized, evidence-based treatment
    with accountability. Continued education and training for the
    multidisciplinary court team (which includes the judge, treatment
    providers, defense, prosecution, law enforcement, community
    supervision, and others) is vital to ensuring fidelity to the
    successful treatment court model. In fact, research shows treatment
    courts whose teams participate in training see a 55% reduction in
    recidivism among program graduates.
        I know firsthand the importance of training and technical
    assistance (TTA) for treatment courts. Prior to becoming a prevention
    associate, I served as drug court case manager. In my current role, I
    work closely with the Harford County Drug Court and see how training
    and technical assistance (TTA) at the local and national level pays off
    in ensuring fidelity to the treatment court model. Our participants
    come from different backgrounds and face unique barriers to recovery
    when they enter the program. From incentives and sanctions to
    medication for addiction treatment and so many other relevant topics,
    training is fundamental to enabling the court team to effectively serve
    the unique needs of program participants.
        I not only attest to the importance of TTA in my professional
    capacity but also in my personal capacity. In 2018, I graduated from
    the Harford County Drug Court. I had casually and sporadically used
    substances in college but spiraled into heavy substance use in 2012
    after I was sexually assaulted. I became dependent on opiates as I
    self-medicated my trauma, and my life unraveled. I was dismissed from
    the University of Maryland right before my senior year, and I began
    stealing to support my addiction. For a long time, I managed to conceal
    the trauma of my sexual assault and my substance use disorder from my
    family, but eventually I could not hide my struggle. While in
    treatment, I resumed use after receiving news that a dear friend had
    overdosed. I don't like to think about where my downward trajectory
    could have landed me. Had my parents not turned me in, and the drug
    court program not accepted me, I'm confident I wouldn't be here today.
        I'm grateful every day for the redirection my life took once I got
    into drug court. The treatment, supervision, coaching, and recovery
    support from the multidisciplinary treatment court team helped turn my
    life around. The court team was highly functional and well trained.
    They worked together seamlessly to respond to every bump in the road
    and ensure I had the tools I needed to find and sustain recovery. The
    treatment providers developed an individualized treatment plan for me
    that included medication for opioid use disorder to help stabilize me
    in early recovery. More than 3 years after graduating, I'm in long-term
    recovery without medication, and I'm once again a proud daughter,
    sister, friend, taxpayer, and employee. I have dedicated my career to
    helping people turn their lives around and stay in recovery.
        Now more than ever, TTA are needed to educate treatment courts on
    critical issues such as medication for addiction treatment, overdose
    prevention, and equity and inclusion. Understanding and implementing
    best practices improves service delivery and outcomes and helps
    treatment courts address the most pressing issues facing our justice
    system.
        I am one of 1.5 million people who have found long-term recovery
    through treatment courts. Supporting TTA for treatment courts is
    critical to ensuring these programs continue providing quality,
    evidence-based care to participants struggling with mental health and
    substance use disorders. I encourage this committee to provide level
    funding of $3 million for the Drug Court Training and Technical
    Assistance Program at the Office of National Drug Control Policy.

        [This statement was submitted by Margaret ``Meg'' Kaiser,
    Prevention Associate, Harford County Office of Drug Control Policy,
    Maryland]
                                     ______

            Prepared Statement of the National Coalition for History
        The National Coalition for History (NCH) supports the Biden
    administration's recommended funding level of $426.5 million for the
    National Archives and Records Administration's (NARA) Operating
    Expenses (OE) budget in fiscal year (FY) 2023, which is an increase of
    $38.2 million from the FY 22 level of $388.3 million.
        NCH also supports the Administration's base funding level of $9.5
    million in FY 23 for the National Historical Publications and Records
    Commission (NHPRC) grants program. That represents an increase of $2.5
    million over the FY 22 base level of $7 million. The NHPRC received a
    total of $12.3 million in funding in FY 22. However, $5.3 million of
    that was the result of congressionally directed funding which we expect
    will fluctuate from year to year.
        The National Coalition for History (NCH) is a consortium of 43
    organizations that advocates and educates on Federal legislative and
    regulatory issues affecting historians, archivists, political
    scientists, documentary editors, teachers, students, genealogists, and
    other stakeholders. As researchers, teachers, and conservators of
    American history and culture, we care deeply about the programs and
    activities of NARA and the NHPRC.
        NARA has reached an inflection point. Recently, David S. Ferriero
    retired after 12 years as Archivist of the United States (AOTUS). We
    want to recognize and thank him for his leadership, dedication, and
    integrity during what have been challenging times for NARA.
        The new Archivist will face tremendous challenges in both the short
    and long term. For far too long, NARA has been neglected and
    underfunded. NARA has made progress but continues to struggle with the
    transition from paper to electronic records. As the quantity of
    material increases exponentially, NARA will have difficulty keeping up
    with Federal records generated each year, let alone tackling the
    massive backlog of older, historically important paper records that
    should be digitized. Perhaps most importantly, the quality and quantity
    of services provided to our citizens will further deteriorate if not
    addressed in this budget cycle. There are indications that NARA may be
    unable to manage these important responsibilities, a trend that has
    only been exacerbated by the pandemic, the ensuing shutdown and delayed
    restoration of on-site services. This limitation owes less to
    management issues than to inadequate funding.
        NARA's operating expenses (OE) budget has remained stagnant for
    more than a decade at a time when the transition to use of electronic
    records by Federal agencies is well underway. Investment in human
    capital, including professional archivists, is vital for providing an
    elevated level of service to the public. For too long Congress and the
    administrations of both parties have, unfortunately, viewed NARA as a
    mere housekeeping agency, rather than as a vital agency that ensures
    transparency, efficiency, and historical documentation for the Nation.
        NARA's FY 22 operating expenses budget is $388 million, which is
    only $3 million more than the FY 18 level of $385 million. NARA
    requires a level of appropriations commensurate with its vastly
    expanded responsibilities. This chart provides a summary of the NARA OE
    and NHPRC budgets over the past decade.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        In inflation-adjusted dollars, NARA's OE budget has declined for
    more than a decade.--No Federal agency can absorb such significant
    reduction in funding without concomitant decreases in public services.
    Even before the pandemic, NARA had to reduce hours at its research
    rooms.
        We fully understand, and agree, that NARA must prioritize the
    safety of its staff, researchers, and visitors and we realize they are
    doing the best they can under unusual and trying circumstances.
    Currently, customers must make appointments in advance to visit NARA's
    research rooms and the wait time varies from location to location. In a
    vast number of cases, researchers working on a project cannot complete
    their work in a single visit, thus increasing the time required to
    conduct research.
        Researchers may be coming from some distance to use the records at,
    for example, a presidential library, and being unable to conduct
    research on consecutive days is not merely an inconvenience. It may
    make it impossible to do the research at all. To its credit, NARA has
    tried to enhance the customer experience by allowing the researcher to
    request the records to be pulled in advance. However, the current
    system simply cannot be allowed to continue indefinitely.
        We appreciate the additional funds you provided to address the
    backlog of over 500,000 requests for veteran's records at the National
    Personnel Records Center (NPRC). However, these are not the only
    category of NARA's holdings that are experiencing delays. There are
    tremendous backlogs in responding to Freedom of Information Act (FOIA)
    requests. In addition, NARA is also facing backlogs in the
    declassification of records hampering the ability of historians and
    others to perform research. Delays in the processing of records and
    responses to records requests at presidential libraries have also
    increased.
        In recent years Congress and the executive branch have placed
    additional responsibilities on the agency without providing the funding
    necessary to assume these functions. These include transitioning from
    the preservation and storage of paper records to the preservation and
    storage of electronic records. NARA also faces the continued addition
    of presidential libraries. Each new presidential library created and
    placed under NARA's care adds additional costs for staff, maintenance,
    and records management.
        The Federal Government's transition to electronic records,
    including email, has exponentially increased the number of records that
    NARA must process and catalog. In 2019, NARA and the Office of
    Management and Budget (OMB) announced that the agency will no longer
    accept paper records from Federal agencies as of December 31, 2022. We
    are concerned that with diminished resources and the impact the
    pandemic had on its ability to perform even its most basic functions,
    NARA will not be prepared to continue this transition without serious
    disruptions. We doubt that this deadline can be met without additional
    resources, both human and technological.
        Despite the additional appropriations you provided for this purpose
    in the FY 22 budget, NARA lacks the funding needed to meet the
    imperative for digitization and accessibility. This need was made even
    more obvious during the pandemic which showed the public's expectation
    that the Federal Government's records can be easily found on the
    internet. In addition, the need to manage large volumes of textual
    records is not diminishing. Proactively funding NARA's records
    management programs ensures that agencies operate more efficiently and
    that permanent records are preserved. We urge you to provide NARA the
    additional funding necessary to ensure a seamless transition to all
    digital recordkeeping in the coming years.
        While not an issue that can be addressed in the appropriations
    process, we urge you to press the authorizers on the House Committee on
    Oversight and Reform to pass legislation strengthening and clarifying
    the Presidential Records Act (PRA). Events of the past few years have
    shown how woefully inadequate the statute has proven in ensuring that
    the complete historical record of an administration is preserved.
    Increased accountability and oversight are necessary.
        national historical publications and records commission (nhprc)
        The National Historical Publications and Records Commission (NHPRC)
    is the grant-making arm of NARA. It enables the National Archives to
    activate resources that connect the American people with archival and
    historical materials of deep significance to the present. Archive-
    specific work includes the preservation and access of electronic
    records and disaster preparedness for vulnerable collections.
    Historical grants provide for the creation of documentary collections
    (websites, podcasts, books, databases, transcripts, and audio
    resources) of nationally significant groups and individuals. Some
    examples include the documentary histories of people like George
    Washington, Willa Cather, Thomas Edison, Frederick Douglass, Walt
    Whitman, Albert Einstein, Martin Luther King, Jr., and Eleanor
    Roosevelt. NHPRC grants also fund the curation of content pertaining to
    noteworthy institutions like the early Supreme Court, the First Federal
    Congress, and the Freedmen's Bureau. In addition, the NHPRC has funded
    an ongoing project to make the papers of the Founding Fathers available
    for free online.
        NCH supports the Administration's minimum base funding level of
    $9.5 million in FY 23 for the NHPRC. That represents an increase of
    $2.5 million over FY 22 base level of $7 million. The NHPRC received a
    total of $12.3 million in funding in FY 22. However, $5.3 million of
    that was congressionally directed pass-thru funding, an amount which we
    expect will fluctuate from year to year. $9.5 million would enable
    continued support of ongoing programs and modest investment in new
    ones.
        Thank you for the opportunity to present our views on the FY 23
    budgets of NARA and the NHPRC.

        [This statement was submitted by Lee White, Executive Director]
                                     ______

               Prepared Statement of National Security Counselors
        Chairman Van Hollen, Ranking Member Hyde-Smith, and members of the
    Financial Services and General Government Appropriations subcommittee,
    thank you for the opportunity to provide this testimony.
        This testimony will discuss an area where I believe that
    Congressional action is needed to address a subtle issue which
    nonetheless has significant deleterious effects for transparency and
    accountability, namely, agencies' expansive use of secret filings in
    Freedom of Information Act (``FOIA'') cases and the resulting inability
    of journalists, academics, and members of the public to access these
    court filings years or even decades later.\1\
        FOIA cases are somewhat unique in civil litigation, due to the fact
    that the agency being sued must demonstrate through admissible evidence
    that information must be withheld from disclosure without disclosing
    the information in question. Agencies generally do so by submitting
    sworn declarations from FOIA officers which ``must prove that each
    document that falls within the class requested either has been
    produced, is unidentifiable, or is wholly exempt from the act's
    inspection requirements.'' \2\ These declarations ``must be 'relatively
    detailed' and nonconclusory,'' \3\ but ``would not have to contain
    factual descriptions that if made public would compromise the secret
    nature of the information.'' \4\ In some cases, an agency will assert
    that it cannot meet its burden on the public record, and in such cases
    it generally attempts to file a declaration in camera and ex parte so
    that only the judge-and not the plaintiff or their attorney--sees it.
    This mechanism is an imperfect compromise at best, but it is
    increasingly overused and abused by agencies with the passive
    acquiescence of judges, who cite the presumption of good faith that
    they must afford to agency declarations and virtually never refuse to
    accept such filings.
        It is not unheard of for a judge to grant summary judgment to an
    agency solely on the basis of an in camera declaration, in which the
    agency kept from public view not only the facts which would support its
    case but even the legal arguments. In such cases, the actual legal
    brief for the agency's motion includes little more than boilerplate
    language about the burden of proof and the proper conduct of FOIA
    litigation, and then refers the judge to the in camera declaration for
    all the relevant analysis. For instance, one of the FOIA cases
    involving the memos written by former Federal Bureau of Investigation
    (``FBI'') Director James Comey about his meetings with former President
    Trump was decided solely on the basis of in camera testimony, where
    even the arguments were kept secret from the plaintiffs (although the
    judge in that case did agree to review the memos themselves in camera,
    which is very much the exception to the general practice).\5\ In
    another such case, the judge found not only that the declaration filed
    in camera by the FBI was proper, but that the plaintiff did not even
    deserve a chance to file an opposition brief because ``the evidence
    presented in camera was so conclusive as to the questions presented
    that further briefing and argument was clearly unnecessary.'' \6\
    Bizarrely, that same judge had the following to say about this
    purportedly incontrovertible proof:
        Nonetheless, the court must state that Hardy's unredacted
    declaration is the quintessence of bureaucratic obfuscation. While
    attempting to decipher its meaning, I recalled one of Orwell's
    observations when confronted with such writing:

            As soon as certain topics are raised, the concrete melts into
            the abstract and no one seems able to think of turns of speech
            that are not hackneyed: prose consists less and less of words
            chosen for the sake of their meaning, and more and more of
            phrases tacked together like the sections of a prefabricated
            henhouse.

        George Orwell, ``Politics and the English Language,'' in A
    Collection of Essays 162, 165 (Anchor Books 1954). Which begs the
    question, why did the government resort to hackwork here? Orwell again:

            The inflated style is itself a kind of euphemism. A mass of
            Latin words falls upon the facts like soft snow, blurring the
            outlines and covering up all the details. The great enemy of
            clear language is insincerity. When there is a gap between
            one's real and one's declared aims, [the writer] turns, as it
            were, instinctively to long words and exhausted idioms, like a
            cuttlefish squirting out ink.\7\

        My research has determined that the number of such filings has
    shown a slow increase over time, from approximately 15 instances in
    1994 to the high-water mark of approximately 56 in 2017.\8\ I was only
    able to identify three instances of a judge denying an agency's request
    to file an in camera declaration since 1993. My personal litigation
    experience has suggested an increase in the expansiveness of agencies'
    claims that information must remain secret. In the past, I have
    occasionally received redacted versions of such declarations through
    FOIA or similar means, despite the fact that the agency insisted they
    could not possibly be filed on the public record without serious
    consequences.\9\ Some of the newly released information has been
    mundane, and some has been of significant historical importance. For
    example, in the landmark FOIA case Weberman v. NSA, the National
    Security Agency (``NSA'') argued that it could neither confirm nor deny
    the existence of records about a telegram that Jack Ruby was alleged to
    have sent to Havana the year before the assassination of President
    Kennedy.\10\ The district court and the 2nd Circuit granted summary
    judgment to NSA on the basis of an in camera classified declaration,
    and it was not publicly revealed whether NSA had intercepted such a
    telegram. However, in 2011, I obtained a redacted version of the
    classified declaration from NSA, which revealed for the first time that
    NSA had not intercepted the alleged telegram because it had lacked the
    technical capacity at the time.\11\ This was historically important
    information which would never have seen the light of day but for my
    efforts, but the public's access to such information should not depend
    on people like me pursuing it.
        It is for these reasons that I bring this issue to the
    subcommittee's attention. It is arguably beyond the jurisdiction of
    this subcommittee, or even of the Appropriations Committee as a whole,
    to make a significant change to the way in which in camera declarations
    are handled in FOIA cases, but such an effort should not be undertaken
    without hard data. It will be important for legislators to understand
    how prevalent this practice truly is and under what circumstances these
    filings are made by agencies and accepted by courts. To this end, I ask
    that the subcommittee appropriate sufficient funds from within the
    Administrative Office for U.S. Courts account (Salaries and Expenses)
    directing to that office to conduct a comprehensive survey of all in
    camera agency declarations filed in FOIA cases within the past 10 years
    (or another reasonable time period), specifically for the purpose of:
    (1) identifying with certainty the number of such filings; (2)
    identifying any geographic or temporal trends; (3) specifying whether
    the agency sought leave for the filings or simply filed them without
    asking; (4) indicating the depth of the court's discussion of the
    appropriateness of the in camera filings; (5) indicating the nature of
    the claims being supported by the in camera filings; and (6) providing
    any other relevant data.
        I also ask the subcommittee to appropriate sufficient funds to the
    Administrative Office to perform a feasibility study for a process in
    which all agency declarations filed in camera in FOIA cases would
    automatically be filed on the public record after 5 years (or another
    reasonable time period). This study would allow Congress to
    intelligently decide whether it would be appropriate to legislate such
    a proposal, so that these important court records would ultimately
    become accessible to journalists, academics, and the general public
    without relying on individual persons to pursue their release as I did.
    If any type of sealed court filings should be presumptively open after
    a period of time, it would most assuredly be filings made in litigation
    over government transparency.
    ---------------------------------------------------------------------------
        \1\ NSC's Deputy Executive Director Bradley Moss provided oral
    testimony elaborating on this topic as part of the 30 April 2021 Demand
    Progress Webinar on fiscal Year 2022 Appropriations Public Witness
    Testimony, at https://www.youtube.com/watch?v=qsUc5nLcZDk (testimony
    begins at 43:56).
        \2\ Nat'l Cable Television Ass'n. v. FCC, 479 F.2d 183, 186 (D.C.
    Cir. 1973).
        \3\ Goland v. CIA, 607 F.2d 339, 350 (D.C.Cir. 1978).
        \4\ Vaughn v. Rosen, 484 F.2d 820, 826-27 (D.C. Cir. 1973).
        \5\ CNN, Inc. v. FBI, 293 F. Supp. 3d 59, 66-67 (D.D.C. 2018).
        \6\ Truthout v. DOJ, 20 F. Supp. 3d 760, 770 (E.D. Cal. 2014).
        \7\ Id. at 768-69.
        \8\ This research was performed by searching court dockets from
    1993-2018 for the term ``in camera'' and then parsing out the
    appropriate entries. These dockets were provided by the Transactional
    Records Access Clearinghouse's FOIA Project. The degree to which these
    dockets accurately reflect court filings during this time period cannot
    be ascertained at this time, and so these figures may not represent the
    totality of the practice. Detailed information about this analysis and
    my bases for making any other claim in this testimony is available upon
    request.
        \9\ However, as of the last few years, agencies have resisted
    releasing such in camera declarations through FOIA or Mandatory
    Declassification Review (``MDR''), taking the position that because
    they were sealed by a court the agency is powerless to release them.
    The result of this shift in many cases is that courts will not unseal
    them because they remain classified, while agencies will not declassify
    them because they remain sealed, making it literally impossible for
    them to be made publicly available except when the agency voluntarily
    decides to release them.
        \10\ 668 F.2d 676, 677 (2d Cir. 1982).
        \11\ I obtained this record by filing an MDR request with the NSA
    pursuant to Executive Order 13,526. MDR is a different mechanism than
    FOIA which is limited to classified documents.

        [This statement was submitted by Kel McClanahan, Executive
    Director]
                                     ______

                  Prepared Statement of Never Again Coalition
    Dear Chair Van Hollen and Ranking Member Hyde-Smith:

        We are writing to urge you to support increased funding for the
    Financial Crimes Enforcement Network (FinCEN) in FY2023 FSGG
    Appropriations. Today, the House Appropriations FSGG subcommittee has
    approved $210.33 million in FinCEN funding in their FY2023 bill \1\.
        The Never Again Coalition is an organization dedicated to the
    prevention and cessation of genocide and mass atrocities everywhere by
    focusing on five core areas: Sudan, South Sudan, Democratic Republic of
    Congo, Burma and Bangladesh. We seek to empower those affected by mass
    violence through community-led initiatives, awareness building,
    partnerships, and advocacy. The United States government is our most
    powerful ally in these goals and that is why we are urging increased
    funding for FinCEN, to allow them to enact and enforce effective laws
    that will disrupt the cycle of corruption that enable genocide and mass
    atrocities to occur.
        Effective laws, and their enforcement, are part of the
    infrastructure that is necessary for a healthy society. Without them
    the financial system loses integrity, threatening common goals of the
    United States and its allies: basic human rights, democracy,
    sustainable development, and peace. Congress recognized this and passed
    the Corporate Transparency Act in December 2020, in a bipartisan vote.
    Thus directed, Congress must now provide the tools to FinCEN to make
    this act reality. The absence of integrity in our financial system has
    been made stark by the war in Ukraine. When they were most in need, the
    tools were not sufficient. We can do better, and we must.
        It isn't just Russian oligarchs and corrupt government officials
    that we must safeguard our financial system from. It is the duty of the
    U.S., as the leading economy in the world, to prevent bad actors,
    wherever they are, from using and manipulating U.S. laws and financial
    infrastructure for illegal activities. The $210.3 million dollars
    FinCEN is requesting, and the House FSGG subcommittee approved, to
    implement and enforce the CTA, is nearly imperceptible in the scheme of
    costs associated with corruption. In Africa alone, ``Every year, an
    estimated $88.6 billion, equivalent to 3.7% of Africa's GDP, leaves the
    continent as illicit capital flight, according to UNCTAD's Economic
    Development in Africa Report 2020, almost double the amount it receives
    through international development assistance.'' \2\
        This begs the question--is it more effective to systemically fight
    corruption with laws and enforcement, or deal with the resulting famine
    and mass displacement that stems from corruption and kleptocracy?
        The U.S. is wasting resources through development aid if corruption
    isn't stopped and missing opportunities for affected communities around
    the globe to live fulfilling and productive lives when they are not
    reaping any of the benefits from development aid and investment. For
    the U.S. to fulfill its vision of basic human rights for all, there
    must be a commitment to invest in the tools needed to stop illicit
    financial flows. According to a recent report from Transparency
    International, ``Up to the Task'' \3\, the U.S. financial system
    generates thousands of suspicious activity reports (SAR) each year, but
    we staff our enforcement team to only investigate a small fraction of
    these: 10,000 SARs for each staff person, per year. In Germany and
    France the equivalent ratio is 600:1. Without robust and sustained
    resources, ours is a system bound to fail.
        The U.S. can lead on anti-corruption, and the world needs this
    leadership. FinCEN is the correct agency to work with the financial
    system, law enforcement, domestic and international governments to
    effectively implement and enforce these critical laws. We urge you to
    support increased funding for FinCEN, in line with FinCEN's request and
    the House FSGG approved $210.33 million, in your FY2023 budget.

        Thank you,
        Kelly McDermott
        Financial Accountability Analyst
        Never Again Coalition
    ---------------------------------------------------------------------------
        \1\ https://docs.house.gov/meetings/AP/AP23/20220616/114911/BILLS-
    117-SC-AP-FY2023-FServices.pdf.
        \2\ All-Party Parliamentary Groups (APPG) on Anti-Corruption &
    Responsible Tax and the APPG on Fair Business Banking, ``Economic Crime
    Manifesto'', https://www.appgbanking.org.uk/wp-content/uploads/2022/05/
    Economic-Crime-Manifesto-1.pdf.
        \3\ Vincent Freigang and Maira Martini, ``Up to the Task?'',
    Transparency International, https://images.transparencycdn.org/images/
    2022-Report-Up-to-the-task.pdf , May 13, 2022.
    ---------------------------------------------------------------------------
                                     ______

                        Prepared Statement of The Sentry
        On behalf of The Sentry, we urge the subcommittee on Financial
    Services and General Government to approve increased appropriations for
    the Financial Crimes Enforcement Network (FinCEN) to $210.3 million, in
    alignment with the President's fiscal year 2023 budget request.
                             fincen's critical role
        The Sentry is an investigative and policy organization that seeks
    to disable multinational predatory networks that benefit from violent
    conflict, repression, and kleptocracy. Launched in 2016, The Sentry
    produces hard-hitting investigative reports and dossiers on individuals
    and entities connected to grand corruption and violence. We advocate
    for the use of tools of financial and legal pressure, including anti-
    money laundering and illicit finance measures, targeted network
    sanctions, criminal prosecutions, compliance actions by banks and other
    private companies, and asset recovery. As a result of our work, money
    laundering routes have been exposed and shut down, assets have been
    frozen, travel has been banned, and corrupt networks have been cut off
    from the international financial system.
        One of the principal agencies The Sentry collaborates with to
    achieve these objectives is FinCEN. Since The Sentry's launch, we have
    worked closely with FinCEN leadership and staff to take action against
    the money laundering that underlies violent kleptocracies, particularly
    in East and Central Africa. In 2017 and 2018, FinCEN issued important
    Advisories on illicit finance in South Sudan and on the connection
    between serious human rights abuse and corruption, which helped to
    elevate the risk profile of these concerns for the banking community.
    More recently, FinCEN released an Advisory focused on the risks from
    kleptocracies, highlighting Russia in particular.
        FinCEN plays a crucial role in protecting the U.S. economy from the
    threat of money laundering and illicit finance, from both domestic and
    foreign sources. From the current threats posed by the Russian
    government and network of oligarchs (some of whose wealth comes via
    exploitation of natural resources in sub-Saharan Africa) and their
    gatekeepers to regimes such as Iran and Venezuela to more general
    concerns such as money laundering through real estate and
    cryptocurrency, FinCEN's mandate and scope is uniquely local and
    international at the same time, given that the U.S. financial system is
    itself at once both local and international.
        In the years ahead, FinCEN's role will only grow more important to
    the ability of U.S. regulatory and law enforcement to catch up with and
    even get ahead of the array of risks the financial system faces. FinCEN
    plays a central role in implementing the U.S. Strategy on Countering
    Corruption, as well as several critical new proposed rules and
    initiatives, and in tracking new and emerging threats, including the
    impact of the ongoing crisis in Russia and Ukraine.
                           strong cta implementation
        At the top of the list of FinCEN's priorities is implementation of
    the bi-partisan Anti-Money Laundering Act and the Corporate
    Transparency Act (CTA)--landmark pieces of legislation. If robustly
    implemented, the provisions of both laws will be cornerstones in
    FinCEN's ability to address current and emerging risks.
        The CTA in particular needs swift and strong attention. In
    February, The Sentry was pleased to lead a coalition of 23 human rights
    organizations from around the globe in urging implementation of the
    initial proposed rule focused on the CTA's required establishment of a
    corporate registry of beneficial owners. This registry will help bring
    transparency and accountability to human rights abusers who have been
    benefiting financially from their malign activities, and it will begin
    to address the problem of anonymous corporate ownership that has been
    widely reported, including in the blockbuster ``Pandora Papers'' series
    that firmly pointed the finger at U.S. financial secrecy.
        FinCEN is unfortunately behind in its rulemaking and implementation
    efforts. FinCEN must be given the resources it needs so that it is able
    to satisfy congressionally mandated timelines. Given that
    implementation of the CTA is also a priority related to the Summit for
    Democracy and that the United States will serve as host to the next
    International Anti-Corruption Conference, FinCEN's delivery of final
    products for these events in December would prove U.S. commitment and
    provide encouragement to other countries.
                   addressing money laundering in real estate
        A recent study by Global Financial Integrity found that at least
    $2.3 billion has been laundered through the U.S. real estate market in
    the past 5 years. In November 2021 as part of a massive reporting
    project connected to a leak of banking documents, The Sentry reported
    on money laundering scandals involving Congolese officials moving
    illicitly obtained funds into the U.S. real estate market, including in
    Rockville, MD--Congress' backyard--and receiving tens of millions of
    dollars in bribery payments related to massive mining and
    infrastructure deals from Chinese companies and middlemen. These are
    just two of the myriad money laundering schemes routing through the
    U.S. financial system from networks like those of former Congolese
    President Joseph Kabila. Such schemes threaten not only the potential
    for peace and good governance in foreign countries, but also the
    integrity and soundness of the U.S. economy.
        Though the Treasury Department and national security officials
    identified the US real estate market as a money laundering
    vulnerability more than 20 years ago, real estate professionals have
    had a ``temporary exemption'' from having to fulfill anti-money
    laundering obligations similar to those required of other financial
    institutions, thereby offering a gateway to the U.S. financial system.
    In December, FinCEN initiated a rulemaking to update U.S. anti-money
    laundering safeguards for the U.S. real estate sector.
        FinCEN must have the necessary resources to deliver a timely
    proposed rule instituting safeguards for the U.S. real estate sector,
    as another demonstration of U.S. commitment to combat corruption and
    illicit finance.
                                   conclusion
        To implement the CTA, tackle money laundering in real estate, track
    Russian oligarchs' assets and target their enablers, as well as
    continue to deliver on the agency's baseline priorities, FinCEN
    requires high-level and trained professionals to keep up with both the
    financial institutions the agency partners with and the criminal
    networks they seek to disrupt and penalize. As the ``FinCEN Files''
    showed in 2020, in many potential money laundering investigations,
    banks are fulfilling their end of the bargain by submitting the
    Suspicious Activity Reports required of them; the issue is that FinCEN
    lacks the staff and resources to follow up on these leads.
        FinCEN serves a crucial function to uphold U.S. national security
    and, by extension, to protect human rights. This has been made ever
    clearer by Russia's invasion of Ukraine. The Sentry encourages the
    Senate Appropriations Committee to approve the full $210.3 million for
    FinCEN.
                                     ______

                Prepared Statement of Transparency International
        Dear Chairman Leahy and Vice Chairman Shelby:

        On behalf of Transparency International U.S., we write to urge you
    to support increased funding in the amount of $210.3 million for the
    Financial Crimes Enforcement Network (``FinCEN'') in the FY2023
    appropriations process. This is the amount that FinCEN has requested
    \1\ in order to effectively fulfill its mission.
        Transparency International U.S. is a U.S.-based nonprofit
    organization that is part of the largest global network of
    organizations dedicated to combating corruption. One of our top
    priorities is stemming the flow of corrupt and other criminal funds
    into and through the U.S. financial system.
        Corruption causes serious and widespread harm. The wealth drain
    from victimized countries robs people of access to healthcare \2\ and
    basic public services. It drives away private investment and economic
    development opportunities \3\ that are necessary for sustainable
    economies. It props up authoritarian regimes \4\ that engage in human
    rights abuses and undermine democratic values, institutions, and
    practices. And, as demonstrated in the current crisis in Ukraine,
    corruption has played a central role \5\ in emboldening Russian
    leadership to threaten global security.
        Our collective understanding of transnational corruption has been
    enhanced in recent years through a series of blockbuster reports \6\ by
    teams of investigative journalists and others who've exposed the global
    architecture of illicit financial flows. We now know that effective
    enforcement of our anticorruption laws--the ability to ``follow the
    money''--is nearly impossible without a well-resourced financial
    intelligence unit.
        In the U.S. that entity is FinCEN. In a new report, Up to the Task,
    released on May 24, 2022, Transparency International U.S., in
    collaboration with our global network, wrote that:

            Financial intelligence units (FIUs) are one of the most
            important government agencies tasked with combatting financial
            crime. Their core function is to receive and analy[z]e
            suspicious [activity] reports (SARs) and produce financial
            intelligence for further investigation by law enforcement and
            other authorities, where relevant. They also support and
            coordinate the exchange of information with foreign FIU
            counterparts. In some countries, FIUs have additional
            responsibilities as they function as the primary regulators
            and/or anti-money laundering supervisory bodies.

        A key finding of the report is that compared to several financial
    intelligence counterparts that have joined the U.S. to form the Russian
    Elites, Proxies, and Oligarchs (``REPO'') Task Force, FinCEN resources
    are woefully insufficient to address the current crisis in Ukraine and
    to meet the longer-term mission of protecting the U.S. financial system
    from abuse by corrupt officials and other criminals. As a proxy for the
    relative size of the covered financial sectors among REPO participating
    countries, consider the following: Germany and France's financial
    intelligence agencies each receive fewer than 600 suspicious activity
    reports per staff person, per year. In contrast, FinCEN, even with an
    additional allocation this past year, receives more than 10,000 such
    reports per staff person, per year.
        FinCEN's ability to work with federal, state, territorial, Tribal,
    and local law enforcement agencies and to respond to Congress and
    financial institutions with anti-money laundering obligations is
    clearly hampered by a lack of resources.\7\ The bureau we ask to
    safeguard our $20- plus trillion economy has a staff that is smaller
    than the staff of the financial intelligence unit of Australia.
    Additionally, the bureau has outdated equipment and software, and
    limited funds for licenses to access other data to do proper and
    necessary analysis--frustrating partners in law enforcement and the
    private sector.
        The invasion of Ukraine and the subsequent search for sanctioned
    funds is a stark reminder of why a robust financial intelligence bureau
    is so important. The bipartisan call for an effective response to the
    crisis has led to an important bipartisan agreement \8\ to increase
    funding for asset tracing and other improvements to our defenses
    against financial crime. We urge your continued support for increasing
    the FinCEN budget to a level at which the bureau can effectively and
    efficiently manage the data analysis, legally mandated rulemakings, and
    timely support to public and private sector partners.
        Thank you for your consideration of our views. If you have
    questions, please contact Scott Greytak, Director of Advocacy for
    Transparency International U.S., at sgreytak@transparency.org.

        Sincerely,
        Gary Kalman, Executive Director
    ---------------------------------------------------------------------------
        \1\ The Office of Management and Budget, ``Budget of the U.S.
    Government Fiscal Year 2023,'' the White House, March 2022, available
    at https://www.whitehouse.gov/wp-content/uploads/2022/03/
    budget_fy2023.pdf.
        \2\ Karen Hussmann, ``Health Sector Corruption,'' U4 Anti-
    Corruption Resource Center, June 2020, available at https://www.u4.no/
    publications/health-sector-corruption.pdf.
        \3\ Shamim Adam, Laurence Arnold and Yudith Ho, ``How Malaysia's
    1MDB Scandal Shook the Financial World,'' The Washington Post, July 28,
    2020 available at https://www.washingtonpost.com/business/energy/how-
    malaysias-1mdb-scandal-shook-the-financial-world/2020/07/28/dade64d6-
    d094-11ea-826b-cc394d824e35_story.html.
        \4\ Natasha Hall, Karam Shaar, and Munqeth Othman Agha, ``How the
    Assad Regime Systematically Diverts Tens of Millions in Aid,'' Center
    for Strategic & International Studies, October 20, 2021, available at
    https://www.csis.org/analysis/how-assad-regime-systematically-diverts-
    tens-millions-aid.
        \5\ Amanda Taub, ``To Keep Putin and His Oligarchs Afloat, It Takes
    a System,'' The New York Times, May 11, 2022, available at https://
    www.nytimes.com/2022/05/11/world/europe/putin-russia-corruption.html.
        \6\ Michael Hudson, et al., ``Offshore havens and hidden riches of
    world leaders and billionaires exposed in unprecedented leak,'' the
    International Consortium of Investigative Journalists, October 3, 2021,
    available at https://www.icij.org/investigations/pandora-papers/global-
    investigation-tax-havens-offshore/.
        \7\ Himamauli Das, ``Statement by Himamauli Das Acting Director
    Financial Crimes Enforcement Network United States Department of the
    Treasury before the Committee on Financial Services U.S. House of
    Representatives,'' Financial Crimes Enforcement Network, April 28,
    2022, available at https://financialservices.house.gov/uploadedfiles/
    hhrg-117-ba00-wstate-dash-20220428.pdf.
        \8\ Senator Sheldon Whitehouse and Senator Charles Grassley,
    ``Whitehouse, Grassley Lead Senators in Call to Fully Fund FinCEN's
    Anti-Money Laundering Operations,'' the office of Senator Sheldon
    Whitehouse, May 17, 2022, available at https://
    www.whitehouse.senate.gov/news/release/whitehouse-grassley-lead-
    senators-in-call-to-fully-fund-fincens-anti-money-laundering-
    operations.
    ---------------------------------------------------------------------------
                                     ______

     Prepared Statement of Zero Emission Transportation Association (ZETA)
        The Zero Emission Transportation Association is a public interest
    non-profit of over 50 member companies advocating for 100 percent
    electric vehicle sales by 2030. Our membership spans the entire
    electric vehicle (EV) supply chain and includes critical materials,
    charging companies, utilities, vehicle manufacturers, and battery
    recyclers.
        We request the Senate Appropriations subcommittee on Financial
    Services and General Government fully fund the General Services
    Administration (GSA)'s Electric Vehicle Fund, as proposed in the Fiscal
    Year (FY) 2022 White House budget. Additionally, we request that the
    Committee include language in its FY 2022 appropriations report that
    directs GSA to implement policies that will help achieve the
    President's stated goal to rapidly electrify the Federal fleet.
        We offer the following report language suggestions:
      --The Committee directs the General Services Administration to
            rescind delegated authorities for agency vehicle ownership and
            unify fleet management and acquisition under a single updated,
            government-wide fleet management and acquisition system.
      --The Committee directs the General Services Administration to use a
            Total Cost of Ownership (TCO) procurement model that accounts
            for vehicle operating costs, including fuel/charging,
            maintenance, and public health savings.
      --The Committee directs the General Services Administration to work
            with the U.S. Department of Energy to develop a TCO model which
            uses statewide variables, regional variables, and inventory
            variables to estimate the cost of electrifying the Federal
            fleet and accounts for the social cost of carbon.

        [This statement was submitted by Joe Britton, Executive Director]

           LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                                  ----------
                                                                       Page

    Addressing Money Laundering in Real Estate.......................    93
    Adeyemo, Hon. Wally, Deputy Secretary, Department of the
      Treasury, Statement of.........................................    42

    Background.......................................................    84
    Bank History.....................................................    78

    Covid-19 Pandemic................................................    80

    Department of the Treasury.......................................    83
        Disclosure of White House:
            Virtual Visitor Logs.....................................    77
            Visitor Logs.............................................    75

    Federal Communications Commission................................    83
    Fincen Needs to Implement the Corporate Transparency Act.........    71
    Fincen's Critical Role...........................................    93

    Hyde-Smith, Senator Cindy, U.S. Senator From Mississippi, Opening
      Statements of

    Kleptocracy Threatens America's Financial Independence...........    72

    Maryland Profile.................................................    80

    National Historical Publications and Records Commission (NHPRC)..    89

    Office of Management and Budget..................................    82

    Recommendations..................................................    86
    Rettig, Honorable Charles P., Commissioner, Internal Revenue
      Service:
        Prepared Statement of........................................     5
        Statement of.................................................     4

    Small Business Administration....................................    83
    Strong CTA Implementation........................................    93

    The CDFI Role....................................................    80
        The Need for:
            Qualified Economists at the FTC..........................    85
            Technical Expertise at the FTC...........................    85

    Van Hollen, Senator Chris, U.S. Senator From Maryland, Opening
      Statements of

                                 SUBJECT INDEX

                                  ----------

                                                                       Page

                           DEPARTMENT OF THE TREASURY

    Additional Committee Questions...................................    68
                                   __________

                            INTERNAL REVENUE SERVICE

                                                                          1
    Additional Committee Questions...................................    38
    Effects of the COVID-19 Pandemic and the IRS Response............     7
        Reducing Inventory of Paper Returns and Correspondence.......     8
        Other Taxpayer Assistance Offerings..........................    10
        Responding to Unprecedented Demand for Phone Assistance......    10
    Efforts to Improve Tax Compliance................................    14
        Recent Accomplishments.......................................    15
        Resource Challenges..........................................    16
    Legislative Proposals in the President's Fiscal Year 2023 Budget.    19
    Looking to the Future: IRS Taxpayer Experience Office............    17
    The President's Fiscal Year 2023 Budget..........................    17
        Specific Funding Areas.......................................    18
        Structural Changes to IRS Appropriations to Improve Mission
          Delivery...................................................    18
    Update on Modernization Efforts..................................    13
        IRS Online Account...........................................    14
    Update on the 2022 Filing Season.................................    11
        IRS Online Account...........................................    11
        Providing Help to Navigate a Challenging Filing Season.......    11
        Improving Service to Diverse Communities.....................    12

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